Alberta Energy Regulator to appeal ruling on oil and gas cleanup obligations

Workers wear protective clothing while cleaning up an oil spill near Fort McMurray, Alta., in this file photo from Wednesday, July 22, 2015. (Jeff McIntosh/THE CANADIAN PRESS)

CALGARY - The Alberta Energy Regulator says it will appeal a court ruling that would allow oil and gas companies to avoid cleanup costs if they enter bankruptcy protection.

The court case centres on bankrupt Redwater Energy Corp., whose trustees want to sell off its remaining producing wells.

But the energy regulator wants to use those wells to cover cleanup expenses the company is responsible for.

The Alberta Court of Queen's Bench said May 19 that provincial regulations are in conflict with the Bankruptcy and Insolvency Act and ruled in favour of creditors.

The energy regulator says it is appealing the decision because it could encourage more companies to enter receivership and bankruptcy to avoid obligations to clean up around oil and gas wells.

The lawsuit has been closely watched as a precedent-setting case as more bankruptcies loom in the oil and gas industry in the face of chronically low prices.