Canada: B.C. Utilities Commission Must “Grasp the Nettle” and Decide Aboriginal Consultation Disputes

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Aboriginal Law/Energy, February 2009

On February 18, 2009, the B.C. Court of Appeal issued two decisions requiring the British Columbia Utilities Commission (the Commission), when making its decisions, to assess the adequacy of Crown consultation with First Nations. With the tremendous continuing growth in B.C.'s energy sector, including B.C. Hydro's purchase of electricity from independent power producers and the projected expansion of transmission infrastructure, these decisions mark a significant shift in the regulatory regime applicable to many businesses operating in this arena.

In the past, the Commission has typically deferred the issue of aboriginal consultation undertaken by B.C. Hydro (as a regulated utility and the Crown) to other regulators, such as the Environmental Assessment Office. In both decisions, the Court of Appeal clearly held that the Commission has an obligation to determine if the duty to consult arises, the scope of this duty, and whether it has been fulfilled. This puts the Commission squarely in the role of adjudicator of aboriginal consultation and accommodation related to matters before it. This is a role which the Court of Appeal considers integral to upholding the honour of the Crown.

We set out below a brief outline of the facts of each case, an overview of the Court's reasoning, and some thoughts on the potential ramifications of these decisions.

Carrier Sekani Tribal Council v. British Columbia (Utilities Commission)

The backdrop for this case revolves around the historical creation of the Kemano power station in the 1950s by Rio Tinto Alcan (Alcan) and a proposed expansion in the 1990s, often called the Kemano II project. In short, water is diverted from the Kemano River to produce electricity (originally for Alcan's aluminum smelter in Kitimat) and discharged into the Nechako River; water-flows in the river systems were altered, with implications for fish and wildlife. Alcan was granted a water licence to use the flow.

The Carrier Sekani Tribal Council (the Tribal Council) consider the diversion of the water for Alcan's use a historical and continuing infringement of their aboriginal rights and title – a claim also made by the Tribal Council in its pending aboriginal title litigation and within treaty negotiations.

In 2007, B.C. Hydro negotiated an Energy Purchase Agreement (EPA) with Alcan to buy surplus electricity from Alcan's Kemano power station near Kitimat. Before the EPA could be enforceable, B.C. Hydro was required under section 71 of the Utilities Commission Act to apply to the Commission for a determination that the EPA is in the public interest.

The Tribal Council sought to make submissions before the Commission in this section 71 hearing about B.C. Hydro's duty to consult, but the Commission rejected this request. In its motion to be heard before the Commission, the Tribal Council argued that in addition to new physical impacts, the EPA would affect their aboriginal interests in a number of ways, including that it authorizes sales of electricity resulting from diversions of water that causes existing impacts and infringements and makes management and operational decisions about this resource.

The Commission took the position that it had no role in assessing consultation issues. Further, the Commission reasoned that since the EPA had no new physical impacts on Tribal Council territory, any lack of Crown consultation regarding the historical (but continuing) impact was irrelevant to the Commission's assessment of whether the EPA was in the public interest. This was the basis of the Tribal Council's appeal and, as discussed below, these decisions were overturned by the Court of Appeal.

Kwikwetlem First Nation v. British Columbia (Utilities Commission)

In 2006, the British Columbia Transmission Corporation (BCTC) proposed to build a new 246-kilometre 500kV transmission line from Merritt to Coquitlam, called the "Interior to Lower Mainland Transmission Project". BCTC pursued two key approvals for this Project in two separate regulatory contexts. First, it applied for an environmental assessment certificate under applicable environmental assessment laws (the EA process). Second, it applied to the Commission for a certificate of public convenience and necessity (the Certificate) pursuant to s. 45 of the Utilities Commission Act. At the core of this case are two different understandings about these two separate regulatory processes and their interplay.

As part of the Project planning for the EA process, in August 2006 B.C. Hydro (on behalf of BCTC) undertook initial consultation with about 60 First Nations that were identified as potentially impacted by the Project.

In November 2007, BCTC filed its application with the Commission for the Certificate. As a preliminary matter, the Commission established a "scoping process" for deciding whether it should consider the adequacy of consultation and accommodation efforts as part of its determination to grant the Certificate. The Commission sought submissions from BCTC, B.C. Hydro and interested First Nations. Four days before an oral hearing was scheduled involving all of the parties, including about six First Nations registered as interveners, the Commission cancelled the oral hearing because it had decided that it should not address consultation as part of its Certificate decision. Consistent with two prior decisions the Commission had made for similar projects, the Commission reasoned that the EA process created a reliable regulatory scheme as the means for considering whether the Crown had fulfilled its duty to consult for the Project.

