Supreme Court of Canada

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

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

Headnote

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 comply with end-of-life abandonment and reclamation obligations — Company becoming bankrupt — Trustee in bankruptcy renouncing burdensome licensed assets — Energy regulator seeking to enforce abandonment obligations against estate — Whether doctrine of federal paramountcy rendering provincial environmental obligations inoperative — Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 14.06(2), (4).

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 (typically acquired through a surface lease or by statutory right), and a licence issued by the Alberta Energy Regulator. Provincial legislation binds licensees to comprehensive environmental obligations throughout the life of their licences, including obligations to abandon and reclaim their licensed oil and gas assets at end of life. The Regulator has broad powers to ensure that these end-of-life obligations are fulfilled, including by ordering a licensee to abandon licensed assets and by imposing conditions on the transfer of licences. Provincial legislation also includes receivers and trustees in bankruptcy within the definition of "licensee".

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 licensee a rating based on the ratio of its deemed assets to its deemed liabilities (including end-of-life obligations). A licensee whose ratio drops below 1.0 is required to post a security deposit. Any licensee with a post-transfer Licensee Liability Rating below 1.0 will have its proposed licence transfer refused.

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"), which is federal legislation that governs the administration of a bankrupt's estate and establishes a priority scheme for the distribution of its assets to creditors.

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. ATB Financial ("ATB") is Redwater's primary secured creditor. Grant Thornton Limited ("GTL") was appointed as receiver. 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 filing for bankruptcy. GTL took the position that, based on the BIA, it could selectively renounce Redwater's burdensome, non-producing assets (the "Renounced Assets") and use the value of the remaining, productive assets to repay secured creditors. 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 the Licensee Liability Rating requirements.

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 created a conflict with the BIA sufficient to trigger the doctrine of federal paramountcy.

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. There is no operational conflict or frustration of purpose between the BIA and the Alberta legislation establishing the disputed powers of the Regulator.

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 to third parties even where bankruptcy makes compliance more challenging. Section 14.06(4) of the BIA, properly interpreted, does not empower a trustee to walk away from the environmental obligations of the bankrupt estate. That provision 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 source, where a trustee "disclaims" under s. 14.06(4), the trustee is protected only from personal liability. The bankrupt estate's liability is unaffected by "disclaimer".

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 these laws and the BIA and, as a result, they continue to apply to the Redwater 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 the assets of the estate on the abandonment and reclamation of the Renounced Assets.

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 from Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443 ("Abitibi"), requires: first, that there be a debt, a liability or an obligation to a creditor; second, that it be incurred before the debtor becomes bankrupt; and third, that it be possible to attach a monetary value to the debt, liability or obligation.

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. On a proper understanding of the "creditor" requirement, a regulator is not a creditor when it is acting in the public interest and not to advance any private financial interest of its own or of any government. In the circumstances of this case, the Regulator is not a "creditor" of Redwater. Rather, the Regulator is acting as a public regulator enforcing public duties imposed on Redwater as a licensee. It stands to benefit in no financial way from imposing the end-of-life obligations in question.

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. In making this determination, a court may take into account whether a bona fide regulator has actually performed, or has taken concrete steps toward performing, the environmental work in question. In this case, no sufficient certainty exists that either the Regulator or the OWA will perform the environmental work and advance a monetary claim for reimbursement.

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 recover the costs of remedying such environmental damage (s. 14.06(7)). This provision is given full force by the conclusion that the Regulator is not a creditor in this case. The outcome in this case is therefore more consistent with Parliament's intentions behind the BIA than the alternative.

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, and both courts below correctly concluded that the doctrine of federal paramountcy renders the impugned provisions of Alberta's statutory regime inoperative in the context of this appeal.

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" under its provincial legislation, the regime, to that extent, is inconsistent with s. 14.06(4) of the BIA. Additionally, because the AER's use of its statutory powers effectively requires Redwater's estate to satisfy the environmental liabilities ahead of the estate's secured creditors, the provincial regime frustrates the purpose of the BIA's priority scheme.

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 of the words of s. 14.06(4), read in the context of the section as a whole, makes it clear that s. 14.06(4) limits the liability of both the trustee personally and the bankrupt estate.

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 specifically, this means reading each subsection in light of all the others. There are at least four other subsections of s. 14.06 — subs. (5), (6), (7) and (2) itself — that do not make sense on the majority's reading of s. 14.06(4).

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 constitute "order[s] . . . which ha[ve] the effect of requiring a trustee to remedy any environmental condition or environmental damage affecting property involved in a bankruptcy", and Redwater's licences constitute interests in real property. The doctrine of federal paramountcy renders s. 73(1) and (2) of the OGCA and s. 25(1) and (2) of the Pipeline Act inoperative to the extent that they require a trustee to assume the role of "licensee" in respect of disclaimed assets.

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 also frustrates the purpose of the BIA.

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. 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.

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 enforcement of Alberta's statutory regime against the Redwater estate frustrates the purpose of the BIA's priority scheme and is rendered inoperative by the doctrine of federal paramountcy to that extent.

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: Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443; referred to: 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; GMAC Commercial Credit Corp. — Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123; Nortel Networks Corp., Re, 2012 ONSC 1213, 88 C.B.R. (5th) 111; Ocean Port Hotel Ltd. v. British Columbia (General Manager, Liquor Control and Licensing Branch), 2001 SCC 52, [2001] 2 S.C.R. 781.

