Appeal Watch: BC’s Trans Mountain Pipeline Dispute is On Its Way to the SCC

At what point does a provincial environmental law which affects interprovincial pipelines stop being environmental legislation and start being an impermissible regulation of a federal undertaking? The British Columbia Court of Appeal (“BCCA”) was tasked with answering this question in the Reference re Environmental Management Act (British Columbia), 2019 BCCA 181 (EMA Reference), which pitted British Columbia against Ottawa and Alberta’s support for a project to increase the transport capacity of a crude oil pipeline between Edmonton, Alberta and the BC coast. In response to Ottawa and Alberta’s support for the Trans Mountain Expansion project (“TMX project”), the BC government proposed environmental regulations designed to regulate crude oil in the province. Nineteen different intervenors submitted arguments in the EMA Reference, including six BC First Nations groups, six fossil fuel industry bodies, the Railway Association of Canada (which opposed BC’s proposed law), Ecojustice (which supported it), and the cities of Burnaby and Vancouver (also supporting). The Attorneys General of Alberta (a province which produces 77% of Canada’s annual crude oil) and Saskatchewan (which produces 14%) also submitted arguments (EMA Reference, para 56).

In late May 2019, in a unanimous opinion written by Justice Newbury, the BCCA concluded that the proposed amendments were ultra vires provincial legislative authority and therefore could not be validly passed. The BCCA found that the TMX project was an interprovincial undertaking, and noted that only Parliament could legislate in relation to interprovincial undertakings under sections 92(10)(a) and 91(29) of the Constitution Act, 1867. In large part, the Court’s opinion seems motivated by the fact that the proposed law purported to apply to crude oil only, which suggested strongly that the law was specifically meant to inhibit the building of the TMX pipeline. Although the BCCA recognized that provinces may and do pass valid environmental legislation, it concluded that BC’s proposed laws were more than an attempt to regulate only those elements of the pipeline that lay within BC’s territorial jurisdiction.

This case comment briefly outlines the BCCA opinion in the EMA Reference and suggests that, given that the application of the proposed laws was limited to crude oil, it is unsurprising that the BCCA deemed them properly in relation to a federal “matter” and therefore ultra vires. It also suggests that the opinion casts an unflattering light on the Canadian constitutional law when it comes to disputes involving territorial claims by First Nations (including claims to decision-making authority). Finally, this case comment suggests that the BCCA’s opinion highlights a growing tension between environmental and industry groups and between law and politics in high-stakes federalism disputes. The BC Attorney-General has already sought leave to appeal the BCCA’s decision to the Supreme Court of Canada (“SCC”).

The Dispute

The TMX project is a proposal by oil company Kinder Morgan to enlarge one of its pipelines, which carries crude oil from Edmonton to an export facility in Burnaby, on BC’s coast, for shipment to Asia. The project aims to “twin” the existing pipeline, and therefore to increase the transport capacity of the pipeline from 300,000 barrels a day to nearly 900,000. The project would also increase tanker traffic on BC’s coast sevenfold (EMA Reference, para 33), which environmentalists say would harm marine ecosystems and increase the risk of spills over both land and into water. Various groups also argue that the project runs contrary to Canada’s stated goal of reducing carbon emissions and addressing the climate emergency (which the House of Commons declared in a vote on June 17, 2019). The TMX project has nevertheless received conditional approval from the federal National Energy Board (“NEB”), Canada’s independent pipeline regulator. Among other aspects of its work, the NEB regulates environmental impacts of interprovincial pipelines and conducts ongoing monitoring, inspections, and site visits to confirm compliance with regulatory requirements. It may also revoke or suspend a project if it detects a failure to comply with the applicable regulations (EMA Reference, para 22).

