The Supreme Court of Canada has dismissed BC’s attempt to block the Trans Mountain Pipeline: here’s what you need to know

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On January 16, 2020, the Supreme Court of Canada (“SCC”) dismissed an appeal by the government of British Columbia in which it sought to defend its beleaguered anti-pipeline legislation. BC’s law, the Environmental Management Act (also known as the “turn off the taps bill”), would have effectively killed the Trans Mountain Pipeline Expansion project (“TMX”) by regulating the flow of heavy oil through the province.

The SCC’s ruling upholds the decision of the British Columbia Court of Appeal, which held that the bill was unconstitutional. As a result, the long-delayed pipeline has cleared another significant hurdle.

The judgment affirms federal jurisdiction over interprovincial undertakings, and is a victory for pipeline proponents. This is reassuring not only for TMX, but also for any future projects that cross provincial boundaries.

McCarthy Tétrault was pleased to act for one of the interveners, the Railway Association of Canada, who took the position that the BC legislation was unconstitutional.

What Makes This Case Unusual?

Particularly in cases of national significance, it is relatively rare for the SCC to make its ruling immediately (i.e. on the same day the oral arguments were made), with no written decision, and to fully endorse the decision of the Court of Appeal below.

Many watching the proceedings on January 16 noted that the BC government faced an especially tough bench who made their misgivings with the legislation abundantly clear prior to the conclusion to oral arguments. This included a comment from Justice Abella that interprovincial pipelines are unquestionably a federal undertaking, and a number of points from Justice Rowe, who underscored that the BC legislation frustrates the federal permitting process, adding that “[t]oday, it’s heavy oil. Tomorrow, it could be anything else.”

This treatment by the SCC is a clear signal that it viewed BC’s appeal as substantially lacking in merit. Given its relatively obvious violation of federal jurisdiction, it might be suggested that the province knew the bill was likely to fail, but it was nevertheless advanced as a political exercise.

The SCC typically prefers to weigh in on cases where the law requires clarification. In this case, BC had an automatic right of appeal, which meant the SCC had no choice but to hear arguments. However, the fact that the Court declined to issue a written decision in this case is likely one indication that the judges felt the law is already clear on this point.

Background

In 2018, the BC government introduced amendments to the Environmental Management Act (“EMA”) prohibiting anyone from possessing heavy oil in quantities greater than that possessed between 2013 and 2017, unless they obtained a hazardous substance permit.

The BC government asked the Court of Appeal to weigh in on the amendments in a constitutional reference which pitted BC against Ottawa and Alberta.

The Court of Appeal Decision

In support of its legislation, the BC government argued that the purpose of its amendment was not to regulate an interprovincial pipeline, but to regulate the release of hazardous substances into the environment. It stated that the effect on TMX is merely incidental. They also underscored the importance of environmental stewardship to both levels of government, the “disproportionate” impacts of TMX to BC, and that law-making is often best achieved by the level of government closest to those affected (a principle known as subsidiarity).

The Court of Appeal nevertheless found the EMA amendments to be unconstitutional. It held that the “pith and substance” (or dominant characteristic) of the law was “to place conditions on, and if necessary, prohibit, the carriage of heavy oil thorough an interprovincial undertaking”, which is beyond BC’s jurisdiction. The Court found that the amendments would “actually apply only to Trans Mountain’s heavy oil”, thus confirming Canada’s assertion that the law was designed to frustrate the pipeline.

Having found that the law related in substance to a federal head of power, this was “the end of the matter”. Accordingly, the Court noted that unless an undertaking is contained entirely within a province, “federal jurisdiction is the only way in which it may be regulated”.

The Court was quick to add that its decision does not reflect a “sea change” (or decisive shift) in the law away from cooperative federalism. Rather it reflects the constitutional allocation of certain powers exclusively to only one level of government.

Next Steps for TMX

Although the project continues to make headway, the SCC’s dismissal in this case is not the final word in the pipeline battle. Also of note are the ongoing proceedings in the Federal Court of Appeal challenging the federal government’s decision in June 2019 to re-approve the TMX expansion (after its previous approval was quashed by the Court in August 2018). Several First Nations are arguing that Canada has again failed in meeting its duty to consult with Indigenous Peoples. The Federal Court of Appeal heard arguments in December 2019 and has yet to make a decision.

The Bottom Line

The Court of Appeal decision, as affirmed by the SCC, is a clear affirmation of federal authority over interprovincial undertakings. Future challengers may think twice before mounting any jurisdictional arguments against interprovincial projects.

Our team at McCarthy Tétrault has experience navigating the legal challenges and opportunities in the Canada’s energy sector. If you would like more information about this decision and its potential impact on your business, we are here to help. Please contact Will Horne or Zachary Masoud with any questions or for assistance.

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