Project Law Blog

Alberta Energy Regulator Issues Announcement Regarding Licensee Obligations in the Event of Insolvencies

Posted in Mining, Oil & Gas Law, Project Development, Project Permitting, Public Utility, Regulatory, Regulatory Compliance
Comment

On April 8, 2016, the Alberta Energy Regulator (“AER”) sent a sombre reminder to licensees and their directors and officers, of their corporate responsibilities when ceasing operations because of insolvency or for any other reason. Bulletin 2016-10 reinforced the need for compliance with all AER requirements when ceasing operations. Among several other obligations, such as ensuring continued care of AER licensed properties and maintenance of records, the bulletin stressed that either approval for transfer of licences, approvals and permits to an eligible party (i.e. with an LMR of at least 1.0 post-transfer) under Directive 006 be obtained; or abandonment and reclamation of all sites be in compliance with AER requirements; or that security be posted in accordance with Directive 006.  If a licensee fails to meet these obligations, the AER may pursue various enforcement measures not only against the licensee but may also name individual directors and officers of the licensee under Section 106 of the Oil and Gas Conservation Act (“OGCA”).

Section 106 of the OGCA provides, among other things, that where a licensee, approval holder or working interest participant contravenes or fails to comply with an order of the AER, or has an outstanding debt to the AER, or to the AER to the account of the orphan fund, in respect of suspension, abandonment or reclamation costs, and where the AER considers it in the public interest to do so, the AER may make a declaration setting out the nature of the contravention, failure to comply or debt and naming one or more directors, officers, agents or other persons who, in the AER’s opinion, were directly or indirectly in control of the licensee, approval holder or working interest participant at the time of the contravention, failure to comply or failure to pay.

In past AER decisions, including Decision 2015 ABAER 005, citing Decision 2011 ABERCB 037, the AER has confirmed that the purpose of a Section 106 declaration is to prevent a licensee or a person in control of a licensee from continuing to breach AER requirements and orders and from incurring abandonment costs or incurring new breaches or additional debts, thereby safeguarding the public interest.

The test for a section 106 declaration, as set out by the AER in Decision 2015 ABAER 005 (at para 16), is as follows:

  • Were there contraventions of or failures to comply with AER orders?
  • If there was a contravention or failure, was the director, officer, or other person in direct or indirect control of the relevant company at the relevant time?
  • If there was a contravention or failure, and such person was in control, is the requested declaration and order in the public interest?

Further, the AER has indicated in Decision 2015 ABAER 005 (at para 41) that the public interest purposes of a section 106 declaration include:

  • To protect the public and the environment,
  • To ensure confidence in the regulatory scheme,
  • To deter like-minded individuals from engaging in similar conduct, and
  • To serve as a warning to others who may engage in business with the named individuals.

Bulletin 2016-10 does not break new ground in terms of adding new obligations. But it does remind officers or agents of companies that should a company fail in its AER obligations it could be subject to enforcement proceedings by the AER. In addition to other sanctions, notably Section 106(3) of the OGCA provides that named officers, directors or agents may be responsible for payment of abandonment and reclamation deposits in an amount determined by the Regulator.

What are the implications of this? This is merely a reminder of already existing sanctions available to the AER. However, at a time in the industry where we are likely to be seeing more insolvencies, officers, directors or other persons in control of companies should heed this warning and be aware of whether such companies are AER non-compliant.

The Daniels Decision: All Aboriginal Peoples, including Métis and non-status Indians, are “Indians” under section 91(24) of the Constitution Act, 1867

Posted in Aboriginal, Constitutional Law, Consultation
Comment

The Supreme Court of Canada has handed down its decision in the Daniels case. The Supreme Court’s decision resolves a question of constitutional responsibility for Aboriginal peoples other than First Nations and Inuit — Canada’s Métis and non-status Indians.

Under section 91(24) of the Constitution Act, 1867, the federal Parliament has exclusive legislative authority for “Indians, and Lands reserved for the Indians.” In 1939, a decision of the Supreme Court confirmed that Inuit are also “Indians” within the meaning of section 91(24). However, there has been uncertainty about which level of government — federal or provincial — has constitutional authority in relation to Métis and non-status Indians. Neither level of government has been keen to assert constitutional jurisdiction — in part due to the obligations to provide programs and services that may flow from that constitutional jurisdiction.

As a result, in 1999 four individual claimants, along with the Congress of Aboriginal Peoples, commenced this action against the Government of Canada in the Federal Court seeking a declaration that Métis and non-status Indians fall within federal jurisdiction. They also sought declarations that the Crown owes a fiduciary duty to Métis and non-status Indians, and that the Métis and non-status Indians have a right to be consulted and negotiated with by the federal government respecting their rights, interests and needs as Aboriginal peoples.

Federal Court Decision

At trial, the claimants succeeded in obtaining the first declaration. The Federal Court held that Métis and non-status Indians, as defined in the decision, were Indians, within the meaning of the expression “Indians, and Lands reserved for the Indians” in section 91(24) (Reference Re Eskimos, [1939] S.C.R. 104). However, the Federal Court refused to grant the other two declarations sought, regarding the Crown’s fiduciary duty and the right to be consulted by and negotiate with the federal government, on the grounds that the declarations sought were vague and redundant.

