Alberta’s “Turning Off the Taps Legislation” Put on Hold

By Madyson Dietrich, Student-at-Law

Following Kinder Morgan’s decision to suspend all non-essential work on the Trans Mountain pipeline in 2018, the Alberta Legislature passed the Preserving Canada’s Economic Prosperity Act, SA 2018, c P-21 (the “Act”). 

Frequently referred to as the “Turning off the Taps Legislation,” the Act empowered Alberta’s Energy Minister to require exporters of natural gas, crude oil, or refined fuels to obtain a license. One factor to be considered when granting licenses was whether pipeline capacity existed to maximize the return on crude oil and diluted bitumen produced in Alberta.

British Columbia challenged the Act’s constitutionality and applied for an injunction suspending the legislation from operating. Alberta sought to strike BC’s action. 

In British Columbia (Attorney General) v Alberta (Attorney General), 2019 FC 1195, the Federal Court dismissed Alberta’s motion and granted an interlocutory injunction preventing Alberta’s Energy Minister from exercising powers permitted under the Act. 

Alberta’s Motion to Strike

Alberta applied to strike BC’s action on the basis that it was beyond the jurisdiction of the Federal Court, and was premature as no action(s) had been taken under the Act. The Federal Court found that it had optional jurisdiction over interprovincial disputes pursuant to section 19 of the Federal Courts Act. Additionally, it was not necessary for the Energy Minister to have actually exercised its authority prior to litigating the matter since the Act was being challenged as a whole. 

BC’s Interlocutory Injunction

Applying the well-known test for injunctive relief as set out in RJR-MacDonald, the Federal Court found in favour of granting the injunctive relief sought.  

A Serious Issue to be Tried 

Alberta argued that the Act was valid because section 92(a) of the Constitution Act provides that natural resources fall within provincial jurisdiction. However, the Federal Court found that section 92(a) did not save the Act because it was not related to primary production of natural resources and it authorized discrimination between provinces. 

Citing Hansard, the Federal Court concluded that the true intentions of the Act were to limit export of petroleum products from Alberta with limited application; the Act only appeared to be contemplated in relation to BC.  

Irreparable Harm 

The Federal Court accepted evidence that BC heavily relied on Alberta for a large portion of their gasoline and that a restriction would have immediate consequences on the province. In addition, the Federal Court considered Alberta’s failure to provide any examples of what would constitute a valid exercise of power under the Act. 

Balance of Convenience  

Although there is a presumption that challenged legislation was enacted in the public’s interest and it will serve as such, the Federal Court agreed that this was a clear case where an injunction should be granted. The Federal Court struggled to understand why the Act included a 2-year sunset clause if it was intended to serve a valid and non-discriminatory purpose. Overall, it was determined that the irreparable harm that BC would suffer if the injunction was not granted far outweighed any inconvenience that the injunction may impose on Alberta.  

Implications from the Decision 

While the injunction is interlocutory and the constitutionality of the Act has not been decided, there are strong indications that this legislation may be found to be unconstitutional. It is unclear how the new Alberta government will respond to this decision. 

This decision confirms, however, that section 92(a) is viewed as an exception to federal powers granted under section 91 and cannot be used to discriminate against other provinces. To do so would diminish Parliament’s power to regulate interprovincial trade. This demonstrates that the section 92(a) “exception” only grants the provinces limited power when it comes to natural resources. It is limited to primary production and not the exportation of refined or upgraded natural resources across provincial and international boundaries. Further, it does not prevent Parliament from enacting laws that would prevail over provincial legislation.

A hearing date has not been scheduled for a determination on the merits.

Schedule Released for Alberta’s Carbon Tax Challenge

By: Eric Appelt and Gavin Fitch, Q.C.

The Alberta Court of Appeal has released a tentative schedule for Alberta’s challenge of the federal carbon tax, which could see the case heard just before Christmas.  In Reference re Greenhouse Gas Pollution Pricing Act, 2019 ABCA 324, Mr. Justice Slatter set the following schedule for the case: 

-       September 18: Applications heard by those parties seeking to intervene and  
challenge any portion of Alberta’s evidence. 

-       October 11: Deadline for Canada to file its evidence.

-       October 25: Deadline for Canada to file its factum.

-       November 4: Deadline for all other provinces and intervenors to file their evidence and factums.

-       November 18: Deadline for reply factums, if found to be necessary.

-       December 16-18: Oral argument, assuming all necessary steps have taken place.

The decision is part of a broader legal action dating back to June 2019, when Alberta launched a constitutional challenge with respect to the federal carbon pricing framework.

McLennan Ross lawyers, Ryan Martin and Steven Dollansky, are currently co-counsel for the Government of Alberta in the Greenhouse Gas Pollution Pricing Act references.

