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Redwater’s trustee and its lender wanted to sell off the company’s remaining producing wells to pay creditors, arguing a bankruptcy trustee is free to pick and choose from among the company’s assets and disclaim unproductive oil and gas wells.

Disclaimed wells would be abandoned and left to the Orphan Well Association, an industry-funded and government-backed group, to clean up.

Photo by David Rossiter / Postmedia

In a split decision last April, Alberta’s Appeal Court backed the original judge, saying federal bankruptcy law takes precedence over provincial environmental rules.

Previous case law has simply asked if the liability was a debt incurred before the bankruptcy with a monetary value attached to it. If the answer was yes, the liability was considered a “provable claim” — an unsecured debt settled out of what’s left after secured creditors are paid off.

The Supreme Court agreeing to hear the case suggests it may be reconsidering that test, said Bankes.

“Should we be forcing provinces to deal with these issues in a bankruptcy context?” he asked.

“Or should we be simply saying these are the general rules for doing business in the province — you’ve known about them from day one. Your secured creditors knew about them from day one. You should just ante up now that the time has come to abandon this well.

“I think the court is going to be looking at that, and that is good news for taxpayers and .. for solvent players in the sector.”

The Alberta Energy Regulator also welcomed the court’s decision.