Federal Court of Appeal Decision

Canada appealed the part of the Federal Court decision declaring Métis and non-status Indians to be Indians within the meaning of section 91(24). The claimants appealed the part of the Federal Court decision refusing to grant the other two declarations sought.  In April 2014, the Federal Court of Appeal released its decision.

The Federal Court of Appeal upheld the trial court’s finding that Métis are to be considered Indians as that term is used in section 91(24). However, the Federal Court of Appeal held that non-status Indians were clearly “Indians,” and therefore there was no practical utility in declaring that non-status Indians are also Indians within the meaning of section 91(24). The Federal Court of Appeal therefore excluded non-status Indians from its declaration and upheld the trial court’s decision not to grant the other two declarations.

Supreme Court of Canada Decision

With its decision, the Supreme Court has resolved this long-standing area of constitutional uncertainty. The Supreme Court held that all Aboriginal peoples of Canada are “Indians” as that term is used in section 91(24). The Court noted that, historically, the federal government wanted authority over all Aboriginal peoples, including Métis, to ensure that it had the jurisdiction needed to complete nation-building initiatives such as construction of a national railway. In addition, Canada had at times legislated in respect of Métis, and often assumed for policy purposes that its jurisdiction under section 91(24) extended to Métis people. The Court also noted that reading section 91(24) of the Constitution Act, 1867, as applicable to all Aboriginal peoples made sense in light of section 35 of the Constitution Act, 1982, which defines Canada’s Aboriginal peoples to include Indians, Inuit and Métis: the Court held that it would be constitutionally anomalous for Métis to be the only Aboriginal people to be expressly recognized and included in section 35, but excluded from the constitutional scope of section 91(24). As a result, the Supreme Court upheld the trial court’s decision to declare that both Métis and non-status Indians are “Indians” for the purposes of section 91(24) of the Constitution Act, 1867.

The Supreme Court noted that exclusive federal jurisdiction over Métis and non-status Indians did not necessarily render invalid provincial legislation pertaining to Métis or non-status Indians. The Court emphasized that courts should favour the ordinary operation of statutes at both levels of government, and that federal authority is not a bar to provincial schemes that do not impair the core of the federal power over “Indians” under section 91(24).

The Supreme Court also upheld the trial court’s decision not to grant the second and third declarations sought, on the grounds that they lacked practical utility. The Court noted that it is already settled law that the Crown is in a fiduciary relationship with Aboriginal peoples, and that the Court has already recognized a context-specific duty on the Crown to negotiate when Aboriginal rights are engaged.

Implications of the Decision

Daniels’ clarification of constitutional authority to make laws about Métis and non-status Indians removes a significant area of jurisdictional uncertainty. What will flow from that clarification is less clear. The federal government argued before the Supreme Court that, even if it were found to have legislative authority over Métis and non-status Indians, that would not mean that Parliament would be obligated to exercise that authority. On one level, this is correct — while Inuit are within federal legislative competence under section 91(24), Parliament has not enacted a legislative regime for Inuit peoples comparable to the Indian Act regime applicable to most First Nations.

However, on another level, questions may arise as to the extent to which the federal government can lawfully, or legitimately, discriminate between programs and services provided to the different Aboriginal peoples that are now recognized as being within federal jurisdiction. The recent decision of the Canadian Human Rights Tribunal in relation to Canada’s obligation to provide child welfare services to children on reserves at levels comparable to services provided to children off reserve is an example of the type of discrimination-based claims that the Daniels decision may facilitate for Métis and non-status Indians. The decision may also provide policy-based justification for making federal programs and services more available to Métis and non-status Indians. In this sense, the Daniels decision could have significant implications for the federal government.

The decision is unlikely to have any direct consequences for consultation obligations with Métis and non-status Indians in the context of resource development projects. The Supreme Court refused to grant the declarations sought by the claimants in relation to the Crown’s fiduciary relationship with Métis and non-status Indians, and in relation to the Crown’s obligation to consult and negotiate with Métis and non-status Indians, on the grounds that those were matters of settled law. The Crown’s fiduciary relationship with Métis peoples was confirmed in the Manitoba Métis Federation decision. The Crown’s consultation and negotiation obligations in relation to Aboriginal rights have been addressed in decisions like Haida Nation and Tsilhqot’in Nation. While the Daniels decision may not change the law in these areas, it will be seen as a victory for Métis and non-status Indians and may, in turn, encourage use of regulatory and other legal proceedings to assert Aboriginal rights and a right to be consulted about government decisions affecting those rights.

