We had previously written about the British Columbia government’s court action against the Alberta government over its “turn-off-the-taps” legislation, the Preserving Canada’s Economic Prosperity Act in 2019.
What Is the “Turn-Off-the-Taps” Legislation?
Alberta’s Preserving Canada’s Economic Prosperity Act (the “Act”), which has been dubbed the “turn-off-the-taps” legislation, was given Royal Assent on May 18, 2018 and came into force on April 30, 2019.
The Act authorized the Minister of Energy of Alberta to establish a licensing regime for the export of natural gas, crude oil, and refined fuels. The Act left the parameters of the licensing regime to the Minister’s discretion, having regard to the province’s public interest. Before enacting a licensing regime, the Minister had to consider whether an adequate pipeline capacity existed to maximise the return on crude oil and diluted bitumen produced in Alberta and whether adequate supplies and reserves of natural gas, crude oil, and refined fuels would be available for Alberta’s needs. The Minister could also have regard to any other matter considered relevant.
British Columbia Brings Court Challenge
In 2019, British Columbia sought a declaration that the Act was unconstitutional.
British Columbia argued that the Act regulated interprovincial commerce, which is an area of exclusive federal jurisdiction, and that the legislation was not saved by the exceptions contained in section 92A of the Constitution Act, 1867. Additionally, it claimed that the Act contravened the prohibition of interprovincial customs duties in section 121 of the Constitution Act, 1867. According to British Columbia, the only purpose of the Act was to allow Alberta to cut British Columbia’s main source of petroleum products, in retaliation for its perceived opposition to the Trans Mountain pipeline expansion project.
On motion before the court, British Columbia sought an order that would restrain the Minister from exercising its powers under the Act, unless it first obtained leave of the Court. Alberta objected, arguing that it would constitute an impermissible interference with policy decisions.
Federal Court Imposes Injunction Against Alberta Legislation
In its 2019 decision, the Federal Court of Canada held that the irreparable harm that British Columbia would suffer if the injunction was not granted far outweighed any inconvenience that the injunction might impose on Alberta.
As such, the court granted British Columbia’s motion for an interlocutory injunction and the Minister of Energy for the Province of Alberta was prohibited from making an order under section 2(2) of the Act until a final judgment was rendered.
Alberta appealed the decision.
Federal Court of Appeal Lifts Injunction
On April 26, 2021, the Federal Court of Appeal allowed Alberta’s appeal and lifted the injunction.
The court ultimately reasoned that because Alberta had yet to establish any regulations or operational licensing scheme under the Act, it was premature to issue an injunction. The court stated:
“I acknowledge that the Act allows the Minister to issue licences restricting exports from Alberta and that the legislative debates indicate the retaliatory character of the Act. At the same time, … the legislative debates also suggest possible non-discriminatory motivations behind the Act such as maximizing the return on Alberta’s natural resources. That being said, in my view, the fundamental issue is that the lack of a licensing scheme makes it difficult to conclude what constitutes discrimination under section 92A(2) and whether the Act falls outside of what is permitted by this provision. Moreover, how a court interprets section 92A(2)’s prohibition on discrimination may have significant policy implications in affecting, for instance, provinces’ economic development plans.
In the absence of Ministerial action restricting supply to British Columbia and without regulations and an operational licensing scheme, it would be prudent for a court to refrain from assessing the constitutional validity of the Act on the basis that it authorizes or provides for discrimination contrary to section 92A(2). Until Alberta imposes restrictions on exports through action taken pursuant to the Act, a section 92A(2) dispute has yet to arise and may not arise at all. Put otherwise, the dispute as it currently stands remains more theoretical than real. I therefore find the section 92A(2) aspect of BC’s claim to be premature. As previously indicated, Alberta conceded during oral submissions that the Federal Court would have jurisdiction to hear the dispute once the Minister takes action under the Act.”
As such, the court held that British Columbia had failed to meet the test for declaratory relief and allowed Alberta’s appeal.
Alberta Allows Legislation to Lapse
On April 30, 2021, four days after the Federal Court of Appeal’s decision was released, the Alberta Government allowed the Act to be repealed under s. 14 of the Act, which stated:
Repeal and continuation
14(1) Subject to subsection (2), this Act is repealed 2 years after the date on which it comes into force.
(2) Where in the opinion of the Legislative Assembly it is in the public interest of Alberta to extend the date of the repeal of this Act for a further period, the Legislative Assembly may adopt a resolution to extend the date for a further period.
As such, the legislation is no longer in force.
When disputes arise in the oil and gas industry they can be complex, involving international parties and various pieces of specialized legislation. If you are involved in such a dispute, it’s important for you to have a legal team in place that knows how these interests and laws work together and can help you navigate this intricate terrain.
At DBH Law, our Calgary-based lawyers are uniquely positioned to advise clients on issues that may arise in oil and gas. We have worked with clients in Alberta, across Canada, and around the world and are intimately familiar with the global nature of this ever-changing industry.
Our extensive experience representing clients in the oil and gas industry has given us the tools to help our clients with their unique needs. Please contact us online or by phone at 403.252.9937 to find out how we may be able to help you.