On May 24, 2019, the British Columbia Court of Appeal decided unanimously that B.C.’s proposed amendments to the Environmental Management Act (Proposed Law) regarding the Trans Mountain expansion project (TMX Project) were unconstitutional. The court’s decision will have important implications for all provincial regulation of any works and undertakings, such as pipelines or railways, that cross provincial boundaries.
The Proposed Law sought to regulate the possession of “heavy oil” B.C., including the type of heavy crude and diluted bitumen that will be transported through the TMX Project. The Proposed Law applied only to persons who possessed more heavy oil in the province than they had between 2013 and 2017. It prohibited such possession unless the person obtained a permit from a provincial official. Using the permit, the official could place wide-ranging conditions on the person’s possession of heavy oil. For example, the permit could include any conditions that the provincial official regarded necessary to protect human health or the environment.
Under the Constitution of Canada (Constitution), the federal Parliament has authority to pass laws about interprovincial “works and undertakings,” including pipelines that cross provincial borders like the TMX Project. Canada argued that the Proposed Law was unconstitutional because it infringed exclusive federal jurisdiction over interprovincial works and undertakings. B.C.’s position was that, despite its effect on the TMX project, the Proposed Law was valid under the province’s power to regulate property in the province and local matters, which includes some authority to regulate the environment.
The court rejected B.C.’s argument and held that the purpose and effect of the Proposed Law was to regulate interprovincial undertakings like the TMX Project. As a result, it was outside the province’s constitutional authority. The court found that the TMX Project is “not only a ‘British Columbia project’” but one that “affects the country as a whole, and falls to be regulated taking into account the interests of the country as a whole.”
The court characterized the Proposed Law as “an immediate and existential threat to a federal undertaking that is being expanded specifically to increase the amount of oil being transported through British Columbia.” The Proposed Law would prohibit the TMX Project from operating in the province until a provincial official decided otherwise. This would “usurp” the role of the National Energy Board, which regulates the flow of energy resources across Canada.
As a result, the court reasoned that “it is simply not practical – or appropriate in terms of constitutional law – for different laws and regulations to apply to an interprovincial pipeline (or railway or communications infrastructure) every time it crosses a border.” The Constitution gives the federal Parliament authority over interprovincial undertakings so that “a single regulator [may] consider interests and concerns beyond those of the individual province(s).”
The B.C. Court of Appeal’s unanimous decision reinforces the long-standing constitutional principle that the federal Parliament has exclusive legislative jurisdiction over interprovincial works and undertakings, such as interprovincial railways or pipelines. The provinces may not pass laws that, in essence, regulate federal matters.
While the Proposed Law was framed as a law of general application, the court found that it was in effect “targeted at one substance in one (interprovincial) pipeline.” However, the court’s reasoning strongly suggests that even broadly framed provincial environmental legislation cannot constitutionally be applied to federal works and undertakings. The court held that an interprovincial pipeline “would be ‘stymied’ by the necessity to comply with different conditions governing its route, construction, cargo, safety measures, spill prevention, and the aftermath of any accidental release of oil” every time it crossed a provincial boundary. In the future, other courts could rely on this reasoning to hold that general environmental legislation is constitutionally inapplicable or operable to federal works and undertakings.
Finally, B.C. has announced that it will appeal this case to the Supreme Court of Canada, which will have the final word on the matter.
Blakes lawyers Bill Kaplan, Q.C., Cathy Beagan Flood, Peter Keohane, Ben Rogers, Joanne Lysyk, Laura Cundari, Rebecca Spigelman (now of Gilbert and Tobin in Sydney, Australia) and Christopher DiMatteo acted for an interested party, the Consortium of Energy Producers, in this matter.
For further information, please contact Cathy Beagan Flood, or any member of the Blakes team listed above.
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