2021 saw a number of significant Aboriginal law and policy developments with implications for the energy sector in Canada. This includes several court decisions that could affect project consultation requirements or provide a new basis to challenge certain projects. It also includes further steps by the BC and federal governments to implement the UN Declaration on the Rights of Indigenous Peoples and continued uncertainty around how this will impact project-decision making by these governments as discussed below.

CUMULATIVE IMPACTS HALT DEVELOPMENT IN NORTHEASTERN BC

The most significant Aboriginal law decision for project development in 2021 was Yahey v. British Columbia.¹ In this case, the BC Supreme Court ruled that the BC government has unjustifiably infringed the treaty rights of the Blueberry River First Nations (Blueberry) through the cumulative effects of provincially authorized industrial development over the last several decades. The Court declared that the Province may not continue to authorize activities that unjustifiably infringe Blueberry’s treaty rights, which has effectively paused permitting for projects throughout the Treaty 8 territory in BC while the provincial government attempts to negotiate a path forward with Blueberry and other Treaty 8 First Nations in BC. The decision is likely to lead to increased scrutiny of cumulative impact concerns in project consultation. It is also likely to result in similar claims by other First Nations in Treaty 8 and other areas of the country with historic treaties, although each case will need to be considered based on its particular facts and treaty context.

This case required the BC Supreme Court to consider the extent of the Province’s authority to take up lands under Treaty 8, an historic treaty negotiated in 1899 that includes portions of northeastern BC, northern Alberta, northwest Saskatchewan, and southern Northwest Territories. Treaty 8 provides the First Nations signatories a right to hunt, trap, and fish throughout the tract surrendered except on lands that are taken up from time to time for settlement, mining, etc. The Province argued that Treaty 8 was designed to open up the lands for development and the Blueberry needed to prove that there was no meaningful right to hunt, fish, or trap in their territory to establish an infringement.

Justice Burke of the BC Supreme Court rejected this approach and limited the scope of the land take-up clause. Based on oral assurances provided during treaty negotiations, she found that Treaty 8 guaranteed First Nation signatories and adherents the right to continue their way of life based on hunting, fishing, and trapping and that this way of life would not be forcibly interfered with. She concluded that inherent in this promise is that the Crown would not “significantly affect or destroy basic elements or features needed for that way of life to continue”² and that an infringement would arise if Blueberry’s treaty rights had been “significantly or meaningfully diminished when viewed within the way of life from which they arise and are grounded.”³

The Court held that an infringement had arisen in this case based on the extent of development in the territory, impacts on wildlife of importance, and evidence of certain members about the difficulties they were having in exercising their treaty rights. The Court also provided a very critical review of BC’s measures to assess cumulative impact concerns and found that the BC government had breached the honour of the Crown and its fiduciary duty by failing to protect Blueberry’s treaty rights and adequately respond to and assess cumulative impact concerns.

The BC government decided not to appeal the decision and announced an initial agreement with Blueberry in October 2021 to provide C$65 million in funding to support various way of life. This funding was in exchange for Blueberry’s agreement that 195 forestry and oil and gas projects that were already permitted would be able to proceed. The BC government indicated at that time that 20 currently approved authorizations in areas of high cultural importance would not proceed without further negotiation and agreement from Blueberry. The announcement did not deal with projects that were not yet approved or future ancillary permitting for the 195 approved projects. The path forward for future permitting is currently the subject of larger and longer-term negotiations with Blueberry and other Treaty 8 First Nations.

Beyond the immediate impacts the decision has had on permitting in Treaty 8 territory in BC, the decision will likely lead to similar infringement claims in other areas of Treaty 8 or other areas of the country with historic treaties. The written text of the Historic Numbered Treaties, which cover land from northern Ontario to BC, have similar provisions relating to harvesting rights and land-take up clauses, although each case will be dependent on its specific facts and treaty context. It is important to note that the outcome in this case was largely driven by what was said during treaty negotiations and the Court’s interpretation of how that assurance limited the scope of other clauses in the treaty and impacted the threshold at which an infringement arose — as well as the evidence on the extent of development in Blueberry’s traditional territory. Other courts may take different approaches in assessing the threshold for infringement based on the treaty context among other things. Future cases may also need to contend with the justification defence which the BC government did not argue at trial.

