Alberta’s New Energy Innovation Fund


Last week was a big week of announcements from the Alberta Government on its plans to reduce greenhouse gas emissions and diversify the Alberta economy. On December 5, 2017, the creation of a $1.4 billion Energy Innovation Fund to diversify the economy and reduce carbon pollution in the province was announced. The bulk of the funding for the Energy Innovation Fund results from the carbon levies that are being collected under the Climate Leadership Plan. 

The Energy Innovation Fund has five categories:

  • Oil Sand Innovation Fund – $440 million to help oil sand developers  increase production and reduce emissions, while adjusting to the new Carbon Competitive Incentive rules for large emitters. Funding in the Oil Sand Innovation Fund will start at $40 million a year in 2019-20, rising to $80 million in 2020-21 through 2024-25 until the $440 million fund has been depleted.

  • Innovation Across Sectors – $225 million for projects across sectors that support research, commercialization and investment in new technologies that reduce emissions in two program areas: Emissions Reductions Alberta ($80 million) and the new Climate Change Innovation and Technology Framework ($145 million). This new Climate Change Innovation and Technology Framework will help manage government investments in research, innovation and technology and will help commercialize products. 

  • Industrial Energy Efficiency – $240 million for projects that help companies reduce emissions and costs by upgrading equipment or facilities to lower energy use. Support will be available for large industrial, agricultural and manufacturing operations. 

  • Bioenergy – $63 million in grants for bioenergy projects, including biodiesel and ethanol – as well biomass-based electricity generation. Alberta’s existing Bioenergy Producer Program will be adjusted to provide grants to dedicated biofuel-producing facilities. 

  • Green Loan Guarantees – $400 million in loan guarantees to support investment in efficiency and renewable energy measures to reduce risk for financial institutions and make it easier for companies to invest.

If you would like to learn more about how the funds may impact your business, the Energy, Environmental and Regulatory Group at McLennan Ross would be pleased to assist you.
 

New “Rewards” for Low Carbon Emissions from Alberta’s Largest Greenhouse Gas Producers

By JoAnn P. Jamieson and Brittany Scott

The Alberta Government on December 6, 2017 formally unveiled its plans to reboot the carbon levy for Alberta’s largest emitters of greenhouse gases – those who emit more than 100,000 tonnes of carbon per year. This plan, known as the Carbon Competitiveness Incentives (“CCI”), will give companies credits if their facilities produce less than a benchmark amount of emissions, while those that exceed the threshold will have to buy offsets or pay $30 for every tonne of emissions over the limit. The CCI plan comes into effect on January 1, 2018 and replaces the Specified Gas Emitters Regulation. In order to ease the transition and to avoid “big hits” to industry, the government is going to phase in the full impact of the CCI plan over the next three years where industry will pay 50% of costs in 2018, 75% of costs in 2019, and the full amount of costs in 2020.

The aim of the CCI is for the Alberta government to protect its largest industries from competitive impacts that could simply shift production to other jurisdictions without a carbon levy. The idea now is that Alberta's heavy emitters will receive a reserve of "free" greenhouse gas emission credits, to be determined by a sector emissions benchmark. Benchmarks will be set relative to high-performing industrial projects that produce the same or similar products. Most industries will have a benchmark set at 80% of production-weighted average emissions. In the oil sands, emissions intensity will be measured by the amount of greenhouse gas produced in extracting one barrel of oil and the benchmark will be the top quartile of projects or 57.7 kilograms of carbon dioxide equivalent per barrel. Previously under the Specified Gas Emitters Regulation, heavy emitters were judged based on how improved they were from their historical performance – now, they will be judged against their competitors under an output-based allocation system that will be called the CCI.

The Alberta Government expects that, as a result of CCI, greenhouse gas emissions will be cut by 20 million tonnes by 2020 and 50 million tonnes by 2030. However, costs are also expected to be high, with the Alberta Government estimating the total value of levies per year coming in at upwards of $1.2 billion annually when in full force in 2020, though offsets and credits mean the NDP Government expects to take in closer to $800 million.

