Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5, [2019] 1 SCR 150

  

 

SUPREME COURT OF CANADA

 

Citation: Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5, [2019] 1 S.C.R. 150

Appeal Heard: February 15, 2018 Judgment Rendered: January 31, 2019 Docket: 37627

 

Between:

Orphan Well Association and Alberta Energy Regulator

Appellants

 

and

 

Grant Thornton Limited and ATB Financial (formerly known as Alberta Treasury Branches)

Respondents

 

- and -

 

Attorney General of Ontario, Attorney General of British Columbia, Attorney General of Saskatchewan, Attorney General of Alberta, Ecojustice Canada Society, Canadian Association of Petroleum Producers, Greenpeace Canada, Action Surface Rights Association, Canadian Association of Insolvency and Restructuring Professionals and Canadian Bankers’ Association

Interveners

 

Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté and Brown JJ.

 

Reasons for Judgment: (paras. 1 to 164)	Wagner C.J. (Abella, Karakatsanis, Gascon and Brown JJ. concurring)
Dissenting Reasons: (paras. 165 to 292)	Côté J. (Moldaver J. concurring)

 

 

 

 

Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5, [2019] 1 S.C.R. 150

Orphan Well Association and

Alberta Energy Regulator                                                                            Appellants

v.

Grant Thornton Limited and

ATB Financial (formerly known as

Alberta Treasury Branches)                                                                     Respondents

and

Attorney General of Ontario,

Attorney General of British Columbia,

Attorney General of Saskatchewan,

Attorney General of Alberta,

Ecojustice Canada Society,

Canadian Association of Petroleum Producers,

Greenpeace Canada,

Action Surface Rights Association,

Canadian Association of Insolvency

and Restructuring Professionals and

Canadian Bankers’ Association                                                                  Interveners

Indexed as: Orphan Well Association v. Grant Thornton Ltd.

2019 SCC 5

File No.: 37627.

2018: February 15; 2019: January 31.

Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté and Brown JJ.

on appeal from the court of appeal for alberta

                    Constitutional law — Division of powers — Federal paramountcy — Bankruptcy and insolvency — Environmental law — Oil and gas — Oil and gas companies in Alberta required by provincial comprehensive licensing regime to assume end‑of‑life responsibilities with respect to oil wells, pipelines, and facilities — Provincial regulator administering licensing regime and enforcing end‑of‑life obligations pursuant to statutory powers — Trustee in bankruptcy of oil and gas company not taking responsibility for company’s unproductive oil and gas assets and seeking to walk away from environmental liabilities associated with them or to satisfy secured creditors’ claims ahead of company’s environmental liabilities — Whether regulator’s use of powers under provincial legislation to enforce bankrupt company’s compliance with end‑of‑life obligations conflicts with trustee’s powers under federal bankruptcy legislation or with the order of priorities under such legislation — If so, whether provincial regulatory regime inoperative to extent of conflict by virtue of doctrine of federal paramountcy — Bankruptcy and Insolvency Act, R.S.C. 1985, c. B‑3, s. 14.06  — Oil and Gas Conservation Act, R.S.A. 2000, c. O‑6, s. 1(1)(cc) — Environmental Protection and Enhancement Act, R.S.A. 2000, c. E‑12, s. 134(b)(vi) — Pipeline Act, R.S.A. 2000, c. P‑15, s. 1(1)(n).

                    In order to exploit oil and gas resources in Alberta, a company needs a property interest in the oil or gas (typically, a mineral lease with the Crown, which Canadian courts classify as a profit à prendre), surface rights and a licence issued by the Alberta Energy Regulator (“Regulator”). Under provincial legislation, the Regulator will not grant a licence to extract, process or transport oil and gas in Alberta unless the licensee assumes end‑of‑life responsibilities for plugging and capping oil wells to prevent leaks, dismantling surface structures and restoring the surface to its previous condition. These end‑of‑life obligations are known as “abandonment” and “reclamation”.

                    The Licensee Liability Rating Program is one means by which the Regulator seeks to ensure that end‑of‑life obligations will be satisfied by licensees. As part of this program, the Regulator assigns each company a Liability Management Rating (“LMR”), which is the ratio between the aggregate value attributed by the Regulator to a company’s licensed assets and the aggregate liability attributed by the Regulator to the eventual cost of abandoning and reclaiming those assets. For the purpose of calculating the LMR, all the licences held by a given company are treated as a package. A licensee’s LMR is calculated on a monthly basis and, where it dips below the prescribed ratio, the licensee is required to bring its LMR back up to the prescribed level by paying a security deposit, performing end‑of‑life obligations, or transferring licences with the Regulator’s approval. If either the transferor or the transferee would have a post‑transfer LMR below 1.0, the Regulator will normally refuse to approve the licence transfer.

                    The insolvency of an oil and gas company licensed to operate in Alberta engages Alberta’s comprehensive licensing regime, which is binding on companies active in the oil and gas industry, and the Bankruptcy and Insolvency Act  (“BIA ”), federal legislation that governs the administration of a bankrupt’s estate and the orderly and equitable distribution of property among its creditors. Alberta’s Environmental Protection and Enhancement Act (“EPEA”) ensures that a licensee’s regulatory obligations will continue to be fulfilled when it is subject to insolvency proceedings by including the trustee of a licensee in the definition of “operator” for the purposes of the duty to reclaim and by providing that an order to perform reclamation work may be issued to a trustee. However, it expressly limits a trustee’s liability in relation to such an order to the value of the assets in the bankrupt estate, absent gross negligence or wilful misconduct. The Oil and Gas Conservation Act (“OGCA”) and the Pipeline Act take a more generic approach: they simply include trustees in the definition of “licensee”. As a result, every power which these Acts give the Regulator against a licensee can theoretically also be exercised against a trustee. The Regulator has delegated the authority to abandon and reclaim “orphans” — oil and gas assets and their sites left behind in an improperly abandoned or unreclaimed state by defunct companies at the close of their insolvency proceedings — to the Orphan Well Association (“OWA”), an independent non‑profit entity. The OWA has no power to seek reimbursement of its costs, but it may be reimbursed up to the value of any security deposit held by the Regulator to the credit of the licensee of the orphans once it has completed its environmental work.

                    Redwater, a publicly traded oil and gas company, was first granted licences by the Regulator in 2009. Its principal assets are 127 oil and gas assets — wells, pipelines and facilities — and their corresponding licences. A few of its licensed wells are still producing and profitable, but the majority are spent and burdened with abandonment and reclamation liabilities that exceed their value. In 2013, ATB Financial, which had full knowledge of the end‑of‑life obligations associated with Redwater’s assets, advanced funds to Redwater and, in return, was granted a security interest in Redwater’s present and after‑acquired property. In mid‑2014, Redwater began to experience financial difficulties. Grant Thornton Limited (“GTL”) was appointed as its receiver in 2015. At that time, Redwater owed ATB approximately $5.1 million and had 84 wells, 7 facilities and 36 pipelines, 72 of which were inactive or spent, but, since Redwater’s LMR did not drop below the prescribed ratio until after it went into receivership, it never paid any security deposits to the Regulator.

                    Upon being advised of Redwater’s receivership, the Regulator notified GTL that it was legally obligated to fulfill abandonment obligations for all licensed assets prior to distributing any funds or finalizing any proposal to creditors. The Regulator warned that it would not approve the transfer of any of Redwater’s licences unless it was satisfied that both the transferee and the transferor would be in a position to fulfill all regulatory obligations, and that the transfer would not cause a deterioration in Redwater’s LMR. GTL concluded that it could not meet the Regulator’s requirements because the cost of the end‑of‑life obligations for the spent wells would likely exceed the sale proceeds for the productive wells. Based on this assessment, GTL informed the Regulator that it was taking possession and control only of Redwater’s 17 most productive wells, 3 associated facilities and 12 associated pipelines (“Retained Assets”), and that it was not taking possession or control of any of Redwater’s other licensed assets (“Renounced Assets”). GTL’s position was that it had no obligation to fulfill any regulatory requirements associated with the Renounced Assets. In response, the Regulator issued orders under the OGCA and the Pipeline Act requiring Redwater to suspend and abandon the Renounced Assets (“Abandonment Orders”). The Regulator imposed short deadlines, as it considered the Renounced Assets an environmental and safety hazard.

                    The Regulator and the OWA then filed an application for a declaration that GTL’s renunciation of the Renounced Assets was void, and for orders requiring GTL to comply with the Abandonment Orders and to fulfill the end‑of‑life obligations associated with Redwater’s licensed properties. The Regulator did not seek to hold GTL liable for these obligations beyond the assets remaining in the Redwater estate. GTL brought a cross‑application seeking approval to pursue a sales process excluding the Renounced Assets and an order directing that the Regulator could not prevent the transfer of the licences associated with the Retained Assets on the basis of, inter alia, the LMR requirements, failure to comply with the Abandonment Orders, refusal to take possession of the Renounced Assets or Redwater’s outstanding debts to the Regulator. A bankruptcy order was issued for Redwater and GTL was appointed as trustee. GTL invoked s. 14.06(4) (a)(ii) of the BIA  in relation to the Renounced Assets.

                    The chambers judge and a majority of the Court of Appeal agreed with GTL and held that the Regulator’s proposed use of its statutory powers to enforce Redwater’s compliance with abandonment and reclamation obligations during bankruptcy conflicted with the BIA  in two ways: (1) it imposed on GTL the obligations of a licensee in relation to the Redwater assets disclaimed by GTL, contrary to s. 14.06(4)  of the BIA ; and (2) it upended the priority scheme for the distribution of a bankrupt’s assets established by the BIA  by requiring that the provable claims of the Regulator, an unsecured creditor, be paid ahead of the claims of Redwater’s secured creditors. The dissenting judge in the Court of Appeal would have allowed the Regulator’s appeal on the basis that there was no conflict between Alberta’s environmental legislation and the BIA .

                    Held (Moldaver and Côté JJ. dissenting): The appeal should be allowed.

                    Per Wagner C.J. and Abella, Karakatsanis, Gascon and Brown JJ.: The Regulator’s use of its statutory powers does not create a conflict with the BIA  so as to trigger the doctrine of federal paramountcy. Section 14.06(4)  of the BIA  is concerned with the personal liability of trustees, and does not empower a trustee to walk away from the environmental liabilities of the estate it is administering. Furthermore, the Regulator is not asserting any claims provable in the bankruptcy, and the priority scheme in the BIA  is not upended. Thus, no conflict is caused by GTL’s status as a licensee under Alberta legislation. Alberta’s regulatory regime can coexist with and apply alongside the BIA .

                    Bankruptcy is not a licence to ignore rules, and insolvency professionals are bound by and must comply with valid provincial laws during bankruptcy. They must, for example, comply with non‑monetary obligations that are binding on the bankrupt estate, that cannot be reduced to provable claims, and the effects of which do not conflict with the BIA , notwithstanding the consequences this may have for the bankrupt’s secured creditors. Given the procedural nature of the BIA , the bankruptcy regime relies heavily on the continued operation of provincial laws but, where there is a genuine conflict between provincial laws concerning property and civil rights and federal bankruptcy legislation, the BIA  prevails. The BIA  as a whole is intended to further two purposes: the equitable distribution of the bankrupt’s assets among his or her creditors and the bankrupt’s financial rehabilitation. As Redwater is a corporation that will never emerge from bankruptcy, only the former purpose is relevant here.

                    The Abandonment Orders and the LMR requirements are based on valid provincial laws of general application — exactly the kind of valid provincial laws upon which the BIA  is built. There is no conflict between the Alberta regulatory scheme and s. 14.06  of the BIA , because, under s. 14.06(4), a trustee’s disclaimer of real property when there is an order to remedy any environmental condition or damage affecting that property protects the trustee from personal liability, while the ongoing liability of the bankrupt estate is unaffected. This interpretation is supported by the plain language of the section, the Hansard evidence, a previous decision of this Court and the French version of the section. The same concept is also found in both s. 14.06(1.2) and s. 14.06(2), which also specifically state that the trustee is not personally liable — it is impossible to coherently read s. 14.06(2) as referring to personal liability and yet read s. 14.06(4) as somehow referring to the liability of the bankrupt estate.

                    Even assuming that GTL had successfully disclaimed in this case, no operational conflict or frustration of purpose would result from the fact that the Regulator requires GTL, as a licensee, to expend estate assets on abandoning the Renounced Assets. Furthermore, no conflict would be caused by continuing to include the Renounced Assets in the calculation of Redwater’s LMR. Finally, given the restraint with which the doctrine of paramountcy must be applied, and given that the Regulator has not attempted to hold GTL personally liable as a licensee for the costs of abandonment, no conflict with s. 14.06(2)  or s. 14.06(4)  of the BIA  is caused by the mere theoretical possibility of personal liability under the OGCA or the Pipeline Act.

                    The end‑of‑life obligations binding on GTL are not claims provable in the Redwater bankruptcy. Not all environmental obligations enforced by a regulator will be claims provable in bankruptcy. The test set out by the Court in Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443 (“Abitibi”), must be applied to determine whether a particular regulatory obligation amounts to a claim provable in bankruptcy: (1) there must be a debt, a liability or an obligation to a creditor; (2) the debt, liability or obligation must be incurred before the debtor becomes bankrupt; and (3) it must be possible to attach a monetary value to the debt, liability or obligation. Only the first and third parts of the test are at issue in the instant case.

                    With respect to the first part of the test, Abitibi should not be taken as standing for the proposition that a regulator is always a creditor when it exercises its statutory enforcement powers against a debtor. A regulator exercising a power to enforce a public duty is not a creditor of the individual or corporation subject to that duty. Here, it is not disputed that, in seeking to enforce Redwater’s end‑of‑life obligations, the Regulator is acting in a bona fide regulatory capacity and does not stand to benefit financially. It is clear that the Regulator acted in the public interest and for the public good in issuing the Abandonment Orders and enforcing the LMR requirements and that it is, therefore, not a creditor of Redwater. The public is the beneficiary of those environmental obligations; the province does not stand to gain financially from them. Strictly speaking, this is sufficient to dispose of this aspect of the appeal. 

                    As it may prove helpful in future cases, under the third part of the test, a court must determine whether there are sufficient facts indicating the existence of an environmental duty that will ripen into a financial liability owed to a regulator. In determining whether a non‑monetary regulatory obligation of a bankrupt is too remote or too speculative to be included in the bankruptcy proceeding, the court must apply the general rules that apply to future or contingent claims. It must be sufficiently certain that the contingency will come to pass — in other words, that the regulator will enforce the obligation by performing the environmental work and seeking reimbursement. In the instant case, the Abandonment Orders and the LMR requirements fail to satisfy this part of the test. It is not established by the evidence that it is sufficiently certain that the Regulator will perform the abandonments and advance a claim for reimbursement. This claim is too remote and speculative to be included in the bankruptcy process. Furthermore, the Regulator’s refusal to approve licence transfers unless and until the LMR requirements have been satisfied does not give it a monetary claim against Redwater.

                    In crafting the priority scheme of the BIA , Parliament intended to permit regulators to place a first charge on real property of a bankrupt affected by an environmental condition or damage in order to fund remediation. Thus, the BIA  explicitly contemplates that environmental regulators will extract value from the bankrupt’s real property if that property is affected by an environmental condition or damage. Although the nature of property ownership in the Alberta oil and gas industry meant that s. 14.06(7) was unavailable to the Regulator, the Abandonment Orders and the LMR replicate the effect of s. 14.06(7) in this case. Furthermore, Redwater’s only substantial assets were affected by environmental conditions or damage. Accordingly, the Abandonment Orders and LMR requirements did not seek to force Redwater to fulfill end‑of‑life obligations with assets unrelated to the environmental condition or damage. In other words, recognizing that the Abandonment Orders and LMR requirements are not provable claims in this case does not interfere with the aims of the BIA  — rather, it facilitates them.

                    Per Moldaver and Côté JJ. (dissenting): GTL and ATB have satisfied their burden of demonstrating a genuine inconsistency between federal and provincial law under both branches of the paramountcy test, namely operational conflict and frustration of purpose. Accordingly, the appeal should be dismissed.

                    Because Alberta’s statutory regime does not recognize the disclaimers by trustees of assets encumbered by environmental liabilities as lawful by virtue of the fact that receivers and trustees are regulated as licensees who cannot disclaim assets, there is an unavoidable conflict between federal and provincial law. Alberta’s legislation governing the oil and gas sector should therefore be held inoperative to the extent that it does not recognize the legal effect of GTL’s disclaimers. An operational conflict arises where it is impossible to comply with both laws. An operational conflict analysis is an exercise in statutory interpretation: the Court must ascertain the meaning of each competing enactment in order to determine whether dual compliance is possible. This interpretation exercise takes place within the guiding confines of cooperative federalism, which operates as a straightforward interpretive presumption — one that supports, rather than supplants, the modern approach to statutory interpretation. Courts should favour an interpretation of the federal legislation that allows the concurrent operation of both laws; however, where the proper meaning of the provision cannot support a harmonious interpretation, it is beyond a court’s power to create harmony where Parliament did not intend it.

                    In the instant case, reliance on cooperative federalism must not result in an interpretation of s. 14.06(4)  of the BIA  that is inconsistent with its language, context and purpose. The natural meaning which appears when s. 14.06(4) is simply read through is that it assumes and incorporates a pre‑existing common law right to disclaim property in the context of bankruptcy and insolvency. This right is in keeping with the fundamental objective of trustees, which is the maximization of recovery for creditors as a whole by realizing the estate’s valuable assets. It enables trustees to administer the estate in the most efficient manner and to avoid significant costs of administration that would reduce creditor recovery. Section 14.06(4) expresses the disclaimer right in unqualified terms and emphasizes that a trustee may not be held liable whenever that right is exercised. Parliament did not intend to condition the right to disclaim property on the actual existence of a risk of personal liability. Although the opening words of s. 14.06(4) refer to the personal liability of the trustee, when the words of the provision are read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament, their meaning becomes apparent. Avoiding personal liability is not the only effect of the appropriate exercise of this power. By properly disclaiming certain properties, the trustee is relieved of any liabilities associated with the disclaimed property and loses the ability to sell it for the benefit of the estate. The disclaimer right allows the trustee not to realize assets that would provide no value to the estate’s creditors and whose realization would therefore undermine the trustee’s objective of maximizing recovery. However, s. 14.06(4) does not relieve the estate of its liabilities or environmental obligations once a trustee exercises the disclaimer power. The disclaimed property ultimately reverts to the estate at the conclusion of the bankruptcy proceedings, as is the case with unrealized assets. Whether the estate has sufficient assets capable of satisfying those liabilities at that point in time is a separate question that is unrelated to the underlying fact of ongoing liability.

                    In accordance with the predominant and well‑established modern approach to statutory interpretation, courts must read statutory provisions in their entire context, as parts of a coherent whole. In s. 14.06(4)  of the BIA , Parliament has expressly referred to this disclaimer power and spelled out the particular effects flowing from its proper exercise. By doing so, it has purposefully incorporated the disclaimer power into its statutory scheme to achieve its desired purpose. Courts must read statutory provisions in their entire context, and Parliament is presumed to craft sections and subsections of legislation as parts of a coherent whole. The immediate statutory context surrounding s. 14.06(4), specifically, ss. 14.06(2), (5), (6) and (7), as well as the Hansard evidence, confirms that a trustee’s right to disclaim property is not limited to protecting itself from personal liability.

                    The power to disclaim assets provided to trustees by s. 14.06(4)  of the BIA  was available to GTL on the facts of this case. The statutory conditions to the exercise of this power were met: the Abandonment Orders clearly relate to the remediation of an environmental condition. Additionally, the right of disclaimer is applicable in the context of the statutory regime governing the oil and gas industry. In delineating what interests may be disclaimed by a trustee under s. 14.06(4), Parliament used exceptionally broad language: the trustee is permitted to disclaim “any interest” in “any real property”. GTL sought to disclaim profits à prendre and surface leases, which can be characterized as real property interests.

                    The requirement by the Regulator that GTL satisfy Redwater’s environmental liabilities ahead of the estate’s other debts contravenes the BIA ’s priority scheme. The Province’s licensing scheme therefore should be held inoperative under the second prong of the paramountcy test, frustration of purpose. Even where dual compliance with both federal and provincial law is, strictly speaking, possible, provincial legislation or provisions will be rendered inoperative to the extent that they have the effect of frustrating a valid federal legislative purpose. The focus of the analysis is on the effect of the provincial legislation or provision, not its purpose. In the instant case, if the environmental claims asserted by the Regulator (i.e., the Abandonment Orders) are provable in bankruptcy, the Regulator will not be permitted to assert those claims outside the bankruptcy process and ahead of Redwater’s secured creditors because this would frustrate the purpose of the federal priority scheme.

                    In Abitibi, the Court established a three‑part test, rooted in the language of the BIA , to determine whether a claim is provable in bankruptcy. The first prong of the Abitibi test asks whether the debt, liability or obligation at issue is owed by a bankrupt entity to a creditor. The language of Abitibi admits of no ambiguity, uncertainty or doubt: the only determination that has to be made is whether the regulatory body has exercised its enforcement power against a debtor. Most environmental regulatory bodies can be creditors, and government entities cannot systematically evade the priority requirements of federal bankruptcy legislation under the guise of enforcing public duties. In the instant case, the first prong is satisfied. There is no doubt that the Regulator exercised its enforcement power against a debtor when it issued orders requiring Redwater to perform the environmental work on the non‑producing properties. It is neither appropriate nor necessary in this case to attempt to redefine the first prong of the Abitibi test by narrowing the broad definition of “creditor” as the majority does.

                    There is no dispute that the second prong of the Abitibi test, which requires that the debt, liability or obligation be incurred before the debtor becomes bankrupt, is satisfied. The third prong asks whether it is sufficiently certain that the regulator will perform the work and make a claim for reimbursement. In this case, it is sufficiently certain that either the Regulator or its delegate, the OWA, will ultimately perform the abandonment and reclamation work and assert a monetary claim for reimbursement. Therefore, the final prong of the Abitibi test is satisfied. The chambers judge made three critical findings of fact that easily support this conclusion. First, he found that GTL was not in possession of the disclaimed properties and, in any event, had no ability to perform any kind of work on these assets because the environmental liabilities exceeded the value of the estate itself and Redwater had no working interest participants that would step in to perform the work. As a result, he concluded that there was no other party who could be compelled to carry out the work. Second, in light of the fact that neither GTL nor Redwater’s working interest participants would (or could) undertake this work, the chambers judge found as a fact that the Regulator will ultimately be responsible for the abandonment costs, since it has the power to seek recovery of abandonment costs and has actually performed the work on occasion, and has expressly stated an intention to seek reimbursement for the costs of abandoning the renounced assets. Third, the chambers judge found that the Regulator’s only realistic alternative to performing the remediation work itself was to deem the renounced assets to be orphan wells. In this circumstance, he found that the legislation and evidence shows that if the Regulator deems a well an orphan, then the OWA will perform the work. In light of these factual determinations, the chambers judge rightly concluded that the sufficient certainty standard of Abitibi was satisfied because at a minimum, either the Regulator or the OWA will complete the abandonment work.

                    The majority elevates form over substance in concluding that the sufficient certainty standard is not satisfied when a regulatory body’s delegate, as opposed to the regulatory body itself, performs the work. Considering the salient features of the OWA and its relationship with the Regulator, one must conclude that they are inextricably intertwined. When the Regulator exercises its statutory powers to declare a property an “orphan” under s. 70(2) of Alberta’s Oil and Gas Conservation Act, it effectively delegates the abandonment work to the OWA. The majority’s alternative conclusion that it is not sufficiently certain that even the OWA will perform the abandonment work would permit the Regulator to benefit from strategic gamesmanship by manipulating the timing of its intervention in order to escape the insolvency regime and strip Redwater of its assets.

                    Since it is sufficiently certain that the Regulator (or the OWA, as its delegate) will complete the abandonment and reclamation work, all three prongs of the Abitibi test are satisfied. The Regulator’s Abandonment Orders constitute “claims provable in bankruptcy”. It would undermine the BIA ’s priority scheme and therefore frustrate an essential purpose of the BIA  if the Regulator could assert those claims outside the bankruptcy process — and ahead of the estate’s secured creditors — whether by compelling GTL to carry out those orders or by making the sale of Redwater’s valuable assets conditional on the fulfillment of those obligations.

Cases Cited

By Wagner C.J.

                    Applied: Panamericana de Bienes y Servicios S.A. v. Northern Badger Oil & Gas Ltd., 1991 ABCA 181, 81 Alta. L.R. (2d) 45; Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443; approved: Nortel Networks Corp., Re, 2013 ONCA 599, 368 D.L.R. (4th) 122; Strathcona (County) v. Fantasy Construction Ltd. (Trustee of), 2005 ABQB 559, 256 D.L.R. (4th) 536; distinguished: Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327; Northstar Aerospace Inc., Re, 2013 ONCA 600, 8 C.B.R. (6th) 154; referred to: Berkheiser v. Berkheiser, [1957] S.C.R. 387; Imperial Oil Ltd. v. Quebec (Minister of the Environment), 2003 SCC 58, [2003] 2 S.C.R. 624; Peters v. Remington, 2004 ABCA 5, 49 C.B.R. (4th) 273; Garner v. Newton (1916), 29 D.L.R. 276; Nortel Networks Corp., Re, 2012 ONSC 1213, 88 C.B.R. (5th) 111; Husky Oil Operations Ltd. v. Minister of National Revenue, [1995] 3 S.C.R. 453; Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd., 2015 SCC 53, [2015] 3 S.C.R. 419; Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161; Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3; Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R. 536; GMAC Commercial Credit Corp. — Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123; Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601; New Skeena Forest Products Inc. v. Don Hull & Sons Contracting Ltd., 2005 BCCA 154, 251 D.L.R. (4th) 328; Ocean Port Hotel Ltd. v. British Columbia (General Manager, Liquor Control and Licensing Branch), 2001 SCC 52, [2001] 2 S.C.R. 781; M. v. H., [1999] 2 S.C.R. 3; R. v. Sappier, 2006 SCC 54, [2006] 2 S.C.R. 686; R. v. Elshaw, [1991] 3 S.C.R. 24; AbitibiBowater Inc., Re, 2010 QCCS 1261, 68 C.B.R. (5th) 1; Strathcona (County) v. Fantasy Construction Ltd. (Trustee of), 2005 ABQB 794, 261 D.L.R. (4th) 221; Lamford Forest Products Ltd. (Re) (1991), 86 D.L.R. (4th) 534; Daishowa‑Marubeni International Ltd. v. Canada, 2013 SCC 29, [2013] 2 S.C.R. 336; Alberta Energy Regulator v. Grant Thornton Limited, 2017 ABCA 278, 57 Alta. L.R. (6th) 37.

By Côté J. (dissenting)

                    Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443; Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327; Husky Oil Operations Ltd. v. Minister of National Revenue, [1995] 3 S.C.R. 453; Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd., 2015 SCC 53, [2015] 3 S.C.R. 419; Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3; Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161; Reference re Pan‑Canadian Securities Regulation, 2018 SCC 48, [2018] 3 S.C.R. 189; Canadian Pacific Air Lines Ltd. v. Canadian Air Line Pilots Assn., [1993] 3 S.C.R. 724; New Skeena Forest Products Inc. v. Don Hull & Sons Contracting Ltd., 2005 BCCA 154, 251 D.L.R. (4th) 328; Re Thompson Knitting Co., Ltd., [1925] 2 D.L.R. 1007; Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559; Attorney General of Quebec v. Carrières Ste‑Thérèse Ltée, [1985] 1 S.C.R. 831; Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85; GMAC Commercial Credit Corp. — Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; Panamericana de Bienes y Servicios S.A. v. Northern Badger Oil & Gas Ltd., 1991 ABCA 181, 81 D.L.R. (4th) 280; Canada (Attorney General) v. JTI‑Macdonald Corp., 2007 SCC 30, [2007] 2 S.C.R. 610; Morgentaler v. The Queen, [1976] 1 S.C.R. 616; R. v. L.T.H., 2008 SCC 49, [2008] 2 S.C.R. 739; Bank of Montreal v. Hall, [1990] 1 S.C.R. 121; Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, [2010] 3 S.C.R. 379; Teva Canada Ltd. v. TD Canada Trust, 2017 SCC 51, [2017] 2 S.C.R. 317; Canada v. Craig, 2012 SCC 43, [2012] 2 S.C.R. 489; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Nortel Networks Corp., Re, 2013 ONCA 599, 6 C.B.R. (6th) 159; Northstar Aerospace Inc., Re, 2013 ONCA 600, 8 C.B.R. (6th) 154; Sydco Energy Inc. (Re), 2018 ABQB 75, 64 Alta. L.R. (6th) 156.

Statutes and Regulations Cited

Alberta Energy Regulator Administration Fees Rules, Alta. Reg. 98/2013.

Bankruptcy and Insolvency Act , R.S.C. 1985, c. B‑3, ss. 2  “claim provable in bankruptcy, provable claim or claim provable”, “creditor”, 14.06, (2), (4) [am. 1997, c. 12, s. 15(1)], 16 to 38, 40, 69.3(1), (2), 72(1), 80, 121 to 154, 169(4), 197(3).

Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C‑36, s. 11.8(8) .

Conservation and Reclamation Regulation, Alta. Reg. 115/93.

Constitution Act, 1867 , ss. 91(21) , 92(13) , 92A(1) (c).

Environmental Protection and Enhancement Act, R.S.A. 2000, c. E‑12, ss. 1(ddd), 112 to 122, 134(b), 137, 140, 142(1)(a)(ii), 227 to 230, 240, 245.

Oil and Gas Conservation Act, R.S.A. 2000, c. O‑6, ss. 1(1)(a), (w), (cc), (eee), 11(1), 12(1), 18(1), 24(2), 25, 27 to 30, 68(d), 70(1), (2), 73(1), (2), 74, 106, 108, 110.

Oil and Gas Conservation Rules, Alta. Reg. 151/71, ss. 1.100(2), 3.012.

Orphan Fund Delegated Administration Regulation, Alta. Reg. 45/2001, ss. 3(2)(b), 6.

Pipeline Act, R.S.A. 2000, c. P‑15, ss. 1(1)(a), (n), (t), 6(1), 9(1), 23 to 26, 51 to 54.

Responsible Energy Development Act, S.A. 2012, c. R‑17.3, ss. 2(1)(a), 2(2)(h), 3(1), 28, 29.

Surface Rights Act, R.S.A. 2000, c. S‑24, ss. 1(h), 15.

Authors Cited

Alberta. Energy Resources Conservation Board. Directive 006: Licensee Liability Rating (LLR) Program and Licence Transfer Process, March 12, 2013.

Alberta Energy Regulator. Licensee Eligibility — Alberta Energy Regulator Measures to Limit Environmental Impacts Pending Regulatory Changes to Address the Redwater Decision, June 20, 2016 (online: https://www.aer.ca/documents/bulletins/Bulletin-2016-16.pdf; archived version: https://www.scc-csc.ca/cso-dce/2019SCC-CSC5_1_eng.pdf).