The decision is also likely to lead to increased scrutiny of cumulative impact concerns in project consultation. There are several prior cases that confirm that cumulative impacts on Aboriginal and treaty rights are relevant to the duty to consult and can serve to deepen the level of consultation and accommodation required in certain circumstances. Where there are valid cumulative impact concerns, it is likely that government decision-makers (particularly in BC and the federal government) will be increasingly concerned about ensuring that any additional impacts are avoided, offset, or minimized and there could be increased scrutiny of efforts to achieve consent. While these issues go beyond individual projects, we expect that the Crown will rely on proponents to assess cumulative impacts on Aboriginal and treaty rights and to ensure measures are in place to avoid, offset, or minimize any additional incremental impacts from the project at issue where there are valid cumulative impact concerns.

US INDIGENOUS GROUPS CAN HOLD ABORIGINAL RIGHTS IN CANADA

In April 2021, the Supreme Court of Canada ruled in R. v. Desautel that the Lakes Tribe in Washington State have a constitutionally protected Aboriginal right to hunt in a portion of BC. This appeal of a hunting prosecution in BC required Canada’s highest court to interpret the meaning of the words “Aboriginal peoples of Canada” in s. 35 of the Constitution Act, 1982. The majority held that Indigenous groups located outside of Canada may be “Aboriginal peoples of Canada” for the purposes of s. 35 if they are a modern-day successor of an Aboriginal society that occupied what is now Canada at the time of European contact. The majority found that it is consistent with the purpose of reconciliation and s. 35(1) to include “Aboriginal peoples who were here when the Europeans arrived and later moved or were forced to move elsewhere, or on whom international boundaries were imposed.”⁴

It is likely that this decision will lead to more US Indigenous groups asserting Aboriginal rights in Canada, which could expand the number of groups that need to be consulted and potentially accommodated for project development in certain cases. Where credible cross-border claims are raised, this could impact the distribution of project benefits amongst Indigenous groups including the benefits available to Indigenous groups in Canada, depending on the strength of any such claims and the impacts at issue.

The decision could also impact the interpretation of statutory obligations that have definitions of Aboriginal or Indigenous peoples of Canada that are tied to section 35 of the Constitution Act, 1982.

PUBLIC INTEREST TEST MUST CONSIDER BENEFITS TO INDIGENOUS COMMUNITIES

The consideration of Indigenous economic interests in project consultation and decision-making was a matter at issue in two significant decisions this year and another ongoing appeal before the Alberta Court of Appeal.

In AltaLink Management Ltd. v. Alberta (Utilities Commission),⁵ the Alberta Court of Appeal held that when the Alberta Utilities Commission (AUC) considers whether a decision is in the public interest, it should take a broad approach that considers the benefits to Indigenous communities and to Indigenous economic activity.

This decision related to whether two First Nations controlled limited partnerships (FN LPs) that had acquired electrical transmission assets on their reserves could pass on their incurred audit and hearing costs to ratepayers. The Piikani Nation and Blood Tribe had previously entered into agreements with Altalink to allow for the construction of transmission lines across their reserves with the option to purchase up to a 51% interest in the transmission line assets located on their reserves. The transmission lines became operational in 2010 and transfer applications were filed with the AUC in 2017. The AUC approved the transfer but ordered the FN LPs to absorb their hearing and external auditor costs in order to avoid any impact to ratepayers as part of the “no-harm” test. The AUC specifically refused to take into account the past benefits of siting the line on the shortest route among other things.

On appeal, the Court of Appeal held that the FN LPs should be allowed to include their auditing costs in their respective tariffs and that the AUC had erred in considering only forward-looking benefits as part of the “no-harm test”. The Court noted that there were lower maintenance costs for the shorter and more accessible route and highlighted the benefits of education and employment, noting that projects that increase the likelihood of economic activity on reserve are in the public interest and should be encouraged.

In a concurring opinion, Justice Feehan noted that the AUC is obliged to consider the honour of the Crown and act consistently with the honour of the Crown whenever it engages with Indigenous collectives. He also found that the AUC as an administrative tribunal with a broad public interest mandate should have also addressed reconciliation between Indigenous peoples and the Crown — including a consideration of the interests of Indigenous peoples in participating freely in the economy and having sufficient resources to self-govern effectively.