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; 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; R. v. L.T.H., 2008 SCC 49, [2008] 2 S.C.R. 739; AbitibiBowater Inc., Re, 2010 QCCS 1261, 68 C.B.R. (5th) 1; Confederation Treasury Services Ltd. (Bankrupt), Re (1997), 96 O.A.C. 75; Panamericana de Bienes y Servicios S.A. v. Northern Badger Oil & Gas Ltd., 1991 ABCA 181, 81 Alta. L.R. (2d) 45.

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.

Bankes, Nigel. Majority of the Court of Appeal Confirm Chief Justice Wittmann's Redwater Decision, May 3, 2017.

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, 2e 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 826 (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 mitigate these consequences, the Province of Alberta has created a regulatory regime under which companies that wish to operate in the oil and gas industry must obtain licences. These licences come with certain environmental obligations, including obligations to decommission, or "abandon", their wells, facilities and pipelines at the end of their productive lives and to restore the land around them ("reclamation") to its original condition. These obligations cannot be disclaimed, transferred or extinguished.

[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 priority scheme established in the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 ("BIA").

[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 collectively, except where the distinct role of the OWA is relevant.) The Regulator is a provincial regulator established to administer Alberta's comprehensive oil and gas licensing regime and to ensure that licensees comply with their end-of-life obligations. The OWA is a non-profit organization to which the Regulator has delegated its authority to deal with "orphan" wells — wells whose licensees have gone insolvent without having met their end-of-life obligations.

[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 collectively, except where the distinct role of ATB is relevant.) GTL takes the position that the BIA permits it to "disclaim", or renounce, Redwater's burdensome, non-producing licensed assets and to use the value of the remaining, producing assets to repay creditors of the bankrupt estate.

[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 was held to create a conflict with the BIA sufficient to trigger the doctrine of federal paramountcy.

[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. concluded that s. 14.06 of the BIA does not empower GTL, as a trustee, to walk away from the Renounced Assets. She therefore concluded that there was no conflict between the Alberta legislation and the BIA.

[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.

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.

[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 owned almost exclusively by the Crown (about 81 per cent of Alberta's mineral rights are owned by the provincial Crown, with the remainder owned by the federal Crown and private landowners). The Crown grants licenses and leases to extract the resources through a bidding process. In addition, all companies wishing to engage in the oil and gas industry need licences from the Regulator (formerly known as the Energy Resources Conservation Board or "ERCB"), which is established by the Responsible Energy Development Act, S.A. 2012, c. R-17.3 ("REDA"). The relevant legislation governing licences in Alberta is found in the Oil and Gas Conservation Act, R.S.A. 2000, c. O-6 ("OGCA"), the Pipeline Act, R.S.A. 2000, c. P-15, and the Environmental Protection and Enhancement Act, R.S.A. 2000, c. E-12 ("EPEA").

[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, which are typically acquired through a surface lease with the Crown or with a private owner, or by exercising a statutory right of entry under the Surface Rights Act, R.S.A. 2000, c. S-24.

[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. A surface lease is a contractual right to use the surface of land owned by another party.

[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 the drilling of a well for oil or gas without a licence issued by the Regulator: s. 11(1). The Pipeline Act contains a similar prohibition: s. 6(1). And the EPEA contains a prohibition applicable to facilities: ss. 112 to 122.

[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 purpose of or resulting in the production, injection or disposal of oil, gas, or any related substance" (OGCA, s. 1(1)(cc)).

[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 REDA. One of the Regulator's purposes is to "provide for the responsible development of energy resources" (REDA, s. 2(1)(a)). In pursuing this purpose, the Regulator must balance various interests and objectives.

[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 or dismiss the application, with or without conditions. The Regulator may cancel, suspend or transfer a licence, and may require any licensee to fulfill obligations under applicable laws and regulations.

[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 means permanently sealing the well in a manner that prevents any migration of oil, gas or other subsurface fluids in and around the well. The related concept of "reclamation" refers to the process of restoring the surface of the earth around a wellsite to its original state. The costs of abandonment and reclamation of a well or facility can be substantial.

[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 it desirable to do so in the interests of safety or the conservation of oil or gas resources" (OGCA, s. 25(1)).

[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. Under this program, each licensee is assigned a "Licensee Liability Rating" or "LMR" (formerly known as the "LLR"). The LMR is a ratio of the licensee's deemed assets to the licensee's deemed liabilities, which include (most relevantly) the estimated costs of abandoning and reclaiming all of the licensee's licensed assets. A licensee with an LMR below 1.0 is deemed to be "at risk" and must post a security deposit, which can be drawn on to fund abandonment and reclamation work if necessary.

[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 a licence transfer. 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 case, the Regulator could still approve the transfer subject to conditions, such as a requirement that the licensee post security.

[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 case, the Regulator could still approve the transfer subject to conditions, such as a requirement that the licensee post security.

[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 a "receiver" (a person appointed to collect, protect or liquidate the assets of a person) within the definition of "operator" (EPEA, s. 1(ddd)), a definition that, in most contexts, parallels the OGCA's definition of "licensee". The OGCA and the Pipeline Act achieve this by including receivers and trustees in their respective definitions of "licensee". In particular, both statutes provide that"[w]here a receiver or trustee in bankruptcy is appointed in respect of a company that is a licensee, the receiver or trustee" is also a licensee (OGCA, s. 27(1); Pipeline Act, s. 23(1)).