Bankes, Nigel. Majority of the Court of Appeal Confirm Chief Justice Wittmann’s Redwater Decision, May 3, 2017 (online: https://ablawg.ca/2017/05/03/majority-of-the-court-of-appeal-confirms-chief-justice-wittmanns-redwater-decision; archived version: https://www.scc-csc.ca/cso-dce/2019SCC-CSC5_2_eng.pdf).

Bennett, Frank. Bennett on Creditors’ and Debtors’ Rights and Remedies, 5th ed. Toronto: Thomson Carswell, 2006.

Canada. House of Commons. Standing Committee on Industry. Evidence, No. 16, 2nd Sess., 35th Parl., June 11, 1996.

Canada. House of Commons. Standing Committee on Industry. Evidence, No. 21, 2nd Sess., 35th Parl., September 25, 1996.

Canada. Senate. Proceedings of the Standing Senate Committee on Banking, Trade and Commerce, No. 13, 2nd Sess., 35th Parl., November 4, 1996.

Goode, Roy. Principles of Corporate Insolvency Law, 4th ed. London: Sweet & Maxwell/Thomson Reuters, 2011.

Grand Robert de la langue française, 2^e éd. Paris: Le Robert, 2001, “ès”.

Klimek, Jennifer. Insolvency and Environment Liability. Toronto: Carswell, 1994.

Lederman, Sidney N., Alan W. Bryant and Michelle K. Fuerst. The Law of Evidence in Canada, 5th ed. Markham, Ont.: LexisNexis, 2018.

Lund, Anna J. “Lousy Dentists, Bad Drivers, and Abandoned Oil Wells: a New Approach to Reconciling Provincial Regulatory Regimes with Federal Insolvency Law” (2017), 80 Sask. L. Rev. 157.

Oxford English Dictionary (online: http://www.oed.com), “probably”.

Robert & Collins (online: https://grc.bvdep.com/login_.asp), “ès qualités”.

Silverstein, Lee. “Rejection of Executory Contracts in Bankruptcy and Reorganization” (1964), 31 U. Chi. L. Rev. 467.

Stewart, Fenner L. “How to Deal with a Fickle Friend? Alberta’s Troubles with the Doctrine of Federal Paramountcy”, in Janis P. Sarra and Barbara Romaine, eds., Annual Review of Insolvency Law 2017. Toronto: Thomson Reuters, 2018, 163.

Sullivan, Ruth. Statutory Interpretation, 3rd ed. Toronto: Irwin Law, 2016.

Sullivan, Ruth. Sullivan on the Construction of Statutes, 6th ed. Markham, Ont.: LexisNexis, 2014.

                    APPEAL from a judgment of the Alberta Court of Appeal (Slatter, Schutz and Martin JJ.A.), 2017 ABCA 124, 47 C.B.R. (6th) 171, [2017] 6 W.W.R. 301, 8 C.E.L.R. (4th) 1, 50 Alta. L.R. (6th) 1, [2017] A.J. No. 402 (QL), 2017 CarswellAlta 695 (WL Can.), affirming a decision of Wittmann C.J., 2016 ABQB 278, 37 C.B.R. (6th) 88, [2016] 11 W.W.R. 716, 33 Alta. L.R. (6th) 221, [2016] A.J. No. 541 (QL), 2016 CarswellAlta 994 (WL Can.). Appeal allowed, Moldaver and Côté JJ. dissenting.

                    Ken Lenz, Q.C., Patricia Johnston, Q.C., Keely R. Cameron, Brad Gilmour and Michael W. Selnes, for the appellants.

                    Kelly J. Bourassa, Jeffrey Oliver, Tom Cumming, Ryan Zahara, Danielle Maréchal, Brendan MacArthur‑Stevens and Chris Nyberg, for the respondents.

                    Josh Hunter and Hayley Pitcher, for the intervener the Attorney General of Ontario.

                    Gareth Morley, Aaron Welch and Barbara Thomson, for the intervener the Attorney General of British Columbia.

                    Richard James Fyfe, for the intervener the Attorney General of Saskatchewan.

                    Robert Normey and Vivienne Ball, for the intervener the Attorney General of Alberta.

                    Adrian Scotchmer, for the intervener Ecojustice Canada Society.

                    Lewis Manning and Toby Kruger, for the intervener the Canadian Association of Petroleum Producers.

                    Nader R. Hasan and Lindsay Board, for the intervener Greenpeace Canada.

                    Christine Laing and Shaun Fluker, for the intervener Action Surface Rights Association.

                    Caireen E. Hanert and Adam Maerov, for the intervener the Canadian Association of Insolvency and Restructuring Professionals.

                    Howard A. Gorman, Q.C., and D. Aaron Stephenson, for the intervener the Canadian Bankers’ Association.

                    The judgment of Wagner C.J. and Abella, Karakatsanis, Gascon and Brown JJ. was delivered by

                    The Chief Justice —

I.                   Introduction

[1]                              The oil and gas industry is a lucrative and important component of Alberta’s and Canada’s economy. The industry also carries with it certain unavoidable environmental costs and consequences. To address them, Alberta has established a comprehensive cradle-to-grave licensing regime that is binding on companies active in the industry. A company will not be granted the licences that it needs to extract, process or transport oil and gas in Alberta unless it assumes end-of-life responsibilities for plugging and capping oil wells to prevent leaks, dismantling surface structures and restoring the surface to its previous condition. These obligations are known as “reclamation” and “abandonment” (Environmental Protection and Enhancement Act, R.S.A. 2000, c. E-12 (“EPEA”), s. 1(ddd), and Oil and Gas Conservation Act, R.S.A. 2000, c. O-6 (“OGCA”), s. 1(1)(a)).

[2]                              The question in this appeal is what happens to these obligations when a company is bankrupt and a trustee in bankruptcy is charged with distributing its assets among various creditors according to the rules in the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3  (“BIA ”). Redwater Energy Corporation (“Redwater”) is the bankrupt company at the centre of this appeal. Its principal assets are 127 oil and gas assets — wells, pipelines and facilities — and their corresponding licences. A few of Redwater’s licensed wells are still producing and profitable. The majority of the wells are spent and burdened with abandonment and reclamation liabilities that exceed their value.

[3]                              The Alberta Energy Regulator (“Regulator”) and the Orphan Well Association (“OWA”) are the appellants in this Court. (For simplicity, I will refer to the Regulator when discussing the appellants’ position, unless otherwise noted.) The Regulator administers Alberta’s licensing regime and enforces the abandonment and reclamation obligations of licensees. The Regulator has delegated to the OWA, an independent non-profit entity, the authority to abandon and reclaim “orphans”, which are oil and gas assets and their sites left behind in an improperly abandoned or unreclaimed state by defunct companies at the close of their insolvency proceedings. The Regulator says that, one way or another, the remaining value of the Redwater estate must be applied to meet the abandonment and reclamation obligations associated with its licensed assets.

[4]                              Redwater’s trustee in bankruptcy, Grant Thornton Limited (“GTL”), and Redwater’s primary secured creditor, Alberta Treasury Branches (“ATB”), oppose the appeal. (For simplicity, I will refer to GTL when discussing the respondents’ position, unless otherwise noted.) GTL argues that, since it has disclaimed Redwater’s unproductive oil and gas assets, s. 14.06(4)  of the BIA  empowers it to walk away from those assets and the environmental liabilities associated with them and to deal solely with Redwater’s producing oil and gas assets. Alternatively, GTL argues that, under the priority scheme in the BIA , the claims of Redwater’s secured creditors must be satisfied ahead of Redwater’s environmental liabilities. Relying on the doctrine of paramountcy, GTL says that Alberta’s environmental legislation regulating the oil and gas industry is constitutionally inoperative to the extent that it authorizes the Regulator to interfere with this arrangement.

[5]                              The chambers judge (2016 ABQB 278, 37 C.B.R. (6th) 88) and a majority of the Court of Appeal (2017 ABCA 124, 47 C.B.R. (6th) 171) agreed with GTL. The Regulator’s proposed use of its statutory powers to enforce Redwater’s compliance with abandonment and reclamation obligations during bankruptcy was held to conflict with the BIA  in two ways: (1) it imposed on GTL the obligations of a licensee in relation to the Redwater assets disclaimed by GTL, contrary to s. 14.06(4)  of the BIA ; and (2) it upended the priority scheme for the distribution of a bankrupt’s assets established by the BIA  by requiring that the “provable claims” of the Regulator, an unsecured creditor, be paid ahead of the claims of Redwater’s secured creditors.

[6]                              Martin J.A., as she then was, dissented. She would have allowed the Regulator’s appeal on the basis that there was no conflict between Alberta’s environmental legislation and the BIA . Martin J.A. was of the view that: (1) s. 14.06  of the BIA  did not operate to relieve GTL of Redwater’s obligations with respect to its licensed assets; and (2) the Regulator was not asserting any provable claims, so the priority scheme in the BIA  was not upended.

[7]                              For the reasons that follow, I would allow the appeal. Although my analysis differs from hers in some respects, I agree with Martin J.A. that the Regulator’s use of its statutory powers does not create a conflict with the BIA  so as to trigger the doctrine of federal paramountcy. Section 14.06(4) is concerned with the personal liability of trustees, and does not empower a trustee to walk away from the environmental liabilities of the estate it is administering. The Regulator is not asserting any claims provable in the bankruptcy, and the priority scheme in the BIA  is not upended. Thus, no conflict is caused by GTL’s status as a licensee under Alberta legislation.  Alberta’s regulatory regime can coexist with and apply alongside the BIA .

II.                Background

A.                Alberta’s Regulatory Regime

[8]                              The resolution of the constitutional questions and the ultimate outcome of this appeal depend on a proper understanding of the complex regulatory regime which governs Alberta’s oil and gas industry. I will therefore describe that regime in considerable detail.

[9]                              In order to exploit oil and gas resources in Alberta, a company needs three things: a property interest in the oil or gas, surface rights and a licence issued by the Regulator. In Alberta, mineral rights are typically reserved from ownership rights in land. About 90 percent of Alberta’s mineral rights are held by the Crown on behalf of the public.

[10]                          A company’s property interest in the oil or gas it seeks to exploit typically takes the form of a mineral lease with the Crown (but occasionally with a private owner). The company also needs surface rights so it can access and occupy the physical land located above the oil and gas and place the equipment needed to pump, store and haul away the oil and gas. Surface rights may be obtained through a lease with the landowner, who is often a farmer or rancher (but is occasionally the Crown). Where a landowner does not voluntarily grant surface rights, Alberta law authorizes the Surface Rights Board to issue a right of entry order in favour of an “operator”, that is, the person having the right to a mineral or the right to work it (Surface Rights Act, R.S.A. 2000, c. S-24, ss. 1(h) and 15).

[11]                          Canadian courts characterize a mineral lease that allows a company to exploit oil and gas resources as a profit à prendre. It is not disputed that a profit à prendre is a form of real property interest held by the company (Berkheiser v. Berkheiser, [1957] S.C.R. 387). A profit à prendre is fully assignable and has been defined as “a non-possessory interest in land, like an easement, which can be passed on from generation to generation, and remains with the land, regardless of changes in ownership” (F. L. Stewart, “How to Deal with a Fickle Friend? Alberta’s Troubles with the Doctrine of Federal Paramountcy”, in J. P. Sarra and B. Romaine, eds., Annual Review of Insolvency Law 2017 (2018), 163 (“Stewart”), at p. 193). Solvent and insolvent companies alike will often hold profits à prendre in both producing and unproductive or spent wells. There are a variety of potential “working interest” arrangements whereby several parties can share an interest in oil and gas resources.

[12]                          The third thing a company needs in order to access and exploit Alberta’s oil and gas resources, and the one most germane to this appeal, is a licence issued by the Regulator. The OGCA prohibits any person without a licence from commencing to drill a well or undertaking any operations preparatory or incidental to the drilling of a well, and from commencing to construct or operate a facility (ss. 11(1) and 12(1)). The Pipeline Act, R.S.A. 2000, c. P-15, similarly prohibits the construction of pipelines without a licence (s. 6(1)). The profit à prendre in an oil and gas deposit may be bought and sold without regulatory approval. However, it is of little practical use on its own, as, without the licence associated with a well, the purchaser cannot “continue any drilling operations, any producing operations or any injecting operations” (OGCA, s. 11(1)), and, without the licence associated with a facility, the purchaser cannot “continue any construction or operation” (OGCA, s. 12(1)). 

[13]                          The three relevant licensed assets in the Alberta oil and gas industry are wells, facilities and pipelines. A “well” is defined, inter alia, as “an orifice in the ground completed or being drilled . . . for the production of oil or gas” (OGCA, s. 1(1)(eee)). A “facility” is broadly defined and includes any building, structure, installation or equipment that is connected to or associated with the recovery, development, production, handling, processing, treatment or disposal of oil and gas resources (OGCA, s. 1(1)(w)). A “pipeline” is defined as “a pipe used to convey a substance or combination of substances”, including associated installations (Pipeline Act, s. 1(1)(t)).

[14]                          The licences a company needs to recover, process and transport oil and gas are issued by the Regulator. The Regulator is not an agent of the Crown. It is established as a corporation by s. 3(1) of the Responsible Energy Development Act, S.A. 2012, c. R-17.3 (“REDA”). It exercises a wide range of powers under the OGCA and the Pipeline Act. It also acts as the regulator in respect of energy resource activities under the EPEA, Alberta’s more general environmental protection legislation (REDA, s. 2(2)(h)). The Regulator’s mandate is set out in the REDA and includes “the efficient, safe, orderly and environmentally responsible development of energy resources in Alberta” (s. 2(1)(a)). The Regulator is funded almost entirely by the industry it regulates, and it collects its budget through an administration fee (Stewart, at p. 219; REDA, ss. 28 and 29; Alberta Energy Regulator Administration Fees Rules, Alta. Reg. 98/2013).

[15]                          The Regulator has a wide discretion when it comes to granting licences to operate wells, facilities and pipelines. On receiving an application for a licence, the Regulator may grant the licence subject to any conditions, restrictions and stipulations, or it may refuse the licence (OGCA, s. 18(1); Pipeline Act, s. 9(1)). Licences to operate a well, facility or pipeline are granted subject to obligations that will one day arise to abandon the underlying asset and reclaim the land on which it is situated.

[16]                          “Abandonment” refers to “the permanent dismantlement of a well or facility in the manner prescribed by the regulations or rules” made by the Regulator (OGCA, s. 1(1)(a)). Specifically, the abandonment of a well has been defined as “the process of sealing a hole which has been drilled for oil or gas, at the end of its useful life, to render it environmentally safe” (Panamericana de Bienes y Servicios S.A. v. Northern Badger Oil & Gas Ltd., 1991 ABCA 181, 81 Alta. L.R. (2d) 45 (“Northern Badger”), at para. 2). The abandonment of a pipeline refers to its “permanent deactivation . . . in the manner prescribed by the rules” (Pipeline Act, s. 1(1)(a)). “Reclamation” includes “the removal of equipment or buildings”, “the decontamination of buildings . . . land or water”, and the “stabilization, contouring, maintenance, conditioning or reconstruction of the surface of the land” (EPEA, s. 1(ddd)). A further duty binding on those active in the Alberta oil and gas industry is remediation, which arises where a harmful or potentially harmful substance has been released into the environment (EPEA, ss. 112 to 122). As the extent of any remediation obligations that may be associated with Redwater assets is unclear, I will not refer to remediation separately from reclamation, unless otherwise noted. As has been done throughout this litigation, I will refer to abandonment and reclamation jointly as end-of-life obligations.

[17]                          A licensee must abandon a well or facility when ordered to do so by the Regulator or when required by the rules or regulations. The Regulator may order abandonment when “the Regulator considers that it is necessary to do so in order to protect the public or the environment” (OGCA, s. 27(3)). Under the rules, a licensee is required to abandon a well or facility, inter alia, on the termination of the mineral lease, surface lease or right of entry, where the Regulator cancels or suspends the licence, or where the Regulator notifies the licensee that the well or facility may constitute an environmental or safety hazard (Oil and Gas Conservation Rules, Alta. Reg. 151/71, s. 3.012). Section 23 of the Pipeline Act requires licensees to abandon pipelines in similar situations. The duty to reclaim is established by s. 137 of the EPEA. This duty is binding on an “operator”, a broader term which encompasses the holder of a licence issued by the Regulator (EPEA, s. 134(b)). Reclamation is governed by the procedural requirements set out in regulations (Conservation and Reclamation Regulation, Alta. Reg. 115/93).

[18]                          The Licensee Liability Rating Program, which was, at the time of Redwater’s insolvency, set out in Directive 006: Licensee Liability Rating (LLR) Program and License Transfer  Process (March 12, 2013) (“Directive 006”) is one means by which the Regulator seeks to ensure that end-of-life obligations will be satisfied by licensees rather than being offloaded onto the Alberta public. As part of this program, the Regulator assigns each company a Liability Management Rating (“LMR”), which is the ratio between the aggregate value attributed by the Regulator to a company’s licensed assets and the aggregate liability attributed by the Regulator to the eventual cost of abandoning and reclaiming those assets. For the purpose of calculating the LMR, all the licences held by a given company are treated as a package, without any segregation or parcelling of assets. A licensee’s LMR is calculated on a monthly basis and, where it dips below the prescribed ratio (1.0 at the time of Redwater’s insolvency), the licensee is required to pay a security deposit. The security deposit is added to the licensee’s “deemed assets” and must bring its LMR back up to the ratio prescribed by the Regulator. If the required security deposit is not paid, the Regulator may cancel or suspend the company’s licences (OGCA, s. 25). As an alternative to posting security, the licensee can perform end-of-life obligations or transfer licences (with approval) in order to bring its LMR back up to the prescribed level. 

[19]                          Licences can be transferred only with the Regulator’s approval. The Regulator uses the Licensee Liability Rating Program to ensure that end-of-life obligations will not be negatively affected by licence transfers. Upon receipt of an application to transfer one or more licences, the Regulator assesses how the transfer, if approved, would affect the LMR of both the transferor and the transferee. At the time of Redwater’s insolvency, if both the transferor and the transferee would have a post-transfer LMR equal to or exceeding 1.0, the Regulator would approve the transfer, absent other concerns. Following the chambers judge’s decision in this case, the Regulator implemented changes to its policies, including the requirement that transferees have an LMR of 2.0 or higher immediately following any licence transfer: Alberta Energy Regulator, Licensee Eligibility — Alberta Energy Regulator Measures to Limit Environmental Impacts Pending Regulatory Changes to Address the Redwater Decision, June 20, 2016 (online). For the purposes of this appeal, I will be referring to the regulatory regime as it existed at the time of Redwater’s insolvency. 

[20]                          As discussed in greater detail below, if either the transferor or the transferee would have a post-transfer LMR below 1.0, the Regulator would refuse to approve the licence transfer. In such a situation, the Regulator would insist on certain remedial steps being taken to ensure that neither LMR would drop below 1.0. Although Directive 006, as it was in the 2013 version, required both the transferee and transferor to have a post transfer LMR of at least 1.0, during this litigation, the Regulator stated that, when licensees are in receivership or bankruptcy, its working rule is to approve transfers as long as they do not cause a deterioration in the transferor’s LMR, even where its LMR will remain below 1.0 following the transfer. The explanation for this working rule is that it helps to facilitate purchases. The Regulator’s position is that the Licensee Liability Rating Program continues to apply to the transfer of licences as part of insolvency proceedings.

[21]                          The OGCA, the Pipeline Act and the EPEA all contemplate that a licensee’s regulatory obligations will continue to be fulfilled when it is subject to insolvency proceedings. The EPEA achieves this by including the trustee of a licensee in the definition of “operator” for the purposes of the duty to reclaim (s. 134(b)(vi)). The EPEA also specifically provides that an order to perform reclamation work (known as an “environmental protection order”) may be issued to a trustee (ss. 140 and 142(1)(a)(ii)). The EPEA imposes responsibility for carrying out the terms of an environmental protection order on the person to whom the order is directed (ss. 240 and 245). However, absent gross negligence or wilful misconduct, a trustee’s liability in relation to such an order is expressly limited to the value of the assets in the bankrupt estate (s. 240(3)). The OGCA and the Pipeline Act take a more generic approach to applying the various obligations of licensees to trustees in the insolvency context: they simply include trustees in the definition of “licensee” (OGCA, s. 1(1)(cc); Pipeline Act, s. 1(1)(n)). As a result, every power which these Acts give the Regulator against a licensee can theoretically also be exercised against a trustee.

[22]                          Despite this, Alberta’s regulatory regime does contemplate the possibility that some of a licensee’s end-of-life obligations will remain unfulfilled when the insolvency process has run its course. The Regulator may designate wells, facilities, and their sites as “orphans” (OGCA, s. 70(2)(a)). A pipeline is defined as a “facility” for the purposes of the orphan regime (OGCA, s. 68(d)). Directive 006 stated that “a well, facility, or pipeline in the LLR program is eligible to be declared an orphan where the licensee of that licence becomes insolvent or defunct” (s. 7.1). An “orphan fund” has been established for the purpose of paying for, inter alia, the abandonment and reclamation of orphans (OGCA, s. 70(1)). The orphan fund is financed by an annual industry-wide levy paid by licensees of wells, facilities and unreclaimed sites (s. 73(1)). The amount of the levy is prescribed by the Regulator based on the estimated cost of abandoning and reclaiming orphans in a given fiscal year (s. 73(2)).

[23]                          The Regulator has delegated its statutory authority to abandon and reclaim orphans to the OWA (Orphan Fund Delegated Administration Regulation, Alta. Reg. 45/2001), a non-profit organization overseen by an independent board of directors. It is funded almost entirely through the industry-wide levy described above, 100 percent of which is remitted to it by the Regulator. The OWA has no power to seek reimbursement of its costs. However, once it has completed its environmental work, it may be reimbursed up to the value of any security deposit held by the Regulator to the credit of the licensee of the orphans. In recent years, the number of orphans in Alberta has increased rapidly. For example, the number of new orphan wells increased from 80 in the 2013-14 years to 591 in the 2014-15 years.

[24]                          At issue in this appeal is the applicability during bankruptcy of two powers conferred on the Regulator by the provincial legislation. Both are designed to ensure that licensees satisfy their end-of-life obligations.

[25]                          The first power at issue in this appeal is the Regulator’s power to order a licensee to abandon licensed assets, which is accompanied by statutory powers for the enforcement of such orders. Where a well or facility has not been abandoned in accordance with a direction of the Regulator or the rules or regulations, the Regulator may authorize any person to abandon the well or facility or may do so itself (OGCA, s. 28). Where the Regulator or the person it has designated performs the abandonment, the costs of doing so constitute a debt payable to the Regulator. An order of the Regulator showing these costs may be filed with and entered as a judgment of the Alberta Court of Queen’s Bench and then enforced according to the ordinary procedure for enforcement of judgments of that court (OGCA, s. 30(6)). A similar scheme applies with respect to pipelines (Pipeline Act, ss. 23 to 26).

[26]                          A licensee that contravenes or fails to comply with an order of the Regulator, or that has an outstanding debt to the Regulator in respect of abandonment or reclamation costs, is subject to a number of potential enforcement measures. The Regulator may suspend operations, refuse to consider licence applications or licence transfer applications (OGCA, s. 106(3)(a), (b) and (c)), or require the payment of security deposits, generally or as a condition of granting any further licences, approvals or transfers (OGCA, s. 106(3)(d) and (e)). Where a licensee contravenes the Act, regulations or rules, any order or direction of the Regulator, or any condition of a licence, the Regulator may prosecute the licensee for a regulatory offence and a fine may be imposed as a penalty, although the licensee can raise a due diligence defence (OGCA, ss. 108 and 110). A similar scheme applies with respect to pipelines (Pipeline Act, ss. 51 to 54) and the EPEA contains similar debt-creating provisions with respect to environmental protection orders. The EPEA also provides for the prosecution of regulatory offences in cases of non-compliance, with an available due diligence defence. However, as noted, a trustee’s liability in relation to environmental protection orders is capped at estate assets, unless the trustee is guilty of gross negligence or wilful misconduct (EPEA, ss. 227 to 230, 240 and 245).

[27]                          The second power at issue in this appeal is the Regulator’s power to impose conditions on a licensee’s transfer of its licence(s). As when it initially grants a licence, the Regulator has broad powers to consent to the transfer of a licence subject to any conditions, restrictions and stipulations or to reject the transfer (OGCA, s. 24(2)). Under Directive 006 and its 2016 replacement, the Regulator can reject a transfer even where both parties would have the required LMR after the transfer or where a security deposit is available to be posted in compliance with LMR requirements. In particular, the Regulator may determine that it is not in the public interest to approve the licence transfer based on the compliance history of one or both parties or their directors, officers or security holders, or based on the risk posed by the transfer to the orphan fund.

[28]                          Where a proposed transaction would cause the transferor’s LMR to deteriorate below 1.0 (or simply to deteriorate, in the case of an insolvent transferor), the Regulator insists that one of the following conditions be met before it will approve the transaction: (i) that the transferor perform abandonment, reclamation, or both, thus reducing its deemed liabilities, or (ii) that the transferor post a security deposit, thus increasing its deemed assets. Alternatively, the transaction may be structured to avoid any deterioration of the transferor’s LMR by “bundling” the licences for spent wells with the licences for producing wells. A transaction in which the licenses for spent wells are retained while the licences for producing wells are transferred will almost always cause a considerable deterioration in a company’s LMR.

[29]                          During this appeal, there was significant discussion of other regulatory regimes which Alberta could have adopted to prevent environmental costs associated with the oil and gas industry from being offloaded onto the public. What Alberta has chosen is a licensing regime which makes such costs an inherent part of the value of the licensed assets. This regime has the advantage of aligning with the polluter-pays principle, a well-recognized tenet of Canadian environmental law. This principle assigns polluters the responsibility for remedying environmental damage for which they are responsible, thereby incentivizing companies to pay attention to the environment in the course of their economic activities (Imperial Oil Ltd. v. Quebec (Minister of the Environment), 2003 SCC 58, [2003] 2 S.C.R. 624, at para. 24). The Licensee Liability Rating Program essentially requires licensees to apply the value derived from oil and gas assets during the productive portions of the life cycle of the assets to the inevitable cost of abandoning those assets and reclaiming their sites at the end of those life cycles. 

[30]                          Ultimately, it is not the role of this Court to decide the best regulatory approach to the oil and gas industry. What is not in dispute is that, in adopting its current regulatory regime, Alberta has acted within its constitutional authority over property and civil rights in the province and over the “development, conservation and management of non-renewable natural resources . . .  in the province” (Constitution Act, 1867 , ss. 92(13)  and 92A(1) (c)). Alberta has devised a complex regulatory apparatus to address important policy questions concerning when, by whom and in what manner the inevitable environmental costs associated with oil and gas extraction are to be paid. Its solution is a licensing regime that depresses the value of key industry assets to reflect environmental costs, backstopped by a levy on industry in the form of the orphan fund. Alberta intended that apparatus to continue to operate when an oil and gas company is subject to insolvency proceedings.

[31]                          However, the insolvency of an oil and gas company licensed to operate in Alberta also engages the BIA . The BIA  is federal legislation that governs the administration of a bankrupt’s estate and the orderly and equitable distribution of property among its creditors. It is validly enacted pursuant to Parliament’s constitutional authority over bankruptcy and insolvency (Constitution Act, 1867 , s. 91(21) ). Just as Alberta’s regulatory regime reflects its considered choice about how to address the important policy questions raised by the environmental risks of oil and gas extraction, the BIA  reflects Parliament’s considered choice about how to balance important policy objectives when a bankrupt’s assets are, by definition, insufficient to meet all of its various obligations. To the extent that there is an operational conflict between the Alberta regulatory regime and the BIA , or that the Alberta regulatory regime frustrates the purpose of the BIA , the doctrine of paramountcy dictates that the BIA  must prevail.

B.                 The Relevant Provisions of the BIA

[32]                          Here, I simply wish to note the sections of the BIA  at issue in this appeal. These sections will determine whether the doctrine of paramountcy applies. I will discuss the purposes of the BIA and the various issues raised by s. 14.06 in greater detail below.

[33]                          The central concept of the BIA  is that of a “claim provable in bankruptcy”. Several provisions of the BIA  form the basis for delineating the scope of provable claims. The first is the definition provided in s. 2:

claim provable in bankruptcy, provable claim or claim provable includes any claim or liability provable in proceedings under this Act by a creditor . . .

[34]                          “Creditor” is defined in s. 2 as “a person having a claim provable as a claim under this Act”.

[35]                          The definition of “claim provable” is completed by s. 121(1):

 

All debts and liabilities, present or future, to which the bankrupt is subject on the day on which the bankrupt becomes bankrupt or to which the bankrupt may become subject before the bankrupt’s discharge by reason of any obligation incurred before the day on which the bankrupt becomes bankrupt shall be deemed to be claims provable in proceedings under this Act.

[36]                          A claim may be provable in a bankruptcy proceeding even if it is a contingent claim. A “contingent claim is ‘a claim which may or may not ever ripen into a debt, according as some future event does or does not happen’” (Peters v. Remington, 2004 ABCA 5, 49 C.B.R. (4th) 273, at para. 23, quoting Garner v. Newton (1916), 29 D.L.R. 276 (Man. K.B.), at p. 281). Sections 121(2) and 135(1.1) provide guidance on when a contingent claim will be a provable claim:

121 (2) The determination whether a contingent or unliquidated claim is a provable claim and the valuation of such a claim shall be made in accordance with section 135.

 

. . .

 

135 (1.1) The trustee shall determine whether any contingent claim or unliquidated claim is a provable claim, and, if a provable claim, the trustee shall value it, and the claim is thereafter, subject to this section, deemed a proved claim to the amount of its valuation.

[37]                          In Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443 (“Abitibi”), at para. 26, this Court interpreted the foregoing provisions of the BIA and articulated a three-part test for determining when an environmental obligation imposed by a regulator will be a provable claim for the purposes of the BIA and the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36  (“CCAA ”):

First, there must be a debt, a liability or an obligation to a creditor. Second, the debt, liability or obligation must be incurred before the debtor becomes bankrupt. Third, it must be possible to attach a monetary value to the debt, liability or obligation. [Emphasis in original.]

[38]                          I will address the Abitibi test in greater detail below.

[39]                          Once bankruptcy has been declared, creditors of the bankrupt must participate in one collective bankruptcy proceeding if they wish to enforce their provable claims. Section 69.3(1)  of the BIA  thus provides for an automatic stay of enforcement of provable claims outside the bankruptcy proceeding, effective as of the first day of bankruptcy.