It is also unclear where the Daniels decision leaves provincial legislation like the Alberta Metis Settlements Act. This provincial law establishes eight Métis settlements, sets out eligibility for membership in the settlements, establishes their governance structures, and provides a land base for those settlements. There is a long line of cases that holds that a provincial law which goes to the core of federal jurisdiction under section 91(24) is either beyond the powers of the provincial legislature to enact, or constitutionally inapplicable to First Nations, their lands and their members. However, the Supreme Court stated in Daniels that federal jurisdiction over Métis and non-status Indians does not necessarily mean that provincial legislation pertaining to Métis and non-status Indians is inherently beyond the power of provincial legislatures, and emphasized that courts should try to find ways to uphold the validity of laws of both levels of government. In addition, a recent decision of the Supreme Court considered a dispute arising under the Metis Settlements Act (RSA 2000, c M-14) without questioning the constitutional validity of the Act — although its validity was not before the Court in that case.  Nevertheless, the Daniels decision creates uncertainty about the validity the Metis Settlements Act. This will be a continuing concern not only for the Métis settlements and their members, but also for third parties who have been granted rights and tenures pursuant to the Act.

New Consultation Policy and Guidelines for Métis Settlements in Alberta

Posted in Aboriginal, Constitutional Law, Consultation, Project Development, Project Permitting, Regulatory, Regulatory Compliance
Comment

On April 4, 2016, the Government of Alberta (“GoA”) implemented its first formal consultation process between the government, project proponents, and Métis Settlements with the release of The Government of Alberta’s Guidelines on Consultation with Métis Settlements on Land and Natural Resource Management, 2016 (“Guidelines”) and The Government of Alberta’s Policy on Consultation with Métis Settlements on Land and Natural Resource Management, 2015 (“Policy”)The Guidelines and Policy apply to the eight Métis Settlements created under the Alberta-Métis Settlements Accord, but do not apply to consultations with other Métis groups in Alberta.

The Métis consultation process is closely modeled after the current First Nations consultation policy and guidelines which came into effect in 2013. The GoA has said that development of the Policy aligns with its commitment to implement the objectives and principles of the United Nations Declaration on the Rights of Indigenous People (“UNDRIP”). For more information on UNDRIP, see our previous blog post.

The Guidelines provide for consultation on strategic and project-specific decisions that have the potential to adversely impact Métis Settlement members’ harvesting or traditional use activities. Decisions that trigger consultation could include regulatory changes, infrastructure and facility development, policy development and planning initiatives. The Guidelines are intended to clarify the expectations of parties engaged in the consultation process and provide an overview of the procedures to follow. The process, however, is meant to be flexible enough to allow the GoA to assess consultation requirements on a case-by-case basis.

Under the Guidelines, the GoA is responsible for overseeing and managing the substantive aspects of consultation. This includes: a) whether consultation is triggered; b) the depth of the consultation; c) providing notice to the Métis Settlement; d) considering information to the specific project; and, e) assessing accommodation. Similar to consultation requirements with First Nations, the GoA may delegate procedural aspects but retains the sole responsibility for overseeing the overall consultation process and ensuring that the proponent’s consultation activities comply with the Policy and Guidelines.

The Guidelines also include two appendices. The appendices provide further information for sector-specific consultation. Generally, if consultation was deemed adequate within the past two years or if amendments and renewals are within the scope of the original approval, consultation may not be required.

Involvement of the Alberta Energy Regulator

For activities requiring Alberta Energy Regulator (“AER”) approval, the Aboriginal Consultation Office (“ACO”) will manage the consultation process for the GoA. Interaction between the ACO and AER will be described in a new Ministerial Order and the ACO and AER will either create or update the existing joint operating procedures to set out the operations of the ACO and the AER on matters relating to Métis Settlements consultation. Once consultation has been completed, the ACO will decide whether consultation was adequate and provide that decision to the AER. The Guidelines provide that the ACO will work closely with the AER so that consultation requirements for applications made to the AER will occur prior to the AER’s regulatory decision.

Timelines

Generally, the GoA assessment of consultation adequacy will occur within statutory and regulatory timelines, depending on the specifics of the proposed project or initiative, consultation timelines may vary. Through the delegation process, project proponents may be required to notify and engage with Métis Settlements to discuss project-specific issues and possible mitigation. Proponents are encouraged to notify and consult with Métis Settlements as early as possible in the pre-application stage and must document their consultation activities. The consultation record is shared with Métis Settlements and GoA staff.

The Guidelines provide timelines for three levels of consultation, depending on whether the project has a low, moderate or high impact. The Métis Settlement has between 15-20 days to respond to notification and the consultation process may last anywhere from 15 to 60 days.

Comparison to Consultation with First Nations

The Guidelines are comparable to The Government of Alberta’s Guidelines on Consultation with First Nations on Land and Natural Resource Management, July 28, 2014. The purposes of both guidelines are similar and the primary goal of accommodation remains to avoid, minimize, or mitigate adverse impacts of a Crown decision. There are not substantive differences between the two policies and guidelines.

In terms of the stages of consultation, proponents can continue to follow the same process with Métis Settlements as they have been following with First Nations. The consultation process is identical in both guidelines.

As noted at the outset, the Policy and the Guidelines only apply to consultations with Alberta’s eight Métis Settlements. Although reports have suggested that the GoA is discussing consultation processes with other Alberta Métis groups, this announcement does not apply to those groups, or shed any light on whether or how the GoA will approach consultations with them.