The Notorious Bill C-69 Becomes Law in Canada

By JoAnn P. Jamieson and Sarah Levine

Late on June 20, 2019, Bill C-69 was passed into law by the Senate notwithstanding strong and vocal opposition from across the country. Bill C-69 enacts the Impact Assessment Act, the Canadian Energy Regulator Act, and amends the Navigation Protection Act, renaming it the Canadian Navigable Waters Act.

The Senate passed Bill C-69 by a final vote of 57 – 37 and received Royal Assent shortly thereafter. The Senate originally recommended 188 amendments to the Bill, however, the House of Commons only accepted 62 of those amendments as written, and another 37 after alterations. The final version of the Bill passed by the Senate largely resembled the version of the Bill tabled by the Federal Government in the House of Commons on February 8, 2018.

The New Impact Assessment Process

Bill C-69 introduces a new, single agency - the Impact Assessment Agency (the “Agency”) - responsible for all federal impact assessments (“IA”) unless referred to a review panel. The new process expands the scope of federal assessments from potential impacts to the environment to include effects from the designated project to health, social or economic conditions. Notably, the National Energy Board is replaced by the Canadian Energy Regulator and will no longer conduct impact assessments on projects within its jurisdiction (e.g., interprovincial pipelines), as those reviews will be conducted by the Agency as well.

The new IA process retains the concept of a “project list” trigger, similar to what was found in previous legislation. Consultation on the criteria to be applied and the scope of the new project list has been ongoing for the past year. As the new regulations designating certain projects have not yet been released, it remains uncertain to what extent additional projects will be captured under the new legislation. Further, the Minister of Environment and Climate Change retains the power to designate other physical activities if he or she is of the opinion that adverse effects to federal interests or public concerns warrant designation.

The new IA process maintains the same basic structure of the environmental assessment process under CEAA, 2012. There will be three basic phases to an impact assessment - a planning phase, an assessment phase and a decision-making phase. The new planning phase is essentially a more extensive “screening” phase from what was provided for under CEAA, 2012 and contemplates earlier, more extensive dialogue with the public and Indigenous peoples to identify and discuss issues. This stage can last up to a maximum of 180 days from when a proponent submits an initial description of the designated project to the Agency. This stage ends when the Agency issues the notice of commencement and provides the proponent with tailored guidelines to direct the drafting of its Impact Statement, a document prepared by the proponent that identifies the potential impacts of a designated project.

The new IA process still legislates maximum timelines for reviews – now 300 days for Agency assessments (down from 365 under CEAA, 2012) and 600 days for Panel reviews (down from 720 days). Further, there are no longer “stop the clock” provisions that could suspend these review timelines under CEAA, 2012. However, there still are opportunities for the timelines to be extended or suspended. For example, the Minister would be able to extend the time period for the early planning stage up to 90 days. The Governor in Council could further extend this time limit, if required.

The Section 22 Factors

The impact assessment of a designated project, whether it is conducted by the Agency or a review panel, must take into account numerous factors (over 20) including an assessment of the changes to the environment and to health, social or economic conditions and the positive and negative consequences of these changes that are likely to be caused by the carrying out of the designated project.

Of note are three factors new to this legislation that have been the subject of considerable attention:

• the contribution of the project to sustainability;
• the extent to which project may hinder to contribute to Canada’s ability to meet its environmental obligations and climate change commitments; and
• the intersection of sex and gender with other identity factors.

“Sustainability” is defined in the new legislation as “the ability to protect the environment, contribute to the social and economic well-being of the people of Canada and preserve their health in a manner that benefits present and future generations”. No further guidance is provided as to how this, or these other two novel criteria, can be met.

Greater Participation of Indigenous Peoples

The new IA process emphasizes the need to consult with and meaningfully consider project impacts on Indigenous peoples and their rights early on in the review process and in greater detail than is currently required under CEAA, 2012. The section 22 factors expressly require consideration of Indigenous knowledge and culture as well as any effects assessment conducted by or on behalf of an Indigenous governing body that is provided with respect to the designated project.

Decision Making   

The basis for the decision on whether or not a designated project proceeds will also be different from what we know today. Under CEAA 2012, the decision making is based on whether the effects are significant and justified in the circumstances.

Under Bill C-69, the decision must be based on the assessment report and whether the adverse effects of a designated project within the federal jurisdiction are in the “public interest”. In making the public interest determination, the Minister (or Governor in Council) must have regard to the following:

• the extent to which the designated project contributes to sustainability;
• the extent to which the effects of project are adverse;
• whether the implementation of the mitigation measures are considered appropriate;
• the impact of a project on Indigenous groups and Indigenous rights; and
• the extent to which effects of a project hinder or contribute to Canada’s ability to meet environmental obligations and commitments re climate change.