The BC government, elected in May 2017 due in part to its opposition to the TMX project, acknowledged that it has no jurisdiction over interprovincial undertakings, but nevertheless sought legal advice to determine its options to protect BC from some of the effects of the pipeline that caused concern among BC voters, such as spills (EMA Reference, para 36). In April 2018, the BC government proposed an amendment to the Environmental Management Act [EMA], which included a “hazardous substance permitting scheme,” a law designed to give the provincial government the power to implement regulations and conditions over crude oil in the province through permits. The scheme applied only “to a person [defined as either a natural person or a corporation] who in the course of a business or industry has possession, charge or control of heavy oil that exceeds the largest amount that person had in the Province in any of the years 2013 – 2017” (EMA Reference, para 42). Under the proposed provisions, if a person held no heavy oil in BC during any of the enumerated years, the possession or control of any heavy oil by that person would henceforth be prohibited unless that person obtained a permit. Because the TMX project was designed to increase the amount of oil flowing through BC, the project would necessarily increase possession by persons of crude oil in BC, and therefore would require a permit under the new regulations. Crude oil was the only substance that the regulations targeted.

Although BC acknowledged that the TMX project was an interprovincial undertaking, it argued that the purpose of the legislation was not to regulate an interprovincial pipeline, but rather to prevent and control the release of hazardous substances into the environment. Joe Arvay, counsel for BC, argued that this type of environmental mandate was within the province’s “core” jurisdiction with respect to property and civil rights (EMA Reference, para 58). He also argued that the SCC has recognized on occasion the principle of subsidiarity, which states that “law-making and implementation are often best achieved at a level of government that is […] closest to the citizens affected” (EMA Reference, paras 2-3). Because BC and its citizens would be most affected by any potential oil spill, environmental laws were a way of protecting property and civil rights in the province. Canada, on the other hand, argued that the proposed law was “aimed specifically at the TMX project and crosse[d] the line between ‘incidentally affecting’ and impermissibly regulating the expansion and operation of the pipeline” (EMA Reference,para 55).

Under the principle of cooperative federalism, federal or provincial legislatures in Canada may pass laws that affect “matters” within the jurisdiction of the other level of government, so long as the dominant characteristic of the law is a matter within the enacting legislature’s jurisdiction. As Justice LaForest opined in Bank of Montreal v Hall, [1990] 1 SCR 121 [Hall], because of the complexity and inter-connectedness of modern life, “no practical effect could be given to the division of powers in the Constitution Act, 1867 if Parliament were ‘absolutely debarred from trenching to any extent upon the matters assigned to the provincial legislature by sect. 92’” (Hall, 145). Nonetheless, sections 91 and 92 continue to provide the constitutional parameters of the division of powers between the provinces and the federal government, and cooperative federalism does not go so far as to suggest that one level of government may indiscriminately trench upon the constitutionally protected jurisdiction of the other. Rather, cooperative federalism encourages tolerance of overlap only if that overlap is “incidental” and done in good faith. Supporters of the TMX project, including the federal government, argued that BC’s proposed regulations were aimed at stopping the TMX project, rather than being a good-faith attempt to regulate the BC environment.

The Decision

Overall, the BCCA sided with the Attorney-General of Canada’s arguments. The takeaways from the EMA Reference are two-fold: (1) BC’s proposed amendments are ultra vires because they are in pith and substance in relation to an interprovincial pipeline; and (2) even if the proposed amendments are intra vires (in other words, they are in pith and substance in relation to provincial environmental concerns), they would be inapplicable to interprovincial pipelines because they would impair core elements of federal jurisdiction pursuant to s 92(10)(a).

