B.C.’s Bitumen Blockade: Selected Legal Options Available to Producers and Shippers

Article by Peter W. Hogg, Dalton W. McGrath & Michael O'Brien - Blake Cassels & Graydon LLP

Recently, the Government of British Columbia released an announcement to consider a series of proposed measures to restrict the shipment of diluted bitumen from Alberta oil sands operations by rail or pipelines, setting the stage for a constitutional dispute. If the proposals are enacted, such regulations will directly engage federally regulated matters of interprovincial commerce as well as interprovincial trade agreements. Proponents of pipeline projects and shippers may be faced with the prospect of launching constitutional challenges to the proposed new regulations if enacted. However, recent case law suggests that other, more immediate, legal remedies may be available to prevent harm to those parties, including injunctive relief.

THE PROPOSED REGULATIONS

On January 30, 2018, the British Columbia Environment and Climate Change Strategy Minster George Heyman proposed a series of new regulations that would limit the increase of diluted bitumen transported into the province via rail and pipeline. The Minister claimed that the new regulations would impose restrictions on the increase of diluted bitumen transportation until “there is certainty about our ability to clean up a spill.”

The move has significant consequences for a large number of Alberta oil producers and shippers, and raises serious legal implications from a constitutional perspective. Railways and pipelines that cross provincial borders are federally regulated and fall within the jurisdiction of the federal government. Recent pipeline projects have already received approval from the Canadian National Energy Board and the federal cabinet. As a result, the Government of British Columbia will likely face serious legal obstacles in seeking to impose regulations on what is transported on a federally regulated pipeline or railway.

The proposed measures also engage the provisions of interprovincial trade agreements including the New West Partnership Trade Agreement (NWPTA) and the Canadian Free Trade Agreement (CFTA). Implemented in 2013, the NWPTA is an accord between the governments of British Columbia, Alberta, Saskatchewan and Manitoba that creates Canada’s largest barrier-free interprovincial market. Article 3 of the NWPTA (titled No Obstacles) provides that each party shall ensure that it does not undertake measures to restrict or impair trade between, among or through the territory of the parties or investment between or among the parties. Similarly, one of the main purposes of the CFTA is to provide a comprehensive set of trade rules to advance Canada’s internal trade framework and eliminate technical barriers to trade. By attempting to limit the transportation of diluted bitumen, any proposed restrictions will risk conflicting with and breaching the terms and objectives of both the NWPTA and the CFTA.

INJUNCTIVE RELIEF

The time and expense associated with a full constitutional challenge may leave producers and shippers searching for more timely and efficient legal relief. A series of recent decisions bolsters the prospect of obtaining injunctive relief. Once a law has been enacted, the Court’s supervisory jurisdiction is engaged, providing an opportunity to seek an injunction to suspend the operation of the law pending a determination of its constitutionality.

In recent years there has been increased use of the injunction remedy against governments to assess the constitutionality of new laws. In each of those cases, the Courts suspended the implementation and enforcement of new legislation pending a constitutional review of the new laws.

The availability of injunctive relief as a remedy against government’s policies and decisions has been enhanced as a result of the Court’s recent decision in ENMAX Energy Corporation v Balancing Pool. The Court issued a mandatory injunction against an Alberta statutory corporation for failing to perform its statutory and regulatory obligations. The Court held that ENMAX had established a strong prima facie case that the Alberta statutory corporation was not performing its statutory duties, that ENMAX would suffer irreparable harm arising from the failure of the agency to perform its statutory obligations and that the balance of convenience favoured the Alberta statutory corporation performing its legislative role. For more information, please see our Blakes Bulletin: Alberta Court of Queen’s Bench Grants Mandatory Injunction Against Balancing Pool.

CONCLUSION

Producers and shippers seeking to ship their diluted bitumen through British Columbia have an arsenal of legal weapons to use in the event that the proposed new policies are adopted into law. The proposed measures raise constitutional issues that will only be resolved in time. Although constitutional challenges to the validity of the laws may take longer to resolve, there is the prospect of obtaining injunctive relief in the interim to restrain the execution and enforcement of such legislation pending a ruling on its constitutionality