Government of Canada Proposes Methodology for Estimating Upstream GHG Emissions in Major Project Review

Posted in Aboriginal, Consultation, Environmental, Mining, Oil & Gas Law, Project Development, Project Permitting, Regulatory, Regulatory Compliance
Comment

Late last week, the Government of Canada released a proposed methodology for estimating upstream GHG emissions from proposed oil and gas projects undergoing federal environmental assessment. This comes on the heels of the Government’s announcement in late January of its new guiding principles for project review, one of which included assessment of “direct and upstream greenhouse gas emissions linked to the projects under review” (see our previous blog post here). Interested parties have until April 18 to provide comment to the Oil, Gas and Alternate Energy Division of Environment and Climate Change Canada, following which a final methodology will be developed.

What does “upstream” mean? The proposed methodology defines upstream to include all industrial activities from the point of extraction to the project under review. While the specifics will vary by resource and project type, in general this would include extraction, processing, handling and transportation. The example provided in the proposed methodology is that an upstream GHG assessment of a crude oil pipeline project would include the following activities:

  • Extraction — crude oil and gas wells and oil sands mining and in situ facilities;
  • Processing — field processing and upgrading, if occurring;
  • Handling — product transfer at terminals; and
  • Transportation — any pipeline operation in advance of the project.

Having defined the scope of what will be assessed, the proposed methodology then sets out a two part assessment:

  1. a quantitative estimation of the GHG emissions released as a result of upstream production associated with the project, and
  1. a discussion of the project’s potential impact on Canadian and global GHG emissions.

The first component, quantitative estimation, will take into account emissions from the upstream activities “exclusively linked to the project,” such as emissions from combustion or from fugitive, venting and flaring gas emissions. An example of a quantitative estimate that Environment and Climate Change Canada developed for the proposed Pacific Northwest LNG project can be found here.

The second component is intended to assess the conditions under which the Canadian upstream emissions estimated in the first component could be expected to occur even if the project were not built. The baseline for any such assessment under the proposal would require an examination of current production levels and the expected growth of resource production in Canada, as well as the potential global markets for future resource production growth with and without the proposed project.

Project proponents, opponents, and regulators that have been through the EA process in the past will be familiar with the second component of the methodology in particular, as uncertainty with respect to whether upstream impacts will actually occur with or without any particular project has frequently been relied on by regulators in the past as a basis to deny consideration of upstream effects.  It remains to be seen whether this newly proposed methodology, focussing not only on Canadian but also on global market conditions for resource growth within which to benchmark a project’s emissions, will allow regulators to make the assessments they have previously said they are unwilling or unable to make.

Alberta Energy Regulator Institutes Changes to Compliance and Enforcement Program

Posted in Mining, Oil & Gas Law, Project Development, Project Permitting, Public Utility, Regulatory, Regulatory Compliance
Comment

On February 12, 2016, the Alberta Energy Regulator (“AER”) overhauled its compliance and enforcement program with the release of the Integrated Compliance Assurance Framework (“ICAF”) and Manual 013: Compliance and Enforcement Program (“Manual 013”).The ICAF and Manual 013 supersede and replace Directive 019:Compliance Assurance (“Directive 019”). The AER indicated that the purpose for rescinding Directive 019 is that it contained no rules or requirements and provided guidance based only on the ERCB compliance assurance process.

The ICAF outlines the AER’s strategy and approach to ensuring its rules and directives are followed. Previously, the AER had been conducting compliance and enforcement work using both the Energy Resources Conservation Board (“ERCB”) and Alberta Environment and Sustainable Resource Development systems, which had the potential to lead to inconsistent responses from AER staff when encountering noncompliant events. The ICAF describes the AER’s general process for promoting compliance (education), verifying compliance (prevention), and compelling compliance (enforcement) of the AER’s rules and procedures.

Manual 013 provides specifics on how the AER will administer its compliance and assurance program. Notable changes to the AER’s compliance and enforcement program include:

  • an inspection and audit program that focuses on highest-risk energy development activities;
  • issuing a notice of noncompliance as a single approach to dealing with all incidents of noncompliance;
  • a triage process for escalating noncompliance events;
  • a standardized investigation process, and
  • clarification on the intent and purpose of the AER’s compliance and enforcement tools.

In Directive 019, the AER used a “Risk Assessment Matrix” to predetermine the level of risk inherent in the noncompliance event. The AER then sent out a notice of low or high risk noncompliance, and included specific requirements in those notices to be completed by an energy operator to become compliant. The risk rating of an AER (and prior to June of 2013, ERCB) requirement was predetermined, and once the facts of a given noncompliant event were established, AER staff had no discretion in applying a different risk rating.

Under Manual 013, upon learning of a noncompliant event, the AER will immediately issue a standard notice of noncompliance to an energy operator, and the AER will use its new triage assessment to evaluate the significance of noncompliance. The triage assessment will be applied by AER staff across the board for noncompliant events, and five questions will be used to assist AER staff in determining the appropriate response:

1)         Did the noncompliance cause significant impact to the environment, public safety, or an energy resource?

