By Nia Williams
CALGARY, Alberta, April 6 (Reuters) - The receiver in
Canada's latest oil and gas insolvency case will not attempt to
sell the company's Alberta assets because of concerns about
provincial regulations around oil well cleanup costs, according
to a source close to the matter.
A Vancouver court appointed Ernst & Young as receiver for
Terra Energy Corp TT.TO last week after the company's lender
Canadian Western Bank demanded full repayment of its C$15.9
million loan. L2N16T1MX
The court order, filed on Thursday, says the receivership
process "shall not include any oil or gas wells, pipelines or
facilities located within the Province of Alberta or licensed by
the Alberta Energy Regulator".
The source, who is not authorised to speak to the media,
said Ernst & Young did not want to run the risk of becoming
liable for the wells Terra owns in Alberta.
A spokeswoman for Ernst & Young declined to comment.
Calgary-based Terra, which has around 3,500 barrels of oil
equivalent per day of producing assets in Alberta and British
Columbia, is the latest junior company to hit the wall during
the two-year global oil price slump.
The Alberta Energy Regulator said it will be issuing closure
orders to Terra Energy, directing the company and its working
interest partners to suspend and abandon its licensed
properties, but did not comment on why Ernst & Young was not
handling those assets.
Concerns over Alberta's oil well liability regulations have
risked pushing more junior companies towards insolvency and
disrupting energy asset sales at a time when companies are
already struggling with low oil prices. L2N17829Z
In statement last month, Terra said attempts to sell assets
in Alberta to help pay down debt were hampered by the company
having a liability management rating of below one, the ratio
regulators use to assess whether a company's assets cover the
cost of fully reclaiming all its oil wells.
Most of the company's production is in east-central British
Columbia, but just under half comes from Alberta where it holds
133 well licences, 32 facility licences and 51 pipeline
licences.
(Editing by David Gregorio)