Conclusion

Bill C-69 is the new law in Canada. Short of a new Federal Government replacing or overhauling this piece of legislation, it appears that Bill C-69 is here to stay.

While the basic structure of the new IA process remains the same, the emphasis on Indigenous participation, sustainability and climate change factors introduces new criteria to be considered and increases the uncertainty associated with an already protracted federal assessment process, leaving it hard to imagine that Bill C-69 will achieve one of its stated objectives of more efficient and timely decision-making. In particular, it remains to be seen whether a large inter-provincial pipeline or a carbon-emitting, resource project could ever be found to be in the public interest going forward.

Time to Clean Up: Alberta’s Revamped Remediation Regulation

By Sean Parker and Stuart Chambers 

As previously reported, in 2018 the Government of Alberta overhauled the Remediation Certificate Regulation, made under the Alberta Environmental Protection and Enhancement Act (“EPEA”). Effective January 1, 2019, the newly titled “Remediation Regulation” came into force.

The new Alberta regime for contaminated sites under the Remediation Regulation has two main parts:

1.      Deadlines for completing remediation and submitting reports; and

2.      Obtaining remediation certificates.

Deadlines for Remediating Contamination and Submitting Reports

 

One of the fundamental changes to the regulatory regime for contaminated sites is the imposition of a timeline for completing remediation, or submitting a remedial action plan that includes a deadline for clean-up. The obligations for remediation under the revamped regulation are grounded in the general clean-up provisions of EPEA section 112, which impose the duty to remediate a release that “may cause, is causing or has caused an adverse effect”. The Remediation Regulation at section 2.2 adds detail to that general obligation, by requiring a person responsible for a contaminated site to remediate this site “as soon as possible”. Alternatively, if remediation cannot be completed within two years, the person responsible shall “as soon as possible” submit a remedial action plan to the director of Alberta Environment and Parks (“AEP”) for approval. The remedial action plan shall include specified information such as the remedial methods to be used and the deadline for completion. In essence, this provision of the Remediation Regulation requires immediate clean-up, but if that is not feasible within the two-year period (i.e. two remediation seasons), then the obligation becomes a requirement to submit a remedial action plan for AEP’s approval.

The structure of this new regime is intended to provide the person responsible for a contaminated site the opportunity to clean-up the site within a two-year period and then submit all reports, such as a Phase II Environmental Site Assessment and remediation closure report, to AEP once the clean-up work is complete. That is seen to be a more streamlined process where AEP’s involvement is generally limited until the final review.

Alternatively, if the site “cannot be remediated to the satisfaction of the director within a two-year period” (section 2.2 (2)), then the person responsible must follow a different path that involves more oversight by AEP through the process. The first requirement is that the person responsible must submit a Phase II Environmental Site Assessment “as soon as possible” (section 2.2 (1)). The other requirement is that the person responsible must “immediately” submit a remedial action plan that specifies the completion time for the remediation (section 2.2 (2)). Essentially, if the remediation cannot be completed within two field seasons, AEP becomes involved earlier on in the process and has greater oversight over steps such as delineation work and planning of the remediation.

Although there is logic in this general approach – that AEP has more involvement on more complex sites – there is some uncertainty as to how this regime will actually be implemented. For example, it is not clear how the requirement to submit Phase II Environmental Site Assessment “as soon as possible” under section 2.2 (1) will be applied. Likewise, it is not clear how it will be determined that a site “cannot” be remediated within a two-year period, as provided for under section 2.2(2). Further, the remedial obligations are subject to discretion of the AEP director as to how those obligations will be enforced, for example, what information will be required, and timelines for completing a variety of steps. It is understandable and appropriate for a director to have discretion in contaminated site matters, as each site is different and will present its own unique circumstances. However, these obligations are very new and there are no precedents for their application, resulting in a lack of guidance which in turn generates uncertainty for those who may be responsible for a contaminated property. 

Another significant provision with respect to the remedial obligations is the grandfathering clause found in section 2.2(7). Essentially, the Remediation Regulation will only apply to sites reported to AEP on or after January 1, 2019. Sites that were previously reported, will not be subject to the new regime as it is presumed that they would already be engaged in a previous process for dealing with the site. However, as with other aspects of this new regime, the grandfathering clause is also subject to the discretion of the director. In other words, the new requirements for clean-up within two years, or submission of other reports and plans for completing the remediation work, may nevertheless be required by the director for a previously reported site. Again, while it may be appropriate for the director to impose those requirements for certain sites, it is unclear at this time on what basis the director will or should exercise discretion in this regard. 