If you have any questions or concerns about how this will affect you, the Energy, Environmental and Regulatory Group at McLennan Ross would be happy to assist you.

The Costly Future of Site C

By JoAnn P. Jamieson and Brittany J.A. Scott

BC Hydro’s Site C Hydroelectric Project (“Site C”) has been a contentious endeavor from the start.1 In the latest chapter of the saga, the British Columbia Utilities Commission (the “BCUC”) released its final report (“Final Report”) on its inquiry (“Inquiry”) into the implications and costs of continuing, terminating, or suspending construction (with the option to resume by 2024).2 All three possible scenarios come with execution risk and a hefty price tag.

Background


Site C is being built in the northeastern Peace River region and includes a new reservoir that will run 83 km along the Peace River and submerge approximately 5,000 hectares of land. Site C is forecasted to provide a peak capacity of approximately 1,145 MW and 5,286 annual GWh of electricity, which will power the equivalent of approximately 450,000 homes annually for approximately 100 years.
 

Under the Clean Energy Act3 Site C was exempt from having to obtain a Certificate of Public Convenience and Need from the BCUC; however an extensive environmental assessment was completed through a joint federal-provincial review panel hearing process in 2014. BC Hydro received approval to proceed from the provincial government in December 2014, and construction began in summer 2015.
 

Site C played a major role in the 2017 BC provincial election. After the NDP leader John Horgan became Premier, the newly-formed provincial government directed the BCUC to investigate Site C with the aim of answering four questions.4
  1. What are the implications, including costs to ratepayers, of (i) completing Site C by 2024, (ii) suspending Site C while maintaining the option to resume construction until 2024, and (iii) terminating construction and remediating the site?
  2. Is Site C on time and within the proposed $8.335 billion budget, excluding the $440 million project reserve established and held by the province?
  3. What are the mechanisms available to recover any costs associated with suspending or terminating Site C?
  4. Given the Clean Energy Act's objectives,5 could any other portfolio of generating projects and demand-side management initiatives provide similar benefits at similar or lower energy cost as Site C? 
The Inquiry followed a two stage process. The first phase consisted of fact gathering in which BC Hydro, Deloitte LLP, and members of the public were allowed to provide submissions to inform the Inquiry Panel’s preliminary report published on September 20, 2017 (“Preliminary Report”).6 This Preliminary Report noted that Site C was on schedule but found that the available information was insufficient to assess possible scenarios identified at that time. Given the limitations in the first phase, in the second phase, the Panel continued its inquiry with a series of community input sessions, First Nations input sessions, and technical sessions across the province. This second phase of the Inquiry resulted in the Final Report. 

Key Findings from the Final Report

 

The Panel begins the Final Report by assessing BC Hydro’s current load forecast and resource balance and surplus energy and capacity issues. The Panel found BC Hydro's “mid” load forecast to be “excessively optimistic” in light of recent economic developments in the province, and therefore used the “low” load forecast for its findings throughout the Final Report, noting that electricity demand could be less than even the low forecast. The Final Report then provides an extensive review of numerous risks that could impact the benefits of the proposed cases, including the emergence of disruptive technologies, construction cost overruns, the costs of developing alternative energy generation and variability in the province’s economy. 


Case 1: Complete Site C

The Panel reiterated that Site C is currently on schedule for an in-service date of November 2024, while also noting potential significant risks to the proposed timeline.  In particular, the Panel found it concerning that BC Hydro announced a one year delay at the start of the river diversion due to tension cracks in the Peace River valley near Fort St. John. Given the physical limitations of construction in this area, construction can only occur during a one-month window when river flow is at a low level. The Panel concluded that if the river diversion is not achieved by September 2019, Site C will not remain within its proposed budget of $8.335 billion.

The Final Report updates the Panel’s earlier findings on Site C’s budget including the additional costs associated with the delayed river diversion and numerous unresolved geotechnical and contractor issues, concluding that it may cost over $10 billion to complete. Further, the Panel notes that since Site C is still in its early stage of construction, there is much uncertainty given that the Peace River valley is an area prone to landslides. This inherent uncertainty may come with a price tag of being between 20-50% over budget.  

