As we wrote about earlier this year, the British Columbia government went to the B.C. Court of Appeal in an attempt to limit the passage of heavy oil into the province in response to the Trans Mountain pipeline expansion.
This week, the Court of Appeal released its decision, concluding that British Columbia doesn’t have the right to impose environmental laws that would effectively stop the Trans Mountain pipeline expansion.
The Trans Mountain Pipeline is a pipeline that carries crude and refined oil from Alberta to the coast of British Columbia. In 2013, Trans Mountain submitted an application to the National Energy Board for a certificate of public convenience and necessity for the Trans Mountain Expansion Project.
The expansion project proposal included, among others, adding a second span of pipeline parallel to the existing pipeline system with approximately 987 kilometres of new segments for the purpose of transporting diluted bitumen from Edmonton, Alberta to Burnaby, B.C. The project would also increase the overall capacity of Trans Mountain’s existing pipeline system from 300,000 barrels per day to 890,000 barrels per day.
In 2016, the National Energy Board issued its report concerning the proposed expansion of the Trans Mountain pipeline system. The Board’s report recommended that the Governor in Council approve the expansion. The Board’s recommendation was based on its findings that the expansion is in Canada’s public interest, and that if certain environmental protection procedures and mitigation measures and the conditions the Board recommended were implemented, the expansion would not be likely to cause significant adverse environmental effects. The Governor in Council accepted the Board’s recommendation.
In 2018, the Federal Court of Appeal overturned approval of the project, ruling that the National Energy Board had not properly considered its impact on marine life and that Ottawa had not meaningfully consulted with Indigenous groups.
However, in early 2019, the Energy Board found the pipeline was still in the public interest, and added 16 additional conditions for the project.
As a result, in March 2019, the B.C. government submitted a reference to the Court of Appeal seeking to determine whether the province could enact environmental laws that would “prevent oil spills and leaks and mitigate the harm that may occur”. While the government acknowledged it could not stop the Trans Mountain pipeline expansion, it sought to obtain judicial approval of draft regulations to British Columbia’s Environmental Management Act that would allow it to limit any increase of heavy oil being transported through the province, whether by pipeline, rail or highway.
Court of Appeal Decision
The main issue decided by the court centred on the division of powers between the federal and provincial governments regarding the proposed environmental regulations. Ultimately, the court decided that B.C.’s proposed legislation to limit the flow of increased amounts of “heavy oil” into B.C. would be in direct conflict with federal jurisdiction over interprovincial pipelines.
The court found that the proposed amendments to the Environmental Management Act would essentially usurp the National Energy Board’s role in approving projects in the national interest, stating:
“[The proposed amendment] does cross the line between environmental laws of general application and the regulation of federal undertakings. Even if it were not intended to ‘single out’ the TMX pipeline, it has the potential to affect (and indeed ‘stop in its tracks’) the entire operation of Trans Mountain as an interprovincial carrier and exporter of oil. It is legislation that in pith and substance relates to, and relates only to, what makes the pipeline “specifically of federal jurisdiction.” By definition, an interprovincial pipeline is a continuous carrier of liquid across provincial borders. Indeed, in Canada the pipeline owner is subject to conditions of common carriage across those borders […] Unless the pipeline is contained entirely within a province, federal jurisdiction is the only way in which it may be regulated […] [I]t is simply not practical — or appropriate in terms of constitutional law — for different laws and regulations to apply to an interprovincial pipeline (or railway or communications infrastructure) every time it crosses a border.”
The B.C. government is expected to appeal the decision to the Supreme Court of Canada.
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.
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