A recent Ontario Divisional Court decision, wpd Sumac Ridge Wind Inc. v. Kawartha Lakes (City), represents an important precedent for project developers who are facing opposition from municipalities. The court held that a municipality’s attempt to prevent the development of a provincially approved wind turbine project by passing a resolution that prevented its completion was both ultra vires and an act of “bad faith”. The resolution was accordingly quashed.

Background

Ontario’s Ministry of the Environment had granted wpd Sumac Ridge Wind Inc. a Renewable Energy Approval to construct five wind turbines within the City of Kawartha Lakes. In order for wpd to construct the turbines, the company needed to access and upgrade certain municipal roads. However, Kawartha Lakes was opposed to the project and, even though the Ministry had approved it, passed a resolution that said:  "… any request by Wpd … for use of … [the road in question] … to support [the] proposed wind turbine development [will] be refused…."  The resolution had the effect of preventing the project’s construction. In response, wpd brought an application for judicial review.

The Court’s Ruling

The court quashed the resolution for two reasons. The first was that the resolution frustrated the purpose of the Ministry’s Renewable Energy Approval. The court held, as a general principle, that a municipal resolution that frustrates the purpose of a provincial “legislative instrument” is ultra vires the municipality and consequently of no force or effect. Looking specifically at the facts of this case, the court found (i) that the Ministry’s approval to build the wind turbines was a “legislative instrument”, (ii) that the purpose of the instrument was to “authorize the construction, installation, and operation” of the wind turbines, and (iii) that Kawartha Lakes’ resolution, which had the effect of preventing the “the construction, installation, and operation” of the wind turbines, frustrated the legislative instrument’s purpose. This alone was sufficient reason to quash the resolution.

The court also considered the alternative argument that Kawartha Lakes, in passing the resolution, had acted in bad faith. The court held, again as a general principle, that an exercise of municipal power in bad faith will be quashed. According to the court, a municipality acts in bad faith when, among other things, it acts “for an improper purpose”. One way in which a municipality can act for an improper purpose is by acting with the intent to frustrate a provincial legislative instrument. The court held that for the following reasons, Kawartha Lakes’ resolution was passed with the intent to stop the wind turbine project, was thus an exercise of municipal power for an improper purpose, was an exercise of power in bad faith, and should therefore be quashed:

  • Beginning in early 2011, the Kawartha Lakes rebuffed all of wpd’s efforts to negotiate a Road Users Agreement for access to the roadways.
  • Kawartha Lakes failed to express any concerns about wpd’s proposed use of the road in question before the Ministry granted wpd approval to build the wind turbines in December 2013.
  • The reasons advanced by the Kawartha Lakes for its refusal to allow wpd use of road changed over time.
  • Based on the above, Kawartha Lakes’ motivation for the resolution was ultimately to oppose the wind turbine project, not to oppose wpd’s use of the road.

After the court quashed the resolution, it ordered Kawartha Lakes to enter into good faith negotiations with wpd that would lead to the completion of the project.

Conclusion

In the face of mounting municipal opposition to various energy projects (such as wind projects and oil pipelines), this decision demonstrates the limits of municipal authority in dealing with projects under provincial or federal jurisdiction. Also by making a rare finding of municipal bad faith (in addition to the almost as rare ultra vires finding), the court has sent a clear signal that municipalities cannot improperly use their powers to interfere with the development of a project that has obtained the necessary provincial and/or federal approvals.