Executive summary: key legal and evidentiary issues

• AlphaBow Energy Ltd sought leave to appeal a chambers judge's dismissal of its application to stay any request by the Alberta Energy Regulator for a security deposit as a condition of licence transfers.

• The AER's Second Security Request of over $20 million was found to be an action by the AER in its capacity as a regulator, not as a creditor, and therefore was not stayed under the Initial Order.

• Interpretation of subsection 11.1(3) of the CCAA was central to whether the chambers judge had discretion to stay current and future security requests during the CCAA proceedings.

• AlphaBow argued the chambers judge erred in failing to conclude that the Second Security Request was a collateral attack on the court-approved Reverse Vesting Order.

• The Court of Appeal found the appeal lacked prima facie merit, as the chambers judge committed no reviewable error in statutory interpretation or discretionary decision-making.

• Leave to appeal was dismissed, with the Court satisfied that an appeal would unduly hinder the progress of the CCAA action.

Background and the parties involved
AlphaBow Energy Ltd ("AlphaBow") is the applicant in this matter, which was heard in the Court of Appeal of Alberta. The respondents are the Alberta Energy Regulator ("AER") and the Orphan Well Association. The reasons for decision were delivered by the Honourable Justice Bernette Ho on February 9, 2026.

The initial security request and suspension of licences
In March 2023, the AER issued a reasonable care and measures order that required AlphaBow to post over $15 million in security, representing 10% of its inactive licence liability (the "Initial Security Request"). After failing to comply with the order, AlphaBow's licences and sites were suspended, and the Orphan Well Association was directed to provide reasonable care and measures of AlphaBow's licences and sites. AlphaBow thereafter entered a court-ordered claims process under the Companies' Creditors Arrangement Act, RSC 1985, c C-36 (CCAA). At the outset of the CCAA proceeding, an amended and restated initial order (the "Initial Order") imposed a stay against creditors and some regulatory actions. Both AlphaBow and the AER agree that the Initial Order stayed the Initial Security Request.

Asset transfers and the Reverse Vesting Order
Throughout the CCAA proceeding, a series of transactions were approved by the Court of King's Bench transferring some of AlphaBow's assets and environmental liabilities to other entities. On December 19, 2024, a reverse vesting order was approved (the "Reverse Vesting Order"), which included sales approval and vesting orders transferring AlphaBow's assets to other entities, including 2628069 Alberta Ltd and 2628071 Alberta Ltd (collectively, the "069 and 071 Licence Transfers"), and a corporate transaction transferring all the common shares of AlphaBow to 2628071 Alberta Ltd pursuant to a subscription agreement (the "Subscription Agreement"). The completion of the 069 and 071 Licence Transfers is a condition of the Reverse Vesting Order.

The Second Security Request and its consequences
The 069 and 071 Licence Transfers were subject to the AER's approval. Cascade Capture Ltd ("Cascade") filed a licence transfer application as the nominee purchaser for the 069 and 071 Licence Transfers. In July 2025, and after approving other licence transfers without a security requirement, the AER conditionally approved the 069 and 071 Licence Transfers to Cascade, subject to the provision of over $20 million in security from AlphaBow (the "Second Security Request") and nearly $5 million in security from Cascade. The amount of the Second Security Request represented 10% of AlphaBow's then current inactive licence liability. AlphaBow was unable to satisfy the Second Security Request and Cascade pulled its licence transfer application for the 069 and 071 Licence Transfers.

Proceedings before the chambers judge
AlphaBow filed a request for regulatory review of the AER's decision to impose the Second Security Request as a condition of licence transfer. AlphaBow later filed an application with the Court of King's Bench seeking a declaration that any future request for security from AlphaBow by the AER would be stayed for so long as the CCAA proceedings were ongoing and that the failure to pay the Second Security Request could not be relied upon by the AER in considering whether to approve licence transfer applications related to AlphaBow assets. The chambers judge dismissed the application. The chambers judge found that the enforcement of the Second Security Request was an action by the AER in its capacity as a regulator, and not as a creditor, therefore it was not stayed under the Initial Order. The chambers judge also declined to exercise his discretion under subsection 11.1(3) of the CCAA to stay the Second Security Request or any future request because AlphaBow had not satisfied either statutory precondition to subsection 11.1(3).

AlphaBow's grounds for leave to appeal
AlphaBow sought leave to appeal on four grounds: that the chambers judge erred in law in finding that the Second Security Request is not captured by the stay under the Initial Order; that the chambers judge erred in law in interpreting and applying section 11.1(3) of the CCAA; that the chambers judge erred in law in failing to conclude that the Second Security Request was a collateral attack on the Reverse Vesting Order; and that the chambers judge erred in law in speculating that AlphaBow will fail post insolvency.

The leave to appeal test and the Court's analysis
Section 13 of the CCAA requires leave to appeal an order made under that statute. For leave to appeal, an applicant must establish there are "serious and arguable grounds that are of real and significant interest to the parties." This requires consideration of four factors: whether the point on appeal is of significance to the practice; whether the point raised is of significance to the action itself; whether the appeal is prima facie meritorious or frivolous; and whether the appeal will unduly hinder the progress of the action. Justice Ho was satisfied the first two factors were met for at least some of the grounds. The interpretation of section 11.1(3) of the CCAA is arguably a question of significance to the practice, and whether the AER can enforce the Second Security Request against AlphaBow as a condition of its final licence transfers is a question of significance to this CCAA action. However, the Court was not satisfied the third and fourth factors had been met. The applicant had not identified a reviewable error in the chambers judge's interpretation of the law, and the chambers judge's reasons indicated that he was alive to the relevant principles of statutory construction and adequately addressed the jurisprudence relevant to the interpretation and application of the statutory provisions at issue. In determining whether to exercise his discretion under section 11.1(3) of the CCAA, the chambers judge did not make any palpable and overriding errors in principle or application, nor were his factual findings unsubstantiated by the record. On the fourth factor, AlphaBow acknowledged that the imposition of the Second Security Request halted progress of the CCAA action in the Court below, although they submitted the appeal was necessary to move the action forward. The AER submitted an appeal would just further delay the CCAA process. The Court was satisfied that an appeal would hinder the progress of this action.

Ruling and outcome
The application for leave to appeal was dismissed. The Court noted that it understood AlphaBow's position that the Second Security Request in effect undercut the Reverse Vesting Order and the approved transactions, and that it would have been preferable for the AER to clarify its intended use of security enforcement to all parties involved at an earlier stage of the CCAA proceeding. However, AlphaBow was clearly aware of the Initial Security Request that was stayed by the Initial Order, and the approved transactions were conditional on AER approval of licence transfers that, by operation of the governing regulations and directives, can include security conditions on both the transferor and transferee, as set out in the Oil and Gas Conservation Rules, Alta Reg 151/1971, s 1.100, and Directive 088: Licensee Life-Cycle Management, s 5. AlphaBow did not seek clarification from the AER on what, if any, security enforcement might be required to finalize the licence transfers in advance of the Reverse Vesting Order and associated orders being granted, nor did the AER identify the issue earlier in the CCAA proceedings when it had an opportunity to do so. The AER and the Orphan Well Association were the successful respondents. No specific monetary amount was awarded or ordered in this decision, as the matter concerned the denial of leave to appeal.