Remediation Certificates and Tier 2 Compliance Letter

 

The second main part of the refurbished Remediation Regulation relates to the revamping of the regime for issuing remediation certificates, and a newly created Tier 2 compliance letter. Under the new regime, there are two types of remediation certificates available: (1) a “site-based” remediation certificate, and (2) a “limited” remediation certificate (section 4). The general concept of a remediation certificate is that it closes regulatory liability for the party that has obtained it. This means a party that obtains a remediation certificate will not be subject to future regulatory requirements from AEP in relation to the substances or areas covered under the remediation certificate. However, additional contamination discovered at a later date that is not covered under the remediation certificate will not enjoy this same protection and could be subject to further regulatory action. 

The site-based remediation certificate provides the highest degree of regulatory protection. This type of certificate applies to the entire area that has been impacted by the activity. Specific requirements for obtaining a remediation certificate are set out in section 4 of the Remediation Regulation. Essentially, a site-based remediation certificate can only be issued where all of the contamination has been identified and cleaned up on the site and on other affected surrounding lands. There is an exception where a site-based remediation certificate could be issued for the specified parcel of land and where contamination remains off-site, provided that the remaining off-site impacts are subject to a risk management plan that has been approved by the director. It is important to recognize that the off-site areas under a risk management plan would not be captured under the remediation certificate, and therefore would not enjoy the regulatory closure that those certificates provide pursuant to section 117 of the Environmental Protection and Enhancement Act. 

The other type of remediation certificate is called a “limited” remediation certificate. These certificates do not apply to the entire area impacted by the activity, as with a site-based remediation certificate, but rather apply to the limited area that has been remediated to the satisfaction of the AEP director. These limited remediation certificates appear to be more suitable for a discrete type of event such as a known release on a known part of the site. To obtain a limited remediation certificate, the area of impact would need to be assessed and fully remediated to the satisfaction of the director. The certificate would apply only to that limited area, and the contaminants of concern that were identified and remediated. This is a less rigorous process than for the site-based remediation certificate and therefore provides a more restricted degree of regulatory protection. Site-based remediation certificates provide regulatory closure for an entire parcel of land, however, they require full assessment of any impacts on that site and then complete remediation. A limited remediation certificate, on the other hand, would not require a full assessment of the entire site, but rather only of the specific area for which the certificate is sought, and likewise would only provide regulatory closure for that specific area that has been assessed and remediated. 

The third type of document provide for under the new Remediation Regulation is called a Tier 2 compliance letter. This document is intended to provide some level of assurance or comfort to parties that were not able to obtain either a site-based or limited remediation certificate. In order to obtain any form of remediation certificate, some remediation must have actually been completed. If no remediation is conducted, a remediation certificate cannot be issued. The Tier 2 compliance letter was developed to account for situations where the remediation guidelines can be adjusted based on site specific conditions under Alberta’s Tier 2 process, with the effect that human health and the environment are still protected, but no remediation would actually be required. 

While the Tier 2 compliance letter may appear to be a solution where a remediation certificate is not available, its practical value appears to be limited as it does not provide regulatory closure like a remediation certificate would. The Tier 2 compliance letter is solely a creation of the Remediation Regulation, and is not grounded in section 117 of the enabling statute, EPEA, which provides certain statutory guarantees. The effect of this distinction is that an area or site for which a remediation certificate has been issued is not subject to further regulatory action by AEP, for example, requiring further remediation if the guidelines change. Conversely, an area that is the subject of a Tier 2 compliance letter does enjoy the same protections and further regulatory action could be required at a later date, for example, further remediation if the guidelines do change. It is uncertain what the practical benefit of a Tier 2 compliance letter is given the apparently limited degree of protection that it affords.

 Conclusions and Further Thoughts

The Remediation Regulation that came into force on January 1, 2019 sets out a revised regulatory regime that will be applied to contaminated sites in Alberta going forward. The new regime imposes additional requirements for assessment and reporting to AEP, as well as new timelines for doing so. However, given the significant discretion afforded to directors at AEP and the lack of precedents for how decisions will be made under this new regime, there is significant uncertainty as to how the Remediation Regulation will be applied, and how the directors’ discretion will be exercised over a variety of matters. Further, it appears that some of these new requirements will involve an enhanced degree of interaction with AEP in terms of reviewing site assessments, remedial action plans, risk assessments, risk management plans and other documents. It is unclear how AEP will handle this potential increased workload so as to ensure the new regime operates in an efficient and effective manner, rather than creating backlogs and other unintended consequences. 

