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In 'Victory for Land and Water,' Canada's Supreme Court Rules Bankrupt Fossil Fuel Companies Must Clean Up Pollution Left Behind

"Bankruptcy is not a license to ignore rules," said the nation's highest court

The Canadian Supreme Court ruled Thursday that bankrupt energy companies can no longer abandon failed oil wells for the public to clean up. (Photo: Government of Alberta)

Green energy campaigners in Canada applauded a precedent-setting Supreme Court ruling on Thursday which ordered the bankrupt Alberta-based oil and gas company Redwater Energy to clean up its failed wells instead of leaving the task to the public.

Observing the "polluter pays principle," the 5-2 ruling overturned two earlier decisions by lower courts which had sided with a federal law stating that insolvent companies could prioritize paying back their creditors over fulfilling their environmental obligations.

"Bankruptcy is not a license to ignore rules," Chief Justice Richard Wagner wrote in the ruling, which was celebrated as one that would set a new precedent for the entire country.

"The Supreme Court of Canada has prioritized paying clean up costs before creditors when extractive companies go bankrupt. This outcome reinforces the growing understanding that polluters are responsible for their clean up obligations," said the Pembina Institute, a think tank focused on clean energy and environmental policy.

"Working families across this province, as well as all of Canada, should not have to pay for the financial and environmental liabilities left behind when companies walk away from their obligations," said Energy Minister Margaret McCuaig-Boyd. "Upholding the polluter-pays principle is good news for Albertans and it's good news for Canadians."

"In a world tackling climate change and transitioning away from fossil fuels, oil companies' environmental liabilities are only going to grow, which is why it is vital that the polluter pays principle remains a core element of our legal framework." —Keith Stewart, Greenpeace Canada"Today's decision reaffirms that oil companies cannot simply abandon their environmental liabilities," said Keith Stewart, Greenpeace Canada's senior energy strategist. "In a world tackling climate change and transitioning away from fossil fuels, oil companies' environmental liabilities are only going to grow, which is why it is vital that the polluter pays principle remains a core element of our legal framework."

The ruling was handed down in a case involving Alberta-based oil and gas firm Redwater Energy, which went bankrupt in 2015. With the company owing $5 million to its creditor, the accounting firm which took on the bankruptcy case aimed to pay the debt by selling off Redwater's profitable oil wells and leaving its failed wells for the Alberta Energy Regulator (AER) and a non-profit organization to clean up the sites.

The AER is already facing a backlog of 3,000 oil wells to clean up, which may take a generation to get through, according to the Star Calgary.

While applauding the new standard set by the Supreme Court, campaigners also noted the limitations of the decision.

"The Supreme Court's decision does not alleviate broader challenges posed by insolvent operations," the Pembina Institute said. "While the Supreme Court's decision ensures bankrupt companies' remaining assets first go to clean up, those assets are often insufficient to cover full costs."

"Alberta Liberals believe more must be done to address the province's estimated $260 billion in cleanup liabilities," said David Khan, leader of the Alberta Liberal Party. "We have to adopt proactive measures against worst case scenarios."

“It's time to take Alberta taxpayers off the hook," added Khan. "It's time industry steps up to shoulder more of the financial responsibility."

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