Date: 19990317
Docket: A-908-96
CORAM: STRAYER, JA.
| LINDEN, JA. |
| ROTHSTEIN, JA. |
BETWEEN:
CANADIAN HUNTER EXPLORATION LTD.
Appellant
- and -
NATIONAL ENERGY BOARD and
ATTORNEY GENERAL OF CANADA
Respondents
Heard at Vancouver, British Columbia, Monday the 15th day of March, 1999
Judgment delivered at
Vancouver, British Columbia, Monday the 15th day of March, 1999
REASONS FOR JUDGMENT BY: ROTHSTEIN, JA.
Date: 19990317
Docket: A-908-96
CORAM: STRAYER J.A.
| LINDEN J.A. |
| ROTHSTEIN J.A. |
BETWEEN:
CANADIAN HUNTER EXPLORATION LTD.,
Appellant,
- and -
NATIONAL ENERGY BOARD and
ATTORNEY GENERAL OF CANADA,
Respondents.
REASONS FOR JUDGMENT
(Delivered from the Bench at Vancouver, British Columbia on March 15, 1999, as edited)
ROTHSTEIN J.A.
[1] This is an unopposed appeal from a decision of the National Energy Board dated July 25, 1996 in which it decided that it had jurisdiction over certain natural gas gathering system facilities between natural gas wells and a central tie-in point, all within the Province of British Columbia. The gathering facilities consist of small diameter gathering lines between natural gas wells and a central tie-in point. At the central tie-in point is a facility for the extraction of water and some impurities from the natural gas. A 17.2 km pipeline called the West Hamburg pipeline connects the central tie-in point facility in British Columbia to the gas transmission pipeline system operated by Nova Gas Transmission Limited ("Nova") in Alberta. The appellant concedes that the West Hamburg pipeline is under federal jurisdiction as it is constructed between two provinces and carries natural gas between two provinces. The issue is whether the gathering system and central tie-in facilities within British Columbia are also under federal jurisdiction.
[2] Notice of Constitutional Question pursuant to s. 57 of the Federal Court Act was served on the Attorney General of Canada and the Attorneys General of the Provinces and the Yukon and Northwest Territories. The Attorney General of British Columbia and the Alberta Department of Energy intervened in this appeal in support of the appellant. The Attorney General of Canada advised the Court of her non-participation in the appeal, but no explanation of her position was given. Counsel of the National Energy Board attended the appeal but only for the purpose of assisting the Court and answering questions and not defending the jurisdiction of the Board. The Court, therefore, has not had the benefit of argument on the part of any person supporting the Board's finding that the gathering system and tie-in facilities within British Columbia are under federal jurisdiction and subject to the jurisdiction of the National Energy Board.
[3] In Westcoast Energy Inc. v. Canada (National Energy Board), [1998] 1 S.C.R. 322, Iacobucci and Major JJ. indicate how facilities such as the gathering and tie-in facilities here may come under federal jurisdiction. At page 357 they state:
| "It is well settled that the proposed facilities may come within federal jurisdiction under s. 92(10)(a) in one of two ways. First, they are subject to federal jurisdiction if the Westcoast mainline transmission pipeline, gathering pipelines and processing plants, including the proposed facilities, together constitute a single federal work or undertaking. Second, if the proposed facilities do not form part of a single federal work or undertaking, they come within federal jurisdiction if they are integral to the mainline transmission pipeline. See Central Western, supra, per Dickson C.J., at pp. 1124-25:". |
[4] Is there a single federal work or undertaking in this case, i.e. the gathering and tie-in facilities in British Columbia and the interprovincial West Hamburg pipeline between the tie-in facilities and the Nova pipeline in Alberta? In Westcoast, the Supreme Court found that this question was to be answered by considering the degree to which facilities are, in fact, functionally integrated and managed in common as a single enterprise. At page 369, Iacobucci and Major JJ. stated:
| "Whether the Westcoast gathering pipelines, processing plants and mainline transmission pipeline constitute a single undertaking depends on the degree to which they are in fact functionally integrated and managed in common as a single enterprise.". |
[5] In the case at bar, the National Energy Board made no factual findings. The relevant portion of its July 25, 1996 decision simply states:
| "The Board is of the view that the gathering system falls within federal jurisdiction, and is subject to the provisions of the National Energy Board Act ("the Act"). The Board is also of the view that, having determined that the gathering system of (sic) falls within federal jurisdiction, it has no discretion to decline exercising that jurisdiction and accordingly must regulate the gathering system under the Act.". |
This decision followed from a direction from the Board dated February 28, 1996 requiring that an application be made to the Board in respect of the gathering facilities within British Columbia. That direction stated:
| "The Board is of the view that the gathering facilities proposed to be constructed by Tidal that will connect with the applied for pipeline at its upstream end will fall under federal jurisdiction and will be subject to the Act. This view is based on the Board's understanding of the reasons for decision of the Federal Court of Appeal dated 9 February 1996 in respect of an appeal by Westcoast Energy Inc. from a decision of the Board in the matter of Westcoast's Fort St. John Expansion Project (Court File A-606-95) and a reference by the Board to the Federal Court in the matter of Westcoast's Grizzly Valley Expansion Project (Court File A-545-95). Tidal is accordingly directed to apply to the Board for appropriate exemptions in respect of the proposed upstream gathering facility pursuant to s. 58 of the Act.". |
The decision of the Federal Court of Appeal to which the Board made reference in its direction has now been superseded by the decision of the Supreme Court of Canada in Westcoast, supra.