In order to determine which level of government has jurisdiction over a piece of legislation, courts undertake a “pith and substance” analysis, which considers the purpose and effect of the legislation at issue, and determines its “dominant characteristic” or true subject “matter” (see Canadian Western Bank v Alberta, 2007 SCC 22, at paras 25-32). If the true “matter” that the legislation attacks is within the legislating authority’s proper jurisdiction, then the legislation is valid. However, under the interjurisdictional immunity doctrine, if otherwise valid legislation “impairs” the “core” of the legislative powers of another head of power, then that legislation may still be inapplicable. Although the court called attention to the differences between the doctrines of pith and substance and interjurisdictional immunity (EMA Reference, para 18), there was some interchangeability in the language used to separate the two doctrines. Overall, however, the BCCA declared the EMA amendments invalid because it found them to be ultra vires; the BCCA left its analysis at that and declined to go into whether either interjurisdictional immunity doctrine or the federal paramountcy doctrines apply.

The BCCA’s opinion seems to indicate that the EMA‘s validity crumbled on the basis of its specific application to crude oil, the only substance that the proposed laws targeted. The BCCA panel noted that drafting and enforcing environmental regulations over pipelines was already one of the delegated, established tasks of the National Energy Board, and that the “minimization of environmental harm associated with interprovincial undertakings is a key component of the federal “matter”” (EMA Reference, para 103). It also noted that “environmental protection [is] a more diffuse field in which both levels of government play important roles” (EMA Reference, para 102). However, it concluded that proposed EMA “is not legislation of general application, but is targeted at one substance in one (interprovincial) pipeline” (EMA Reference, para 102). “Immediately upon coming into force,” the BCCA opined, the EMA “would prohibit the operation of the expanded Trans Mountain pipeline in the Province until such time as a provincially-appointed official decided otherwise” (ibid). This, according to the BCCA, amounted to “an immediate and existential threat to a federal undertaking” (EMA Reference, para 97), and “although the amendments were not to be characterized as ‘colourable’ in the sense that [the true purpose of the legislation] [was] being concealed,” at least some aspects of the laws were designed to “frustrate the construction and operation of the TMX Project” (EMA Reference, paras 55, 101). Consequently, the unanimous BCCA concluded that BC’s proposed amendments to the EMA were, in pith and substance, about regulating an area outside of provincial authority – interprovincial undertakings – rather than about regulating BC’s environment.

Among the findings that the BCCA made to back up its opinion, it suggested that “[t]he characterization of a ‘matter’ under the pith and substance analysis is not only a question of semantic characterization; it reflects the decisions made by the framers of Confederation as to what laws should be considered by Parliament in the national interest, and what should be decided by provincial legislatures on the basis of local interests” (EMA Reference, para 64). The BCCA also referred to the SCC’s ruling in Consolidated Fastfrate Inc v Western Canada Council of Teamsters, 2009 SCC 53, which suggested that “[t]he fact that works and undertakings that physically connected the provinces were subject to exceptional federal jurisdiction is not surprising. […] If the legislature of the province did not grant railway companies the power of expropriation or if they refused to agree to a uniform gauge, the development of a national railway system would have been stymied” (EMA Reference, para 64).

Justice Newberry opined that although the principle of subsidiarity has understandable appeal, the TMX project is not only a “British Columbia project” but a project that affects the country as a whole, and therefore “falls to be regulated taking into account the interests of the country as a whole” (EMA Reference, para 104). However, at the same time, the principle of cooperative federalism favours interplay and overlap between all levels of government, and the principle is meaningful in a case where, as here, it is clear that there is one specific province in which any negative effects of the TMX project would be most strongly felt (i.e. BC). The BCCA could have chosen to leverage the principle in such a manner so as to empower, rather than hinder, the BC government’s attempt to assert jurisdiction over the crude in the TMX pipeline, but this is not the route the court took. In fact, the BCCA seemed to give very broad powers to the federal government in legislating over interprovincial pipelines when the court declares that “[u]nless the pipeline is contained entirely within a province, federal jurisdiction is the only way in which it may be regulated” (EMA Reference, para 101).

