Project Law Blog

“Free, Prior and Informed Consent” to become part of Alberta law?

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

On July 7, 2015, Alberta’s Premier Rachel Notley directed her Cabinet Ministers to review their Ministries’ policies, programs and legislation that may require changes based on the principles of the United Nations Declaration on the Rights of Indigenous Peoples (UN Declaration). Premier Notley tasked her Ministers to “engage directly with Indigenous people to find a common and practical understanding of how the principles of the UN Declaration can be implemented in a way that is consistent with our [Canadian] Constitution and with Alberta law.” Premier Notley’s direction highlights the government’s commitment to working with indigenous peoples as “true partners.”  The governmental review is due February 1, 2016.

The UN Declaration

The UN Declaration was passed by the United Nations in 2007, and was intended to provide a standard of achievement for member nations in dealing with indigenous populations within their nations.  The UN Declaration addresses a wide spectrum of indigenous people’s individual and collective rights, ranging from the right not to be forcibly relocated to allow resource development to occur, to a right of self-determination.

A key aspect of the UN Declaration is its treatment of how indigenous peoples should be involved in decision-making about resource developments possibly affecting their rights. The UN Declaration speaks to the need to obtain the “Free, Prior and Informed Consent” (FPIC) of indigenous communities to development activities that could affect their traditional lands, territories and resources. Some pertinent references to FPIC include:

Article 19: States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free, prior and informed consent before adopting and implementing legislative or administrative measures that may affect them.

Article 28(1):  Indigenous peoples have the right to redress, by means that can include restitution or, when this is not possible, just, fair and equitable compensation, for the lands, territories and resources which they have traditionally owned or otherwise occupied or used, and which have been confiscated, taken, occupied, used or damaged without their free, prior and informed consent.

Article 32(2): States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water or other resources.

How the UN Declaration — including FPIC — applies, or should apply, in Canada, has been a matter of debate since it was passed. Aboriginal groups believe that the UN Declaration recognizes that governments should obtain their consent in making decisions that affect their rights. However, the Supreme Court of Canada has recognized that the Crown’s duty to consult and accommodate constitutionally-protected Aboriginal and treaty rights does not require governments to obtain consent, except in limited circumstances (for example, where Aboriginal title has been established).

As a result, Canadian governments have been cautious to formally adopt the UN Declaration.  In 2010, the federal government adopted the UN Declaration, but was careful to state that the UN Declaration was a non-binding document which was not consistent with international law, and which did not change Canadian law. The federal government adopted the UN Declaration as an “aspirational” document that Canada would interpret consistent with the Canadian constitution and legal framework.

Note that the UN Declaration does not define or expand on the use of the term “their lands or territories.” Accordingly, the question of to what extent FPIC applies in the context of indigenous title to traditional lands that may have been ceded through historical or modern treaties is left unanswered.

Implications for Resource Development in Alberta

What does it mean for the Government of Alberta to “implement” the UN Declaration?  At this early stage in the governmental review, the implications are uncertain.

Currently, Alberta’s aboriginal communities have a right to meaningful consultation and to be accommodated if their treaty or Aboriginal rights have the potential to be impacted. Implementation of a requirement for Aboriginal consent to government decisions affecting treaty or Aboriginal rights would have significant consequences for project development in Alberta.

However, other elements of the UN Declaration — such as the implicit recognition that indigenous peoples should share in the benefits from resource development activities affecting their lands or rights — may be less controversial. Canadian case law recognizes compensation as a possible form of accommodation by government. The Government of British Columbia has negotiated resource revenue sharing agreements with Treaty 8 First Nations in northeast BC, and some modern land claims agreements north of 60 provide for territorial governments to share resource revenues with aboriginal groups. These measures have helped to develop aboriginal support for resource development activities affecting their traditional lands and treaty rights.

In committing to implement the UN Declaration, the Government of Alberta has taken on the very difficult task of balancing aboriginal rights and expectations against the need to foster an economic and regulatory climate that allows continued development of Alberta’s natural resources. The recommendations arising from the governmental review will be closely watched by aboriginal groups as well as oil and gas companies and other resource developers in the Province.

Alberta to Double Price of Carbon

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

On June 25, 2015, Alberta’s Environment Minister announced that the province will make changes to current climate change legislation, including the doubling of carbon levies from $15/tonne to $30/tonne by 2017. The government also stated that larger emitters will be required to reduce emissions intensity of greenhouse gases by 20 percent by 2017, up from the current 12 percent reductions currently prescribed in the regulations.

