Decision Date: February 7, 2013

Panel: Robert Wickett

Keywords: Water Act – ss. 11(2), 12(1), 92; Ministry of Environment Act – s. 4; Crown’s duty to consult; Aboriginal rights and title; Indian reservation; water licence; water bottling; cumulative impacts; West Moberly First Nation v. British Columbia (Chief Inspector of Mines), 2011 BCCA 247

Chief Richard Harry, in his own right and on behalf of the Xwémalhkwu First Nation (the “First Nation”), appealed two decisions of the Assistant Regional Water Manager (the “Manager”), Ministry of Environment, now the Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”). The Manager issued two conditional water licences to Bear River Contracting Ltd. (“BRC”), authorizing BRC to construct certain water works, and to divert and use water from the Bear River. The Bear River flows into Bear Bay, within Bute Inlet on the mainland coast of British Columbia. Before discharging into Bear Bay, the Bear River traverses land that BRC owns, and crosses a portion of the First Nation’s Indian Reservation No. 8. Indian Reservation No. 8 borders Bear Bay to the south, and is surrounded by BRC’s land on its other three sides. The only deep water access to Indian Reservation No. 8 is on the shore of Bear Bay adjacent to BRC’s land. Indian Reservation No. 8 has not been inhabited in recent years, but is used by the First Nation when harvesting fish in the area. The First Nation is involved in 4th stage treaty negotiations, and Bear Bay is within the First Nation’s claimed traditional territory. The First Nation asserts ownership of the Bear River’s water resources.

In February 2009, BRC applied for the water licences as part of a plan to build cabins on its land, and to withdraw water from the Bear River for use in bottling, and ultimately, use in a microbrewery. As part of the water bottling proposal, BRC sought to build a dock facility on the foreshore of Bear Bay adjacent to BRC’s land. Consequently, in addition to applying for the water licences under the Water Act, BRC applied for tenure over the Crown foreshore pursuant to the Land Act.

The water licence applications were referred to various stakeholders for comment, including the First Nation and the Ministry’s Environmental Stewardship Division. The Crown has a legal duty to consult with, and if necessary accommodate, the First Nation if its Aboriginal rights and/or title may be adversely affected by the water licences. The First Nation advised the Ministry that it objected to the commercialization of fresh water in the area, as it could impact the First Nation’s Aboriginal rights and have long-term environmental consequences.

In August 2010, after various communications and meetings between the Ministry, BRC, and the First Nation, the Ministry completed a preliminary assessment which concluded that the water licences had minimal potential environmental impacts, but the affected site could be of considerable interest to the First Nation. The Ministry sent a copy of its preliminary assessment to the First Nation, and offered the First Nation an opportunity to respond, but it did not respond.

In February 2011, the Ministry completed a technical report that included a summary of the potential environmental impacts of the water licences, and the concerns expressed by stakeholders, including the First Nation. The technical report also included a summary of the Ministry’s research into the First Nation’s asserted Aboriginal rights and title in the area. The technical report concluded that the First Nation’s strength of claim in the affected area was strong in terms of rights, and significant in terms of title, but the water licences had a low potential to infringe the First Nation’s Aboriginal rights and title.

Subsequently, the Manager accepted the recommendations in the technical report, and issued the water licences to BRC.

One of BRC’s water licences is for the purposes of fire protection and residential lawn watering. During the appeal hearing before the Board, the First Nation abandoned its appeal of that licence.

BRC’s other water licence is for industrial purposes, particularly bottling sales (the “Commercial Water Licence”). That licence was the focus of the appeal hearing.

Under the Commercial Water Licence, BRC may withdraw up to 0.15 cubic metres of water per second, or 1 percent of the instantaneous pre-diversion stream flow at the point of diversion, whichever quantity is less. The licenced works consist of a screened intake, pump, pipe and tanks, and the works must be constructed, and the water beneficially used, before December 31, 2014. In addition, within six months of completion, the works must be inspected by an independent qualified environmental professional (“QEP”), who must report whether there are any environmental concerns.