[40]                          The BIA  establishes a comprehensive priority scheme for the satisfaction of the provable claims asserted against the bankrupt in the collective proceeding. Section 141 sets out the general rule, which is that all creditors rank equally and share rateably in the bankrupt’s assets. However, the rule set out in s. 141 applies “[s]ubject to [the BIA ]”. Section 136(1) lists the claims of preferred creditors and the order of priority for their payment. It also states that this order of priority is “[s]ubject to the rights of secured creditors”. Under s. 69.3(2), the stay of proceedings does not prevent secured creditors from realizing their security interest. The BIA  therefore sets out a priority scheme for paying claims provable in bankruptcy, with secured creditors being paid first, preferred creditors second and unsecured creditors last (see Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327, at paras. 32-35).

[41]                          Essential to this appeal is s. 14.06  of the BIA , which deals with various environmental matters in the bankruptcy context. I will now reproduce s. 14.06(2) and s. 14.06(4), the two portions of the s. 14.06 scheme that are directly implicated in this appeal. The balance of s. 14.06 can be found in the appendix at the conclusion of these reasons.

[42]                          Section 14.06(2) reads as follows:

(2) Notwithstanding anything in any federal or provincial law, a trustee is not personally liable in that position for any environmental condition that arose or environmental damage that occurred

 

                 (a) before the trustee’s appointment; or

(b) after the trustee’s appointment unless it is established that the condition arose or the damage occurred as a result of the trustee’s gross negligence or wilful misconduct or, in the Province of Quebec, the trustee’s gross or intentional fault.

[43]                          Section 14.06(4) reads as follows: 

(4) Notwithstanding anything in any federal or provincial law but subject to subsection (2), where an order is made which has the effect of requiring a trustee to remedy any environmental condition or environmental damage affecting property involved in a bankruptcy, proposal or receivership, the trustee is not personally liable for failure to comply with the order, and is not personally liable for any costs that are or would be incurred by any person in carrying out the terms of the order,

(a) if, within such time as is specified in the order, within ten days after the order is made if no time is so specified, within ten days after the appointment of the trustee, if the order is in effect when the trustee is appointed, or during the period of the stay referred to in paragraph (b), the trustee

            (i) complies with the order, or

            (ii) on notice to the person who issued the order, abandons, disposes of or otherwise releases any interest in any real property, or any right in any immovable, affected by the condition or damage;

      (b)       during the period of a stay of the order granted, on application made within the time specified in the order referred to in paragraph (a), within ten days after the order is made or within ten days after the appointment of the trustee, if the order is in effect when the trustee is appointed, by

            (i) the court or body having jurisdiction under the law pursuant to which the order was made to enable the trustee to contest the order, or

            (ii) the court having jurisdiction in bankruptcy for the purposes of assessing the economic viability of complying with the order; or

      (c) if the trustee had, before the order was made, abandoned or renounced or been divested of any interest in any real property, or any right in any immovable, affected by the condition or damage.

 

[44]                          As I will discuss, a main point of contention between the parties is the very different interpretations they ascribe to s. 14.06(4)  of the BIA . I note that s. 14.06(4)(a)(ii), which is relied upon by GTL, refers to a trustee who “abandons, disposes of or otherwise releases any interest in any real property”. The word “disclaim” is used in these reasons, as it has been throughout this litigation, as a shorthand for these terms.

[45]                          I turn now to a brief discussion of the events of the Redwater bankruptcy.

C.                 The Events of the Redwater Bankruptcy

[46]                          Redwater was a publicly traded oil and gas company. It was first granted licences by the Regulator in 2009. On January 31 and August 19, 2013, ATB advanced funds to Redwater and, in return, was granted a security interest in Redwater’s present and after-acquired property. ATB lent funds to Redwater with full knowledge of the end-of-life obligations associated with its assets. In mid-2014, Redwater began to experience financial difficulties. Upon application by ATB, GTL was appointed receiver for Redwater on May 12, 2015. At that time, Redwater owed ATB approximately $5.1 million.

[47]                          Upon being advised of the receivership, the Regulator sent GTL a letter dated May 14, 2015, setting out its position. The Regulator noted that the OGCA and the Pipeline Act included both receivers and trustees in the definition of “licensee”. The Regulator stated that it was not a creditor of Redwater and that it was not asserting a “provable claim in the receivership”. Accordingly, notwithstanding the receivership, Redwater remained obligated to comply with all regulatory requirements, including abandonment obligations for all licensed assets. The Regulator stated that GTL was legally obligated to fulfill these obligations prior to distributing any funds or finalizing any proposal to creditors. It warned that it would not approve the transfer of any of Redwater’s licences unless it was satisfied that both the transferee and the transferor would be in a position to fulfill all regulatory obligations. It requested confirmation that GTL had taken possession of Redwater’s licensed properties and that it was taking steps to comply with all of Redwater’s regulatory obligations.

[48]                          At the time it ran into financial difficulties, Redwater was licensed by the Regulator for 84 wells, 7 facilities and 36 pipelines, all in central Alberta. The vast majority of its assets were these oil and gas assets. At the time GTL was appointed receiver, 19 of the wells and facilities were producing and the remaining 72 were inactive or spent. There were working interest participants in several of the wells and facilities. Redwater’s LMR did not drop below 1.0 until after it went into receivership, so it never paid any security deposits to the Regulator.

[49]                          By September 2015, Redwater’s LMR had dropped to 0.93. The net value of its deemed assets and its deemed liabilities was negative $553,000. The 19 producing wells and facilities for which Redwater was the licensee would have had an LMR of 2.85 and a deemed net value of $4.152 million. The remaining 72 wells and facilities for which Redwater was the licensee would have had an LMR of 0.30 and a deemed net value of negative $4.705 million. Given that Redwater was in receivership, the Regulator’s position was that it would approve the transfer of Redwater’s licences only if the transfer did not cause a deterioration in its LMR.

[50]                          In its Second Report to the Alberta Court of Queen’s Bench dated October 3, 2015, GTL explained why it had concluded that it could not meet the Regulator’s requirements. GTL had concluded that the cost of the end-of-life obligations for the spent wells would likely exceed the sale proceeds for the productive wells. It viewed a sale of the non-producing wells — even if bundled with producing wells — as unlikely. If such a sale were possible, the purchase price would be reduced by the end-of-life obligations, negating the benefit to the estate. Based on this assessment, by letter dated July 3, 2015, GTL informed the Regulator that it was taking possession and control only of Redwater’s 17 most productive wells (including a leaking well that was subsequently abandoned), 3 associated facilities and 12 associated pipelines (“Retained Assets”), and that, pursuant to para. 3(a) of the Receivership Order, it was not taking possession or control of any of Redwater’s other licensed assets (“Renounced Assets”). GTL’s position was that it had no obligation to fulfill any regulatory requirements associated with the Renounced Assets. 

[51]                          In response, on July 15, 2015, the Regulator issued orders under the OGCA and the Pipeline Act requiring Redwater to suspend and abandon the Renounced Assets (“Abandonment Orders”). The orders required abandonment to be carried out immediately where there were no other working interest participants and, by September 18, 2015, where there were other working interest participants. The Regulator stated that it considered the Renounced Assets an environmental and safety hazard and that s. 3.012(d) of the Oil and Gas Conservation Rules required a licensee to abandon wells or facilities so considered. In issuing the Abandonment Orders, the Regulator also relied on ss. 27 to 30 of the OGCA and ss. 23 to 26 of the Pipeline Act. If the Abandonment Orders were not complied with, the Regulator threatened to abandon the assets itself and to sanction Redwater through the use of s. 106 of the OGCA. The Regulator further stated that, once abandonment had taken place, the surface would need to be reclaimed and reclamation certificates obtained in accordance with s. 137 of the EPEA.

[52]                          On September 22, 2015, the Regulator and the OWA filed an application for a declaration that GTL’s renunciation of the Renounced Assets was void, an order requiring GTL to comply with the Abandonment Orders, and an order requiring GTL to “fulfill the statutory obligations as licensee in relation to the abandonment, reclamation and remediation” of all of Redwater’s licensed properties (A.R., vol. II, at p. 41). The Regulator did not seek to hold GTL liable for these obligations beyond the assets remaining in the Redwater estate. GTL brought a cross-application on October 5, 2015, seeking approval to pursue a sales process excluding the Renounced Assets. GTL sought a court order directing that the Regulator could not prevent the transfer of the licences associated with the Retained Assets on the basis of, inter alia, the LMR requirements, failure to comply with the Abandonment Orders, refusal to take possession of the Renounced Assets or any outstanding debts owed by Redwater to the Regulator. GTL did not seek to foreclose the possibility that the Regulator might have some other valid reason to reject a proposed transfer.

[53]                          A bankruptcy order was issued for Redwater on October 28, 2015, and GTL was appointed as trustee. GTL sent another letter to the Regulator on November 2, 2015, this time invoking s. 14.06(4) (a)(ii) of the BIA  in relation to the Renounced Assets. The Abandonment Orders remain outstanding.

D.                Judicial History

(1)           Court of Queen’s Bench of Alberta

[54]                          The chambers judge concluded that s. 14.06  of the BIA  was designed to permit trustees to disclaim property where this was a rational economic decision in light of the environmental condition affecting the property. Personal liability of the trustee was not a condition precedent to the power to disclaim. The chambers judge accordingly found an operational conflict between s. 14.06 of the BIA and the definition of “licensee” in the OGCA and the Pipeline Act.  Under s. 14.06  of the BIA , GTL could renounce assets and not be responsible for the associated environmental obligations. However, under the OGCA and the Pipeline Act, GTL could not renounce licensed assets because the definition of “licensee” included receivers and trustees, so GTL remained liable for environmental obligations.

[55]                          Applying the test from Abitibi, the chambers judge concluded that, although in a “technical sense” it was not sufficiently certain that the Regulator or the OWA would carry out the Abandonment Orders and assert a monetary claim to have its costs reimbursed, the situation met what was intended by the Court in Abitibi because the Abandonment Orders were “intrinsically financial” (para. 173). Forcing GTL, as a “licensee”, to comply with the Abandonment Orders would therefore frustrate the BIA ’s overall purpose of equitable distribution of the bankrupt’s assets, as the Regulator’s claim would be given a super priority to which it was not entitled, ahead of the claims of secured creditors. It would also frustrate the purpose of s. 14.06, by which Parliament had legislated as to environmental claims in bankruptcy and had specifically chosen not to give them a super priority. The conditions imposed by the Regulator on transfers of the licences for the Retained Assets further frustrated s. 14.06 by including the Renounced Assets in the calculation for determining the approval of a sale.

[56]                          The chambers judge approved the sale procedure proposed by GTL. He declared that the OGCA and the Pipeline Act were inoperative to the extent that they conflicted with the BIA  by deeming GTL to be the “licensee” of the Renounced Assets; that GTL was entitled to disclaim the Renounced Assets pursuant to s. 14.06(4)(a)(ii) and (c), and was not subject to any obligations in relation to those assets; that the Abandonment Orders were inoperative to the extent that they required GTL to comply or to provide security deposits; and that Directive 006 was inoperative to the extent it conflicted with s. 14.06  of the BIA . Lastly, he declared that the Regulator, in exercising its discretion to approve a transfer of the licences for the Retained Assets, could not consider the Renounced Assets for the purpose of calculating Redwater’s LMR before or after the transfer, nor could it consider any other issue involving the Renounced Assets.

(2)           Court of Appeal of Alberta

(a)           Majority Reasons

[57]                          Slatter J.A., for the majority, dismissed the appeals. He stated that the constitutional issues in the appeals were complementary to the primary issue, which was the interpretation of the BIA . Section 14.06 did not exempt environmental claims from the general bankruptcy regime, other than the super priority in s. 14.06(7), which would rarely, if ever, have any application to oil and gas wells. Section 14.06(4) did not “limit the power of the trustee to renounce . . . properties to those circumstances where it might be exposed to personal liability” (para. 68). Additionally, the word “order” in s. 14.06(4) had to be given a wide meaning.

[58]                          Slatter J.A. identified the essential issue as “whether the environmental obligations of Redwater meet the test for a provable claim” (para. 73).  He agreed with the chambers judge that the third branch of the Abitibi test was met, but concluded that that test had been met “in both a technical and substantive way” (para. 76). The Regulator’s policies essentially stripped away from the bankrupt estate enough value to meet environmental obligations. Requiring the depositing of security, or diverting value from the bankrupt estate, clearly met the standard of “certainty”. The Regulator’s policies required that the full value of the bankrupt’s assets be applied first to environmental liabilities, creating a super priority for environmental claims. Slatter J.A. concluded that, “[n]otwithstanding their intended effect as conditions of licensing, the Regulator’s policies [had] a direct effect on property, priorities, and the Trustee’s right to renounce assets, all of which [were] governed by the BIA ” (para. 86).

[59]                          In terms of constitutional analysis, Slatter J.A. concluded that the role of GTL as a “licensee” under the OGCA and the Pipeline Act was “in operational conflict with the provisions of the BIA ” that exempted trustees from personal liability, allowed them to disclaim assets and established the priority of environmental claims (para. 89). It also frustrated the BIA ’s purpose of “managing the winding up of insolvent corporations and settling the priority of claims against them” (para. 89). As such, the Regulator could not “insist that the Trustee devote substantial parts of the bankrupt estate in satisfaction of the environmental claims in priority to the claims of the secured creditor” (para. 91).

         (b)      Dissenting Reasons

[60]                          Martin J.A. dissented. In contrast to the majority, she stressed the constitutional dimensions of the case, in particular the need for co-operative federalism in the area of the environment, and noted that the doctrine of paramountcy should be applied with restraint. She concluded that the Regulator was not asserting a provable claim within the meaning of the Abitibi test. It was not enough for a regulatory order to be “intrinsically financial” for it to be a claim provable in bankruptcy (para. 185, quoting the chambers judge’s reasons, at para. 173). There was not sufficient certainty that the ordered abandonment work would be done, either by the Regulator or by the OWA, and there was “no certainty at all that a claim for reimbursement would be made” (para. 184). Martin J.A. was also of the view that the Regulator was not a creditor of Redwater — or, if it was a creditor in issuing the Abandonment Orders, it was at least not one in enforcing the conditions for the transfer of licences. The Regulator had to be able to maintain control over the transfer of licences during a bankruptcy, and there was no reason why such regulatory requirements could not coexist with the distribution of the bankrupt’s estate.

[61]                          With regard to s. 14.06, Martin J.A. accepted the Regulator’s argument that s. 14.06(4) allowed a trustee to renounce real property in order to avoid personal liability but did not prevent the assets of the bankrupt estate from being used to comply with environmental obligations. However, she went beyond this. In her view, s. 14.06(4) to (8) were enacted together as a statutory compromise. Martin J.A. concluded that a trustee’s power to disclaim assets under s. 14.06 simply had no applicability to Alberta’s regulatory regime. The ability to renounce under s. 14.06(4) had to be read in conjunction with the other half of the compromise — the Crown’s super priority over the debtor’s real property established by s. 14.06(7). Licence conditions were not the sort of “order” contemplated by s. 14.06(4), nor were licences the kind of “real property” contemplated by that provision. The balance struck by s. 14.06 was not effective when there was no “real property of the debtor” in which the Crown could take a super priority (para. 210).

[62]                          As there was no entitlement under the BIA  to renounce the end-of-life obligations imposed by Alberta’s regulatory regime, there was no operational conflict in enforcing those obligations under provincial law. Nor was there any frustration of purpose. The Regulator was not asserting any claims provable in bankruptcy: “The continued application of [Alberta’s] regulatory regime following bankruptcy did not determine or reorder priorities among creditors, but rather value[d] accurately the assets available for distribution” (para. 240).

III.             Analysis

A.                The Doctrine of Paramountcy

[63]                          As I have explained, Alberta legislation grants the Regulator wide-ranging powers to ensure that companies that have been granted licences to operate in the Alberta oil and gas industry will safely and properly abandon oil wells, facilities and pipelines at the end of their productive lives and will reclaim their sites. GTL seeks to avoid being subject to two of those powers: the power to order Redwater to abandon the Renounced Assets and the power to refuse to allow a transfer of the licences for the Retained Assets due to unmet LMR requirements. There is no doubt that these are valid regulatory powers granted to the Regulator by valid Alberta legislation. GTL seeks to avoid their application during bankruptcy by virtue of the doctrine of federal paramountcy, which dictates that the Alberta legislation empowering the Regulator to use the powers in dispute in this appeal will be inoperative to the extent that its use of these powers during bankruptcy conflicts with the BIA .

[64]                          The issues in this appeal arise from what has been termed the “untidy intersection” of provincial environmental legislation and federal insolvency legislation (Nortel Networks Corp., Re, 2012 ONSC 1213, 88 C.B.R. (5th) 111, at para. 8). Paramountcy issues frequently arise in the insolvency context. Given the procedural nature of the BIA , the bankruptcy regime relies heavily on the continued operation of provincial laws. However, s. 72(1)  of the BIA  confirms that, where there is a genuine conflict between provincial laws concerning property and civil rights and federal bankruptcy legislation, the BIA  prevails (see Moloney, at para. 40). In other words, bankruptcy is carved out from property and civil rights but remains conceptually part of it. Valid provincial legislation of general application continues to apply in bankruptcy until Parliament legislates pursuant to its exclusive jurisdiction in relation to bankruptcy and insolvency. At that point, the provincial law becomes inoperative to the extent of the conflict (see Husky Oil Operations Ltd. v. Minister of National Revenue, [1995] 3 S.C.R. 453, at para. 3).

[65]                          Over time, two distinct forms of conflict have been recognized. The first is operational conflict, which arises where compliance with both a valid federal law and a valid provincial law is impossible. Operational conflict arises “where one enactment says ‘yes’ and the other says ‘no’, such that ‘compliance with one is defiance of the other’” (Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd., 2015 SCC 53, [2015] 3 S.C.R. 419, at para. 18, quoting Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161, at p. 191). The second is frustration of purpose, which occurs where the operation of a valid provincial law is incompatible with a federal legislative purpose. The effect of a provincial law may frustrate the purpose of the federal law, even though it does “not entail a direct violation of the federal law’s provisions” (Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3, at para. 73). The party relying on frustration of purpose “must first establish the purpose of the relevant federal statute, and then prove that the provincial legislation is incompatible with this purpose” (Lemare, at para. 26, quoting Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R. 536, at para. 66).

[66]                          Under both branches of paramountcy, the burden of proof rests on the party alleging the conflict. This burden is not an easy one to satisfy, as the doctrine of paramountcy is to be applied with restraint. Conflict must be defined narrowly so that each level of government may act as freely as possible within its respective sphere of constitutional authority. “[H]armonious interpretations of federal and provincial legislation should be favoured over an interpretation that results in incompatibility . . . [i]n the absence of ‘very clear’ statutory language to the contrary” (Lemare, at paras. 21 and 27). “It is presumed that Parliament intends its laws to co-exist with provincial laws” (Moloney, at para. 27). As this Court found in Lemare, at paras. 22-23, the application of the doctrine of paramountcy should also give due weight to the principle of co-operative federalism. This principle allows for interplay and overlap between federal and provincial legislation. While co-operative federalism does not impose limits on the otherwise valid exercise of legislative power, it does mean that courts should avoid an expansive interpretation of the purpose of federal legislation which will bring it into conflict with provincial legislation.

[67]                          The case law has established that the BIA  as a whole is intended to further “two purposes: the equitable distribution of the bankrupt’s assets among his or her creditors and the bankrupt’s financial rehabilitation” (Moloney, at para. 32, citing Husky Oil, at para. 7). Here, the bankrupt is a corporation that will never emerge from bankruptcy. Accordingly, only the former purpose is relevant. As I will discuss below, the chambers judge also spoke of the purposes of s. 14.06 as distinct from the broader purposes of the BIA . This Court has discussed the purpose of specific provisions of the BIA  in previous cases — see, for example, Lemare, at para. 45.

[68]                          GTL has proposed two conflicts between the Alberta legislation establishing the disputed powers of the Regulator during bankruptcy and the BIA , either of which, it says, would have provided a sufficient basis for the order granted by the chambers judge.

[69]                          The first conflict proposed by GTL results from the inclusion of trustees in the definition of “licensee” in the OGCA and the Pipeline Act. GTL says that s. 14.06(4) releases it from all environmental liability associated with the Renounced Assets after a valid “disclaimer” is made. But as a “licensee”, it can be required by the Regulator to satisfy all of Redwater’s statutory obligations and liabilities, which disregards the “disclaimer” of the Renounced Assets. GTL further notes the possibility that it may be held personally liable as a “licensee”. In response, the Regulator says that s. 14.06(4) is concerned primarily with protecting trustees from personal liability in relation to environmental orders, and does not affect the ongoing responsibilities of the bankrupt estate. Thus, as long as a trustee is protected from personal liability, no conflict arises from its status as a “licensee” or from the fact that the bankrupt estate remains responsible under provincial law for the ongoing environmental obligations associated with “disclaimed” assets.

[70]                          The second conflict proposed by GTL is that, even if s. 14.06(4) is only concerned with a trustee’s personal liability, the Regulator’s use of its statutory powers effectively reorders the priorities in bankruptcy established by the BIA . Such reordering is said to be caused by the fact that the Regulator requires the expenditure of estate assets to comply with the Abandonment Orders and to discharge or secure the environmental liabilities associated with the Renounced Assets before it will approve a transfer of the licences for the Retained Assets (in keeping with the LMR requirements). These end-of-life obligations are said by GTL to be unsecured claims held by the Regulator, which cannot, under the BIA , be satisfied in preference over the claims of Redwater’s secured creditors. In response, the Regulator says that, on the proper application of the Abitibi test, these environmental regulatory obligations are not provable claims in bankruptcy. Accordingly, says the Regulator, the provincial laws requiring the Redwater estate to satisfy these obligations prior to the distribution of its assets to secured creditors do not conflict with the priority scheme in the BIA .  

[71]                          I will consider each alleged conflict in turn.

B.                 Is There a Conflict Between the Alberta Regulatory Scheme and Section 14.06  of the BIA ?

[72]                          As a statutory scheme, s. 14.06  of the BIA  raises numerous interpretive issues. As noted by Martin J.A., the only matter concerning s. 14.06 on which all the parties to this litigation can agree is that it “is not a model of clarity” (C.A. reasons, at para. 201). Given the confusion caused by attempts to interpret s. 14.06 as a coherent scheme during this litigation, Parliament may very well wish to re-examine s. 14.06 during its next review of the BIA .

[73]                          At its core, this appeal raises the issue of whether there is a conflict between specific Alberta legislation and the BIA . GTL submits that there is such a conflict. It argues that, because it “disclaimed” the Renounced Assets under s. 14.06(4)  of the BIA , it should cease to have any responsibilities, obligations or liability with respect to them. And yet, it notes, as a “licensee” under the OGCA and the Pipeline Act, it remains responsible for abandoning the Renounced Assets. Furthermore, those assets continue to be included in the calculation of Redwater’s LMR. GTL suggests an additional conflict with s. 14.06(2)  of the BIA  based on its possible exposure, as a “licensee”, to personal liability for the costs of abandoning the Renounced Assets.

[74]                          I have concluded that there is no conflict. Various arguments were advanced during this appeal concerning the disparate elements of the s. 14.06 scheme. However, the provision upon which GTL in fact relies in arguing that it is entitled to avoid its responsibilities as a “licensee” under the Alberta legislation is s. 14.06(4). As I have noted, GTL and the Regulator propose very different interpretations of s. 14.06(4). However, s. 14.06(4) is clear and unambiguous when read on its own: where it is invoked by a trustee, the result is that “the trustee is not personally liable” for failure to comply with certain environmental orders or for the costs incurred by any person in carrying out the terms of such orders. The provision says nothing about the liability of the “bankrupt” or the “estate” — distinct concepts referenced many times throughout the BIA . Section 14.06(4), on its own wording, does not support the interpretation urged upon this Court by GTL.

[75]                          In my view, s. 14.06(4) sets out the result of a trustee’s “disclaimer” of real property when there is an order to remedy any environmental condition or damage affecting that property. Regardless of whether “disclaimer” is understood as a common law power or as a power deriving from some other statutory source, the result of a trustee’s “disclaimer” of real property where an environmental order has been made in relation to that property is that the trustee is protected from personal liability, while the ongoing liability of the bankrupt estate is unaffected. The interpretation of s. 14.06(4) as being concerned with the personal liability of the trustee and not with the liability of the bankrupt estate is supported not only by the plain language of the section, but also by the Hansard evidence, a previous decision of this Court and the French version of the section. Furthermore, not only is the plain meaning of the words “personally liable” clear, but the same concept is also found in both s. 14.06(1.2) and s. 14.06(2), which specifically state that the trustee is not personally liable. In particular, in my view, it is impossible to coherently read s. 14.06(2) as referring to personal liability and yet read s. 14.06(4) as somehow referring to the liability of the bankrupt estate.  

[76]                          Given that s. 14.06(4) dictates that “disclaimer” only protects trustees from personal liability, then, even assuming that GTL successfully “disclaimed” in this case, no operational conflict or frustration of purpose results from the fact that the Regulator requires GTL, as a “licensee”, to expend estate assets on abandoning the Renounced Assets. Furthermore, no conflict is caused by continuing to include the Renounced Assets in the calculation of Redwater’s LMR. Finally, given the restraint with which the doctrine of paramountcy must be applied, and given that the Regulator has not attempted to hold GTL personally liable as a “licensee” for the costs of abandonment, no conflict with s. 14.06(2) or s. 14.06(4) is caused by the mere theoretical possibility of personal liability under the OGCA or the Pipeline Act.

[77]                          In what follows, I will begin by interpreting s. 14.06(4) and explaining why, based on its plain wording and other relevant considerations, the provision is concerned solely with the personal liability of the trustee, and not with the liability of the bankrupt estate. I will then explain how, despite their superficial similarity, s. 14.06(4) and s. 14.06(2) have different rationales, and I will demonstrate that, on a proper understanding of the scheme crafted by Parliament, s. 14.06(4) does not affect the liability of the bankrupt estate. To conclude, I will demonstrate that there is no operational conflict or frustration of purpose between the Alberta legislation and s. 14.06  of the BIA  in this case, with particular reference to the question of GTL’s protection from personal liability. 

(1)           The Correct Interpretation of Section 14.06(4)

(a)           Section 14.06(4) Is Concerned With the Personal Liability of Trustees

[78]                          I have concluded that s. 14.06(4) is concerned with the personal liability of trustees, and not with the liability of the bankrupt estate. I emphasize here the well-established principle that, “[w]hen a federal statute can be properly interpreted so as not to interfere with a provincial statute, such an interpretation is to be applied in preference to another applicable construction which would bring about a conflict between the two statutes” (Canadian Western Bank, at para. 75, quoting Attorney General of Canada v. Law Society of British Columbia, [1982] 2 S.C.R. 307, at p. 356).

[79]                          Section 14.06(4) says nothing about the “bankrupt estate” avoiding the applicability of valid provincial law. In drafting s. 14.06(4), Parliament could easily have referred to the liability of the bankrupt estate. Parliament chose instead to refer simply to the personal liability of a trustee. Notably, s. 14.06(7) and s. 14.06(8) both refer to a “debtor in a bankruptcy”. Parliament’s choice in this regard cannot be ignored. I agree with Martin J.A. that there is no basis on which to read the words “the trustee is not personally liable” in s. 14.06(4) as encompassing the liability of the bankrupt estate. As noted by Martin J.A., it is apparent from the express language chosen by Parliament that s. 14.06(4) was motivated by and aimed at concerns about the protection of trustees, not the protection of the full value of the estate for creditors. Nothing in the wording of s. 14.06(4) suggests that it was intended to extend to estate liability.

[80]                          The Hansard evidence leads to the same conclusion. Jacques Hains, Director, Corporate Law Policy Directorate, Department of Industry Canada, noted the following during the 1996 debates preceding the enactment of s. 14.06(4) in 1997:

The aim is to provide a better definition of the liability of insolvency professionals and practitioners in order to encourage them to accept mandates where there may be problems related to the environment. It is hoped that this will reduce the number of abandoned sites both for the benefit of the environment and the safeguard of businesses and jobs.

 

(Standing Committee on Industry, Evidence, No. 16, 2nd Sess., 35th Parl., June 11, 1996, at 15:49-15:55, as cited in C.A. reasons, at para. 197.)

Several months later, Mr. Hains stated:

What Parliament tried to do in 1992 was to provide a relief to insolvency practitioners . . . because they were at risk when they accepted a mandate to liquidate an insolvent business. Under environmental laws, therefore, they could have been subject to personal liability to clean up the environment. I am speaking of personal liability here, meaning “out of their own pockets.”

 

(Proceedings of the Standing Committee on Banking, Trade and Commerce, No. 13, 2nd Sess., 35th Parl., November 4, 1996, at p. 15)

Mr. Hains proceeded to explain how the 1997 amendments were intended to improve on the 1992 reforms to the BIA  that had included the original version of s. 14.06(2) (as discussed further below), but he gave no indication that the focus had somehow shifted away from a trustee’s “personal liability”.

[81]                          Prior to the enactment of the 1997 amendments, G. Marantz, Legal Advisor to the Department of Industry Canada, noted that they were intended to “provide the trustee with protection from being chased with deep-pocket liability” (Standing Committee on Industry, Evidence, No. 21, 2nd Sess., 35th Parl., September 25, 1996, at 17:15, as cited in C.A. reasons, at para. 198). I agree with the Regulator that the legislative debates give no hint of any intention by Parliament to immunize bankrupt estates from environmental liabilities. The notion that s. 14.06(4) was aimed at encouraging trustees in bankruptcy to accept mandates, and not at limiting estate liability, is further supported by the fact that the provision was inserted under the general heading “Appointment and Substitution of Trustees”.

[82]                          Furthermore, in drafting s. 14.06(4), Parliament chose to use exactly the same concept it had used earlier in s. 14.06(2): by their express wording, where either provision applies, a trustee is not “personally liable”. This cannot have been an oversight given that s. 14.06(4) was added to the BIA  some five years after the enactment of s. 14.06(2). Since both provisions deal expressly with the protection of trustees from being “personally liable”, it is very difficult to accept that they could be concerned with different kinds of liability. By their wording, s. 14.06(2) and s. 14.06(4) are clearly both concerned with the same concept. Indeed, if one interprets s. 14.06(4) as extending to estate liability, then there is no principled reason not to interpret s. 14.06(2) in the same way. However, it is undisputed that this was not Parliament’s intention in enacting s. 14.06(2).