[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. Such wells are called "orphans". The Regulator is empowered to designate a well, facility or pipeline as an "orphan" when, among other things, the licensee is bankrupt or under receivership, or has abandoned the location without abandoning the well (OGCA, s. 70(1) and (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 the Regulator concludes that a licensee's LMR has fallen below 1.0, it may issue orders to the licensee to suspend and abandon its licensed assets.

[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 enforcement mechanisms under the OGCA: ss. 68(d), 106, 108 and 110. The Regulator may also refuse to process a licence transfer application from a licensee that has failed to comply with an order (OGCA, s. 27 to 30; Pipeline Act, ss. 23 to 26).

[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 discretion when it considers a licence transfer application. In exercising this discretion, the Regulator may have regard to the LMR of the transferor and the transferee.

[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 options be pursued before approving the transfer: (1) the posting of security by the transferee; (2) the transfer of the entire licence package (rather than only the producing assets); (3) the actual completion of the abandonment and reclamation work on the non-producing assets prior to transfer; or (4) the sale of the non-producing assets to another entity.

[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 externalized onto third parties (such as neighbouring landowners or the government, which would then become responsible for abandonment and reclamation costs). However, it is ultimately not this Court's role to decide the best regulatory approach.

[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 made a choice to require oil and gas companies to internalize their environmental costs throughout the life of the company. Unlike some other regulatory regimes, Alberta's system does not pool risk across the industry (other than through the orphan fund and the industry levy used to fund it).

[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 establishes a priority scheme for the distribution of its assets to creditors.

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 how these provisions fit into that framework in the course of my analysis.

[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 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 happens or does not happen'" (Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443 ("Abitibi"), at para. 24, citing D. G. Baird and T. H. Jackson"Kovacs and Toxic Wastes in Bankruptcy" (1988), 36 Stan. L. Rev. 1199, at p. 1203). The relevant sections of the BIA dealing with contingent claims are ss. 121(2) and 135(1.1):

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 section 135, deemed a proved claim.

[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 whether an environmental obligation is a claim 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.

[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 triggers a stay of proceedings that prevents creditors with provable claims from enforcing their claims against the bankrupt estate outside of the collective proceeding.

[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 that the bankrupt's property is distributed pari passu, or equally, among creditors. The comprehensive priority scheme established by the BIA can be altered by Parliament, but not by the provinces. The provinces cannot, through legislation, alter the manner in which a bankrupt's assets are distributed among creditors.

[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 s. 14.06 that are most directly relevant to this appeal.

[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, provides that a trustee can avoid personal liability by "abandon[ing], dispos[ing] of or otherwise releas[ing] any interest in any real property, or any right in any immovable, affected by the condition or damage".

[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 general security agreement over all present and after-acquired property. On May 11, 2015, ATB applied to be appointed as Redwater's receiver. On May 13, 2015, the Alberta Court of Queen's Bench appointed GTL as receiver.

[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 within the definition of "licensee". It reminded GTL that this meant it was legally obligated to fulfill abandonment obligations for all licensed assets prior to distributing any funds or filing for bankruptcy. It further advised GTL that, if it wished to transfer any licensed assets, prior approval from the Regulator was required.

[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 unproductive. Of its 127 licensed assets, only 19 were producing. GTL initially sought to comply with the Regulator's direction but, as described below, concluded it would be unable to do so while still distributing assets to creditors.

[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 had licences had a net realizable value of approximately $1.63 million; the 108 non-producing licensed assets had end-of-life obligations estimated at approximately $2.3 million, and thus had a negative net realizable value.

[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 it would be entitled to receive in exchange for Redwater's 19 producing assets a price in the range of $1,000,000 to $1,500,000. This was insufficient to meet the abandonment costs for the non-producing assets and leave enough to satisfy the debt owed to ATB.

[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 named GTL as a "licensee" and required that it comply with the orders. GTL wrote to the Regulator, invoking s. 14.06(4)(a)(ii) of the BIA and announcing that it was abandoning the Renounced Assets.

[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 the LMR requirements, an order that any distribution to ATB be held in trust pending the outcome of the application, and other relief.

[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 and claiming to abandon the Renounced Assets.

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, and to thereby protect trustees from both personal liability and liability of the estate. He concluded that s. 14.06(4) of the BIA permitted GTL to disclaim the Renounced Assets and, consequently, to avoid any obligation to comply with the Abandonment Orders or the LMR requirements in relation to those assets.

[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, the Regulator's position was "intrinsically financial", meaning it would ultimately "get paid" for the environmental work, one way or another. He therefore found that all three prongs of the Abitibi test were met and that the environmental obligations were provable claims in the Redwater bankruptcy.

[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 a licensee who could be required to expend estate assets to comply with the Regulator's orders.

(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 protection it provides to trustees from personal liability. The doctrine of paramountcy did not, for that reason, arise. Instead, Slatter J.A. concluded that Alberta's legislation created provable claims that conflicted with the BIA's priority scheme.

[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 a broad sense", as distinct from the chambers judge who found it met only in the latter sense. Slatter J.A. relied, in part, on the fact that the AER had "chosen to proceed in a fashion that is financial in both form and substance" by issuing the Abandonment Orders naming GTL as a licensee and making the claim provable in bankruptcy directly as a result.