 

Case 2: Terminate Site C

The Panel found that terminating Site C would result in combined termination and remediation costs between $750 million to $2.3 billion, exclusive of the $2.1 billion in sunk costs to date. The Panel expressly recognized that whether taxpayers ought to pay for sunk costs instead of ratepayers in the future may be challenged, but did not take a position or affix a value of this in their analysis. Given a sensitivity calculation, the Panel estimated that terminating Site C would cost about $1.8 billion. 

The Panel agreed with BC Hydro that financing and alternative energy costs must be considered when looking at the total impact of termination to the ratepayer. In this analysis, the Panel considered whether another portfolio of commercially feasible alternative generation and demand-side management initiatives could provide similar benefits to Site C at a similar or lower unit energy cost. The Panel concluded that it is plausible to design an alternative portfolio at a lower unit energy cost than Site C, but at a slightly higher overall cost to the ratepayers ($3.234 billion for the Illustrative Alternative Portfolio compared to $3.188 billion for Site C). 


The Panel notes that to be competitive, an alternative portfolio must provide sufficient savings to account for the $1.8 billion in expected termination and remediation costs. Given the type of energy provided by Site C, many alternative types of energy such as wind are not dispatchable so they do not provide the same benefit to ratepayers. The Panel discusses this conundrum and concludes that because BC Hydro has substantial existing dispatchable energy, the “Illustrative Alternative Portfolio” (which has a relatively small amount of wind) would effectively provide the same value as that from Site C. 


Case 3: Suspend Site C with the Option to Resume in 2024

The Panel stated that the suspension scenario results in the highest total cost to ratepayers and most risky option. The Panel concluded that putting Site C into a state of suspension, would be just as costly as termination, if not more. In addition, suspension carries remobilization costs and the costs to complete the project beginning in 2024 including retendering contracts, renegotiating First Nations’ benefit agreements, and a restart of environmental permitting upon resumption of construction. The Panel estimated the costs to suspend, restart, and complete Site C, with some adjustments to the estimated $13.6 billion figure provided by BC Hydro, as being $14.812 billion.

Conclusion

 

The Final Report notes that all of the three options for Site C come with a hefty price tag:
  1. Completion comes with a risk of an in-service date of later than 2024 and a high probability of being over the $8.335 billion budget,
  2. Termination comes with the combined termination costs (estimated at $1.8 billion) plus the costs to secure generation from alternative sources comparable to completing Site C exclusive of the $2.1 billion in sunk costs to date, and
  3. Suspension carries an estimated cost of $14.8 billion.

Of the three options, the Final Report concludes that the scenario suspending the construction process until 2024 presents the greatest cost to ratepayers and is accompanied by further potentially-costly risks.
 

Given the BCUC’s cost estimates of each option, the Panel seems to suggests that a basket of renewable projects has a roughly comparable cost to completing the Site C. However, the Final Report advises that specific uncertainties associated with terminating or continuing will determine comparative viability. In particular, the potential for further cost overruns and the materialization of a higher or lower load forecast will be the primary determinative factors. Although the Final Report lacks a recommendation on which scenario is “best”, the Panel’s analysis and findings is intended to inform the BC Government’s decisions on the future of Site C. 

_____________________________

[1] It has been the subject of extensive debate during the provincial elections and much litigation including, but not limited to, Prophet River First Nation v Canada (Attorney General), 2017 FCA 15; Prophet River First Nation v British Columbia (Minister of Environment), 2015 BCSC 1682, aff’d 2017 BCCA 58; Prophet River First Nation v British Columbia (Minister of Forests, Lands and Natural Resource Operations), 2016 BCSC 2007; Peace Valley Landowner Assn. v British Columbia (Minister of Environment), 2015 BCSC 1129, aff’d 2016 BCCA 377; Peace Valley Landowner Assn. v  Canada (Attorney General), 2015 FC 1027; Peace Valley Landowner Assn. v  Canada (Attorney General), 2015 FC 1030; and British Columbia Hydro and Power Authority v Boon, 2016 BCSC 355.

