Reconciling the Honour of the Crown and the Duty to Consult: Prosper Petroleum’s Rigel Oil Sands Project Remitted to the AER for Reconsideration

April 30, 2020

On April 27, 2020, the Alberta Court of Appeal, in Fort McKay First Nation v. Prosper Petroleum Ltd., 2020 ABCA 163, vacated the Alberta Energy Regulator’s (AER) approval of Prosper Petroleum’s (“Prosper”) Rigel bitumen recovery project and directed the AER to take into consideration the honour of the Crown, and the Moose Lake Access Management Plan (MLAMP) currently in development as part of the Lower Athabasca Regional Plan (LARP) under the Alberta Land Stewardship Act.

The MLAMP is the subject of ongoing negotiations between the Government of Alberta and the Fort McKay First Nation (FMFN), which is a signatory to Treaty 8. As part of the negotiations related to the MLAMP, the Government of Alberta and the FMFN executed a letter of intent in 2015 that identified land within 10 kilometres of the FMFN’s Moose Lake reserves be included in the MLAMP as a buffer. The Project would be located within this buffer.

At issue in Fort McKay First Nation v. Prosper Petroleum Ltd. was whether the AER erred by failing to consider implications arising through the honour of the Crown in its public interest determination of the Project, as well as failing to delay the approval despite FMFN’s ongoing negotiations with the Government of Alberta relating to the MLAMP.

AER Decision

The Project was originally approved by the AER in June 2018.  However, the requisite authorization from the Alberta cabinet for final approval remains outstanding. The issue of the outstanding cabinet approval was the subject of an earlier Alberta Court of Queen’s Bench decision that directed the cabinet to render a decision, which has since been stayed.[1]

As part of the AER’s proceeding at first instance, the AER declined to rule on a number of issues, including (i) the adequacy of Crown consultation, citing a lack of jurisdiction; (ii) the adequacy of the LARP and the yet-to-be-finalized MLAMP, which was not a sub regional plan under the LARP and therefore not within the panel’s mandate; and (iii) cumulative effects from other projects.

The AER’s justification for this approach was threefold: (i) that section 21 of the Responsible Energy Development Act (REDA) prevented it from assessing the adequacy of Crown consultation, (ii) that LARP prohibited the AER from delaying its decision to await the finalization of the MLAMP; and (iii) the Project was subject to authorization by cabinet and therefore cabinet was the “most appropriate place for a decision on the need to finalize the MLAMP”.[2]

The Court of Appeal’s Decision

The majority of the Court of Appeal,[3] held that the AER’s narrow interpretation of its jurisdiction with respect to aboriginal concerns under REDA, did not prevent it from considering aboriginal concerns when assessing whether the project was in the public interest.[4]The majority held the MLAMP and FMFN’s concerns relating to it were not an issue encompassed in the duty to consult but instead the MLAMP was directed at treaty implementation and for this reason implicated the honour of the Crown and should have been considered by the AER in its public interest assessment. The Court found that section 21 of the REDA was no answer to the AER’s failure to consider the FMFN’s concerns in its assessment of the public interest. In finding that the AER erred in deferring considerations surrounding the MLAMP to cabinet, the Court held that the AER’s statutory mandate to consider the public interest did not entitle it to decline addressing the MLAMP. Rather, the Court directed that while these issues may be considered by cabinet, “the AER is no less responsible for considering the Crown’s constitutional obligations than is cabinet.”[5]

Following the Supreme Court of Canada’s holding in Clyde River (Hamlet) v. Petroleum Geo-Services Inc. that a “project authorization that breaches the constitutionally protected rights of Indigenous people cannot serve the public interest”,[6]the AER was statutorily obligated to engage with those concerns in assessing the public interest.

Concurring in the result, the minority[7]stressed that protecting and maintaining treaty rights, including those to hunt, trap and fish, is an ongoing Crown obligation that implicates the honour of the Crown and that the Crown acting honourably promotes reconciliation.[8] The ongoing obligation to protect treaty rights cannot be done piecemeal through consultation on individual projects since, in the case of the FMFN, it has not resulted in adequate consideration of the cumulative effects of development on those rights.[9] In the minority’s view, since the ultimate purpose of the honour of the Crown and the constitutional protections of aboriginal rights is bound up in reconciling aboriginal interests and Crown sovereignty, the Crown must not wait for concerns relating to protecting and maintaining treaty rights to be addressed in a treaty infringement claim. Rather, the honour of the Crown is engaged prior to stave off and prevent infringement.

In the result, the Court directed the AER to reconsider whether the Project was in the public interest, so as to consider both the development of the MLAMP and the honour of the Crown.

Comment

This decision provides welcome clarity for project proponents on the AER’s jurisdiction with respect on how to address Indigenous interests, narrows the application of section 21 of the REDA, and stresses that the AER must assess Indigenous issues and concerns more fully as part of its public interest determinations. As demonstrated by the submissions before the Court in this case, section 21 of the REDA was, to a certain extent, considered a shield for minimizing direct engagement with Indigenous concerns and interests before the AER. The result of this approach had narrowed the consideration of Indigenous issues before the AER, as many were viewed as falling within the purview of the duty to consult - and with that the purview of the Alberta Aboriginal Consultation Office - or as was the case here, deferred for cabinet’s consideration.

By framing these considerations as part of the honour of the Crown – and thereby encompassing more than simply consultation – the assessment of Indigenous concerns now clearly fall within the AER’s jurisdiction to assess a project in the public interest when the honour of the Crown is at issue.

Despite these clarifications, the decision creates some additional project risk regarding action or inaction on the part of government in fulfilling its duties with respect to treaty negotiation and implementation. As a result, it is unclear whether the Court’s judgment will set in motion any process changes for projects before the AER where such issues are in play.

It is yet to be seen how the implications of the Court’s decision may affect how other statutory decision makers approach Indigenous issues and concerns in assessing the public interest.


[1] Prosper Petroleum Ltd v. Her Majesty the Queen in Right of Alberta, 2020 ABQB 127

[2] At para 44.

[3] Veldhuis J.A. and Stekaf J.A.

[4] At paras 57-58.

[5] At para 65.

[6] Clyde River (Hamlet) v Petroleum Geo-Services Inc., 2017 SCC 40 at para 40.

[7] Greckol J.A.

[8] At para 81.

[9] At para 82.

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