Articles

2014 Developments in Administrative Law Relevant to Energy Law and Regulation

Author: 1 | March 2015 – Volume 3, issue 1 2015

Introduction

My mandate in this paper is to address 2014 developments in administrative law that are of interest to the energy regulation community. Rather than attempt to assess the impact of the entire range of administrative law developments of potential relevance to energy regulation, I have chosen to confine myself for the most part to developments and case law arising out of energy regulatory settings. Indeed, I have narrowed the field further and will cover just three topics in some detail rather than deal superficially with a broader range of administrative law issues emerging from the regulatory process. Those three topics are: participatory rights at energy regulatory hearings, issues of standard of review emerging in judicial review applications and statutory appeals from decisions of energy regulators, and the evolution of the constitutional duty to consult and, where appropriate, accommodate aboriginal peoples.

Participatory Rights in Energy Regulatory Hearings

a. The New Federal Regime

Until recently, the energy regulatory regimes of Alberta have been the principal contributors to the law governing participatory rights at public hearings on energy issues.2 Largely operating within statutory regimes which make party and intervenor participation at those public hearings dependent on whether those seeking status are “directly and adversely affected”3 or whose “rights”4 are affected, both regulators and courts have evolved a set of principles for making such determinations. To say that the outcomes have been consistent and uncontroversial would be to dissemble, but there is, nonetheless, a body of jurisprudence that provides general and, at times, clear guidance.

Now, however, the centre of attention has changed to the federal regulatory sphere and the National Energy Board in particular. The precipitating cause, as Rowland Harrison has previously outlined in these pages,5 has been section 55.2 of the National Energy Board Act.6 This provision was inserted as part of the amendments to the Act contained in the much-criticized 2012 omnibus legislation, the Jobs, Growth and Long-term Prosperity Act.7 In reaction to the extent of the demand for participatory opportunities at the Joint Review Panel’s consideration of the Northern Gateway Pipeline application, the government clearly intended to provide the Board (and future Joint Review Panels) with the statutory tools to limit participatory opportunities.

Nonetheless, given the Alberta experience, the terms of section 55.2 are interesting. It provides that on an application for a certificate,

… the Board shall consider the representations of any person who, in the Board’s opinion, is directly affected by the granting or refusing of the application, and it may consider the representations of any person who, in its opinion, has relevant information or expertise. A decision of the Board as to whether it will consider the representations of any person is conclusive.8

At one level, it is clear that there is no longer (if there ever were) the possibility of general public access to participatory rights at an NEB hearing on an application for a certificate. However, in conferring discretion on the Board to consider the representations of anyone who “has relevant information or expertise”, the potential exists for broader participation than countenanced under some of the various Alberta regimes.

Subsequently, the Board issued guidelines as to how it would interpret both limbs of the entry points to participation at hearings on an application for a certificate.9 As discussed by Harrison, the first test of the new regime (leaving aside the immediate and vociferous criticism of the legislation by various public interest groups) was Enbridge Pipelines Inc.’s application for approval of reversal of part of Line 9B, a Capacity Expansion Project in relation to the entirety of Line 9, and the transportation of heavy crude oil through a reversed Line 9.

b. The New Regime in Operation – The Enbridge Line 9 Hearing

As part of the process leading to the public hearing of these applications, the Board established a procedure for determining whether a person came within either of the two section 55.2 entry points. Anyone seeking participatory rights was required to submit a form responding to requests for what the Board regarded as information relevant to the determination of status. For these purposes, the Board created two classes of participant: intervenors with rights of audience at the hearing itself and those merely entitled to submit a comment. Moreover, in completing the form, potential participants were required to indicate which level of involvement they were seeking with the Board entitled to disregard that choice at least to the extent of assigning those applying to be intervenors to the commentary category.10

177 individuals and organizations submitted applications to participate. Perhaps surprisingly for those anticipating a very restrictive approach in the interpretation and application of section 55.2, the Board granted 158 applications as requested. In addition, eleven seeking intervenor status were restricted to a letter of comment. Only eight were denied standing outright.11 Nevertheless, there was criticism as reflected in the title of an article on the Canadian Centre for Policy Alternatives website: “Pipeline Reversal Protestors Muzzled; NEB limits public input at oil pipeline reversal hearings.”12

Aside from complaints about the Board’s exclusion of the eight and the assignment of comment status to some applying to be intervenors, the author, Joyce Nelson emphasised the low number of applications for status, something attributed to not only a perception on the part of the public of an intention to put a lid on public participation but also the short time limit for the submission of applications to participate and the complex and user unfriendly nature of the form that had to be completed. Indeed, the article was written against the backdrop of an application to the Federal Court of Appeal for review of three interlocutory decisions of the Board on the Line 9 applications.

c. The Line 9 Process in the Federal Court of Appeal

The applicants for judicial review were the Forest Ethics Advocacy Association, an environmental organization founded in 2000 and with roots in the Friends of Clayoquot Sound, and now with offices in San Francisco and Bellingham, Washington as well as British Columbia,13 and Donna Sinclair, one of the eight persons denied status. The rulings challenged were:

  1. The Board’s exclusion from the scope of the hearing of the “environmental and socio-economic effects associated with upstream activities, the development of the Alberta oil sands, and the downstream use of oil transported by the pipeline”;
  2. The process used to determine participation rights, and, more specifically, the requirements of the application to participate form; and
  3. The rejection of Donna Sinclair’s application to participate seemingly only as a commenter,14 not an intervenor.

The applicants had two bases for each of these challenges: freedom of expression as guaranteed by section 2(b) of the Canadian Charter of Rights and Freedoms and administrative law unreasonableness. Indeed, associated with the challenge to the second ruling was a claim for a declaration that section 55.2 was itself unconstitutional as violating the section 2(b) guarantee.

By the time this application for judicial review was heard, the hearings on Line 9 had been completed and a decision made allowing Enbridge’s applications subject to conditions.15 Nonetheless, the Court of Appeal proceeded to hear the case and, on October 31, 2014, four days after the hearing, delivered judgment rejecting all three limbs of the application.

In Forest Ethics Advocacy Association v National Energy Board,16 Stratas J.A., delivered the judgment of the panel. Before reaching the merits of the interlocutory rulings, he made various “procedural” rulings deserving comment.

