The importance of consultation with First Nations, progressive reclamation and increased reclamation security for amended permits in the mining industry

1 décembre 2021 | Sarah D. Hansen, Jason Fitzpatrick

( Disponible en anglais seulement )

The BC Supreme Court recently cast light on issues regarding British Columbia mining operations on First Nation’s territory in Ignace v. British Columbia (Chief Inspector of Mines), 2021 BCSC 1989. Miller Thomson was counsel in Ignace challenging the permit amendment.

The Court determined that the decision by the Inspector of Mines (the “Inspector”) to issue an amended permit in 2019 (the “Amended Permit”) under the Mines Act, increasing production in the McAbee Quarry (the “Quarry”), was unreasonable and failed to adequately discharge the honour of the Crown regarding the consultation process with the Stk’emlupsemc te Secwepemc Nation (« SSN« ).

Notably, the Court also ventured into relatively uncharted waters for a long-standing mining operation in finding the Inspector’s decision unreasonable on the grounds that:

  1. the Inspector failed, without justification, to require progressive reclamation for the Quarry; and
  2. the decision to require only $20,000 of security for an estimated $27 million reclamation was unreasonable.

Background

The Quarry land is owned in fee simple by the Canadian National Railway Company (“CNR”) and has been operated as a Quarry since 1978. CNR mines the Quarry for ballast that it uses to maintain its railway lines.

The Quarry land is located near Thompson River, British Columbia, and is part of the territory over which SSN claims Aboriginal rights and title. SSN commenced action in 2015 claiming these rights and title to the territory, though the action had not yet been set for trial at the time of this decision.

BC began regulating the Quarry in 1996 when it issued a permit under the Mines Act. As part of that permit, CNR was required to post $20,000 as security for reclamation. In 2010, CNR submitted a new Notice of Work (“NoW”) to expand the Quarry and to continue blasting for ballast. Upon receiving the NoW, the Inspector amended the permit in 2010. The permit was similarly amended in 2012 in response to a further NoW from CNR.

CNR once again submitted a new NoW in 2017, this time requesting to increase production rates by 25% without expanding the Quarry lands. For the first time, CNR was required by the inspectors to perform a cost assessment and estimated the total reclamation costs to be around $27 million. On April 15, 2019, the Inspector issued the Amended Permit approving the expansion, however, the Amended Permit had no requirement for progressive reclamation, and only maintained the $20,000 fixed security requirement for reclamation.

SSN sought judicial review of this decision to have it quashed on the following grounds:

  • BC failed to adequately consult SSN regarding the decision to issue the Amended Permit; and
  • the decision was unreasonable in light of the inadequate technical information, failure to meet statutory requirements, and failure to impose reasonable conditions (including progressive reclamation, increased security for reclamation, and sufficient water quality conditions and monitoring).

The Decision: Duty of consultation

Existence of duty to consult

BC and SSN agreed that consultation was required for the Amended Permit. CNR argued that consultation was not required as the Inspector was operating under the reoccurring 5-year filing requirements of the previous permit and that it held a “perpetual permit.”  The Court rejected CNR’s argument because CNR was not authorized to continue mining ballast after 2017 under the previous permit. Therefore, the Court found that consultation was required before issuing the Amended Permit.

Degree of consultation required

In determining the level of consultation required, the Court noted that BC and SSN were parties to a Mining and Minerals Agreement from 2009 (the “MMA”) that included an appendix setting out a consultation and accommodation approach agreed to by the parties. The MMA delineated three “consultation levels,” requiring different approaches depending on the strength of claim and level of infringement.

The Court held that a formal agreement entered into by the Crown and Indigenous representatives, such as the MMA, must be taken by the Court to shape the honour of the Crown and the appropriate consultation process. The Court emphasized the importance of following the process set out in the MMA due to its intended purpose of regularizing consultation to provide certainty to both sides. The government also had an internal government policy document outlining detailed protocols for the conduct and coordination of consultation in these situations.

The Court concluded that consultation was required at level three of the MMA, but it did not require “deep” consultation at the highest level of the common law spectrum. In reaching this conclusion, the Court considered the strength of the claim, the nature of the interests affected, and the risk of non-compensable damages.

Strength of the claim

It was common ground that SSN’s claim was strong, though the Court held that the claim was not as strong on the Quarry land that had been owned in fee simple by CNR since the 19th century (before s. 35 had been ingrained in the Constitution Act, 1982).

Nature of the impacts

The impacts on SSN’s interests were found to be moderate because the NoW simply sought to increase the rate of production without expanding the Quarry itself. Therefore, the Amended Permit would exacerbate current impacts, but was unlikely to cause additional adverse impacts.

