On Thursday, October 28, 2010, the Supreme Court of Canada released its decision in Rio Tinto Alcan Inc. v. Carrier Sekani Tribal Council, overturning the British Columbia Court of Appeal and confirming the decision of the British Columbia Utilities Commission (the “Commission”) approving the 2007 Energy Purchase Agreement entered into by Alcan and BC Hydro (the “2007 EPA”). The 2007 EPA commits Alcan to supplying and BC Hydro to purchasing excess electricity generated by the Kenney Dam project in the Nechako River in northwestern British Columbia until 2034.

The government of British Columbia authorized the building of the dam by Alcan in the 1950s. The dam affected the amount and timing of water flows into the Nechako River, impacting fisheries on lands now claimed by the Carrier Sekani Tribal Council (“CSTC”) First Nations. Alcan effected these water diversions under a final water licence which gives Alcan use of the water on permanent basis. The electricity generated by the project has been used over the years primarily for aluminum smelting. Since 1961, however, Alcan has sold its excess power to BC Hydro.

The CSTC First Nations were not consulted about the diversion of the river effected by the 1950s dam project and asserted a constitutional right of consultation with respect to the 2007 EPA under s. 35 of the Constitution Act, 1982.

The 2007 EPA was subject to review before the Commission. The Commission accepted that it had the power to consider the adequacy of consultation with aboriginal groups, but found that the consultation issue could not arise because the 2007 EPA would not adversely affect any aboriginal interest. The British Columbia Court of Appeal reversed the Commission’s orders and remitted the case to the Commission for evidence and argument on whether a duty to consult First Nations exists and, if so, whether it had been met. Alcan and BC Hydro appealed.

Chief Justice McLachlin, writing for a unanimous Court, reviewed the three elements from the Haida Nation v. British Columbia (Minister of Forests) decision that must be satisfied in order for the duty of consultation to be triggered. First, the Crown must have knowledge, actual or constructive, of a potential aboriginal claim or right. Second, there must be contemplated Crown conduct. Third, there must be the potential for the contemplated conduct to adversely affect an aboriginal claim or right.

The Court easily found that the first and second elements were met. The CSTC First Nations’ claims were well-known to the Crown and BC Hydro’s proposal to enter into an agreement to purchase electricity from Alcan was clearly proposed Crown conduct. The issue was whether the Commission acted reasonably in finding that the third element – adverse impact on an aboriginal claim or right caused by the Crown conduct – had not been met. The Chief Justice found that the Commission was correct in concluding that an underlying infringement, in and of itself, would not constitute an adverse impact giving rise to a duty to consult. The claimant must show a causal relation between the proposed government conduct or decision and a potential for adverse impacts on pending aboriginal claims or rights. The Court stated:

The question is whether there is a claim or right that potentially may be adversely impacted by the current government conduct or decision in question. Prior and continuing breaches, including prior failures to consult, will only trigger a duty to consult if the present decision has the potential of causing a novel adverse impact on a present claim or existing right. This is not to say that there is no remedy for past and continuing breaches, including previous failures to consult. As noted in Haida Nation, a breach of the duty to consult may be remedied in various ways, including the awarding of damages. To trigger a fresh duty of consultation — the matter which is here at issue — a contemplated Crown action must put current claims and rights in jeopardy. [Emphasis in original]

Since the evidence before the Commission established that the 2007 EPA would have no impact on the Nechako River water levels, the Nechako fisheries, or the management of the contested resource, the Commission was correct in concluding that the 2007 EPA had no potential to adversely impact on aboriginal interests. The failure to consult on the initial project was an underlying infringement, and was not sufficient to trigger a duty to consult.

In the course of its reasons, the Supreme Court of Canada also commented on the second element of the duty to consult, that is, contemplated Crown conduct. Of particular interest, the Court stated that government action engaging the duty to consult is not confined to decisions or conduct which have an immediate impact on lands and resources. A potential for adverse impact suffices. Thus, the duty to consult extends to strategic, higher level decisions that may have an impact on aboriginal claims and rights. Further, although the adverse effects are often physical in nature, physical impacts are not the only impacts to be considered. Adverse impacts extend to any effect that may prejudice a pending aboriginal claim or right. High-level management decisions or structural changes to the resource’s management may set the stage for further decisions that will have a direct adverse impact on land and resources. These decisions may have no immediate impact on the lands and resources, but may nonetheless trigger the duty to consult.

Finally, in its decision the Supreme Court of Canada highlighted the protective features of the duty to consult, stating that the duty is grounded in the need to protect aboriginal rights and to preserve the future use of the resources claimed by Aboriginal peoples. The Court further noted that the duty to consult can be used to delay ongoing development and “may thus serve not only as a tool to settle interim resource issues but also… as a tool to achieve longer term compensatory goals.”