First, he denied standing to the Association, describing it as a classic “busybody.”17 Given the Association’s record of involvement in environmental causes, this may at first blush seem somewhat of an overstatement or far too ready a rejection of the status and capacities of the Association. However, the reality was that it had not been involved in the proceedings before the Board in any capacity. According to Stratas J.A., there was also nothing in the materials filed by the Association indicating involvement in section 2(b) issues such as the ones it was now seeking to raise. In terms of the second limb of the Supreme Court’s test for public interest standing,18 the Association’s record did not reveal a “real stake or a genuine interest”19 in the matters it was now raising; a generalized history of advocacy on behalf of environmental causes was obviously not enough. Moreover, Stratas J.A. then noted that, at least as far as participatory rights were concerned, there was someone with standing before the Court: Ms. Sinclair. The Association therefore lost out on the third public interest standing criterion as well. In short, the lesson is that standing will not be accorded readily to organizations that come to the party late not having participated or attempted to participate in regulatory proceedings before bringing an application for judicial review as a public interest litigant.

Secondly, he held that neither the Association nor Ms. Sinclair could rely on the claim that the three interlocutory rulings or section 55.2 itself violated section 2(b) of the Charter. These were matters on which the Board should have had the opportunity to rule. Not only did the Board have the capacity to deal with such Charter questions20 but Supreme Court precedent21 indicated that the invocation of that capacity was an almost invariable condition precedent to the bringing of a judicial review application relying on assertions of Charter violations. Indeed, it appears as though the applicants, aware of this possibility, attempted to finesse this form of prematurity argument by seeking an adjournment of the application so that it could be joined with an application for judicial review of the Board’s participatory rulings in another matter (the Kinder Morgan Trans Mountain Expansion Project application) in which the Board had actually ruled that neither section 55.2 nor its participatory determinations in that matter violated section 2(b) of the Charter.22 The Federal Court rejected that application for an adjournment.

In relation to the need to advance such Charter arguments before the Board, the Court ruled in a manner that should inform regulatory agencies in both the energy sector and elsewhere that have the capacity to deal with Charter questions:

Had the constitutional question been raised before the Board, the Board could have received evidence relevant to it, including any evidence of justification under section 1 of the Charter. The Board would also have had the benefit of cross-examinations and submissions on the matter, along with the opportunity to question all parties on the issues. Then with those advantages, it would have reflected and weighed in on the matter and expressed its views in its reasons. In its reasons, it could have set out its factual appreciations, insights gleaned from specializing over many years with the myriad complex cases it has considered, and any relevant policy understandings. At that point, with a rich, fully-developed record in hand a party could have brought the matter to this Court on judicial review.23

Stratas J.A. then held that the normal principles requiring an initial confrontation of the issue before the agency were not overcome by the seeking of a declaration of unconstitutionality, a remedy that only the Court and not the agency could formally award. All this is indicative of a general theme that underpins the whole of the judgment: respect for the decision-making imperatives of the Board and its specialized jurisdiction and expertise. As a consequence, however, one of the principal issues raised by the application was not determined and must now await the further decision of the Court on the application for judicial review of the Board’s rulings in the Kinder Morgan application.

Once the Charter challenges were excised from the application, the Court was left with the administrative law grounds of challenge – that each of the three rulings was unreasonable – a challenge that seemingly accepted that, on each, unreasonableness rather than correctness was the standard of review by reference to the presumptions and criteria emerging from Dunsmuir v New Brunswick24 and its progeny.

(i) The Scope Ruling

In its Hearing Order of February 19, 2013, the NEB, in Appendix I – List of Issues, stated:

The Board will not consider the environmental and socio-economic effects associated with upstream activities, the development of oil sands, or the downstream use of the oil transported by the pipeline.25

However, it invited suggestions for amendments to the List of Issues. This produced a number of responses and some revisions.26 However, there was no change to the matters specifically excluded from consideration. In its letter of April 4, 2013, the Board justified those exclusions by reference to a range of considerations and, most notably, the absence of any connection between some of the matters excluded and the project for which approval was being sought, the Board’s lack of jurisdiction, the regulatory and policy responsibilities of jurisdictions other than the Board, and the uncertainties or speculative nature of the lines of inquiry relating to some of the excluded issues.27

In holding that neither the Board’s initial scope ruling nor its subsequent rejection of participation for the purposes of raising the issue of climate change was unreasonable, Stratas J.A. endorsed the applicants’ concession that the appropriate standard of review was that of unreasonableness. This was a case of the Board interpreting its empowering statute and, in particular, section 52(2) dealing with the considerations that are or might in the Board’s discretion or opinion be relevant to the making of a recommendation to the Governor in Council at the conclusion of the hearing of any application. Since Dunsmuir and Alberta (Information and Privacy Commissioner) v Alberta Teachers’ Association,28 there was a strong presumption of unreasonableness review in such situations, including any determination of a tribunal or board on issues of relevance. Moreover, he also held by reference to a range of considerations that this was a situation in which the margin of appreciation appropriate under the reasonableness standard was a wide one. Among those considerations were the discretionary or subjective terms in which section 52(2) referenced factors relevant to any consideration of the application and the factually suffused nature of the Board’s task. He also linked sections 52(2) and section 55.2, 2012 additions to the Act intended to

… empower the Board to regulate the scope of proceedings and parties before it more strictly and rigorously.29

In any consideration of whether exclusions in a preliminary scope ruling were reasonable, those objectives loomed large. When coupled with the Board’s own sense of its jurisdictional capacities and limits and the limits arising out of the nature of the particular application before it, there was no case for setting aside any aspect of the scope ruling as unreasonable.