[2] Released on November 1, 2017. Available at: http://www.sitecinquiry.com/wp-content/uploads/2017/11/11-01-2017-BCUC-Site-C-Inquiry-Final-Report.pdf

[3] Clean Energy Act, SBC 2010, c 22, s 7(1)(d).

[4] The Lieutenant Governor directed the BCUC to initiate the inquiry pursuant to Order-in-Council dated August 2, 2017 utilizing  its powers under section 5 of the Utilities Commission Act, RSBC 1996, c 473.

[5] Clean Energy Act, s 2. These objectives include, but are not limited to, achieving electricity self-sufficiency in BC, reducing electricity demand by 2020 by at least 66%, generating at least 93% of electricity in BC from clean or renewable sources, reducing BC’s greenhouse gas emissions, encourage economic development and creation/retention of jobs, and become a net exporter of clean electricity.
 
 






 

 



Supreme Court of Canada Dismisses Consultation and Charter Claims in Relation to Jumbo Valley Resort

Authors: Marco Baldasaro and Gavin Fitch, QC

On November 2, 2017 in Ktunaxa Nation v British Columbia (Forests, Lands and Natural Resource Operations), 2017, SCC 54, the Supreme Court of Canada dismissed an appeal by the Ktunaxa Nation (“Ktunaxa”) concerning the approval of a year-round ski resort in the Jumbo Valley near Invermere, British Columbia. The Jumbo Valley is located in the northwestern part of the Ktunaxa territory in an area the Ktunaxa call Qat’muk. The appeal raised the novel issue of whether approval of the ski resort infringed the Ktunaxa’s right to freedom of religion under the Canadian Charter of Rights and Freedoms (the “Charter”). A majority of the Supreme Court ruled that it did not.
 
Facts

The Jumbo resort was proposed by Glacier Resorts Ltd. (“Glacier Resorts”) in 1991. Early on in the consultation process, the Ktunaxa raised concerns with Glacier Resorts about the impact of the resort. The Ktunaxa asserted that Qat’muk was both ecologically sensitive and a place of spiritual significance. Consultation between the parties led to significant changes to the original resort proposal. Late in the consultation process, however, the Ktunaxa adopted a new, uncompromising position that accommodation was impossible because permanent structures would drive the Grizzly Bear spirit from Qat’muk and irrevocably impair the Ktunaxa’s religious beliefs and practices. After failed efforts to revive the consultation process and reach agreement, the Minister declared that reasonable consultation had occurred and approved the resort. 

Ktunaxa sought judicial review of the Minister’s decision before the Supreme Court of Canada on two grounds:
  1. the project would violate the Ktunaxa’s freedom of religion under s. 2(a) of the Charter; and
  2. the government breached the duty of consultation and accommodation imposed on the Crown by s. 35 of the Constitution Act, 1982.

Religious Freedom (Section 2(a) of the Charter)

Following earlier case law, the Court confirmed that section 2(a) of the Charter has two aspects – the freedom to hold religious beliefs and the freedom to manifest those beliefs. To establish an infringement of the right to freedom of religion, the claimant must demonstrate (1) that he or she sincerely believes in a practice or belief that has a nexus with religion, and (2) that the impugned state conduct interferes, in a manner that is non-trivial or insubstantial, with his or her ability to act in accordance with that practice or belief.

The court accepted that the Ktunaxa sincerely believe in the existence and importance of the Grizzly Bear Spirit and that permanent development in Qat’muk would drive this spirit from the Qat’muk. However, the Supreme Court refused to accept that the Minister’s approval interfered with the Ktunaxa’s ability to act in accordance with this belief. The Court noted that the appellants were not seeking protection to believe in the Grizzly Bear Spirit or to pursue practices related to it but instead, to protect Grizzly Bear Spirit itself. The court ruled that this was beyond the scope of the protection provided by section 2(a) and rejected the Ktunaxa’s argument on this point.

Consultation and Accommodation

Where a permit is sought to use or develop lands subject to an unproven Aboriginal claim, the government is required to consult with the affected Aboriginal group, and where appropriate, accommodate the group’s claim pending is final resolution. 

The extent of the Crown’s duty to consult and accommodate in the case of an unproven Aboriginal claim varies with the apparent strength of the claim and the effect the proposed development would have on the claimed Aboriginal right. A strong claim or significant impact may require deep consultation. A weak claim or transient impact may attract a lighter duty of consultation. Significantly, section 35 guarantees a process, not a particular result. There is no guarantee that the specific accommodation sought will be warranted or possible. 

The Court noted that negotiations between Glacier Resorts and the Ktunaxa had spanned two decades and found that deep consultation had taken place. Multiple changes had been made to the project to accommodate the Ktunaxa’s spiritual claims and environmental concerns. At a point when it appeared that all major issues had been resolved, the Ktunaxa adopted a new, absolute position that no accommodation was possible because permanent structures would drive the Grizzly Bear spirit from Qat’muk. The Minister attempted to consult with the Ktunaxa on the newly formulated claim, but was told that only a total rejection of the project would be satisfactory. After reviewing the evidence, the Supreme Court ruled that the Minister’s conclusion that sufficient consultation had occurred was reasonable and dismissed the appeal.

Analysis

Ktunaxa Nation confirms that while section 2(a) of the Charter protects the freedom to worship, it does not protect the spiritual focal point of worship.  In other words, section 2(a) protects the believer, not the belief. An extension of section 2(a) as requested by the Ktunaxa would theoretically have allowed them to control development on public lands according to their subjective spiritual beliefs. The Supreme Court’s rejection of this interpretation certainly provides greater predictability to the law. Courts in Canada are well positioned to assess whether state conduct interferes with an individual’s ability to hold and manifest his or her belief. They are less suited to assess whether state conduct will drive a particular spirit from an area, since this would involve assessing a subjective belief.

With respect to consultation, the decision is a reminder that section 35 only guarantees a process. While the Minister did not offer the ultimate accommodation demanded by the Ktunaxa (complete rejection of the resort), the Court reiterated that section 35 guarantees a right to consultation and accommodation, not a right to particular outcome. Section 35 does not provide Aboriginal groups with veto power in relation to developments on their territories.

Though ostensibly a victory for Glacier Resorts, it remains unclear whether the construction of the resort will ultimately proceed. The provincial NDP government previously expressed, while in opposition, unequivocal hostility towards the resort. Whether the government takes steps to prevent the resort from being constructed remains to be seen. In any event, Ktunaxa Nation exemplifies the multi-pronged resistance and delay that many developments now face in an age of environmental and indigenous activism and increased regulatory scrutiny. 

Death by a Thousand Cuts: Caribou Habitat and Crown Consultation

Authors: JoAnn P. Jamieson and Sarah Levine

The Fort Nelson First Nation (“First Nation”) has filed a judicial review of a British Columbia Oil and Gas Commission (“OGC”) decision to approve a 39 kilometre gas pipeline and storage facility located in the Horn River Basin, citing an “inadequate, unlawful and wholly unacceptable approach to consultation”. The First Nation has challenged the OGC’s consultation process on the basis that the OGC refused to seriously consider and address its concerns regarding the health and abundance of the Maxhamish caribou herd and the ongoing disturbance to its habitat. The First Nation seeks to have the Court declare that the Crown failed to fulfill its legal and constitutional duty of consultation and set aside the approvals.   

The First Nation’s Concerns
The First Nation seeks to protect its treaty right to hunt boreal caribou in an area known as the “Fortune Core”. The First Nation asserts that the proposed pipeline would traverse an area where the Maxhamish boreal caribou herd frequent and would heavily impact its habitat. The First Nation’s claims regarding the condition of the Maxhamish herd include:
  • a consistently decreasing population of caribou in the Maxhamish range;
  • a significant disturbance level to the Maxhamish range of 74% (well past the minimum accepted threshold of 35% disturbed habitat for achieving a self-sustaining population); and
  • a 3-times increase in the speed at which the caribou’s predators (mainly wolves) can travel due to linear disturbances in the natural forest- such as roads, pipeline, and seismic lines.
The First Nation contends that the OGC did not adequately consult with it regarding the proposed project and the potential impact to the herd, despite the First Nation’s extensive knowledge and connection with the caribou population in their territory.

Scope of the OGC’s Consultation
The OGC is the provincial regulator responsible for ensuring the Crown’s legal obligations to consult and accommodate are fulfilled with respect to oil and gas activities in British Columbia. The OGC opposes the relief sought by the First Nation, stating that it acted in good faith and maintained the honour of the Crown while fulfilling its obligations to consult and accommodate.

The OGC conducted its consultation with the First Nation in accordance with its Interim Consultation Procedures for Treaty 8 First Nations (the “Procedures”), which sets out the standard process and timing for the OGC’s consultation activities.  Of note is that the Procedures do allow for a customized approach to the consultation process in appropriate circumstances.

Over the course of the application process, it appears that the OGC and the First Nation exchanged several pieces of correspondence outlining their respective positions on the scope and extent of the OGC’s consultation obligations. The First Nation claims that the OGC limited the scope of the consultations to the proposed project and refused to discuss the provincial initiatives relating to the boreal caribou, the First Nation’s third party assessment or interpretations of items such as linear density and caribou population health. 

In response, the OGC asserts that it referred the First Nation to the broader consultation process on the Implementation Plan for the Ongoing Management of Boreal Caribou and repeatedly requested meetings to discuss the project and develop a project-specific consultation process, but that the First Nation did not accept these offers. Upon its review of the materials and information available to it, the OGC concluded that the proposed project would not cause a material adverse effect on the boreal caribou’s habitat or its ability to survive, and approved the project.

Implications of this Judicial Review
This case is one to watch. The issue at stake is a factual one, however it also raises the larger question of whether the OGC can adhere to its standard consultation procedures or whether, when a First Nation raises broader concerns of cumulative effects and habitat protection in the context of a specific application, it is incumbent on the OGC to respond to the full scope of issues raised.

Many will recall the British Columbia Court of Appeal’s decision in West Moberly First Nations v. British Columbia (Chief Inspector of Mines), 2011 BCCA 247 where the Court found that the Crown had failed to meaningfully consult and accommodate the West Moberly First Nation’s treaty right to hunt the Burnt Timber caribou herd. In that case, the Ministry of Energy, Mines and Petroleum Resources had authorized coal mining activities in an area of fragile caribou habitat. Specifically, the Court found that the historical context – meaning the status of the herd and condition of its habitat – was essential to a proper understanding of the seriousness of the potential impacts on the First Nation’s treaty right to hunt. The Court suggested that the cumulative effects of development can become a situation of “death by a thousand cuts”, making the potential impact of the next cut critical to an understanding of the potential impact to the First Nation’s treaty rights.   

Given the pace of oil and gas development in northeast BC, the scope of the OGC’s consultation process, and to what extent it must include the cumulative impact on a treaty right, is sure to become a key issue.

The Role of a Tribunal in Fulfilling the Duty to Consult

Author: Gavin Fitch, Q.C.

The Supreme Court of Canada (the “SCC”) recently provided welcomed guidance on the role of a tribunal in fulfilling the duty to consult with Indigenous peoples when their rights are potentially impacted by Crown action.  In the companion cases Clyde River (Hamlet) v. Petroleum Geo-Services Inc.[1] (“Clyde River”) and Chippewas of the Thames First Nation v. Enbridge Pipelines Inc.[2] (“Chippewas of the Thames”) the SCC stated clearly that the Crown’s duty must be fulfilled prior to project approval.  Where the duty remains unfulfilled, the final decision maker must withhold the approval.

The Clyde River case

Clyde River concerned an application to the NEB under the Canadian Oil and Gas Operations Act[3] (“COGOA”) for approval to conduct seismic testing off Baffin Island in Baffin Bay and Davis Strait.  The Hamlet of Clyde River (“Clyde River”) opposed the application. 

Clyde River is in Nunavut, which was established as part of the settlement of the comprehensive land claim of the Inuit of the eastern Arctic.  Accordingly, the residents of Clyde River have established treaty rights that would potentially be affected by approval of the application. 

Further, according to the SCC, there was no dispute that the seismic testing could impact those established treaty rights (for example, by increasing the mortality risk of marine mammals).  Therefore, the duty to consult owed by the Crown fell at the highest end of the spectrum (i.e., “deep consultation”).

After the application was filed, the NEB undertook an environmental assessment of the proposed project and a series of public meetings were held in various communities in Baffin Island, including Clyde River.  According to the SCC, community members asked “basic questions” about the effects of the seismic testing on marine mammals, which the proponent was unable to answer.  Instead, the proponent said the issue would be addressed in an environmental assessment (“EA”) report it was preparing and that would be filed with the NEB.

Several months later, with no additional consultation having occurred, a 3,926 page EA report was filed by the proponent.  It was posted on the NEB’s website and delivered to Clyde River’s offices.  The “vast majority” of the EA report was not translated into Inuktitut and:

“[n]o further efforts were made to determine whether this document was accessible to the communities, and whether there questions were answered.”[4]

The NEB approved the application.  Clyde River sought judicial review of the approval before the Federal Court of Appeal (“FCA”) on the basis of inadequate consultation.  The FCA found that the Crown’s duty to consult had been satisfied and dismissed the judicial review.  Clyde River appealed to the SCC.  In Clyde River, the SCC allowed the appeal, holding that the consultation carried out by the NEB on behalf of the Crown was not adequate.

Chippewas of the Thames

Chippewas of the Thames concerned Enbridge’s Line 9 applications to the NEB.  The applications were for approval of a modification of an existing pipeline that would reverse the flow of part of the pipeline, increase its capacity, and enable it to transport heavy crude oil.  The Chippewas of the Thames requested Crown consultation before the NEB approved the project; the Crown advised that it would be relying on the NEB’s public hearing process to address its duty to consult.

The Chippewas of the Thames participated in the NEB hearing process.  They applied for and received participant funding, submitted evidence (including expert evidence) and delivered oral argument at the conclusion of the hearing.  In this way, the Chippewas of the Thames communicated to the NEB their position that the project would increase the risk of pipeline ruptures and spills along Line 9 which could adversely impact their use of the land and the Thames River for traditional purposes.

The NEB approved the Line 9 application.  The Chippewas of the Thames appealed the approval to the FCA on the basis of inadequate consultation by the Crown.  The majority of the court dismissed the appeal.  The Chippewas of the Thames further appealed to the SCC.  The SCC dismissed the appeal, holding that the NEB’s hearing process, which the Chippewas of the Thames participated in fully, constituted effective consultation which discharged the Crown’s duty to consult.

Can an NEB approval process trigger the duty to consult?

In Clyde River, the SCC stated clearly that yes, the NEB’s approval process triggered the duty to consult.  Notwithstanding that the NEB is not, strictly speaking, “the Crown” nor an agent of the Crown, the NEB “acts on behalf of the Crown when making a final decision on a project application.”

Interestingly, the SCC went on to find that it “does not matter whether the final decision maker on a resource project is Cabinet or the NEB.  In either case, the decision constitutes Crown action that may trigger the duty to consult.”  Thus, the Crown may delegate the duty to consult both to regulatory agencies that have the power to make final decisions on resource projects and those that merely make recommendations to a Minister or Cabinet.

Can the Crown rely on the NEB’s process to fulfill the duty to consult?

This question had already been considered by the SCC in Rio Tinto.  What Clyde River and Chippewas of the Thames make clearer is that the duty to consult may be delegated by the Crown to a regulatory agency in whole or in part.  Further, the Crown may delegate the assessment of whether the duty to consult has, in the circumstances of the case, been fulfilled.

In Chippewas of the Thames, the majority of the FCA expressed the concern that a tribunal like the NEB might be charged with both carrying out consultation on behalf of the Crown and then adjudicating on the adequacy of those consultations.[5]  The SCC dismissed these concerns, writing:

In our view, these concerns are answered by recalling that while it is the Crown that owes a constitutional obligation to consult with potentially affected Indigenous peoples, the NEB is tasked with making legal decisions that comply with the Constitution.  When the NEB is called on to assess the adequacy of Crown consultation … its obligation to remain a neutral arbitrator does not change.  A tribunal is not compromised when it carries out functions Parliament has assigned to it under its Act and issues decisions that conform to the law and the Constitution.  Regulatory agencies often carry out different, overlapping functions without giving rise to a reasonable apprehension of bias.[6]  [emphasis added]

While it is hard to disagree with the general proposition that a regulatory agency may carry out different, overlapping functions without giving rise to a reasonable apprehension of bias, where one of those functions is to assess and adjudicate on the agency’s carrying out of another function, it is far less obvious that no apprehension of bias might occur.  The Court’s judgment will likely give rise to future cases where the ground of judicial review is that the regulatory agency’s assessment of the adequacy of consultation (as opposed to, or in addition to, the adequacy of the consultation itself) was inadequate or flawed.

What is the NEB’s role in considering Crown consultation before approval?

The SCC in Clyde River and Chippewas of the Thames was very clear:  where the Crown has delegated to a regulatory tribunal like the NEB duty to consult, the project being assessed may only be approved if Crown consultation has been adequate; otherwise, approval must be withheld or it will be quashed on judicial review.

This means that where the regulatory tribunal is the decision-maker, it must adequately consult with the relevant Indigenous peoples as part of the regulatory process before making a decision on the project. 

What about where the regulatory tribunal is not the decision-maker (i.e., the decision-maker is the Minister or Cabinet)?  

In Clyde River, the SCC noted that while the Crown may rely on steps undertaken by a regulatory agency to fulfill its duty to consult, the Crown “always holds ultimate responsibility for ensuring consultation is adequate.”[7]  Therefore:

Where the regulatory process being relied upon does not achieve adequate consultation or accommodation, the Crown must take further measures to meet its duty.  This might entail filling any gaps on a case-by-case basis or more systematically through legislative or regulatory amendments….  Or, it might require making submissions to the regulatory body, requesting reconsideration of a decision, or seeking a postponement in order to carry out further consultation in a separate process before the decision is rendered.”[8]

While “filling” gaps on a case-by-case basis might appear to be a recipe for still more regulatory delay, by adding another step in the process before approval is finally issued, in fact it is not that different from the situation today.  For example, review panels under the Canadian Environmental Assessment Act 2012 are typically used by the federal Crown to collect information on aboriginal claims and potential project impacts on those rights, but this is followed by additional consultation by the Crown on the review panel’s report before a decision is made by the Minister.

Conclusion

The outcomes in Clyde River and Chippewas of the Thames were different because the facts of the cases were different.  In Clyde River, there was no public hearing and minimal efforts made by the NEB to assess the impact of the seismic project on the rights of the Inuit (as opposed to considering the environmental effects of the project more generally).  By contrast, in Chippewas of the Thames, there was a major public hearing which the Chippewas participated in fully, in part because they were the recipient of participant funding. 

This suggests that, all else being equal, the NEB’s normal public hearing processes can effectively discharge the Crown’s duty to consult.  It is interesting to note that since the SCC rendered judgment in Clyde River and Chippewas of the Thames, the FCA has dismissed applications for leave to appeal by First Nations participants alleging inadequate consultation in two cases involving approval by the NEB of pipelines following public hearings.[9]





[1] 2017 SCC 40.
[2] 2017 SCC 41.
[3] R.S.C. 1985, c. O-7.
[4] Clyde River, at para. 11.
[5] Chippewas of the Thames, at para. 33.
[6] Ibid, at para. 34.
[7] Clyde River, at para. 22.
[8] Ibid.
[9] Blueberry River First Nations v. A.G. of Canada and NOVA Gas Transmission Ltd., 2015 FCA (36676) and Saulteau First Nations v. A.G. of Canada, NOVA Gas Transmission and National Energy Board, 2015 FCA (36677).