Publications & Media

Supreme Court of Canada takes thirty minutes to unanimously reject British Columbia’s proposed regulation of Alberta heavy oil through the Trans Mountain Pipeline

Litigation Bulletin
20.01.20
By Paul Chiswell, Robert Martz and Brendan Downey

On January 16, 2020, the Supreme Court of Canada deliberated for only thirty minutes before dismissing British Columbia's unconstitutional attempt to legislate the flow of heavy oil through the Trans Mountain Pipeline Expansion Project (TMX). British Columbia's appeal was the culmination of its government's efforts to fulfill its May 2017 election promise to "use every tool in the toolbox" to stop the TMX.

In April 2018, the Government of British Columbia submitted three reference questions to the Court of Appeal of British Columbia. These questions asked whether British Columbia had jurisdiction to amend the Environmental Management Act to impose a permitting requirement on the transportation of "heavy oil" within British Columbia (the Proposed Amendments). The Proposed Amendments defined "heavy oil" to only capture blends of oil produced in Alberta and Saskatchewan and, due to the infrastructure currently in place, would only apply to the TMX and additional crude-by-rail operations.

The British Columbia Court of Appeal unanimously rejected the Proposed Amendments in May 2019, finding that the Province did not have the jurisdiction to enact them as they impermissibly intruded on the federal government's constitutional jurisdiction over interprovincial works and undertakings, which include interprovincial pipelines and railroads. British Columbia appealed to the Supreme Court of Canada.

On January 16, 2020, the Supreme Court of Canada, citing only the reasons of the British Columbia Court of Appeal, unanimously dismissed the Appeal. While the ultimate result was expected, the speed with which the Court announced its decision was extraordinary. The comments and questions from certain Supreme Court Justices during the hearing, particularly those of Justices Rowe and Brown, made it clear that federal jurisdiction over interprovincial undertakings remains an unimpeachable core federal power and provinces cannot interfere in their operation.

As the Supreme Court of Canada will not be issuing further reasons for its decision, it is difficult to say with any certainty its precedential effect, however, certain themes emerge from the questions and statements of the Justices at the hearing, including:

Colourability lives: The Attorney General of Canada, as the respondent in the reference question and on the appeal, did not argue that British Columbia had intentionally drafted the Proposed Amendments to conceal its true purpose. And, typically, the Supreme Court will be reticent to second-guess the intentions of a province in the circumstances of a reference. But at least two members of the Court appeared willing to consider departing from its usual deference, with Justices Rowe and Brown making statements and asking questions suggesting that British Columbia drafted the Proposed Amendments in a colourable or intentional way to conceal an attempt to improperly regulate or target the TMX. Not only did the federal Attorney General not argue for this conclusion, but it was also further than the British Columbia Court of Appeal went in its decision. This, combined with Justice Stratas' recent comments at the Federal Court of Appeal regarding costs awards for abusive applications in the TMX case, suggest that the courts are becoming more alive to improper court challenges regarding the TMX. In the future, courts may be more willing to halt such tactics at a preliminary stage.

The protection of the environment is not a constitutional principle: The intervener, EcoJustice Canada Society, was on the receiving end of difficult questions when it advanced its position—a position it has advanced in many previous hearings—that protecting the environment is an organizing principle that informs the constitutional division of powers. This appeared to have no traction with the Court, with Justice Rowe being particularly sceptical. While there is no doubt that both federal and provincial governments have the jurisdiction to legislate environmental protections, the argument that it constitutes a superseding constitutional principle seemed to garner little support.

A recognition of the Court's role in timing: The dismissal of this reference from the bench was extraordinary. However, it accorded with some comments from members of the Court, which were to the effect that the mere existence of such challenges posed regulatory risk sufficient to kill the TMX and similar projects. The willingness of the Court to address this risk by dismissing the reference from the bench may be a message that other courts can and should move quickly to resolve these matters.

The Court's decision is certainly welcome by Alberta oil producers who have continued to battle legal and regulatory uncertainty as they seek access to new export markets.

Three BD&P lawyers, Paul Chiswell, Robert Martz, and Brendan Downey, represented the Explorers and Producers Association of Canada in its intervention at the Supreme Court of Canada.