To accomplish these changes, the Alberta government has renewed the Specified Gas Emitters Regulation (“SGER“) for two years. Currently, “heavy emitters” (facilities that emit more than 100,000 tonnes of greenhouse gases a year) are required to reduce baseline emissions intensities by 12 percent. Specifically, the SGER requires that the net emissions intensity for established facilities cannot exceed 88 percent of the baseline emissions intensity for the facility for any particular year. The SGER offers some leeway for facilities that fail to meet emissions targets, such as purchasing “fund credits” at $15/tonne, making use of available emissions performance credits (awarded to facilities which have shown a reduction greater than 12 percent) or submitting offset credits.

Under the proposed changes, heavy emitters will be required to reduce emissions intensity by 15 percent in 2016 and 20 percent in 2017. Further, the price of “fund credits” will increase to $20/tonne in 2016 and $30/tonne in 2017. The timing of the proposed changes has not yet been announced.

The renewal of SGER for two years allows time for the government’s comprehensive review of Alberta’s climate change policies. This review will be undertaken by an advisory panel chaired by Andrew Leach, an environmental economist at the University of Alberta. The review is intended to develop a more advanced climate action strategy, one that could include enacting an economy-wide price on carbon pollution, phasing out coal-fired power, prioritizing renewable energy, building energy-efficient homes and businesses and investing in public transit.

Bulletin 2015-20: Release of Revised Joint Operating Procedures for First Nations Consultation on Energy Resource Activities

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

On June 9, 2015, the Alberta Energy Regulator (“AER”) and the Aboriginal Consultation Office (“ACO”) released revised Joint Operating Procedures for First Nations Consultation on Energy Resources Activities (the “Revised Operating Procedures”).  Bulletin 2015-20, detailing the revisions, was released by the AER on June 10, 2015.  The Revised Operating Procedures explain how the AER and ACO will administer and coordinate their respective operations on matters relating to First Nations consultation.   The Revised Operating Procedures replace the first version of the Joint Operating Procedures for First Nations Consultation on Energy Resource Activities (“Original Operating Procedures”) dated December 10, 2014 and released on February 4, 2015.  A Lawson Lundell Project Law Blog on the Original Operating Procedures can be found here.

The principal revision to the Original Operating Procedures is the replacement of the requirement to submit a declaration.  Section 4 of the Original Operating Procedures required that a “First Nations Consultation Declaration” be completed and submitted and that proponents swear that the First Nations Impacts and Mitigation table “…accurately documents the potential adverse impacts on the existing rights of aboriginal peoples … or their traditional uses”.  This was controversial as the declaration required companies to swear they had accurately documented all impacts in respect of each Aboriginal group regardless of whether consultation was required by the ACO.

The Revised Operating Procedures have eliminated the declaration requirement and now require instead, the submission of an “application supplement” on First Nations consultation.  Section 4 of the Revised Operating Procedures states that “for all applications under the specified enactments submitted to the AER, except those applications for activities listed in appendix C of the Consultation Guidelines, an application supplement on First Nations consultation is required…”

Section 2.3 of the Revised Operating Procedures “First Nations Impacts and Mitigation Table” further provides that in the application supplement, the applicant must identify whether First Nations consultation was required. If First Nations consultation was required, the applicant must (1) complete the First Nations impacts and mitigation table contained in the supplement; (2) provide the information in a separate document attached to the supplement; or (3) attach the ACO Report containing the ACO’s findings on consultation adequacy and any advice to the AER to the supplement.

The Revised Operating Procedures, including the new requirement for an application supplement, come into effect on July 1, 2015.

Canada Throws Hat into the Emissions Reduction Ring

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

On May 15, 2015, the federal government announced that it will commit to reducing its greenhouse gas emissions by 30 per cent below 2005 levels by 2030.  New regulations for Canada’s oil and gas sector, as well as regulations on natural gas electrical plants, will be introduced.  Canada’s Environment Minister, Leona Aglukkaq, stated that she will be meeting with provincial environment ministers in June to discuss potential avenues to reduce emissions.

The 30 per cent target is a significant increase over Canada’s current target to reduce emissions by 17 per cent below 2005 levels by 2020.  To put the 30 per cent reduction into perspective, according to recent reports, Canada will have to reduce its emissions from the 726 megatons emitted in 2013 to 515 megatons in 2030 in order to meet its target.  In comparison, the United States has pledged to cut its emissions by 26 to 28 per cent from 2005 levels by 2025.  Additionally, Mexico has pledged to cut emissions by 25 per cent by 2030 and the European Union has agreed to reduce its emissions on 1990 levels by 40 per cent by 2030.