(ii) Establishing Participatory Rights

When the Court came to the process for establishing who was entitled to participatory rights including the form that applicants were required to complete, the issue of the standard of review was not nearly so clearcut despite the concession of reasonableness review by the applicants. Here, Stratas J.A. characterized the issue as a procedural one and then discussed the current controversy over whether correctness is the universal standard of review for procedural fairness issues.30 Ultimately, he determined that the Board’s choice as to how to proceed in determining participatory entitlement was entitled to a significant margin of appreciation or deference. Among the factors considered relevant was the experience and expertise possessed by the Board in devising procedures appropriate for complex regulatory hearings in which the values of public participation and the need to deal with applications to be dealt with in a timely and efficient manner sometimes had to be balanced against each other. He also referred to the open-textured nature of the legislative criteria for according participatory rights as also justifying latitude in the nature of the information that the Board could demand of applicants in assessing whether to allow participation. As well, the Board’s decision in such matters came within the reach of the Act’s privative clause.31

In then moving to a reasonableness or deferential assessment of the contents of the form and the requirements it imposed, Stratas J.A. noted the necessary link between the request for information and the scope ruling. To the extent that the Board was entitled to a margin of appreciation on the scope of the hearing, that margin of appreciation also extended to the Board’s assessment of what information it should require of applicants as to their connection to the matters in issue or within the scope of the hearing. That aside, he was obviously not impressed by arguments that the required form was complicated and excessively long, and therefore acted as a deterrent to those who might otherwise have considered applying for participatory status. Making participation dependent on effort and ensuring that participants did not view the hearings as an opportunity to raise anything they wished irrespective of relevance and degree of connection were laudable rather than unreasonable objectives. He also saw the Board’s demands as consistent with the objectives of section 55.2. The project of conducting hearings that were more focussed and efficient justified the Board being rigorous in the kind of information it required particularly of those such as Ms. Sinclair who sought participatory rights not as persons directly affected but as possessors of “relevant information and expertise.”

In fact, there were serious questions that could be raised about the process for determining participatory rights that do not surface in Stratas J.A.’s judgment such as a fifteen day deadline for the submission of applications for participatory status from the date of the unveiling of the questionnaire. It is also a questionable allocation of resources for the Board to require and then assess detailed responses to a wide-ranging questionnaire from those whose only claim is not for intervenor status but the right to submit a comment to the Board.32 On the other hand, the claims that the questionnaire was too complicated are almost certainly overblown at least for those who are literate in English or French and internet savvy, and, in any event, counteracted at least to some extent by a feature of the process also not mentioned in the Stratas judgment: the designation of a member of the Board’s staff as a Process Advisor for those contemplating applying for participatory status.33

(iii) Denial of Status to Donna Sinclair

Donna Sinclair’s Application to Participate revealed her as living in North Bay which was not in the vicinity of Line 9. Her wish to make some form of written submission was based on her concerns about Enbridge’s spill record, her faith-based belief in the sacred nature of land, and a special familiarity with and empathy for aboriginal peoples and their beliefs and ambitions, all reflected in her work as a journalist and author of many books.34 In its rejection of her application,35 the Board categorized her as having only “a general public interest in the proposed Project” and emphasized her lack of physical proximity to the project. More generally, the Board stated the principles on which it would evaluate participatory claims based on possession of “relevant information and expertise”. The first imperative was that the proposed intervention must be relevant to the issues that the Board had defined as relevant to the application. Secondly, the Board would assess whether or not allowing the applicant participatory rights “will add value to the Board’s assessment.”36 In other words, in terms of its discretion over participatory rights for those who offered relevant information and expertise, the Board was indicating that participation would not be permitted when that information and expertise replicated what was being provided by others or came within the Board’s own specialized or expert knowledge. In terms of structuring the Board’s discretion, there is nothing offensive about these general operating principles and nothing surprising about the Board’s decision to reject Ms. Sinclair’s Application to Participate.

Indeed, this was how Stratas J.A. viewed the matter. First, he noted that a decision on Applications to Participate had both substantive and procedural components. It was substantive in the sense that it depended in part on an evaluation of whether the nature of the participation was at all relevant or material to the issues before the Board. It was procedural in the sense that it concerned whether the applicant would receive some kind of a hearing either as an intervenor or a commenter. After again noting the jurisprudential debate over the standard of review applicable, here too, he accepted that, irrespective of how one characterized the issue, the Board’s assessment of individual applications was entitled to “a significant margin of appreciation.”37

The Board engaged in factual assessment, drawing upon its experience in conducting hearings of this sort and its appreciation of the type of parties that do and do not make useful contributions to its decisions.38

He then noted that the Board’s reasons revealed that it was very conscious of the fact that it was required in making such decisions to balance the importance of providing participatory opportunities against the need for focussed and efficient hearings. Moreover, in so far as the decision on participation implicated values underlying “freedom of expression” protected by section 2(b) of the Charter, even though section 2(b) was not mentioned, the Board’s approach to the determination of applications to participate was consistent with an appreciation of those values and the need to balance them against countervailing concerns.39 With specific reference to the exclusion of Ms. Sinclair, he viewed the justification advanced by the Board as an “acceptable and defensible outcome.”40

d. Conclusions

As an exercise in process design and application, the Board’s decision on participatory rights in the Line 9 hearings passed muster in the Federal Court of Appeal at least in administrative law terms and by reference to the interpretation and application of one of the two limbs of section 55.2, the limb governing access to the process on the part of those offering “relevant information or expertise”. Even though the Board’s rulings were subjected to a reasonableness or deferential standard of review rather than review on a correctness basis, the Court’s decision assuredly offers considerable comfort to the Board in terms of its according of a considerable margin for manoeuvre in the crafting of processes and principles for the determination of participatory entitlements in hearings subject to section 55.2.

However, this is clearly not the end of the matter. Left for another day is the issue of whether the relevant amendments to the Act, and the processes and interpretive standards adopted by the Board infringe the Charter’s section 2(b) guarantee of “freedom of expression”. Indeed, as noted, the Board’s detailed ruling on these questions on an interlocutory motion in the Kinder Morgan Application is currently the subject of judicial review applications.

Also dangling even from a purely administrative law perspective is the question of the standards that the Board established and applied in the Line 9 application for determining whether an applicant qualified for participatory entitlements as of right as someone “directly affected”; Ms. Sinclair’s application was not brought under that limb of section 55.2. In making such judgments, the Board stated that it

… looks at how the person uses the area where the project will be located, how the project will affect the environment and how the effect on the environment will affect the person’s use of the area. The closer these elements are connected (their proximity), the more likely the person is directly affected. An effect that is too remote, speculative or not likely to impact the applicant’s interests will not lead to a finding that an applicant is directly affected.41

In Line 9, the application of this test resulted, for example, in the denial of intervenor status to persons whose claim was based on residency in Toronto potentially affected by a spill.42 However, they were allowed to provide a letter of comment. Similarly, those asserting entitlement based on business interests that would benefit from approval of the project were limited to letters of comment.43

Here too, litigation emerging from the participatory rulings in the Kinder Morgan application will almost certainly provide a forum for consideration of the test for determination of whether someone is “directly affected.” For that hearing, there were 2118 Applications to Participate and 468 were denied outright.44

Also of significance in the Kinder Morgan application is the question of whether the exclusions from the scope of the hearing in Line 9, a case involving a conversion in the use of an existing pipeline, are transferrable to an application involving pipeline expansion. In an expansion context, is there a reasonable justification for exclusion from consideration of the “environmental and socio-economic effects associated with upstream activities, the development of oil sands, or the downstream use of the oil transported by the pipeline”? Is the issue of climate change equally off-limits at this hearing? Indeed, it seems clear that the Kinder Morgan scope ruling45 is also connected to issues raised by some of those granted intervenor status at the public hearing of this application: the apparent refusal of the Board to require Trans Mountain to answer more than 5 percent of questions posed by intervenors46 and the removal of an oral cross-examination phase from the hearing.47 These, of course, are procedural issues that reach well beyond the initial grant of status decisions and that will give rise to yet further examination by the Federal Court.