[6] The Court is now in the difficult position of having to infer from the record, the degree of functional integration between the gathering and tie-in facilities on the one hand, and the interprovincial West Hamburg pipeline on the other. Counsel for the appellant and intervenors concede that these facilities are all owned and operated by the same parties, but contend that there is insufficient functional integration between the West Hamburg pipeline and the gathering and tie-in facilities in British Columbia to form one single enterprise. They say a demarcation must be made between production facilities which are clearly under provincial jurisdiction and an interprovincial pipeline under federal jurisdiction. They say that the logical point at which such demarcation should be made is at the central tie-in point in this case. Gathering facilities between natural gas wells and this point were constructed under separate agreements from the agreement covering the interprovincial West Hamburg pipeline. They say this implies that the gathering and tie-in facilities in this case are part of the production process under provincial jurisdiction and not part of interprovincial transportation of natural gas under federal jurisdiction.
[7] The appellant and intervenors note that in Westcoast, it was because Westcoast's business was exceptional that the Supreme Court concluded that its gathering and pipeline systems comprised a single federal undertaking (see page 369). Westcoast is primarily engaged in the transmission of natural gas through its mainline transmission pipeline. Its gathering and processing was dedicated to the operation of its mainline transmission pipeline. In the present case, the facilities in question are owned and operated by producers of natural gas and the West Hamburg pipeline is incidental to the production of natural gas. The appellant and intervenors say there is nothing exceptional in this case as there was in Westcoast.
[8] In the absence of argument to the contrary and without a factual determination on the point by the National Energy Board, we accept the appellant's and intervenors' argument that the circumstances here are different from those in Westcoast. We conclude that the gathering and central tie-in facilities in British Columbia are not part of a single interprovincial undertaking merely because they are physically connected to the interprovincial West Hamburg pipeline between the tie-in facility in British Columbia and the Nova transmission pipeline in Alberta.
[9] We turn to whether the gathering and tie-in facilities are integral to the federally regulated West Hamburg pipeline. On this point we are guided by the decision of this Court in Consumers' Gas Co. v. National Energy Board (1996), 195 N.R. 150. At page 154 Hugessen J.A. states:
| "While it is clear that in cases of primary instance federal jurisdiction under s. 92(10)(a) it is enough that only a minor part of the undertaking be interprovincial so long as it is performed on a continuous and regular basis ..., the rule is otherwise in cases of secondary instance federal jurisdiction. In such cases the focus is not on the interprovincial undertaking but rather on an undertaking which, by definition, is primarily provincial and the inquiry is to determine whether such undertaking has become federal by reason of its integration with a core federal undertaking.". |
[10] In the case at bar it is obvious that the primary undertaking is provincial " the production of natural gas by gas producers. The interprovincial West Hamburg pipeline is clearly secondary. Where the undertaking is overwhelmingly provincial, portions of it do not become federal merely because they have some connection to a federal undertaking.
[11] The appeal is allowed. We find that the National Energy Board's jurisdiction is limited to the West Hamburg pipeline and specifically does not extend to the gathering and central tie-in facilities located solely within British Columbia. National Energy Board Order T81-30-96 should be quashed.
(Sgd.) "Marshall E. Rothstein"
Judge
Vancouver, British Columbia
March 17, 1999
FEDERAL COURT OF APPEAL
Date: 19990317
Docket: A-908-96
BETWEEN:
CANADIAN HUNTER EXPLORATION LTD.
Appellant
- and -
NATIONAL ENERGY BOARD and
ATTORNEY GENERAL OF CANADA
Respondents
REASONS FOR JUDGMENT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT NO.: A-908-96
STYLE OF CAUSE: CANADIAN HUNTER EXPLORATION LTD.
Applicant
- and -
NATIONAL ENERGY BOARD and
| ATTORNEY GENERAL OF CANADA |
Respondent
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: March 15, 1999
REASONS FOR JUDGMENT BY: ROTHSTEIN, JA.
CONCURRED IN BY: STRAYER, JA.
LINDEN, JA.
DATED: March 17, 1999
APPEARANCES:
| Mr. Bernard Roth for the Appellant |
| Mr. Peter Noonan for the Respondent |
| (National Energy Board) |
| Ms. C.J.C. Page and for the Respondent |
| Mr. Robert Normey (Alberta Department of Energy) |
| Mr. Paul Pearlman for the Respondent |
| (Attorney General of B.C. and |
| B.C. Ministry of Employment and Investment) |
SOLICITORS OF RECORD:
Fraser Milner for the Appellant
Calgary, Alberta
Mr. George Thomson for the Respondent
Deputy Attorney General of Canada