In its recent decision Fort McKay First Nation v Prosper Petroleum Ltd., the Alberta Court of Appeal clarified that the Alberta Energy Regulator (the “AER”) may have an obligation to take into account the honour of the Crown when deciding whether to recommend approval of a new oil sands project under s. 10 of the Oil Sands Conservation Act, RSA 2000, C. O-7 (“OSCA”). The decision also addresses the cumulative impacts of projects on Treaty lands.
In an appeal brought by the Fort McKay First Nation (“FMFN”) concerning a 2018 decision by the AER approving a bitumen recovery project advanced by Prosper Petroleum Ltd. (“Prosper”), the Court quashed the AER’s project approval and has remitted the matter to the AER.
Background
In 2001, the Government of Alberta (“Alberta”) and the FMFN began negotiating protection for the Moose Lake area, which led to negotiations in 2003 to develop a management plan, known as the Moose Lake Access Management Plan (“MLAMP”). Negotiations regarding the MLAMP have not concluded in an agreement to date. The MLAMP was intended to address the cumulative effects of oil sands development on the FMFN’s Treaty 8 rights.
The Moose Lake area is part of the FMFN’s traditional territory and is of cultural importance to the FMFN and the Fort McKay Métis. Due to the cumulative effect of the industrial and resource development surrounding Fort McKay, the FMFN expressed concerns about their members’ ability to pursue their traditional way of life and exercise their Treaty rights in the Moose Lake area.
The MLAMP was intended to be incorporated as a sub-plan of the Lower Athabasca Regional Plan (the “LARP”) under the Alberta Land Stewardship Act, RSA 2000, c. A-26.8. The LARP is a regional plan designed to manage the region’s natural resources. The LARP strategic plan and implementation plan are to be considered by decision-makers before they make their decisions.
Between 2009 and 2010, in the LARP negotiations, the FMFN sought a 10 km buffer zone from oil sands development around its two Moose Lake Reserves. In November 2014, Alberta’s then Premier Jim Prentice and FMFN Chief Jim Boucher met to discuss Alberta committing to developing a MLAMP under LARP on an expedited basis. To that end, a Letter of Intent was entered into. The Letter of Intent, among other things, acknowledged the importance of the Moose Lake area to the FMFN and set a March 31, 2016 deadline for the completion and approval of the draft MLAMP
The AER's Decision
In 2013, Prosper applied for the approval of a steam-assisted gravity drainage (“SAGD”) bitumen recovery project (the “Project”). The Project would be located within 5 kilometers of the Moose Lake Reserves, which is within the geographic area to be covered by the yet-to-be finalized MLAMP.
In the course of the AER proceeding, the FMFN raised issues related to the MLAMP negotiations.
The AER concluded that the status of the MLAMP negotiations was not a valid reason to deny Prosper’s application. The AER found that s. 21 of the Responsible Energy Development Act (“REDA”) precluded it from assessing the adequacy of Crown consultation and that Cabinet was the most appropriate place for a decision on the need to finalize the MLAMP. On June 12, 2018, the AER found the Project to be in the public interest and, approved the Project, subject to authorization by the Lieutenant Governor in Council (“Cabinet”).
Appeal Proceeding Initiated by the FMFN
The FMFN was granted permission to appeal the AER’s decision, on the question of whether the AER erred in law by failing to consider the honour of the Crown and, as a result, failing to delay the Project’s approval until after the MLAMP negotiations between the FMFN and Alberta are completed.
Majority Decision of the Alberta Court of Appeal
The Majority of the Alberta Court of Appeal concluded that the AER has a broad, implied jurisdiction consider issues of constitutional law, including the honour of the Crown, as part of its determination of whether an application is in the “public interest”. In making that determination, the Court held the following:
- the AER is not confined to considering “questions of constitutional law” as defined in the Administrative Procedures and Jurisdiction Act (“AP&JA”). As not all constitutional issues meet this definition under the AP&JA, formal notice of such questions may not be necessary;
- while the Government of Alberta has retained the responsibility of assessing the adequacy of Crown consultation on AER-regulated projects, the AER has been delegated significant procedural aspects of the Crown’s duty to consult, including pursuant to a Ministerial Order, which requires the AER to consider potentially adverse impacts of energy applications on existing rights of Indigenous peoples;
- the AER’s jurisdiction to consider the public interest requires it to consider potential adverse impacts to Indigenous rights, such as Treaty rights, under s. 35 of the Constitution Act, 1982. As such, s. 21 of REDA does not preclude the AER from considering relevant matters involving Indigenous peoples when carrying out its mandate to decide if a particular project is in the public interest. While the AER may not consider the adequacy of consultation, the honour of the Crown can give rise to duties beyond the duty to consult. In this case, the AER was obliged to consider whether the honour of the Crown was engaged in the MLAMP process. As such, the AER erred in concluding that s. 21 of the REDA prevented it from considering whether the MLAMP process was relevant to assessing whether the Project was in the public interest; and
- While Cabinet has the authority to decide whether “to authorize” and to impose “terms and conditions” on the project, the AER is not relieved from performing its mandated function. The AER has a broad mandate to determine if a project is in the public interest. The “public interest” includes adherence to constitutional principles like the honour of the Crown. The AER is no less responsible for considering the Crown’s constitutional obligations than is Cabinet. As such, the regulator is not entitled to decline to address such matters because they could be addressed by Cabinet. To the extent the MLAMP negotiations implicate the honour of the Crown and therefore need to be considered as part of the “public interest”, the AER is under a statutory duty to consider the issue.
The Majority of the Court concluded that there was no basis for the AER to decline to consider the MLAMP process as part of its assessment of the public interest. The public interest mandate can, and should, encompass considerations of the effect of a project on Indigenous peoples, which in this case will included the state of negotiations between the FMFN and the Crown. Accordingly, the Court vacated the approval of the Project, and remitted the matter to the AER to consider whether approval of the Project is in the public interest after taking into consideration the honour of the Crown and the MLAMP process. The Majority noted that its decision should not be viewed as a comment on whether the approval of the public interest.
Madame Justice Greckol, in her concurring opinion, concluded that that the honour of the Crown was, in fact, engaged by the MLAMP negotiation process, going even further to say that the honour of the Crown requires the Crown to keep promises made during negotiations designed to protect Treaty rights.
Implications of the Decision
In our view, this case provides important clarification of the breadth of s. 21 of the REDA and how the AER is expected to consider potential impacts to Treaty and other Indigenous rights in relation to AER-regulated projects. The decision is consistent with the Supreme Court of Canada’s finding in Clyde River (Hamlet) v. Petroleum Geo‑Services Inc., that a project authorization that beaches the constitutionally protected rights of Indigenous peoples cannot serve the public interest.
The decision also has practical implications for energy law practitioners who appear before regulatory tribunals in Alberta. Unlike a recommendation of the Canada Energy Regulator (“CER”) to the federal Cabinet for a certificate for a CER-regulated pipeline or high voltage transmission line, the Court of Appeal found that the AER’s public interest determinations are final decisions that may be appealed prior to Cabinet approval being received. The Decision also clarifies that formal notice under the AP&JA may not be required in all circumstances.