[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 BIA's priority scheme.

(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's end-of-life obligations were not claims provable in bankruptcy, and that there was no frustration of purpose.

[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 recognized that the question of the estate's liability was a separate and distinct issue from the question of whether there was an operational conflict with s. 14.06(2), which protects the trustee from personal liability.

[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; rather, it was performing its regulatory function in the public interest by enforcing its end-of-life obligations through non-monetary orders. The BIA's priority scheme was not thereby circumvented.

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 restore the surface of the earth around them. These powers include the power to issue abandonment orders and to impose conditions on the transfer of licences. The Regulator has exercised both of these powers in this case. The question in this appeal is whether, in doing so, it has created a conflict with the BIA sufficient to invoke the doctrine of paramountcy and render the relevant provisions of Alberta's provincial legislation inoperative.

[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 because bankruptcy touches on many aspects of the life of the bankrupt that are otherwise regulated by the provinces. The BIA is not meant to operate in a vacuum. It is built on valid provincial laws, many of which impose non-monetary obligations on the bankrupt. Insolvency professionals are bound by and must comply with valid provincial laws during bankruptcy. They must, for example, comply with non-monetary obligations to third parties even where bankruptcy makes compliance more challenging.

[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 'to comply with a provincial law a person has to violate the federal law'" (Moloney, at para. 16, citing Canadian Western Bank, at para. 75). The second form of conflict is frustration of purpose, which arises "where the application of the provincial law 'displaces' the operation of federal law by rendering it 'a practical nullity'" (Moloney, at para. 17, citing Bank of Montreal v. Hall, [1990] 1 S.C.R. 121, at p. 155).

[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 sphere of authority (Lemare, at para. 14; Canadian Western Bank, at para. 75).

[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, and the relevant purpose is the equitable distribution of the bankrupt's assets.

[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", the Regulator insists that GTL take responsibility for environmental remediation and abandonment — even of the Renounced Assets. This, says GTL, creates an operational conflict: GTL cannot comply with both s. 14.06(4) of the BIA and the Alberta legislation.

[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 can insist that assets of the estate be used to comply with end-of-life obligations ahead of distribution to creditors.

[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 this section, I will now set out my interpretation of s. 14.06(4), the key provision, before directly addressing the alleged conflicts.

[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 for those assets under the OGCA and the Pipeline Act. In the alternative, it says that, even if it cannot disclaim its responsibilities under Alberta's legislation by virtue of s. 14.06(4), the Regulator's enforcement of the LMR requirements and the Abandonment Orders against the Redwater estate has the practical effect of reordering the BIA's priorities in a manner that creates a conflict.

[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 OGCA and the Pipeline Act is s. 14.06(4). In my view, s. 14.06(4) is only concerned with the personal liability of the trustee. GTL cannot escape the liability of the bankrupt estate by relying on s. 14.06(4).

[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 source, where a trustee "disclaims" under s. 14.06(4), the trustee is protected only from personal liability. The bankrupt estate's liability is unaffected by "disclaimer".

[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 the assets of the estate on the abandonment of the Renounced Assets. The estate remains liable for its environmental obligations, and the Regulator's enforcement of these obligations against the estate does not create a conflict with s. 14.06(4).

[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, in the second alleged conflict, the end-of-life obligations are not claims provable in bankruptcy and therefore the Regulator's enforcement of them does not constitute the reordering of the BIA's priorities.

(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 one that would create a conflict with federal paramountcy" (Canadian Western Bank, at para. 75).

[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. This textual choice reflects the fundamental distinction in insolvency law between the personal liability of a trustee and the liability of the bankrupt estate. A trustee acts in a representative capacity; they are not personally responsible for a bankrupt's debts. It is this capacity — the trustee's personal liability — and not the broader liability of the bankrupt estate that s. 14.06(4) addresses.

[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 for the protection of the creditors.

(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, and this was a concern for them.

(Proceedings of the Standing Senate 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 14:18). This too supports the conclusion that s. 14.06(4) is concerned only with the personal liability of trustees. There is no hint in the legislative debates of a parliamentary intention to relieve trustees of the obligation to expend the estate's assets on environmental remediation.

[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 at the same time as amendments were made to 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" for certain obligations. The consistency of this language across the provisions of s. 14.06 shows that, when Parliament intends to limit personal liability, it does so expressly.

[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 as follows: "en sa qualité de, en tant que". Robert & Collins defines it as "in one's official capacity". In legal usage, this expression refers to a person acting in a representative capacity, as opposed to in their personal capacity. The use of this expression in both ss. 14.06(2) and 14.06(4) confirms that both provisions are addressed to the same issue: the personal liability of trustees.

[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 reasons suggest that s. 14.06(4) was understood to be exclusively about the personal liability of trustees, as opposed to the liability of the bankrupt estate.

[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 purposive interpretation of s. 14.06(4) to conclude that it extends beyond the personal liability of trustees, its conclusion rests on a view of the purposes of s. 14.06(4) that is inconsistent with the legislative debates and with the plain language of the provision.

[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, or any right in any immovable, affected by the condition or damage". The concept of "disclaimer" is used in s. 14.06(4) in a broad sense, so as to encompass more than just the common law disclaimer of real property.