The new site-based remediation certificate provides more comprehensive regulatory closure as compared to the limited remediation certificate. However, the higher degree of protection for the site-based certificate comes with greater assessment and remedial obligations. Depending on the unique circumstances of each site and intended purpose for obtaining a remediation certificate, consideration should be given as to what degree of regulatory closure is reasonably required balanced against the amount of work and cost associated with each type. Further, consideration should be given to the amount of time that may be required for processing of a remediation certificate application. Often, remediation certificates are sought to limit liability and facilitate some type of commercial transaction, such as the sale of land. However, the current timeline for obtaining a remediation certificate could be in excess of three years, which could wipe out any practical benefit depending on the commercial conditions of the transaction. In order to have an effective remediation certificate regime, the process will need to be reasonably responsive and operate on timelines that correspond to commercial realities. 

While the concept of a Tier 2 compliance letter appears to be sound and may be appropriate in certain circumstances, its practical utility is questionable given that the regulator could still come back at a future date and require a further action. To obtain the protections afforded by a remediation certificate, a proponent may consider conducting at least some remediation in order to be eligible for remediation certificate. However, the degree of remediation required in order to qualify for the remediation certificate program is an another currently open question. 

Overall, the Remediation Regulation sets out a new regime for managing contaminated sites in Alberta, building upon the existing remedial obligations embodied in section 112 of the Environmental Protection and Enhancement Act. Given the newness of this regime and the significant discretion afforded to AEP decision-makers, there is uncertainty as to how the regulation will actually be implemented.

NEB Recommends TransMountain Expansion Project Be Approved

By Sarah Levine and JoAnn P. Jamieson

Earlier this morning, the National Energy Board (“NEB”) delivered its Reconsideration report to the federal government, ultimately recommending that the Trans Mountain Expansion Project (“TMX” or the “Project”) should be approved in the public interest of Canadians. The NEB found that the potential effects from the Project can be justified in light of the considerable benefits flowing from the Project and the measures to minimize the effects. The NEB has recommended approval contingent on 156 conditions, plus 16 new recommendations based on its review of potential effects to the marine environment.

The NEB’s decision now starts the clock on a 90-day deadline for Cabinet to make a decision on whether the Project should proceed. However, a final decision will not be made until additional consultations with potentially impacted Indigenous groups are complete, meaning that the 90-day timeline will likely be extended. 

Reconsideration Hearing and Report

The future of TMX has been uncertain as the federal government has attempted to comply with the requirements regarding Indigenous consultation and consideration of the potential adverse environmental impacts of additional tanker traffic to the marine environment as set out by the Federal Court of Appeal.
In September, 2018, the NEB was directed by the Federal Court of Appeal to reconsider those aspects of its recommendation report related to marine shipping and in particular, the potential effects to the southern resident killer whales. Former Supreme Court of Canada Justice Iacobucci was appointed to oversee a new round of consultation with Indigenous communities.
The NEB was given 155 days to complete its reconsideration. The Reconsideration hearing provided an opportunity for various potentially impacted and interested groups, including 52 Indigenous groups and individuals, and 8 federal government departments, to comment on the scope of the environmental assessment and the design of the hearing process, file evidence, present traditional Indigenous oral evidence, and comment on the draft conditions and recommendations.
Flowing from the hearing, the NEB delivered its Reconsideration report, which specifically examined the impacts of Project-related marine shipping under the application of the Canadian Environmental Assessment Act, 2012 and the Species at Risk Act (“SARA”), in accordance with the federal government’s aforementioned direction to the NEB. 

16 New Recommendations

If the Project is approved by the federal government, the Project must comply with the 156 conditions originally set out by the NEB. In addition, the NEB has made 16 new recommendations to the federal government related to Project-related marine shipping. The recommendations are designed to offset potential effects to marine life and include:

• cumulative effects management for the Salish Sea,
• measures to offset increased underwater noise and increased strike risk posed to SARA-listed marine mammal and fish species,
• marine oil spill response,
• marine shipping and small vessel safety,
• reduction of GHG emissions from marine vessels, and
• engaging the Indigenous Advisory and Monitoring Committee for their feedback on the marine safety system and identifying engagement opportunities for Project-related marine shipping activities that intersect with Canadian Coast Guard operational programs.

First Nations and environmental groups have already responded to the NEB’s announcement by indicating that additional legal challenges will be launched and delays can be expected.

Australian Court Rejects Coal Project Based In Part on Climate Change Impacts

By Marika Cherkawsky, Student-at-Law and Gavin Fitch, Q.C.

On February 8, 2019, the Land and Environment Court of New South Wales released its decision on whether to approve the Rocky Hill Coal Project after it had previously been refused by the state’s Planning and Assessment Commission in 2017. The Court rejected the Project based, in part, on climate change. This decision marks a historic moment, as it is possibly the first time a court has rejected a fossil fuel development project based on  the cumulative impact of carbon emissions.