Standards of Judicial Review in Energy Regulatory Decision-Making

The judgment in Forest Ethics Advocacy Association is an important landmark in the evolution of the law respecting the standard of judicial review to be applied to the decisions and rulings of energy regulators. Certainly, in accepting that reasonableness is the almost immutable standard to be applied when an energy regulator is interpreting its home statute, the Court is merely reiterating what has been apparent since Dunsmuir and Alberta Teachers. However, in extending the standard of reasonableness review to the interpretation and application of provisions in home legislation that are either procedural or of a mixed procedural and substantive nature, Stratas J.A. was wading into somewhat more turbulent waters but nonetheless reflecting a growing body of jurisprudence rejecting a universal correctness standard for the review of issues raising questions of procedural fairness. Also significant in the approach taken by the Court was its holding that, in terms of the emerging (or emerged) conception of reasonableness review as a context-sensitive inquiry, the three interlocutory rulings were with respect to statutory provisions where the regulatory body should be afforded a wide (as opposed to more limited) margin of appreciation. Finally, the Court resisted the argument that reasonableness review as to the scoping decision of the Board should be conducted by reference to the traditional nominate grounds of judicial review and, in particular, on the basis of what in effect would be correctness review of whether the Board had in its scope or list of issues ruling excluded impermissibly a legally relevant (and, indeed, mandatory) consideration.

All of this should be of considerable comfort to energy regulators across the country, though not those challenging the decisions or rulings of regulators; for them, the prospects of successful judicial review or statutory appeal have become that much more daunting. Indeed, the judgment also underscores remedial aspects of judicial review that both support the integrity of the decision making processes of regulatory agencies and generally confine applications for judicial review to the final (as opposed to interlocutory) decisions of these agencies. The first message has already featured in the previous section of this review: Do not come to the Court on Charter challenges to either an agency’s empowering statute or its interpretation and application of that statute until such time as you have raised that issue with the agency itself. The second message, though not applied in that case partly because the point was not taken by the Board or Enbridge, is that even challenges to rulings excluding participatory rights should generally be postponed until such time as the regulatory agency has rendered its final decision on an application. Seeking judicial review of interlocutory rulings by agencies and tribunals fragments the administrative process and is therefore presumptively covered by the prematurity bar.

Affording deference to energy regulators in the discharge of their core functions extends beyond the domain of facilities approval to rate setting as is evident from two cases argued before the Supreme Court of Canada on December 3, 2014 and still under reserve. In both ATCO Gas and Pipelines Ltd. v Alberta (Utilities Commission)48 and Ontario Energy Board v Ontario Power Generation Inc.,49 the respective Courts of Appeal accepted that the relevant energy regulator was entitled to the benefit of deferential reasonableness review in interpreting and applying the provision conferring authority to fix rates charged by regulated utilities on the basis of what is “just and reasonable”. Over the years, however, various methodologies have been developed for the carrying out of rate of return regulation. To some, those methodologies represent a common law regime which underpins the relevant statutory provisions. Seen in that light, any departure from the perceived common law methodologies is regarded as either necessarily unreasonable or to be countenanced only if appropriately justified by the regulator. Indeed, this is how the Ontario Court of Appeal viewed what it perceived as a departure by the Energy Board from an accepted methodology for assessing the appropriateness of costs incurred by the regulated utility. As a consequence, the Court, reversing a majority of the Divisional Court, held that this element of the Board’s rate fixing exercise was unreasonable. This can be seen as contrasting with the rather more fluid approach taken by the Alberta Court of Appeal in ATCO to its assessment of the Alberta Utilities Commission’s treatment of whether costs arising out of the regulated utility’s pension plan were prudently incurred.

Indeed, though the Ontario Court of Appeal in Ontario Power Generation specifically stated that it was conducting reasonableness review, analysis of the judgment suggests that in reality it was an instance of disguised correctness review to the extent that the Court regarded the Board’s methodology in assessing the prudence of the regulated utility’s compensation costs as unjustifiable by reference to the Board’s own precedents previously endorsed as reasonable in an earlier case by the Court of Appeal.50 Whether this was an accurate characterization of both the precedents and the Board’s treatment of costs in the particular circumstances is obviously an issue at stake in the Supreme Court of Canada. However, accepting that characterization, what the Court has done, in terms of the Stratas judgment in Forest Ethics Advocacy Association, is applied a context-sensitive version of reasonableness review in which the range of options available to the Board is not wide but narrowed or confined considerably by reason of the Board’s own past jurisprudence.

It remains to be seen how the Supreme Court of Canada will sort all of this out in the context of the two most significant energy regulation judicial review cases to come to that Court since the controversial 2006 Stores Block case (ATCO Gas and Pipelines Ltd. v Alberta (Energy and Utilities Board)51). There, a majority of the Supreme Court applied a correctness standard to an issue which seemed at the core of the then Board’s authority, the question of whether ratepayers were entitled to a share in the proceeds of an asset previously in the rate base. In conducting review, the majority treated the issue as one of jurisdiction generating automatic correctness review. In contrast, the minority was of the view, even in a pre-Dunsmuir world, that the standard of review should be the now discredited patent unreasonableness.