Risk of non-compensable harm

Finally, the Court found that potential adverse environmental effects of the increased production posed some risk of non-compensable damage to SSN’s Aboriginal fisheries.

Sufficiency of the consultation process

Applying a standard of reasonableness, the Court found that the consultation process was inadequate.

The Court emphasized that consultation is a two-way street, imposing obligations on both the Crown and the affected First Nations. The Court quoted the following passage from Coldwater First Nation v. Canada (Attorney General), 2020 FCA 34, for the notion that the objective is clear, honest, good-faith communication with a view to reconciliation:

[56] Reconciliation as relationship can only be advanced through consultation when the respective parties commit to the process, avoid counterproductive tactics, get to the substance of the issues of concern and exercise good faith — Indigenous peoples by communicating their concerns in the clearest possible way and the Crown by listening to, understanding and considering the Indigenous peoples’ points with genuine concern and an open mind throughout. Only then can the process lead to accommodations that respond to the concerns of the Indigenous peoples.

The Court found that “[u]nfortunately, the consultation process that took place over two years in this case fell well short of this ideal. Both sides bear some responsibility for this” (para 14). BC’s conduct was found to be relatively passive and unresponsive throughout, followed by the Inspector abruptly stopping consultations and making a decision without explanation or prior notice to SSN. On the other hand, SSN pursued objectives beyond the scope of the decision at hand, asserted a veto right, and failed to properly bring forward several grounds of concern.

Shortcomings of BC’s conduct

The Court found that BC’s conduct fell significantly short of upholding the honour of the Crown. Most notably, the government representatives did not follow the consultation procedures set out in both the government’s internal policy and the MMA. Specifically, the Court found that the government was relatively unresponsive, improperly attempted to delegate their responsibilities, and failed to provide adequate notification or explanation for the final decision.

Unresponsive

SSN first contacted the BC Government representative on July 24, 2017, requesting consultation. Without receiving any response, SSN followed up three weeks later with a list of potentially impacted interests. While the Court found the listed interests were unhelpfully broad, BC made no substantive efforts to clarify SSN’s concerns other than during a meeting with SSN in January, 2018. The Court found BC’s lack of engagement fell short of upholding the honour of the Crown.

Delegation

SSN specifically requested several times to negotiate directly with CNR. The Inspector obliged with this request and attempted to facilitate negotiation between SSN and CNR. It is established law that the Crown cannot delegate its obligations to third parties. Therefore, the Court held that BC should have returned to the process of consultation once it became clear that negotiations between CNR and SSN were no longer proceeding fruitfully. Instead, the Inspector simply concluded that consultation was complete and he went on to issue a decision.

Insufficient notification and explanation

CNR sent a proposal to the Inspector in January, 2019, noting their urgent need to resume operations at the Quarry and requesting expedited approval. Without notifying SSN beforehand, the Inspector approved the NoW and issued the Amended Permit on April 15, 2019.

The procedures set out in the internal policy document and the MMA required the Inspector to notify SSN prior to entering the decision-making phase. The Inspector was also required to inform SSN about the decision in writing, including an explanation of how the consultation engagement was incorporated into the results.

Contrary to the expectations set out in the MMA, SSN was not notified of the decision until the following day and was simply provided a list of conditions that were attached to the amended permit. No explanation was provided for the conditions, nor were any of the conditions requested by SSN or even discussed with them.

Shortcomings of SSN’s conduct

SSN’s conduct was also found to fall short of their obligations during the consultation process. Given SSN’s long history with the Quarry, the Court found that SSN was a sophisticated party “experienced in dealing with the legal and administrative framework by which mining is regulated in British Columbia” (para 17).

Most notably, the Court took issue with SSN’s overly broad list of concerns, their attempt to assert a veto, and their pursuit of collateral objectives beyond the proper scope of the consultations.

Broad concerns

While SSN did provide a list of concerns in 2017, the list was comprised of broadly identified concerns such as “Environmental,” “Socio-Economic,” and “Historical Infringement.” The Court found that these concerns were too broad to be helpful. Further, the Court found no evidence that SSN made any efforts to provide sufficient specificity to assist in the consultation process – aside from the discussion of a specific fishing rock during the meeting in January, 2018.

Veto rights and collateral objectives

The Court noted that consultation does not confer a veto right to First Nations. Therefore, the Court held that SSN incorrectly took the position that their consent was required for approval of the Amended Permit.

SSN attempted to use the consultation process to address collateral objectives such as addressing historic grievances with CNR and the impacts of CNR’s railway throughout SSN’s territory. The Court was firm that this was not the appropriate channel for those concerns because consultation is limited in scope to only address potential impacts of the decision at hand. While past and current impacts may be considered to shed light on how cumulative impacts may exacerbate potential adverse effects, such historic impacts cannot be addressed in their own right during consultation.