2)         Has the operator conducted an unauthorized activity that would not have been approved?

3)         Is there evidence that suggests that the noncompliance was done knowingly, willfully, or with demonstrated disregard for requirements?

4)         Does the operator have a history of noncompliance related to the current noncompliance?

5)         Has the operator knowingly provided false or misleading information while addressing a regulatory requirement?

The AER program staff first determines whether any of the above triage factors are applicable to the potential noncompliance activity. If they determine triage factors do not apply, then the matter is placed into Compliance Stream A and an investigation is not warranted. If it is determined that the triage factors do apply, then the matter is referred to the Environmental and Operational Performance (“EOP“) Investigation Manager who then assesses the triage criteria and the need for an investigation. If no investigation is warranted, then the matter goes to Stream A. If investigation is warranted, the matter is then referred to either Stream B (where AER program staff conduct investigations) or to Stream C (where the EOP Investigation Team conducts investigations). The Investigation Team is a unit of the EOP branch of the AER that deals with critical and high-priority investigations.

If there is uncertainty as to the applicability of the triage factors, consultation is undertaken with the AER Compliance Assurance Team who determines whether or not the triage factors apply, and consequently, which stream the matter will be referred to.

Notably, the ICAF and Manual 013 do not contain a list of events that would be considered noncompliant. For a list of noncompliant events and their associated level of risk, the AER has created the aforementioned Risk Assessment Matrix, found here.

Given that this matrix was in place before the changes to the AER’s compliance and enforcement program were announced, it is likely that it will be revamped in the near future. Manual 013 now has categories of prioritizing investigations of “medium” and “critical” priority, in addition to low and high priority. Further, the AER has indicated that this matrix is not exhaustive of noncompliant events, and that Manuals 001, 002 and 005 contain a list of further noncompliant events.

BC Supreme Court Revisits Issue of Federal Paramountcy

Posted in Aboriginal, Consultation, Environmental, Mining, Oil & Gas Law, Project Development, Project Permitting, Regulatory, Regulatory Compliance
Comment

On January 14, the Supreme Court of British Columbia found that the Province had improperly abdicated its decision making authority with respect to the Enbridge Northern Gateway Project by entering into an Equivalency Agreement with the federal government. Furthermore, the Court found that the Province had breached its duty to consult with First Nations by not consulting with First Nations on the Province’s decision not to terminate the agreement and take steps to impose conditions on the project.

The Enbridge Northern Gateway Project is an interprovincial pipeline, and as such it falls under the exclusive jurisdiction of the Federal government. In order to proceed, the Project requires an environmental assessment under the Canadian Environmental Assessment Act, 2012 (“CEAA 2012”) and a Certificate of Public Convenience and Necessity from the National Energy Board (“NEB”) under the National Energy Board Act (“NEB Act”). The environmental assessment was completed on December 19, 2013 and was approved by the Minister on June 17, 2014, with 209 conditions attached to the Project. The NEB issued a Certificate of Public Convenience and Necessity on June 18, 2014.

By agreement dated June, 2010, the British Columbia Minister of Environment, as represented by the Executive Director of the British Columbia Environmental Assessment Office (“BCEAO”), reached an agreement with the NEB confirming that projects such as transmission pipelines that are within the jurisdiction of the NEB Act would not require an assessment or certificate under the British Columbia Environmental Assessment Act (“BCEAA”). Madam Justice Koenigsberg’s decision in Coastal First Nations v. British Columbia (Environment), 2016 BCSC 34 takes issue with this agreement.

Madam Justice Koenigsberg found that the BCEAA is legislation with a purpose of general environmental regulation that coexists with the federal regulation of interprovincial projects. She found that the BCEAO did not have the authority to abdicate its authority to grant a certificate for the Project and thereby foreclosing its ability to impose conditions on the Project.

In our view, the decision is inconsistent with the recent decision of the BC Supreme Court in Burnaby (City) v. Trans Mountain Pipeline ULC, 2015 BCSC 2140, in which the Court found that the doctrine of federal paramountcy applied to the effect that the NEB Act’s jurisdiction over interprovincial pipelines trumped provincial laws where those laws interfere with the core functioning of a federal undertaking. The Court went on to say that the provincial laws remain valid, but are rendered inoperative where their application would interfere with the federal undertaking. Finally, the Court found that the doctrine of interjurisdictional immunity applied to prevent provincial laws from improperly trenching on a protected core of exclusive federal jurisdiction.

Presumably, the same principles apply in the Coastal case. The Project is a federal undertaking, and as such lies within the jurisdiction of Parliament. To the extent that any provincial laws interfere with that jurisdiction, federal paramountcy renders the provincial laws inoperative. Furthermore, the doctrine of interjurisdictional immunity applies to prevent the provincial law from interfering with interprovincial pipelines – which are a protected core of federal jurisdiction pursuant to the NEB Act.

With respect to the duty to consult, the Court found that the Province was not required to consult with First Nations in entering into equivalency agreements, but would be required to consult where the operation of those agreements had the potential to adversely affect First Nations’ claims or rights. Under the circumstances, the Court found that it was a breach of the duty to consult for the Province not to consult with First Nations with respect to its decision not to terminate the Equivalency Agreement and impose conditions on the project. This issue is arguably moot, given the Court’s declaration on the requirement for a provincial certificate summarized above.

