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Reference re Environmental Management Act (British Columbia) (2019 BCCA 181)

Link to decision summarized

TransMountain Pipeline Expansion (TMX) – Environmental Regulation – Federalism – Separation of Powers

In this reference, the British Columbia Court of Appeal (“BCCA”) considered which level or levels of government may regulate the planned TransMountain pipeline expansion (“TMX”).

The five-member BCCA panel unanimously found that it was not within the legislative authority of the Legislature of British Columbia (“Province” or “BC”) to enact a proposed amendment to the Environmental Management Act dealing with “hazardous substance permits.”

The Constitutional Reference

In April 2018, the new government formulated a proposed amendment to the Environmental Management Act consisting of a new Part 2.1 dealing with “hazardous substance permits.” It was this proposed legislation that was the subject of the reference made by BC on April 25, 2018, pursuant to the Constitutional Question Act, 1867.

The substance of the reference was the Province’s assertion that it may regulate the pipeline in the interests of the environment. The Province’s stated intention was not exclusive regulation but to the extent that it may impose conditions on, and even prohibit, the presence of “heavy oil” in the Province unless a director under the Environmental Management Act issued a “hazardous substance permit” under the proposed Part 2.1.

The three questions referred by the Province to the BCCA for hearing and consideration were as follows:

1. Is it within the legislative authority of the Legislature of BC to enact legislation substantially in the form set out in the proposed addition of Part 2.1 to the Environmental Management Act?

2. If the answer to question 1 is yes, would the legislation be applicable to hazardous substances brought into BC 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 legislation inoperative?

Parties’ Submissions

The Province submitted that the purpose of the proposed legislation was not to regulate an interprovincial pipeline but to regulate the release of hazardous substances into the environment. It asserted that the expansion and operation of the Pipeline as a carrier of heavy oil would have a disproportionate effect on the interests of British Columbians. The Province submitted that the proposed addition to the Environmental Management Act as relating to “Property and Civil Rights in the Province” or “Matters of a merely local or private nature” fell under section 92 of the Constitution Act, 1867.

Canada submitted that its jurisdiction under sections 91(29) and 92(10)(a) of the Constitution Act, 1867 include the regulation of the construction and operation of the Pipeline, its route and contents, and the management of risks of environmental harm. Canada asked the BCCA to find BC’s proposed amendment ultra vires or inoperative, and thus to eliminate the uncertainty (or some of it) that now hangs over a project of importance to Canada as a whole.

Constitutional Framework

Sections 91 and 92 of the Constitution Act, 1867

The BCCA explained that, in Canada, the distribution of legislative power between the federal Parliament and the provincial legislatures is mainly set out in sections 91 and 92 of the Constitution Act, 1867. Section 91 lists the kinds of laws that are competent to the federal Parliament, and section 92 lists the kinds of laws that are competent to the provincial legislatures. Both sections use a distinctive terminology, giving legislative authority in relation to “matters” coming within “classes of subjects.”

The BCCA set out the following relevant heads of power for the purpose of this reference:

(a) Federal legislative powers:

(i) Section 91(1): Navigation and shipping;

(ii) Section 92(10)(a): Interprovincial works and undertakings; and

(iii) Section 92(10)(c): Such works, although wholly situated within a Province, are declared by the Parliament of Canada to be for the general advantage of Canada or for the advantage of two or more of the provinces;

(b) Provincial legislative powers:

(i) Section 92(13): Property and Civil Rights in the Province; and

(ii) Section 92(16): Generally all matters of a merely local or private nature in the Province.

The BCCA noted that “environmental protection” is not a head of power allocated to either level of government. Valid environmental protection legislation is on the books of all provinces and of Canada.

In such cases, the court must determine the pith and substance of the impugned law, and to which of the enumerated powers it relates.

Courts will consider both the purpose and effects of legislation in identifying its pith and substance. In considering the purpose of legislation, a court may consider “intrinsic” evidence (the text of the law itself) and “extrinsic” evidence (such as the circumstances in which the law was adopted).

The BCCA suggested that the effects of a law are perhaps a more reliable guide to its constitutional validity than its apparent or stated intention. These effects may be legal ones such as effects on the rights or obligations of citizens; or practical ones, especially where there is reason to believe the enacting government may be attempting to do indirectly what it cannot do directly.

Where only a part or parts of a statute are challenged, the challenged portions should first be considered on their own rather than in the context of the overall statute.

Occasionally, a law may fairly relate to two matters, one provincial and one federal. Where this happens, and where both “aspects” are of roughly equivalent importance, the law may be upheld at either level. This is the so-called “double aspect” doctrine.

The BCCA noted that the double aspect principle had been found to apply to traffic laws; securities regulation; the maintenance of spouses and children and custody of children; entertainment in taverns; and gaming.

Paramountcy and Interjurisdictional Immunity

Paramountcy applies where the validly enacted laws of two levels of government conflict or the purpose of the federal law is ‘frustrated’ by the operation of the provincial law. Where this occurs, the provincial law will be rendered inoperative to the extent necessary to eliminate the conflict or frustration of purpose.

