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OIL AND GAS - Conservation and licensing - Federal regulation - National Energy Board - Pipelines - Intra-provincial

Tuesday, August 29, 2017 @ 8:38 AM  


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Appeal by Sawyer from a decision of the National Energy Board (Board) determining that it had no jurisdiction over a proposed gas pipeline. The Board concluded that the appellant had not established a prima facie case that the pipeline was a federal work or undertaking within paragraph 92(10)(a) of the Constitution Act, 1867. The proposed line was to move gas from the Western Canadian Sedimentary Basin (WCSB) in Northeastern British Columbia and Northwestern Alberta, to an export facility, the LNG plant, on the Pacific coast of British Columbia (BC). From there, it would be liquefied and shipped to international markets. In order to facilitate the proposal, the existing NOVA Gas Transmission Ltd. pipeline (NGTL) would be extended northward by the North Montney Mainline (NM Line) to the fields of the WCSB. Gas from the NM Line would enter the Prince Rupert Gas Transmission Line (PRGT) in BC and continue to the proposed liquefied natural gas (LNG) export facility. It was not disputed that the NM and NGTL Lines were subject to federal regulation. The LNG plant was also subject to federal regulation. The Board concluded that the PRGT line was “local” in nature, as it provided for gas transportation between two points in BC to meet the requirements of a single shipper. It found that the PRGT was functionally different from the NGTL, which provided a gas transportation service to multiple customers on a different commercial arrangement.

HELD: Appeal allowed. The Board erred in its appreciation and application of the prima facie test in determining its mandate and in respect of the legal analysis of the constitutional question. The Board erred in its understanding and application of the prima facie test. It engaged in an evaluation of the substance of the evidence as it would in a full jurisdictional hearing, giving rise to an error of law. It did not ask whether an arguable case had been made out, but answered the underlying question. This was inconsistent with the purpose of s. 12 of the National Energy Board Act (Act), which was to screen out unmeritorious cases or to manage the Board’s agenda, not to avoid hearings that it was legally mandated to hear. The Board’s constitutional analysis was flawed, as it did not consider the nature of the undertaking or project as a whole. The Board confined its analysis to the fact that the pipeline was “point to point” within BC. The test, however, was one of functional integration. The Board failed to consider that an enterprise could form part of a federal undertaking and still be wholly situated within a province. The Board erred in confusing the commercial and billing arrangements with the undertaking. The business model was not the undertaking. The Board erred in relying on the business model of the PRGT (namely, that it carried gas for one customer) as the basis of displacing what it appeared to have concluded was otherwise a prima facie case. A tangential factor could not overcome a prima facie case that had otherwise been made out. The Board failed to identify and consider a considerable body of highly pertinent evidence on the legal criteria of common direction and control. Accordingly, the appellant’s application was remitted to the Board for redetermination.

Sawyer v. TransCanada Pipeline Ltd., [2017] F.C.J. No. 727, Federal Court of Appeal, D.G. Near, R. Boivin and D.J. Rennie JJ.A., July 19, 2017. Digest No. TLD-August282017006