In another case involving the consideration of Indigenous economic interests, the Federal Court held in Ermineskin Cree Nation v. Canada⁶ that a Crown decision that had the potential to adversely impact a First Nation’s economic benefits under an IBA triggered the duty to consult. This case involved an application by the Ermineskin Cree (Ermineskin) to quash an order designating the Vista Coal Mine expansion project in Alberta as a reviewable project under the federal Impact Assessment Act. The project was designated under the IAA at the request of two First Nations after the Minister had declined six months earlier to designate the project. Ermineskin was consulted on the initial designation decision but not notified or consulted on the second designation request and the Designation Order was contrary to the recommendation of the Impact Assessment Agency. Ermineskin argued that the Minister breached the duty to consult as the Designation Order would delay or eliminate the economic interests they negotiated in an IBA with the proponent. The Federal Court agreed and found the IBA was an economic interest that was closely related to and derivative of Aboriginal and treaty rights (in this case harvesting rights) and capable of triggering the duty to consult. The Court held the duty was breached in this case as there was no consultation whatsoever, although the decision is currently under appeal to the Federal Court of Appeal.

It is surprising that the federal government did not consult Ermineskin from a policy and relationship perspective but the underlying reasoning of this decision is questionable and it may be set aside or varied on appeal. The duty to consult is focused on avoiding or minimizing impacts to Aboriginal and treaty rights. This can include impacts to economic components of rights like commercial harvesting rights but its extension to adverse impacts to contractual benefits in third-party contracts is questionable, particularly when these benefits are not derivative components of Aboriginal or treaty rights and there would be no impact to Aboriginal or treaty rights from the Crown decision at issue.

If this decision is upheld on appeal by the Federal Court of Appeal, it could expand the circumstances in which the duty to consult is triggered and the issues that need to be considered in project consultation. There are also similar challenges by two other Alberta First Nations currently before the Federal Court and the Alberta Court of Appeal relating to decisions by the federal government and the Alberta Energy Regulator to decline approvals relating to the Grassy Mountain coal project. The First Nations — one of whom requested the designation order for the Vista Mine expansion project — are alleging breaches of the duty to consult by the federal government and the joint review panel acting for the Alberta Energy Regulator for failing to consider their economic interests in declining the approval of the project.

COMPENSATION FOR FLOODING OF RESERVE LAND MUST INCLUDE VALUE OF LAND TO HYDRO PROJECT

In Southwind v. Canada,⁷ the Supreme Court of Canada (SCC) set aside a damages award for the use of reserve land for a hydroelectric project because the award did not take into account the value of the land to hydroelectricity generation. This decision provides guidance on the principles of equitable compensation and the fiduciary obligations of the Crown with respect to the management of reserve land.

This decision related to the permanent flooding of 11,304 acres of Lac Seul First Nation (Lac Seul) reserve land following the construction of a hydroelectric dam in 1929. The flooding of reserve land proceeded without Lac Seul’s authorization and the First Nation did not receive any compensation until 14 years after the flooding began and the amount was inadequate. The trial judge found that Canada had breached its fiduciary duty and ordered C$30 million in damages, which was based on expropriation principles and excluded the value of the land for hydroelectricity generation.

Lac Seul appealed the judge’s valuation to the Federal Court of Appeal, and then to the SCC. The SCC allowed Lac Seul’s appeal, holding that the fiduciary duty requires more than compensation based on expropriation principles. The Court found that the ability to expropriate or take land under the Indian Act or the need to use the land for a public work did not define, negate or limit Canada’s fiduciary obligations relating to reserve land and that the principles of expropriation law are entirely inappropriate within the context of valuing the underlying Indigenous interest in land and Canada’s breach of its historic obligations. The SCC held that that Crown has a duty to consider the nature of the interest and the impact on the First Nation in assessing appropriate compensation and has a “duty to preserve the First Nation’s quasi-proprietary interest in the land as much as possible and to ensure fair compensation reflecting the sui generis interest.”⁸ In light of the significant impact of the expropriation on the First Nation interest and Canada’s knowledge that “the impact would be catastrophic”, the Court held that Canada was required to capture the full potential value of the land for the First Nation which would reflect the land’s use as water storage for hydroelectricity generation.⁹

