Distributed to Duty Judge

COURT OF APPEAL OF

COURT OF APPEAL FILE 2101-0085AC Clerk’s Stamp NUMBER FILED TRIAL COURT FILE 25-2332583 27 Aug 2021 NUMBER 25-2332610 25-2335351 SA

REGISTRY OFFICE

APPLICANTS STETTLER COUNTY, WOODLANDS COUNTY and ORPHAN WELL ASSOCIATION

STATUS ON APPEAL PROPOSED INTERVENERS

STATUS ON APPLICATION APPLICANTS

RESPONDENT ALVAREZ & MARSAL INC. in its capacity as the Court-appointed receiver and manager of MANITOK ENERGY INC.

STATUS ON APPEAL APPELLANT

STATUS ON APPLICATION RESPONDENT

RESPONDENTS PRENTICE CREEK CONTRACTING LTD., RIVERSIDE FUELS LTD. and ALBERTA ENERGY REGULATOR

STATUS ON APPEAL RESPONDENTS

STATUS ON APPLICATION RESPONDENTS

DOCUMENT MEMORANDUM OF ARGUMENT OF ALVAREZ & MARSAL CANADA INC. in its capacity as the Court- appointed receiver and manager of MANITOK ENERGY INC., RESPONDENT

ADDRESS FOR SERVICE Norton Rose Fulbright Canada LLP AND CONTACT 400 3rd Avenue SW, Suite 3700 INFORMATION OF PARTY Calgary, Alberta T2P 4H2 FILING THIS DOCUMENT Phone: 403.267.8222 / Fax: 403.264.5973 Attn: Howard A. Gorman Q.C. / D. Aaron Stephenson / Meghan L. Parker

Counsel for the Respondent, the Receiver (File # 1001023920) CAN_DMS: \141002939\3

CONTACT INFORMATION FOR ALL OTHER PARTIES:

Stettler County and Woodlands County Orphan Well Association Brownlee LLP Borden Ladner Gervais LLP 2200 Commerce Place Centennial Place, East Tower 10155-102 Street 1900, 520 - 3rd Avenue SW , AB T5J 4G8 Calgary, AB T2P 0R3 Attn: Greg G. Plester Attn: Jessica L. Cameron / Robyn Gurofsky [email protected] [email protected] / [email protected] T: 780-497-4800 T: 403-232-9715 / 9774 F: 780-424-3254 F: 403-266-1395

Prentice Creek Contracting Ltd. Riverside Fuels Ltd. Altalaw LLP Hamilton Baldwin Law 5233 – 49 Avenue 5039 50th Street Red Deer, AB T4N 6G5 Rocky Mtn. House, AB T4T 1C1 Attn: Glyn Walters Attn: Garrett SE Hamilton [email protected] [email protected] T: 403-343-0812 T: 403-845-7301 F: 403-340-3545 F: 403-871-8063

Alberta Energy Regulator Suite 1000, 250 – 5 Street SW Calgary, AB T2P 0R4 Attn: Maria Lavelle [email protected] T: 403-297-3736 F: 403-297-7031 And to the Service List

CAN_DMS: \141002939\3

Table of Contents

PART I - OVERVIEW ...... 1

PART II – FACTS ...... 1

PART III – LAW AND APPLICATION ...... 3

A. Principles of intervening ...... 3

B. Leave should be denied to the Prospective Municipal Interveners ...... 4

PART IV– RELIEF SOUGHT ...... 5

CAN_DMS: \141002939\3

PART I - OVERVIEW

1. This Memorandum is submitted by the Receiver of Manitok Energy Inc. (Manitok) in response to applications for leave to intervene in the within Appeal, which relates to the relative priorities of abandonment and reclamation obligations (ARO) and builders’ lien claims. The applicants are (i) Stettler County and Woodlands County, jointly (Prospective Municipal Interveners), and (ii) the Orphan Well Association (OWA).