Background

 

Gloucester Resources Limited (GRL), a coal mining company, sought to overturn the 2017 decision by the New South Wales (NSW) Planning and Assessment Commission (PAC), which rejected GRL’s application to develop an open-cut coal mine at Rocky Hill in the Gloucester Valley of NSW. The mine, known as the Rocky Hill Mine Project, was proposed to produce 21 million tonnes of coal over 16 years. The PAC’s refusal of GRL’s application was based entirely on planning grounds, particularly the incompatibility of the proposed mine with other land uses in the vicinity.

The Land Environment Court of New South Wales (Court) was established in 1979 to hear appeals about mining and other projects on planning, environmental, land, mining and related grounds. The Court acts a ‘one stop shop’ for environmental, planning and land matters, and is the first specialist environmental superior court in the world.

Significantly, the Court allowed a local community action group, Gloucester Groundswell Inc., to be joined as a party to the proceedings. Gloucester Groundswell was concerned with the impacts of the Rocky Hill Coal Project on the local community and on the local and wider environment. Gloucester Groundswell hired experts to present evidence of the mine’s detrimental impact on not just the social fabric of the Gloucester valley but also climate change.

Decision

 

The Court’s decision was written by Chief Judge Brian Preston. Preston CJ held that the mine should be refused due to its significant and unacceptable planning, visual and social impacts, none of which could be satisfactorily mitigated.

What makes this decision ground breaking, however, is Preston’s CJ reasoning and commentary on the effects on climate change the proposed coal mine would have. Preston CJ conducted an exhaustive examination of  evidence of climate change before the court, international and national decisions, international agreements and Australian climate policies, following which he rejected the project.

Evidence of Climate Change

 

The court heard from Emeritus Professor Will Steffen, an earth systems scientist, called by Gloucester Groundswell to give evidence on climate change science and the “carbon budget”. The “carbon budget” is the total allowable amount of carbon dioxide and other greenhouses gases that the world can emit without incurring a risk of exceeding the specific global average temperature of 1.5ºC. Professor Steffen summarized the impacts of climate change and concluded that any development of new fossil fuel reserves is incompatible with any carbon budget and with Australia’s commitments to the Paris Agreement and “is inconsistent with the carbon budget approach towards climate stabilization.” This was true despite the fact that the total GHG emissions of the Project would only constitute a small fraction of total global emissions, because all GHG emissions are important, as they cumulatively contribute to the destabilization of the global climate system.

GRL’s Argument for Approval

 

GRL did not contest that climate change is real and happening and that GHG emission must be reduced rapidly in order to meet the internationally agreed temperature targets of 1.5ºC or 2ºC. GRL did, however, contest that the Rocky Hill Coal Project needs to be refused in order to achieve these temperature targets. Essentially, GRL argued the Rocky Hill Coal Project by itself would not contribute to climate change and thus should be approved.

Reasoning

 

After a lengthy review of the evidence, Preston CJ agreed with Professor Steffen’s conclusion, and held the Project’s cumulative GHG emissions would contribute to future changes to the climate system and the impacts of climate change. This increase in GHG emissions caused by the Project would counter the measures being undertaken to limit climate change and would do nothing to assist Australia in meeting the globally agreed goals of the Paris Agreement, in particular  the long term goal of limiting the increase in global average temperature to between 1.5ºC and 2ºC above pre-industrial levels.

Further, Preston CJ rejected GRL’s submission that the increase in GHG emissions associated with the Project would be offset by reductions in GHG emissions from other sources, none of which were actually identified by GRL. Preston CJ stated that an authority cannot approve a development that is likely to have some identified environmental impact on the theoretical possibility that the environmental impact will be mitigated or offset by some unspecified and uncertain action at some unspecified and uncertain time in the future. He noted that this was not a case where a project proponent committed to take specific and certain action to mitigate and offset the environmental impact of its proposed development.

Conclusion

 

In conclusion, Preston CJ held that the mine should be rejected as it was not in the public interest, concluding:

In short, an open cut coal mine in this part of the Gloucester valley would be in the wrong place at the wrong time. Wrong place because an open cut coal mine in this scenic and cultural landscape, proximate to many people’s homes and farms, will cause significant planning, amenity, visual and social impacts. Wrong time because the GHG emissions of the coal mine and its coal product will increase global total concentrations of GHGs at a time when what is now urgently needed, in order to meet generally agreed climate targets, is a rapid and deep decrease in GHG emissions. These dire consequences should be avoided. The Project should be refused.

GRL has stated it will assess the implications of the decision and consider its next steps.  It has 28 days to appeal on a point of law to the New South Wales Court of Appeal.

The implications of this judgment, assuming it were to be followed in other jurisdictions such as Canada and Alberta, are enormous.  On the Court’s reasoning, any major new fossil fuel project, including oil sands projects, would be “at the wrong time” and could be rejected on the basis of increased GHG emissions.