In the meantime, at least one judge (Fraser C.J.A.) of the Alberta Court of Appeal has confronted the ramifications of the Stores Block judgment as it bears upon standard of review: ATCO Gas and Pipelines Ltd. v Alberta (Utilities Commission).52 For Fraser C.J.A., the appeals from Utilities Commission cost orders in two separate regulatory proceedings reduced themselves to a contest between two conceptions of the entitlement of regulated utilities to recover their legal costs. The Commission’s position was that the costs provision in the relevant legislation applied to regulated utilities and justified the Commission assessing legal costs incurred in participating in those proceedings by reference to a scale of costs created by one of its Rules. In contrast, the regulated utilities contended that they were not covered in law by the costs provision and the relevant Rule but rather by the normal principle of regulatory law that regulated utilities were entitled to the recovery of all costs (including legal costs) prudently incurred as part of their regulated activities including those arising out of participation in regulatory proceedings.

At one level, the case is highly context sensitive and depends essentially on a reading of the specific costs regime applicable to the Alberta Utilities Commission: section 21(1) of the Alberta Utilities Commission Act.53 However, the judgment of Fraser C.J.A. is more generally significant in at least three respects. First, it contains a useful elaboration of the history of energy utility regulation in Alberta and gas and electricity regulation in particular. Secondly, her judgment involves a detailed consideration of what she perceived as a clash or tension between the regulatory compact (developed initially under common law) establishing the principles of cost recovery for regulated utilities traditionally as part of rate of return regulation, and the reading of provisions in regulatory legislation that might derogate from the principles of that compact. Thirdly, the judgment, as already noted, re-evaluates Stores Block and the categorization of issues as ones of “true” jurisdiction attracting correctness review even in a post-Dunsmuir world.

On the standard of review issue, Fraser C.J.A. refused to classify the costs issue as one of “true” jurisdiction. It involved the Commission interpreting its home or constitutive statute and therefore presumptively attracted reasonableness review. In this context, she in effect treated Stores Block as an unsatisfactory precedent that could no longer be relied upon safely in the aftermath of Dunsmuir and its progeny. In other words, the majority decision in Stores Block classifying allocation of rate base disposition proceeds as jurisdictional should no longer be regarded as binding now that the Supreme Court had indicated that the classification of an issue as truly jurisdictional should be exceptional and generally not applied to tribunals and agencies interpreting their own statutes. In this context, she contrasted the matter in issue here from that which the Court of Appeal had confronted in Shaw v Alberta (Utilities Commission).54 There, according to Fraser C.J.A., the issue was one of true jurisdiction in the sense that was at stake was whether amendments to the legislation had in effect transferred authority with respect to the consideration of overriding public interest in a needs assessment for transmission lines from the regulator to the legislative or executive branch of government. In other words, in terms of Dunsmuir, this issue could be classified as one involving the resolution of a competing or duelling jurisdictions issue subject generally to correctness review.

If now part of the general principles of standard of review analysis recognized and applied by the Alberta Court of Appeal, this does amount to an important refining and narrowing of the concept of true jurisdiction in that province. Whether that is so depends on how one reads the other two judgments of the Alberta Court of Appeal. Certainly, it is difficult to treat Martin J.A.’s concurring judgment as supporting the Chief Justice’s analysis since he appeared to engage in correctness standard of review analysis of the legal components of the costs awards in each of the proceedings. Côté J.A., in concurring with Fraser C.J.A. in the result, albeit on a much more limited compass, nonetheless did so within the confines of a reasonableness standard. However, that standard was applied to the merits of the Commission’s costs awards and not to the question of whether section 21 included Commission authority over the legal costs of regulated utilities. While acceptance of the existence of that capacity was implicit in his judgment (and explicit in that of Martin J.A.), it is quite unclear whether Côté J.A. reached that conclusion on a reasonableness or correctness basis, since Fraser C.J.A. ultimately addressed the merits of that question by reference to both reasonableness and correctness standards.

As for the regulatory compact analysis, it is also unclear as to what has emerged from the judgment. At one level, Fraser C.J.A. seems to treat the statute’s costs provisions and the Rule as having liberated the Commission from the shackles of the regulatory compact and conferred a much broader discretion on the Commission with respect to the criteria on which costs would be awarded. However, at the end of her judgment, she was careful to point out that the two proceedings out of which the appeals arose were Commission-initiated hearings into broader regulatory issues and approaches and not a conventional rate of return hearing or hearing on an application by a regulated utility. How the statutory provision and the costs Rule should be applied in those contexts was not argued on these appeals.

Côté J.A. was even more restrained doubting whether it was appropriate to read the costs provision and Rule as justifying in all instances an approach to costs awards unbounded by the regulatory compact and the test of legal costs prudently incurred. Rather, his concurrence was very specifically restricted to the reasonableness of the costs awarded in the particular proceedings before the Commission, proceedings which were not in any direct sense concerned with establishing a rate of return. In those contexts, he was not prepared to set aside the Commission’s approach as being unreasonable.

In partial dissent, Martin J.A. seemed to adopt an approach that differed in principle from that of the Chief Justice. In a sense, he saw the costs provision of the Act and the Rule as having to be read consistently with the regulatory compact and the entitlement of the regulated utility to recover costs reasonably incurred. In determining regulated utility legal costs in any case (including these policy focussed and Commission-initiated proceedings), the test of costs prudently incurred governed. However, to the extent that the Commission’s Rule and application of the Rule in this case could, with the exception of the denial of costs from an earlier phase of one of the two proceedings, be regarded as consistent with the demands of the regulatory compact, there was no basis for setting aside the Commission’s awards.

Obviously, this difference of approach among the three judges leaves open for another day a comprehensive treatment of the Commission’s costs jurisdiction as it applies to regulated utilities.