2. Leave to intervene should be denied to the Prospective Municipal Interveners. They are only indirectly affected by the Appeal, they declined to litigate in the context of similar insolvencies in which their interests were directly at stake, their interests are not meaningfully distinguishable from the interests of the Respondent lien claimants (the Lien Claimants), and they are proposing to raise additional issues that will expand the lis in dispute.

3. The Receiver takes no position on the OWA intervention application. Granting intervener status is favoured by aspects of the OWA application (the OWA is directly affected because it is responsible for abandoning and reclaiming licensed assets orphaned from the Manitok estate; the OWA has expertise based on status as party in Redwater1), whereas denial of intervener status is favoured by other aspects (potential duplication of interests and arguments).

PART II – FACTS

4. Manitok was an oil and gas producer with operations in various municipal jurisdictions in Alberta, not including those of the Prospective Municipal Interveners.

5. The Receiver was appointed on February 20, 2018. It initiated a Court-approved sales process shortly thereafter, resulting in various sales of Manitok interests in licensed assets, including a sale to Persist Oil & Gas Inc.2 (Persist and Persist Sale). By operation of a sale approval and vesting order (Persist SAVO), as amended, (i) the purchased assets were taken “free and clear” by Persist, (ii) the net proceeds were deposited in an interest bearing trust account to stand in the “place and stead” of the purchased assets, and (iii) portions of the net proceeds were

1 Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 [Redwater] at para 160 [Tab 1]. 2 The Persist Sale was originally entered with the predecessor by amalgamation of Persist (Tantalus Energy Corp.). 1

defined as holdbacks (Builders’ Lien Holdbacks and Municipal Holdback) pending a resolution of asserted but disputed secured builders’ liens and municipal claims.3

6. After the Persist Sale, the Alberta Energy Regulator (AER) issued Abandonment Orders and designated an overwhelming majority of the unsold assets in the Manitok estate as orphans.4 Total realizations by the Receiver will be insufficient to satisfy the Manitok estate’s ARO burden.5

7. On consent, post-receivership municipal taxes on properties that were operated and sold by the Receiver were paid from the Municipal Holdback to five municipalities, not including the Prospective Municipal Interveners, as administrative expenses of the receivership. The rest of the Municipal Holdback was released because the unfunded ARO in the Manitok estate ranked in priority to any municipal special liens. The distributions to the five municipalities were made in full and final satisfaction of their claims.6

8. A resolution was not reached with the Lien Claimants, which led to litigation. The focus of the litigation (and this Appeal) is whether ARO ranks in priority to secured lien claims.7 If so, the Builders’ Lien Holdbacks should be released based on the subordinate priority of the liens.

9. Based on their own affidavits, the Prospective Municipal Interveners do not have direct interests in the Manitok estate; however, they are owed approximately $24.8 million in property taxes arrears by other oil and gas operators, including Trident Exploration Ltd. (Trident).8 The Prospective Municipal Interveners provide no explanation for why they should intervene in this Appeal, rather than litigate as true parties in proceedings in which they are directly interested.

3 Affidavit of Sarah Trigueiro, sworn April 5, 2021 and filed April 6, 2021 [Trigueiro Affidavit] at Exhibit I: Sale Approval and Vesting Order [SAVO] at paras 11-12. The Persist SAVO was amended twice, without impacting the material terms. 4 Trigueiro Affidavit, supra note 3 at Exhibit M: Affidavit of Laura Chant, sworn October 7, 2020 and filed October 8, 2020 at paras 9-15. 5 Trigueiro Affidavit, supra note 3 at Exhibit E: Eleventh Report of the Receiver at para 28. 6 Appeal Record, filed July 26, 2021 [Appeal Record] at Part 2, p 108: Order of Justice Romaine, pronounced July 10, 2020, filed July 10, 2020, at para 3. 7Appeal Record, supra note 6 at Part 2, p 111: Reasons for the Decision of Justice Romaine, decided March 24, 2021, filed March 24, 2021; Redwater, supra note 1 at para 160 [Tab 1]. 8 Affidavit of Gordon Frank, sworn July 15, 2021 and filed July 23, 2021 at paras 8-9; Affidavit of Yvette Cassidy, sworn July 20, 2021 and filed July 23, 2021 at paras 8, 10. 2