Redwater Decision Overturned by the Supreme Court of Canada

By Nathaniel Brenneis

Today, the Supreme Court of Canada (SCC) overturned the Alberta Court of Appeal’s contentious decision to prioritize the interests of secured creditors in bankruptcy over the fulfillment of oil well abandonment and reclamation obligations.

At issue was whether the province’s rules for cleaning up oil wells frustrated the purpose of Canada’s federal bankruptcy regime. The SCC held there was no conflict. As a result, the trustees of bankrupt oil and gas companies can no longer disclaim remediation liabilities and simply walk away from uneconomic oil and gas sites. Environmental clean-up now takes priority over payments to creditors.

Background

As previously reported, this case revolved around the assets of Redwater Energy Corporation (“Redwater”), a public oil and gas company which was placed in receivership in 2015 by Alberta Treasury Branch ("ATB"). Following an application by ATB, Grant Thornton Limited (“GTL”) was appointed as the receiver and trustee. Redwater had a number of non-producing oil wells licensed by the Alberta Energy Regulator (the “Regulator”), which needed to be reclaimed. The costs of abandoning and remediating these wells, however, far outstripped their remaining economic value. As a result, GTL sought to renounce or disclaim these unattractive assets.

In response, the Regulator ordered GTL to remediate the disclaimed oil wells before distributing funds to creditors. It argued that Redwater’s bankruptcy did not affect Redwater’s environmental obligations and that GTL was legally required to discharge those obligations before paying Redwater’s creditors. GTL brought a cross-application challenging the Regulator’s position and seeking approval of its sale.

Broadly speaking, the case pitted the public’s interest in ensuring that oil and gas facilities are reclaimed against the interests of secured creditors in the federal bankruptcy regime.

Lower Court Decisions

The key issue before the courts was determining the proper priority and treatment of environmental claims under the Bankruptcy and Insolvency Act (BIA).

The lower courts determined there was operational conflict between the BIA and the province’s regulatory regime set out under the Oil and Gas Conservation Act (OGCA) and Pipeline Act (PA). Based on the doctrine of paramountcy, the OGCA and PA were thus rendered inoperable to the extent that their provisions would frustrate the BIA’s system of distribution and priorities. Further, the courts held that the Regulator’s orders were essentially unprotected monetary claims and therefore unenforceable against a trustee and receiver.

As a result, the lower courts concluded that GTL did not have to comply with the Regulator’s orders and could settle the claims of secured creditors without fulfilling any of its environmental remediation obligations.

Supreme Court Decision

In a 5-2 decision, the majority of the SCC ruled that Alberta’s environmental regulatory regime can coexist alongside the scheme of distribution set out under the BIA.

Rather than find the provincial and federal regimes to be incompatible, the SCC determined that the Regulator’s orders were based on valid provincial laws of general application – exactly the kind of valid provincial laws that underpin the BIA. The BIA is clear that the ownership of certain assets and the existence of particular liabilities depend upon provincial law. In this case, the provincial laws provide certain end-of-life obligations for Redwater’s production facilities which define how much of the bankrupt’s estate is available for distribution.

In other words, in crafting the priority scheme of the BIA, Parliament intended to permit regulators to place a first charge on real property of a bankrupt affected by an environmental condition or damage in order to fund remediation and reclamation. Thus, the BIA explicitly contemplates that environmental regulators will extract value from the bankrupt’s real property if that property is affected by an environmental condition or damage. Therefore, there is no conflict to trigger the doctrine of paramountcy in this case. The Regulator’s orders supersede the distribution.

The SCC also stated that bankruptcy is not a licence to ignore rules. Redwater has remedial obligations that are not claims provable in bankruptcy. Section 14.06(4) of the BIA is purely concerned with a trustee’s personal liability, and does not empower the trustee to walk away from the environmental liabilities of the estate it is administering. Pursuant to orders of the lower courts, GTL had already sold or renounced all of Redwater’s assets, and the sale proceeds were being held in trust. Accordingly, the SCC ordered that these funds be used to address Redwater’s end-of-life obligations and reclaim the well sites.

Take Away

In overturning the lower courts’ ruling, the SCC has helped unravel the tangled intersection between bankruptcy proceedings and provincial environmental law, but this is a lengthy decision and its ramifications will take time to fully assess and consider.

There is no question, however, that this case will have far-reaching implications across several different industries nationwide. While environmental regulators and advocates will consider this ruling a significant victory, the decision also introduces uncertainty for secured lenders in the oil and gas sector, as well as secured lenders to other industries with potential for significant environmental liability.

For further information on how this decision may impact you, please contact a member of our Restructuring & Insolvency Practice Group or our Energy, Environmental & Regulatory Practice Group.