Implications

In the absence of an appeal, the result of the decision is that all projects that meet the thresholds of reviewable projects under the BCEAA require an Environmental Assessment Certificate, regardless of whether those projects are federal undertakings subject to exclusive federal jurisdiction. While the Province may consider a federal assessment in determining whether or not to issue a Certificate, the project may nevertheless be subject to potentially inconsistent conditions imposed by federal and provincial regulators. It remains to be seen whether the decision will have practical implications for the Northern Gateway Project, which is fully authorized to proceed under federal jurisdiction.

Federal Government Releases Guiding Principles for Project Review

Posted in Aboriginal, Consultation, Environmental, Mining, Oil & Gas Law, Project Development, Project Permitting, Regulatory, Regulatory Compliance
Comment

In a set of press releases issued today (here and here), the Government of Canada announced 5 principles that it says will guide its discretionary decision-making for projects being reviewed in environmental assessment, along with a set of interim measures it says will be implemented in two existing pipeline reviews.

While today’s announcements will likely have an impact on the Government of Canada’s approach to its participation in existing pipeline reviews conducted by the National Energy Board (NEB), as well as its approach to decision making once the NEB makes a recommendation to cabinet as to whether those projects should proceed, today’s announcements do not change any of the regulations or legislation governing environmental assessments currently being conducted. One possible exception is that the Minister of Natural Resources has indicated he will seek an extension to the legislated time for the Government to make a discretionary and final decision on the Trans Mountain Expansion Project and the Energy East Pipeline by 4 and 3 months, respectively (likely under section 52(7) of the National Energy Board Act), as well as an extension of the NEB’s time to review the Energy East project by 6 months (likely under section 54(3) of the National Energy Board Act). The reference to “seeking” an extension is that the Minister cannot extend the timelines he is seeking on his own – the extension must be granted by cabinet.

The purpose of seeking an extension of the timelines for review is to allow deeper consultation with First Nations and gather input from the public. The Government has also indicated that it will assess the upstream greenhouse gas emissions associated with the Trans Mountain and Energy East pipeline projects, though it is not clear how those assessments will fit into the context of the current reviews, given that the NEB has consistently ruled that consideration of upstream greenhouse gas emissions is not within the scope of its environmental assessment of pipeline projects.

Importantly, the Government of Canada has indicated that project reviews currently underway will not need to restart – apart from the extension of timelines, existing reviews will carry on under the existing regulatory framework. It seems likely, however, that we can expect to see actual changes to the regulatory framework for environmental assessment of major projects in the future. For now, while the Government of Canada’s attitude towards project reviews may have changed, the written rules have not, or at least, not yet.

Losing the Battle but Winning the War?

Posted in Aboriginal, Constitutional Law, Mining, Oil & Gas Law, Project Development, Project Permitting, Regulatory
Comment

On November 4, 2015, the Yukon Court of Appeal released its decision in the Peel River case that we first reported on here.  The decision focussed on whether the Yukon Government properly followed the land use planning process set out in three modern land claims agreements in the development of a land use plan for the Peel River region.  The Court of Appeal largely agreed with the lower court that the Yukon Government had not followed the proper process in making extensive changes to a land use plan prepared by an independent regional planning Commission.  However, the Court of Appeal also confirmed that the Yukon Government has a broad power to make land use decisions for Crown lands in the territory, as long  as those decisions are made in a manner consistent with the treaties, interpreted in a generous, purposive manner, and consistent with the honour of the Crown.  Accordingly, the Court of Appeal sent the parties back to the point at which the process failure began, in contrast to the trial judge, who would have sent the parties back to the final stage of the land use planning process. As a result, while the Yukon Government may have lost the process battle, it won the war over the more fundamental issue of its power to make land use decisions for Crown lands in the territory.

Background

As set out in more detail in our previous post, this case in involved the interpretation of provisions in final agreements between Yukon First Nations and the Yukon Government that established a consultative process for the development of a land use plan in the Peel Watershed. The process allowed the parties to create an independent planning Commission to create an initial recommended plan, and required Yukon to consult on that plan before approving, rejecting, or proposing modifications to it (section 11.6.2 of the Final Agreement). In response to the Yukon’s decision at that stage, the Commission was then required to reconsider as necessary and propose a final recommended plan, followed by another obligation on Yukon to consult on that plan before final approval, rejection or modification by Yukon (section 11.6.3.2 of the Final Agreement).

In this case, the Yukon provided very general suggestions at the 11.6.2 stage, and then proposed its own plan at the 11.6.3.2 stage. The trial judge found that to be “an ungenerous interpretation not consistent with the honour and integrity of the Crown”, resulting in the government usurping the Commission’s role and the planning process by introducing new land use planning tools and concepts at the final stage of the process. As a result, the trial judge quashed the Yukon’s plan and remitted to process to the 11.6.3.2 stage. It is this choice of remedy that marks the significant difference between the trial judge and the appeal court in resolving this case.