Interjurisdictional immunity applies when a valid law of a province trenches upon or impairs the “core” of, a matter under exclusive federal jurisdiction. In later cases, the doctrine was modified to require the impairment of a vital part of an undertaking. More recently, however, the Alberta Court of Appeal noted that the difficulties inherent in applying the doctrine led the Supreme Court to suggest in Canadian Western Bank (2007) that it should be used “with restraint” in future.

Existing Environmental Legislation

The Federal Scheme

The BCCA explained that there is in place a complex web of federal statutes and regulations that apply to all aspects of interprovincial pipelines, including environmental assessment, operational oversight, spill and accident responses, and financial liability and compensation for harm done by spills. The BCCA noted that the ‘polluter pays’ principle was clearly an important part of these laws. The BCCA also noted that the Province did not contend that any of the federal environmental laws may be constitutionally invalid or inapplicable to the Pipeline.

The BCCA set out several federal statutes and regulations that regulate the interprovincial transportation of petroleum in Canada, including the following:

(a) the National Energy Board Act, which establishes the NEB having general oversight over the approval, construction, and operation of interprovincial and international pipelines;

(b) the National Energy Board Onshore Pipeline Regulation, which imposes various obligations on pipeline companies, many of which relate to environmental protection and the minimization of spills;

(c) the Oil and Gas Regulations, which set out the information that applicants seeking such export orders and licences must provide to the NEB, and the terms and conditions that the NEB may impose on export orders and licences; and

(d) the Canadian Environmental Act, 2012 (“CEAA 2012”), under which the NEB is responsible for conducting Environmental Assessments (“EAs”) in accordance with CEAA 2012 for projects that are prescribed as designated projects thereunder.

The Provincial Scheme

The BCCA went on to set out various provincial statutes aimed at environmental protection, the leading one being the Environmental Management Act. Permits are issued by a director under the Environmental Management Act, who may attach conditions to permits that are “intended to address concerns or risks posed by a proponent’s proposed activities, or which ensure that commitments made by proponents are carried out.”

The Environmental Assessment Act is more specific legislation dealing with “reviewable projects” in the Province, which includes new transmission pipelines as defined in the Reviewable Projects Regulation. Such a project requires either an environmental assessment certificate or a determination of the executive director that such a certificate is not required because the project will not have significant adverse environmental, economic, social, heritage, or health effects.

Where an assessment certificate is required, the provincial Environmental Assessment Office prepares an assessment report concerning its recommendations, which are then forwarded to the Minister of the Environment and the Minister of Natural Gas Development. After they have considered the assessment report and any other matters relevant to the public interest, the ministers may issue a certificate with or without conditions, refuse to issue the certificate, or order further assessment.

The BCCA further noted that the Environment Assessment Office and the NEB entered into an “equivalency agreement” in which they agreed that any assessment by the NEB of a project would constitute an equivalent assessment under the provincial Environmental Assessment Act. The agreement contemplated that the governments would promote a coordinated approach to “achieve environmental assessment process efficiencies with respect to such Projects.”

The Trans Mountain Pipeline Expansion Project

The BCCA explained that the TMX project involves ‘twinning’ the existing Trans Mountain Pipeline and modifying and expanding pump stations, storage tanks, and dock facilities. It will increase the capacity of the existing Pipeline, which has been in operation since 1953 and now transports about 300,000 barrels per day of mainly light and medium crude oil, and refined and semi-refined petroleum products from Sherwood Park, Alberta. After the expansion, the Pipeline will transport about 890,000 barrels of petroleum products per day, including approximately 540,000 barrels per day of heavy crude and blended bitumen.

Heavy crude and blended bitumen are not consumed in British Columbia. All volumes shipped are exported.

To support the increased capacity of the Pipeline, Trans Mountain intended to construct approximately 987 km of additional pipeline, to increase the capacity of the Burnaby tank farm by almost 300 percent, and to update and expand existing dock facilities at the Westridge Marine Terminal in Burnaby. The additional products were expected to be exported to Washington state via pipeline and other Pacific destinations such as California, Hawaii, and Asia by tanker.

The BCCA noted that the project had the potential to result in a seven-fold increase in tanker traffic off the south coast of BC.

BCCA Findings

Based on its review of the relevant authorities, the BCCA found that the first task in determining the constitutional validity of legislation was to determine its “true character” or “dominant characteristic.” That determination was not to be conflated with deciding whether the law “impairs” a “vital part” of the federal jurisdiction over interprovincial undertakings. If the law relates in substance to a federal head of power, that is “the end of the matter.”

The BCCA held that the proposed Part 2.1 of the Environmental Management Act was legislation that in pith and substance related to, and related only to, what makes the Pipeline “specifically of federal jurisdiction.”

This conclusion was based on the following:

(a) by definition, an interprovincial pipeline is a continuous carrier of liquid across provincial borders;

(b) unless the pipeline is contained entirely within a province, federal jurisdiction is the only way in which it may be regulated;

(c) the proposed Part 2.1 crossed the line between environmental laws of general application and the regulation of federal undertakings; and

(d) even if it was not intended to ‘single out’ the TMX pipeline, the proposed legislation had the potential to affect (and indeed ‘stop in its tracks’) the entire operation of Trans Mountain as an interprovincial carrier and exporter of oil.

The BCCA found that, in this case, the pith and substance of the subject legislation was the end of the matter, and it was unnecessary to continue on to paramountcy or interjurisdictional immunity.

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