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In the recent decision of AlphaBow Energy Ltd. (Re) ("AlphaBow"),1 the Alberta Court of King's Bench dismissed AlphaBow's application to stay the Alberta Energy Regulator's ("AER") request for a security deposit for the duration of its restructuring proceedings.
Background
AlphaBow is a private energy company that was involved in oil and natural gas development and production in Alberta. Since at least 2019, the AER has been concerned with AlphaBow's ongoing failure to meet its regulatory obligations. The AER intervened repeatedly to no avail and eventually limited AlphaBow's ability to acquire new licenses.2 AlphaBow subsequently failed to comply with two orders and the AER temporarily suspended its licenses and sites. The AER later directed the Orphan Well Association ("OWA") to suspend AlphaBow's sites and to provide care and custody. On February 28, 2024, the AER dismissed AlphaBow's appeals and confirmed the orders.3
On March 28, 2024, AlphaBow filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act. On April 26, 2024, the proposal proceedings were taken up and continued under the Companies' Creditors Arrangement Act (the "CCAA").4 AlphaBow subsequently obtained a sale and investment solicitation process order, and the Court's approval for several sale transactions.
On March 4, 2025, AlphaBow applied to the AER for a license transfer application to the nominee purchaser, Cascade Capture Ltd. ("Cascade"), for two transactions. On July 10, 2025, the AER conditionally approved the application, subject to Cascade and AlphaBow posting security of approximately $4.9 million and $20.5 million, respectively. AlphaBow requested that the AER rescind the decision, but the AER refused to negotiate or adjust the security amount and Cascade withdrew its license transfer application. Notwithstanding that there is no extant application before the AER, AlphaBow requested a regulatory appeal of the decision, seeking a declaration that any future request of the AER for a security deposit is stayed for the duration of AlphaBow's CCAA proceedings.
The Decision
The Court dismissed AlphaBow's application to stay any future request of the AER requiring a security deposit. In so doing, the Court confirmed the distinction made by the Supreme Court of Canada in Redwater between a regulatory body's rights as a creditor versus rights in a regulatory capacity.5 The Court's analysis began with the statutory framework, namely: section 11.1 of the CCAA. In particular, subsection 11.1(2) of the CCAA provides that a stay of proceedings under section 11.02 of the statute does not apply to the actions of a regulatory body except where it seeks enforcement of payment.6 Subsection 11.1(4), in turn, empowers the court to declare that a regulatory body is seeking to enforce its rights as a creditor, and not qua regulator, and therefore that enforcement of those rights is stayed. Even if a regulatory body is not seeking to enforce its rights as a creditor, it may nonetheless be subject to the stay of proceedings imposed by the CCAA if two conditions are met:
- the stay is necessary to make a viable compromise or arrangement; and
- subjecting the regulatory body to the stay would not be contrary to the public interest.7
Here, the Court rejected AlphaBow's argument that the AER was enforcing its rights as a creditor. Following the Supreme Court's guidance in Redwater, the Court held that the AER's security requirement was a public duty owing by AlphaBow, rather than a provable claim, and thus requiring its payment did not constitute creditor enforcement.8 Although AlphaBow sought to distinguish the matter from Redwater by arguing that amendments to the Oil and Gas Conservation Act expanded the AER's statutory lien to include requests for security, this argument was also rejected by the Court, which instead found the addition of the words "deposit or other form of security" to the provincial statute simply expanded the scope of the statutory lien, but did not transform the obligations in question "into a debt for all purposes".9 Accordingly, enforcement of AlphaBow's public duties (including security deposit requirements) did not alter the priority scheme among AlphaBow's creditors, even if it effectively prioritized end-of-life obligations over creditor rights.10
The Court also dismissed AlphaBow's alternative argument that the stay should apply despite the fact that the AER was acting in a regulatory capacity. Applying the two-part test set out above, the Court concluded that AlphaBow had not satisfied the test to justify staying the regulatory action. On the first branch of the test, AlphaBow argued that a viable arrangement was impossible unless the regulatory exception applied as posting security would frustrate its restructuring efforts and prevent production. In the alternative, AlphaBow claimed that the requirement to post security would reorder priorities by allocating funds to the AER rather than distributing them to AlphaBow's creditors, resulting in a windfall to AlphaBow's purchaser. On the second part of the test, AlphaBow argued that a stay would enhance the public interest because it would facilitate production – and thus create jobs and revenue to pay associated obligations – by enabling the transfer application.11
In declining the stay, the Court distinguished a number of authorities in which a regulatory body's actions were stayed by the CCAA. In particular, the Court noted that none of the authorities involved staying regulatory actions beyond the initial 10-day stay period in CCAA proceedings, whereas AlphaBow was already months into its restructuring proceedings and the requested stay would not be addressing an emergent or short-lived liquidity issue.12 The Court also noted that while the stay would facilitate AlphaBow's exit from the CCAA proceedings, AlphaBow would still not be in the position to discharge its environmental obligations or satisfy the AER's security deposit requirements, and would thus fail to resume production, generate revenue or create jobs. In this regard, since the proposed stay would end upon conclusion of the CCAA proceedings, AlphaBow's remaining inactive wells would ultimately end up in the hands of the OWA.13
Implications and Key Takeaways
A decision which further illustrates the significant impact of Redwater on debtors operating in regulated industries, AlphaBow confirms that a regulatory body's security deposit requirement does not necessarily constitute "enforcement of payment" in restructuring proceedings. Importantly, courts will not stay the regulatory actions if doing so only benefits the parties at the expense of the public interest. AlphaBow is part of a growing jurisprudence recognizing that remediation is a public issue and environmental obligations – and a company's ability to meet them post-restructuring – take priority over creditor claims.
Footnotes
1 AlphaBow Energy Ltd. (Re), 2025 ABKB 622 AlphaBow.
2 AlphaBow at para 4.
3 AlphaBow at para 5.
4 Companies' Creditors Arrangement Act, RSC 1985, c C-36, as amended CCAA.
5 Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5, 2019 1 SCR 150 Redwater.
6 Note that section 11.02 of the CCAA is the provision from which the courts find authority to grant stays of proceedings on an initial order and on subsequent orders in CCAA proceedings.
7 AlphaBow at para 20.
8 AlphaBow at para 24, citing Redwater at para 135 and Panamericana de Bienes y Servicios S.A. v Northern Badger Oil & Gas Ltd, 1991 ABCA 181 at 33.
9 AlphaBow at para 26.
10 AlphaBow at para 27, citing Redwater at paras 122, 131, 159.
11 AlphaBow at para 30.
12 AlphaBow at para 36.
13 Ibid at paras 37-38
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