Canada: AER Seeks To Hold Directors, Officers Personally Liable For Obligations Of Insolvent Corporate Licensees

The Alberta Energy Regulator (AER) recently released Bulletin 2016-10 (Bulletin), as a reminder to directors and officers of corporate holders of AER oil and gas well licences (Licensees) that they may be personally responsible for the statutory obligations of the Licensee when it enters insolvency proceedings or otherwise ceases operations.

The AER's traditional position has been that the failure of a Licensee to comply with its obligations under the directives issued by the AER, or an order seeking to enforce those obligations, would result in the AER pursuing enforcement actions against the Licensee. Only in rare cases would the directors and officers be targeted by the AER for non-compliance by a Licensee. This recent Bulletin may indicate a change in that attitude.

There are a number of ways that a director or officer of an insolvent Licensee could be personally affected by this change in AER policy. Options open to the AER include declaring directors and officers as named persons or naming them in environmental protection orders (EPO). Liability continues until such orders are satisfied.

Section 106 of the Oil and Gas Conservation Act (OGCA) and section 51 of the Pipeline Act (Naming Provisions) allow the AER, where it considers it in the public interest to do so, to declare a director or an officer a named person (Named Person). In order to issue such a declaration, there must be:

  1. A contravention or failure by a Licensee to comply with an AER order
  2. At the time of the contravention or failure, the Named Person must have been a director, officer, or other person in direct or indirect control of the Licensee at the relevant time
  3. The requested declaration and order must be in the public interest. Prior to taking this step, the AER must give written notice of its intention to make a declaration and give the person(s) affected 10 days to show cause as to why the declaration should not be made (OGCA, section 106(2)).

The specific reference to directors, officers, and agents in the Naming Provisions demonstrates a presumption that they are in direct or indirect control of the Licensee. The Naming Provisions are also reverse onus provisions. Once a person's position as a director or officer is confirmed, it is up to that person to disprove control. The AER considers "control" to be the authority to cause a Licensee to meet its financial obligations to the AER and to comply with AER orders, regardless of title or position.

Being declared a Named Person does not impose personal liability on directors or officers for abandonment or reclamation costs. Instead, it effectively blacklists such Named Person from being involved in the operations of Licensee in the future. Where a Named Person is involved with a Licensee, the AER may suspend such Licensee's operations, deny its applications or require it to post security because of its association with the Named Person. These actions are also available against any subsequent Licensee that the Named Person becomes involved with, effectively preventing the Named Person from holding a position of control in the industry unless the original AER orders are satisfied.

Unlike a declaration against a Named Person, the directors or officers of an insolvent Licensee could be found personally liable where they are deemed a "person responsible" and named in an EPO under the Environmental Protection and Enhancement Act (EPEA). Generally, an EPO is issued where a substance is or has been released, where contaminated lands exist, or where reclamation obligations have not been satisfied.

An EPO can be issued against every person responsible who has or has had charge, management or control of a substance or thing. This description has been found to be broad enough to include both past and present officers of a Licensee. The onus is on directors and officers to present evidence as to their lack of involvement if they wish to avoid being subject to an EPO. The greater the degree of a control over a Licensee, the more likely a director or officer will be found to be a "person responsible" for the purposes of the EPEA.

We are not currently aware of any EPOs that have been issued against directors and officers as a result of a Licensee failing to comply with its reclamation obligations associated with oil and gas assets. However, the Bulletin may signal a change in the AER's view in respect of recovering these costs from directors of a corporation and is consistent with the approach taken in other jurisdictions such as Ontario.

In Baker v. Director, Ministry of Environment, the Ontario Ministry of Environment (MOE) issued an order naming former directors and officers of Northstar Aerospace (Canada) Inc. (Northstar Canada) personally, even though Northstar Canada had filed for insolvency protection. The order named former directors and officers on the basis that they had management and control of the site when the contamination occurred. The named parties were all held personally liable for remediation costs of approximately C$15-million.

In Currie v. Director, Ministry of Environment, the MOE issued an order in similar circumstances that was upheld on appeal in spite of the fact that subsequent owners and corporate directors had taken responsibility for the contaminated site and even though regulatory action was not taken until after the former directors had left the company.

The most common course of action for the AER is to either threaten or take steps to declare such directors and officers Named Persons. This specifically occurred in Decision to Issue a Declaration Naming Bryce Lee Karl Pursuant to Section 106 of the Oil and Gas Conservation Act, where Bryce Karl was declared a Named Person after three of the Licensees he controlled failed to comply with 18 AER orders, including several abandonment and abandonment cost orders.

Ultimately, the AER has a diverse statutory tool chest that provides a broad array of enforcement mechanisms to ensure compliance with its orders. The Bulletin may be an indication that the AER is prepared to exercise some of the less common options available to it in an effort to respond to the increasing tide of insolvent Licensees and the surge in orphan properties. It also may indicate that the AER is prepared to sanction directors and officers as a means to address occurrences of non-compliance where a Licensee enters insolvency proceedings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions