SCC Dismisses BC Government’s Appeal and Secures Legal Win for Trans Mountain
On January 16, a reference panel of Supreme Court Justices dismissed the appeal of the British Columbia Court of Appeal’s (“BCCA”) decision in Reference re Environmental Management Act, 2019 BCCA 181 [BCCA Reference].
The SCC found that the BC government’s proposed amendments to the BC Environmental Management Act [EMA], which would have barred an entity such as the Trans Mountain Pipeline from possessing or controlling heavy oil without a “hazardous substances permit,” was ultra vires provincial jurisdiction and, therefore, contravened the legislative powers outlined in the Constitution Act, 1867.
The appeal’s dismissal, with the panel of Justices adopting the reasons given by the BC Court of Appeal in the lower court decision, effectively means that the Supreme Court of Canada (“SCC’) has done away with the BC government’s proposed avenue of control over the Trans Mountain project (TMX). At time of completion, TMX would include two roughly parallel pipelines running from Alberta to BC, carrying crude oil and diluted bitumen. With the invested stakeholders and the nation-wide conversation surrounding the pipeline project, particularly among Indigenous rights and environmental advocacy groups, this victory for TMX is unlikely to be the end of the TMX debate.
The provincial government’s proposed amendments to the EMA occurred against the context of increasing tensions over the TMX expansion between the BC and Alberta governments. In 2019, then-premier of Alberta, Rachel Notley, passed Bill 21, the Preserving Canada’s Economic Prosperity Act, which allows the Alberta Energy Minister to bar shipments of oil, gas and refined fuel. The constitutionality of the Bill was challenged by the BC government. Since the legislation had not yet come into force, however, the Alberta Court of Queen’s Bench found the BC government’s argument premature. With the new Premier, Jason Kenney, Bill 12 officially became law and the BC government seized the opportunity to challenge it, seeking an injunction. The hearing has not yet been heard.
In early 2019, the National Energy Board (“NEB”) released an expanded reconsideration report early last year, following a 2018 Federal Court of Appeal decision that found the NEB’s original report to be lacking sufficient considerations regarding the pipeline expansion’s marine environmental impacts. The reconsideration report released last year included over 150 conditions that TMX is required to meet before continuing development and 16 new recommendations — not requirements — meant to guide the project towards mitigating environmental degradation and carry out consultation with affected Indigenous communities. The final decision regarding the expansion project by the federal cabinet was postponed, in order to provide adequate time for the government to sufficiently consult with Indigenous communities who would be impacted. Then, in June of 2019, the federal government gave its decision approving the expansion.
The BC government’s proposed amendments to the EMA were a way to exercise broad control over the expansion project. The amendments suggested that “in the course of operating an industry, trade or business, a person must not … have possession, charge or control” of a “hazardous substance” — the only such substance listed in the EMA being “heavy oil” — in an amount equal to or greater than the stipulated minimum amount without first obtaining a “hazardous substance permit” (BCCA Reference, para 40). In effect, the amendments would legitimize a broad discretion over the possession and control of new oil imports and would require those behind TMX to establish “a fund or make payments to local governments or First Nations to ensure they have the capacity to respond to a release of the substance” (para 44). The above context of Bill 12, the Prosperity Act, is important because it is not entirely dissimilar from the proposed EMA amendments — both would give their respective governments much wider control over the flow of heavy oil into their provinces.
Against the above landscape of political tensions between the Alberta and BC governments, the BC government referred the question of the constitutional validity of the proposed amendments to the BC Court of Appeal. They asked whether the legislation was within the legislative authority of the provincial government afforded to it by the Constitution Act, 1867; whether, if so, the legislation would apply to heavy oil transmitted from another province into BC; and whether, if so, the law would be held inoperative in favour of federal legislation (para 47). At its core, this was a question of the division of powers. Centrally, the question is whether the proposed amendments to the EMA were within provincial jurisdiction as pertaining to matters of provincial environmental law or whether they were an encroachment on the regulation of interprovincial “works and undertakings” that fall under constitutionally protected federal jurisdiction (Constitution Act, 1867, s 92).