Image from the Peel Watershed Planning Commission’s December 2005 "Issues and Interests Report."

Image from the Peel Watershed Planning Commission’s December 2005 “Issues and Interests Report.”

The Decision

In its decision, the Yukon Court of Appeal confirmed that the Yukon Government has a broad power to modify plans proposed by regional planning commissions.  However, it must do so at a point the in the planning process that allows for proper consultation with affected First Nations and communities, and allows those parties to understand and respond meaningfully to the proposed modifications.  In this case, this meant providing detailed proposals for modifications, and written reasons explaining those modifications, to enable meaningful consultation (the 11.6.2 stage).  However, once those consultations are complete, and a revised plan is received from the planning commission, the Yukon government could exercise its powers to reject the revised plan, or to modify the revised plan to incorporate modifications on which the government had adequately consulted.

Implications

Because this case deals with the unique wording of the land use planning provisions of the Yukon treaties, its direct impact outside the Yukon may be limited.  However, the case is consistent with other past case law and may have the following implications:

  • The decision recognizes that the final decision-making authority over the management and use of public lands and resources rests with government.
  • At the same time, governments must exercise that decision-making authority in a manner that is consistent with the ongoing reconciliation of societal interests with Aboriginal rights and interests.
  • The honour of the Crown requires transparency in government communication with First Nations — stating government’s proposed measures in a specific and clear enough manner that First Nations being consulted under the proposed measures and can comment effectively on those measures.
  • The decision emphasizes the need for government decision-makers to provide proper reasons in support of decisions that may affect Aboriginal interests (see for example West Moberly and Adam).  The courts want to see how a government has arrived at its decision, and how governments balanced Aboriginal rights and interests with broader societal interests in arriving at that decision.  Reconciliation of those rights and interests can be demonstrated where adequate reasons are given.

In the result, the Yukon Court of Appeal’s decision represents another step in understanding governments’ powers over public lands and resources, as well as governments’ continuing obligations under modern treaties to reconcile Aboriginal rights and interests with broader public interests. For project proponents – particularly in the north where many modern treaties have been entered into – the message remains that treaty rights can apply to Crown lands and that First Nations may have a right to participate in decision-making for the management of public lands and resources.  Project proponents and governments must therefore pay close attention to any applicable treaties in areas where they wish to work and must be satisfied that the processes set out in the treaties are being observed in a manner that reflects ongoing Aboriginal interests in decisions affecting Crown lands within their traditional territories. If those processes are not being observed, then it is possible, as in this case, that the parties may be forced to return back to the point at which the failure began.

AER Releases Draft Requirements for Oil Sands Tailings Management

Posted in Oil & Gas Law, Project Development, Project Permitting, Regulatory, Regulatory Compliance
Comment

On September 17, 2015, the Alberta Energy Regulator (the “AER”) released its draft Directive Fluid Tailings Management for Oil Sands Mining Projects (the “Draft Directive”). The Draft Directive establishes new requirements that operators must meet to manage tailings during and after mine operations, including application filing requirements, the review and approval processes and performance reporting for fluid tailings volume profiles. Once finalized, the Directive will also inform the AER’s surveillance and compliance management responses.

Background

The Draft Directive is part of the AER’s phased approach to implement the Lower Athabasca Region: Tailings Management Framework for Mineable Athabasca Oil Sands (the “Framework”) issued by the Government of Alberta in March 2015.  The Framework sets out the government’s policy to manage fluid tailings volumes in order to manage and decrease liability and environmental risk resulting from the accumulation of fluid tailings on the landscape.

Notably, the Framework requires operators to demonstrate that all fluid tailings will be treated and reclaimed progressively during the life of the project and that they will be in a ready-to-reclaim state within 10 years of the end of mine life.  The Framework also provides direction on reclamation towards various end land uses and promotes outcome-based, proactive management strategies while requiring additional monitoring and reporting.

The AER is responsible for developing and implementing requirements to achieve the Framework’s objectives and outcomes. The Framework also specifically charged the AER with undertaking a review of Directive 74: Tailings Performance Criteria and Requirements for Oil Sands Mining Schemes (“Directive 074”) and amending, as appropriate.  In response, the AER suspended Directive 74 and started working on the new directive.

Directive 074 used a specific strength measurement for the capture of the clay particles within fluid tailings. The Framework requires the use of the volume of fluid tailings as the metric to track reduction of fluid tailings.  To introduce consistency in reporting and replace the old determination of fluid tailings volume, the AER has adopted Canada’s Oil Sands Innovation Alliance’s Guidelines for Determining Oil Sands Fluid Tailings Volumes, June 2015 (the “COSIA Guideline”). The AER considers the measurement tools in the COSIA Guideline to be comparable to those promoted in the Framework.

The Application Process

The Draft Directive requires the submission of a detailed application that includes new and legacy fluid tailings volume profiles in accordance with the COSIA Guideline, a tailings management plan (“TMP”) and a map of a project’s treated tailings deposits and fluid tailings ponds. The Draft Directive also requires the demonstration of progressive reclamation and ready-to reclaim tailings within 10 years of the end of mine life.

