B.C. Court Denies Provincial Attempt to Regulate Shipments of Heavy Oil through Trans Mountain Pipeline Expansion Project

24 juin 2019 | Charles W. Bois

( Disponible en anglais seulement )

The B.C. Court of Appeal released its unanimous decision in Reference re Environmental Management Act (British Columbia) on May 24, 2019. A full sitting of the Court held that B.C.’s amendment to the Environmental Management Act (“EMA”) seeking to regulate the transportation of hazardous substances – of which “heavy oil” was the only substance listed – was outside of the provincial government’s jurisdiction. The Court emphasized that minimizing environmental harm related to an interprovincial undertaking – in this case, the Trans Mountain Pipeline Expansion Project, an oil pipeline (the “Project”) – is an essential component of the federal government’s constitutional authority over interprovincial undertakings.  The Province of British Columbia has announced it will appeal this decision to the Supreme Court of Canada.

Background

The federal government approved the Project in November 2016. The Project involves twinning the existing Trans Mountain pipeline that has been transporting heavy oil, light crude and gasoline from Alberta to the B.C. coast for export and domestic use since 1953. Currently, the pipeline transports about 300,000 barrels per day. After the expansion, it is estimated that the pipeline’s capacity will increase to carry approximately 890,000 barrels per day.

In April 2018, the B.C. government drafted a proposed amendment to the EMA including a new Part 2.1 that introduced a permitting scheme for hazardous substances moving through the province. At the time of the court proceeding, “heavy oil” was the only substance listed in the schedule as a hazardous substance. The new permitting scheme was designed to allow the provincial government to implement regulations and conditions over the transportation of heavy oil through the province by creating hazardous substance permits and implementing measures to require that applicants demonstrate they had adequate procedures and measures in place to prevent a leak or spill of such substances.  In essence, the Court saw the amendments as an attempt by the province to restrict and effectively block an “interprovincial undertaking” by potentially not issuing the necessary permit required by the amendments.

The B.C. government submitted a reference question to the B.C. Court of Appeal regarding the constitutionality of those provisions. The B.C. government took the position that Part 2.1 fell within the province’s jurisdiction over property, and that any effects on interprovincial undertakings were incidental. The federal government took the position that Part 2.1 was targeting the Project and was an attempt by the province to regulate an interprovincial pipeline – an area that is solely within the federal government’s constitutional jurisdiction over interprovincial undertakings.

The Questions

The B.C. government put the following three questions to the Court:

  1. Is it within the legislative authority of the Legislature of British Columbia to enact legislation substantially in the form set out in B.C.’s proposed amendments to the EMA?
  2. If the answer to question 1 is yes, would the proposed amendments be applicable to hazardous substances brought into British Columbia by means of interprovincial undertakings?
  3. If the answers to questions 1 and 2 are yes, would existing federal legislation render all or part of the proposed amendments inoperative?

The Decision

In a unanimous decision, the Court answered “no” to the first question and therefore found it unnecessary to address the other two questions. While the Court affirmed the province’s ability to pass environmental laws of general application through its jurisdiction over property, the Court found that the pith and substance of the amendments were intended to set conditions for and possibly prohibit the transportation of heavy oil entering the province.  Madame Justice Newbury wrote that,

[…] although Part 2.1 is framed as a law of general application, it is intended, and (more importantly) its sole effect is, to set conditions for, and if necessary prohibit, the possession and control of increased volumes of heavy oil in the Province. Heavy oil will enter the Province only via Trans Mountain’s interprovincial pipeline and railcars destined for export. [Emphasis in original]

The Court highlighted that jurisdiction over interprovincial undertakings was allocated to the federal government under the Constitution because it was impractical for different laws and regulations to apply to an interprovincial project every time it crossed a provincial border. The Court found that “[t]he minimization of environmental harm associated with interprovincial undertakings is a key component of the federal ‘matter’ […]”. The Court rejected the Province’s argument that the effect of the proposed amendments on interprovincial undertakings was simply incidental and found that the amendments were intended to directly impede the federal government’s jurisdiction over interprovincial undertakings.

Implications

This decision is a big victory for the Project because the Court’s decision means that the Project is an interprovincial undertaking subject to regulation by the federal government and, as such, the Province of B.C. is unable to interfere with the Project through provincial legislation.  This decision enshrines the principle that the federal government has the constitutional authority to enact legislation over, and to regulate and approve, interprovincial undertakings, and the provinces may have little recourse in stopping such projects when they might oppose a project.

Opponents of the Project argue that this ruling will be used by companies to shield themselves from provincial legislative requirements that might hinder or impose additional requirements through various permits needed for such activities, such as highway and road construction, access to provincial crown lands, water permits, hazardous waste disposal and cleanup, environmental permits and other matters that might add further regulatory burdens to a project.

On June 18, 2019, the Federal Government announced that the Cabinet had approved the Project as being in the national interest and committed to its construction.  Negotiations with stakeholders and First Nations have been ongoing and are proceeding on the basis that the Project would be constructed.  Several First Nations have recently formed two different consortiums which have expressed an interest in acquiring an ownership equity position in all or part of the Project.  However, other First Nations in British Columbia have recently indicated that they will appeal the Cabinet’s decision to approve the Project to the Federal Court of Appeal.  The basis for such an appeal is not yet known, but it does signal that the Project may still be delayed by various new litigation proceedings.

Written with valuable assistance of Jason Fitzpatrick, Summer Student. 

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