PART III – LAW AND APPLICATION

A. Principles of intervening

10. The discretion to grant intervener status should be exercised sparingly.9 The court must always be mindful that unnecessary interventions are inherently wasteful and risk duplication.10

11. In evaluating a proposed intervention, the court must consider the subject matter of the proceeding and determine the prospective intervener’s interest in it, focussing on whether the prospective intervener (i) will be directly and significantly affected by the appeal, and (ii) has expertise or a fresh perspective that will assist the court.11 This evaluation is informed by other factors, including those listed by the Prospective Municipal Interveners.12

12. Being directly affected is a necessary but not sufficient basis for intervening: “If parties can intervene simply because they have affected interests, the number of potential interveners would greatly increase and unduly delay the appeal process without a corresponding benefit.”13 Being “interested in” a proceeding is not enough—a legal interest must be at stake.14

13. Leave to intervene should not be granted based on jurisprudential interests: “It is generally not sufficient for that interest to be a mere curiosity, an intellectual interest, a policy-based concern, a personal interest or a jurisprudential interest”.15 A prospective intervener is not “directly affected” if it is interested in how an appeal will apply as a future precedent: “[T]he precedential value of a case does not constitute a direct interest such as to justify intervener status.”16 A jurisprudential interest is inherently indirect, whereas a direct interest is required to intervene.

9 Pedersen v Alberta, 2008 ABCA 192 [Pedersen] at para 4 [Tab 2]; Orphan Well Association v Grant Thornton Limited, 2016 ABCA 238 [OWA] at para 11 [Tab 3]; Canadian Centre for Bio-Ethical Reform v (City), 2017 ABCA 280 [CCBER] at para 11 [Tab 4]; Pelletier (Re), 2020 ABCA 450 [Pelletier] at para 35 [Tab 5]. 10 Pelletier, supra note 9 at para 40 [Tab 5]. 11 OWA, supra note 9 at para 8 [Tab 3]; Papaschase Indian Band (Descendants of) v Canada (Attorney General), 2005 ABCA 320 [Papaschase] at paras 2, 5 [Tab 6]. 12 Memorandum of Argument of the Prospective Municipal Interveners, filed July 23, 2021 at para 3. 13 OWA, supra note 9 at para 9 [Tab 3]; Pedersen, supra note 9 at para 10 [Tab 2], interpreting Papaschase, supra note 11 [Tab 6]; Stewart Estate (Re), 2014 ABCA 222 [Stewart Estate] at para 7 [Tab 7]; Styles v Canadian Association of Counsel to Employers, 2016 ABCA 218 [Styles] at para 14 [Tab 8]. 14 Piikani Nation v Kostic, 2017 ABCA 259 [Kostic] at para 4 [Tab 9]; Reference re Impact Assessment Act, 2020 ABCA 94 [IA Reference] at para 11 [Tab 10]. 15 IA Reference, supra note 14 at para 12 [Tab 10]; see also Papaschase, supra note 11 at para 8 [Tab 6]. 16 Styles, supra note 13 at para 28 [Tab 8]; see also Stewart Estate, supra note 13 at para 6 [Tab 7]. 3

14. A prospective intervener’s argument is not based on a “fresh” perspective if it will or could be advanced by a true party.17 Duplication is impermissible.18 To avoid the risk of duplication, a prospective intervener is required to provide a detailed outline of its argument at the leave stage. A bald statement that one’s arguments are useful and different is not enough.19

15. Finally, an intervention is unnecessary if Supreme Court of Canada guidance on the central issues is already available. It is the role of the parties, not interveners, to argue why an existing judicial precedent is or is not distinguishable.20

B. Leave should be denied to the Prospective Municipal Interveners

16. The Prospective Municipal Interveners are not directly affected by the Appeal. The Receiver negotiated a resolution with the municipalities that did have interests at stake in the Manitok receivership. The ambition of the Prospective Municipal Interveners is plainly and admittedly21 to influence how this Appeal will be used as a precedent. This is an indirect interest and does not justify intervener status. They do not have a direct interest at stake.

