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.
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.
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