To meet its goal, Canada will have to rely heavily on the provinces to reduce emissions within their own boundaries.  Ontario recently set its own 2030 target of a 37 per cent reduction from 1990 levels, while British Columbia had previously committed to a 33 per cent reduction from 2007 levels by 2020.  In Alberta, the oil and gas industry anxiously awaits the changes in climate change policy promised by the new NDP government, including possible cancellation of the carbon capture and storage program and phasing out of coal fired electricity generation.  Alberta is the number one greenhouse gas emitter amongst the provinces, with 267 megatons emitted in 2013.  This figure is expected to rise to nearly 300 megatons by 2020.

Notably, on June 2, 2015, Alberta’s newly enacted Environment Minister announced that new climate-change regulations would be introduced by the end of June.  Details remain to be seen, but an increase in the current $15-a-tonne levy for carbon emissions from major industries is expected.

Whether Canada can hit its new target remains to be seen.  According to Environment Canada, Canada’s emissions are actually projected to increase slightly between 2015 and 2020, when they are projected to reach 727 megatons.  There is no question, however, that Canada’s emission target will continue to gain international and domestic scrutiny, particularly with the upcoming G7 conference in Germany on June 7 and 8, 2015, and the United Nations Climate Change Conference being held in Paris in late November, 2015.

Update — Extractive Sector Transparency Measures Act Now in Force

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

On Monday, June 1, 2015, the federal Minister of Natural Resources, Greg Rickford, announced that the Extractive Sector Transparency Measures Act has come into force.

As we discussed in an earlier post, the Act will require companies operating in the extractive natural resources sector (oil and gas, mining) to report certain payments, including royalties, taxes, fees, production entitlements and infrastructure improvement payments, made to governments in Canada as well as to foreign governments.

Companies subject to the Act will now have to report specified payments made to any level of government which in aggregate exceed $100,000.  The Act provides for a two-year deferral of implementation of reporting requirements in relation to Aboriginal governments; those requirements will now apply effective June 1, 2017.  The federal government reports that engagement will continue with stakeholders, including Aboriginal governments and organizations, on the implementation of the Act.

Regulations setting out the details and format of the requirements are expected in the near future.  The current financial year is excluded from the Act’s application but reporting companies will want to implement internal systems and procedures in order to track reportable payments and file timely and accurate annual reports.

Crown’s Duty to Consult Not Triggered by Subsurface Dispositions

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

Does the granting of subsurface mineral rights trigger the duty to consult with Aboriginal groups? In Saskatchewan, the short answer is “no”. The possibility of impact on Treaty 10 rights from the disposition of subsurface oil sands exploration permits is determined to be “too speculative” by the Saskatchewan Court of Appeal in Buffalo River Dene Nation v. Saskatchewan (Energy and Resources), 2015 SKCA 31.

Background

This decision arose from an appeal of a lower court decision in which the judge found that the duty to consult had not been triggered when the Province of Saskatchewan granted subsurface exploration permits to a land agent company. The Buffalo River Dene Nation had asserted that the Crown’s duty to consult had been triggered by the issuance of subsurface exploration permits, as this would affect their ability to practise their Treaty 10 rights, which include hunting, trapping, and fishing. The lower court found that the First Nation had not shown a connection between the granting of subsurface exploration permits and a potential adverse effect on the First Nation’s treaty rights.

In Saskatchewan, the permitting process for mineral exploration rights is a two-stage process. First, a party interested in exploring for certain subsurface minerals submits a request to the Ministry of Energy. The Ministry may then choose to post the lands for public bid. Notice of the potential sale is then given to the public, including affected First Nations. In the case at hand, a copy of the Public Sale Notice was mailed to Buffalo River First Nation.

Once the subsurface exploration permit is granted, permission to enter onto the land requires a surface access permit, which can be obtained from the Ministry of Environment. In this case, the Crown took the position that the duty to consult could only be triggered by the application for a surface access permit as the potential to impact Treaty 10 rights, which are exercised on the surface, could arise only at this stage.

