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Reference case on Trans Mountain pipeline wraps up

Province considers dilbit a ‘hazardous substance,” but only if volume increases
A five-day hearing on B.C. government's dilbit regulations wrapped up Friday. | Rob Kruyt

Should the B.C. government win a reference case to the BC Appeal Court on the restriction of diluted bitumen, at what point might B.C., or some other province, also decide to restrict other products, like uranium or hazardous waste, moving by interprovincial pipelines, railways and trucking?

That is one of the doors that could be opened, should the court rule that the B.C. government’s proposed amendments to the Environmental Management Act is constitutionally valid.

The amendments are aimed at halting the expansion of the $7.4 billion Trans Mountain pipeline by restricting one of the products that would flow on it – diluted bitumen.

Five days of hearings on the B.C. government’s reference to the BC Appeal Court case wrapped up Friday, March 22, with industry associations representing railway, pipeline and oil companies arguing that the B.C. government’s attempts to restrict increased volumes of bitumen moving through B.C. by pipeline or railway is jurisdictional “overreach.”

It was also argued that, should the B.C. government succeed in getting the court’s green light to enact its own restrictions on diluted bitumen, other provinces could likewise decide to try to restrict products moving on interprovincial pipelines and railways.

“If B.C. could have this constitutional authority, so too would any other province,” said Brad Armstrong, a lawyer representing the Canadian Association of Petroleum Producers Association (CAPP).

Though he didn’t refer to it, Alberta’s Bill 12 also proposes to give that province the authority to regulate petroleum products, although it would be on exports, not imports.

That bill would allow the province to throttle refined petroleum products (gasoline an diesel) that currently flow to B.C. on the Trans Mountain pipeline, in order to free up more space on the pipeline for oil.

The B.C. government attempted an end-run on Bill 12 when it asked the Alberta Supreme Court to strike it down, but the court dismissed B.C.'s application as premature, since the bill has not been formally proclaimed.

“That legislation also has some considerable constitutional uncertainty,” said Robin Junger, a lawyer for McMillan LLP who specializes in environmental and First Nations law.

But by the time it got through a court challenge, Bill 12 could cause some serious damage in B.C.

In an affidavit, the B.C. government acknowledged that B.C. really has no alternatives to bringing in the gasoline and diesel it needs, and that severe price spikes, shortages and “civil unrest” could result, if Alberta used Bill 12 the way it has threatened to do.

The two provincial regulations differ in their aims. In B.C.’s case, the stated objective is environmental protection. In Alberta, it is an economic argument. If the Trans Mountain pipeline isn’t expanded, the aim of Bill 12 would be to free up space on the exiting Trans Mountain pipeline for Alberta heavy oil by reducing the amount of refined fuels that now flow on it.

At the core of both provincial acts is the question of jurisdictional paramountcy.

The B.C. government is asking the B.C. Court of Appeal if it has the constitutional authority, under its environmental protection laws, to limit the flow of diluted bitumen – and only diluted bitumen – on the Trans Mountain pipeline, should its expansion ever proceed.

The B.C. government insists it is not intended to halt the pipeline’s expansion, nor to restrict the existing volume of dilbit that flows on the existing pipeline, but to prevent any increased volumes of dilbit flowing on the pipeline, or by rail. So, while the B.C. government considers dilbit a "hazardous substance," its a definition that doesn't appear to apply to the current volumes – only to increased volumes.

While provinces do have the authority to enforce environmental protection laws, it doesn’t have the right to ban a product outright moving on a pipeline or railway that is federally approved, according to the Attorney General of Canada.

“Despite its stated purpose of environmental protection, its pith and substance is the regulation of interprovincial oil transportation,” the attorney general argues. “As this is a subject matter reserved exclusively to the federal Parliament, the regime is ultra vires the province.”

And for a regulation that purports to be designed to protect the environment, it is lacking in actual prescriptions for environmental protection, the attorney general argues.

“The proposed legislation does not set out any specific requirements that reasonably could be characterized as concrete measures for preventing or responding to an accidental release of a hazardous substance into the environment.”

The province argues that having higher provincial environmental standards than federal ones does not make the federal law “inoperative.”

Notably, the regulations, as proposed by the province, would not restrict other types of heavy crude oil, like synthetic crude (upgraded dilbit).

Lawyers arguing for CAPP and other associations said the province acknowledges it does not have the constitutional authority to outright prohibit a product from moving through B.C. on a federally approved pipeline or railway. So it proposes to use permits, with onerous conditions attached, to restrict one particular product – dilbit.

Bill Kaplan, representing the Consortium of Energy Producers, called that a “distinction without a difference.”

“Common sense actually plays some role in law,” Kaplan said. “And the notion that you can’t say no, but you can say yes with conditions is a distinction without a difference.

“All you have to do is read the legislation, read what it says it’s going to do, and you can see that it’s main purpose is to achieve an environmental purpose through an unconstitutional regulatory scheme.”

Three First Nations and the Assembly of First Nations were interveners in the case, supporting the provincial government.

But four First Nations also acted as interveners supporting the Attorney General of Canada, which opposes the B.C. regulations as unconstitutional.

The Lax Kw’alaams, which supports a different pipeline project – Eagle Spirit Energy  – oppose the B.C. regulation.

“The band contends that the proposed legislation is designed to discourage investment to such an extent as to render the intended development of its territory impracticable,” it says in a written brief.

The Songhees, Beecher Bay and T-Sou-ke argue that the provincial law would frustrate attempts to achieve self-government.

“To be meaningful, the right to self-government needs to be enforceable,” they write in a joint submission to the court.

“Indigenous governments need the legislative space to effectively regulate. They need to be able to determine which laws prevail in the event of a conflict. The Attorney General of British Columbia’s proposed approach would hinder that right.”

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