Environmental Obligations Cannot Be Ignored Even In Bankruptcy: Orphan Wells Association v Grant Thornton Ltd.

With the growing concern over the environmental impacts of commercial activity, provinces have enacted and expanded environmental legislation in order to hold companies accountable for the costs of remediating the environmental harm they cause. However, regulators have struggled with how to hold companies accountable for environmental harm when they become insolvent.  For many years, clean-up obligations have been treated as unsecured claims lacking priority over secured claims.

On January 31, 2019, the Supreme Court of Canada (the “SCC”) released its much anticipated decision in Orphan Well Association v Grant Thornton Ltd., 2019 SCC 5 (“Redwater”) in which the Court considered the interplay between federal insolvency law and provincial environmental regulation. The SCC upheld the Alberta environmental regulatory scheme allowing it to circumvent established priorities in the federal Bankruptcy and Insolvency Act (the “BIA”) with potentially wide ranging