Beyond the risk of a deadly hydrogen sulphide leak that would have put thousands of Calgarians at risk, the 2016 bankruptcy of Lexin Resources, a small natural gas producer in Alberta, left behind a string of 700 or more creditors waiting for payment of overdue bills.
The list ranges from individual landowners, to a small scaffolding company, to multinational oilfield services company Baker Hughes, to the provincial government and rural municipalities looking to recover unpaid royalties and taxes, to former workers concerned about vacation pay, severance, and pensions.
Now, the company is claiming that it’s the one whose rights have been violated, in a statement of claim accusing the Alberta Energy Regulator of “malicious” and “unconstitutional” enforcement action designed to force it into bankruptcy.
A University of Calgary natural resources law researcher told the Calgary Herald that claim appears to be without merit.
“Lexin operated a gas processing plant in Mazeppa northeast of High River and 1,400 wells across Alberta before it ran afoul of the energy regulator for allegedly failing to comply with a series of orders, including demands to clean up spills,” the Herald recalls. “The regulator suspended all of Lexin’s licences—effectively shutting it down—and later forced the company into receivership after losing confidence in its ability to look after it assets.”
Along the way, Lexin accumulated debt to landowners who were entitled to annual payments for natural gas wells on their property, usually in the range of a few thousand dollars per year.
“In Alberta, most landowners don’t own the mineral rights below their land and are required to allow access to energy companies that want to drill wells,” CBC News reports. Now, “the province’s taxpayers will be paying the surface lease cash owed.”
Citing an anonymous former Lexin executive, CBC says the company stopped paying its creditors in late 2015. “It was across the board, no royalties to owners, no rentals to mineral owners, no rentals to surface owners,” the executive said, adding that the company continued to pay employees and cover health and safety costs. When landowner Maureen Strong tried to collect the lease income she and her husband were owed, “we got the name of the guy at Lexin and phoned him,” she told CBC. “Nice guy, but he said, ‘Just get lined up, we’ve had 700 calls on this.'”
Recently-retired gas plant worker Larry Nagle said many former Lexin employees are still waiting for their severance pay. “A company like that should not be allowed to get away with treating people like they did,” he said. “They broke union contracts, they let people go with no notice, and they still owe those people money.”
But CBC warns that well cleanups will be the biggest cost arising from the Lexin bankruptcy.
The company “operated 1,380 wells, 81 facilities, such as the Mazeppa plant, 201 pipelines, and was responsible for a further 145 abandoned well sites,” notes reporter Tracy Johnson. “When the AER pulled the plug on the company in February 2017, it said Lexin owed it more than $70 million in deposits to cover the reclamation of its wells and other sites. If the receivership order stands, the regulator will sell what it can to raise money for the cleanup of the infrastructure it fails to sell.”