UNDRIP IMPLEMENTATION UPDATES

BC Proposes Extensive Changes in Draft Action Plan to Implement UNDRIP: In June 2021, the BC government released a Draft Action Plan for consultation, with a view to supporting the implementation of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) in the province. The action plan, which was developed pursuant to BC’s Declaration on the Rights of Indigenous Peoples Act (DRIPA), identifies 79 proposed actions that the BC government will take to achieve the objectives of UNDRIP in cooperation with Indigenous peoples over the next five years. The Draft Action Plan proposes a number of potentially significant new measures, although these initiatives are only described at a high-level at this time and the precise magnitude of the potential changes remains to be seen. Some of the measures include: (i) a new framework for resource revenue sharing and other fiscal mechanisms to support Indigenous peoples; (ii) the negotiation of joint-decision making agreements and agreements in which consent from Indigenous governing bodies will be required before the BC government exercises a statutory decision-making power; (iii) reviews of various policies and programs relating to the stewardship of the environment, land and resources; (iv) establishing economic metrics to help evaluate progress as reconciliation is advanced; and (v) establishing a dedicated secretariat to coordinate the Province’s reconciliation and UNDRIP compliance efforts and a new institution to provide support to First Nations in their work of nation and governance rebuilding and resolution of overlapping claims.

Public consultation on the Draft Action Plan has been completed. Once finalized, BC ministries will continue to work with Indigenous peoples on implementing the Action Plan and reporting on progress. It is expected that the Action Plan will be reviewed within five years and a new plan adopted at that time.

BC Amends Interpretation Act: On November 25, 2021, the BC government amended the Interpretation Act to require that provincial laws and laws must be construed in a manner that is consistent with UNDRIP and that does not abrogate or derogate from the rights recognized and affirmed in s. 35 of the Constitution Act, 1982. In discussing the intent of the legislation, the BC Attorney General clarified that the intention of the amendment is to provide “direction and assistance for the interpretation of laws when the meaning is not clear.” He noted that the amendment does not incorporate UNDRIP into BC law and “if a court considers a provincial law to be inconsistent with the UN declaration, this amendment does not allow the court to read in, read down or find that law to be of no force or effect,” noting that the substantive work of amending provincial laws and regulations was to be done in consultation with Indigenous groups.

Gitxaala Takes Legal Action to Bring BC Mineral Tenure Act into Compliance with DRIPA: In October 2021, the Gitxaala First Nation launched a judicial review in the BC Supreme Court, seeking to overturn seven mineral claims granted for exploration on Banks Island, which is located in Gitxaala traditional territory. The Gitxaala’s position is that the granting of mineral claims without the consent, or even knowledge, of the Gitxaala in their traditional territory is a violation of DRIPA. The Gitxaala is seeking, among other things, an amendment of the provincial Mineral Tenure Act to bring it into compliance with DRIPA. In addition, the Gitxaala are seeking a declaration that DRIPA legally requires the BC government to consult and cooperate with Gitxaala (as well as other Indigenous peoples) about measures necessary to bring the Mineral Tenure Act regime into compliance with UNDRIP.

Federal Government Passes UNDRIP Legislation: On June 21, 2021, the federal United Nations Declaration on the Rights of Indigenous Peoples Act (the Act) received Royal Assent. The Act contains two key objectives:

i) affirm UNDRIP as a universal international human rights instrument with application in Canadian law; and

ii) provide a framework for the government of Canada to implement UNDRIP.

The Act sets out a framework for how these two objectives will be achieved, namely by making Canada’s laws consistent with UNDRIP and by preparing and implementing an action plan to achieve UNDRIP’s objectives. The federal government has until June 21, 2023 to prepare the federal action plan. The government has established an UNDRIP implementation secretariat and will be engaging initially with Indigenous groups and then industry about measures to align federal laws with UNDRIP. Federal officials have repeatedly stated that the principle of free, prior, and informed consent (FPIC) in UNDRIP does not provide Indigenous groups with a veto but the federal government has not been clear about how specifically requirements relating to project consultation may change as a result. Instead, the federal government has made statements that are open to multiple interpretations and create continued uncertainty and varying expectations, such as the following:

“FPIC is a manifestation of Indigenous peoples’ right to self-determination and is about the effective and meaningful participation of Indigenous peoples in decisions that affect them, their communities, and territories. FPIC is contextual in that there is no “one size fits all” for all Indigenous peoples in terms of what it means or how it is implemented on the ground. Operationalizing FPIC may require different processes or new creative ways of working together to ensure meaningful and effective participation in decision-making.”10

The one area where the federal government has provided some direction is the Impact Assessment Act. The government has indicated that legislation already aligns with the Declaration and does not need to be changed as a result of the federal UNDRIP legislation, although the federal government’s commitment to implement UNDRIP could still impact their interpretation and application of the Impact Assessment Act