When a company cannot meet its obligations or its liabilities exceed the value of its assets, including oil and gas infrastructure, it is insolvent. When a company fails to meet its obligations, the courts can appoint a receiver or trustee to sell the insolvent company’s assets.
Roles During an Insolvency
Receiver or Trustee’s Role
A receiver or trustee helps move assets into the hands of responsible operators and oversees the assets. The receiver or trustee is responsible for the assets until they are sold, including incident or emergency response. The receiver or trustee has the authority to sell AER-licensed assets to responsible operators, where they can remain in production or closed through proper abandonment, remediation, and reclamation.
Our Role
We do not control or prevent insolvencies. Our focus when a company enters into insolvency is to protect the public and the environment. Following the Supreme Court of Canada’s Redwater decision, we work to ensure that any remaining funds in the estate are used for site cleanup before creditors are repaid.
When assets are sold, a transfer application must be submitted to us for review and decision. Our final decision ensures that the purchaser is an eligible licensee and that the application meets all requirements. Directive 088: Licensee Life-Cycle Management introduced new requirements for license transfers in the oil and gas sector.
Where There Is No Owner
Where there is no legally responsible party to look after an asset, we may designate it as an orphan. The responsibility for an orphaned asset is transferred to the Orphan Well Association (OWA). The OWA is an industry-funded not-for-profit organization that safely closes orphaned assets.
The OWA’s annual budget is funded through an industry levy.
For more information, contact the OWA.
Insolvencies in Alberta
The insolvency professional handling an insolvency will publish information about it, including contact information and materials for court applications, on its website.
The Government of Canada’s Office of the Superintendent of Bankruptcy maintains the official records of companies in formal insolvency proceedings. For inquiries related to a specific insolvency, email OrphaningInsolvency@aer.ca.
Unpaid Surface Lease Payments
Landowners may apply for surface lease compensation through the Land and Property Rights Tribunal. Landowners should contact the tribunal for information or questions about surface lease payments. The AER and OWA are not involved with surface lease payments.
The Government of Alberta has more information on what to do when a company fails to make annual surface lease payments.
The Farmers’ Advocate Office provides support and resources for farmers and ranchers, including advocacy, energy and utility surface rights, and rural dispute resolution.
Terminology
Common terms related to insolvencies include:
- Bankruptcy: A company can place itself into bankruptcy or be placed by a creditor. A trustee is assigned and may take possession and sell the company’s property.
- CCAA protection: A company that owes more than $5 million to its creditors may seek protection under the Companies’ Creditors Arrangement Act (CCAA) to avoid bankruptcy and renegotiate its debt with its creditors. If granted, it will receive court protection from its creditors for a limited time – which may be extended with court approval – to help plan how it intends to renegotiate its debt. A court-appointed monitor will observe the company’s operations but does not take possession of the company’s property.
- Ceased operations: When an AER-licensed company has contacted us to indicate that it cannot continue operations and has no remaining staff to oversee and supervise its AER-licensed assets. The AER confirms that the company will not place itself into bankruptcy or be placed into receivership by a lender or secured creditor.
- Notice of Intention to Make a Proposal: A company may restructure by preparing and submitting a formal proposal to its creditors to avoid bankruptcy. If a company does not file a proposal or it is rejected by its creditors, the company is assigned to bankruptcy.
- Receivership: A receivership typically happens when a lender or secured creditor appoints a receiver to recover amounts owed under a secured loan agreement. The receiver may take control and possession, operate, manage, sell, or liquidate a company’s assets.