Outcome

The Saskatchewan Court of Appeal agreed with the lower court’s finding that the duty to consult had not been triggered and dismissed the First Nation’s appeal. In doing so, the Court acknowledged the First Nation’s concerns about the potential adverse impacts of oil sands exploration and development on Treaty 10 lands resulting from attempting to access or exploit minerals underlying the land. However, the Court concluded that ultimately, the First Nation’s concern was premature. The Court noted the Crown’s argument that the First Nation had not advanced a treaty right or Aboriginal claim to subsurface rights, and that the Crown conduct complained of was in regard to subsurface activity only. The Court reasoned that the issuance of subsurface exploration permits would not impact surface rights, so the issuance of the permits could not impact the exercise of the First Nation’s treaty rights. Further, although the issuance of a subsurface exploration permit is the first step in exploring mineral potential in a region, the permitting regime in Saskatchewan is such that, at this early stage in the process, it remained unknown as to whether a surface access permit would ultimately be issued. Given this level of speculation, the Court concluded that the issuance of the permits could have no meaningful impact on Treaty 10 rights without subsequent permitting decisions, and that at this stage there was no project at stake that was anything more than speculative that could have any impact on the First Nation’s ability to exercise their treaty rights.

Implications

This decision confirms yet again that where there are no possible impacts resulting from the Crown’s conduct or authorization of conduct that could potentially impact Aboriginal or treaty rights, then the duty to consult is not triggered.

In Alberta, where there is a very similar two-stage permitting process, the Alberta Crown has consistently taken the position that the duty to consult does not generally arise until the disposition of Crown land authorizing surface activities under the Public Lands Act. The permitting process in British Columbia is different, as consultation with affected stakeholders, including First Nations, occurs prior to the posting of subsurface rights for disposition.

Proof of Aboriginal rights (including title) not required prior to commencing legal action for enforcement

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

On April 15, 2015, the BC Court of Appeal issued its decision in Saik’uz First Nation and Stellat’en First Nation v. Rio Tinto Alcan Inc, 2015 BCCA 154. The decision is significant because the Court of Appeal found that proof of an existing Aboriginal right (including title) is not required prior to Aboriginal peoples commencing claims against private parties to enforce those rights. While such is the approach in general in civil proceedings, prior to this case, there was uncertainty as to whether Aboriginal rights required proof before a claim to enforce them could be commenced.

Background

In September 2011, the Saik’uz First Nation and Stellat’en First Nation (the “First Nations”) brought a civil claim in nuisance (public and private) and breach of riparian rights against Rio Tinto Alcan Inc. (“Alcan”) in respect of the operation of the Kenney Dam situated on the Nechako River, creating the Nechako Reservoir. The First Nations are members of the Carrier Sekani Tribal Council. The First Nations alleged that the operation of the Kenney Dam harmed the Nechako River system and its fisheries. The underlying basis for the First Nations’ claims was their asserted, but not yet proven, Aboriginal rights, including Aboriginal title, and rights arising from their interest in their Indian Reserves which border the Nechako River.

Alcan brought an application seeking:

  1. summary judgement dismissing the First Nations’ claims on the basis that the defence of statutory authority was a full defence to the claims; and
  2. in the alternative, an order striking the whole of the Notice of Civil Claim on the basis that it did not disclose a reasonable cause of action.

Alcan based its application to strike the Notice of Claim on the argument that as the underlying Aboriginal rights (on which the claims in nuisance and breach of riparian rights were based) were not proven rights, the claims did not disclose a reasonable cause of action.

Chambers Decision

The chambers judge dismissed Alcan’s application for summary judgement; but granted Alcan’s application to strike out the whole of the notice of claim. In the result, the action was dismissed. Of particular note in the decision was the chambers judge’s finding that no reasonable causes of action existed until Aboriginal rights and title were proven or acknowledged by the Crown. The First Nations appealed the order striking out their notice of civil claim and Alcan cross appealed the dismissal of its application for summary judgement.

Appeal Decision

First Nations’ Appeal of decision to strike Notice of Civil Claim

The First Nations appealed the chambers judge’s decision to strike the Notice of Civil Claim. The Court of Appeal found that the chambers judge erred in holding that no reasonable causes of action existed until Aboriginal rights and title were proven or acknowledged by the Crown. In so finding, the Court of Appeal stated that to require proof of an Aboriginal right or title prior to commencing a claim like the one in this case would “created a unique pre-requisite to the enforcement of Aboriginal title and other Aboriginal rights” which would only be justified if the Aboriginal title and other Aboriginal rights “do not exist until they are so declared or recognized.”

