Canada: BC Environmental Appeal Board Revokes Horn River Basin Water Licence – Part 2 Of 2

On September 3, 2015, the British Columbia (BC) Environmental Appeal Board (the Board) delivered its decision in Chief Gale and the Fort Nelson First Nation v. Assistant Regional Water Manager & Nexen Inc et al (Decision No. 2012-WAT-013(c)), revoking a water licence issued to Nexen Inc. (Nexen) for the purpose of pumping water from Tsea Lake in BC's Horn River Basin for storage and use in oilfield injection (the Licence).

Please see Part 1 of our discussion here.

Issue 2 – Breach of the Crown's Duty to Consult

The First Nation alleged that the Crown failed to ascertain the nature and scope of its Treaty 8 rights, and did not provide it with an adequate opportunity to provide such information. Due to this lack of information, together with the flaws in the technical data, the Crown could not properly assess the potential impacts on the First Nation's treaty rights or engage in meaningful consultation. The First Nation also alleged various procedural failures of the Crown in consultation. In response, the Ministry and Nexen submitted that the First Nation failed to fulfill its reciprocal obligation to express its concerns in a meaningful and substantive way.

Board's Findings

Based on its conclusions under Issue 1, the Board held that the Ministry had insufficient evidence to conclude that the Licence would have no adverse impact on the First Nation's treaty rights. There was also tangible evidence before the Ministry that the 2012 water withdrawals had caused or contributed to certain changes in riparian vegetation and fish habitat that could impact the exercise of treaty rights. However, the Board also found that the actual impact of the Licence on treaty rights was still uncertain, and there was no evidence the First Nation would be unable to continue its traditional activities in the Tsea Lakes area.[1]

The Board acknowledged that the First Nation was partly responsible for failing to express concerns and provide relevant information regarding the specific impacts of the Licence on the exercise of its members' treaty rights. The Board noted that First Nations have a reciprocal obligation to express their interests and concerns to the Crown and to consult in good faith by whatever means available to them. The failure of the First Nation to share relevant information in its possession, over several years of consultation efforts by the Crown and by Nexen, created the risk that its concerns would not be taken into account.[2]

The Board determined that the level of consultation required in the circumstances was at the mid-range of the Haida spectrum.[3] The Board held that, although a standard of perfection is not required, "the consultation process in this case suffered from an overall lack of understanding and clarity about each party's needs and expectations," particularly given the complex and novel nature of the Licence application.[4] The Board found that there were a number of flaws in the consultation process, including that the Ministry:

  • provided insufficient clarity regarding the respective roles of the Ministry and Nexen in consultation or the consultation process it intended to follow;
  • failed to keep the First Nation regularly informed regarding the status of its review of the Licence application;
  • failed to consider site-specific information regarding the First Nation's treaty rights that was known to it such as the existence of a trapline, and relied upon an irrelevant traditional use study; and
  • failed to disclose relevant technical information to the First Nation.[5]

Despite these procedural shortcomings, which the Board indicated could have been improved, the Board noted that until 2012, the Ministry appeared to have been genuinely willing to share and receive information with the First Nation.[6] The Board also noted that if the First Nation had fulfilled its reciprocal obligation to participate in consultation by providing relevant information regarding the exercise of its treaty rights (such as a "Tsea Lake Use Value" map that it had in its possession), this could have led to better understanding between the parties and accommodation of the First Nation's concerns, prior to the Licence being issued.[7]

However, the Board held that during the final months leading up to the issuance of the Licence in May 2012, the Crown failed to consult with the First Nation in good faith. The record indicated that Ministry staff had concluded internally that any further consultation with the First Nation would not give rise to new information about impacts and would only delay issuance of the Licence, and that they intended to issue the Licence regardless of any further discussions with the First Nation. The Board found that this conduct was inconsistent with the honour of the Crown.[8] In our view, the Ministry's conduct in this regard appears to be the primary basis upon which the Board concluded that the Ministry had breached its duty to consult.

Remedy

The Board's findings under Issue 1 regarding the serious technical flaws in the licensing regime were sufficient for it to conclude that the Licence should be reversed. The Board further concluded that a suspension of the Licence pending further consultation would be insufficient to address such serious flaws, or to protect the First Nation's interests. Accordingly, it held that a reversal of the Licence was appropriate in the circumstances.[9]

Discussion

From a technical perspective, this decision sensibly confirms that water licence applications must be supported with scientifically robust data, backed by ongoing monitoring and reporting commitments. This will help to ensure that the terms and conditions of any licence are responsive to potential environmental impacts, thus reducing the risk of a possible legal challenge on technical grounds.

The decision also highlights that consultation is an ongoing process, and that good faith consultation requires the Crown to be willing to consider, and make changes based upon, new information that emerges, even at a late stage. However, in our view the Board's decision lacks a discussion of the fact that proponents are also entitled to procedural fairness and to expect that Crown decisions will be carried out within a reasonable period of time. As the Supreme Court of Canada noted in Beckman v. Little Salmon, the proponent also has an important stake in the outcome of consultation, and at some point, "somebody has to bring consultation to an end and weigh up the respective interests."[10]

On its face, the decision may give rise to concerns for resource developers, considering the potential prejudice to the proponent resulting from its reliance on the Licence and its subsequent cancellation more than three years after the Licence was issued. However, it is worth noting that the Board concluded that the prejudice to Nexen caused by cancellation of the Licence was minimized in several ways. First, Nexen would have incurred the costs of constructing the water works for its short term licences in any event, prior to applying for the Licence. Further, Nexen had already enjoyed the benefits of water withdrawals under the Licence for more than half of its term, which was due to expire in 2017. Nexen had also indicated its willingness to consider other water sources.[11]

[1] Ibid. at paras. 433 – 434, 437 – 439.

[2] Ibid. at paras. 452, 459 – 461.

[3] Ibid. at para. 440.

[4] Ibid. at para. 449.

[5] Ibid. at paras. 442 – 448, 451, 462.

[6] Ibid. at paras. 463 – 464.

[7] Ibid. at para. 461.

[8] Ibid. at paras. 469 – 485.

[9] Ibid. at paras. 490, 494.

[10] Beckman v. Little Salmon/Carmacks First Nation, [2010] 3 SCR 103, 2010 SCC 53 at para. 84.

[11] Nexen, at paras. 491 – 493.

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