[83]                          Similarly, Parliament has also chosen to use the same concept found in both s. 14.06(4) and s. 14.06(2) in a third part of the 14.06 scheme, namely s. 14.06(1.2). This provision states that a trustee carrying on the business of a debtor or continuing the employment of a debtor’s employees is not “personally liable” in respect of certain enumerated liabilities, including as a successor employer. Although this provision is not directly raised in this litigation, by its own terms, it clearly does not and cannot refer to the liability of the bankrupt estate. Again, it is difficult to conceive of how Parliament could have specified that a trustee is not “personally liable”, using the ordinary, grammatical sense of that phrase, in both s. 14.06(1.2) and s. 14.06(2), but then intended the phrase to be read in a completely different and illogical manner in s. 14.06(4). All three provisions refer to the personal liability of a trustee, and all three must be interpreted consistently. Indeed, I note that the concept of a trustee being “not personally liable” is also used consistently in other parts of the BIA  unrelated to the s. 14.06 scheme — see, for example, s. 80 and s. 197(3).

[84]                          This interpretation of s. 14.06(4) is also bolstered by the French wording of s. 14.06. The French versions of both s. 14.06(2) and s. 14.06(4) refer to a trustee’s protection from personal liability “ès qualités”. This French expression is defined by Le Grand Robert de la langue française (2nd ed. 2001) dictionary as referring to someone acting “à cause d’un titre, d’une fonction particulière”, which, in English, would mean acting by virtue of a title or specific role. The Robert & Collins dictionary (online) translates “ès qualités” as in “one’s official capacity”. In using this expression in s. 14.06(4), Parliament is therefore stating that, where “disclaimer” properly occurs, a trustee, is not personally liable, in its capacity as trustee, for orders to remedy any environmental condition or damage affecting the “disclaimed” property. These provisions are clearly not concerned with the concept of estate liability. The French versions of s. 14.06(2) and s. 14.06(4) thus utilize identical language to describe the limitation of liability they offer trustees. It is almost impossible to conceive of Parliament using identical language in two such closely related provisions and yet intending different meanings. Accordingly, a trustee is not personally liable in its official capacity as representative of the bankrupt estate where it invokes s. 14.06(4).

[85]                          Prior to this litigation, the case law on s. 14.06 was somewhat scarce. However, this Court has considered the s. 14.06 scheme once before, in GMAC Commercial Credit Corp. — Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123. In that case, comments made by both the majority and the dissenting judge support my conclusion that s. 14.06(4) is concerned only with the personal liability of trustees. Abella J., writing for the majority, explained that “where Parliament has intended to confer immunity on trustees or receivers from certain claims, it has done so explicitly” (para. 67). As examples of this principle, she referred to 14.06(1.2) and, most notably for our purposes, to s. 14.06(4), which she described as follows: “trustee immune in certain circumstances from environmental liabilities” (para. 67). In her dissent, Deschamps J. explained that a “trustee is not personally bound by the bankrupt’s obligations” (para. 91). She noted that trustees are protected by the provisions that confer immunity upon them, including s. 14.06 (1.2), (2) and (4).

[86]                          Although the dissenting reasons focus on the source of the “disclaimer” power in s. 14.06(4), nothing in this case turns on either the source of the “disclaimer” power or on whether GTL successfully “disclaimed” the Renounced Assets. I would note that, while the dissenting reasons rely on a purported common law power of “disclaimer”, the Court has been referred to no cases — and the dissenting reasons have cited none — demonstrating the existence of a common law power allowing trustees to “disclaim” real property. In any case, regardless of the source of the “disclaimer” power, nothing in s. 14.06(4) suggests that, where a trustee does “disclaim” real property, the result is that it is simply free to walk away from the environmental orders applicable to it. Quite the contrary — the provision is clear that, where an environmental order has been made, the result of an act of “disclaimer” is the cessation of personal liability. No effect of “disclaimer” on the liability of the bankrupt estate is specified. Had Parliament intended to empower trustees to walk away entirely from assets subject to environmental liabilities, it could easily have said so.  

[87]                          Additionally, as I have mentioned, s. 14.06(4)’s scope is not narrowed to a “disclaimer” in its formal sense. Under s. 14.06(4)(a)(ii), a trustee is not personally liable for an environmental order where the trustee “abandons, disposes of or otherwise releases any interest in any real property”. This appeal does not, however, require us to decide what constitutes abandoning, disposing of or otherwise releasing real property for the purpose of s. 14.06(4), and I therefore leave the resolution of this question for another day. Nor does this appeal require us to decide the effects of a successful divestiture under s. 20  of the BIA . Section 20  of the BIA  was not raised or relied upon by GTL as providing it with the authority to walk away from all responsibility, obligation or liability regarding the Renounced Assets.

[88]                          The dissenting reasons argue that certain other parts of the s. 14.06 scheme make the most sense if s. 14.06(4) limits estate liability. Other than s. 14.06(2), none of these provisions is in issue in this litigation, and none of them was relied on by GTL. Regardless, in view of the clear and unambiguous wording of s. 14.06(4), less weight should be given to its statutory context. This is particularly so given that the proposed alternative interpretation would require the Court to read words such as “personally” out of the subsection. As has been noted, when the words of a provision are precise and unequivocal, their ordinary meaning plays a dominant role in the interpretive process (Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601, at para. 10). Ultimately, the consequences of a trustee’s “disclaimer” are clear — protection from personal liability, not from estate liability. There is no ambiguity on the face of s. 14.06(4). This Court has no option other than to accede to the clear intention of Parliament.

[89]                          I turn now to the relationship between s. 14.06(2) and (4).

(b)           How Section 14.06(4) Is Distinguishable From Section 14.06(2)

[90]                          In this case, GTL relied solely on s. 14.06(4) in purporting to “disclaim” the Renounced Assets. However, as I will explain, GTL is fully protected from personal liability for the environmental liabilities associated with those assets whether it is understood as having “disclaimed” the Renounced Assets or not. However, it cannot simply “walk away” from the Renounced Assets in either case.

[91]                          Regardless of whether GTL can access s. 14.06(4) (in other words, regardless of whether it has “disclaimed”), it is already fully protected from personal liability in respect of environmental matters by s. 14.06(2). Section 14.06(2) protects trustees from personal liability for “any environmental condition that arose or environmental damage that occurred”, unless it is established that the condition arose or the damage occurred after the trustee’s appointment and as a result of their gross negligence or wilful misconduct. In this case, it is not disputed that the environmental condition or damage leading to the Abandonment Orders arose or occurred prior to GTL’s appointment. Section 14.06(2) provides trustees with protection from personal liability as broad as that provided by s. 14.06(4). Although, on the face of the provisions, there are two ways in which s. 14.06(4) may appear to offer broader protection, neither of them withstands closer examination.

[92]                          First, the Regulator submits that the protection offered by s. 14.06(4) should be distinguished from that offered by s. 14.06(2) on the basis that the former is concerned with orders while the latter is concerned with environmental obligations generally. I agree with the dissenting reasons that a persuasive distinction cannot be drawn between liability for an environmental condition or environmental damage (purportedly covered by s. 14.06(2)) and liability for failure to comply with an order to remedy such a condition or such damage (purportedly covered by s. 14.06(4)). As the dissenting reasons note, “[t]his distinction is entirely artificial” (para. 212). The underlying liability addressed through environmental orders is the liability provided for in s. 14.06(2): an “environmental condition that arose or environmental damage that occurred”. Second, on the face of s. 14.06(4), no exceptions are carved out for gross negligence or wilful misconduct post-appointment, unlike in s. 14.06(2). However, s. 14.06(4) is expressly made “subject to subsection (2)”. I agree with the dissenting reasons that the only possible interpretation of this proviso is that, where the trustee has caused an environmental condition or environmental damage through its wilful misconduct or gross negligence, the trustee will still be personally liable, regardless of its reliance on s. 14.06(4).

[93]                          It follows that s. 14.06(4) does not provide trustees with protection from personal liability any broader than the protection provided by s. 14.06(2). Despite this, in my view, Parliament had good reasons for enacting s. 14.06(4) in 1997. The first was to make it clear to trustees that they had complete protection from personal liability in respect of environmental conditions and damage (absent wilful misconduct or gross negligence), especially in situations where they have “disclaimed”. The Hansard evidence shows that one of the impetuses for the 1997 reforms was the desire of trustees for further certainty. The second was to clarify the effect of a trustee’s “disclaimer”, on the liability of the bankrupt estate for orders to remedy an environmental condition or damage. In other words, s. 14.06(4) makes it clear not just that a trustee who “disclaims” real property is exempt from personal liability under environmental orders applicable to that property, but also that the liability of the bankrupt estate is unaffected by such “disclaimer”.

[94]                          In 1992, Parliament turned its attention to the potential liability of trustees in the environmental context and enacted s. 14.06(2). The provision originally stated that trustees were protected from personal liability for any environmental condition that arose or any environmental damage that occurred “(a) before [their] appointment . . .  or (b) after their appointment except where the condition arose or the damage occurred as a result of their failure to exercise due diligence”. The Hansard evidence demonstrates that trustees were unhappy with the original language of s. 14.06(2). As Mr. Hains explained, they complained that the due diligence standard was “too vague. No one knows what it does and it may vary from one case to another. With the vagueness of the standard and what may be required to satisfy it, and with the risk of personal liability, the trustees were not even interested in investigating how they might exercise due diligence” (Proceedings of the Standing Senate Committee on Banking, Trade and Commerce, No. 13, 2nd Sess., 35th Parl., November 4, 1996, at pp. 15-16).

[95]                          As a result, Parliament made reforms to the BIA  in 1997. These reforms not only changed the standard of protection offered to trustees by s. 14.06(2) by adopting the current language, but also introduced s. 14.06(4). As is evident from their shared language, the provisions were intended to work together to clarify a trustee’s protection from personal liability for any environmental condition or damage. Section 14.06(4) provided the certainty that trustees had been seeking in the years prior to 1997. For the first time, it explicitly linked the concept of “disclaimer” to the scheme protecting trustees from environmental liability. Whether it is understood as a common law power or as a reference to other statutory provisions, the concept of “disclaimer” predates s. 14.06(4) itself, as well as the 1992 version of s. 14.06(2). “Disclaimer” is also applicable in other contexts, such as in relation to executory contracts, as discussed in New Skeena Forest Products Inc. v. Don Hull & Sons Contracting Ltd., 2005 BCCA 154, 251 D.L.R. (4th) 328.

[96]                          Prior to 1997, the effects of a “disclaimer” of real property on environmental liability was unclear. In particular, it was unclear what effect “disclaimer” might have on the liability of the bankrupt estate, given that environmental legislation imposed liability based on the achievement of the status of owner, party in control or licensee (see J. Klimek, Insolvency and Environment Liability (1994), at p. 4‑19). By enacting s. 14.06(4), Parliament clarified that the effect of the “disclaimer” of real property was to limit the personal liability of the trustee for orders to remedy any environmental condition or damage, but not to limit the liability of the bankrupt estate. Parliament could have merely updated the language of s. 14.06(2) in 1997, but this would have left the question of “disclaimer” and estate liability unaddressed. Knowledge of the impact of “disclaimer” could be important to a trustee who is deciding whether to accept a mandate. Section 14.06(4) thus went a considerable way towards resolving the vagueness of which trustees had complained prior to 1997.

[97]                          A notable aspect of the scheme crafted by Parliament is that s. 14.06(4) applies “[n]otwithstanding anything in any federal or provincial law”. In enacting s. 14.06(4), Parliament specified the effect of the “disclaimer” of real property solely in the context of environmental orders. The effect of “disclaimer” on liability in other contexts was not addressed. Parliament was concerned with orders to remedy any environmental condition or damage, where, liability frequently attaches based on the status of owner, party in control, or licensee. Parliament did not want trustees to think that they could avoid the estate’s environmental liability through the act of “disclaiming”. Accordingly, it used specific language indicating that the effect of the “disclaimer” of real property on orders to remedy an environmental condition or damage is merely that the trustee is not personally liable. It is possible that the effect of “disclaimer” on the liability of the bankrupt estate might be different in other contexts.

[98]                          Section 14.06(4) thus makes it clear that “disclaimer” by the trustee has no effect on the bankrupt estate’s continuing liability for orders to remedy any environmental condition or damage. The liability of the bankrupt estate is, of course, an issue with which s. 14.06(2) is absolutely unconcerned. Thus, it can be seen that s. 14.06(4) and s. 14.06(2) are not in fact the same — they may provide trustees with the same protection from personal liability, but only the former has any relevance to the question of estate liability. Section 14.06(2) protects trustees without having to be invoked by them — it does not speak to the results of a trustee’s “disclaimer”.

[99]                          Where a trustee has “disclaimed” real property, it is not personally liable under an environmental order applicable to that property, but the bankrupt estate itself remains liable. Of course, the fact that the bankrupt estate remains liable even where a trustee invokes s. 14.06(4) does not necessarily mean that the trustee must comply with environmental obligations in priority to all other claims. The priority of an environmental claim depends on the proper application of the Abitibi test, as I will discuss below.

[100]                      Accordingly, regardless of whether GTL is properly understood as having “disclaimed”, the result is the same. Given that the environmental condition or damage arose or occurred prior to GTL’s appointment, it is fully protected from personal liability by s. 14.06(2). However, “disclaimer” does not empower a trustee to simply walk away from the “disclaimed” assets when the bankrupt estate has been ordered to remedy any environmental condition or damage. The environmental liability of the bankrupt estate remains unaffected.

[101]                      I offer the following brief comment on the balance of the s. 14.06 scheme, although, as mentioned, none of those provision is actually in issue before this Court. The dissenting reasons argue that interpreting s. 14.06(4) as being concerned solely with the personal liability of trustees creates interpretive issues with the balance of the s. 14.06 scheme. In my view, this is not a reason to ignore the plain meaning of s. 14.06(4). No principle of statutory interpretation requires that the plain meaning of a provision be contorted to make its scheme more coherent. This Court has been tasked with interpreting s. 14.06(4), and, in my view, the wording of s. 14.06(4) admits of only one interpretation.

(2)           There Is No Operational Conflict or Frustration of Purpose Between Section 14.06(2) and Section 14.06(4) of the BIA and the Alberta Regulatory Scheme

[102]                      The operational conflicts between the BIA and the Alberta legislation alleged by GTL arise from its status as a “licensee” under the OGCA and the Pipeline Act. As I have just demonstrated, s. 14.06(4) does not empower a trustee to walk away from all responsibilities, obligations and liabilities with respect to “disclaimed” assets. Rather, it clarifies a trustee’s protection from environmental personal liability and makes it clear that a trustee’s “disclaimer” does not affect the environmental liability of the bankrupt estate. Regardless of whether GTL effectively “disclaimed” the Renounced Assets, it cannot walk away from them. In light of the proper interpretation of s. 14.06(4), no operational conflict is caused by the fact that, under Alberta law, GTL, as a “licensee”, remains responsible for abandoning the Renounced Assets utilizing the remaining assets of the Redwater estate. Likewise, no operational conflict is caused by the fact that the end-of-life liabilities associated with the Renounced Assets continue to be included in the calculation of Redwater’s LMR.

[103]                      Thus, regardless of whether it has effectively “disclaimed”, s. 14.06(2) fully protects GTL from personal liability in respect of environmental matters affecting the Redwater estate. GTL notes that, on the face of the OGCA and the Pipeline Act, there is nothing specifically preventing the Regulator from holding it personally liable as a “licensee” for the costs of carrying out the Abandonment Orders. GTL submits that the mere possibility that it may be held personally liable for abandonment under the Alberta legislation creates an operational conflict with the protection from personal liability provided by s. 14.06(2)  of the BIA .

[104]                      There is no possibility of trustees facing personal liability for reclamation or remediation — they are specifically protected from such liability by the EPEA, absent wilful misconduct or gross negligence. GTL is correct that its potential personal liability for abandonment as a “licensee” is not similarly capped at estate assets under the OGCA and the Pipeline Act. The Regulator submits that “[w]hile the definition of a licensee does not explicitly provide that the receiver’s liability is limited to assets in the insolvency estate, such federal requirements are obviously read in to the provision and [are] explicitly included in other legislation administered by the [Regulator], namely the [EPEA]” (A.F., at para. 104 (footnote omitted)). For its part, GTL says that it is no answer that the Regulator’s practice is to impose liability only up to the value of the estate because, as ATB argues, without a specific statutory provision, “[p]ractices can change without notice” (ATB’s factum, at para. 106).

[105]                      I reject the proposition that the inclusion of trustees in the definition of “licensee” in the OGCA and the Pipeline Act should be rendered inoperative by the mere theoretical possibility of a conflict with s. 14.06(2). Such an outcome would be inconsistent with the principle of restraint which underlies paramountcy, as well as with the principles of cooperative federalism. The inclusion of trustees in the definition of “licensee” is an important part of the Alberta regulatory regime. It confers on them the privilege of operating the licensed assets of bankrupts while also ensuring that insolvency professionals are regulated during the lengthy periods of time when they manage oil and gas assets.

[106]                      Importantly, the situation in this case is completely different from the one before the Court in Moloney. In that case, Gascon J. rejected the argument that there was no operational conflict because the bankrupt could voluntarily pay a provincial debt post discharge or could choose not to drive. He noted that “the test for operational conflict cannot be limited to asking whether the respondent can comply with both laws by renouncing the protection afforded to him or her under the federal law or the privilege he or she is otherwise entitled to under the provincial law” (para. 60). In the instant case, GTL retains both the protection afforded to it under the federal law (no personal liability) and the privilege to which it is entitled under the provincial law (ability to operate the bankrupt’s assets in a regulated industry). GTL is not being asked to forego doing anything or to voluntarily pay anything. Nor is it urged that the Regulator could avoid conflict by declining to apply the impugned law during bankruptcy, as in Moloney, at para. 69. This is not a situation in which the Regulator might decline to apply the provincial law, but a situation in which the provincial law can be — and has been — applied during bankruptcy without conflict. 

[107]                      According to the evidence in this case, the OGCA and the Pipeline Act have included trustees in the definition of “licensee” for 20 years now, and, in that time, the Regulator has never attempted to hold a trustee personally liable. The Regulator does not look beyond the assets remaining in the bankrupt estate in seeking compliance with the bankrupt’s environmental obligations. If the Regulator were to attempt to hold GTL personally liable under the Abandonment Orders, this would create an operational conflict between the OGCA and the Pipeline Act, and s. 14.06(2)  of the BIA , rendering the former two Acts inoperative to the extent of the conflict. As it stands, however, GTL can both be protected from personal liability by s. 14.06(2) and comply with the Alberta regime in administering the Redwater estate as a “licensee”.

[108]                      The suggestion, in the dissenting reasons, that the Regulator is seeking to hold GTL personally liable is untrue. No one disputes that significant value remains in the Redwater estate. Although the Regulator’s entitlement is, of course, dependent on the priorities established by the BIA , the history of this regulatory system demonstrates that there are ways for the Regulator to access that value without holding GTL personally liable. It is not this Court’s role to mandate a particular mechanism for the Regulator to achieve that end. Even if this was not the case, the fact that Redwater’s assets have already been sold and are currently being held in trust means that personal liability is no longer a concern. There is no operational conflict.

[109]                      I turn now to frustration of purpose. The chambers judge identified a number of purposes of s. 14.06 in his reasons. GTL relies on three of them, namely: “limit[ing] the liability of insolvency professionals, so that they will accept mandates despite environmental issues”; “reduc[ing] the number of abandoned sites in the country”; and “permit[ing] receivers and trustees to make rational economic assessments of the costs of remedying environmental conditions, and giv[ing] receivers and trustees the discretion to determine whether to comply with orders to remediate property affected by these conditions” (chambers judge’s reasons, at paras. 128-29).

[110]                      The burden is on GTL to establish the specific purposes of s. 14.06(2) and s. 14.06(4) if it wishes to demonstrate a conflict. This has been described as a “high” burden, requiring “[c]lear proof of purpose” (Lemare, at para. 26). In my view, based on the plain wording of s. 14.06(2) and s. 14.06(4) (a “trustee is not personally liable”) and the Hansard evidence, it is evident that the purpose of these provisions is to protect trustees from personal liability in respect of environmental matters affecting the estates they are administering. 

[111]                      This purpose is not frustrated by the inclusion of trustees in the definition of “licensee” in the OGCA and the Pipeline Act. The Regulator’s position is that it would never attempt to hold a trustee personally liable. Trustees have been considered licensees under these Acts for over 20 years, and they have yet to face the scourge of personal liability. To find an essential part of Alberta’s regulatory regime inoperative based on the theoretical possibility of frustration of purpose would be inconsistent with the principles of paramountcy and cooperative federalism. To date, Alberta’s regulatory regime has functioned as intended without frustrating the purpose of s. 14.06(2)  or s. 14.06(4)  of the BIA .

[112]                      In arguing that s. 14.06 has the broader goals of reducing the number of abandoned sites (in the non-technical sense of “abandoned”) and encouraging trustees to accept mandates, GTL relies on what it calls “the available extrinsic evidence and the actual words and structure of that section” (GTL’s factum, at para. 91). In my view, the arguments it advances are insufficient for GTL to meet its high burden and demonstrate that the purpose of s. 14.06(2) and s. 14.06(4) should be defined as including these broader objectives. Reducing the number of unaddressed sites and encouraging trustees to accept mandates may be positive side effects of s. 14.06(2) and s. 14.06(4), but it is a stretch to see them as the purpose of the provisions. Like the provision at issue in Lemare, it is more plausible that they serve a “simple and narrow purpose” (para. 45). 

[113]                      Regardless, even if it is assumed that such broader goals are part of the purpose of s. 14.06(2) and s. 14.06(4), the evidence does not show that they are frustrated by the inclusion of trustees in the statutory definition of “licensee”. Relying on statements made by GTL in the Second Report, ATB asserts that, if trustees continue to be considered licensees and if environmental claims continue to be binding on estates, then, in situations akin to that of the Redwater insolvency, trustees will refuse to accept appointments. The fact that, prior to this litigation, it had been settled in Alberta since at least Northern Badger that certain ongoing environmental obligations in the oil and gas industry continue to be binding on bankrupt estates must be weighed against this bald allegation. It was also well established that the Regulator would never attempt to hold insolvency professionals personally liable for such obligations. As noted by the Canadian Association of Petroleum Producers, there is nothing to suggest that this well-established state of affairs has led insolvency professionals to refuse to accept appointments or has increased the number of orphaned sites. There is no reason why the Regulator and trustees cannot continue to work together collaboratively, as they have for many years, to ensure that end-of-life obligations are satisfied, while at same time maximizing recovery for creditors.

(3)           Conclusion on Section 14.06  of the BIA 

[114]                      There is no conflict between the Alberta legislation and s. 14.06  of the BIA  that makes the definition of “licensee” in the former inapplicable insofar as it includes GTL. GTL continues to have the responsibilities and duties of a “licensee” to the extent that assets remain in the Redwater estate. Nonetheless, GTL submits that, even if it cannot walk away from the Renounced Assets by invoking s. 14.06(4), the environmental obligations associated with those assets are unsecured claims of the Regulator for the purposes of the BIA . GTL says that the order of priorities in the BIA  requires it to satisfy the claims of Redwater’s secured creditors before the Regulator’s claims, which rank equally with the claims of other unsecured creditors. According to GTL, the Regulator’s attempts to use its statutory powers to prioritize its environmental claims conflict with the BIA . I will now consider this alleged conflict, which turns on the Abitibi test.

C.                 The Abitibi Test: Is the Regulator Asserting Claims Provable in Bankruptcy?

[115]                      The equitable distribution of the bankrupt’s assets is one of the purposes of the BIA . It is achieved through the collective proceeding model. Creditors of the bankrupt wishing to enforce a claim provable in bankruptcy must participate in the collective proceeding. Their claims will ultimately have the priority assigned to them by the BIA . This ensures that the bankrupt’s assets are distributed fairly. This model avoids inefficiency and chaos, thus maximizing global recovery for all creditors. For the collective proceeding model to be viable, creditors with provable claims must not be allowed to enforce them outside the collective proceeding.

[116]                      It is well established that a provincial law will be rendered inoperative in the context of bankruptcy where the effect of the law is to conflict with, reorder or alter the priorities established by the BIA . Both Martin J.A. and the chambers judge dealt with the altering of bankruptcy priorities under the frustration of purpose branch of paramountcy. In my view, it could also be plausibly advanced that a provincial law that has the effect of reordering bankruptcy priorities is in operational conflict with the BIA  — such was the conclusion in Husky Oil, at para. 87. For the purposes of this appeal, there is no need to decide which would be the appropriate branch of the paramountcy analysis. Under either branch, the Alberta legislation authorizing the Regulator’s use of its disputed powers will be inoperative to the extent that the use of these powers during bankruptcy alters or reorders the priorities established by the BIA .

[117]                      GTL says that this is precisely the effect of the obligations imposed on the Redwater estate by the Regulator through the use of its statutory powers, even if it cannot walk away from the Renounced Assets by invoking s. 14.06(4). Parliament has assigned a particular rank to environmental claims that are provable in bankruptcy. It is accepted that the limited super priority for environmental claims created by s. 14.06(7)  of the BIA  does not apply here, and accordingly, says GTL, the Regulator is an ordinary creditor as regards its environmental claims — in other words, neither a secured nor a preferred creditor. The Regulator’s environmental claims are thus to be paid rateably with those of Redwater’s other ordinary creditors under s. 141  of the BIA . GTL argues that, to comply with the Abandonment Orders or LMR requirements, the Redwater estate will have to expend funds prior to distributing its assets to the secured creditors, and that this amounts to the Regulator using its statutory powers to create for itself a priority in bankruptcy to which it is not entitled.

[118]                      However, only claims provable in bankruptcy must be asserted within the single proceeding. Other claims are not stayed upon bankruptcy and continue to be binding on the estate. In Abitibi, this Court clearly stated that not all environmental obligations enforced by a regulator will be claims provable in bankruptcy. As a matter of principle, bankruptcy does not amount to a licence to disregard rules. The Regulator says that it is not asserting any claims provable in the bankruptcy, so the Redwater estate must comply with its environmental obligations, to the extent that assets are available to do so.

[119]                      The resolution of this issue turns on the proper application of the Abitibi test for determining whether a particular regulatory obligation amounts to a claim provable in bankruptcy. To reiterate:

First, there must be a debt, a liability or an obligation to a creditor. Second, the debt, liability or obligation must be incurred before the debtor becomes bankrupt. Third, it must be possible to attach a monetary value to the debt, liability or obligation. [Emphasis in original; para. 26.]

[120]                      There is no dispute that in this appeal, the second part of the test is met. Accordingly, I will discuss only the first and the third parts of the test.

[121]                      In this Court, the Regulator, supported by various interveners, raised two concerns about how the Abitibi test has been applied, both by the courts below and in general. The first concern is that the “creditor” step of the Abitibi test has been interpreted too broadly in cases such as the instant appeal and Nortel Networks Corp., Re, 2013 ONCA 599, 368 D.L.R. (4th) 122 (“Nortel CA”), and that, in effect, this step of the test has become so pro forma as to be practically meaningless. The second concern has to do with the application of the “monetary value” step of the Abitibi test by the chambers judge and Slatter J.A. This step is generally called the “sufficient certainty” step, based on the guidance provided in Abitibi. The argument here is that the courts below went beyond the test established in Abitibi by focusing on whether Redwater’s regulatory obligations were “intrinsically financial”. Under Abitibi, the sufficient certainty analysis should have focused on whether the Regulator would ultimately perform the environmental work and assert a monetary claim for reimbursement.

[122]                      In my view, both concerns raised by the Regulator have merit. As I will demonstrate, Abitibi should not be taken as standing for the proposition that a regulator is always a creditor when it exercises its statutory enforcement powers against a debtor. On a proper understanding of the “creditor” step, it is clear that the Regulator acted in the public interest and for the public good in issuing the Abandonment Orders and enforcing the LMR requirements and that it is, therefore, not a creditor of Redwater. It is the public, not the Regulator or the General Revenue Fund, that is the beneficiary of those environmental obligations; the province does not stand to gain financially from them. Although this conclusion is sufficient to resolve this aspect of the appeal, for the sake of completeness, I will also demonstrate that the chambers judge erred in finding that, on these facts, there is sufficient certainty that the Regulator will ultimately perform the environmental work and assert a claim for reimbursement. To conclude, I will briefly comment on why the effects of the end-of-life obligations do not conflict with the priority scheme in the BIA .

(1)           The Regulator Is Not a Creditor of Redwater

[123]                      The Regulator and the supporting interveners are not the first to raise issues with the “creditor” step of the Abitibi test. In the six years since Abitibi was decided, concerns about the “creditor” step and the fact that, as it is commonly understood, it will seemingly be satisfied in all — or nearly all — cases have also been expressed by academic commentators, such as A. J. Lund, “Lousy Dentists, Bad Drivers, and Abandoned Oil Wells: A New Approach to Reconciling Provincial Regulatory Regimes with Federal Insolvency Law” (2017), 80 Sask. L. Rev. 157, at p. 178, and Stewart. This Court has not had an opportunity to comment on Abitibi since it was decided. However, the interpretation of the “creditor” step adopted by lower courts, including the majority of the Court of Appeal in this case, has focused on certain comments found at para. 27 of Abitibi, and the “creditor” step has accordingly been found to be satisfied whenever a regulator exercises its enforcement powers against a debtor (see, for example, C.A. reasons, at para. 60; Nortel CA, at para. 16).

[124]                      GTL submits that these lower courts have correctly interpreted and applied the “creditor” step. It further submits that, because of Abitibi, the 1991 Alberta Court of Appeal decision in Northern Badger is of no assistance in analyzing the creditor issue. Conversely, the Regulator forcefully argues that Abitibi must be understood in the context of its own unique facts and that it did not overrule Northern Badger. Relying on Northern Badger, the Regulator argues that a regulator exercising a power to enforce a public duty is not a creditor of the individual or corporation subject to that duty. Like Martin J.A., I agree with the Regulator on this point. If, as GTL urges and the majority of the Court of Appeal concluded, the “creditor” step is satisfied whenever a regulator exercises its enforcement powers against a debtor, then it is hard to imagine a situation in which the “creditor” step would not be satisfied by the actions of an environmental regulator. Stewart was correct to suppose that “[s]urely, the Court did not intend this result” (p. 189).  For the “creditor” step to have meaning, “there must be situations where the other two steps could be met . . . but the order [or obligation] is still not a provable claim because the regulator is not a creditor of the bankrupt” (Attorney General of Ontario’s factum, at para. 39).

[125]                      Before further explaining my conclusion on this point, I must address a preliminary issue: the fact that the Regulator conceded in the courts below that it was a creditor. It is well established that concessions of law are not binding on this Court: see Ocean Port Hotel Ltd. v. British Columbia (General Manager, Liquor Control and Licensing Branch), 2001 SCC 52, [2001] 2 S.C.R. 781, at para. 44; M. v. H., [1999] 2 S.C.R. 3, at para. 45; R. v. Sappier, 2006 SCC 54, [2006] 2 S.C.R. 686, at para. 62. As noted by L’Heureux‑Dubé J., in dissent, but not on this point, in R. v. Elshaw, [1991] 3 S.C.R. 24, at p. 48, “the fact that an issue is conceded below means nothing in and of itself”. Although concessions by the parties are often relied upon, it is ultimately for this Court to determine points of law. For several reasons, no fairness concerns are raised by disregarding the Regulator’s concession in this case.