The Duty to Consult Aboriginal Peoples

a. Defining and Refining the Role of Regulatory Bodies55

The parameters of the Crown’s constitutional duty to consult and, where appropriate, accommodate aboriginal peoples is of critical importance to energy regulators, government departments and agencies having statutory authority that affects the rights and interests of aboriginal peoples, as well as proponents seeking approval from either regulators or government departments or agencies for projects that potentially have an impact on those rights and interests. Devising appropriate procedures and substantive approaches that fulfill this duty is a complex process. Among the design challenges is the current position of the Supreme Court of Canada that, absent explicit legislative conferral of statutory authority, regulatory agencies do not possess the capacity to fulfil the Crown’s constitutional obligation56 though it does appear as though the consultation processes of such agencies and, through them, proponents may be invoked by the Crown as at least in part meeting the Crown’s own obligations. A further layer of complexity is added by reason of the fact that, while regulators have at least in some circumstances the ability to assess as part of an application approval process whether the Crown’s duty to consult has been fulfilled,57 that is a responsibility that may be withdrawn from them as in the case of the Alberta Energy Regulator.58

As a consequence, one of the features of the evolution of the law and practice of the duty to consult during 2014 has been the way in which the newly minted Alberta Aboriginal Consultation Office has been working to establish a legally compatible and compliant relationship with the Alberta Energy Regulator with respect to the duty to consult on Regulator proceedings that implicate land and natural resource management affecting aboriginal rights and interests.59 Indeed, this has not been left entirely in the hands of the Office and the Regulator in the sense that, in October, the Ministers of Energy, and the Environment and Sustainable Development issued a revised Ministerial Order under the Regulator’s constitutive statute, the Responsible Energy Development Act60 directing the Energy Regulator as to its responsibilities with respect to consultation and, in particular, coordination with the work of the Aboriginal Consultation Office.61 Already questions have been raised about the meaning and reach of this Direction62 and undoubtedly further refinements and specificity can be expected as the relationship between the Regulator and the Office develops. Ultimately, of course, the main question will be whether they, with the assistance of the relevant ministries, establish a working relationship and set of protocols which not only are workable (in the sense of being practical and efficient) but also meet the legal obligations found in the ever-growing body of case law.

b. Case Law Developments

As governments and participants in various regulatory processes continue to struggle with procedural design issues, litigation in the arena of the duty to consult continues apace. A great deal of that litigation is now focussed on whether the Crown has on the facts of the particular situation complied with the constitutional duty to consult and, where appropriate, accommodate aboriginal peoples. Many of these cases involve complex evidential inquiries and very detailed application of the criteria established in the leading Supreme Court cases on whether the duty is even triggered, how intense the consultation duty is, and whether, on the facts as found, the appropriate standards have been met.63 However, during 2014 and the very early part of 2015, there were a number of cases that addressed some of the continuing uncertainties in this area. In this context, I will refer to three in particular.

(i) Hupacasath First Nation v Minister of Foreign Affairs Canada64

While not directly involving energy regulation, this Federal Court of Appeal judgment raises an issue as to the exercises of power that the duty to consult reaches. In this instance, it was the entry into and bringing into effect of an investment treaty with the People’s Republic of China. The source of authority for both actions was the Royal Prerogative.

The First Nation brought an application to review this exercise of prerogative power under section 18.1 of the Federal Courts Act.65 It asserted that the government should have consulted with the First Nation before entering into and ratifying the treaty. The basis for this was an assertion that the Treaty and some of its details had the potential to affect adversely the rights and interests of the First Nation.

In delivering the judgment of the Federal Court of Appeal affirming the judgment of Crampton C.J. of the Federal Court dismissing the application for judicial review,66 Stratas J.A. addressed a number of preliminary issues. He decided each of these issues in favour of the First Nation applicant/appellant. First, pure exercises of prerogative power as well as orders made under an exercise of prerogative power were reviewable under section 18.1.67 Secondly, the issue of the lawfulness of the exercise of at least this aspect of the prerogative power with respect to treaties and foreign relations was justiciable; it was within the ken of the Courts. Thirdly, the duty to consult and, where appropriate, accommodate aboriginal peoples could apply in the context of the exercise of prerogative powers in general and treaty and foreign relations powers in particular. Where, however, the First Nation failed in both Courts was in not providing adequate justification of the contention that the entry into and ratification of the Treaty had a sufficient impact on the First Nation’s rights and interests; any effect was, in terms of the tests laid down in the jurisprudence,68 “non-appreciable” and “speculative”. In dismissing the appeal, Stratas J.A. did, however, leave open the possibility of the First Nation bringing an application for judicial review of a decision or action taken under the Treaty which it could demonstrate had had adverse consequences for aboriginal rights and interests.

(ii) Mikisew Cree First Nation v Governor in Council69

Among the judgments referred to by Stratas J.A. in Hupacasath, released on January 9, 2015, was that of Hughes J. of the Federal Court delivered less than a month earlier on December 19, 2014 in Mikisew Cree First Nation v Governor in Council. This was an application for judicial review stemming from two of the 2012 federal omnibus statutes and, in particular, the provisions respecting environmental assessment, species at risk, and navigable waters. The First Nation claimed that, as these measures diminished the extent of environmental and other protection for the rivers and lakes within its traditional lands and used for the fishing, trapping and navigation, the government was obliged by the duty to consult the First Nation at some point in the legislative process.

Despite the obstacles posed by existing jurisprudence on judicial review of the legislative process, Hughes J. held that, in some circumstances, the immunity from review for the introduction and passage of legislation had to yield to the constitutional imperatives of the duty to consult and, where appropriate, accommodate. While that duty did not extend to the preparation of and introduction of legislation in Parliament, it was triggered once the legislation was introduced. At that point, provided there was a sufficient impact on the rights and interests of aboriginal peoples, the duty arose. As a precondition of the passage of the legislation, the duty had to be met. Moreover, here, as opposed to Hupacasath, Hughes J. was of the view that there was a sufficient possibility of an adverse impact on the rights and interests of the First Nation as a result of the operation of some of the provisions of the omnibus legislation. Nonetheless, in recognition of the uncertainty of any such impact, the duty to consult was at the lower end of the procedural spectrum. Also, Hughes J. was of the opinion that the most that the Court should do in response to the failure to consult in this instance was to issue a declaration to that effect. To issue an injunction (or presumably to declare the relevant aspects of the legislation constitutionally invalid) would not sufficiently respect the constitutional relationship among the courts, the legislative, and the executive branches of government.

In combination, the judgments of the Federal Court of Appeal and Hughes J., provided they are not appealed successfully, represent a confirmation of the theory that the constitutional duty to consult and, where appropriate, accommodate binds the Crown across the spectrum of governmental action whether taken under the royal prerogative, by way of Act of Parliament, and, if in those two situations, also by way of subordinate legislation or order-in-council.70 This is an important rounding of the circle on the scope of this constitutional duty that has such importance for energy regulation.

