Two significant decisions were released on Thursday, February 19, 2009 by the British Columbia Court of Appeal. These cases are significant to natural resource developers as they confirm that project approvals are at risk if regulatory tribunals fail to take into account, and make decisions about, whether the Crown’s duty to consult and accommodate Aboriginal interests has been adequate. Full consideration within regulatory proceedings of whether the Crown’s duty has been met represents both new risks and new opportunities for project proponents.

In Carrier Sekani Tribal Council v. British Columbia (Utilities Commission) (Carrier Sekani Decision), 2009 BCCA 67, the court found that the British Columbia Utilities Commission (Commission) has both the jurisdiction and the obligation to decide the constitutional question of whether the Crown’s duty to consult (and, if necessary, accommodate) exists and, if so, whether that duty has been discharged.

In the second companion decision, Kwikwetlem First Nation, et al v. British Columbia (Utilities Commission) (Kwikwetlem First Nation Decision), 2009 BCCA 68, the court relied on the Carrier Sekani decision to rule that the adequacy of consultation must be assessed at the initial stage of crown decision making (i.e., when an application for a certificate of public convenience and necessity for an electricity transmission project has been made), even though a subsequent decision-making process (the environmental assessment) made specific provision for the consideration of Aboriginal consultation and accommodation.

Carrier Sekani Decision

In 2007, B.C. Hydro entered into an Energy Purchase Agreement (EPA) with Rio Tinto Alcan Inc. (Alcan) to buy electricity produced from Alcan’s Kemano Power Plant. The plant was constructed in the 1940’s and comprises a large-scale hydro-electric dam and reservoir. Construction required the permanent reversal and diversions of major watercourses, resulting in significant implications for fish and wildlife. Water licenses issued to Alcan and construction of the Plant took place without consultation by the Crown with member tribes of the Carrier Sekani Tribal Council about the plant’s impacts.

Since the plant first began its operations, generated power was used for Alcan’s local smelter requirements. Alcan also generated power in excess of its requirements and sold this power to others, including BC Hydro.

The EPA was the latest commercial agreement for the purchase and sale of excess power. Section 71 of the Utilities Commission Act (UCA) required the Commission to determine whether the EPA was in the public interest. This determination must take into account several considerations, including: the government’s energy objectives; the quantity, availability and price of the power; and the price and availability of other alternative energy sources.

During a public hearing process into the section 71 application, the Carrier Sekani had sought to be heard on whether the Crown had fulfilled its duty to consult with them before B.C. Hydro entered into the EPA. The Commission, however, ruled that it did not need to decide whether B.C. Hydro had a duty to consult since there were no new physical impacts arising from the power produced and sold under the EPA and that triggered the duty. The Commission’s decision also meant that it did not need to consider whether historical infringements of aboriginal interests had taken place since the Kemano Power Plant was first constructed.

The court disagreed with the Commission’s ruling and observed that the Commission’s error to assess the Crown’s duty of consultation had an “institutional dimension,” suggesting the Commission had “demonstrated in several cases an aversion to assessing the adequacy of consultation” by having deferred the consultation question to the environmental assessment process. Applying the Supreme Court of Canada decision in R. v. Paul, 2003 SCC 55, the court found that because the Commission was a quasi-judicial body with authority to decide questions of law, it had the necessary jurisdiction and was competent to decide the constitutional question of whether the duty to consult was triggered and, if so, whether it was discharged. Notably, the court ruled that it is not necessary to find an explicit grant of power in the statute to consider constitutional questions. The court also ruled that because section 71 of the UCA mandates review of the EPA according to the public interest, the Commission had the jurisdiction to assess the adequacy of Aboriginal consultation by a Crown agent, in this case the purchaser of the power under the EPA, B.C Hydro.

Of significance is that the court went on to rule that the Commission not only has the ability to decide the consultation issue, it also is the appropriate forum to decide the issue in a timely manner. Furthermore, as an administrative tribunal and Crown actor, the “honour of the Crown” concept that was developed in the seminal Supreme Court of Canada decision in Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73, obliges the Commission to do so. While the Commission is a quasi-judicial tribunal bound to observe the duty of fairness and to act impartially, it is also a creature of government, subject to government direction on energy policy. The honour of the Crown therefore requires the regulatory tribunal to decide any consultation dispute that arises within the scheme of its regulation.

The court also noted that the honour of the Crown entitles Aboriginal groups to early consultation. The court clarified that the logical extension of this principle is the timely assessment of the adequacy of consultation. On the facts before it, the court found that it was an error of law for the Commission to dispose of the consultation issue on a preliminary basis given the significant nature of the historical allegations of continuing infringement of aboriginal title and rights.

