The January 31, 2019, Supreme Court of Canada (“SCC”) decision on Redwater will have a chilling effect on investment in Canadian energy, resources and brownfields projects. It will also accelerate the number of abandoned and problem files for environmental regulators.
HERE is a comprehensive review of the SCC decision prepared by Gowling WLG. Note that environmental orders will, in many circumstances, rank ahead of secured lenders, even DIP lenders, and, therefore, secured lenders will back away from the space because they will be unable to quantify the value of their security. With secured lenders out of the capital stack, the rates of return for equity investors decrease, which will likely serve to eliminate funding for all but the lowest risk projects.