(iii) Tsilhqot’in Nation v British Columbia71

Undoubtedly, the most important aboriginal rights judgment of 2014 was Tsilhqot’in Nation v British Columbia. A full analysis of the reach of this decision is beyond the scope of this review of administrative law cases of significance for energy law and regulation. However, suffice it to say, that not only did the Court find that there had been a failure to consult the affected First Nation with respect to the rights arising out of its now established land claim72 but also that, in the case of successfully asserted land claims, the accommodation aspect of the constitutional duty came close to a requirement of consent to any derogation from the rights associated with the successful claim.73 This adds a whole new dimension (or gives clarity) to the notion of accommodation and will undoubtedly have ramifications for a whole range of litigation involving the constitutional duty.

  1. David Mullan, Emeritus Professor, Faculty of Law, Queen’s University.
  2. For discussion, see David J. Mullan, “Regulators and the Courts: A Ten Year Perspective” (2013), 1 ERQ 13, at 15-19. See, in particular, Kelly v Alberta (Energy Resources Conservation Board), 2011 ABCA 325, 515 AR 201.
  3. See e.g. Alberta Utilities Commission Act, SA, c A-37.2, s 9.
  4. Administrative Procedures and Jurisdiction Act, RSA 200, c A-3 (as amended), s 1.
  5. Rowland J. Harrison, Q.C., “Enbridge Line 9 Reversal” (2014), 2 ERQ 129.
  6. National Energy Board Act, RSC 1985, c N-7, [NEB Act].
  7. Jobs, Growth and Long-term Prosperity Act, SC 2012, c 19, s 83.
  8. There is an interesting divergence between section 55.2 and the provisions of the Canadian Environmental Assessment Act, SC 2012, c 19, s 52, also enacted as part of the Jobs, Growth and Long-term Prosperity Act. Section 2(2) of that Act defines “interested person” in terms of someone who in the opinion of the regulator is “directly affected” or “has relevant information and expertise”. However, under section 28, all interested persons have the right to a participatory opportunity at hearings where a certificate is required under section 58 of the National Energy Board Act. This contrasts with section 52.2 under which the Board still has discretion to hear from those it has determined to have “relevant information and expertise.” In the Ruling on Participation in The Trans Mountain Expansion Project, Hearing Order OH-001-2014 (April 2, 2014) at 5, the National Energy Board noted this difference but then described it as having no practical significance.
  9. Section 55.2 Guidance – Participation in a Facilities Hearing, <http://www.neb-one.gc.ca/prtcptn/pblchrng/prtcptnthrhrnggdncs52_2-eng.html>.
  10. Hearing Order OH-002-2013, Enbridge Pipelines Inc. (Enbridge), Line 9 Reversal and Line 9 Capacity Expansion Project, Application under Section 58 of the NEB Act (February 19, 2013), at paras 28-33.
  11. Hearing Order OH-002-2013, Procedural Update No 2 – Ruling on Participation and Updated Timetable of Events (May 22, 2013).
  12. Joyce Nelson, “Pipeline Reversal Protesters Muzzled; NEB Limits Public Input at Oil Pipleine Reversal Hearings” (October 1, 2013), online: Canadian Center for Policy Alternatives <https://www.policyalternatives.ca/publications/monitor/pipeline-reversal-protestors-muzzled>.
  13. For a description of the current organizational framework, see “ForestEthics is now operating as an international coalition: Coalition FAQs”, online: ForestEthics <http://forestethics.org/forestethics-now-operating-international-coalition-coalition-faqs>.
  14. Her Application to Participate is accessible on the National Energy Board’s website. Copy also available on request. In completing the form, Ms. Sinclair did not fill in the section requiring applicants to identify the capacity in which they were applying to be recognized. However, other parts of her responses indicated that she wanted no more than an opportunity to make a written submission.
  15. Enbridge Pipelines Inc., Reasons for Decision (6 March 2013), OH-002-2013.
  16. Forest Ethics Advocacy Association v National Energy Board, 2014 FCA 245 [Forest Ethics].
  17. Ibid at para 33.
  18. As articulated most recently in Canada (Attorney General) v Downtown Eastside Sex Workers United Against Violence Society, 2012 SCC 45, [2012] 2 SCR 524.
  19. Forest Ethics, supra note 16 at para 34.
  20. As established in principle by Nova Scotia (Workers’ Compensation Board) v Martin; Nova Scotia (Workers’ Compensation Board) v Laseur, 2003 SCC 54, [2003] 2 SCR 504, and confirmed in this case by section 12(2) of the National Energy Board Act and its conferral of authority on the Board of exclusive jurisdiction to hear all issues of fact and law, including constitutional issues, that arise in its proceedings.
  21. See Mackay v Manitoba, [1989] 2 SCR 357. See also Stratas J.A.’s earlier judgment in Canada (Attorney General) v Quadrini, 2010 FCA 246, [2012] 2 FCR 3.
  22. Hearing Order OH-001-2014, Trans Mountain Pipeline ULC (Trans Mountain), Application for Trans Mountain Expansion Project (Project), Ms. Lynne M Quarmby and others – notices of motion – dated 6 and 15 May 2014, Ruling No 34.
  23. Supra note 16 at para 42.
  24. Dunsmuir v New Brunswick, 2008 SCC 9, [2008] 1 SCR 190 [Dunsmuir].
  25. Supra note 10 at Appendix I.
  26. Hearing Order OH-002-2013 – Procedural Update No 1 – List of Issues and Application to Participate Form, at 1-7 and Appendix I.
  27. Ibid at 7.
  28. Alberta (Information and Privacy Commissioner) v Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 SCR 654.
  29. Forest Ethics, supra note 16, at para 69.
  30. The ambivalence of the Supreme Court on this issue is amply illustrated by the judgment of LeBel J., for the Court, in Mission Institution v Khela, 2014 SCC 24, [2014] 1 SCR 502, at paras 79 (correctness) and 89 (deference to procedural rules and rulings). It is also reflected in the differing approaches of Evans J.A. in Re: Sound v Fitness Industry Council of Canada, 2014 FCA 48, at paras 34-42, and Stratas J.A. himself in Maritime Broadcasting System Ltd. v Canadian Media Guild, 2014 FCA 59, at paras 50-56, discussed by Stratas J.A. in Forest Ethics, supra note 16 at paras 70-73.