Four First Nations appealed this scoping decision to the Court of Appeal, which, as discussed below, overturned the Commission's ruling. In the interim, pending the Court of Appeal's decision, the Commission proceeded with its review of the Certificate and granted it to BCTC in August 2008. The Certificate has not been appealed.

The Court of Appeal's Reasons

While the cases are factually distinct, and consider applications under different parts of the Utilities Commission Act, the Court's approach and findings in each case are virtually identical. In each case, the Court first considered whether the Commission has the jurisdiction and competency to assess the adequacy of the Crown's consultation efforts before assessing whether the Commission's decision to decline to assess the adequacy of those efforts in each situation was justifiable.

Does the Commission have the jurisdiction and competency to assess consultation and accommodation?

The Court of Appeal answered this question with an unequivocal "yes". While observing that the Commission has previously demonstrated an "aversion" to assessing the adequacy of consultation and has a "disinclination to grapple with the issue", it stated that the Court should settle this point. The Court found that the Commission is a quasi-judicial tribunal with authority to decide questions of law on applications before it. As such, the Commission has the jurisdiction and capacity to decide the constitutional questions of whether the duty to consult exists and, if so, whether that duty has been met.

The Commission and B.C. Hydro and BCTC had argued that "Aboriginal law is not in the steady diet" of the Commission. The Court drew on the reconciliatory purpose behind the Crown's duty to consult, holding that there is no other forum that is more appropriate to decide consultation and accommodation issues in a timely and effective manner.

Did the Commission make the wrong decision in declining to assess the adequacy of consultation?

Again, the Court answered "yes".

In Carrier Sekani, the Court held that the Commission had erred by dismissing the Tribal Council's arguments around inadequate consultation as a preliminary matter without allowing those arguments to be heard on their merits. The Court did not hold that the Commission was bound to find that a duty to consult was triggered on these facts, but that the Commission had erred by refusing to entertain argument as to the duty to consult in the context of a section 71 hearing.

Likewise, in Kwikwetlem, the Court held that the Commission was not entitled to rely on the issue of consultation being dealt with in a parallel EA process. The Court observed that the granting of a Certificate under section 45 of the Act is the "first important decision in the process of constructing a power line" and has an effect on the character and scope of potential infringements of asserted First Nations' rights. Again, the Court held that the Commission was not bound to find that consultation efforts had been lacking but, up to that point, that it "is required to assess those efforts to determine whether the Crown's honour was maintained in its dealing with First Nations regarding the potential effects of the proposed project."

A critical point to each decision was the Court's finding that the "Crown's obligation to First Nations requires interactive consultation and, where necessary, accommodation, at every stage of a Crown activity that has the potential to affect their Aboriginal interests." As such, the Commission could not deny its jurisdiction nor rely on a parallel or future process to assess the adequacy of the Crown's efforts to consult and accommodate.

What is the appropriate remedy where the Commission fails to consider consultation?

In each case, the Court ordered the Commission to reopen its process and reconsider the adequacy of the Crown's consultation efforts with respect to the applications under sections 71 and 45 of the Act, respectively. These re-hearings will undoubtedly create some delay for these two specific projects.

Conclusions

These cases highlight the policy considerations around the appropriate role and responsibility of the Commission in dealing with the evolving dynamics of energy growth and diversification in B.C. and the participation of First Nations. In particular, the Court of Appeal sees the Commission as having an integral role to assessing the adequacy of aboriginal consultation and accommodation. The Commission cannot avoid this role by refusing to hear submissions from First Nations,

choose to limit its public interest mandate to exclude these considerations or rely on another regulatory process, such as the EA process, to address aboriginal consultation and accommodation.

The immediate effect of this decision is that – barring an appeal of this decision to the Supreme Court of Canada or a significant legislative amendment expressly limiting the Commission's jurisdiction to consider the adequacy of consultation – proceedings before the Commission will now necessarily involve a consideration of the Crown's duty to consult with First Nations in regards to the matter or project being considered by the Commission.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.