[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 language of s. 14.06(4), I am not satisfied that these provisions lead to the conclusion that s. 14.06(4) limits the liability of the bankrupt estate. The dissenting reasons have not persuaded me that the provisions of s. 14.06 not relied on by the parties in this litigation require a departure from the interpretation of s. 14.06(4) that I have set out above.

[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" before the trustee's appointment. 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 a trustee can be protected from personal liability — one by relying on s. 14.06(2) and one by relying on s. 14.06(4) — in the circumstances of this case, this distinction makes no practical difference.

[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 this distinction is artificial. Both provisions protect the trustee from personal liability: s. 14.06(2) does so in respect of any environmental condition or damage; s. 14.06(4) does so in respect of an order to remedy any environmental condition or damage. Any order that s. 14.06(4) applies to will also be addressed by s. 14.06(2), since an order to remedy an environmental condition or damage necessarily presupposes the existence of an environmental condition or damage.

[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 could not be held personally liable for environmental orders (particularly, for any costs of remediation associated with such orders), even where they chose to walk away from the underlying property.

[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 before the trustee's appointment or after the trustee's appointment unless as a result of the trustee's negligence. Uncertainty arose as to whether a trustee who wished to walk away from property affected by an environmental condition could be held personally responsible for costs of remediation associated with such property.

[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 in conjunction. Section 14.06(2) provides protection from personal liability for any environmental condition or damage. Section 14.06(4) then provides protection from personal liability in the context of a specific type of situation — an order requiring a trustee to remedy an environmental condition or damage — where the trustee can choose to walk away from the property affected by the order, or where the trustee had already walked away before the order was made.

[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 or occupier of the property. Section 14.06(4) addresses this: it makes clear that, regardless of whether a trustee has "disclaimed" the property, the bankrupt estate remains liable for environmental orders affecting the property.

[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" outside of the context of an environmental order — for example, in respect of the common law property rights associated with real property — is not addressed by s. 14.06(4).

[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.

[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 mean that the full value of the estate must necessarily be used to satisfy environmental orders before any distribution to creditors can be made.

[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 affect the liability of the bankrupt estate. The Redwater estate remains bound to comply with the Abandonment Orders, to the extent that any assets of the estate remain.

[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 absurdity in the context of other provisions of s. 14.06. I disagree.

(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 of the bankrupt estate.

[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 attempting to hold GTL personally liable under the Abandonment Orders. 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. But the Regulator has not done so, and has never sought to hold GTL personally liable.

[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" could, in theory, lead to an operational conflict with s. 14.06(2). But this conflict would only arise if the Regulator were to seek to hold GTL personally liable under the Abandonment Orders. There is no evidence that the Regulator has done or intends to do so.

[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 with which the doctrine of paramountcy is to be applied.

[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 in Alberta. In contrast to the situation in Moloney, the Regulator in this case is not seeking to hold GTL personally liable. Rather, it is exercising its statutory powers to enforce the environmental obligations of the Redwater estate against the assets of that estate.

[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 estate and has publicly committed to never seeking to hold trustees or receivers personally liable.

[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 Regulator's enforcement of the Abandonment Orders against the estate amounts to the enforcement of a debt owed by the estate, not to the imposition of personal liability on GTL.

[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"; and "encouraging the proper abandonment of problem properties".

[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) and the legislative debates, the purpose of these two provisions is to protect the personal liability of insolvency professionals. The dissenting reasons have not persuaded me that this purpose extends to relieving the bankrupt estate from its environmental obligations.

[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 without any attempt to hold them personally liable. Accordingly, as I will explain, the practical effect of including trustees in the definition of "licensee" is to require the Redwater estate to satisfy end-of-life obligations, not to expose GTL to personal liability.

[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". The legislative debates, however, do not support the broader purposes on which GTL relies.

[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, which were made for strategic purposes at a particular point in the litigation, the chambers judge found that requiring GTL to expend estate assets to comply with environmental obligations "would likely deter properly licensed insolvency professionals from accepting mandates involving environmental issues." However, this finding was not supported by the evidence.

(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. Section 14.06(4) does not empower GTL to escape this conclusion; that provision is concerned solely with the personal liability of trustees and has no effect on the liability of the bankrupt estate.

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 be distributed according to the BIA's priority scheme.

[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 in the context of the frustration of purpose branch of the paramountcy analysis. In my view, the issue of the reordering of priorities is better addressed by asking directly whether the Regulator is asserting claims provable in bankruptcy.

[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 — s. 14.06(7) of the BIA gives environmental claims a super priority. The Regulator is seeking to avoid this priority scheme by enforcing the Abandonment Orders outside of bankruptcy proceedings.

[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.

[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 one, such that it will seemingly be satisfied in virtually all cases involving a regulator exercising its enforcement powers. The second concern is that the "sufficient certainty" step of the Abitibi test has sometimes been applied too leniently, such that purely speculative future events are used to satisfy the third step.

[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" requirement, the Regulator is not a creditor of Redwater. In addition, in the context of this appeal, there is no sufficient certainty that the Regulator will perform the work and advance a monetary claim.

(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 virtually all — cases involving a regulator exercising its enforcement powers, have been raised by lower courts (see, e.g., Nortel Networks Corp., Re, 2013 ONCA 599, 6 C.B.R. (6th) 159; Strathcona (County) v. Fantasy Construction Ltd. (Trustee of), 2005 ABQB 559, 256 D.L.R. (4th) 536) and academic commentators (see, e.g., 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).

