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by Doug Alexander and Asjylyn Loder

TORONTO

Canada’s biggest banks are on the hook for at least $478 million of the $26 billion owed to U.S. oil and gas firms that bought protection against plunging crude prices.

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The Bank of Montreal, Canadian Imperial Bank of Commerce and Bank of Nova Scotia are among lenders that provided price protection for U.S. shale drillers that bought insurance against declines in energy prices when North American crude oil was above $90 a barrel. The Toronto-based lenders, which have all said they’ve hedged their risk with offsetting trades, must make good on the protection sold to wildcatters now that oil is trading around $56 a barrel.

Those lenders, along with Royal Bank of Canada and Toronto- Dominion Bank, had derivatives liabilities to U.S. energy companies including Energen Corp. and Pioneer Natural Resources Co. at the end of 2014, energy company records show. The amount owed is probably much higher than the $478 million reported in filings, as not all energy companies, including Canadian firms, disclose their hedging counterparties.