The Trans Mountain purchase: Some unresolved legal issues

Given the kind of year Rachel Notley has had, you could forgive the Alberta premier for taking a small victory lap last month after the federal government went all the way for Trans Mountain.

Reacting to the Trudeau government’s announcement that it would be purchasing the existing Trans Mountain pipeline for $4.5 billion — to guarantee construction of a politically-fraught expansion to transport Alberta’s bitumen to the Pacific coast — Notley argued the purchase would put an end to B.C. Premier John Horgan’s legal attempts to frustrate the work.

“As a result of the pipeline having been purchased by the federal government, they have a form of Crown immunity which actually limits the degree to which provincial laws would apply to the project because it’s a federal project now,” Notley told reporters.

“I suspect premier Horgan will be going off to get legal advice … some folks would suggest their reference case will have less relevance than before today’s announcement.”

Is she right? Horgan hasn’t taken off the table his government’s reference case before the provincial Court of Appeal — to rule on the province’s power to restrict the flow of diluted bitumen through British Columbia. Does he know something Notley doesn’t?

The answer is complicated, of course (with Trans Mountain, nothing is simple). The notion of ‘Crown immunity’ — the presumption that a statute does not “bind the Crown” unless it expressly says that it does — is an old one, dating in one form or another back to British common law in the 17^th century. Originally summed up in the legal principle that “the king can do no wrong,” Crown immunity has been watered down over the centuries by exceptions imposed by courts, and by federal and provincial ‘interpretation acts’ limiting it. The federal Interpretation Act still asserts that “no enactment is binding on Her Majesty or affects Her Majesty or Her Majesty’s rights or prerogatives in any manner, except as mentioned or referred to in the enactment.”

But — again — it’s complicated. Whenever the legal status of Trans Mountain comes up for discussion, the effects of Crown immunity tend to blur together with the effects of constitutional jurisdiction (“When federal and provincial government laws occupy the same field, the federal law prevails,” says David Austin, a specialist in energy and resources law at Clark Wilson LLP in Vancouver). Ottawa has jurisdiction over interprovincial pipelines and federally-regulated projects; while the Constitution doesn’t specifically address the environment, the provinces have some authority to protect their land and coastlines from environmental threats.

Most constitutional law experts seem to think the law leans in Ottawa’s direction on Trans Mountain — that B.C.’s court reference was doomed from the start because it targets an interprovincial project under federal purview, making the question of Crown immunity almost moot.

“(The federal purchase) doesn’t make the project immune,” says Dwight Newman, Canada Research Chair in Indigenous Rights in Constitutional and International Law, University of Saskatchewan.

“In fact, it really doesn’t change its status much at all. A federally-owned project has some legal immunity from provincial regulation and taxation, but that’s not really a huge change. As a federally-regulated pipeline the project already enjoyed quite a large degree of that immunity.”

“I don’t think (the federal purchase) really affects the reference — the B.C. government was always going to struggle to assert that it has authority over the interprovincial transport of diluted bitumen,” says Eric Adams, a constitutional law specialist at the University of Alberta.

Federal Crown corporations don’t operate in a legal vacuum just because they’re owned by Ottawa, he adds. “I’ve heard a lot of people talking about ‘Crown immunity.’ I don’t think you can go that far to say that the project wouldn’t be subject to any provincial or municipal laws. To some extent, Crown corporations may still have to operate under provincial environmental regulations.”

Federal ownership could, however, narrow B.C.’s options when it comes to actually stopping Trans Mountain’s expansion, Adams says. Provincial law cannot affect federally-owned entities in a way that impairs their “core objectives.”

“They can’t prevent them from doing what they exist to do, in other words,” he says. If the Court of Appeal decides B.C.’s efforts to regulate diluted bitumen transport are targeting the pipeline itself — not the product — it’s more likely to rule the province out of bounds. And public statements by B.C. officials certainly seem to suggest the purpose of the court reference is to stop the pipeline expansion project altogether.

“It is possible Crown immunity may further insulate (Trans Mountain) from various regulations,” Adams says. “It will depend on whether or not those regimes stipulate their application to the Crown, or whether courts have found them to be so.”

All of which may be beside the point, assuming B.C.’s intention was always simply to throw roadblocks in the project’s path for political purposes.

In theory, Ottawa’s purchase of Trans Mountain could even multiply those roadblocks. Newman suggests that the change of ownership could trigger new court challenges on the basis of the federal government’s “duty to consult” Indigenous interests. He points out that one of the key cases that established the duty to consult — Haida Nation v. British Columbia — began with the ownership transfer of a tree farming licence.

“That might or might not be a problem for Ottawa,” Newman says. “The federal government could argue that the required consultation was already done. But I can still see someone making the argument.”

In other words, federal ownership hasn’t settled anything. The impediments facing the project are more political than legal. The purchase merely transferred the burden from private to public hands.

“Some of the early commentary I read suggested this was the start of a whole new ball game. I think it’s just driving home what we already know about federal jurisdiction,” says Adams.

“The larger questions — about Indigenous consultation and provincial jurisdiction over diluted bitumen — remain unresolved.”

Doug Beazley is a regular contributor based in Ottawa.