[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 argued that Northern Badger remains relevant and that its analysis of the "creditor" step should be adopted.

[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. 32. I note that no unfairness arises from reconsidering this question given the following.

[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 about the nature of the matter. Although the Regulator subsequently conceded its creditor status in the courts below, no prejudice results from reconsidering the matter given that both parties fully argued the issue before this Court.

[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 threatened to bring a claim under NAFTA. In response, the province issued remediation orders. The chambers judge in Abitibi made a specific finding of fact, which was not challenged before this Court, that the province's remediation orders were connected to the expropriation and that the province intended to use those orders to offset any NAFTA claim.

[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 the public and the environment. This stands in contrast to the situation in Abitibi, where the chambers judge found that:

. . . 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 of the Province.

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 this applies to a detached regulator or public enforcer.

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, this Court noted that the first prong of the test "is not a very exacting one". On a fair reading of Abitibi, the "creditor" requirement was not intended to operate in a way that would render any regulator, regardless of its actual regulatory function and motivation, a "creditor".

[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" step but not to the "creditor" step of the Abitibi test. Northern Badger must be read in that light.

[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 built upon it.

[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. and in Nortel Networks Corp., Re, 2013 ONCA 599, that Northern Badger remains relevant and that, on a proper understanding of the "creditor" requirement, a regulator enforcing a public duty by way of non-monetary order is not 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. Lund argues that the reasoning in Northern Badger is still "alive and well" and should be used to narrow the scope of the "creditor" requirement. Klimek states that insolvency practitioners should continue to rely on Northern Badger after Abitibi.

[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 . . .

[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 duties.

[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. It was not necessary to consider whether the reasoning in Northern Badger survived those amendments given the unique factual matrix of Abitibi.

[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 requirements do not satisfy that step in any event.

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

[138] As I noted, the Regulator is not a creditor of the Redwater estate. However, if I am wrong about this, the Abandonment Orders and the LMR requirements still do not satisfy the third step of the Abitibi test for determining whether a regulatory obligation amounts to a claim provable in bankruptcy. As Deschamps J. wrote in Abitibi, at para. 45:

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, the third requirement is easily met. When the order is not monetary in nature, however, the question is whether there is sufficient certainty that the obligation will ripen into a monetary claim. 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 environmental obligations, this means the court must assess whether a monetary claim will result from the remediation orders.

[139] In this case, the question is whether there is sufficient certainty that the Regulator or the OWA will perform the abandonment and reclamation work associated with the Renounced Assets and make a monetary claim for reimbursement against the Redwater estate. For the following reasons, I have concluded that there is no such sufficient certainty.

[140] It is important to clarify the nature of the inquiry at this stage of the analysis. A court is not asking whether it is generally possible to attach a monetary value to a regulatory obligation. Rather, a court must determine whether there are sufficient facts indicating the existence of an environmental duty that will ripen into a financial liability. In making this determination, a court may take into account whether a bona fide regulator has actually performed, or has taken concrete steps toward performing, the environmental work in question.

[141] In Abitibi, there was sufficient certainty that the Province would eventually perform the required environmental work. The Province had already taken concrete steps toward performing the remediation — it had expropriated or otherwise taken control of three of the five properties for which it had issued remediation orders. In particular, the Province had already cleaned up two of the five sites by the time the CCAA proceedings were commenced. Given these facts, it was sufficiently certain that the Province would carry out the remediation and make a claim for reimbursement.

[142] The situation in this appeal stands in stark contrast to the factual situation in Abitibi. In this appeal, there is no evidence that either the Regulator or the OWA has taken any concrete steps toward performing the abandonment and reclamation work associated with the Renounced Assets. Although there may ultimately be liability, it is by no means certain in the current circumstances.

[143] It is also important to note the specific nature of the OWA's involvement in the management of orphan assets. As I noted above, the OWA is a non-profit organization to which the Regulator has delegated its authority to deal with orphan assets. The OWA is overseen by an independent board of directors and is funded almost entirely through the industry-wide levy. It has no power to seek reimbursement of its costs from the estate. This has important implications for the analysis.

[144] In particular, it means that even if the OWA does ultimately perform the abandonment and reclamation work, it may not assert a claim against the Redwater estate for reimbursement. The OWA's only source of reimbursement is from the security deposits held by the Regulator to the credit of the relevant licensees — not from the Redwater estate itself. It follows that the performance of the abandonment and reclamation work by the OWA may never give rise to a monetary claim against the Redwater estate.

[145] Furthermore, it is important to address the relationship between the Regulator and the OWA. As I noted, the Regulator has delegated its authority to deal with orphan assets to the OWA. For the purposes of the Abitibi test, the question is whether the Regulator, as the entity exercising the regulatory authority at issue in this appeal, will perform the work and advance a claim. The OWA is not the Regulator.

[146] Even if it could be assumed that the OWA's performance of the work is equivalent to the Regulator's performance, it remains unclear that the OWA will advance a monetary claim. The evidence in this case shows that the OWA may wait many years before undertaking the abandonment work in question. GTL's evidence indicated that the OWA had estimated that the abandonment of the Renounced Assets would take 10 to 12 years. This uncertainty undermines the finding that the OWA's performance of the work is sufficiently certain.