The Court relied on the wording of s. 35 of the Constitution Act, 1982 to conclude that “the use of the words ‘recognized and affirmed’ (in s. 35) indicates that the Crown has already accepted the existing Aboriginal rights, and it is really just a matter of identifying what they are.” Turning to the case at hand, the Court of Appeal found that as the First Nations Aboriginal rights were already in existence, “there is no reason in principle to require them to first obtain a court declaration in an action against the Province before they can maintain an action against another party seeking relief in reliance on their Aboriginal rights.” In so finding, the Court stated:

Aboriginal people are part of Canada’s community, and they should not be treated disadvantageously in comparison to any other litigant asserting claims for nuisance and breach of riparian rights.  Setting a separate standard for Aboriginal people before they can sue other parties in order to enforce their rights is not only lacking in principle but could also be argued to be inconsistent with the principle of equality under the Charter of Rights and Freedoms.

On this basis, the Court of Appeal concluded that assuming the facts as alleged were true; it was not plain and obvious that the Notice of Civil Claim disclosed no reasonable cause of action.

The Court of Appeal also considered whether the First Nations’ reserve interests were a sufficient basis on which the claim for breach of riparian rights could be based. Ultimately, it found that when the reserves were created with land conveyed by the Province to the federal Crown in 1938, the Province had already abolished riparian rights for land owners and thus the transfer of the lands did not include riparian rights.

In the result, the First Nations’ Notice of Civil Claim was restored except those paragraphs dealing with the First Nations’ reserve interest as a basis for their riparian rights.

Appeal of decision denying summary judgment on the basis of statutory defence

Turning to Alcan’s appeal of the decision denying summary judgment, the Court of Appeal reviewed the caselaw on whether or not an act is the “inevitable result” of a statutory authorization. The chambers judge had found that the harm alleged in this case was not the mere storage and diversion of water, but yet an allegation that the manner in which the water is being stored and diverted was resulting in specific adverse impacts such as increased water temperature, erosion of the river banks and adverse impacts on the fisheries resources. The Court of Appeal agreed with this noting “the statutory authority did not prescribe how the Kenney Dam was to be constructed, and it is not known whether it could have been constructed in a manner that could have avoided the alleged nuisance.” The Court further noted that while the licence set out minimum annual release amounts, it did not prescribe timing or manner of releases, or water temperature and thus “it is not known whether water could be released in a fashion that could avoid the alleged nuisance.” These matters were the proper subject of the discovery process and thus, a full trial was necessary.

In the result, the Court of Appeal dismissed Alcan’s cross-appeal.

Implications of the Decision

One of the most significant practical implications of the decision is that Aboriginal rights are expected to be proven within a proceeding for which the Crown may or may not be a party. Recall that in this case, neither the Provincial, nor the Federal Crown was a party to the litigation at this stage. This raises an interesting question of what a finding of Aboriginal title would mean for other parties interests in the land in question, particularly if they, like the Crown, are not a party to the action. Another potential consequence of taking the approach adopted by the BC Court of Appeal is that given the substantial time and resources required to prove Aboriginal title, private third parties defending such actions (such as Alcan in this case) may be required to participate in years long or even decades long litigation.

For more information please contact Keith B. Bergner at (604) 631.9119 or kbergner@lawsonlundell.com or Michelle S. Jones at (604) 631.9224 or mjones@lawsonlundell.com

The New Federal Extractive Sector Transparency Measures Act and Contractual Payments to Aboriginal Governments

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

The proposed Extractive Sector Transparency Measures Act has been enacted by Parliament and is now awaiting proclamation. The Government of Canada has stated that it intends to have the Act in force by June, 2015. This post provides a short overview of the legislation and its potential application to contracts between resource developers and Aboriginal governments.

Disclosure Obligations under the Act

Once the Act comes into force, each company subject to the Act will have to prepare and submit an annual report to the Minister of Natural Resources within 150 days of its financial year end. The report must disclose payments made to any level of government in Canada or abroad that fall into certain categories, the aggregate value of which is greater than CDN$100,000, including payments made to bodies that perform duties on behalf of a government. The Act also provides for penalties of up to $250,000 for failure to comply with the reporting obligations.

These reporting obligations will impact resource developers specifically, as the Act applies to any company engaged in the commercial development of oil, gas or minerals in Canada or elsewhere that

  • is publicly listed in Canada, or
  • does business in Canada and has met two of the following three criteria in either of its two most recent financial years:
    • (i) at least $20 million in assets;
    • (ii) at least $40 million in revenue; or
    • (iii) at least 250 employees.