The AER requires the application to contain sufficient information to demonstrate that the TMP is aligned with existing approvals under the Environmental and Protection Enhancement Act, the Water Act and the Oil Sands Conservation Act (the “OSCA”)Any inconsistencies between the TMP and existing approvals must be identified and may require a future amendment application in order to manage risks more thoroughly.

Oil sands projects operating as of the effective date of the final directive must submit an application to the AER by March 31, 2016 that demonstrates that outcomes of the Framework will be met including social, environmental and economic policy outcomes. Projects which have been approved but are not yet operating have until one year prior to bitumen production to submit their application.

For the submission and review of a TMP, the AER will follow the established application and review process for OSCA applications. The application will first undergo a preliminary review to ensure it is administratively complete. The AER will then proceed with a detailed technical review. The AER may request supplemental information to clarify issues or obtain additional information and may approve or deny the application with conditions.

AER Seeking Public Feedback

The AER is seeking feedback on the Draft Directive from oil sands operators, aboriginal groups, environmental nongovernmental organizations, affected municipalities and multi-stakeholder community groups. Comments are accepted until November 17, 2015.

A multi-stakeholder technical advisory committee has also been established. The Draft Directive will be reviewed and amended taking into account policy direction from the Government of Alberta, observations on the effectiveness of requirements and feedback from stakeholders. The AER is then expected to post a summary of the feedback received from stakeholders and finalize the directive. Review of the initial TMP for each operating oil sands operation is expected in 2016.

Enforcement of the Directive

New details on the surveillance and compliance management system, the 5-year review plan and changes to the Mine Financial Security Program to include incentives to manage fluid tailings will be released in the 2016 edition of the directive. The AER has indicated that failure to meet reclamation deadlines may range from financial penalties to production cutbacks. Enforcement tools available to the AER include more frequent and detailed inspections, enforcement orders, shutting down operations, administrative penalties and prosecution. Generally, the larger the fluid tailings volume, the more severe the management response will be.

Implications

The implementation of both the Framework and the Draft Directive clearly signal a major shift in tailings management for oil sands development in the Lower Athabasca region. Operators will want to track the changes closely as the implications to existing and new operations will be significant in the years to come.

Bulletin 2015-28: The AER Will Be Publishing Participation and Procedural Decisions

Posted in Aboriginal, Administrative Law, Consultation, Environmental, Mining, Oil & Gas Law, Project Development, Project Permitting, Public Utility, Regulatory, Regulatory Compliance
Comment

On September 23, 2015, the Alberta Energy Regulator released Bulletin 2015-28: “Posting of Participation and Procedural Decisions” a significant change in the AER’s practice with respect to the publishing of its decisions. Until now, relatively few AER decisions were directly available on the AER’s website. To date, only five AER decisions from 2015 have been published. The inaccessibility of AER decisions has been previously criticized by some observers. The Bulletin announces that, effective immediately, the AER will post both participation decisions and substantive procedural decisions made by AER hearing panels on the AER’s website.

The Bulletin explains that when the AER decides to hold a hearing, it must consider any requests to participate in the hearing and decide on the nature and scope of participation. These decisions, previously known as “standing decisions”, are referred to by the AER as participation decisions. Participation decisions also include the AER’s decisions on requests for regulatory appeals. The AER will consider these requests, in accordance with the Responsible Energy Development Act, its rules and regulations, and issue a written decision with reasons.

Substantive procedural decisions determine the course of a proceeding or the filing of information for a proceeding. Examples include confidentiality orders, the setting or extending of deadlines and determining the scope of issues to be discussed in a hearing. The Bulletin clarifies that this category of decision reflects the AER’s interpretation and application of the Alberta Energy Regulator Rules of Practice.

The AER will continue to provide both participation decisions and substantive procedural decisions directly to applicants, participants and persons directly affected by a decision. However, statements of concern and other documents filed in relation to a proceeding will not be posted, and will only be available by filing an information request with the AER, in accordance with previous practice.

Both participation decisions and substantive procedural decisions will be available through the “Applications & Notices” tool of the AER’s website, under the “Decisions” tab.

For many in Alberta’s energy sector, the posting of AER participation and procedural decisions, often seen in letter format, has been a long-awaited step in the AER’s promise to deliver greater transparency and accountability in its decision-making process. The publication of these participation and procedural decisions will provide industry and stakeholders with greater access to the AER’s interpretation of its home statute, rules, regulations and directives.

Some categories of decisions and documents, filed in the course of application proceedings, are not covered by the Bulletin. As noted, statements of concern continue to be unavailable directly on the AER’s website. Also, the Bulletin does not indicate whether the AER’s decisions in response to statements of concern or its decisions on whether to hold a hearing are considered “participation decisions” and will be made available on the AER’s website. Finally, it is also unclear whether the Bulletin will have retrospective effect; in other words, whether past participation and procedural decisions of the AER will be made available. Nonetheless, publication of participation decisions and substantive procedural decisions represents a helpful step forward for industry and stakeholders.