Ottawa’s Trans Mountain purchase was a legal checkmate against B.C.

Provinces have less power to regulate the federal government than private industry

Kyle Carruthers | Special to the News

Opinions differ on the proposed Trans Mountain pipeline expansion and, especially, the recent decision by the federal government to buy the pipeline itself.

I think it is important that Canadians understand the real reason why Ottawa has chosen to take such a drastic course of action. Nationalizing energy infrastructure isn’t something that governments in Canada have done with any frequency in recent years so it invites the question: Why did the government take this approach?

Reading much of the commentary, many seem to be under the impression that the goal was to provide yet another corporate bailout to a private company to fund and ultimately profit from a project that is not financially viable. That is certainly how the move appears on the surface and it is unquestionably an incidental effect of the policy that public money is now being risked on a contentious and uncertain project.

Despite appearances however, the intent of this policy is quite different. It is actually more about the law and the ability of project proponents to gain a stronger legal position against the NDP/Green government in British Columbia.

Understand that when Kinder Morgan, as a private company, is constructing a pipeline that carries bitumen across provincial borders it does so based on approvals from the National Energy Board acting under the jurisdiction of the federal government. But there is a large body of complex constitutional law about the extent to which provinces, regulating in areas that provinces normally might regulate — such as land usage and the transportation and storage of hazardous materials — can interfere with that company’s operations.

Some of that body of law is favourable to Kinder Morgan. Legal principles such as paramountcy and interjurisdictional immunity limit the extent that provinces can thwart what the feds have approved.

And for understandable reasons. You may not like the Kinder Morgan pipeline but ask yourself what the point of federal jurisdiction would be if provincial governments could easily find ways to override it. Constitutional law isn’t necessarily interested in whether the pipeline is a good or bad idea, and it has to consider whether there might be circumstances where robust federal authority, immune from provincial meddling, might be a good thing.

However — and this is the part that is bad for Kinder Morgan — these principles that protect its operations are not hard and fast rules. The courts have upheld various provincial and municipal laws that affect companies engaged in federally regulated areas such as air transport and telecommunications. In fact Kinder Morgan has already (as of April 14) applied for 587 provincial permits and been approved for 201.

The problem for Kinder Morgan and the federal government is the ambiguity in where that line lies and where the B.C. government could and could not exercise jurisdiction. Legal experts seem to have a variety of strong opinions on the subject, but practically speaking, the law is ultimately what the Supreme Court of Canada says it is. Projected outcomes of a legal challenge ought to be expressed as odds rather than certainties.

To make matters more difficult, B.C Premier John Horgan has played his chess pieces well by not overtly attempting to interfere with the project — which Ottawa could challenge in the court — but rather by continuing to allow the threat that it might do so to weigh heavily on the business decisions of the company and raising suspicions that it is dragging its feet in the permitting process.

At the end of the day there is just enough grey in the law that the B.C. government may succeed in delaying the project long enough to kill it even if it was ultimately unsuccessful in asserting jurisdiction.

But with Ottawa’s intention to build the pipeline itself, a whole different set of rules — those of Crown immunity — come into play. Provinces are much more limited in how much they can interfere with what the federal government does within provincial borders when it acts directly through its various departments, branches and Crown corporations than it can with private companies. Provinces have much less authority to tell Canada Post (a Crown corporation) what to do than they do with Bell (a federally regulated telecom company).

The legal nuances of what provincial laws do and don’t apply to private companies are complex and uncertain. The law of Crown immunity is clearer.

Taking advantage of these different legal environments was the end game. For those who believe it was about the money, I suspect the Trudeau government would have much preferred to avoid the optics of entering the oil transportation industry. The decision looks bad whether viewed from the left — concerned as it is with expanding fossil fuel infrastructure — or the right — for which state-owned industry is anathema. If the goal was to subsidize the pipeline there were much less obvious and extreme ways Ottawa could have done so.

At the end of the day the federal government is risking public money to construct a pipeline that will bring a polluting product to market using technology that can fail with serious environmental consequence. You can think that is wrong, even outrageous. That is completely fair.

But if your concern is the money and you are asking yourself why Ottawa did this, I think it is important to understand that the intent of the policy wasn’t to financially support the project. It was a legal checkmate by Ottawa designed to head off resistance by the B.C. government

Of course none of this changes Ottawa’s obligations to Indigenous people whose territory lie along the pipeline’s path. That is a completely different issue.

Kyle Carruthers is a born-and-raised Yukoner who practices law in Whitehorse.

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