Better Late Than Never? Court of Appeal Rules on Extending Limitation Periods in Contaminated Site Litigation

By: Sean Parker & Gavin Fitch, Q.C.


On February 6, 2019, the Alberta Court of Appeal released its decision in Brookfield Residential (Alberta) LP (Carma Developers LP) v Imperial Oil Limited, 2019 ABCA 35 (“Brookfield”). The Court of Appeal upheld the Court of Queen’s Bench decision where the Chambers Judge denied an application by the Plaintiff, Brookfield Residential, to extend the limitation period as permitted under section 218 of the Environmental Protection and Enhancement Act (“EPEA”). Instead, the Chambers Judge granted Imperial Oil’s application for summary dismissal, ending the action against it. In doing so, the Court of Appeal rejected a legal test for applying EPEA section 218 developed in another recent Queen’s Bench decision, Lakeview Village Professional Centre Corporation v Suncor Energy Inc, 2016 ABQB 288 (“Lakeview Village”), and clarified the law on this unique provision.

Brookfield Residential owns a parcel of land in south Edmonton that it intended to develop for residential purposes. In 2010, environmental testing revealed that the land was contaminated.  In 2012, Brookfield Residential brought an action against Imperial Oil and others alleging that the contamination resulted from an oil well Imperial Oil drilled on the property in 1949. Imperial Oil applied for summary dismissal on the basis that the limitation period had expired. Brookfield Residential brought a cross-application to extend the limitations period under section EPEA section 218.

Limitation periods in contaminated site litigation are subject to unique legislation. The typical timeframes for commencing an action provided for under Limitations Act do not necessarily apply.  In most cases, a party has 2 years to commence an action from when they discovered, or ought to have discovered, the circumstances giving rise to the claim, or no later than 10 years from when the wrongful act was committed in any event. EPEA section 218 gives the court discretion to extend these limitation periods in certain circumstances.

Factors the court must consider in an application under EPEA section 218 include: (1) when the contamination (adverse effect) occurred, (2) whether the plaintiff exercised due diligence in discovering the contamination, (3) prejudice to the defendant’s ability to maintain a defence, and (4) any other criteria the court considers to be relevant. Application of this provision is fact-specific and the court has discretion in how to apply it.

In its analysis, the Court of Appeal discussed the need to balance competing policy objectives found in environmental legislation, such as EPEA, against those that form the basis for limitation periods, as found in Alberta’s Limitations Act. The Court of Appeal found that EPEA reflects the objectives of “polluter pays”, and recognizes that contamination may be difficult to detect in some circumstances, where strict application of limitation periods may be unreasonable or unfair. However, those objectives need to be balanced against the rationale for limitation periods, for example, that defendants be protected from “ancient obligations”, disputes should be resolved while evidence is still available and witnesses’ memories are still fresh, and claimants ought to act in a timely manner.

Ultimately, the Court of Appeal upheld the Chambers Judge’s finding that Imperial Oil was sufficiently prejudiced in maintaining a defence that and accordingly, the limitation period should not be extended. Despite the finding that Brookfield Residential was duly diligent in discovering the contamination, the actions complained of occurred some 50 or 60 years prior to the claim being filed, and the prejudice to the defendant was the determinative factor. On that basis, Brookfield Residential’s application to extend the limitation period was denied, and the action against Imperial Oil was dismissed. The Court of Appeal found that the Chambers Judge considered the relevant factors, made no palpable and overriding error and accordingly, his discretionary decision in relation to EPEA section 218 should not be disturbed.

The Court of Appeal also took the opportunity to comment on another Queen’s Bench decision, Lakeview Village, and clarified the process for EPEA section 218 applications. The Chambers Judge in Lakeview Village created a test for determining if an application for extending the limitation period could appropriately be decided in a pre-trial application, or if it should be a matter for trial. However, the Court of Appeal in Brookfield rejected that approach, finding that it is inconsistent with the wording and intent of EPEA section 218. Rather, a motion to extend the limitation period should be decided in a pre-trial application, and deferring a section 218 application to trial defeats the whole purpose of the provision. The Court of Appeal expressly stated that the Lakeview Village approach should not be followed, and section 218 applications should be decided prior to trial.

The Court of Appeal’s decision in Brookfield is significant as it highlights the importance of prejudice to the defendant when considering limitation issues, and furthers the trend in Canada to resolve litigation in pre-trial summary applications, where appropriate. Additionally, the Brookfield decision clarifies the process for applications under EPEA section 218, which were subject to some uncertainty following the Lakeview Village decision in 2016.

For more information on how the Brookfield decision may affect you, please contact Sean Parker, Gavin Fitch, Q.C., or any other member of our Energy, Environmental & Regulatory Practice Group.