Federal regulations can expand or restrict the scope of companies subject to the Act.

Payments made to a defined list of payees will have to be reported. Payees include governments in Canada and in other countries, as well as entities established by those governments. Federal regulations may also expand the list of payees that trigger reporting requirements.

The Act specifies the categories of payments to be included in the annual reports. If payments within a category to a payee exceed $100,000, each payment must be disclosed in the company’s report. The categories include:

  • taxes, other than consumption taxes and personal income taxes;
  • royalties;
  • fees, including rental fees, entry fees and regulatory charges;
  • production entitlements;
  • bonuses, including signature, discovery and production bonuses;
  • dividend payments; and
  • infrastructure improvement payments.

In addition, federal regulations may add further categories of payments requiring disclosure.

The Act leaves other details to be incorporated though regulations. For example, the Act allows for regulations to be made addressing the following matters, among others:

  • circumstances in which all or part of the Act will not apply to a company, a payee or a type of payment;
  • whether a company is controlled by another (and therefore subject to the Act);
  • what aggregate payment amount within a given payment category triggers mandatory disclosure (if none is prescribed, the aggregate amount is CDN$100,000);
  • how long records must be kept by companies (unless otherwise provided in regulations, then companies must retain records for at least five years);
  • what level of public disclosure is required for the report provided to the Minister (unless regulations are passed limiting disclosure requirements, then the entire report submitted to the Minister must be made public); and
  • what rate of exchange shall be used for the conversion of payments made abroad into Canadian funds.

It is expected that federal regulations fleshing out details of the Act will be brought into force concurrently. The government is also developing administrative tools to support industry compliance, including a reporting template.

Application to Contractual Payments to Aboriginal Groups

While the Act will impose new reporting obligations on resource developers for payments to all domestic and foreign governments, uncertainty remains as to how those obligations will apply to payments arising from financial commitments in private contracts between resource developers and Aboriginal governments and organizations ‑ including impact benefit agreements.

A resource developer may enter into an agreement with an Aboriginal government or organization where that government or organization is acting in any of four or more different capacities:

  • in a governmental capacity (such as an Indian Act band with the power to tax resource companies on reserve lands);
  • in the capacity of owner of mineral resources (such as a land claims organization that holds subsurface and surface rights in its settlement lands);
  • in a consultative capacity (such as a representative of rights holders in relation to potential impacts of resource development activities on Aboriginal or treaty rights); or
  • in a commercial capacity (such as a band-owned contractor providing goods or services to the company).

Payments made to Aboriginal organizations acting in their governmental or land-owner capacities — royalties, rents, production entitlements, bonus payments, etc. — will likely be reportable. It is less clear to what extent payments made to Aboriginal organizations acting in a consultative or commercial capacity will be subject to the Act’s disclosure requirement.

Most agreements between resource developers and Aboriginal governments or organizations are typically considered confidential by both parties. Unless otherwise provided in the regulations, qualifying payments under those agreements will have to be disclosed, even where the agreements were entered into before the Act was passed or brought into force.

While the Act has significant potential implications for contracts between resource developers and Aboriginal organizations, the impact will not be felt immediately as the Act provides for a two year delay in its application to payments made to Aboriginal governments in Canada. The federal government has stated that those two years will allow it the opportunity for further consultation with Aboriginal organizations and governments about how the reporting obligations will apply to payments made to these groups. Accordingly, it is likely that there will be further guidance and clarification regarding the application of this legislation prior to the time at which it may ultimately apply to these payments.

It’s “Buyer Beware” for Resource Developers When it Comes to Crown Consultation

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

The duty to consult is a Crown responsibility. But what happens when the Crown’s consultation is inadequate? Can a company that suffers losses as a result claim compensation from the Crown? A recent decision of the British Columbia Court of Appeal in Moulton Contracting Ltd. v British Columbia, 2015 BCCA 89 indicates that it will be very difficult for companies to seek compensation from governments even where the Crown is found to have mishandled its consultation obligations.

Background

This decision arose from an appeal of a trial decision that ordered the Province of British Columbia (the “Province”) to pay damages of $1,750,000 to the respondent, Moulton Contracting Ltd., (“Moulton“) for breach of an implied term of a contract as well as liability in negligent misrepresentation.

