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Interprovincial transport of oil: Wine or wine not? By Karissa Kelln, Bernard LLP

By BCShippingNews 15 May 2018
Karissa Kelln, Bernard LLP
A look at the legal framework surrounding the interprovincial transport of oil...

The interprovincial transport of oil has been a controversial topic in western Canada. In January 2018, the British Columbia government announced plans to develop additional measures to protect the province’s environment from a heavy oil spill. At that time, it said it would consult with British Columbia residents on issues such as spill response times and response plans, but most controversially, it raised the possibility of an interim ban on increased diluted bitumen exports flowing from Alberta through the Kinder Morgan Trans Mountain pipeline expansion until the behaviour of spilled bitumen is better understood and there is certainty regarding the ability to adequately mitigate spills.

Premier Rachel Notley of Alberta immediately claimed B.C. was outside of its jurisdiction by proposing to control oil flow through an interprovincial pipeline and launched a moratorium on the importation of B.C. wine in retaliation. Alberta did away with the moratorium after a couple of weeks when Premier John Horgan promised to refrain from further action related to the interim ban until the courts can rule on whether British Columbia has the authority to restrict increased amounts of oil from coming into the province through the pipeline. As of the time of writing, no relevant court action has been initiated. The federal government, through Prime Minister Justin Trudeau, has continually and emphatically affirmed that this pipeline “will be built.” The battle lines have been drawn. One is left to speculate on how this might unfold.

The legal framework surrounding the interprovincial transport of oil is as follows. Section 91 of the Constitution Act, 1867 (the “Constitution”) assigns various powers to the federal government while section 92 of the Constitution lists the powers of the provinces.

The relevant provision with respect to provincial jurisdiction is section 92(10)(a), which assigns to the provinces exclusive authority to make laws in relation to “Local Works and Undertakings” other than such classes, including “Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province. “

With respect to federal jurisdiction, subsection 91(29) of the Constitution states that the classes of subjects assigned to the federal government include those expressly excepted in the enumeration of classes of subjects assigned exclusively to the provinces. The result is that the federal government has exclusive authority in relation to the items enumerated in paragraph 92(10)(a) above as if that paragraph had been included among the classes of subjects enumerated in section 91 of the Constitution.

Other federal heads of power relevant to this discussion include section 91(2) of the Constitution which empowers the federal government to regulate trade and commerce; and section 91(10) which gives the federal government power over navigation and shipping. In regards to section 91(2), the federal government has exclusive authority to regulate international and interprovincial trade — the regulation of goods, persons, capital, or services crossing provincial or Canadian borders for a commercial purpose.

The federal authority over navigation and shipping is quite broad and clearly includes the regulation of ship-sourced pollution and the protection of the marine environment.

It would appear that, constitutionally, the federal government has the clear right to legislate and approve projects in regards to interprovincial pipelines and interprovincial trade, including incidents of shipping related thereto. The rationale behind federal jurisdiction over interprovincial trade and navigation and shipping under s. 91 of the Constitution was to ensure the full and free access of the provinces to national and international markets, and to preclude individual provinces from impairing the trade, navigation and shipping rights of other provinces. This underlying rationale for the federal power over trade, navigation and shipping should support a reasonable expectation of access to the sea by the landlocked provinces of Alberta and Saskatchewan. Trade protections, without the ability to move the respective province’s products to the coast for shipping, would be meaningless. This is the constitutional deal.

Short of B.C. attempting to rewrite the Constitution, the province lacks sustainable legal grounds on which to pursue a court action. This may well be the reason that no court proceeding has been launched by Premier John Horgan’s government to date.

The central focus is whether perceived environmental concerns should impair established constitutional rights and expectations of access and whether such decisions should be made by the federal government, the provincial government, or individual citizens through acts of protest and potential civil disobedience.

To suggest that only British Columbia is concerned about the marine environment may be politically expedient but is factually incorrect. The federal government’s commitment has been backed by the Oceans Protection Plan and 1.5 billion dollars in funding.

Having said that, the politics of oil transport are far from consistent at either the federal or provincial (British Columbia) level. Both sides cite tanker safety concerns. None of these concerns are backed by actual data, which clearly show a worldwide near elimination of major tanker incidents; a spotless 60-year history of tanker traffic in southern British Columbia; and increased measures being taken to make B.C. far above world-class in terms of safety.

The federal and provincial governments both snuffed the Enbridge Northern Gateway pipeline project (which would have moved oil from Bruderheim, Alberta to Kitimat, British Columbia). The federal government is instituting a tanker ban (Bill C-48), which would exclude tankers carrying more than 12,500 metric tonnes of oil (12,500,000 litres). It is inconsistent that the northern coast is worthy of special protection but the southern coast is not. No one, including the provincial government, First Nations or environmental protesters has commented negatively on the 12,500-tonne limit — this is a lot of oil. In addition, that amount of oil is carried in smaller ships that statistically worldwide have a higher incidence of accidents.

The uncertainty that this debate creates also has a direct effect on the investment decisions of those considering Canada, and particularly British Columbia, as a place to do business. Having obtained federal approval for the expansion of its existing pipeline, Kinder Morgan now faces an amorphous obstacle, thrown up by the B.C. government whose real tactic may well be to create enough uncertainty that Kinder Morgan simply abandons the project. That tactic may have hit pay dirt with the decision in April of 2018 by Kinder Morgan to halt unnecessary expenditures pending resolution of the dispute. The B.C. government, and others who might applaud this move as a victory, should be cognizant of such on the future development of a still resource-based economy. They should also be aware of the potential effect of how governments and citizens view the Constitution.

The Constitution protects all Canadians in many ways, most of which have nothing to do with pipelines. The problem with adopting an ad hoc approach to constitutional structure and adherence is that it undermines the legal firmament that holds us together as a nation and, through the Charter of Rights and Freedoms, protects us as individuals. Abandoning the Constitution or thwarting its provisions with non-legal tactics for short-term political gain will become increasingly easier every time we do it.

Karissa Kelln is a Maritime Lawyer with Bernard LLP and can be reached at kelln@bernardllp.ca.