The BCCA reference stated that the proposed amendments extended beyond provincial jurisdiction. The initial language of the reasoning tries to separate regulation of projects like TMX for environmental purposes from the core legal issue of the division of powers. The Court, it seems to suggest, wants to delineate these two matters into separate argumentative spheres. Justice Newbury begins by emphasizing that the “protection of the environment is one of the challenges of our time” but that this reference is not about that. Rather, it is about “which level or levels of government may [regulate] under our constitution” (para 1).
The Court of Appeal sided with the federal government’s central argument that the proposed amendments were primarily aimed at halting the development of the Trans Mountain pipeline, which is an interprovincial undertaking and therefore falls directly within the federal legislative power granted by section 92 of the Constitution Act. The BCCA reference stated that this fact of an interprovincial undertaking overshadowed the aspects of the amendments that were a regulation of provincial environmental matters, because their whole purpose was to control and restrict the undertaking specifically and directly.
Going over the jurisprudence surrounding disputes over the division of powers, the Court begins the analysis by attempting to determine the pith and substance of the relevant legislation by determining its “true character” or “dominant characteristic” (para 92). Here, the Court decides, the pith and substance is a deciding matter — the dominant characteristic of the proposed amendments to the EMA are inextricable from control over an interprovincial undertaking (para 100-102). While it may not specifically mention TMX in its language, the Court says, the law’s entire operation is hinged on controlling and affecting the continuation of projects such as TMX (para 101).
The Court further states that the law, if the amendments were introduced, would overtake the role of National Energy Board, which is a federal body which operates in order to regulate interprovincial projects such as TMX and consider the ramifications and influence of pipeline projects beyond a single province. TMX, it states, “affects the country as a whole, and falls to be regulated taking into account the interests of the country as a whole” (para 104). Therefore, in answering the first referenced question in the negative — deciding that the proposed amendments were not within provincial legislative authority afforded by the constitution — the Court ended the analysis there and did not consider the latter two questions.
In effect, the proposed amendments were a similar to a veto power over the continuation of the TMX project. Therefore, had the SCC granted the BC government’s appeal and found the legislation intra vires provincial jurisdiction, the province would have had the power to impose far stricter restrictions on the pipeline than its current regulation.
It could have required that there be a much more extensive consideration for and accountability of the environmental impacts of the expansion, or that the consideration of Indigenous communities extend from the realm of government consultation to the establishment of tangible funds that can be felt by the communities most affected. At the least, it would have required that the TMX obtain a hazardous substance permit, the approval of which would have been at the discretion of the BC government. But the SCC removed this legal possibility with the Reference. Instead, by denying the appeal, the SCC erased yet another legal hurdle that stood in the way of TMX being fully continued by the federal government.
It is worth drawing a link between the Reference to the more recent legal victory for the TMX granted by the Federal Court of Appeal or, from the perspective of the Indigenous communities bringing the case, the more recent loss. In December 2019, the Federal Court of Appeal (“FCA”) heard from the Squamish and Tsleil-Waututh nations, the Coldwater Indian Band, and a coalition of smaller Indigenous nations from the BC interior, each of whom claimed the federal government failed to adequately consult them and hear their concerns about the TMX’s tangible impact on their lives. But, in a unanimous decision, the FCA found the consultations to be sufficient.
Both the FCA decision and the dismissal of the appeal to the BCCA Reference are unequivocal signs that the federal government is consistently getting closer to an un-frustrated continuation of the TMX expansion project. And although the BCCA reference begins by clearly separating environmental considerations from the pragmatic legal issue at hand, these decisions also indicate that the political and social underpinnings of the TMX and its legal challenges are unlikely to fall away anytime soon.
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