  31. National Energy Board Act, section 23(1). Also, section 55.2 states that the Board’s determination as to participatory rights is “conclusive.”
  32. See e.g. Andrew Gage“NEB should abandon undemocratic limits on public comment” (April 10 2013), online: West Coast Environmental Law, <http://wcel.org/resources/environmental-law-alert/neb-should-abandon-undemocratic-limits-public-comment> (updated 7 August 2013).
  33. Supra note 10 at 5 and Appendix VIII.
  34. Supra note 14.
  35. Supra note 11 at 12.
  36. Ibid at 3.
  37. Supra note 16 at para 82.
  38. Ibid.
  39. Ibid at 83, with reference to Doré v Barreau du Québec, 2012 SCC 12, [2012] 1 SCR 395, at para 24, and its prescription of reasonableness review for decision-making that engages Charter values.
  40. Ibid.
  41. Supra note 11 at 3.
  42. Ibid at 5-7.
  43. Ibid at 7-8.
  44. Supra note 8 at 1.
  45. Hearing Order OH-001-2014, Trans Mountain Pipeline ULC, Trans Mountain Expansion Project (2 April 2014) at 4 and Appendix I.
  46. See “Energy Executive Blasts Kinder Morgan Review as “Fraudulent,” Quits”, online: <http://dogwoodinitiative.org/blog/fraudulent-process> containing a November 2, 2014 letter to the National Energy Board, from Marc Eliesen, former CEO of B.C. Hydro and Chair of Manitoba Hydro, withdrawing as a participant in the Kinder Morgan hearing.
  47. See Hearing Order OH-001-2014, Trans Mountain Pipeline ULC (Trans Mountain), Application for the Trans Mountain Expansion Project (Application), Notices of motion from Ms. Robyn Allan and Ms. Elizabeth May to include cross-examination of witnesses, Ruling No 14 (7 May 2014).
  48. ATCO Gas and Pipelines Ltd. v Alberta (Utilities Commission) 2013 ABCA 310, 2013 CarswellAlta 1984, leave to appeal to SCC granted, [2013] SCCA No 459 and appeal heard on December 3, 2014.
  49. Ontario Energy Board v Ontario Power Generation Inc. 2013 ONCA 359, 116 OR (3d) 793 (sub nom. Power Workers’ Union, Canadian Union of Public Employees, Local 1000 v Ontario (Energy Board)), rev’g. 2012 ONSC 729, 109 OR (3d) 576, leave to appeal to SCC granted, [2013] SCCA No 339 and appeal heard on December 3 2014. (For elaboration see Gordon E. Kaiser, “The Prudence Doctrine Goes to the Supreme Court of Canada: the Alberta and Ontario Appeals will be Heard at the Same Time” (Summer 2014), 2 ERQ 205.)
  50. Enbridge Gas Distribution Inc. v Ontario (Energy Board), 2010 OAC 4.
  51. ATCO Gas and Pipelines Ltd. v Alberta (Energy and Utilities Board), 2006 SCC 4, [2006] 1 SCR 140.
  52. ATCO Gas and Pipelines Ltd. v Alberta (Utilities Commission), 2014 ABCA 397.
  53. Supra note 3 s 21(1).
  54. Shaw v Alberta (Utilities Commission), 2012 ABCA 378, 539 AR 315. See, however, in contrast, Williams Energy (Canada) Inc. v Alberta Utilities Commission, 2014 ABCA 51, treating as subject to reasonableness review the issue of whether the Commission could respond to an application to set rates for the use of a pipeline without an order from the Lieutenant Governor in Council. However, in reviewing the Commission’s decision on this point, the Court’s analysis reads as correctness review.
  55. For a comprehensive discussion, see Keith B. Bergner, “The Crown’s Duty to Consult and the Role of the Energy Regulator” (2014), 2 ERQ 15.
  56. Rio Tinto Alcan Inc. v Carrier Sekani Tribal Council, 2010 SCC 43, [2010] 2 SCR 650.
  57. Ibid at 68-70.
  58. Responsible Energy Development Act, SA 2012, c R-17.3, s 21:
    The Regulator has no jurisdiction with respect to assessing the adequacy of Crown consultation associated with the rights of aboriginal peoples as recognized and affirmed under Part II of the Constitution Act, 1982.
  59. See The Government of Alberta’s Guidelines on Consultation with First Nations on Land and Natural Resource Management (July 28, 2014) at 7. See also Government of Alberta Proponent’s Guide to First Nations Consultation Procedures for Land Dispositions (September 3, 2014). (For other discussion, see Hannah Roskey, “Alberta Government Releases Guidelines to Clarify First Nations Consultation Process” (Fall 2014), 2 ERQ 265.)
  60. Supra note 58, s 67.
  61. See Aboriginal Consultation Direction, An Appendix to Energy Ministerial Order 105/2014 and Environment and Sustainable Resource Development Ministerial Order 53/2014 (October 31, 2014), replacing Energy Ministerial Order 141/2013 (November 26, 2013).
  62. See Giorilyn Bruno and Nigel Bankes, “A Revised Aboriginal Consultation Direction issued to the Alberta Energy Regulator”, online: Ablawg <http://ablawg.ca/2014/12/08/a-revised-aboriginal-consultation-direction-issued-to-the-alberta-energy-regulator/>.
  63. See, for example, Adam v Minister of the Environment, 2014 FC 1185 and Fort McKay First Nation v Alberta (Minister of Environment and Sustainable Resource Development), 2014 ABQB 393, 98 Alta LR (5th) 1.
  64. Hupacasath First Nation v Minister of Foreign Affairs Canada, 2015 FCA 4.
  65. Federal Courts Act, RSC 1985, c F-7.
  66. 2013 FC 900, 438 FTR 210.
  67. Refusing to follow the Ontario Court of Appeal in Black v Canada (Prime Minister) (2001), 54 OR (3d) 215.
  68. And, in particular, Rio Tinto Alcan Inc. v Carrier Sekani Tribal Council, 2010 SCC 43, [2010] 2 SCR 650, at para 46.
  69. Mikisew Cree First Nation v Governor in Council, 2014 FC 1244.
  70. On the more general issue of the authority of Cabinet to determine questions of law in regulatory matters and the standard of review applicable to any such determinations, see Canadian National Railway Co. v Canada (Attorney General), 2014 SCC 40, 458 NR 150, a case arising out of the review jurisdiction of the Governor in Council over the Canadian Transportation Agency.
  71. Tsilhqot’in Nation v British Columbia, 2014 SCC 44, 459 NR 287.
  72. Ibid at paras 95-97.
  73. Ibid at para 97, it is asserted that a failure to consult can be cured by securing consent.

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