A contract was granted by the Province to Moulton on June 27, 2006, for the sale of two timber licences (the “TSLs”) in the Fort Nelson Timber Supply Area. This part of British Columbia is covered by Treaty No. 8, to which the Fort Nelson First Nation (“FNFN”) is a signatory. The TSLs granted Moulton the right to harvest timber in defined areas as well as the right to enter the timber harvest areas. The damages awarded at trial were a result of losses suffered by Moulton when it was prevented from logging under the TSLs due to a blockade erected by the respondents, George Behn and his family, most of whom were members of FNFN. About a month after the granting of the TSLs and unbeknownst to Moulton, George Behn informed an employee of the Province that he intended to “stop the logging”. The Province did not inform Moulton of this threat until two months later, after Moulton had started logging. Almost immediately afterward, the blockade was erected and Moulton was unable to complete logging under the TSLs. Notably, Moulton was not involved in Crown consultation on the TSLs, as consultation was completed by the Province before it issued the TSLs.

Trial Decision

Moulton sued the Province, the Behns and FNFN in November of 2006. The trial judge concluded that the Province’s consultation with FNFN was inadequate, but imposed no liability on the Province on this basis, as this failure was not causative of the blockade. The trial judge further found that the limitation of liability clause in the TSLs exempted the Province from liability for the blockade with respect to inadequate Crown consultation.

However, the trial judge went on to find the Province liable for breach of an implied (unwritten) term of the TSLs, and for concurrent breach of an implied continuing representation in the same terms, for failing to inform Moulton of the blockade threats from Behn. The trial judge held that it was an implied term of the TSLs that the Province was not aware of any First Nations expressing dissatisfaction with consultations undertaken by the Province, except as disclosed by the Province.

Appeal

The appeal focused on the Province’s liability for 1) breach of the implied term and 2) negligent representation.

In rejecting the existence of the implied term, the Court of Appeal stated that the trial judge erred in basing the implied term on the “commercial reality” of parties who contract with the Province; rather, the test is “whether the parties intended such a term.” Further, the Court found the implied term to be contradictory to provisions of the TSLs that were clearly intended to limit the liability of the Province for the consequences of an event such as the blockade. Additionally, the Court rejected Moulton’s reliance on the Supreme Court of Canada’s recent Bhasin v Hrynew decision, finding that there was no basis to say that the Province acted dishonestly in failing to disclose the threatened blockade to Moulton.

In overturning the trial judge’s findings on negligent misrepresentation, the Court of Appeal found that there was no positive duty on the Province to inform Moulton of any First Nations’ dissatisfaction with the consultation, and that specific provisions in the TSLs shielded the Province from liability from occurrences such as the blockade.

Implications of the Decision

While this case arose in a forestry context, it has broader applications for other sectors as well — such as mining and oil and gas — where governments issue tenures that may affect aboriginal or treaty rights. The decision does not mean that the Crown can never be liable if it breaches its duty to consult, and a company is harmed as a result – it will depend on the facts of the case. However, it does mean that companies will have to carefully examine tenures or approvals from government to determine whether contractual language found therein shields or absolves the Crown of liability arising from inadequate Crown consultation.

We would also suggest that the decision reinforces the need for companies to adopt a “buyer beware” approach when seeking Crown dispositions that may trigger the Crown’s duty to consult, particularly where the Crown conducts its own consultations as opposed to delegating the process to the proponent. While the legal duty to consult clearly rests with the Crown, the Court of Appeal’s decision reinforces the message that it is industry, not the Crown, that will bear the consequences of the Crown’s failure to consult adequately. The decision is a reminder that proponents should undertake their own due diligence and review consultations undertaken by government agencies where possible, so that they can identify and address potential issues before committing significant financial resources to their projects.

Court suspends implementation of Mackenzie Valley “Superboard”

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

The Supreme Court of the Northwest Territories has granted an injunction to the Tlicho Government suspending the implementation of the Mackenzie Valley “Superboard” legislation. Creation of the Mackenzie Valley “Superboard” is contemplated in amendments to the Mackenzie Valley Resource Management Act (MVRMA) contained in the Northwest Territories Devolution Act, whose effect would be to collapse the functions of the Wek’eezhii Land and Water Board (WLWB), the Sahtu Land and Water Board, and the Gwich’in Land and Water Board into one single land and water board – or “Superboard”. The injunction means that the existing land and water boards will continue to exist until the underlying issues in this case are determined, including a determination of whether the Superboard legislation is unconstitutional because it is contrary to Tlicho Land Claims Agreement.