17. The Prospective Municipal Interveners’ own evidence indicates they are owed property tax arrears by oil and gas operators in their own jurisdictions. Leave to intervene should not be granted to allow the Prospective Municipal Interveners to litigate indirect interests when they declined to litigate their direct interests, as full parties, against operators in their jurisdictions. While an application by the Prospective Municipal Interveners in Trident has been adjourned pending the outcome of the Appeal, Trident accounts for less than one third of the oil and gas-related property tax arrears owing to the Prospective Municipal Interveners ($7 million of $24.8 million).

18. The Prospective Municipal Interveners have not provided a detailed outline of their arguments. They instead identify two broad interests: (i) as a creditor, and (ii) as a regulator.

17 Papaschase, supra note 11 at para 2 [Tab 6]; Pedersen, supra note 9 at para 3 [Tab 2]; IA Reference, supra note 14 at para 13 [Tab 10]; Stewart Estate, supra note 13 at para 9 [Tab 7]; Styles, supra note 13 at para 31 [Tab 8]. 18 Pelletier, supra note 9 at paras 39-40 [Tab 5]. 19 OWA, supra note 9 at para 13 [Tab 3]; Pedersen, supra note 9 at para 11 [Tab 2], Pelletier, supra note 9 at para 38 [Tab 5]; Kostic, supra note 14 at para 5 [Tab 9]. 20 UAlberta Pro-Life v Governors of the University of Alberta, 2018 ABCA 350 at para 30 [Tab 11]; CCBER, supra note 9 at para 25 [Tab 4]; Stewart Estate, supra note 13 at para 13 [Tab 7]. 21 Memorandum of Argument of the Prospective Municipal Interveners, filed July 23, 2021 at paras 5, 6. 4

19. However, all creditors have a general interest in insolvency proceedings. This is not unique to municipalities. In the Appeal, creditors’ interests are already represented by two sets of counsel for the Lien Claimants. Arguments by the Prospective Municipal Interveners relating to their interests as creditors would be duplicative.

20. The Prospective Municipal Interveners, qua creditor, wish to argue about the priority of ARO over “assets unrelated to environmental contamination concerns” and assets not subject to AER regulation.22 However, the Builders’ Lien Holdbacks were established from the net proceeds of a sale of AER-regulated assets. Any consideration about the priority of ARO over non-oil and gas assets would expand the lis in dispute.

21. The Prospective Municipal Interveners argue that municipalities are regulators, including in relation to “regulatory obligations tied to land development.”23 The status of municipalities as regulators of land development is not in dispute in the Appeal. Satisfying ARO is indisputably a regulatory obligation, per Redwater. The principal issue in dispute in the Appeal is what ARO has priority over; specifically, whether ARO has priority over the Builders’ Lien Holdbacks. Arguments about regulation by municipalities would expand the lis in dispute.

22. The Appeal is focussed on a well-known, binding SCC decision: Redwater. It is for the parties, not interveners, to argue about how it should apply in their case.24

23. Leave to intervene is never granted other than sparingly. Unnecessary interventions are inherently wasteful. The circumstances surrounding the Appeal do not justify intervention by the Prospective Municipal Interveners.

PART IV– RELIEF SOUGHT 24. The Receiver takes no position on the application of the OWA for leave to intervene. Leave should be denied to the Prospective Municipal Interveners. Any intervention order should prohibit the granting of costs for or against the intervener(s).

22 Memorandum of Argument of the Prospective Municipal Interveners, filed July 23, 2021 at para 4. 23 Ibid at para 6. 24 See paragraph 15 above and the cases cited therein. 5