[126]                      First, in a letter to GTL dated May 14, 2015, the Regulator advanced the position that it was “not a creditor of [Redwater]”, but, rather, had a “statutory mandate to regulate the oil and gas industry in Alberta” (GTL’s Record, vol. 1, at p. 78). I note that this was the initial communication between the Regulator and GTL, only two days after the latter’s appointment as receiver of Redwater’s property. Second, the issue of whether the Regulator is a creditor was discussed in the parties’ factums. Third, during oral arguments before this Court, the Regulator was questioned about its concession. Counsel made the undisputed point that higher courts are not bound by such concessions and took the position that, on the correct interpretation of Abitibi, the Regulator was not a creditor. Fourth, when the Regulator’s status as a creditor was raised as an issue before this Court, opposing counsel did not argue that they would have adduced further evidence on the issue had it been raised in the courts below. Finally, a proper understanding of the “creditor” step of the Abitibi test is of fundamental importance to the proper functioning of the national bankruptcy scheme and of provincial environmental schemes throughout Canada. I conclude that this case is one in which it is appropriate to disregard the Regulator’s concession in the courts below.

[127]                      Returning to the analysis, I note that the unique factual matrix of Abitibi must be kept in mind. In that case, Newfoundland and Labrador expropriated most of AbitibiBowater’s property in the province without compensation. Subsequently, AbitibiBowater was granted a stay under the CCAA . It then filed a notice of intent to submit a claim to arbitration under the North American Free Trade Agreement between the Government of Canada, the Government of the United Mexican States and the Government of the United States of America, Can. T.S. 1994 No. 2 (“NAFTA”), for losses resulting from the expropriation. In response, Newfoundland’s Minister of Environment and Conservation ordered AbitibiBowater to remediate five sites pursuant to the Environmental Protection Act, S.N.L. 2002, c. E-14.2 (“EPA”). Three of the five sites had been expropriated by Newfoundland and Labrador. The evidence led to the conclusion that “the Province never truly intended that Abitibi was to perform the remediation work”, but instead sought a claim that could be used as an offset in connection with AbitibiBowater’s NAFTA claim (Abitibi, at para. 54). In other words, the Province sought a financial benefit from the remediation orders.

[128]                      In this appeal, it is not disputed that, in seeking to enforce Redwater’s end-of-life obligations, the Regulator is acting in a bona fide regulatory capacity and does not stand to benefit financially. The Regulator’s ultimate goal is to have the environmental work actually performed, for the benefit of third-party landowners and the public at large. There is no colourable attempt by the Regulator to recover a debt, nor is there an ulterior motive on its part, as there was in Abitibi. The distinction between the facts of this appeal and those of Abitibi becomes even clearer when one examines the comprehensive reasons of the chambers judge in Abitibi. The crux of the findings of Gascon J. (as he then was) is found at paras. 173-76:

. . . the Province stands as the direct beneficiary, from a monetary standpoint, of Abitibi’s compliance with the EPA Orders. In other words, the execution in nature of the EPA Orders would result in a definite credit to the Province’s own “balance sheet”.  Abitibi’s liability in that regard is an asset for the Province itself. 

 

With all due respect, this is not regulatory in nature; it is rather purely financial in reality.  This is, in fact, closer to a debtor-creditor relationship than anything else.

 

This is quite far from the situation of the detached regulator or public enforcer issuing order for the public good. Here, the Province itself derives the direct pecuniary benefit from the required compliance of Abitibi to the EPA Orders.  The Province stands to directly gain in the outcome.  None of the cases submitted by the Province bear any similarity to the fact pattern in the present proceedings.

 

From this perspective, it is the hat of a creditor that best fits the Province, not that of a disinterested regulator.

 

(AbitibiBowater Inc., Re, 2010 QCCS 1261, 68 C.B.R. (5th) 1)

[129]                      This Court recognized in Abitibi that the Province “easily satisfied” the creditor requirement (para 49). It was therefore not necessary to consider at any length how the “creditor” step should be understood or how it would apply in other factual situations. However, even at para. 27 of Abitibi, the paragraph relied on by the majority of the Court of Appeal, Deschamps J. made a point of noting that “[m]ost environmental regulatory bodies can be creditors in respect of monetary or non-monetary obligations imposed by the relevant statutes” (emphasis added). The interpretation of the “creditor” step adopted by the majority of the Court of Appeal and urged upon this Court by GTL leaves no room for a regulator that enforces obligations not to be a creditor, though this possibility was clearly contemplated by para. 27 of Abitibi. As noted above, GTL’s interpretation leaves the “creditor” step with no independent work to perform.

[130]                      Northern Badger established that a regulator enforcing a public duty by way of non-monetary order is not a creditor. I reject the claim in the dissenting reasons that Northern Badger should be interpreted differently. First, I note that whether the Regulator has a contingent claim is relevant to the sufficient certainty test, which presupposes that the Regulator is a creditor. I cannot accept the proposition in the dissenting reasons that Northern Badger was concerned with what would become the third prong of the Abitibi test. In Northern Badger, Laycraft C.J.A. accepted that abandonment was a liability and identified the issue as “whether that liability is to the board so that it is the board which is the creditor” (para. 32). Second, the underlying scenario here with regards to Redwater’s end-of-life obligations is exactly the same as in Northern Badger — a regulator is ordering an entity to comply with its legal obligations in furtherance of the public good. This reasoning from Northern Badger was subsequently adopted in cases such as Strathcona (County) v. Fantasy Construction Ltd. (Trustee of), 2005 ABQB 794, 261 D.L.R. (4th) 221, at paras. 23-25, and Lamford Forest Products Ltd. (Re) (1991), 86 D.L.R (4th) 534.

[131]                      I cannot agree with the suggestion by the majority of the Court of Appeal in this case that Northern Badger “is of limited assistance” in the application of the Abitibi test (para. 63). Rather, I agree with Martin J.A. that Abitibi did not overturn the reasoning in Northern Badger, but instead “emphasized the need to consider the substance of provincial regulation in assessing whether it creates a claim provable in bankruptcy” (para. 164). As Martin J.A. noted, even following Abitibi, the law continues to be that “public obligations are not provable claims that can be counted or compromised in the bankruptcy” (para. 174). Abitibi clarified the scope of Northern Badger by confirming that a regulator’s environmental claims will be provable claims under certain circumstances. It does not stand for the proposition that a regulator exercising its enforcement powers is always a creditor. The reasoning in Northern Badger was simply not applicable on the facts of Abitibi, given the actions of the Province as outlined above.

[132]                      In Abitibi, Deschamps J. noted that insolvency legislation had evolved in the years since Northern Badger. That legislative evolution did not, however, change the meaning to be ascribed to the term “creditor”. In this regard, I agree with the conclusion in Strathcona County v. Fantasy Construction Ltd. (Trustee of), 2005 ABQB 559, 256 D.L.R. (4th) 536, that the amendments to the BIA  dealing with environmental matters in the years following Northern Badger cannot be interpreted as having overturned the reasoning in that case. As should be clear from the earlier discussion of s. 14.06, the amendments to the BIA  do not speak to when a regulator enforcing an environmental claim is a creditor.

[133]                      The conclusion that the reasoning in Northern Badger continues to be relevant since Abitibi and the amendments to insolvency legislation also finds support in the writings of academic commentators. Stewart’s position is that, while Abitibi discussed Northern Badger, it did not overturn it. He urges this Court to clarify that there remains “a distinction between a regulatory body that is a creditor because it is enforcing a debt, and a regulatory body that is not a creditor because it is enforcing the law” (p. 221). Similarly, Lund argues that a court should “consider the importance of the public interests protected by the regulatory obligation when deciding whether the debtor owes a debt, liability or obligation to a creditor” (p. 178).

[134]                      For the foregoing reasons, Abitibi cannot be understood as having changed the law as summarized by Laycraft C.J.A. I adopt his comments at para. 33 of Northern Badger: 

The statutory provisions requiring the abandonment of oil and gas wells are part of the general law of Alberta, binding every citizen of the province. All who become licensees of oil and gas wells are bound by them. Similar statutory obligations bind citizens in many other areas of modern life . . .  But the obligation of the citizen is not to the peace officer, or public authority which enforces the law. The duty is owed as a public duty by all the citizens of the community to their fellow citizens. When the citizen subject to the order complies, the result is not the recovery of money by the peace officer or public authority, or of a judgment for money, nor is that the object of the whole process. Rather, it is simply the enforcement of the general law. The enforcing authority does not become a “creditor” of the citizen on whom the duty is imposed.

[135]                      Based on the analysis in Northern Badger, it is clear that the Regulator is not a creditor of the Redwater estate. The end-of-life obligations the Regulator seeks to enforce against Redwater are public duties. Neither the Regulator nor the Government of Alberta stands to benefit financially from the enforcement of these obligations. These public duties are owed, not to a creditor, but, rather, to fellow citizens, and are therefore outside the scope of “provable claims”. I do not intend to suggest, however, that a regulator will be a creditor only where it acts exactly as the province did in Abitibi. There may very well be situations in which a regulator’s actions fall somewhere between those in Abitibi and those in the instant case. Notably, unlike some previous cases, the Regulator has performed no environmental work itself. I leave such situations to be addressed in future cases in which there are full factual records. Here, it is clear that the Regulator is seeking to enforce Redwater’s public duties, whether by issuing the Abandonment Orders or by maintaining the LMR requirements. The Regulator is not a creditor within the meaning of the Abitibi test.  

[136]                      I reject the suggestion that the foregoing analysis somehow overrules the first prong of the Abitibi test. The facts in Abitibi were not comparable to the facts of this appeal. Although this Court discussed Northern Badger in Abitibi, it merely referenced the subsequent amendments to the BIA , and did not overturn the earlier decision. The Court was clear that the ultimate outcome “must be grounded in the facts of each case” (para. 48). The dissenting reasons claim that, given the foregoing analysis, it will be nearly impossible to find that regulators are ever creditors. Abitibi itself shows this not to be the case. Furthermore, as I have said, there may well be cases that fall between Abitibi and the present case. However, if Abitibi is read as requiring only a determination of whether the regulator has exercised an enforcement power, it will in fact be impossible for a regulator not to be a creditor. The dissenting reasons do not seriously deny this, merely suggesting that regulators can publish guidelines or issue licences. The Regulator does both, yet, under the approach taken in the dissenting reasons, it is powerless to take any practical steps in the public interest regarding its guidelines or licences without qualifying as a creditor. As I have explained, Abitibi clearly contemplates a place for regulators who are not creditors.

[137]                      Strictly speaking, this is sufficient to dispose of this aspect of the appeal. However, additional guidance on the sufficient certainty analysis may prove helpful in future cases. Accordingly, I turn now to a discussion of the “sufficient certainty” step and of the reasons why the Abandonment Orders and the LMR conditions both fail on this step of the Abitibi test. Abitibi test.

(2)           There Is No Sufficient Certainty That the Regulator Will Perform the Environmental Work and Advance a Claim for Reimbursement

[138]                      The “sufficient certainty” test articulated in paras. 30 and 36 in Abitibi essentially does no more than reorganize and restate the requirements of the relevant provisions of the BIA . Section 121(2) provides that contingent claims may be provable claims. In other words, contingent debts or liabilities owed by a bankrupt to a creditor may be, but are not necessarily, provable claims. Section 135(1.1) provides for the valuation of such a claim. A contingent claim must be capable of valuation under s. 135(1.1) — it cannot be too remote or speculative — in order to be a provable claim under s. 121(2).

[139]                      Before the third step of the Abitibi test can even be reached, a regulator must already have been shown to be a creditor. I have concluded that, on the facts of this case, the Regulator is not a creditor of Redwater. However, for the purpose of explaining how I differ from the chambers judge on the “sufficient certainty” analysis, I will proceed as if the Regulator were, in fact, a creditor of Redwater in respect of the Abandonment Orders and LMR requirements. These end-of-life obligations do not directly require Redwater to make a payment to the Regulator. Rather, they are obligations requiring Redwater to do something. As discussed in Abitibi, if the Regulator were in fact a creditor, end-of-life obligations would be its contingent claims.

[140]                      What a court must determine is whether there are sufficient facts indicating the existence of an environmental duty that will ripen into a financial liability owed to a regulator. In determining whether a non-monetary regulatory obligation of a bankrupt is too remote or too speculative to be included in the bankruptcy proceeding, the court must apply the general rules that apply to future or contingent claims. It must be sufficiently certain that the contingency will come to pass ­— in other words, that the regulator will enforce the obligation by performing the environmental work and seeking reimbursement.

[141]                       I will now discuss the Abandonment Orders and the LMR requirements in turn and demonstrate how they fail to satisfy the “sufficient certainty” step of the Abitibi test.

(a)           The Abandonment Orders

[142]                      The Regulator has issued orders under the OGCA and the Pipeline Act requiring Redwater to abandon the Renounced Assets. Even if the Regulator were a creditor of Redwater, the Abandonment Orders would still have to be capable of valuation in order to be included in the bankruptcy process. In my view, it is not established either by the chambers judge’s factual findings or by the evidence that it is sufficiently certain that the Regulator will perform the abandonments and advance a claim for reimbursement. The claim is too remote and speculative to be included in the bankruptcy process.

[143]                      The chambers judge acknowledged that it was “unclear” whether the Regulator would perform the abandonments itself or would deem the wells subject to the Abandonment Orders to be orphans (para. 173). He stated that, in the latter case, the OWA would probably carry out the abandonments, although it was not clear when they would be completed. Indeed, the chambers judge acknowledged that, given the OWA’s resources, it could take as long as 10 years for it to get around to performing the required environmental work on the Redwater property. He nonetheless concluded that — even though the “sufficient certainty” step was not satisfied in a “technical sense” — the situation met what had been intended in Abitibi. That conclusion was at least partly based on his finding that the Abandonment Orders were “intrinsically financial” (para. 173).

[144]                      In my view, the chambers judge did not make a finding of fact that the Regulator would carry out the abandonments itself. As noted, he acknowledged that it was “unclear” whether the Regulator would perform the abandonments. This can hardly be deemed a finding of fact deserving of deference.  In my view, considered as a whole, the evidence in this case leads to the conclusion that the Regulator will not abandon the Renounced Assets itself.

[145]                      The Regulator is not in the business of performing abandonments. It has no statutory duty to do so. Abandonment is instead an obligation of the licensee. The evidence of the Regulator’s affiant was that the Regulator very rarely abandons properties on behalf of licensees and virtually never does so where the licensee is in receivership or bankruptcy. The affiant stated that the Regulator had no intention of abandoning Redwater’s licensed assets. As noted by the chambers judge, it is true that, in its letter to GTL dated July 15, 2015, the Regulator threatened to perform the abandonments itself, but the Regulator subsequently took no steps to follow up on that threat. Even if this letter should be accorded any weight, the contradiction between it and the Regulator’s subsequent affidavits at the very least makes it difficult to say with anything approaching sufficient certainty that the Regulator intends to carry out the abandonments. These facts distinguish this case from Abitibi, in which the restructuring judge’s findings were based on the premise that the province would most likely perform the remediation work itself.

[146]                      Below, I will explain why the OWA’s involvement is insufficient to satisfy the “sufficient certainty” test. First, I note that any reliance the chambers judge placed on the intrinsically financial nature of the Abandonment Orders was an error. In this regard, I am in complete agreement with Martin J.A. Considering whether an order is intrinsically financial is an erroneous interpretation of the third step of the Abitibi test. It is too broad and would result in a provable claim being found even where the existence of a monetary claim in bankruptcy is merely speculative. Thus, in Nortel CA, Juriansz J.A. rightly rejected the argument that the Abitibi test did not require a determination that the regulator would perform the environmental work and claim reimbursement, and that it was sufficient for there to be an environmental order requiring an expenditure of funds by the bankrupt estate. He held the following, at paras. 31-32:

. . . As I read it, the Supreme Court’s decision is clear: ongoing environmental remediation obligations may be reduced to monetary claims that can be compromised in CCAA  proceedings only where the province has performed the remediation work and advances a claim for reimbursement, or where the obligation may be considered a contingent or future claim because it is “sufficiently certain” that the province will do the work and then seek reimbursement.

 

The respondents’ approach is not only inconsistent with AbitibiBowater Inc., Re, it is too broad. It would result in virtually all regulatory environmental orders being found to be provable claims. As Deschamps J. observed, a company may engage in activities that carry risks. When those risks materialize, the costs are borne by those who hold a stake in the company. A risk that results in an environmental obligation becomes subject to the insolvency process only when it is in substance monetary and is in substance a provable claim.

[147]                      As the chambers judge correctly acknowledged, the fact that the Regulator would not conduct the abandonments itself does not mean that it would wash its hands of the Renounced Assets. Rather, if necessary, it would designate them as orphans pursuant to the OGCA and leave them for the OWA. I am not suggesting that a regulator can strategically avoid the “sufficient certainty” test simply by delegating environmental work to an arm’s length organization. I would not decide, as the Regulator urges, that the Abitibi test always requires that the environmental work be performed by the regulator itself. However, the OWA’s true nature must be emphasized. There are strong grounds to conclude that, given the particular features of this regulatory context, the OWA is not the regulator. 

[148]                      The creation of the OWA was not an attempt by the Regulator to avoid the BIA  order of priorities in bankruptcy. It is a non-profit organization with its own mandate and independent board of directors, and it operates as a financially independent entity pursuant to legally delegated authority. Although the OWA’s board includes a representative of the Regulator and a representative of Alberta Environment and Parks, its independence is not in question. The OWA’s 2014-2015 annual report indicates that five out of six voting directors represent industry. The OWA uses a risk assessment tool to prioritize when and how it will perform environmental work on the many hundreds of orphans in Alberta. There is no suggestion that the Regulator has any say in the order in which the OWA chooses to perform environmental work. The 2014-2015 annual report also states that, since 1992, 87 percent of the money collected and invested to fund OWA activities has been provided by industry via the orphan levy. The Regulator, at para. 99 of its factum, hints obliquely that additional provincial or federal funding may be forthcoming in the future, but even if it materializes, it will be almost entirely in the form of loans. I cannot accept the suggestion in the dissenting reasons that the Regulator and the OWA are “inextricably intertwined” (para. 273).

[149]                      Even assuming that the OWA’s abandonment of Redwater’s licensed assets could satisfy the “sufficient certainty” test, I agree with Martin J.A. that it is difficult to conclude that there is sufficient certainty that the OWA will in fact perform the abandonments. I also agree with her view that there is no certainty that a claim for reimbursement will be advanced should the OWA ultimately abandon the assets. 

[150]                      The dissenting reasons suggest that the facts of this appeal are more akin to those of Northstar Aerospace Inc., Re, 2013 ONCA 600, 8 C.B.R. (6th) 154, than to those of Nortel CA, arguing that the “sufficient certainty” test is satisfied because, as in Northstar, there is no purchaser to take on Redwater’s assets and the debtor itself is insolvent, so only the OWA can perform the work. In my view, Northstar is easily distinguishable. In that case, the bankrupt had been voluntarily carrying out remediation prior to its bankruptcy. After it made its assignment into bankruptcy, the Ministry of the Environment (“MOE”) took over the remediation activities itself, purporting to do so on a without prejudice basis. Jurianz J.A. found that the fact that the MOE had already undertaken remediation activities made it sufficiently certain that it would do so. As I will now demonstrate, the facts here are very different.

[151]                      At the beginning of this litigation, the OWA estimated that it would take 10 to 12 years to get through the backlog of orphans. By 2015, that backlog was increasing rapidly, and it may well have continued to increase at the same or an even greater speed in the intervening years, as submitted by the Regulator. If anything, this suggests the possibility of an even larger backlog. There is no indication that the Renounced Assets would have a particularly high priority in the backlog. Even if the potential additional funding materializes, the Regulator submits that it will be a generation or more before the OWA can address its existing inventory of orphans. 

[152]                      The dissenting reasons rely on the chambers judge’s conclusion that the OWA would “probably” perform the abandonments eventually, while downplaying the fact that he also concluded that this would not “necessarily [occur] within a definite timeframe” (paras. 261 and 278, citing the chambers judge’s reasons, at para. 173). Given the most conservative timeline — the 10 years discussed by the chambers judge — it is difficult to predict anything occurring with sufficient certainty. Much could change within the next decade, both in terms of government policy and in terms of the willingness of those in the Alberta oil and gas industry to discharge environmental liabilities. This is not at all the same situation as in Northstar, in which the MOE had already commenced environmental work.

[153]                      Perhaps more to the point, this lengthy timeline means that, should it ultimately perform the work, the OWA will not advance a claim for reimbursement. Advancement of a claim is an element of the test that is just as essential as performance of the work. The OWA itself has no ability to seek reimbursement of its costs from licensees and, although the costs of abandonment carried out by a person authorized by the Regulator constitute a debt payable to the Regulator under s. 30(5) of the OGCA, no evidence has been adduced that the Regulator has exercised its power to recover such costs in comparable cases. There is a good reason for this: the reality is that, by the time the OWA got around to abandoning any of Redwater’s wells, the estate would be finalized and GTL long since discharged. In sum, the chambers judge erred in failing to consider whether the OWA can be treated as the regulator and in failing to appreciate that, even if it can, it is not sufficiently certain that the OWA will in fact perform the abandonments and advance a claim for reimbursement. 

[154]                      Accordingly, even if the Regulator had acted as a creditor in issuing the Abandonment Orders, it cannot be said with sufficient certainty that it would perform the abandonments and advance a claim for reimbursement.

(b)           The Conditions for the Transfer of Licenses

[155]                      I will deal briefly with the LMR conditions for the transfer of licences. Much of the foregoing analysis with regard to the Abandonment Orders also applies to these conditions. As noted by Martin J.A., the requirement of regulatory approval for licence transfers is difficult to compare directly with the remediation orders at issue in Abitibi. However, this Court confirmed that the Abitibi test applies to a class of regulatory obligations that is broader than “orders” in Moloney, at paras. 54-55. The LMR conditions are a “non-monetary obligation” for the Redwater estate, since they must be satisfied before the Regulator will approve the transfer of any of Redwater’s licences. However, it is notable that, even apart from the LMR conditions, licences are far from freely transferrable. The Regulator will not approve the transfer of licences where the transferee is not a licensee under the OGCA, the Pipeline Act, or both. The Regulator also reserves the right to reject a proposed transfer where it determines that the transfer is not in the public interest, such as where the transferee has outstanding compliance issues.

[156]                      In a sense, the factors suggesting an absence of sufficient certainty are even stronger for the LMR requirements than for the Abandonment Orders. There is a debt enforcement scheme under the OGCA and the Pipeline Act in respect of abandonment, but there is no such scheme for the LMR requirements. The Regulator’s refusal to approve licence transfers unless and until the LMR requirements have been satisfied does not give it a monetary claim against Redwater. It is true that compliance with the LMR requirements results in a reduction in the value of the bankrupt estate. However, as discussed earlier, not every obligation that diminishes the value of the bankrupt estate, and therefore the amount available to secured creditors, satisfies the “sufficient certainty” step. The question is not whether an obligation is intrinsically financial.

[157]                      Compliance with the LMR conditions prior to the transfer of licences reflects the inherent value of the assets held by the bankrupt estate. Without licences, Redwater’s profits à prendre are of limited value at best. All licences held by Redwater were received by it subject to the end-of-life obligations that would one day arise. These end-of-life obligations form a fundamental part of the value of the licensed assets, the same as if the associated costs had been paid up front. Having received the benefit of the Renounced Assets during the productive period of their life cycles, Redwater cannot now avoid the associated liabilities. This understanding is consistent with Daishowa-Marubeni International Ltd. v. Canada, 2013 SCC 29, [2013] 2 S.C.R. 336, which dealt with the statutory reforestation obligations of holders of forest tenures in Alberta. This Court unanimously held that the reforestation obligations were “a future cost embedded in the forest tenure that serves to depress the tenure’s value at the time of sale” (para. 29).

[158]                      The fact that regulatory requirements may cost money does not transform them into debt collection schemes. As noted by Martin J.A., licensing requirements predate bankruptcy and apply to all licensees regardless of solvency. GTL does not dispute the fact that Redwater’s licences can be transferred only to other licensees nor that the Regulator retains the authority in appropriate situations to reject proposed transfers due to safety or compliance concerns. There is no difference between such conditions and the condition that the Regulator will not approve transfers where they would leave the requirement to satisfy end-of-life obligations unaddressed. All these regulatory conditions depress the value of the licensed assets. None of them creates a monetary claim in the Regulator’s favour. Licensing requirements continue to exist during bankruptcy, and there is no reason why GTL        cannot comply with them.

(3)           Conclusion on the Abitibi test

[159]                      Accordingly, the end-of-life obligations binding on GTL are not claims provable in the Redwater bankruptcy, so they do not conflict with the general priority scheme in the BIA . This is not a mere matter of form, but of substance. Requiring Redwater to pay for abandonment before distributing value to creditors does not disrupt the priority scheme of the BIA . In crafting the priority scheme set out in the BIA , Parliament intended to permit regulators to place a first charge on real property of a bankrupt affected by an environmental condition or damage in order to fund remediation (see s. 14.06(7)). Thus, the BIA  explicitly contemplates that environmental regulators will extract value from the bankrupt’s real property if that property is affected by an environmental condition or damage. Although the nature of property ownership in the Alberta oil and gas industry meant that s. 14.06(7) was unavailable to the Regulator, the Abandonment Orders and the LMR replicate s. 14.06(7)’s effect in this case. Furthermore, it is important to note that Redwater’s only substantial assets were affected by an environmental condition or damage. Accordingly, the Abandonment Orders and LMR requirements did not seek to force Redwater to fulfill end-of-life obligations with assets unrelated to the environmental condition or damage. In other words, recognizing that the Abandonment Orders and LMR requirements are not provable claims in this case does not interfere with the aims of the BIA  — rather, it facilitates them.

[160]                      Bankruptcy is not a licence to ignore rules, and insolvency professionals are bound by and must comply with valid provincial laws during bankruptcy. They must, for example, comply with non-monetary obligations that are binding on the bankrupt estate, that cannot be reduced to provable claims, and the effects of which do not conflict with the BIA , notwithstanding the consequences this may have for the bankrupt’s secured creditors. The Abandonment Orders and the LMR requirements are based on valid provincial laws of general application — exactly the kind of valid provincial laws upon which the BIA  is built. As noted in Moloney, the BIA  is clear that “[t]he ownership of certain assets and the existence of particular liabilities depend upon provincial law” (para. 40). End-of-life obligations are imposed by valid provincial laws which define the contours of the bankrupt estate available for distribution.

[161]                      Finally, as noted earlier, the BIA ’s general purpose of facilitating financial rehabilitation is not relevant for a corporation such as Redwater. Corporations with insufficient assets to satisfy their creditors will never be discharged from bankruptcy because they cannot satisfy all their creditors’ claims in full (BIA , s. 169(4) ). Thus, no conflict with this purpose is caused by the conclusion that the end-of-life obligations binding Redwater are not provable claims.

IV.             Conclusion

[162]                      There is no conflict between Alberta’s regulatory regime and the BIA  requiring portions of the former to be rendered inoperative in the context of bankruptcy. Although GTL remains fully protected from personal liability by federal law, it cannot walk away from the environmental liabilities of the bankrupt estate by invoking s. 14.06(4). On a proper application of the Abitibi test, the Redwater estate must comply with ongoing environmental obligations that are not claims provable in bankruptcy.

[163]                      Accordingly, the appeal is allowed. In Alberta Energy Regulator v. Grant Thornton Limited, 2017 ABCA 278, 57 Alta. L.R. (6th) 37, Wakeling J.A. declined to stay the precedential effect of the Court of Appeal’s decision. As he noted, the interests of the Regulator itself were already protected. Pursuant to earlier orders of the Alberta courts, GTL had already sold or renounced all of Redwater’s assets, and the sale proceeds were being held in trust. Accordingly, the Regulator’s request for an order that the proceeds from the sale of Redwater’s assets be used to address Redwater’s end-of-life obligations is granted. Additionally, the chambers judge’s declarations in paras. 3 and 5-16 of his order are set aside.

[164]                      As the successful party in the appeal, the Regulator would normally be entitled to its costs. However, the Regulator specifically did not seek costs. Accordingly, there will be no order made as to costs.

                    The reasons of Moldaver and Côté JJ. were delivered by

 

                    Côté J. (dissenting) —

I.              Introduction

[165]                      Redwater Energy Corporation (“Redwater”) is a bankrupt oil and gas company. Its estate principally consists of two types of properties or assets: valuable, producing oil wells and facilities that are still capable of generating revenue; and value-negative, non-producing assets, including depleted wells that are subject to onerous environmental liabilities. Redwater’s receiver and trustee in bankruptcy, Grant Thornton Limited (“GTL”), purports to have disclaimed ownership of the non-producing assets. It did so in order to sell the valuable, producing wells separately — unencumbered by the liabilities attached to the disclaimed properties — and to distribute the proceeds of that sale to the estate’s creditors.

[166]                      However, Alberta law does not recognize GTL’s disclaimers as enforceable. Shortly after GTL’s appointment as receiver, the Alberta Energy Regulator (“AER”) issued “Abandonment Orders” for the disclaimed assets, directing Redwater and its working interest participants to carry out environmental work on those properties. Specifically, the AER sought to have GTL “abandon” the non-producing properties, which meant to render the wells environmentally safe according to the AER’s directives. It later notified GTL that it would refuse to approve any sale of Redwater’s valuable assets unless GTL did one of three things: sell the disclaimed properties in a single package with the producing wells and facilities; complete the abandonment and reclamation work itself; or post security to cover the environmental liabilities associated with the disclaimed properties.

[167]                      The evidence reveals that none of these options is economically viable. The net value of Redwater’s 127 licensed properties is negative, so no rational purchaser would ever agree to buy them as a package. This is precisely why GTL opted to disclaim the burdensome properties in the first place. As to the remaining options, GTL cannot undertake or guarantee the abandonment and reclamation work because the environmental liabilities attached to the disclaimed assets exceed the estate’s realizable value — and in any event, GTL could not access the funds necessary to satisfy these commitments until after a sale of the estate’s valuable assets was completed. The effect of the AER’s position, then, is to hamper GTL in its administration of the estate, preventing it from realizing any value for any of Redwater’s creditors, including the AER. And the AER’s position effectively leaves the valuable and producing wells in limbo, creating a real risk that they, too, will become “orphans” — assets that are unable to be sold to another company and are left entirely unrealized.