Remedy

The Court noted that the ultimate question at issue was what to do when both parties are partially responsible for the inadequate consultation. Despite finding shortcomings on behalf of both parties, the Court was clear that “BC is not relieved of its obligation to do better by SSN’s lack of focus and its pursuit of an agreement with CNR” (para 151).

The Court declared that the statutory decision-maker failed to adequately and meaningfully consult with SSN. The Court further determined that the appropriate remedy was to require further consultation with SSN regarding the Amended Permit. In coming to this conclusion, the Court considered:

  • the importance of the duty to consult;
  • the potential prejudice to CNR (a 3rd party not responsible for consultation);
  • SSN’s shortcomings throughout the process; and
  • the focus on furthering the ultimate objective of reconciliation between BC and SSN.

Was the permit approval substantively unreasonable?

Aside from inadequate consultation, SSN also argued that the Inspector’s decision was substantively unreasonable on the grounds that it did not require progressive reclamation, maintained an insufficient security requirement for reclamation, and lacked water quality standards and an appropriate water quality monitoring program.

The decision is significant in that it confirms that progressive reclamation and sufficient security requirements in the Health, Safety and Reclamation Code for Mines in British Columbia (the “Code”) apply to long-standing mining operations and that the 2018 Regional Mine Reclamation Bond Calculation Policy should be used to calculate estimated reclamation costs. This may be of interest to mining companies in BC, which is home to a number of mining exploration companies.

Lack of progressive reclamation

Since the 2017 enactment of the Code, reclamation plans are required to include progressive reclamation.

The previous permit for the Quarry contemplated progressive reclamation to begin around 2020. However, the Amended Permit seems to retract that intention as it makes no mention of progressive reclamation, despite mentioning reclamation several times.

The Court determined that it was unreasonable for the Inspector not to follow the Code’s requirement for progressive reclamation without providing any evidence or reasons as to why progressive reclamation was not appropriate in this situation.

Insufficient security

The Court also agreed with SSN that it was unreasonable for the Inspector to maintain a fixed amount of $20,000 required for security for reclamation. Firstly, the newly estimated reclamation costs were larger than the required security amount by more than three orders of magnitude. Secondly, the Regional Mine Reclamation Bond Calculation Policy, developed in April 2018, implies that security amounts should reflect the expected cost of reclamation.

The Court held that, absent justification by the Inspector, it was unreasonable to stray so drastically from the policy of reflecting expected costs ($27 million) in the security amount.

Imposition of water quality standards and conditions for monitoring water quality

With regards to water quality standards, the Court found no evidence to suggest that water quality standards would breach provincial standards, thus triggering s. 10.7.20 of the Code requiring a remediation strategy.

Regarding monitoring, the Amended Permit did include a monitoring program. The Court was unable to conclude that the Inspector’s discretion was exercised unreasonably in approving the monitoring plan that it did.

Key Takeaways

Ignace is a significant case regarding the Crown’s duty to consult, especially regarding mines and mining operations in BC.

The importance of increasing transparency and certainty for First Nations regarding the consultation process was heavily stressed throughout Ignace. The Court made it clear that if the government enters a formal agreement – or develops an internal policy – outlining protocols for consultation, then the government must follow those protocols.

Regarding government policies for how representatives are to consult with First Nations, the BC Government is not required to consult with First Nations when developing such an internal policy, but the policy cannot justify a lower level of consultation than would otherwise be required. The policy serves to increase transparency, consistency, and certainty.

The Court emphasized the importance of progressive reclamation, noting that a statutory decision-maker in BC must require progressive reclamation (as per the Code) if they do not provide sufficient reasons as to why progressive reclamation is not appropriate. This has implications for mining companies operating in BC’s mining industry.

Ignace is also one of the first cases where the Court found a decision to be unreasonable based on the amount of security required to be posted for reclamation. With regards to this aspect of the case, the drastic difference between the amount of security posted and the expected costs should be noted ($20,000 in security was posted for $27 million in estimated reclamation costs). However, it is unclear whether the courts would be willing to make a similar finding in the absence of a government policy providing guidance on what may be considered a reasonable amount.

First Nations and mining companies may want to consider obtaining legal advice to address the issues of progressive reclamation and increased security for estimated reclamation costs for mining operations in BC and in relation to BC’s consultation approach with First Nations.

For more information, please contact Sarah D. Hansen (shansen@millerthomson.com or 604-687-2242), the lead counsel for SSN in the Ignace case, together with Megan Young (myoung@millerthomson.com) and Shawnee Monchalin (smonchalin@millerthomson.com).

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