On August 13, 2015, the Ontario Divisional Court released its decision in Wpd Sumac Ridge Wind Inc. v. Corporation of the City of Kawartha Lakes, 2015 ONSC 4164.[1] This decision, which will be welcome news to wind farm developers in Ontario, confirms that municipalities cannot arbitrarily or for an improper purpose deny an approval-holder the use of a roadway that is explicitly referenced in a Renewable Energy Approval (REA).

Wind farm developers typically require usage of municipal roadways for access during construction and operations, including temporary reconstruction or realignment to permit delivery of oversized components such as turbine blades, as well as the installation and maintenance of transmission or distribution infrastructure to connect to the grid.  As a result, a wind farm developer will usually enter into a road use agreement with the affected municipality in order for both parties to clarify their respective rights in coordination with each other.  REAs also typically reference a road user agreement under a traffic planning or similar provision; however, in any case, negotiating such an agreement is a difficult task when the municipality has declared itself not to be a “willing host.” In this case, the City went much further and among other things also passed a resolution which purported to deny wpd Sumac Ridge Wind Inc. (the Applicant) access to a road, despite the fact that it is a key arterial access road, and was referenced in the application underlying the REA.

The Court found that in denying the Applicant the use of a roadway, the City deliberately frustrated the REA, and acted in bad faith by collaterally attacking the REA. As a result, the Court quashed the resolution denying the Applicant access to the roadway, and ordered the City to enter into road use negotiations with the Applicant in good faith, and in a manner that does not frustrate the purpose of the REA.

Background

The Applicant obtained an REA in December, 2013 from the Ministry of the Environment pursuant to theEnvironmental Protection Act. The REA authorized the Applicant to construct five wind turbines (the Project) in the municipality of the City of Kawartha Lakes (the City). The REA stipulated that the Applicant shall use reasonable efforts to enter into a road users agreement with the City within three months of having provided a traffic management plan to the City.

The City appears to have been opposed to the Project from its inception. Prior to the issuance of the REA, the City petitioned the provincial government to impose a moratorium on all approvals of wind turbine projects until studies confirmed their impact on human health. Furthermore, in February 2013, the City adopted a resolution requesting the provincial government to deny Applicant’s REA application. However, in spite of the foregoing, the City did not raise any concerns regarding proposed access routes until after the REA was issued to the Applicant, in spite of the fact that the City was specifically consulted on this point. 

Approximately four months after the Applicant was granted the REA, the City passed a resolution that purported to prohibit the Applicant’s use of a key roadway. Specifically, the resolution passed by the City provided that “… any request by [the Applicant] and/or future successors for use of the unopened portion of Wild Turkey Road for property access and/or other vehicular traffic to support proposed wind turbine development be refused …”.

The Applicant commenced an application for judicial review to quash the resolution, and sought orders directing the City to consider and decide in good faith:

  • the Applicant’s applications to allow for the upgrading and use of Wild Turkey Road; and
  • the Applicant’s applications for any municipal permits necessary for the expeditious construction and operation of the Project.[2]

The Parties’ Positions at the Hearing of the Application

The Applicant argued that the resolution passed by the City was demonstrative of the City’s intention to obstruct or prevent the construction of the Project, and that the roadway at issue was a central and integral part of the REA as sought and approved by the Ministry.

The City maintained that the resolution represented a lawful exercise of its jurisdiction over roads, pursuant to Ontario’s Municipal Act, 2001 (Municipal Act)[3], and that the resolution was made in furtherance of the public interest and in reliance on the reports of independent consultants. The City also took the position that the resolution did not frustrate the purpose of the Green Energy and Green Economy Act, 2009 (Green Energy Act) or the REA, because of the availability of alternate routes.

The Resolution Frustrates the Purpose of the REA

Section 14(1) of the Municipal Act provides that if a municipal by-law conflicts with a provincial instrument, the by-law is without effect to the extent of the inconsistency.  Section 14(2) of the Act goes on to clarify that a conflict will be found if the by-law frustrates the purpose of an instrument.[4]

The Court stated that the test for determining whether the resolution frustrates the purpose of the REA requires the consideration of: (1) the purpose of the legislative instrument, and (2) whether the exercise of municipal power is incompatible with this purpose.

