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Thursday Thinkpiece: Newman on Devolution of Resource Jurisdiction

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Natural Resource Jurisdiction in Canada
Dwight Newman
Toronto: LexisNexis Canada, 2013

Excerpt from Chapter 4 Devolution of Jurisdiction to the Northern Territories

In various areas of natural resource jurisdiction, a problem that can exist is that case law developed in very different contexts — without any contemplation of the effects on natural resource issues — will nonetheless become binding case law on general division of powers matters and thus affect natural resource jurisdiction. A particularly striking instance may arise here.

In Consolidated Fastfrate Inc. v. Western Canadian Council of Teamsters, the Supreme Court of Canada considered in the context of a freight forwarding business whether freight consolidation and deconsolidation within a province was sufficiently connected to interprovincial transportation so as to amount to interprovincial transportation. Writing for a majority of six judges, Rothstein J. came very close to offering an originalist interpretation of section 92(10). He wrote of it in general terms: “[H]aving regard to the historical context of s. 92(10) and its underlying purpose, the preference for diversity of regulatory authority over works and undertakings should be respected, absent a justifiable reason that exceptional federal jurisdiction should apply.” One of the results, on Rothstein J.’s conception, is the following:

I am therefore of the view that a requirement for federal jurisdiction over transportation undertakings is that the undertaking itself physically operates or facilitates carriage across interprovincial boundaries. In my view, this approach best reflects the text of s. 92(10) and preserves the intent of the Constitution Act, 1867, which sees federal jurisdiction over both works and undertakings and labour relations as the exception, rather than the rule.

Justice Binnie offers a sharply worded dissent in which he attacks Rothstein J.’s originalist tendencies and urges attention to modern business realities. Justice Binnie would have considered the reality of the business to amount to a national freight forwarding activity. However, Rothstein J. emphasizes that the operations of the company depended upon third-party interprovincial carriers, saying that “[i]t is in precisely the inverse situation of those undertakings that have been found to be subject to derivative federal jurisdiction because they are integral to a recognized interprovincial work or undertaking”.

Although both opinions engage in far-reaching examination of different transportation and communication cases, neither appears to contemplate the pipelines context. Nonetheless, the majority reasons, cast in broad terms, appear to urge a generally narrower reading of section 92(10) and to place some emphasis on physical operations across interprovincial boundaries before an activity properly falls within section 92(10). The question is what implications the case, taken seriously as a precedent, has in the context of pipelines.

One could try to minimize its impact in two ways. First, Rothstein J. implicitly accepts the possibility of a test based on something being “integral to a recognized interprovincial work or undertaking” being applied in some contexts, and one could argue for tests like the Westcoast Energy test thus being implicitly acknowledged as continuing. Second, Rothstein J.’s reasons draw sharp distinctions between the transportation and communications contexts, although without attention to the specific transportation context of pipelines. Even if his reasons bear on transportation of physical, solid freight, one might argue that different considerations accrue with pipelines transporting oil and gas in liquid forms and facing particular business realities in the fact that they depend upon the laying down of massive amounts of new infrastructure in their construction.

One could argue more generally that given that the Consolidated Fastfrate reasons do not explicitly consider the pipelines context, they cannot have been intended to alter its tests in ways causing problems for its business realities. In my view, there is much to be said for this approach. When the Court writes about general federalism principles while thinking not a moment about the very direct implications for natural resource contexts, there is room to question how far to apply its conclusions to this special context.

However, to give a fair hearing to all possible positions, it is worth noting that the principles underlying Rothstein J.’s reasons in Consolidated Fastfrate are not based on business realities (those being Binnie J.’s concern in dissent) but on the intentions of the framers and a general reading of federalism principle. Such considerations are normally quite compelling. Thus, although my view would tend to oppose allowing this case to distort natural resource issues that were not within the contemplation of the Court, there is ongoing room to think about whether Consolidated Fastfrate requires a narrower reading of the scope of section 92(10) in future pipelines cases.

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