The Carrier Sekani Decision is authority for the proposition that regulators, such as the Commission, must consider and make determinations about whether the Crown has adequately fulfilled its duty to consult and accommodate. That much is clear. What is not clear, however, is the process the courts are expecting regulators to follow to fulfill these obligations. In this case, recall that the relief sought before the Commission concerned an approval regarding the economic reasonableness of the power sold under the EPA. The terms of that agreement did not involve the construction of new generation facilities. The plant had been in place for many decades. But, the reasoning in the Carrier Sekani Decision casts significant doubt on how asserted historical and prospective infringements should be considered and addressed before a regulator. Regulators may very well find it necessary to err on the side of caution and implement a broader inquiry process. That approach is likely to lead to lengthier regulatory hearings and more complex evidentiary records. Whether or not such an inquiry actually promotes the Crown’s honour for all, and leads to better decision-making by tribunals in the matters that are expressly within their area of expertise (i.e. in this case, energy regulation), remains uncertain.

Kwikwetlem First Nation Decision

This appeal examined an application under section 45 of the UCA for a Certificate of Public Convenience and Necessity (CPCN) for a transmission line project proposed by the British Columbia Transmission Corporation. A new transmission line was to be built along an existing right of way which would be widened to accommodate the new line and which lay within the traditional land of the Kwikwetlem. An EA process, with a ministerial decision, follows the issuance of a CPCN before a transmission project can proceed. That process specifically contemplates assessing the adequacy of Aboriginal consultation. The Commission therefore determined that it should defer this assessment to the Ministerial EA determination.

The Kwikwetlem appeal argued that this deferral precluded consideration of alternatives to the transmission project. The court relied on the Carrier Sekani Decision to rule that the Commission should have considered whether the Crown’s constitutional duty of consultation had been fulfilled concerning the subject matter of the application. Thus, before it certified the project as necessary and convenient in the public interest, the Commission was required to determine when the Crown’s duty to consult with that project arose, the scope of that duty and whether that duty had been fulfilled.

Implications for Proponents

The possibility that the government may fail in its obligations to Aboriginal communities represents a significant risk to resource developers. Therefore, developers have a vested interest in effectively managing the consultation process to reduce this risk. While such a risk has been apparent for some time now, the assessment of the adequacy of the Crown’s consultation has generally been played out once project approvals have been received. The result can be delay at a time when the costs of delay are the greatest.

The time for assessing the adequacy of the Crown’s duty to consult has now been brought into the regulatory process. This may be the better forum for such an assessment, as the tribunal is best placed to determine impact and whether Aboriginal interests have been accommodated. Regardless of the forum, however, it is now more important than ever that a strong consultation record be brought forward at the application stage. Accordingly, the following steps are advised:

  1.  Involve the Crown Early in the Project Planning Process - As the adequacy of Crown consultation is now an issue for energy regulators to assess and determine, proponents need to plan and work with the Crown early in the process to ensure roles and responsibilities are well defined and understood. Both parties need to carefully plan and consider how the Crown’s evidentiary record of consultation and the assessment process used by the Crown may be put before a regulator, explained and tested through any cross-examination process.
  2.  Effectively Manage the Consultation Process – As the proponent is usually in the best position to share project information and assess the potential impacts from its projects, the proponent is well-advised to have the procedural aspects of Crown consultation expressly delegated to it and then to carry those aspects out. Substantive responsibilities, however, cannot be delegated; they must remain with the Crown. Those substantive roles and responsibilities can be facilitated by having the Crown remain a part of the project planning process. The Crown may then be able to make informed assessments about potential impacts upon asserted rights and the project’s proposed mitigation and accommodation measures.
  3. Take Action to Avoid, Mitigate or Accommodate Impacts – It is not sufficient to learn about Aboriginal interests and how those interests may be impacted but then not take substantive measures to eliminate or reduce those impacts. Proponents must develop a reasonable strategy that specifically addresses identified impacts.
  4. Thoroughly Document the Consultation Process – No matter what the outcome of the consultation process, project proponents must thoroughly document their own Aboriginal consultation and accommodation efforts, any efforts on the part of the Crown, any issues raised, and the responses and mitigation measures provided. This consultation record will provide the evidence required by the board or tribunal to effectively assess whether the duty to consult has been fulfilled.

The consultation process does not always result in a mutually satisfactory solution, despite the corresponding obligation of Aboriginal communities to act in good faith and to participate in that process. Therefore, project proponents that are able to effectively navigate consideration of the Crown’s duty within their regulatory and EA processes will ultimately be successful at mitigating this risk.