The Federal Court ruled that the respondent Minister does not have an obligation to follow the instructions of the Coldwater Indian Band to refuse consent to the assignment of pipeline easements from Trans Mountain Pipeline to Kinder Morgan. Two easements through one of the Band’s reserves were created in the 1950s and one pipeline was built. The pipeline assets were transferred to Kinder Morgan in 2007, but the consent of the Minister to such assignment is required. The Court held that the Minister is required to listen in good faith to the concerns of the Band, balance those concerns with the public interest, and negotiate with Kinder Morgan to obtain more favourable terms for the Band. There seems little basis for refusing to consent to the assignment of the easement for the existing pipeline. However, there is a reasonable argument that the other easement created in the 1950s has expired for non-use, and the Minister could re-negotiate with Kinder Morgan to obtain more favourable terms for the Band.

The Coldwater Indian Band possesses reserves near Merritt, British Columbia. In 1952, Trans Mountain Oil Pipeline Company sought a 60-foot right of way through one of the Band’s reserves for the purpose of building an oil pipeline. The Band Council passed a resolution approving of the ROW, and an Order-in-Council was passed in March 1953 approving the ROW. In 1955, Trans Mountain entered into an agreement with the Crown relating to the easement. One of the terms stated that Trans Mountain shall not assign the ROW without the written consent of the Minister. The pipeline was subsequently built, and carries approximately 300,000 barrels of oil per day from Alberta.

In 1957, Trans Mountain made a request for a second easement through Indian reserves, including the Coldwater Indian Band’s reserve. The Band Council made a resolution approving the ROW. In 1958, Trans Mountain and the Crown entered into an agreement with the same terms as the 1955 agreement. However, a second pipeline has not been built.

Through a complex series of corporate transactions, Trans Mountain sold its pipeline assets in 2007 to interests controlled by Kinder Morgan. In June 2012, Kinder Morgan made a request to the Minister to consent to the assignment of the assets. The Band had been made aware that such a request would be made, and requested meetings with the Minister. They ultimately took the position that the original indenture was void due to the failure in 2007 to obtain a consent to the assignment, and that a new process needed to be started. The Band also pointed out that Kinder Morgan was a foreign company, and questioned its safety record. In separate correspondence with Kinder Morgan, the Band stated that it did not authorize use of the ROW and demanded that Kinder Morgan cease operations. Kinder Morgan objected to the perceived threat about “consequential damage that may result” from continued operations.

The Minister has not yet made a decision in regards to the assignment. The Band applied to the Court for an order declaring that the Minister is obligated to follow its instructions, and deny retroactive consent to the assignment of the ROW. The Court noted that the Band expects to obtain a much better deal if Kinder Morgan was required to bargain under some duress.

There was no dispute that the Minister owed a fiduciary duty to the Band in relation to the assignment. Justice Hughes held that the main issue concerned the nature and extent of that duty. The relevant legislation was section 35 of the Indian Act which concerns lands being taken from Indian reserves for public purposes. This provision has not changed materially since the creation of the easements in the 1950s. The Court also reviewed a “Land Management Manual” issued by Indian and Northern Affairs Canada which set out the policy of obtaining the written consent of the First Nation to an assignment. The taking or using of reserve lands without the consent of the First Nation would only be sought in exceptional circumstances. The Court held that such policy documents are the kind of “soft law” that are useful guidelines for those who administer statutes, but are not legally binding.

The Court reviewed a number of cases relating to the Crown’s fiduciary duty and the taking of reserve lands. Such cases emphasize that the Crown wears many hats, and must balance fiduciary duties to the bands with the public interest. Justice Hughes summarized this survey of the law as follows:

From the jurisprudence recited above, from the Supreme Court of Canada and the three further cases that I have cited, I draw the following conclusions as to the jurisprudence:

  • the Crown owes a fiduciary duty to First Nations persons in respect of claims relating to title to and use of lands set aside as a reserve;
  • the nature and extent of that fiduciary duty may vary according to the circumstances and importance of the matter;
  • the Crown has a duty to prevent the First Nation from being exploited; and
  • the Crown must listen in good faith to the concerns of the First Nation, but has a duty to weigh those concerns against other public interests that the Crown represents; it must endeavour to reach a compromise between those interests, while endeavouring to obtain the best possible result for the First Nation.

In this case, the Crown has to balance the Band’s position against other public interests, such as the maintenance of the existing pipeline and the possibility of Kinder Morgan applying for a second pipeline. Justice Hughes commented that “there seems to be little reason for the Minister to withhold consent in respect of the first easement”. With respect to the second easement, and the possibility of Kinder Morgan wanting to build a second pipeline, the Court held that there was a reasonable argument that the easement created in the 1950s has ceased to exist. The Minister would be prudent in taking the Band’s concerns into account, with a view to obtaining a much better result for the Band. The Minister should consider whether the easement has expired for non-use, and whether re-negotiation with Kinder Morgan for more favourable terms is required.

Justice Hughes summarized his findings as follows:

In answer to the issues presented by the Applicant: 

  • The Minister does not have an absolute duty to refuse to consent to the assignments upon being advised that Coldwater does not agree to them.
  • The Minister is required to re-examine whether Coldwater’s consent is required; particularly in respect of the second easement, and to determine if it is in Coldwater’s and the public’s interest not to consent.

Since success was divided, there was no order as to costs.
http://www.canlii.ca/en/ca/fct/doc/2013/2013fc1138/2013fc1138.html

Scott Kerwin, Partner
Aboriginal Law
BLG, Vancouver
604-640-4029
SKerwin@blg.com

Author

Scott Kerwin 
SKerwin@blg.com
604.640.4029

Expertise

Aboriginal Law