Canadian Energy Oil And Gas: Top 20 Of 2020 - Judicial Decisions

• Published date: 11 February 2021
• Subject Matter: Corporate/Commercial Law, Environment, Energy and Natural Resources, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Contracts and Commercial Law, Energy Law, Environmental Law, Oil, Gas & Electricity
• Law Firm: Borden Ladner Gervais LLP
• Author: Mr Rick Williams, Jessica Cameron, Clay Jacobson, Garrett Finegan, Jack Maslen, Tiffany Bennett and Brett Carlson

Part 1

Without question, the top story over the last year has been the COVID-19 pandemic and its tremendous ongoing effects felt across Canada and the world.

This time has had a significant impact on Canada's energy industry and many of the changes and developments that took place in 2020 will continue to influence trends, business decisions and the future growth of Canada's energy industry in 2021.

As we look back at 2020, we have highlighted the Top 20 industry developments and decisions made throughout the year in four key areas: Judicial decisions, regulatory decisions, legislative and policy developments, and transactions and trends. In this article, we analyze the top five judicial decisions of the last year and how these decisions may affect your business in 2021.

The top five judicial decisions of 2020

Our list of the top five judicial decisions starts with a busy Supreme Court of Canada (SCC) considering issues of federal and provincial jurisdiction as well as the scope of the peace, order and good government federal power. The SCC started 2020 with its January ruling on BC's provincial jurisdiction to regulate heavy oil on an interprovincial pipeline, followed by the Saskatchewan, Ontario and Alberta Carbon tax challenges in September. The Federal Court of Appeal handed TMX a victory in one of its many legal challenges, while the difficult economic environment for Canadian oil and gas companies kept Alberta courts busy with numerous insolvency proceedings, including considering gross overriding royalties and eligible financial contracts. Finally, the SCC closes out our list with its decision to provide additional guidance and a caution to contracting parties on the scope of the duty of honest performance of contractual obligations in December 2020.

1. The Carbon Tax Challenge heads to the Supreme Court of Canada in Reference Re Greenhouse Gas Pollution Pricing Act (Saskatchewan, Ontario, and Alberta)¹

In 2019 and 2020, the Saskatchewan Court of Appeal (SKCA), the Ontario Court of Appeal (ONCA) and the Alberta Court of Appeal (ABCA) released their reference decisions on the constitutionality of the federal Greenhouse Gas Pollution Pricing Act (the GGPPA). These decisions were appealed to the SCC, which is now tasked with resolving a critical division of powers issue between the federal and provincial governments over the regulation of GHG emissions.

The ONCA and SKCA majorities found that the GGPPA was a valid exercise of federal power under the national concern branch of the peace, order, and good government power (POGG) on the basis that without a concerted provincial effort to address GHG emissions, legislative action in Canada would be conducted in fragmented fashion and ultimately be ineffective.² The dissent in both decisions, foreshadowing aspects of the ABCA decision that followed, disputed this, finding that '[t]here are many things that individual provinces cannot establish, but it does not follow that those things are matters of national concern on that account.

The ABCA provided support for the dissenting opinions from the SKCA and ONCA, with its February 2020 decision, holding that the GGPPA represents an unconstitutional 'Trojan Horse' that would 'forever alter the constitutional balance' between the provinces and territories.³ On the issue of POGG, the ABCA majority differed from the SKCA and ONCA majorities by: (1) interpreting its scope of application more narrowly, holding that 'it is not a grand entrance hall into every head of provincial power';⁴ and(2) holding that the provincial inability test does not relate to the consequences of provincial inaction but rather provinces' jurisdictional ability to enact a challenged scheme on their own. Accordingly, placing the GGPPA under POGG would allow it to 'intrude deep into the provinces' exclusive jurisdiction over property and civil rights'.⁵

The SCC heard the appeals in September of 2020 and has reserved judgement. Before it were two different articulations of the GGPPA's pith and substance and the proper scope of POGG. At it's core, the ABCA's decision represents a strong and robust articulation of provincial rights, interpreting the GGPPA broadly and the scope of POGG narrowly. Contrastingly, the ONCA and SKCA decisions interpret the GGPPA narrowly and invite a broader application of POGG. If the SCC adopts the ABCA's reasoning, it will significantly restrict federal ability to regulate GHG emissions, and potentially other environmental matters, under POGG. A more detailed analysis of the ABCA decision can be found here.

The lasting implications of the decision will be significant for future development of energy projects in Canada, as well as other reference decisions making their way through the courts, including the ABCA's upcoming reference hearing on the constitutionality of the recently enacted Impact Assessment Act. While the parties filed their materials with the ABCA in 2020, no date has been set for a hearing of the Reference.

2. The Supreme Court of Canada considers the scope of provincial jurisdiction in Reference re Environmental Management Act (British Columbia)

On January 16, 2020, the SCC dismissed British Columbia's attempt to regulate the transportation of heavy oil through the province. The nine-member panel delivered a rare oral...