[168]                      According to Wagner C.J., GTL is without recourse because federal law enables it only to protect itself from personal liability and because the AER was entitled to assert its environmental liability claims outside of the bankruptcy process. I disagree on both points. In my view, two aspects of Alberta’s regulatory regime conflict with the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B‑3  (“BIA ”). This result flows from a proper and accurate understanding of fundamental principles of constitutional and insolvency law.

[169]                      First, Alberta’s statutes regulating the oil and gas industry define the term “licensee” as including receivers and trustees in bankruptcy. The effect of this definition is that insolvency professionals are subject to the same obligations and liabilities as Redwater itself — including the obligation to comply with the AER’s Abandonment Orders and the risk of personal liability for failing to do so. The BIA , however, permits a trustee in bankruptcy to disclaim assets encumbered by environmental liabilities. This power was available to GTL in the circumstances of this case, and GTL validly disclaimed the non-productive assets. The result is that it is no longer subject to the environmental liabilities associated with those assets. Because Alberta’s statutory regime does not recognize these disclaimers as lawful (by virtue of the fact that receivers and trustees are regulated as licensees, who cannot disclaim assets), there is an unavoidable operational conflict between federal and provincial law. Alberta’s legislation governing the oil and gas sector should therefore be held inoperative to the extent that it does not recognize the legal effect of GTL’s disclaimers.

[170]                      Second, the AER has required that GTL satisfy Redwater’s environmental liabilities ahead of the estate’s other debts, which contravenes the BIA ’s priority scheme. Because the Abandonment Orders are “claims provable in bankruptcy” under the three-part test outlined by this Court in Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443 — from which this Court should not depart either explicitly or implicitly — the AER cannot assert those claims outside the bankruptcy process. To do so would frustrate an essential purpose of the BIA : distributing the estate’s value in accordance with the statutory priority scheme. Nor can the AER achieve the same result indirectly by imposing conditions on the sale of Redwater’s valuable assets. The province’s licensing scheme effectively operates as a debt collection mechanism in relation to a bankrupt company: it prevents GTL from discharging its duties as trustee unless the AER’s environmental claims are satisfied. As such, it should be held inoperative as applied to Redwater under the second prong of the paramountcy test, frustration of purpose.

II.           Background

[171]                      Redwater was a publicly traded oil and gas company that operated wells, pipelines and other facilities in central Alberta. In mid-2014, it suffered a number of financial setbacks following a series of acquisitions and unsuccessful drilling initiatives. As a result, it became unable to meet its obligations to its largest secured creditor, ATB Financial, which commenced enforcement proceedings.

[172]                      GTL was appointed as Redwater’s receiver on May 12, 2015. Upon its appointment, but before taking possession of any AER-licensed properties, GTL carried out an analysis of the economic viability and marketability of Redwater’s assets. It determined that only a portion of the company’s properties was actually saleable and that it would not be in Redwater’s best interests — or in the interests of its creditors — for GTL, as receiver, to take possession of the non-producing properties. It therefore informed the AER on July 3, 2015, that it would take possession of only 20 of Redwater’s 127 licensed wells and facilities. On November 2, 2015, shortly after its appointment as trustee, GTL again disclaimed the same non-producing properties it had previously renounced in its capacity as receiver.

[173]                      According to GTL’s assessment, Redwater’s valuable assets were worth $4.152 million and would generate significant value for the estate’s creditors if they were sold at auction. On the other hand, the net value of the non-producing properties was -$4.705 million, reflecting the extensive abandonment and reclamation liabilities owed to the AER. The net value of the estate as a whole was ‑$0.553 million. This was why, in GTL’s business judgment, a sale of all the estate’s assets together was simply not realistic.

[174]                      The AER responded to GTL’s first disclaimer notice by issuing the Abandonment Orders which required Redwater to carry out environmental work on the non-producing properties that GTL had disclaimed. But the AER’s enforcement efforts were not limited to the debtor’s estate itself. In its initial application that spurred this litigation, the AER filed suit against GTL seeking three principal remedies: (1) a declaration that GTL’s disclaimers were void and unenforceable; (2) an order compelling GTL, in its capacity as receiver, to comply with the Abandonment Orders issued in relation to a portion of Redwater’s assets; and (3) an order compelling GTL to fulfill its obligations as licensee under Alberta’s legislation, specifically in relation to the abandonment, reclamation and remediation of Redwater’s licensed properties.

[175]                      The genesis of this litigation, then, was a clear and forceful effort by the AER to require GTL to satisfy Redwater’s environmental obligations. To understand why the AER took that approach, it is important to note that it had provincial law on its side. Under the Oil and Gas Conservation Act, R.S.A. 2000, c. O-6 (“OGCA”) and the Pipeline Act, R.S.A. 2000, c. P-15 (“PLA”), the term “licensee” is defined to include receivers and trustees in bankruptcy (OGCA, s. 1(1)(cc); PLA, s. 1(1)(n)). As a result, insolvency professionals become subject to the same regulatory obligations as the insolvent debtor itself by effectively stepping into its shoes. They can therefore be compelled to carry out abandonment and reclamation work on the direction of the AER (OGCA, s. 27; PLA, s. 23; Oil and Gas Conservation Rules, Alta. Reg. 151/71 (“OGCA Rules”), s. 3.012); to reimburse anyone else who does abandonment work (OGCA, ss. 29 and 30; PLA, s. 25); to pay the orphan fund levy for any of the debtor’s assets (OGCA, s. 74); to provide a security deposit, under certain circumstances, at the AER’s request (OGCA Rules, s. 1.100(2)); and to pay a fine for failing to comply with an order made by the AER (OGCA, ss. 108 and 110(1); PLA, ss. 52(2) and 54(1)). These liabilities are all personal in nature. Other comparable legislation expressly limits the liability of insolvency professionals. For example, the Environmental Protection and Enhancement Act, R.S.A. 2000, c. E-12, states that the liability of a receiver or trustee under an environmental protection order “is limited to the value of the assets that the person is administering”, absent “gross negligence or wilful misconduct” (s. 240(3)). Alberta’s oil and gas statutory regime, however, does not include such a clause protecting receivers and trustees. And as the AER’s initial application makes clear, the AER itself viewed these obligations as personal. This was why it sued GTL to compel it, among other things, to comply with its obligations as a licensee under provincial law.

[176]                      The AER also exercised its enforcement power in another capacity. In addition to issuing the Abandonment Orders, the AER imposed restrictions and conditions on the sale of Redwater’s assets — conditions that effectively required GTL to satisfy those same obligations before a sale could be approved. Thus, even if GTL defied the AER’s request to abandon the non-producing properties, it would still be unable to discharge its duties as receiver and trustee.

[177]                      Both the chambers judge and the majority of the Court of Appeal found in favour of GTL on each prong of the paramountcy test, concluding that there is an operational conflict and a frustration of purpose (2016 ABQB 278, 33 Alta. L.R. (6th) 221; 2017 ABCA 124, 50 Alta. L.R. (6th) 1). They agreed with GTL and ATB Financial that the provisions of Alberta’s statutory regime permitting the AER to enforce compliance with Redwater’s environmental abandonment and reclamation obligations were constitutionally inoperative during bankruptcy. The AER and the Orphan Well Association (“OWA”) then appealed to this Court.

III.        Analysis

[178]                      The Constitution Act, 1867 , grants the federal government exclusive jurisdiction to regulate matters relating to bankruptcy and insolvency (s. 91(21)). In the exercise of that jurisdiction, Parliament enacted the BIA , “a complete code governing bankruptcy” (Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327, at para. 40; see also Husky Oil Operations Ltd. v. Minister of National Revenue, [1995] 3 S.C.R. 453, at para. 85). The BIA  outlines, among other things, the powers, duties and functions of receivers and trustees responsible for administering bankrupt or insolvent estates and the scope of claims that fall within the bankruptcy process (see BIA , ss. 16  to 38  and 121  to 154 ).

[179]                      Although the operation of the BIA  “depends upon the survival of various provincial rights” (Moloney, at para. 40), this is true only to the extent that “substantive provisions of any [provincial] law or statute relating to property . . . are not in conflict with [the BIA ]” (BIA , s. 72(1) ). When a conflict arises, the BIA  necessarily prevails (Moloney, at paras. 16 and 29; Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd., 2015 SCC 53, [2015] 3 S.C.R. 419, at para. 16). This reflects the constitutional principle that federal laws are paramount (Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3, at para. 32).

[180]                      The respondents in this appeal — GTL and ATB Financial — posit two distinct conflicts between the federal and provincial legislation. First, they argue that the BIA  grants receivers and trustees the power to disclaim any interest in any real property, even where they are not at risk of personal liability by virtue of their possession of the property. This disclaimer power enables trustees to renounce valueless and liability-laden property of a bankrupt in pursuit of their primary goal, which is to maximize global recovery for all creditors. The respondents argue that GTL validly disclaimed the non-producing assets and therefore cannot be held responsible for carrying out the Abandonment Orders; nor can the AER make any sale of Redwater’s assets conditional on the fulfillment of obligations with respect to the disclaimed properties.

[181]                      Second, they argue that the AER’s Abandonment Orders constitute “claims provable in bankruptcy”. In their view, it would undermine the BIA ’s priority scheme if the AER could assert those claims outside the bankruptcy process — and ahead of the estate’s secured creditors — whether by compelling GTL to carry out those orders or by making the sale of Redwater’s valuable assets conditional on the fulfillment of those obligations.

[182]                      In my view, GTL and ATB Financial have satisfied their burden of demonstrating a genuine inconsistency between federal and provincial law under both branches of the paramountcy test. In what follows, I first discuss the operational conflict that arises between Alberta’s regulatory regime and s. 14.06(4)  of the BIA . I then turn to the second branch of the paramountcy analysis, frustration of purpose.

A.           Operational Conflict

[183]                      The first branch of the paramountcy test is operational conflict. An operational conflict arises where “it is impossible to comply with both laws” (Moloney, at para. 18) — “where one enactment says ‘yes’ and the other says ‘no’”, or where “the same citizens are being told to do inconsistent things” (Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161, at p. 191; see also Lemare Lake, at para. 18).

[184]                      In essence, an operational conflict analysis is an exercise in statutory interpretation: the Court must ascertain the meaning of each competing enactment in order to determine whether dual compliance is possible. Although this interpretation exercise takes place within the guiding confines of cooperative federalism, a concept that allows for some interplay and overlap between federal and provincial legislation, this Court recently set out the limits to this concept:

[C]ooperative federalism may be used neither to “override nor [to] modify the division of powers itself” (Rogers Communications Inc. v. Châteauguay (City), [2016 SCC 23, [2016] 1 S.C.R. 467] at para. 39), nor to impose “limits on the otherwise valid exercise of legislative competence” (Quebec (Attorney General) v. Canada (Attorney General), [2015 SCC 14, [2015] 1 S.C.R. 693] at para. 19; Reference re Securities Act, [2011 SCC 66, [2011] 3 S.C.R. 837] at paras. 61-62). It cannot, therefore, be used to make ultra vires legislation intra vires. By fostering cooperation between Parliament and the legislatures within the existing constitutional boundaries, however, cooperative federalism works to support, rather than supplant, the division of legislative powers (see: Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3, at para. 22).

 

(Reference re Pan-Canadian Securities Regulation, 2018 SCC 48, [2018] 3 S.C.R. 189, at para. 18)

[185]                      Properly understood, cooperative federalism operates as a straightforward interpretive presumption — one that supports, rather than supplants, the modern approach to statutory interpretation. This Court recognized as much in Moloney, where Gascon J. wrote that courts should “favour an interpretation of the federal legislation that allows the concurrent operation of both laws” on the basis of a presumption “that Parliament intends its laws to co-exist with provincial laws” (para. 27). But where “the proper meaning of the provision” — one that is not limited to “a mere literal reading of the provisions at issue” — cannot support a harmonious interpretation, it is beyond this Court’s power to create harmony where Parliament did not intend it (para. 23; see also Pan-Canadian Securities Regulation, at para. 18; Lemare Lake, at paras. 78-79, per Côté J., dissenting, but not on this point).

[186]                      In my view, my colleague places undue reliance on the principle of cooperative federalism to narrow the scope of federal law and find a harmonious interpretation where no plausible one exists. Courts must be especially careful about using cooperative federalism to interpret legislative provisions narrowly in a case like this where Parliament expressly envisioned that the disclaimer right could come into conflict with provincial law. This is evident from the very first line of s. 14.06(4), which states that the disclaimer power applies “[n]otwithstanding anything in any federal or provincial law”. The notion that judicial restraint should compel a different interpretation is therefore belied by the fact that Parliament considered, acknowledged and accepted the potential for conflict. To rely on judicial restraint, then, to avoid a conflict between federal and provincial law is to disregard Parliament’s express instruction. Simply put, this is not a case where a drastic power is to be assumed from the statute; it is one where such a power is clearly provided for. In my view, reliance on cooperative federalism must never result in an interpretation of s. 14.06(4) that is inconsonant with its language, context and purpose.

[187]                      It is undisputed in this appeal that Alberta law does not recognize GTL’s disclaimers of assets licensed by the AER as enforceable to the extent that they relieve GTL of the obligation to satisfy the environmental liabilities associated with the assets. As receiver and trustee, GTL steps into Redwater’s shoes as a “licensee” under provincial law; and, GTL submits, it can therefore, without the disclaimers, be held liable for the debtor’s abandonment and reclamation obligations in the same manner as Redwater itself. The question, then, is whether the BIA  permits GTL to disclaim these properties and what legal effect results from such disclaimer.

[188]                      Section 14.06  of the BIA , reproduced in full in the appendix, outlines a trustee’s powers and duties with respect to environmental liabilities and the disclaimer of property. Specifically, s. 14.06(4) states that the trustee is “not personally liable for failure to comply” with an order requiring it to “remedy any environmental condition or environmental damage affecting property involved in a bankruptcy”, provided that the trustee “abandons, disposes of or otherwise releases any interest in any real property . . . affected by the condition or damage” within the statutory timeframes. The timing of GTL’s disclaimers is not at issue here. 

[189]                      My colleague concludes that, regardless of whether GTL could have properly invoked the disclaimer power in this case, the effect of any such disclaimer would simply be to protect it from personal liability. He states that, in any event, the exercise of the disclaimer power was unnecessary in this case because GTL was already fully protected from personal liability through the operation of s. 14.06(2). Further, he argues, because the AER has not sought to hold GTL personally liable, there is no conflict between federal and provincial law on the facts of this case. With respect, I disagree with this approach to the language of the BIA , which does not properly account for fundamental principles of constitutional and insolvency law. I will begin by addressing the proper scope of the disclaimer power provided to trustees, explaining that the actual existence of a risk of personal liability is not a necessary condition for the exercise of this power and that, while protection from personal liability is one effect of a valid disclaimer, it is not the only one. In my view, this interpretation makes s. 14.06(4) consistent with the remainder of the section and is therefore to be preferred. With respect, I do not accept that Parliament intended s. 14.06(4) simply to protect trustees from the exact same liability that it had already addressed through s. 14.06(2). Subsection (4) must have a meaningful role to play within Parliament’s bankruptcy and insolvency regime; I reject the suggestion that Parliament crafted a superfluous provision. I will also deal briefly with the AER’s argument that the disclaimer power is not available at all in the context of Alberta’s oil and gas statutory regime. In my view, it is available in this context.

(1)           The Power to Disclaim Under Section 14.06(4)

[190]                      The “natural meaning which appears when the provision is simply read through” (Canadian Pacific Air Lines Ltd. v. Canadian Air Line Pilots Assn., [1993] 3 S.C.R. 724, at p. 735) is that s. 14.06(4) assumes and incorporates a pre-existing common law right to disclaim property in the context of bankruptcy and insolvency (see L. Silverstein, “Rejection of Executory Contracts in Bankruptcy and Reorganization” (1964), 31 U. Chi. L. Rev. 467, at pp. 468-72; New Skeena Forest Products Inc. v. Don Hull & Sons Contracting Ltd., 2005 BCCA 154, 251 D.L.R. (4th) 328, at paras. 24-31; Re Thompson Knitting Co., Ltd., [1925] 2 D.L.R. 1007 (Ont. S.C. (App. Div.), at p. 1008). This right is in keeping with the fundamental objective of court officers in insolvencies: the maximization of recovery for creditors as a whole by realizing the estate’s valuable assets. By allowing trustees to disclaim assets with substantial liabilities, this power enables them to administer the estate in the most efficient manner and to avoid significant costs of administration that would reduce creditor recovery. Section 14.06(4) recognizes and supports this foundational principle of insolvency law.

[191]                      This reading offers the clearest and most obvious explanation for the manner in which the provision is drafted, in that it plainly describes a result or legal effect of disclaimer: a trustee “is not personally liable for failure to comply” with an environmental order “if . . . the trustee . . . abandons, disposes of or otherwise releases any interest in any real property” (s. 14.06(4)). We should interpret s. 14.06(4) as authorizing the act of disclaimer in light of the principle that “[t]he legislator does not speak in vain” (Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 37, citing Attorney General of Quebec v. Carrières Ste-Thérèse Ltée, [1985] 1 S.C.R. 831, at p. 838). If a trustee did not have the power to disclaim property, and if that power were not recognized and provided for in the statute, a provision describing the effect of such a disclaimer would serve no purpose.

[192]                      The AER submits that property may be disclaimed only where it is necessary for a trustee to avoid personal liability with respect to an environmental order. This interpretation entirely inverts the language of the provision, turning a stated effect of disclaimer into a necessary condition that circumscribes the exercise of the power. The operative clauses are neither written nor ordered in this manner. Rather, s. 14.06(4) expresses the disclaimer right in unqualified terms and emphasizes that a trustee may not be held liable whenever that right is exercised. If Parliament truly intended to condition the right to disclaim property on the actual existence of a risk of personal liability, “it is hard to conceive of a more convoluted and sibylline way of stating something that could be so easily expressed in clear and direct terms” (Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85, at p. 124).

[193]                      My colleague adopts a slightly different approach. Rather than accepting the argument that the risk of personal liability is a necessary condition to the exercise of the disclaimer power in s. 14.06(4), he concludes that protection from personal liability for non-compliance with environmental orders is the only consequence of a valid disclaimer. Therefore, he says, the bankrupt’s estate is not relieved of its obligations under the environmental orders and the trustee can be compelled to expend the entirety of the estate’s assets on compliance. With respect, this also cannot be the correct reading of the subsection. Nor do I believe that the brief references to s. 14.06(4) in GMAC Commercial Credit Corp. — Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123 — a case in which this subsection was not directly in issue and this Court was not tasked with interpreting it in any meaningful way — provide much assistance in this case.

[194]                      I accept that the opening words of s. 14.06(4) refer to the personal liability of the trustee. However, when the words of the subsection are read “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”, as the courts are required to do (see Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; Bell ExpressVu, at para. 26, quoting E. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87), their meaning becomes apparent.

[195]                      Section 14.06(4) both assumes and relies on the common law power of trustees to disclaim assets, a power that the majority of the Court of Appeal described as “commonplace” (para. 47). Even my colleague appears to accept that this disclaimer power “predates” s. 14.06(4) itself (at para. 95). Indeed, the majority of the Court of Appeal recognized that “[s]ection 14.06 does not appear to create a right in a trustee to abandon properties without value, but rather assumes that one exists upon bankruptcy” (para. 63). This is the only rational explanation for why Parliament made the effects of s. 14.06(4) available when the trustee “abandons, disposes of or otherwise releases any interest in any real property”. While avoiding personal liability is one effect of the appropriate exercise of this power, it is not the only effect. Disclaimer operates to “determine, as from the date of the disclaimer, the rights, interests and liabilities” in the disclaimed property (R. Goode, Principles of Corporate Insolvency Law (4th ed. 2011), at p. 202). By properly disclaiming certain assets, the trustee is relieved of any liabilities associated with the disclaimed property and loses the ability to sell the property for the benefit of the estate. The author Frank Bennett, writing about the administration of the bankrupt’s real property, explains that “[w]here the trustee disclaims its interest, the disclaimer releases and disclaims any and all right, title and interest to the property” (Bennett on Creditors’ and Debtors’ Rights and Remedies (5th ed. 2006), at p. 482 (footnote omitted)).

[196]                      The majority asserts that s. 14.06(4) does not allow a trustee to “walk away” from assets and the environmental liabilities associated with them (paras. 86, 100 and 102). However, disclaiming property does have precisely this effect. It permits the trustee not to realize assets that would provide no value to the estate’s creditors and whose realization would therefore undermine the trustee’s fundamental objective. A recognized purpose of the disclaimer power is to “avoid the continuance of liabilities in respect of onerous property which would be payable as expenses of the liquidation, to the detriment of unsecured creditors” (Goode, at p. 200 (footnote omitted)). These principles are no less valid in relation to valueless real property than they are in relation to unprofitable and burdensome executory contracts. Indeed, there has been no suggestion in this appeal, including from the AER and the OWA, that trustees can never disclaim onerous real property.

[197]                      This explanation of the disclaimer power is borne out by GTL’s actions in the instant case. After assessing the economic viability and marketability of Redwater’s assets, GTL determined that it would be most beneficial to Redwater’s creditors as a whole if it disclaimed the non-producing, liability-laden assets.

[198]                      Parliament’s recognition of this common law disclaimer power in s. 14.06(4) is not new. The power is also referred to in another section, albeit in a broader context. Section 20(1)  of the BIA , provides trustees with the ability to “divest” themselves of “any real property or immovable of the bankrupt” generally. However, the disclaimer power itself does not derive from this section. Nor is a trustee required to invoke s. 20(1) in order to exercise the disclaimer power described in s. 14.06(4), which incorporates that power and spells out the particular effects of its exercise in the specific context of environmental remediation orders. In any event, this Court is not required in this appeal to comment on the full effects of s. 20(1).

[199]                      Under my colleague’s interpretation, it is unclear why Parliament chose to enact the disclaimer mechanism. It is surely true that Parliament could have achieved the same outcome through the use of simpler language. Had it merely intended to protect trustees from personal liability for failure to comply with environmental orders, it could have easily done so directly — in fact, it had already done so in s. 14.06(2). There is no reason why Parliament would have attempted to achieve this relatively straightforward result through the convoluted mechanism of requiring trustees to disclaim property while at the same time not intending such disclaimer to have its “commonplace” common law effects. There is a reason why Parliament has referred to the power to disclaim in s. 14.06(4); we must give effect to this choice and to the words that Parliament has used.

[200]                      It follows, then, that I respectfully disagree that s. 14.06(4) only protects trustees from specific types of personal liability. But it does not follow that the estate is relieved of its liabilities once a trustee exercises the disclaimer power — a misconception that is pervasive in the AER’s submissions and the majority’s analysis. The disclaimed property ultimately reverts to the estate at the conclusion of the bankruptcy proceedings, as is the case with unrealized assets (see BIA , s. 40 ; see also Bennett, at p. 528). The estate remains liable for the remediation obligations attached to the land. Whether the estate has sufficient assets capable of satisfying those liabilities at that point in time is a separate question that is unrelated to the underlying fact of ongoing liability. In any case, the regulatory scheme continues to apply with respect to the retained assets. In referring repeatedly to the idea that disclaimer does not “immunize bankrupt estates from environmental liabilities” (para. 81), the majority misunderstands the impact and purpose of the disclaimer power. The estate itself is not relieved of environmental obligations. As I have noted, the trustee does not take possession of the bankrupt’s assets in order to continue the life of the bankrupt indefinitely. The trustee’s function is to realize on the estate’s valuable assets and maximize global recovery for all creditors. Allowing the trustee to deal only with the value-positive assets to achieve this goal does not relieve the estate of its environmental obligations. As a result, the disclaimer power, and its incorporation into s. 14.06(4), is entirely consistent with the foundational principles of insolvency law.

[201]                      In s. 14.06(4), Parliament has expressly referred to this disclaimer power and spelled out the particular effects flowing from its proper exercise. By doing so, it has purposefully incorporated the disclaimer power into its statutory scheme to achieve its desired purposes.

[202]                      My interpretation of s. 14.06(4) finds ample support in the Hansard evidence. In the debates preceding the enactment of s. 14.06(4) in 1997, Jacques Hains, a director in the Department of Industry Canada who had been involved in drafting the amendments to the BIA , discussed the new options being provided to trustees when faced with an environmental remediation order:

First, he could decide to carry out the order and remedy the environmental damage, the costs to be charged as costs of administration from the bankrupt’s assets.

 

The second option would be to challenge this order to remedy before the appropriate courts; these two options are already to be found in environmental legislation.

 

The third option would be for the monitor to apply to the appropriate court for a period of stay to assess the economic viability of complying with the order, whether it is worth the trouble and whether the assets are sufficient to cover the clean up costs.

 

As a fourth option, if he considers that this course has absolutely no economic viability, he may give notification that he has renounced the real property to which the order applies. [Emphasis added.]

 

(Standing Committee on Industry, Evidence, No. 16, 2nd Sess., 35th Parl., June 11, 1996, at 15:45 to 15:50)

The above passage makes no reference to the personal liability of a trustee who is considering whether to invoke the “fourth option” and disclaim the property. Mr. Hains was clear that the decision to disclaim is based on the “economic viability” of complying with the remediation orders, specifically “whether the assets are sufficient to cover the clean up costs”. This makes sense only in the context of the trustee’s obligation to maximize economic recovery for creditors.

[203]                      Several months later, Mr. Hains reiterated this fourth option, explaining that, after assessing the economic viability of complying with the order and “knowing that the bill will be too expensive and will not be economically viable, the trustees are then out of it and can abandon that piece of property subject to the order” (Proceedings of the Standing Senate Committee on Banking, Trade and Commerce, No. 13, 2nd Sess., 35th Parl., November 4, 1996, at p. 13:68 (emphasis added)). This description plainly reflects the function of the disclaimer power, which does indeed allow trustees to “walk away” from liability-laden assets that will not contribute to maximizing creditor recovery.

[204]                      Mr. Hains’ answers to questions from the House of Commons Standing Committee further confirms this interpretation of the disclaimer power. The following exchange is very telling:

Mr. Lebel [Member of Parliament for Chambly]: When a trustee decides to give up the land and realize[s] assets elsewhere, for example by making a profit from the sale of assets, having released himself from the obligation to clean up the land, he would be sharing a dividend realized from other profitable assets and telling the creditors to manage as best they can with the real property. If the creditors are not willing to touch it, he will then tell the government to clean it up. In such a case, each of the bankruptcy creditors would also . . . stand to earn a small dividend, as it is referred to in Bankruptcy Law.

 

Do you not think that your bill should require the trustee to carry out a clean-up from the assets of the bankruptcy before the dividends are distributed?

 

Mr. Hains: It's an excellent question that was put to me only three weeks ago by colleagues from the Department of the Environment of Quebec, whom I was meeting to discuss this subject. There were a number of matters of interest to them, particularly the one raised by Mr. Lebel. [Emphasis added.]

 

(Standing Committee on Industry, June 11, 1996, at 16:55)

Mr. Hains went on to reference various other features of the scheme to assuage Mr. Lebel’s concerns and noted that provincial environmental agencies would be responsible for performing the remediation work. Significantly, at no point did Mr. Hains contradict Mr. Lebel’s understanding of the bill’s provisions. Nor did he take issue with the premise underlying the question: that the new legislation does not “require the trustee to carry out a clean-up from the assets of the bankruptcy” before they are distributed to creditors. Mr. Hains did not claim that provincial regulators might still enforce such a requirement.

[205]                      This exchange between Mr. Lebel and Mr. Hains clearly demonstrates the collective understanding of all parties that the proposed amendments, containing what would become s. 14.06(4), specifically did not require the trustee to expend the estate’s assets to comply with environmental remediation orders. The drafters of s. 14.06(4) thus turned their minds directly to this issue, and their understanding of the provision’s effects was contrary to that proposed by the majority.

[206]                      Based on these references to Hansard, I cannot agree with the majority’s statement that the legislative debates provide “no hint” of a parliamentary intention to relieve trustees of the obligation to expend estate assets on environmental remediation (para. 81). This intention was clearly expressed on multiple occasions.

[207]                      As courts must read statutory provisions in their entire context, and as Parliament is presumed to craft sections and subsections of legislation as parts of a coherent whole, it is important to carefully examine the other subsections of s. 14.06. This is true regardless of whether a party to litigation seeks to apply them or to put them directly in issue (majority reasons, at paras. 88 and 101). Significantly, the immediate statutory context surrounding s. 14.06(4) confirms that a trustee’s right to disclaim property is not limited in the manner suggested by the AER or my colleague. Four provisions adjacent to s. 14.06(4) support this conclusion.

[208]                      First, s. 14.06(5) provides that a court may stay an environmental order “for the purpose of enabling the trustee to assess the economic viability of complying with the order”. Assessing “economic viability” is, on its face, broader than assessing the risk of personal liability. This provision indicates that a trustee is entitled to disclaim assets based on a rational economic analysis geared toward maximizing the value of the estate, and not merely in order to protect itself from personal liability. Otherwise, there would be no reason for Parliament to permit a court to grant a stay for the purpose of assessing economic viability. This understanding is consistent with the fundamental principles of insolvency law and with the Hansard evidence, as noted above, as well as with one of the recognized justifications for the disclaimer power more generally: to allow a trustee “to complete the administration of the liquidation without being held up by continuing obligations on the company under . . . continued ownership and possession of assets which are of no value to the estate” (Goode, at p. 200).

[209]                      Second, s. 14.06(7) grants the government a super priority for environmental claims in cases where it has already taken action to remedy the condition or damage. This provision would serve little purpose if a government regulator could assert a super priority for all environmental claims, as the AER effectively purports to do here by refusing to recognize GTL’s disclaimers as lawful. It also suggests that Parliament specifically envisioned that the government could obtain a super priority and leapfrog other creditors, but only where the government itself has already remediated the environmental damage. An analogous argument was central to the reasoning in Abitibi, where this Court observed that the existence of a Crown priority limited to the contaminated property and certain related property under s. 11.8(8)  of the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 , undercut the argument that Parliament “intended that the debtor always satisfy all remediation costs” in circumstances where that express priority was inapplicable and where the Crown had no further priority with respect to the totality of the estate’s assets (para. 33).

[210]                      Third, s. 14.06(6) provides that claims for costs of remedying an environmental condition or environmental damage cannot rank as costs of administration if the trustee has disclaimed the property in question. Again, if the AER could effectively assert a super priority by compelling GTL to use all of Redwater’s assets to satisfy its outstanding environmental liabilities, this provision would be unnecessary, because the costs of environmental remediation would rank ahead of administrative costs in the priority structure. Moreover, s. 14.06(6) highlights the potential for a direct conflict between federal and provincial law. A trustee cannot comply with the AER’s instruction to pay environmental costs as part of its administration of the estate while simultaneously complying with the BIA ’s requirement that such costs not be included in the trustee’s administrative costs. This further raises the spectre of bankruptcy professionals being forced to expend their own funds under Alberta’s regulatory regime — a notion that Parliament clearly rejected by amending the BIA  in response to Panamericana de Bienes y Servicios S.A. v. Northern Badger Oil & Gas Ltd., 1991 ABCA 181, 81 D.L.R. (4th) 280 (see C.A. reasons, at para. 63). This is a risk that is not adequately addressed under my colleague’s interpretation.