[147] I also note that the OWA's true nature as an organization affects the sufficiency of the certainty analysis in this case. The OWA is a non-profit organization; it has an independent board of directors; it is funded almost entirely through the industry-wide levy (which is not a government appropriation); it has no power to seek reimbursement from the Redwater estate; and it can only be reimbursed up to the value of any security deposit held by the Regulator to the credit of the relevant licensee.

[148] For the foregoing reasons, I conclude that the Abandonment Orders and the LMR requirements do not satisfy the third step of the Abitibi test.

[149] It is not sufficiently certain that the Regulator or the OWA will perform the abandonment and reclamation work and advance a monetary claim for reimbursement. The Abandonment Orders and the LMR requirements are not claims provable in the Redwater bankruptcy.

[150] Given this conclusion, there is no need to directly address the second alleged conflict — that the Regulator's use of its statutory powers has the effect of reordering the priorities in bankruptcy established by the BIA. The basis for this alleged conflict is the claim that, in asserting claims outside of bankruptcy, the Regulator is jumping the queue. However, because the Regulator's obligations are not claims provable in bankruptcy, no conflict with the BIA's priority scheme arises.

[151] I have concluded that the Regulator's enforcement of the Abandonment Orders and the LMR requirements does not create a conflict with the BIA. The end-of-life obligations are not claims provable in the Redwater bankruptcy. The Regulator is not a creditor. There is no sufficient certainty that the Regulator or the OWA will perform the environmental work and make a monetary claim for reimbursement.

[152] As a result of this conclusion, the outcome in this case is entirely consistent with Parliament's intentions behind the BIA priority scheme. The outcome is also consistent with the purposes of the BIA. The Regulator's enforcement of the Abandonment Orders allows the BIA's priority scheme to function as Parliament intended: secured creditors are given the assets remaining in the estate, subject to the environmental obligations binding on the estate. The environmental obligations — which are not provable claims — are not caught by the stay of proceedings and continue to bind the Redwater estate. The Regulator may use its statutory powers to enforce the Abandonment Orders and the LMR requirements against the estate's assets.

[153] A few words about the dissenting reasons are warranted. The dissenting reasons fault the chambers judge for "failing to consider whether the OWA can be treated as the regulator" (para. 274). But this reasoning is misdirected: the chambers judge's analysis on the third step of the Abitibi test was broader than the dissenting reasons suggest, and his conclusion on the third step does not rest on whether the OWA can be treated as the Regulator.

[154] Furthermore, the dissenting reasons assert that there is "sufficient certainty" that either the AER or the OWA will perform the work based on the chambers judge's findings of fact. However, those findings of fact were based on a different legal question: whether the environmental obligations are "intrinsically financial". Applying the correct legal standard — whether there is sufficient certainty that the Regulator or the OWA will perform the work and make a monetary claim for reimbursement — the chambers judge's findings do not demonstrate sufficient certainty.

[155] As I have noted, the OWA is a non-profit organization that has no power to assert a claim for reimbursement against the Redwater estate (other than the value of any security deposit). The dissenting reasons assert that the AER and the OWA are "inextricably intertwined" (para. 272), but this does not resolve the fundamental point that the OWA has no power to assert a monetary claim against the Redwater estate. In the absence of such a claim, even the performance of the work does not make the obligation a claim provable in bankruptcy.

[156] The dissenting reasons also argue that the majority's approach would allow the AER to engage in "strategic gamesmanship" (para. 276). I disagree. The application of the third step of the Abitibi test must be based on the facts of the case, as found by the chambers judge. On the facts of this case — in particular, the OWA's estimate that the abandonment of the Renounced Assets would take 10 to 12 years, and the absence of any concrete steps toward performing the work — the sufficient certainty standard is not met.

[157] I emphasize that this conclusion does not mean that a provincial regulator can never advance a claim provable in bankruptcy. The facts of a given case will determine whether the Abitibi test is satisfied. In a case where a bona fide regulator has already performed, or has taken concrete steps toward performing, the environmental work, the sufficient certainty standard may be met, and the regulator's claim will be a claim provable in bankruptcy that must be advanced in the collective proceeding.

D. The LMR Requirements

[158] I now turn to the LMR requirements. As I noted, the Regulator has sought to impose conditions on the transfer of Redwater's producing assets by invoking the LMR requirements. GTL and ATB claim that these requirements also conflict with the BIA and must be rendered inoperative by paramountcy.

[159] The Regulator's imposition of the LMR requirements is, of course, based on valid provincial legislation. The Regulator has broad discretion to impose conditions on licence transfers, and one of the conditions it may impose is a requirement that the transferor satisfy its environmental liabilities. The LMR requirements are an exercise of this discretion.

[160] As with the Abandonment Orders, the Regulator's imposition of the LMR requirements does not create a conflict with s. 14.06 of the BIA. Section 14.06(4) addresses "disclaimer" in the context of orders to remedy environmental conditions or damage. The LMR requirements are not such orders. They are conditions imposed in the context of a licence transfer. Section 14.06(4) does not apply.

[161] Similarly, the LMR requirements are not claims provable in bankruptcy. The Regulator is not a creditor of Redwater for the reasons I have already set out. Moreover, the LMR requirements do not satisfy the third step of the Abitibi test for the same reasons I have already discussed.

