Canacol: hardship was inevitable, so the court allocated it

Canacol Energy Ltd. is headquartered in Calgary, listed on the TSX and on the principal exchange in Colombia, and produces natural gas in Colombia through a group of Canadian, Colombian, Swiss and Panamanian subsidiaries. It is insolvent, and it cannot deliver the gas it has promised, because its production is declining, per Canacol Energy Ltd (Re), 2026 ABKB 467, paras. 1–2.

Every day it fails to deliver, penalties accrue under contracts whose prices are fixed and whose penalties are calculated on those fixed prices. On June 24, 2026, Justice Feasby let it walk away from them.

What was on the table

Three categories of offtake agreement, all "take or pay": the seller must make a maximum fixed daily quantity available and physically deliver what the customer nominates each day, with a minimum revenue guarantee to the seller if the gas is there, minimum delivery obligations, and penalties for non-delivery, per 2026 ABKB 467, para. 11.

• Consumer Offtake Agreements — supply to residential and small business end-users, the regulated or "essential" market.
• Commercial Offtake Agreements — large-load supply to commercial users in the non-essential market.
• Dual Category Offtake Agreements — both.

Pricing under all of them is fixed monthly and adjusted annually on contractual terms. It is not benchmarked to market pricing, and neither are the non-delivery and early termination penalties, per 2026 ABKB 467, para. 12.

Alongside those, the Promigas Agreements for pipeline transportation on a ship-or-pay basis, and the Canaven Agreement, an LNG logistics contract under which Canaven trucks LNG from the group's plant at Jobo to facilities in Cúcuta for regasification, paid a service fee per MMBTU delivered — a contract that exists solely to support certain Consumer Offtake Agreements, per 2026 ABKB 467, paras. 13, 16, 71.

The group's stated objectives were to reset unregulated prices to the prevailing interruptible market, eliminate volume commitments for a finite period while production is rebuilt, and obtain relief from accrued and accruing penalties, per 2026 ABKB 467, para. 18.

Justice Feasby is blunt about how the matter arrived: these were terms that should have been resolved commercially, but the parties would not make the necessary compromises — and granting disclaimer "should force the parties to negotiate new commercial terms", per 2026 ABKB 467, para. 5.

The eligible financial contract argument

The counterparties' first line of defence was that their agreements are eligible financial contracts, which s. 32 of the CCAA cannot reach.

The route to EFC status runs through the Eligible Financial Contract Regulations: the agreement must be a "derivatives agreement" under s. 1, and must then satisfy s. 2(a) — trading on an exchange or other regulated market, or being the subject of recurrent dealings in the derivatives, over-the-counter securities or commodities markets, per 2026 ABKB 467, paras. 26–28.

The older authorities — Blue Range, Androscoggin, Calpine — all predate the 2007 Regulation, and as the Court of Appeal noted in Bellatrix the Regulation has still never been interpreted by an appellate court, per 2026 ABKB 467, para. 34.

What Blue Range does supply is Fruman JA's limiting words, which do a great deal of work here: while forward commodity contracts may be physically settled, they must be "restricted to contracts for fungible commodities which trade in a liquid and volatile market", per 2026 ABKB 467, para. 29.

A recorded dissent from a decision that binds him

Before reaching the answer, Justice Feasby does something worth noting on its own.

In Bellatrix at first instance, Justice Jones held — "not without some doubt" — that s. 2(a)(ii) refers to the underlying commodity being the subject of recurrent dealings, rather than the agreement itself. Justice Feasby disagrees, on the plain meaning of the words, and says nothing in the CCAA's purpose or the Regulation's justifies departing from them, per 2026 ABKB 467, paras. 38–42.

He then accepts that horizontal stare decisis binds him, and explains why he has set out his view anyway: its purpose is to ensure stability until a potentially incorrect interpretation receives due consideration by a higher court, and he states his position "so that in the future when the issue comes before an appellate court, it is clear that there is disagreement amongst superior court judges as to the correct interpretation", per 2026 ABKB 467, para. 43.

For anyone waiting on appellate guidance on the EFC Regulation, that paragraph is an invitation on the record.

It made no difference here, because the case turned on the prior question: whether these are derivatives agreements at all, per 2026 ABKB 467, para. 44.

Why the Colombian market decided it

The answer came from evidence about the market rather than from the drafting. Colombia does not export gas; most of what it consumes is produced domestically and sold under long-term contracts; the country's only LNG regasification terminal, near Cartagena, is fully contracted; there is no significant storage; and the market is tight with no excess supply. One affiant described it as "a physical market in which supply is contracted based on the geographic location of production fields and pipeline infrastructure", per 2026 ABKB 467, paras. 49–51.

From which four conclusions follow: there was scant evidence of an active gas derivatives market in Colombia; in the regulated market, fixed annual pricing cannot function as a hedge because increases pass through to end-users under the tariff; the secondary market is too small for the contracts to hedge exposure to it, making that exposure "entirely theoretical"; and the true purpose of these arrangements is supply certainty, with fixed pricing a practical necessity in the absence of the "liquid and volatile market" Blue Range requires, per 2026 ABKB 467, paras. 55–58.

None of the agreements is an EFC. The Consumer, Commercial and Dual Category agreements lack a financial purpose distinct from the underlying supply obligation; the Promigas Agreements could in principle have been financialised but there was no evidence that pipeline capacity is treated that way in Colombia; and the Canaven Agreement is a logistics services contract, per 2026 ABKB 467, paras. 64, 68, 69, 70, 71.