[211]                      Fourth, s. 14.06(2) already deals with the circumstances in which a trustee can be held personally liable for a bankrupt’s environmental liabilities. Under this provision, personal liability can arise only where environmental damage occurs as a result of the trustee’s gross negligence or wilful misconduct. If a risk of personal liability is, in fact, a necessary condition to disclaim under s. 14.06(4), or if protection from personal liability is the only effect of disclaimer, this would mean that the disclaimer power is available or useful only in cases where the underlying environmental condition arises after the trustee’s appointment and the trustee is responsible for gross negligence or wilful misconduct.

[212]                      This obvious absurdity cannot be sidestepped by trying to distinguish between liability for environmental damage (purportedly covered by s. 14.06(2)) and liability for a failure to comply with an order to remedy such damage (purportedly covered by s. 14.06(4)). This distinction is entirely artificial. If the AER issues an abandonment order in relation to a licensed property, it effectively creates liability for the underlying condition itself — liability that would still be encompassed by s. 14.06(2). This is evident from the marginal note for s. 14.06(2), “[l]iability in respect of environmental matters”, which is capacious enough to include liability that flows from a failure to comply with an environmental order. In any event, it is difficult to imagine why Parliament would intend to immunize a trustee from personal liability for an environmental condition, but still hold the trustee liable for a failure to comply with an order to remedy that exact same condition — and then further, permit the trustee to avoid that very liability by disclaiming the property, but either not permit the trustee to disclaim that property in any other circumstance or make it pointless to do so. This convoluted reasoning not only misreads s. 14.06(4), but also rewrites s. 14.06(2) in the process. It effectively creates a sector specific exemption from bankruptcy law that would prohibit many receivers and trustees that operate in the oil and gas industry from disclaiming assets (see N. Bankes, Majority of the Court of Appeal Confirms Chief Justice Wittmann’s Redwater Decision, May 3, 2017 (online)).

[213]                      I also cannot accept that Parliament enacted s. 14.06(4) simply to protect trustees from personal liability in the narrow subset of circumstances not already covered by s. 14.06(2) — namely where an environmental condition or environmental damage arises after a trustee’s appointment and as a result of the trustee’s gross negligence or wilful misconduct — for two main reasons. Firstly, the terms of the provision itself belie this theory. The opening lines of s. 14.06(4) expressly make the limitation of liability “subject to subsection (2)”. This indicates that Parliament deliberately intended subs. (2) to supersede subs. (4) in the determination of liability. Thus, where a trustee has caused an environmental condition or environmental damage through its wilful misconduct or gross negligence, the trustee will still be personally liable, despite any valid disclaimer under subs. (4). Secondly, there is no evidence, or indeed any rationale, to explain why Parliament would have drafted s. 14.06(4) to protect trustees in such narrow circumstances, through the method of disclaiming property, and to shield them from liability where they cause environmental issues through their own wrongdoing.

[214]                      The majority of this Court accepts that, on its interpretation, no meaningful distinction can be drawn between the protection from personal liability provided by subs. (2) and that provided by subs. (4). Indeed, the majority appears to believe that such a distinction is not even necessary, accepting that “s. 14.06(4) does not provide trustees with protection from personal liability any broader than the protection provided by s. 14.06(2)” (para. 93). However, the effect of this interpretation is to render subs. (4) entirely meaningless and redundant. Trustees would have no reason to exercise their power to disclaim assets, as the only effect of doing so would be to protect them from personal liability from which they are already fully shielded by subs. (2). Section 14.06(4) would therefore serve no purpose whatsoever within Parliament’s bankruptcy regime. I cannot understand the logic of Parliament explicitly referring to, and incorporating, the ability of trustees to disclaim assets — and specifically outlining one consequence of that power — simply to mandate that such an action has no meaningful effect. We must presume that Parliament does not speak in vain and did not craft a pointless provision (Canada (Attorney General) v. JTI-Macdonald Corp., 2007 SCC 30, [2007] 2 S.C.R. 610, at para. 87). It is a trite principle of statutory interpretation that every provision of a statute should be given meaning:

It is presumed that every feature of a legislative text has been deliberately chosen and has a particular role to play in the legislative design. The legislature does not include unnecessary or meaningless language in its statutes; . . . it does not make the same point twice.

 

(R. Sullivan, Statutory Interpretation (3rd ed. 2016), at p. 43)

[215]                      This evident absurdity cannot be avoided by suggesting that s. 14.06(4) was created to clarify to trustees that they may be required to expend the entire value of a bankrupt estate to comply with environmental orders, despite valid disclaimers. If Parliament’s intent was truly to undermine the disclaimer power in this way, it is difficult to conceive of a more convoluted, tortuous and unclear method to achieve this result than s. 14.06(4). Had Parliament simply sought to make clear to trustees that disclaimer would not allow them to relieve themselves from satisfying environmental liabilities, it could easily have done so directly rather than enacting a provision that describes protection from personal liability they do not actually face.

[216]                      Section 14.06, when read as a whole, indicates that subs. (4) does more than merely protect trustees from personal liability. My colleague has declined to even consider the remaining subsections of s. 14.06 that I have discussed, other than subs. (2). Nonetheless, he says that the plain meaning of a provision cannot be “contorted to make its scheme more coherent” (para. 101). The conclusion that would result from such an approach would be that Parliament simply intended to craft a largely incoherent framework. I disagree that we should reach this conclusion here. As Dickson J. (as he then was) stated in Morgentaler v. The Queen, [1976] 1 S.C.R. 616, at p. 676: “We should pay Parliament the respect of not assuming readily that it has enacted legislative inconsistencies or absurdities.” A determination that Parliament designed s. 14.06 as an incoherent whole is inconsistent with the role of the courts in statutory interpretation, which is to read the words of a statute in their entire context, harmoniously with the scheme of the statute. As Ruth Sullivan has noted:

It is presumed that the provisions of legislation are meant to work together, both logically and teleologically, as parts of a functioning whole. The parts are presumed to fit together logically to form a rational, internally consistent framework; and because the framework has a purpose, the parts are also presumed to work together dynamically, each contributing something toward accomplishing the intended goal.

 

The presumption of coherence is also expressed as a presumption against internal conflict. It is presumed that the body of legislation enacted by a legislature does not contain contradictions or inconsistencies, that each provision is capable of operating without coming into conflict with any other. [Footnote omitted.]

 

(Sullivan on the Construction of Statutes (6th ed. 2014), at p. 337; see also R. v. L.T.H., 2008 SCC 49, [2008] 2 S.C.R. 739, at para. 47.)

[217]                      Where it is possible to read the provisions of a statute — especially the various subsections of a single section — in a consistent manner, that interpretation is to be preferred over one that results in internal inconsistency. In my view, as I have set out above, it is possible to read s. 14.06(4) coherently with the remainder of the section. This is the interpretation that Parliament is presumed to have intended. In this case, I see no compelling reason to depart from this presumption.

[218]                      My colleague’s analysis is reminiscent of the strictly textual or literal approach to statutory interpretation — the “plain meaning rule” — that this Court squarely rejected in Rizzo. This is apparent from the fact that he relies strictly on what he alleges to be the “clear and unambiguous” wording of s. 14.06(4), while discounting the context of the provision. With respect, I am of the view that the Court should rely on the predominant and well-established modern approach to statutory interpretation: the words of an Act must be “‘read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”’ (Rizzo, at para. 21; Bell ExpressVu, at para. 26, both quoting Driedger, at p. 87).

[219]                      In Rizzo, Iaccobucci J. explained that “statutory interpretation cannot be founded on the wording of the legislation alone” (para. 21). The Court of Appeal in Rizzo, which had adopted the plain meaning interpretation, “did not pay sufficient attention to the scheme of the [Act], its object or the intention of the legislature; nor was the context of the words in issue appropriately recognized” (para. 23).

[220]                      In interpreting s. 14.06(4)  of the BIA , the majority similarly relies on the supposed plain meaning of the words of the provision but does not pay sufficient attention to the scheme of s. 14.06 as a whole; nor does it appropriately recognize the context of the words.

[221]                      Even if we were to leave aside the wording of the provision itself and its immediate statutory context, a purposive interpretation would lead to the same result. Consider the consequences of the analysis of the AER or the analysis of my colleague in other cases like this, where an oil company’s environmental liabilities exceed the value of its realizable assets. Insolvency professionals, knowing in advance that they can be compelled to funnel all of the estate’s remaining assets toward those environmental liabilities (either because they cannot disclaim value-negative assets absent a risk of personal liability or because their disclaimer will be ineffective to prevent this), will never accept mandates in the first place. This is sensible business practice: if the estate’s entire realizable value must go toward its environmental liabilities, leaving nothing behind to cover administrative costs, insolvency professionals will have nothing to gain — and much to lose — by stepping in to serve as receivers and trustees, irrespective of whether they are protected from personal liability. Debtors and creditors alike, knowing that this is the case, will have no reason to even petition for bankruptcy. The result is that none of a bankrupt estate’s assets will be sold — not even an oil company’s valuable wells — and the number of orphaned properties will increase. This is a far cry from the objectives of the 1997 amendments to the BIA  as discussed in Parliament, which were to “encourage [insolvency professionals] to accept mandates” and to “reduce the number of abandoned sites” (Standing Committee on Industry, June 11, 1996, at 15:49). It is difficult to imagine that Parliament would have intended a construction of s. 14.06(4) that explicitly undermines its stated purposes.

[222]                      The majority appears to accept that the purposes of s. 14.06(4)  of the BIA  included encouraging insolvency professionals to accept mandates in cases where there may be environmental liabilities (paras. 80-81). However, merely protecting trustees from personal liability in such cases will fail to achieve Parliament’s desired result. As I have explained, even where prospective trustees face no risk of personal liability, they will be reluctant to accept mandates if provincial entities can require the entire value of a bankrupt’s realizable estate to be applied to satisfy environmental obligations.

[223]                      Since I have explained that s. 14.06(4) provides trustees with the power to disclaim assets even where there is no risk of personal liability, it is now necessary to briefly consider whether this power was available to GTL on the facts of this case. Here, the statutory conditions to the exercise of this power were met. The Abandonment Orders clearly relate to the remediation of an “environmental condition” (or “tout fait . . . lié à l’environnement” in the French version of the BIA , which can be translated literally as “any fact . . . related to the environment”). Indeed, even the AER and the OWA have never contested this point. In response to such orders, GTL was therefore entitled to exercise the disclaimer power provided for in s. 14.06(4).

(2)           Section 14.06(4) Applies to Alberta’s Oil and Gas Industry

[224]                      The AER raised an additional argument that the right of disclaimer is entirely inapplicable in the context of the statutory regime governing the oil and gas industry due to the role played by third-party surface landowners and the nature of the property interests involved which rendered the Crown’s super priority under s. 14.06(7) impractical. Martin J.A. (as she then was), writing in dissent at the Alberta Court of Appeal, reached the same conclusion. With respect, I cannot agree. Parliament did not make the disclaimer power in s. 14.06(4) conditional on the availability of the Crown’s super priority.

[225]                      In delineating what interests may be disclaimed by a trustee under s. 14.06(4), Parliament used exceptionally broad language. The trustee is permitted to disclaim “any interest” in “any real property”. While Redwater’s AER-issued licences may not be real property, all of the parties accept that profits à prendre and surface leases can be characterized as real property interests. In the context of this case, it is these interests that GTL truly sought to disclaim. The AER argued that s. 14.06(4) permits the disclaimer only of “true real property”, meaning land currently or previously owned by the bankrupt, without any third-party landowners. This interpretation is not consistent with the actual language used by Parliament. Had Parliament intended to restrict the disclaimer power solely to fee simple interests, it could have stated this, rather than referring to “any interest in any real property”.

[226]                      Further, the Alberta oil and gas industry is far from the only natural resource sector in which companies traditionally operate on the land of third parties, whether the Crown or private landowners. The potential liability of trustees would explode if the mere presence of these third-party landowners rendered the disclaimer power in s. 14.06(4) entirely inapplicable. The language of the section is clearly broad enough to capture the statutory regime governing Alberta’s oil and gas sector.

(3)           Conclusion on Operational Conflict

[227]                      In light of this interpretation of s. 14.06(4), I agree with both courts below that there is an operational conflict to the extent that Alberta’s statutory regime holds receivers and trustees liable as “licensees” in relation to the disclaimed assets (see chambers judge reasons, at para. 181; C.A. reasons, at para. 57). This conflict is far from hypothetical. Under federal law, GTL is entitled to disclaim the bankrupt’s assets affected by the Abandonment Orders. Under the BIA, GTL cannot be compelled to take action with respect to properties it has validly disclaimed, since the act of disclaimer relieves it of any rights, interests and liabilities in respect of the disclaimed properties. But under provincial law, the AER can order GTL to abandon the disclaimed assets, among other things (see para. 11). This is exactly what happened here. Not only did the AER order GTL to complete the work, but it also made the sale of Redwater’s valuable assets conditional on GTL either abandoning the non-producing properties itself or packaging those properties with the estate’s valuable assets for the purposes of any sale. In doing so, the AER impermissibly disregarded the effect of GTL’s disclaimers. This remains the case, irrespective of whether GTL could (or would) ever be held personally liable for the costs of abandoning the properties above and beyond the entire value of the estate.

[228]                      My colleague claims that the AER “has never attempted to hold a trustee personally liable” (para. 107). What is clear is that, on the facts of this case, the AER directly sought to require GTL to perform or pay for the abandonment work itself, whether this is referred to as personal liability or not. It is critical to observe that this litigation began when the AER filed an application seeking to compel GTL to comply with its obligations as a licensee, including the obligation to abandon the non-producing properties. Practically speaking, this amounted to an effort to hold GTL personally liable. Where else would the money required to abandon the disclaimed properties have come from? The value of the estate as a whole was negative, and the AER refused to permit GTL to sell the valuable properties on their own. No purchaser would have agreed to buy all of the assets together. Therefore, GTL had no way to recoup any value from the estate, as Redwater was bankrupt and no longer generating income. The only source of funds, in this scenario, was GTL itself. This is why the AER filed suit to compel GTL to carry out Redwater’s abandonment obligations. As this makes clear, I cannot agree with the suggestion that the provincial regime has never been utilized to hold trustees personally liable in contravention of federal law. That is precisely what happened in this very case.

[229]                      This conclusion cannot be avoided by referring to the fact that, pursuant to orders of the Alberta courts, GTL has already sold the valuable Redwater assets and the proceeds are being held in trust pending the outcome of this appeal (see majority reasons, at para. 108). This is precisely the result the AER sought to prevent by precluding GTL from selling only the valuable properties, without the disclaimed ones. GTL was able to do so only as a direct result of this litigation.

[230]                      My colleague states that, if the AER “were to attempt to hold GTL personally liable under the Abandonment Orders, this would create an operational conflict between the OGCA and the Pipeline Act, and s. 14.06(2)  of the BIA , rendering the former two Acts inoperative to the extent of the conflict” (para. 107). Thus, even on my colleague’s interpretation of s. 14.06 — which I do not accept — an operational conflict does exist on the facts of this case, specifically as a result of the AER’s application to the Alberta Court of Queen’s Bench seeking to have GTL personally satisfy the environmental obligations associated with the disclaimed assets.

[231]                      All of that being said, creditors with provable claims can still seek payment in accordance with the BIA ’s priority scheme (Abitibi, at para. 98). As I discuss below, the AER’s environmental claims remain valid as against the Redwater estate, and it may pursue those claims through the normal bankruptcy process. Thus, even if s. 14.06(4) does not permit GTL to disclaim the non-producing wells and relieve itself of the environmental obligations associated with them, it is nevertheless the case that the AER cannot compel GTL to satisfy its claims ahead of those of Redwater’s secured creditors.

B.            Frustration of Purpose

[232]                      The second branch of the paramountcy test is frustration of purpose. Even where dual compliance with both federal and provincial law is, strictly speaking, possible, provincial legislation or provisions will nevertheless be rendered inoperative to the extent that they have the effect of frustrating a valid federal legislative purpose (Moloney, at para. 25; Bank of Montreal v. Hall, [1990] 1 S.C.R. 121, at pp. 154-55; Canadian Western Bank, at para. 73). The focus of the analysis is on the effect of the provincial legislation or provisions, not its purpose (Moloney, at para. 28; Husky Oil, at para. 39).

[233]                      This Court has repeatedly recognized that one of the purposes of the BIA  is “the equitable distribution of the bankrupt’s assets among his or her creditors” (Moloney, at para. 32; Husky Oil, at para. 7). It achieves this goal through a collective proceeding model — one that maximizes creditors’ total recovery and promotes order and efficiency by distributing the estate’s assets in accordance with a designated priority scheme (Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, [2010] 3 S.C.R. 379, at para. 22). All claims that are “provable in bankruptcy” are subject to this priority scheme. Exercises of provincial power that have the effect of altering bankruptcy priorities are therefore inoperative because they frustrate Parliament’s purpose of equitably distributing the estate’s assets in accordance with the federal statutory regime (Abitibi, at para. 19; Husky Oil, at para. 32).

[234]                      The question here is whether the environmental claims asserted by the AER (i.e., the Abandonment Orders) are provable in bankruptcy. If they are, then the AER is not permitted to assert those claims outside of the bankruptcy process and ahead of Redwater’s secured creditors because this would frustrate the purpose of the federal priority scheme. Rather, it must abide by the BIA and seek recovery from the estate through the normal bankruptcy procedures (Abitibi, at para. 40).

[235]                      In Abitibi, this Court established a three-part test, rooted in the language of the BIA , to determine whether a claim is provable in bankruptcy: “First, there must be a debt, a liability or an obligation to a creditor. Second, the debt, liability or obligation must be incurred before the debtor becomes bankrupt. Third, it must be possible to attach a monetary value to the debt, liability or obligation” (para. 26 (emphasis in original)). Since there is no dispute that Redwater’s environmental obligations arose before it became bankrupt, I limit my analysis below to the first and third prongs of the Abitibi test: whether the liability is owed to a creditor, and whether it is possible to attach a monetary value to that liability.

[236]                      The first prong of the Abitibi test asks whether the debt, liability or obligation at issue is owed by a bankrupt entity to a creditor. Deschamps J., writing for a majority of the Court, suggested that this is not an exacting requirement: “The only determination that has to be made at this point is whether the regulatory body has exercised its enforcement power against a debtor. When it does so, it identifies itself as a creditor, and the requirement of this stage of the analysis is satisfied” (para. 27 (emphasis added)). Though I would not go so far as to suggest that the analysis under the first prong is merely perfunctory or pro forma, and circumstances may well exist where it is not satisfied, Deschamps J. made clear in Abitibi that “[m]ost environmental regulatory bodies can be creditors”, again stressing that government entities cannot systematically evade the priority requirements of federal bankruptcy legislation under the guise of enforcing public duties (para. 27 (emphasis added)). Even Martin J.A., writing in dissent at the Court of Appeal in this case, acknowledged that “Abitibi cast[s] the creditor net widely” (para. 186). The language of Abitibi admits of no ambiguity, uncertainty or doubt in this regard.

[237]                      The majority suggests that applying Abitibi on its own terms will make it “impossible for a regulator not to be a creditor” (para. 136 (emphasis in original)). Without seeking to speculate on all possible scenarios, I would simply note that there will be many obvious circumstances in which regulators are not even exercising enforcement powers against particular debtors and the analysis from Abitibi can be concluded at a very early stage. Provincial regulators do many things that do not qualify as enforcement mechanisms against specific parties. For example, a regulatory agency may publish guidelines for the benefit of all actors in a certain industry or it may issue a license or permit to an individual. In such cases, any discussion of frustrating federal purposes will not go far. However, as Deschamps J. expressly acknowledged, the first prong of the test will have very broad application. This Court should not feel compelled to limit its scope when Abitibi employed clear language in full recognition of its wide-ranging effects.

[238]                      Here, there is no doubt that the AER exercised its enforcement power against a debtor when it issued orders requiring Redwater to perform the environmental work on the non-producing properties. The reasoning is simple: Redwater owes a debt to the AER, and the AER has attempted to enforce that debt by issuing the Abandonment Orders, which require Redwater to make good on its obligation. If Redwater (or GTL, as the receiver and trustee) does not abide by those orders — to the detriment of the estate’s other creditors — it can be held liable under provincial law. This is, by any definition, an exercise of enforcement power, which is precisely what Abitibi describes. In fact, the AER itself conceded this point twice — first before the Court of Queen’s Bench, and again at the Court of Appeal (chambers judge reasons, at para. 164; C.A. reasons, at para. 73).

[239]                      The conclusion that I reach with respect to the AER’s status as a creditor follows from a straightforward application of Abitibi. My colleague, however, seeks to reformulate this prong of the test. He suggests that a regulator is acting as a creditor only where it is not acting in the public interest and where the regulator itself, or the general revenue fund, is the beneficiary of the environmental obligation. He endorses the holding allegedly made in Northern Badger that “a regulator enforcing a public duty by way of non-monetary order is not a creditor” (para. 130).

[240]                      In my view, it is neither appropriate nor necessary in this case to attempt to redefine this prong of Abitibi and narrow the broad definition of “creditor” provided by Deschamps J. This Court should leave her clear description of the provable claim standard to stand on its own terms. Respectfully, I disagree with the manner in which the majority is attempting to reformulate the “creditor” analysis, for a number of reasons.

[241]                      Firstly, I do not believe that this case represents an appropriate opportunity to revisit the “creditor” stage of the Abitibi test. The AER conceded in both of the courts below that it was in fact a creditor of GTL. As a direct result of these concessions, neither the Alberta Court of Queen’s Bench nor the majority of the Court of Appeal directly addressed this issue; instead, they merely provided cursory comments. This issue appears to have been raised for the first time by Martin J.A. in her dissenting judgment. However, even her analysis is relatively brief, comprising only three paragraphs and consisting mainly of the statement that the costs of abandonment are “not owed to the Regulator, or to the province” (para. 185). While it is true that the parties briefly addressed this issue in their written and oral submissions to this Court, it was clearly not a substantial focus of their arguments. Without the benefit of considered reasons from the lower courts or thorough submissions on the continued application of the first prong of the test formulated in Abitibi, this Court should not attempt to significantly alter it.

[242]                      Secondly, the majority states that no fairness concerns are raised by disregarding the AER’s concessions below. It makes this point predominantly because the issue was raised and argued before this Court and because of the AER’s unilateral assertion in its letter to GTL in May 2015. However, it is important to note that the effect of the AER’s concessions was that GTL and ATB Financial were no longer required to adduce any evidence on this issue (S. N. Lederman, A. W. Bryant and M. K. Fuerst, The Law of Evidence in Canada (5th ed. 2018), at p. 1387). This point is important given that the majority’s reformulation of the “creditor” requirement under the first prong of the test is highly fact-specific and dependent on the circumstances of the particular case. As a direct result of the AER’s concession in the Alberta Court of Queen’s Bench, we cannot know what evidence GTL or ATB Financial could have adduced on this issue. Therefore, there may indeed be real prejudice occasioned to these parties by disregarding the AER’s concession at this point in time.

[243]                      Thirdly, my colleague relies on the fact that the chambers judge in Abitibi found that the Province had already expropriated three of the five sites for which it issued remediation orders and was likely using the orders as a means to offset AbitibiBowater’s NAFTA claims. While the chambers judge did in fact make these findings, they were inconsequential to Deschamps J.’s analysis on the “creditor” prong of the test. When applying the test to the facts of Abitibi, she explained that the first prong was “easily satisfied” because “the Province had identified itself as a creditor by resorting to [Environmental Protection Act, S.N.L. 2002, c. E-14.2] enforcement mechanisms” (Abitibi, at para. 49). She placed no reliance on the fact that the Province might itself derive a financial benefit from its actions and was not enforcing a purely public duty. Her analysis was in no way based on a finding that the Province’s actions were a “colourable attempt” to recover a debt or that they demonstrated an “ulterior motive” (majority reasons, at para. 128).

[244]                      Fourthly, in my view, it is incorrect to rely on Northern Badger in this case. That decision does not support my colleague’s position in the manner he alleges. The issue in Northern Badger was also whether environmental remediation orders could be considered claims provable in bankruptcy. However, the crux of the dispute was whether “enforcing the requirement for the proper abandonment of oil and gas wells” (p. 57) gave rise to a provable claim because it would require the receiver to expend funds. Laycraft C.J.A. never addressed the question of whether the regulator could be said to have a contingent claim because it would complete the abandonment work itself and assert a claim for reimbursement. It was in the context of the regulator requiring the receiver to fulfill the abandonment obligations itself that the Alberta Court of Appeal discussed the enforcement of a public duty. It is important to carefully examine what the Court of Appeal actually said in this regard:

     The statutory provisions requiring the abandonment of oil and gas wells are part of the general law of Alberta, binding every citizen of the province. All who become licensees of oil and gas wells are bound by them. Similar statutory obligations bind citizens in many other areas of modern life. Rules relating to health, or the prevention of fires, or the clearing of ice and snow, or the demolition of unsafe structures are examples which come to mind. But the obligation of the citizen is not to the peace officer, or public authority which enforces the law. The duty is owed as a public duty by all the citizens of the community to their fellow citizens. When the citizen subject to the order complies, the result is not the recovery of money by the peace officer or public authority, or of a judgment for money, nor is that the object of the whole process. Rather, it is simply the enforcement of the general law. The enforcing authority does not become a “creditor” of the citizen on whom the duty is imposed.

 

     It is true that this board has the power by statute to create in its own favour a statutory debt if it chooses to do so. It may, under Sections 91(1) and (2) of the Oil and Gas Conservation Act (discussed above) do the work of abandonment itself and become a creditor for the sums expended. But the Board has not done so in this case. Rather it is simply in the course of enforcing observance of a part of the general law of Alberta. [Emphasis added; paras. 33-34.]

[245]                      As is evident from para. 34 of Northern Badger, quoted above, the Court of Appeal never stated in that case that a regulator is not — or cannot be — a creditor when it is acting to enforce a public duty. In Abitibi, when referring to Northern Badger, Deschamps J. explained that the Alberta Court of Appeal “found that the duty to undertake remediation work is owed to the public at large until the regulator exercises its power to assert a monetary claim” (Abitibi, at para. 44 (emphasis added)). Laycraft C.J.A. accepted that when the regulator fulfills an environmental obligation itself and asserts a claim for reimbursement, it does indeed “become a creditor for the sums expended”. Even in this situation, the public is still the ultimate beneficiary of the remediation work. This is largely consistent with Deschamps J.’s formulation of the test for a provable claim. In fact, this Court simply extended this principle in Abitibi, concluding that a regulator may also be a creditor with a provable contingent claim when it is sufficiently certain that the regulator will perform the remediation work and advance a claim for reimbursement. This is precisely the situation with the AER and the OWA here, as I will explain in more detail below. The Alberta Court of Appeal did not frame the issue in terms of the three-part test that would later be developed in Abitibi; it did not divide its analysis of whether a provable claim existed. However, viewed properly, Deschamps J. dealt with the concerns raised in Northern Badger under the third prong of the Abitibi test. It is not appropriate to duplicate these principles under the first prong as well, as the majority proposes. For this reason, it is misguided to rely on Northern Badger in this appeal to conclude that the AER is not a creditor.

[246]                      However, even if the majority were correct about the reasoning in Northern Badger with respect to whether regulators enforcing public duties can be creditors — which I do not concede — I do not accept its conclusion that Abitibi did not overturn that reasoning. The Court was well aware of the decision in Northern Badger and cited it directly. Despite this, Deschamps J., when formulating the first prong of the test, made no distinction between regulators acting in the public interest and regulators acting for their own benefit. Instead, she stated that “the only determination that has to be made” (para. 27) is whether the regulator is exercising its enforcement powers against a debtor. In referring to Northern Badger, she expressly noted that “[t]he real question is not to whom the obligation is owed, as this question is answered by the statute, which determines who can require that it be discharged” (paras. 27 and 46 (emphasis added)).

[247]                      Finally, and perhaps most importantly, suggesting that a regulator is not acting as a creditor where its environmental enforcement activities are aimed at the public good and are for the benefit of the public effectively overrules the first prong of the Abitibi test. Under my colleague’s approach, it is no longer the case that the only determination that has to be made at the creditor stage of the analysis is “whether the regulatory body has exercised its enforcement power against a debtor” (Abitibi, at para. 27). Instead, the court must consider whether the regulatory body is enforcing a public duty and whether it stands to benefit financially from the fulfillment of the obligation in question.

[248]                      Provincial regulators, in exercising their statutory environmental powers, will, in some sense, virtually always be acting in some public interest or for the benefit of some segment of the public. Under my colleague’s reformulation of the first prong of the Abitibi test, it will be nearly impossible to find that regulators acting to protect environmental interests are ever creditors, outside the facts of Abitibi itself. As a result, provincial entities will be able to completely disregard the BIA ’s priority scheme as long as they can plausibly point to some public interest that is furthered by their actions. Such a result strips Abitibi of its central holding and entitles provincial regulators to easily upend Parliament’s purpose of providing an equitable recovery scheme in bankruptcy for all creditors.

[249]                      In my view, it is insufficient to simply note that the facts of Abitibi differ from those of the present appeal (majority reasons, at para. 136). Deschamps J.’s broad articulation of the first prong of the test was in no way made dependent upon the particular facts of Abitibi. She sought to provide a clear general framework for determining when a regulator will be classified as a creditor — a framework that the majority’s reasons effectively rewrite.

[250]                      Further, it is worth noting that this Court in Moloney followed Abitibi in applying the broad definition of “creditor”. In Moloney, this Court concluded that the Province of Alberta was acting as a creditor even though the debt it was collecting was reimbursement for compensating a third party who had been injured by the debtor in a car accident (para. 55). I fail to see how any meaningful distinction can be drawn between that situation and a situation in which a regulator seeks reimbursement for the costs incurred to remedy environmental damage caused to the land of third parties by the debtor.

[251]                      “[G]reat care should be taken” before this Court overturns or overrules one of its prior decisions (Teva Canada Ltd. v. TD Canada Trust, 2017 SCC 51, [2017] 2 S.C.R. 317, at para. 65). It is “a step not to be lightly undertaken” (Canada v. Craig, 2012 SCC 43, [2012] 2 S.C.R. 489, at para. 24). In order to do so, “the Court must be satisfied based on compelling reasons that the precedent was wrongly decided and should be overruled” (Craig, at para. 25; see also Teva, at para. 65). The reasons for exercising such caution are clear and sound, namely to ensure “certainty, consistency and institutional legitimacy” and to recognize that “the public relies on our disciplined ability to respect precedent” (Teva, at para. 65). When this Court decides that it is necessary to depart from one of its past decision, it should be clear about what it is doing and why.