A Missed Opportunity

The BCCA EMA decision is also notable for the insight it provides into the status of First Nation governments in relation to provincial ones when it comes to pipeline disputes. The BCCA heard argument from half a dozen Indigenous nations during the EMA Reference. The First Nations groups were granted intervenor status in order to assert the important role that First Nations governments have to play in developing and passing environmental legislation in BC. Lisa Fong and Michael Ng of the law firm Ng Ariss Fong, which represented the Heiltsuk First Nation in the Reference, have pointed out in a blog post that all of the groups, while differing in their support for the proposed amendments, were alike in their assertion of Indigenous sovereignty. Unfortunately, the Court seemed to take little note, and as Fong and Fg point out, “the … final decision was strikingly bare of any discussion about the arguments of Indigenous intervenors.” In fact, the BCCA opinion did not once mention the submissions that the Court heard from intervening Indigenous groups asserting (shared) sovereignty over environmental regulation in BC.

Fong and Ng pointed out that Heiltsuk First Nation submitted that Indigenous governments are part of Canada’s evolving system of cooperative federalism, and consequently that Indigenous governments – like other levels of government – should be able to enact environmental protection laws. Fong and Ng argued that after seeing first-hand the damaging effects of a fuel spill on Heiltsuk traditional territory, these arguments were “timely” for the group. They suggested that “Court references provide occasion for the court to opine on key issues that shape the very constitutional foundation of Canada’s legal framework. In this Reference, the court could have addressed fundamental questions about the role of Indigenous governmental authority under Canada’s constitution. By failing to engage with the submissions of the Indigenous intervenors, the court missed a valuable opportunity to speak about the constitutional status of Indigenous governments that have existed for thousands of years, and their role in protecting the environment.”

In failing to acknowledge First Nations interests in this case, the Court echoed Canada’s historical legacy of legislating on behalf on First Nations groups without adequately consulting or acknowledging them. The thrust of many of the Indigenous intervenors’ submissions was that federal jurisdiction over interprovincial pipelines “does not necessarily oust either provincial legislation or Indigenous laws and legal orders, both of which have a proper role to play along with federal legislation” (Council of the Haida Nation factum, p.2). The BCCA’s opinion in the EMA Reference does not give a sense of the arguments that Indigenous intervenors put forward. This lack of consideration of their submissions, and the failure of the BCCA to explore their implications for the evolution of plurinational federalism in Canada, was an unfortunate omission.

Conclusion

As the BCCA stated in its opinion, “th[is] reference is not about whether the planned Trans Mountain pipeline expansion should be regulated to minimize the risks it poses to the environment,” because that is a given. Rather, in the BCCA’s view, the reference was about “which level or levels of government may [legislate over this matter] under [Canada’s] constitution.” The BCCA focused its opinion narrowly, answering only one of the reference questions that BC submitted (whether BC’s proposed regulations fall in pith and substance within provincial legislative authority), and leaving the questions about the applicability of interjurisdictional immunity doctrine and federal paramountcy unaddressed. Ultimately, the BCCA found that BC’s proposed environmental law was invalid because it sought to regulate an interprovincial undertaking.

In mid-June 2019, the BC Attorney General filed a Notice of Appeal to the SCC. Appeals to the SCC from provincial references are as of right pursuant to s 36 of the Supreme Court Act, RSC 1985, c. S-26. The upcoming appeal is an opportunity for Canada’s highest court to weigh in on some key issues that shape the very constitutional foundation of Canada’s legal framework, and to address the state of Canada’s system of cooperative federalism balanced between federal, provincial and Indigenous governments. The EMA Reference will also test the Supreme Court’s commitment to cooperative federalism in a high stakes and highly politicized context. The Supreme Court may find, contrary to the BCCA’s opinion, that federal legislation is not the only way that interprovincial pipelines may be regulated (EMA Reference, para 101). Merging the Supreme Court’s modern approach to federalism with the need for reconciliation with Indigenous nations leads to the conclusion that there ought to be room for provincial, federal and Indigenous perspectives to shape our regulatory responses to interprovincial pipelines.