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).

The Board’s decision is noteworthy for its discussion of:

  • the Board’s role in reviewing regulatory approvals and decisions;
  • the purpose of the Water Act;
  • the technical evidence required for a Water Act licence and the deficiencies in the evidence provided by Nexen in support of the Licence; and
  • procedural aspects of the Crown’s duty to consult in the context of treaty rights.

Overview

The Ministry of Forests, Lands and Natural Resource Operations (the Ministry) issued the Licence to Nexen in May 2012. The Licence authorized Nexen to withdraw up to 2.5 million cubic metres of water annually from the North Tsea Lake. The water was to be diverted into storage dugouts and used for oilfield injection for shale gas fracturing, for a term expiring on December 31, 2017. Prior to receiving the Licence, Nexen withdrew water under a short-term licence.

The Tsea River Watershed is within the traditional territory of the Fort Nelson First Nation (the First Nation), a Treaty 8 signatory. In June 2012, the First Nation appealed the Ministry’s decision to issue the Licence on the grounds that the Licence was flawed and would cause harm to the environment, and that the provincial Crown breached its duty to consult with and accommodate the First Nation regarding the potential impacts of the Licence on its treaty rights.

The Board heard the First Nation’s appeal between October 2013 and January 2014. Nexen was permitted to withdraw water under the Licence until the Board reached its decision to revoke the Licence on September 3, 2015. On the technical merits of the Licence, the Board concluded that the science behind the Licence was fundamentally flawed in concept and operation. In particular, the Board’s assessment found that the flow-weighted withdrawal scheme authorized by the Licence was not supported by scientific precedent, appropriate modelling, or adequate field data. Further, the Board found that excessive water withdrawals may cause adverse effects on the habitat of aquatic and riparian species. The Board also found that the Ministry breached its duty consult, primarily because it failed to carry out good faith consultation with the First Nation in the months prior to issuing the Licence in 2012.

Role of Environmental Appeal Board

As a preliminary matter, the Board held that its powers and procedures for hearing and deciding an appeal under the Water Act are not limited to reviewing the decision and the decision making process, for errors, but instead, the Board can conduct a new hearing.[1] The Board’s ruling is consistent with earlier decisions it has made on its jurisdiction and means that the Board may consider the merits of the Licence based on all of the relevant information presented at the hearing, including new evidence that became available after the Licence was issued.[2] It should however be noted that this broad power is limited with respect to the Board’s consideration of the adequacy of the Crown’s consultation. The Board noted that it is a quasi-judicial tribunal and does not conduct its own independent consultations with First Nations.[3] Therefore, its review of the adequacy of consultation considered only the consultation that occurred prior to issuance of the Licence.

Purpose of the Water Act

In its lengthy analysis of the technical evidence, the Board held that the Water Act serves many purposes, including licensing decisions to allocate and regulate private rights to use water. While the Board held that this purpose includes taking into account potential impacts of the licensed water use on “stream flow, other licensees, and aquatic and riparian species and their habitat” it does not require that licensing decisions consider the cumulative impacts,[4] which in the context of Nexen’s Licence includes the broad cumulative environmental effects of oil and gas developments on the watershed. Instead, the Board noted that those activities and the cumulative environmental effects are regulated under other legislation including the Oil and Gas Activities Act.[5]

The Board also considered whether the precautionary principle was applicable to decisions made pursuant to the Water Act. The Board, as it has done in other appeals, rejected reading-in the precautionary principle to BC’s Water Act. However, its reasons repeatedly take a cautionary or conservative approach to the technical evidence, modelling and monitoring of stream flows and impacts on the aquatic and riparian environment.

Issue 1 – Deficiencies in the Technical Evidence

The Board concluded that the Licence and Nexen’s 2011 Water Plan contained a number of informational gaps and technical errors and inadequacies (these deficiencies are listed in detail at paragraph 296 of the decision). Due to these fundamental flaws in concept and operation, and a flow-weighted withdrawal scheme that was “not supported by scientific precedent, appropriate modelling, or adequate field data,” the Board held that the Licence should be cancelled.[6]

Although it held that the Licence was issued on the basis of inadequate and flawed information, the Board also acknowledged that it would be unreasonable and “inconsistent with the objective of the licensing provisions in the Water Act, to expect applicants to delay developments indefinitely pending studies that attempt to conclusively predict impacts.”[7] The Board went even further to acknowledge that a hard line and unreasonably stringent evidentiary and scientific requirements would only encourage applicants to pursue temporary diversion approvals under section 8 of the Water Act (issued by the Oil and Gas Commission).

It should be noted that section 10 of the new Water Sustainability Act, which is expected to come into force in early 2016, permits the issuance of repeat short-term (up to 24 months) water use approvals to the same person allowing the diversion of water from the same water source for the same water use purpose. This would enshrine in legislation the practice of issuing repeat short-term approvals for water use in connection with certain industrial activities such as hydraulic fracturing.

Please see Part 2 of our discussion here.