[252]                      Despite these clear admonitions against this Court too easily overturning its own precedents, that is precisely what the majority proposes to do in this case. Its approach effectively overrules the unequivocal definition of “creditor” provided in Abitibi — a considered decision rendered by a majority of this Court a mere six years ago. Not only does the majority fail to provide compelling reasons why Deschamps J.’s clear definition is wrong, but it also does not acknowledge that it is overturning a recent decision of this Court, rejecting the suggestion that this is the impact of its reasoning (para. 136). Further, this is being done without complete and robust submissions on the issue. Such an approach to our own precedents does not serve the goals of certainty, consistency or institutional legitimacy.

[253]                      This Court should continue to apply the “creditor” prong of the test as it was clearly articulated in Abitibi. Deschamps J.’s definition ensures that provincial regulators are not able to easily appropriate for themselves a higher priority in bankruptcy and undermine Parliament’s priority scheme. It advances the goals of orderliness and fairness in insolvency proceedings. Under that broad standard, the AER plainly acted as a creditor with respect to the Redwater estate. That is likely why it conceded this point in both of the courts below.

[254]                      Since there is no dispute that the second prong of the Abitibi test is satisfied, I turn next to the third prong, which asks whether it is sufficiently certain that the regulator will perform the work and make a claim for reimbursement. As explained in Abitibi in the context of an environmental order:

     With respect to the third requirement, that it be possible to attach a monetary value to the obligation, the question is whether orders that are not expressed in monetary terms can be translated into such terms. I note that when a regulatory body claims an amount that is owed at the relevant date, that is, when it frames its order in monetary terms, the court does not need to make this determination, because what is being claimed is an “indebtedness” and therefore clearly falls within the meaning of “claim” as defined in s. 12(1)  of the CCAA .

 

. . .

 

The criterion used by courts to determine whether a contingent claim will be included in the insolvency process is whether the event that has not yet occurred is too remote or speculative (Confederation Treasury Services Ltd. (Bankrupt), Re (1997), 96 O.A.C. 75). In the context of an environmental order, this means that there must be sufficient indications that the regulatory body that triggered the enforcement mechanism will ultimately perform remediation work and assert a monetary claim to have its costs reimbursed. If there is sufficient certainty in this regard, the court will conclude that the order can be subjected to the insolvency process. [Emphasis added; paras. 30 and 36.]

[255]                      In my view, it is sufficiently certain that either the AER or the OWA will ultimately perform the abandonment and reclamation work and assert a monetary claim for reimbursement. Therefore, the final prong of the Abitibi test is satisfied. The chambers judge made three critical findings of fact — each of which is entitled to deference on appeal (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 10) — that easily support this conclusion.

[256]                      First, Wittmann C.J. found that GTL was not in possession of the disclaimed properties and, in any event, “has no ability to perform any kind of work on these assets” because the environmental liabilities exceeded the value of the estate itself (para. 170; see also Abitibi, at para. 53 where the Court stated that: “Abitibi had no means to perform the remediation work”). He discounted the possibility that any of Redwater’s working interest participants would step in to perform the work, even for the small number of Redwater’s licensed assets for which such partners existed (chambers judge reasons, at para. 171). In sum, he concluded that “there is no other party who could be compelled to carry out the abandonment work” (para. 172).

[257]                      Two decisions of the Ontario Court of Appeal highlight why this is important. In Nortel Networks Corp., Re, 2013 ONCA 599, 6 C.B.R. (6th) 159, Juriansz J.A. found that the “sufficient certainty” standard was not satisfied in respect of certain sites because those sites had already been sold so the purchasers could be compelled to carry out the work on the basis that they were jointly and severally liable for the remediation obligations (paras. 39-40). But in Northstar Aerospace Inc., Re, 2013 ONCA 600, 8 C.B.R. (6th) 154, Juriansz J.A. found that the “sufficient certainty” standard was satisfied because there was no purchaser that could be compelled by the regulator to complete the work. While it is true that fresh evidence on appeal revealed that the Ministry of the Environment had commenced the remediation work, Juriansz J.A. found that the fact that there were no subsequent purchasers had grounded the application judge’s implicit conclusion regarding sufficient certainty (paras. 16‑17). The present case is like Northstar, which is perfectly applicable to the facts of this case: there is no purchaser to take on Redwater’s assets, and the debtor itself is insolvent. The chambers judge in this case concluded that there was no other party who could be compelled to carry out the work.

[258]                      Second, in light of the fact that neither GTL nor Redwater’s working interest participants would (or could) undertake this work, Wittmann C.J. found as a fact that “the AER will ultimately be responsible for [the abandonment] costs” (para. 171). He concluded that “the AER has the power [to seek recovery of abandonment costs] and has actually performed the work on occasion” (para. 168). In fact, in this very case, “the AER has expressly stated an intention to seek reimbursement for the costs of abandoning the renounced assets” (para. 172). This conclusion finds ample support in the record. In a cover letter sent with the Abandonment Orders on July 15, 2015, the AER unambiguously stated that if Redwater failed to abandon the disclaimed properties in accordance with its instructions, “the AER will, without further notice, use its process to have the properties abandoned” (GTL’s Record, vol. I, at p. 102 (emphasis added)). The letter further stated that “[t]he AER will exercise all remedies available to it to recover the costs from the liable parties” (p. 102 (emphasis added)). The chambers judge did not err in relying on these unequivocal statements from the AER itself — to the effect that it will have the abandonment work performed and seek reimbursement — to conclude that sufficient certainty existed in this case.

[259]                      Although there is some contrary evidence in the record — principally, the remarks of an AER affiant, who stated that the AER would not abandon the properties — Wittmann C.J. did not commit any palpable and overriding error by giving more weight to the letter that the AER sent contemporaneously with the Abandonment Orders. Likewise, to the extent that the AER sent other correspondence stating that it was not a creditor and that it was not asserting a provable claim, Wittmann C.J. did not err in discounting these self-serving statements as insufficiently probative on the ultimate legal questions. There is therefore no basis to disturb these factual findings or to reweigh this evidence on appeal.

[260]                      Even if the AER’s admission that it would abandon the properties itself is not sufficient on its own, Wittmann C.J. made a third critical finding of fact: the AER’s only “realistic alternativ[e] to performing the remediation work itself” was to deem the renounced assets to be orphan wells (para. 172). In this circumstance, he found that “the legislation and evidence shows that if the AER deems a well an orphan, then the OWA will perform the work” (para. 166 (emphasis added)).

[261]                      In light of these factual determinations, Wittmann C.J. rightly concluded that the “sufficient certainty” standard of Abitibi was satisfied. He elaborated on the legal basis for that conclusion as follows:

     Does this situation meet the sufficient certainty criterion as described in AbitibiBowater?  The answer is no in a narrow and technical sense, since it is unclear whether the AER will perform the work itself or if it will deem the properties subject to the orders, orphans. If so, the OWA will probably perform the work, although not necessarily within a definite timeframe. However, the situation does meet, in my opinion, what was intended by the majority of the Court in AbitibiBowater. . . . In the result, I find that although not expressed in monetary terms, the AER orders are in this case intrinsically financial. [para. 173]

[262]                      My colleague does not specify the standard of review he applies in overturning Wittmann C.J.’s application of the third prong of the Abitibi test to this case. Nevertheless, he disagrees with the chambers judge and holds that the “sufficient certainty” standard is not satisfied. He offers two reasons for overruling Wittmann C.J.’s finding; but in doing so, he does not identify any palpable and overriding error (or, even under the non-deferential standard of correctness, any true error) in the chambers judge’s ultimate conclusion.

[263]                      The first reason — the purported legal error of determining that the Abandonment Orders are “intrinsically financial” — is little more than a distraction. Even if this is an erroneous application of Abitibi, it is evident that Wittmann C.J. was of the view, at a minimum, that either the AER or the OWA would complete the abandonment work. And as I describe below, this alone is enough to satisfy the “sufficient certainty” standard. My colleague overemphasizes the import of this stray comment in the context of a thorough set of reasons that otherwise faithfully applies the correct standard. Any legal error on this basis, to the extent that one exists, does not displace the result that the chambers judge reached.

[264]                      The second reason is more substantial. According to Wagner C.J., whether the AER will perform the abandonment work itself or delegate that task to the OWA is dispositive, since it was the Province itself that undertook the reclamation work in Abitibi. Here, he suggests, “the OWA is not the regulator” (para. 147) and thus the involvement of the OWA “is insufficient to satisfy the ‘sufficient certainty’ test” (para. 146).

[265]                      Accepting, for a moment, the potential relevance of this distinction, I am of the view that any uncertainty as to whether the AER would delegate the reclamation work to the OWA is questionable. My colleague’s emphasis on the self-serving remarks of an AER affiant and the fact that the AER took no immediate steps to perform the abandonment work itself amounts to little more than post hoc appellate fact finding, especially in light of the AER’s own statement. Although Wittmann C.J. suggested that it was “unclear” whether the AER would complete this work itself, his other findings of fact and law — that the AER has the statutory power to perform the work, that it has actually done so in the past, and that it expressly stated its intention to seek reimbursement here — suggest otherwise. Regardless, Wittmann C.J.’s remark that the “sufficient certainty” standard was not satisfied “in a narrow and technical sense” must be read in this context: he was simply suggesting that there was some uncertainty as to “whether the AER will perform the work itself” as opposed to delegating the work to the OWA (para. 173). He was not implying — let alone concluding as a matter of law — that GTL had failed to prove the third prong of the Abitibi test. That reading would vastly overstate, and completely decontextualize, the meaning of a few isolated words in his reasons.

[266]                      The more important problem, though, is that any distinction between the performance of the abandonment work by the AER and its performance by the OWA is meaningless. Form is elevated over substance if it is concluded that the “sufficient certainty” standard is not satisfied when a regulatory body’s delegate, as opposed to the regulatory body itself, performs the work. And despite my colleague’s suggestion that a regulatory body cannot act strategically to evade Abitibi, that is precisely what his analysis permits.

[267]                      We are told that the “OWA’s true nature” (majority reasons, at para. 147) — and therefore what purports to distinguish this case from impermissible examples of strategic delegation — rests on four factors: (1) the OWA is a non-profit organization; (2) it has an independent board of directors; (3) it has its own mandate and determines “when and how it will perform environmental work” (para. 148); and (4) it is “financially independent” (para. 148) as it is funded “almost entirely” by a tax on the oil and gas industry (para. 23).

[268]                      The first point is true, but irrelevant. Why does an organization’s non-profit status have any bearing on whether it is being used as a vehicle to avoid the “sufficient certainty” standard under Abitibi? 

[269]                      The second point is not accurate. The AER appoints members of the OWA’s board of directors, as does another provincial body, Alberta Environment and Parks — underscoring the extent to which the provincial government can influence the OWA’s activities.

[270]                      The third point overstates the OWA’s level of independence. The Orphan Fund Delegated Administration Regulation, Alta. Reg. 45/2001, gives the AER substantial power to influence the OWA’s decision making. Section 3(2)(b) of the regulation expressly states that, in fulfilling its delegated powers, duties and functions, the OWA must act in accordance with “applicable requirements, guidelines, directions and orders of the [AER]”. The regulation also mandates that the OWA provide information to the AER on request and regularly submit reports indicating or containing its budget, “goals, strategies and performance measures”, activities for the previous year and financial statements (s. 6). The AER appears to be able to exercise substantial control and oversight over the OWA if it so chooses, including over the manner in which the OWA carries out its environmental work.

[271]                      The fourth point is also inaccurate and would probably be irrelevant even if it were accurate. The Province has provided funding to the OWA in the past, including a $30 million contribution in 2009 and an additional $50,000 in 2012, and it has announced that it will loan the OWA an additional $230 million (see A.F., at para. 99 (alluding to this loan); recall Abitibi, at para. 58 where the Court stated that: “Earmarking money may be a strong indicator that a province will perform remediation work”).

[272]                      In any event, it is important to note the more salient features of the OWA and its relationship with the AER (and, more generally, with the provincial government). The OWA operates under legal authority delegated to it by the AER and in accordance with a Memorandum of Understanding it has signed with both the AER and Alberta Environment and Parks. The orphan fund itself is administered by the AER, which prescribes and collects industry contributions and remits the funds to the OWA. The OWA cannot increase the industry levy without first obtaining approval from the Alberta Treasury Board. In addition, the OGCA makes clear that abandonment costs incurred by any person authorized by the AER — which would include the OWA — constitute a debt payable to the AER (OGCA, s. 30(5)). The record shows that the AER has remitted abandonment costs to the OWA in the past, in the form of security deposits and amounts recovered through successful enforcement action against licensees.

[273]                      The AER and the OWA are therefore inextricably intertwined. We should see this arrangement for what it is: when the AER exercises its statutory powers to declare a property an “orphan” under s. 70(2) of the OGCA, it effectively delegates the abandonment work to the OWA. Treating the OWA’s work as meaningfully different from abandonment activities carried out by the AER turns a blind eye to this reality and does nothing to further the underlying principles of paramountcy. To the contrary, it provides provincial regulators with an easy way to evade the test of Abitibi through strategic behaviour, thereby undermining the legitimate federal interest in enforcing the BIA ’s priority scheme. It should not matter which body carries out the work (see C.A. reasons, at para. 78; OGCA, s. 70(1)(a)(ii)).

[274]                      The majority faults the chambers judge for “failing to consider whether the OWA can be treated as the regulator” (para. 153). However, the chambers judge cannot have erred by failing to appreciate a level of independence that simply does not exist. 

[275]                      The majority also offers an alternative conclusion: it is not sufficiently certain that even the OWA will perform the abandonment work (para. 149). Whether the chambers judge’s conclusion to the contrary amounts to a palpable and overriding error, or something else, we are not told.

[276]                      Again, such an approach would permit the AER to benefit from strategic gamesmanship by manipulating the timing of its intervention in order to escape the insolvency regime and strip Redwater of its assets. This arbitrary line-drawing exercise, in which a period of 10 years before the wells are abandoned is too long (but presumably some shorter time line would not be), has no basis in law. As Slatter J.A. convincingly observed in his reasons, the AER

     cannot insist that security be posted to cover environmental costs, but at the same time argue that it may be a long time before the Orphan Well Association actually does the remediation. If the Regulator takes security for remediating Redwater’s orphan wells, those funds cannot be used for any other purpose. If security is taken, it is no answer that the security might be held for an indefinite period of time; the consequences to the insolvency proceedings and distribution of funds to the creditors are immediate and certain. Further, if security is taken, the environmental obligation has clearly been reduced to monetary terms. [Emphasis added; para. 79.]

[277]                      Moreover, the OWA’s estimate of 10 to 12 years was put forward at the start of this litigation more than 3 years ago. Whether that estimate remains accurate after the province’s proposed infusion of nearly a quarter of a billion dollars into the orphan fund (A.F., at para. 99)^[1] — money that will undoubtedly speed up the OWA’s abandonment efforts — is an open question. In any case, the changing factual context highlights the essential problem with the majority’s approach: pinning the constitutional analysis on the timing of the OWA’s intervention is arbitrary and irrational, as it causes the result to shift based on decisions made by the very actor that stands to benefit from a finding that the “sufficient certainty” standard is not satisfied.

[278]                      All that aside, the chambers judge’s recognition that the OWA will “probably” abandon the properties should be enough (chambers judge reasons, at para. 173). Concluding otherwise is not justified, since it would mean applying a stricter certainty requirement than is called for by Abitibi itself. Deschamps J. expressly rejected an alternative standard — a “likelihood approaching certainty” — adopted by McLachlin C.J. in dissent (Abitibi, at para. 60). But here, dismissing as insufficient the chambers judge’s conclusion that the OWA would “probably” complete the work essentially means requiring a “likelihood approaching certainty”. Since Abitibi does not require absolute certainty, or even a likelihood approaching certainty, Wittmann C.J. did not err in concluding that the third prong was satisfied (see the Oxford English Dictionary (online), which defines “probably” as “with likelihood (though not with certainty)”; “almost certainly; as far as one knows or can tell; in all probability; most likely”).

[279]                      After concluding that it is not sufficiently certain that the AER will abandon the sites, the majority goes on to find that the AER’s licence transfer restrictions similarly do not satisfy the Abitibi test. This is so, it says, because the AER’s refusal to approve a licence transfer does not give it a monetary claim against Redwater and because compliance with the Licensee Management Ratio (“LMR”) conditions “reflects the inherent value of the assets held by the bankrupt estate” (para. 157). At the outset, I wish to make clear that I have already concluded that, since GTL lawfully disclaimed the non-producing properties under s. 14.06(4)  of the BIA , an operational conflict arises to the extent that the AER included those disclaimed properties in calculating Redwater’s LMR for the purpose of imposing conditions on the sale of Redwater’s assets. In the analysis that follows, I reach that same conclusion under the frustration of purpose aspect of the paramountcy test as well.

[280]                      I take issue with the majority’s conclusion regarding the LMR conditions for two reasons. First, this approach elevates form over substance, disregarding Gascon J.’s admonition in Moloney that “[t]he province cannot do indirectly what it is precluded from doing directly” (para. 28; see also Husky Oil, at para. 41). Refusing to approve a sale of Redwater’s assets unless GTL satisfies Redwater’s environmental liabilities is no different, in substance, from directly ordering Redwater or GTL to undertake that work. This is because the AER achieves the exact same thing — the fulfillment of Redwater’s environmental obligations — by making any sale conditional on GTL completing the work itself, posting security or packaging the non-producing assets into the sale, which reduces the sale price by the exact amount of those liabilities and ensures that the purchaser can be compelled, as the subsequent “licensee” under provincial law, to comply with the Abandonment Orders.

[281]                      The only difference between these two exercises of provincial power is the means by which the AER has opted to enforce the underlying obligations. The Abandonment Orders carry a threat of liability for non-compliance; imposing conditions on the sale of Redwater’s assets, on the other hand, does not create a liability in a formal sense, but it does preclude any sale from occurring unless and until those obligations are satisfied. Since the trustee must sell the assets in order to carry out its mandate, the effect of imposing conditions on the sale of Redwater’s assets is the same as that of issuing abandonment orders — and, as my colleague acknowledges, it is the effect of provincial action, not its intent or its form, that is central to the paramountcy analysis (para. 116; see also Husky Oil, at para. 40). In either case, then, the effect of the AER’s action is to create a debt enforcement scheme — one that requires the environmental obligations owed to the AER to be discharged ahead of the bankrupt’s other debts.

[282]                      Second, it is irrelevant to this analysis that the licensing requirements predate Redwater’s bankruptcy and apply to all licensees. This is no different from Abitibi, where the obligation to close down and remediate the properties predated AbitibiBowater’s bankruptcy and could also have been said to constitute an “inherent” limitation on the value of the regulatory licence. Yet the obligations at issue there were provable claims. So too here. Alberta is, of course, free to affect the priority of claims in non-bankruptcy contexts. For example, it can leverage its licensing power to condition the sale of assets by solvent corporations on the payment of outstanding debts to the province. But “once bankruptcy has occurred [the BIA ] determines the status and priority of the claims” (Husky Oil, at para. 32, quoting A. J. Roman and M. J. Sweatman, “The Conflict Between Canadian Provincial Personal Property Security Acts and The Federal Bankruptcy Act: The War is Over” (1992), 71 Can. Bar Rev. 77, at p. 79).

[283]                      In this case, imposing conditions on the sale of Redwater’s valuable assets does result in a monetary debt in the AER’s favour, whether in the form of: (1) the posting of security; (2) actual completion of the environmental work; or (3) the sale of the non-producing properties to another entity that is then regulated as a “licensee” and, as such, can be compelled under provincial law to complete the work. In each case, the result is the same: the AER is conditioning any sale of Redwater’s assets on its ability to recover a pre-existing debt owed to it by the bankrupt.

[284]                      An approach which artificially separates the Abandonment Orders and the transfer requirements in order to treat them as analytically distinct under the Abitibi test would cause the paramountcy analysis to turn on irrelevant subtleties in the manner or form in which the province has chosen to exercise its power. The two measures must be seen in tandem as the AER’s means of enforcing a debt against the Redwater estate. As I have described, there is no meaningful difference in the bankruptcy context between a formal abandonment order directing a trustee to engage in remediation work and a rigid licensing system that imposes the exact same obligations as a condition of sale — a sale that, if the trustee is to carry out its mandate, must occur. The only effect of the majority’s analysis is to encourage regulators to collect on their debts in more creative ways. None of this serves the purposes of paramountcy; and, more critically, nothing in that analysis offers insolvency professionals (or regulators, for that matter) clear guidance as to the types of obligations that will or will not satisfy the Abitibi test.

[285]                      Since it is sufficiently certain that the AER (or the OWA, as its delegate) will complete the abandonment and reclamation work, all three prongs of the Abitibi test are satisfied. The Abandonment Orders are provable claims, and therefore the AER may not compel Redwater or its trustee to fulfill the obligations in question outside of the BIA ’s priority scheme. Likewise, the AER may not condition the sale of Redwater’s valuable assets on the performance of those same obligations.

[286]                      Towards the end of its analysis, the majority makes the point that the AER’s enforcement actions in this case facilitate, rather than frustrate, Parliament’s intentions behind the BIA  priority scheme due to the super priority for environmental remediation costs set out in s. 14.06(7) (para. 159). Respectfully, I completely reject this contention. No party attempted to argue that the super priority in subs. (7) was applicable on the facts of this case. Indeed, it is clear that it is not, as the majority itself acknowledges. I cannot accept that where Parliament has set out a particular super priority for the Crown for environmental remediation costs, secured against specific real property assets of the bankrupt, and where certain conditions are met, it somehow “facilitates” Parliament’s priority scheme to, in effect, impose that super priority over other assets, in the absence of those statutory conditions being satisfied. It is wrong to rely on s. 14.06(7) to recognize an effective super priority for the AER in circumstances where the terms of that subsection are inapplicable. Doing so clearly undermines the detailed and comprehensive priority scheme that Parliament set out in the BIA  to achieve its purposes. Had Parliament wished to extend a Crown super priority for environmental remediation costs beyond the circumstances in s. 14.06(7), it could have done so.

[287]                      As a final note, GTL and ATB Financial advance alternative arguments that some aspects of Alberta’s statutory regime, including the definition of “licensee”, frustrate the purposes of the 1997 amendments to the BIA  — purposes that, they say, include protecting insolvency professionals from liability and reducing the number of orphaned sites.

[288]                      It is not strictly necessary for me to address these arguments, since I have already found that there is an operational conflict (the Alberta regime’s failure to recognize the lawfulness of GTL’s disclaimers) as well as a frustration of purpose on other grounds (interference with the BIA ’s priority scheme). I would note, however, that GTL has stated that it would immediately seek a discharge if it were required to carry out the abandonment work, which would result in the remaining Redwater assets being surrendered to the OWA. The result in this circumstance, which does not appear to be acknowledged, or which appears to be ignored, in my colleague’s reasons, would be more orphaned oil wells. To the extent, then, that the 1997 amendments were intended to reduce the number of orphaned properties, that purpose is also frustrated by preventing a receiver or trustee from disclaiming value-negative assets.

IV.        Conclusion

[289]                      There is much to be said in the context of this appeal about which outcome will optimally balance environmental protection and economic development. On the one hand, enforcing the AER’s remediation orders would effectively wipe out the estate’s remaining value and leave all of its creditors (except the AER) without any recovery. It would also likely discourage insolvency professionals from accepting mandates in cases such as this one — potentially resulting in more orphaned properties across the province. On the other hand, permitting GTL to disclaim the non-producing wells and preventing the AER from enforcing environmental obligations before the estate’s value is depleted would leave open the question of who, exactly, should foot the bill for remediating the affected land.

[290]                      Whatever the merits of these competing positions, in matters of statutory interpretation this Court is one of law, not of policy. As the majority recognizes, at para. 30, “it is not the role of this Court to decide the best regulatory approach to the oil and gas industry”; decisions on these matters are made — indeed, they have been made — by legislators, not judges. And the law in this case supports only one outcome. But this does not mean that the AER is without options to protect the public from bearing the costs of abandoning oil wells. It could adjust its LMR requirements to prevent other oil companies from reaching the point of bankruptcy with unfunded abandonment obligations (as it has already done since this litigation began). It could adopt strategies used in other jurisdictions, such as requiring the posting of security up-front so that abandonment costs are not borne entirely at the end of an oil well’s life cycle. One of the interveners, the Canadian Bankers’ Association, noted that such systems of up-front bonding are prevalent in American jurisdictions. The AER could work with industry to increase levies so that the orphan fund has sufficient resources to respond to the recent increase in the number of orphaned properties. It could seek judicial intervention in cases where it suspects that a company is strategically using insolvency as a voluntary step to avoid its environmental liabilities (Sydco Energy Inc. (Re), 2018 ABQB 75, 64 Alta. L.R. (6th) 156, at para. 84). And, as I have noted, it can continue to apply the province’s statutory regime to all assets of an insolvent or bankrupt debtor that are retained by a receiver or trustee, including wells and facilities that the receiver or trustee seeks to operate rather than sell.

[291]                      The AER may not, however, disregard federal bankruptcy law in the pursuit of otherwise valid statutory objectives. Yet that is precisely what it has done here by effectively displacing the “polluter-pays” principle enacted by Parliament in favour of a “lender-pays” regime, in which responsibility for the bankrupt’s environmental liabilities is transferred to the estate’s creditors. Our paramountcy jurisprudence does not permit that result.

[292]                      For the foregoing reasons, I would dismiss the appeal and affirm the orders made by the chambers judge.

APPENDIX

 

 

Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 

14.06 (1) No trustee is bound to assume the duties of trustee in matters relating to assignments, bankruptcy orders or proposals, but having accepted an appointment in relation to those matters the trustee shall, until discharged or another trustee is appointed in the trustee’s stead, perform the duties required of a trustee under this Act.

(1.1) In subsections (1.2) to (6), a reference to a trustee means a trustee in a bankruptcy or proposal and includes

(a) an interim receiver;

(b) a receiver within the meaning of subsection 243(2); and

(c) any other person who has been lawfully appointed to take, or has lawfully taken, possession or control of any property of an insolvent person or a bankrupt that was acquired for, or is used in relation to, a business carried on by the insolvent person or bankrupt.

. . .

(2) Notwithstanding anything in any federal or provincial law, a trustee is not personally liable in that position for any environmental condition that arose or environmental damage that occurred

(a)   before the trustee’s appointment; or

(b)   after the trustee’s appointment unless it is established that the condition arose or the damage occurred as a result of the trustee’s gross negligence or wilful misconduct or, in the Province of Quebec, the trustee’s gross or intentional fault.

(3) Nothing in subsection (2) exempts a trustee from any duty to report or make disclosure imposed by a law referred to in that subsection.

(4) Notwithstanding anything in any federal or provincial law but subject to subsection (2), where an order is made which has the effect of requiring a trustee to remedy any environmental condition or environmental damage affecting property involved in a bankruptcy, proposal or receivership, the trustee is not personally liable for failure to comply with the order, and is not personally liable for any costs that are or would be incurred by any person in carrying out the terms of the order,

(a)   if, within such time as is specified in the order, within ten days after the order is made if no time is so specified, within ten days after the appointment of the trustee, if the order is in effect when the trustee is appointed, or during the period of the stay referred to in paragraph (b), the trustee

                                                                        (i)  complies with the order, or

(ii) on notice to the person who issued the order, abandons, disposes of or otherwise releases any interest in any real property, or any right in any immovable, affected by the condition or damage;

(b)   during the period of a stay of the order granted, on application made within the time specified in the order referred to in paragraph (a), within ten days after the order is made or within ten days after the appointment of the trustee, if the order is in effect when the trustee is appointed, by

(i)   the court or body having jurisdiction under the law pursuant to which the order was made to enable the trustee to contest the order, or

(ii)  the court having jurisdiction in bankruptcy for the purposes of assessing the economic viability of complying with the order; or

(c)   if the trustee had, before the order was made, abandoned or renounced or been divested of any interest in any real property, or any right in any immovable, affected by the condition or damage.

(5) The court may grant a stay of the order referred to in subsection (4) on such notice and for such period as the court deems necessary for the purpose of enabling the trustee to assess the economic viability of complying with the order.

(6) If the trustee has abandoned or renounced any interest in any real property, or any right in any immovable, affected by the environmental condition or environmental damage, claims for costs of remedying the condition or damage shall not rank as costs of administration.

(7) Any claim by Her Majesty in right of Canada or a province against the debtor in a bankruptcy, proposal or receivership for costs of remedying any environmental condition or environmental damage affecting real property or an immovable of the debtor is secured by security on the real property or immovable affected by the environmental condition or environmental damage and on any other real property or immovable of the debtor that is contiguous with that real property or immovable and that is related to the activity that caused the environmental condition or environmental damage, and the security

(a)   is enforceable in accordance with the law of the jurisdiction in which the real property or immovable is located, in the same way as a mortgage, hypothec or other security on real property or immovables; and

(b)   ranks above any other claim, right, charge or security against the property, despite any other provision of this Act or anything in any other federal or provincial law.

(8) Despite subsection 121(1), a claim against a debtor in a bankruptcy or proposal for the costs of remedying any environmental condition or environmental damage affecting real property or an immovable of the debtor shall be a provable claim, whether the condition arose or the damage occurred before or after the date of the filing of the proposal or the date of the bankruptcy.

 

                    Appeal allowed, Moldaver and Côté JJ. dissenting.

                    Solicitors for the appellants: Bennett Jones, Calgary; Alberta Energy Regulator, Calgary.

                    Solicitors for the respondents: Blake, Cassels & Graydon, Calgary; Cassels Brock & Blackwell, Calgary; Gowling WLG (Canada), Calgary.

                    Solicitor for the intervener the Attorney General of Ontario: Attorney General of Ontario, Toronto.

                    Solicitor for the intervener the Attorney General of British Columbia: Attorney General of British Columbia, Victoria.

                    Solicitor for the intervener the Attorney General of Saskatchewan: Attorney General of Saskatchewan, Regina.

                    Solicitor for the intervener the Attorney General of Alberta: Attorney General of Alberta, Edmonton.

                    Solicitor for the intervener Ecojustice Canada Society: Ecojustice Clinic at the University of Ottawa, Ottawa.

                    Solicitors for the intervener the Canadian Association of Petroleum Producers: Lawson Lundell, Calgary.

                    Solicitors for the intervener Greenpeace Canada: Stockwoods, Toronto.

                    Solicitor for the intervener Action Surface Rights Association: University of Calgary Public Interest Law Clinic, Calgary.

                    Solicitors for the intervener the Canadian Association of Insolvency and Restructuring Professionals: McMillan, Calgary.

                    Solicitors for the intervener the Canadian Bankers’ Association: Norton Rose Fulbright Canada, Calgary.