Background

Beginning in 2007, the federal government formally embarked on a review of environmental regulatory systems throughout the North. This process, which included negotiations with the Government of the Northwest Territories and various Aboriginal Governments in the context of NWT devolution, led to several changes to the MVRMA, including creation of the Superboard. Among other things, creation of the Superboard would mean that Tlicho participation in decisions affecting the Wek’eezhi (traditional territory of the Tlicho) would continue, but that the nature and extent of that participation would change. Notably, whereas participation of a Tlicho Government appointee in decisions about land and water use in the Wek’eezhi is guaranteed under the existing regime, participation under the amended regime is not.

The Superboard legislation was to take effect on April 1, 2015. Canada maintained that the legislation is necessary to increase efficiency in the regulatory process. The Tlicho objected on the grounds that the Tlicho Agreement expressly requires the establishment of the WLWB. The Tlicho further said that they were not consulted on the amendments.

As a result of this disagreement, the Tlicho Government commenced an action against the federal government in May 2014, seeking among other things a declaration that Superboard legislation is unconstitutional, as well as an injunction preventing the Superboard legislation from taking effect until the constitutionality of the Superboard can be determined.

The injunction

The decision deals only with the issue of whether an injunction should be granted. The underlying question of whether the Superboard is constitutional has not been determined. Rather, the Court applied well-known injunction principles to decide that implementation of the Superboard should be temporarily suspended until the constitutionality of the Superboard legislation can be determined.

Before turning to the injunction test, the Court had to first satisfy itself that an injunction against the Crown was available at all, given Canada’s arguments that an injunction was barred by reason of Crown immunity and because issuing an injunction would inappropriately interfere with the legislative process. On both counts, the Court found that Canada’s arguments failed. First, the Court held that neither crown immunity nor the common law principle of immunity are bars to granting injunctive relief against the Crown where constitutional rights are in issue. Second, the Court held that an injunction would not constitute interference with the legislative process because the legislation at issue had already been validly enacted – the only question was when it was to come into force, a question that was within the Court’s power to suspend.

Next, applying the injunction test, the Court found that the Tlicho had satisfied the three well-known criteria for granting an injunction:

  1. Is there a serious issue to be tried? Whereas Canada pointed to various provisions of the Tlicho Agreement that it said allowed it to create the Superboard, the Tlicho pointed to the provision of the Tlicho Agreement that state the WLWB “shall” be established. The Court found those positions to be legitimately in conflict and that this raised a serious constitutional issue to be tried.
  2. Would the Tlicho suffer irreparable harm if the injunction was not granted? The Court had no difficulty finding this requirement had been satisfied, appearing to agree with the Tlicho that, should they ultimately be successful, dismantling the WLWB in the interim would result in (1) loss of institutional knowledge and skill sets accumulated over many years and (2) permanent loss of opportunity to participate in decisions in the interim.
  3. Does the balance of convenience favour granting an injunction? In answering this question, the Court found that there is a very real public interest benefit in protecting the status quo where it has been demonstrated that there is a serious constitutional issue to be tried and that irreparable harm could result from the breach of a constitutionally protected right. It also found that there is a public interest in a stable regulatory regime, which could be lost if the constitutional validity of Superboard decisions are later called into question if the Tlicho are successful.  Lastly, the Court found that the risk for the federal government is significantly less than for that of the Tlicho. Should Canada succeed, the effect of the injunctive relief would be limited to a mere delay in implementing the new regulatory regime for developments in the Mackenzie Valley.

In granting the injunction, the Court found that the Superboard legislation is an “all or nothing” proposition, meaning that it was not possible for the Court to carve out the portions of the Superboard legislation that applied to the WLWB and leave those portions of the legislation applying to the Sahtu and Gwichin Boards in place. Accordingly, while the injunction application was brought only by the Tlicho with respect to the WLWB, the Sahtu and Gwichin Boards will also remain in place pending determination of the Tlicho issue by the Court.

Effect of the Decision

As mentioned above, the effect of this decision is not that the Superboard legislation is unconstitutional. Rather, the decision suspends the implementation of the Superboard legislation until that issue can be tried in Court. In the meantime, the existing regulatory structure for project development in the Mackenzie Valley will continue.

Whether Canada will appeal the injunction, or whether this case will be determined together with a similar challenge to the Superboard legislation brought by the Sahtu Secretariat, remains to be seen.