In our October 2008 Energy Update, we discussed the decision by the Ontario Energy Board (OEB) to limit its review of the adequacy of Aboriginal consultation in the Bruce to Milton leave-to-construct proceeding and defer certain issues to the environmental assessment process. The OEB noted in that decision that the area was devoid of "definitive guidance from the courts." The significance of this issue has been elevated since last October by the provincial government's new Green Energy Act, which contains many of the promises that are dependent upon the development and approval of new transmission lines.

Two companion decisions released by the British Columbia Court of Appeal in February 2009 -- Carrier Sekani Tribal Council v. British Columbia (Utilities Commission), 2009 BCCA 67 and Kwikwetlem First Nation v. British Columbia (Utilities Commission), 2009 BCCA 68 - provide some guidance in the area of Aboriginal consultation. In Carrier Sekani, the Court determined that British Columbia's utilities regulator has the jurisdiction and obligation to assess the adequacy of an applicant's consultation efforts; in Kwikwetlem, the Court found that this assessment should not be deferred to the environmental assessment process.

Carrier Sekani was an appeal of a decision of the British Columbia Utilities Commission (BCUC) approving an Energy Purchase Agreement (EPA), under which BC Hydro will purchase electricity from a hydro-generating station owned by Alcan that has been in operation since the 1940s. The Carrier Sekani First Nation claimed that the diversion of water for use in the project was an infringement of their Aboriginal and treaty rights and that BC Hydro therefore had a duty to consult before entering into the EPA. The BCUC declined to deal with the issue, as the EPA will not affect water flows (it is a financial arrangement with limited physical consequences) and Alcan could have avoided the duty to consult by selling its electricity to a non-Crown entity.

In setting aside the BCUC's decision, the Court of Appeal was critical of what it called the BCUC's "aversion to assessing the adequacy of consultation" and concluded the BCUC acted unreasonably by not considering the duty to consult in circumstances where BC Hydro "was taking commercial advantage of an assumed infringement on a massive scale, without consultation." Moreover, the Court held that the BCUC's obligation to consider the public interest gave the BCUC the needed jurisdiction to consider "whether the Crown has a duty to consult and whether it has fulfilled the duty." The Court went on to state that the BCUC was the most appropriate forum to decide consultation issues in a timely and effective manner and that the BCUC has "the skill, expertise and resources to carry out this task."

The companion appeal of Kwikwetlem involved a BCUC approval for a proposed transmission line that will serve the lower mainland and pass through the traditional territory of a number of First Nations. Several of the affected First Nations intervened in the BCUC proceeding and claimed the duty to consult had not been fulfilled by BC Hydro. The BCUC again concluded that it did not need to consider the adequacy of the Crown's consultation and determined that this assessment could be deferred to the future environmental assessment process. The First Nations disagreed with this approach and asserted that the BCUC was effectively precluding their input on alternative solutions to satisfy the lower mainland's anticipated energy shortage.

The BCUC's decision in Kwikwetlem was also set aside by the Court of Appeal. The Court found that deferring the assessment was tantamount to denying First Nations timely access to a Crown decision-maker with authority over the subject matter, and was therefore inconsistent with the honour of the Crown. At the heart of the Court's conclusion was a finding that the BCUC approval process fixed the essential structure of the project and effectively determined the scope of any subsequent environmental assessment. In the Court's view, consultation cannot be deferred in such circumstances and the BCUC should have determined whether "the Crown's honour had been maintained up to that stage of the Crown's activity."

Underlying the two decisions was an understandable concern that in the absence of a forum to address consultation issues, First Nations will be forced to seek interlocutory injunctions in the courts and engage in complex litigation that takes years or decades to resolve. That said, it is questionable whether an economic regulator such as the BCUC has the expertise and resources to deal with these complex questions more expeditiously than the courts. The Court's vague direction that the adequacy of consultation be considered "up to that stage" could also prove troublesome in practice. For example, it is unclear if the OEB's decision in the Bruce to Milton proceeding to limit its assessment of consultation to matters within its jurisdiction would satisfy this threshold.

It should be noted there are unique elements in the British Columbia environmental assessment regime that were important in the Court's analysis and may lead to different conclusions in other Canadian jurisdictions. Legislative action may also fill the void identified by the Court in these two decisions. Nevertheless, these decisions are important precedents, and if followed in Ontario, they could significantly extend the complexity and length of leave-to-construct proceedings before the OEB. To avoid delaying projects dependent on the development of new transmission, it is critical that the Crown be proactive, and in this respect it is notable that the Ontario Power Authority recently announced the establishment of a First Nations and Métis Relations Department.