Engelland has a role - to be able to clear the crease and handle bigger players. Ideally, there would be more size throughout the defence corps, especially when you consider the teams in the Pacific division, but the Flames key defenceman are not big guys. Enter Hamilton - he has size, but it remains to be seen how he will use it against bigger forwards out west. He won't be a bruiser, but if he can use his size and reach to stop big forwards running roughshod, then Engelland has less use and likely sees less ice, maybe even into the pressbox. If Smid recovers to be top 6 worthy, he could replace Engelland, but then it is like for like, not much of an upgrade, and costing more $$ too.
Then you look at the players in the system, Nakladal has some size, but not experienced on north american ice, nor has he shown a lot of physicality like Engelland brings. Wotherspoon is similarly sized to Engelland, but it by no means a physical guy. Morrison is similar to Wotherspoon, but with a better shot. Sieloff is a hitter, but smaller - more of an open ice/on the boards checker. Kanzig has size, but it remains to be seen if he develops into a guy who can take a shift in the NHL, and that may not happen until after Engelland's contract is up anyway.
Long story short, until the Flames are equipped to handle big forwards without a bruiser in the defence corps, Engelland will have a role to play, and at least one of Engelland/Smid will need to be on the roster. Add to this how the coach and GM value his leadership in the room, he seems to be entrenched.
And to anyone who feels Wilson could be signed to replace Engelland - any team the Flames would want to trade Engelland to, if they felt the same way, would be signing Wilson right now for $2M less than Engelland makes. Wilson is a big question mark until he has more injury free time, and signing him and shipping out Engelland would be a risk, especially with Smid's recovery being another big question mark. If Treliving has a buyer for Engelland and fancies a gamble, he could go for this, but he has shown he values depth and is less inclined to gamble, especially when he doesn't need to move this contract yet.
Maybe by next season Engelland will go - one season left is tradeable, and if the team is fully restocked on D, there will be less worry about depth behind Engelland.
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