[162] The Regulator's imposition of the LMR requirements may have the practical effect of frustrating GTL's ability to realize full value for the producing assets of the estate. However, this is a consequence of the valid provincial legislative scheme that Alberta has adopted, and not a conflict with the BIA. As I have noted, the BIA is built on valid provincial laws. Alberta has chosen to create a regulatory regime under which the end-of-life obligations attached to licensed assets cannot be avoided by selling only the producing assets. This is a legitimate exercise of provincial authority.

[163] In the absence of an operational conflict or a frustration of purpose, the LMR requirements remain applicable to the Redwater estate. The Regulator may impose conditions on the transfer of Redwater's producing assets in the course of the bankruptcy. The Regulator's conditions must be satisfied before any licence transfer can be approved.

[164] I note that the practical effect of the Regulator's imposition of the LMR requirements is that the producing assets of the Redwater estate may be less valuable than they otherwise would be, given that any purchaser must take on the burden of the end-of-life obligations attached to those assets. This may result in a lower price for those assets, which in turn means that creditors of the Redwater estate, including ATB, will receive less. However, this is a consequence of the valid provincial legislative scheme, not a conflict with the BIA.

IV. Conclusion

[165] I would allow the appeal, set aside the orders of the chambers judge and the majority of the Court of Appeal, and dismiss GTL's application. The costs of this appeal should be paid by GTL and ATB to the Regulator and the OWA on a party-and-party basis.

Dissenting Reasons

Côté J. (Moldaver J. concurring), dissenting —

[166] At issue in this appeal is whether the doctrine of federal paramountcy renders inoperative the provisions of Alberta's statutory regime for regulating the oil and gas industry that require receivers and trustees in bankruptcy to perform end-of-life work on abandoned oil and gas assets. I would uphold the conclusions of the chambers judge and a majority of the Court of Appeal that those provisions are rendered inoperative by the doctrine of federal paramountcy, and I would dismiss the appeal.

[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.

I. The Interpretation of Section 14.06(4) of the BIA

[168] I begin with the interpretation of s. 14.06(4) of the BIA. In my view, the majority's interpretation of this provision is flawed. Section 14.06(4) does not merely limit the personal liability of trustees; it also limits the liability of the bankrupt estate. The majority's interpretation ignores the ordinary meaning of the words of the provision, its legislative context and its purpose.

[169] As I will explain, s. 14.06(4) of the BIA permits trustees to disclaim property encumbered by environmental liabilities. This power is available not merely to protect a trustee from personal liability but also to free the bankrupt estate from the obligation to expend its remaining assets to comply with environmental remediation orders. When a trustee exercises this power, the bankrupt estate is no longer obligated to comply with such orders.

[170] I begin with the text of s. 14.06(4). The ordinary meaning of the words of this provision makes clear that a trustee who exercises the disclaimer power conferred by s. 14.06(4) is not "personally liable" for failure to comply with an environmental order. In addition, the trustee is not personally liable for "any costs that are or would be incurred by any person in carrying out the terms of the order". This latter phrase — liability "for any costs that are or would be incurred by any person" — goes beyond the purely personal liability of the trustee. It encompasses costs that would be incurred by "any person", including the bankrupt estate.

[171] As I will now explain, read in the context of the section as a whole and in light of its purpose, s. 14.06(4) clearly limits the liability of the bankrupt estate, as well as the personal liability of the trustee.

II. The Abitibi Test

[172] Turning to the Abitibi test, I have three areas of disagreement with the majority's analysis of the "creditor" step.

[173] First, the majority redefines the first prong of the Abitibi test in a manner inconsistent with the Court's unanimous decision in that case. Under the majority's approach, a regulator is not a creditor where it acts for the public good and does not stand to benefit financially. However, the Court in Abitibi did not impose such conditions. A regulator is a creditor when it exercises enforcement powers against a debtor.

[174] Second, the majority relies on Northern Badger to ground its reformulation of the Abitibi test. However, Abitibi itself built upon the pre-Northern Badger legal framework, updated it to reflect the evolution of insolvency legislation, and did not preserve or endorse Northern Badger's narrower approach to the "creditor" requirement.

[175] Third, the majority's approach to the "sufficient certainty" step ignores the chambers judge's findings of fact. The chambers judge found, as a matter of fact, that it was sufficiently certain that either the AER or the OWA would perform the abandonment work and advance a claim against the estate. The majority's decision to overturn this finding is not supported by the evidence.

III. 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 with nothing. On the other hand, allowing GTL to walk away from Redwater's environmental obligations would leave the cost of abandoning more than 100 wells to the AER and the OWA and, ultimately, Alberta's oil and gas industry. This is not a trivial concern: the number of orphan wells in Alberta, and the associated costs of remediating them, has increased substantially in recent years.

[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 policy matters "are properly left to Parliament and the provincial legislatures". But the majority then proceeds to rely on policy considerations to justify its reformulation of the "creditor" step of the Abitibi test. Courts should decide cases based on law, not on the policy outcome that they prefer.

[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 environmental remediation is shifted from the estate and its creditors to secured lenders like ATB.

[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 of trustee in relation to the estate.

(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, and

(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 bankruptcy or the filing of the proposal.

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.

[^1]: I am assuming that the AER's factum is accurate in referring to the existence and amount of this loan (which no other party contested).