The Court accepted that the purpose of an REA, as a provincial legislative instrument, was properly explained by the court in East Durham Wind Inc. v. Grey (Municipality), [2014] O.J. No. 3742 (Div. Ct.). There, the court held that the “purpose of the [Green Energy Act] regime as a whole is to encourage and facilitate the development of renewable energy projects in Ontario …”. The Court further held that the purpose of an REA within this legislative scheme is to authorize the building of the project in furtherance of the province’s goal of increasing renewable energy generation.

In the case at bar, the Court held that the resolution passed by the City frustrated the purpose of the REA, and should be quashed, for the following reasons:

  • the City’s jurisdiction over roads is circumscribed by the Green Energy Act and section 14 of theMunicipal Act;
  • the REA approves the application exactly as submitted by the Applicant, and requires that the Applicant construct the Project in accordance with the application;
  • the application explicitly references access routes, including Wild Turkey Road;
  • the Applicant would need to seek an amendment to the REA in order to obtain approval for an alternate access route (and the evidentiary record demonstrated that the City was aware of this fact);
  •  it would be inappropriate to second-guess the elements of the REA, given the comprehensive and specialized process established by the Green Energy Act;
  • the City did not object to the use of Wild Turkey Road during the REA approval process, even though it was consulted on this very issue; and
  • a conflict must considered in terms of the REA as it was approved, not as it might be if it were amended.

The City’s Actions Demonstrate Bad Faith

The Court’s conflict analysis was dispositive of the application; however, the Court opted to address the Applicant’s arguments regarding whether the City acted in bad faith, given that the Court’s reasons on this issue may inform future discussions and negotiations between the Applicant and the City.

The Court held that bad faith on the part of a municipality may be found where a municipality acts unreasonably and arbitrarily, without the degree of fairness, openness and impartiality required of a municipal government,[5] or where a municipality acts for an improper purpose.[6]

The Court found that the City acted in bad faith, because the factual record demonstrated that the City was motivated by its opposition to the Project, as opposed to the legitimate exercise of its jurisdiction over roadways.  In particular:

  • the City refused to engage in discussions with the Applicant about the necessary approvals for the Project prior to the issuance of the REA;
  • the City actively petitioned the provincial government to reject the Applicant’s REA application;
  • the City did not express any concerns about the use of Wild Turkey Road prior to the issuance of the REA, even though municipalities are expressly consulted about proposed access routes for renewable energy projects;[7]
  • the City’s arguments for refusing to allow the use of Wild Turkey Road changed over time;
  • the City’s own report, relied upon by the City in refusing access to Wild Turkey Road, supported the inference that the City’s true goal was to oppose the Project;
  • City Council passed the resolution at issue before the Applicant could complete its Municipal Class Environmental Assessment, as previously required by the City; and
  • permitting the City to challenge the Applicant’s use of Wild Turkey Road at this stage is tantamount to  a collateral attack on the REA, and undermines the comprehensive process established in the Green Energy Act.

Implications

This decision, as well as the reasoning in East Durham, collectively underscore that once an REA is granted that provides for the usage of a roadway, a municipality cannot use its authority under the Municipal Act to frustrate an REA arbitrarily or for an improper purpose by refusing access to that roadway.  

The typical subject matter of road use agreements include confirming issues such as the grant of a non-exclusive easement for the purposes required to construction and operate the wind project, the term of the agreement and any options to extend, the right of the municipality to allow other third parties usage of the roadway for other infrastructure, notification to the municipality of anticipated traffic effects, location of electrical infrastructure within the roadway, provision of plans to the municipality, rights of relocation, required insurance, repair obligations, and indemnification of the municipality, but municipalities cannot prohibit access under the guise of their authority over roads pursuant to the Municipal Act.  The Court pointed out that legitimate issues regarding access should be explored during the REA approval process, which may require municipalities to trouble spot bona fide road use issues at an earlier juncture in the approval process.