The main issue in the appeal was whether the Manager, on behalf of the Crown, conducted adequate consultation with the First Nation in relation to the potential impacts of the water licence on the First Nation’s asserted Aboriginal rights and title in the Bear Bay area. In particular, the First Nation argued that the Manager had failed to adequately consult with the First Nation in relation to not only the withdrawal of water under the water licence, but also the water bottling project as a whole, and particularly regarding the effects on the First Nation’s rights and title in relation to Indian Reservation No. 8. In addition, the First Nation submitted that the Manager breached section 11 of the Water Act by failing to hold a hearing with the First Nation before issuing the Commercial Water Licence.

The Environmental Law Centre (“ELC”), a public interest environmental law clinic associated with the University of Victoria’s Faculty of Law, was granted limited participant status in the appeal by the Board. The ELC provided submissions on two issues: whether the Manager had the legal authority to issue the Commercial Water Licence without re-referring the licence application to the Ministry of Environment after a ministerial reorganization in October 2010 resulted in the Manager’s position being transferred to the then Ministry of Natural Resource Operations; and, whether the Manager unlawfully relied on future reporting from a QEP as a condition of the Commercial Water Licence.

The Manager submitted that he, on behalf of the Crown, met the duty to consult the First Nation regarding the potential impact of the Commercial Water Licence on the First Nation’s Aboriginal rights and title.

BRC submitted that it met its obligations in the application process, and it made its best efforts to inform the First Nation of its plans with respect to the water bottling proposal. BRC also submitted that the Commercial Water Licence will have minimal impact on the First Nation’s rights and title.

In assessing the nature of the Crown’s duty to consult in this case, the Board first considered the strength of the First Nation’s claims to Aboriginal rights and title in the area affected by BRC’s water bottling proposal. The Board then considered the potential impacts of the Commercial Water Licence on the First Nation’s asserted rights and title. The Board found that the First Nation’s asserted right of ownership of the Bear River’s water resources was weak based on the lack of evidence before the Board to support such a claim. The Board also found that there was no evidence that the withdrawal of water in accordance with the Commercial Water Licence would cause any harm to the First Nation’s asserted right of water ownership. Accordingly, the Board found that the Crown’s duty to consult the First Nation with respect to the potential impacts of the Conditional Water Licence on the asserted water ownership right was at the low end of the spectrum. In that regard, the Board found that the Manager had fulfilled the Crown’s duty to consult.

However, the Board found that the First Nation’s asserted rights of ownership, occupation, use and access in relation to Indian Reservation No. 8 are strong. In addition, the Board found that the Crown was obliged to consider the Commercial Water Licence application in the context of the entire water bottling proposal, including the potential impacts of the dock facility on the marine environment and the First Nation’s ability to access Indian Reservation No. 8. In that regard, the Board noted that the Manager’s powers under section 12 of the Water Act include the ability to require “additional information” relevant to water licence applications. Consequently, the Board found that there was no statutory restriction on the Manager’s ability to engage in consultation with respect to the impacts of the water bottling proposal as a whole.

The Board held that the evidence clearly established that the Manager, and his staff, made no effort to consult with the First Nation on the overall impacts of the water bottling proposal, as the Manager viewed those matters as being outside of his jurisdiction. Further, there was limited evidence before the Board regarding the Crown’s consultations with the First Nation regarding the proposed dock and the application for foreshore tenure under the Land Act. The branch of the Crown responsible for approving the Land Act application did not share consultation information with the Manager, and vice versa. The Board found that, at the least, the Manager was obliged to seek relevant information from that branch to ensure the disclosure of that information to the First Nation, and to seek information about the First Nation’s position with respect to the water bottling proposal as a whole. The Manager, on behalf of the Crown, failed to fulfill his duty to consult in this regard, in part, because the policy at the time was that information should not be shared between various branches of the Crown. Had the Manager met this duty, it may have changed his assessment of certain aspects of the Commercial Water Licence, such as the quantity of water authorized.

Next, the Board considered whether the Manager breached section 11(2) of the Water Act by not holding a hearing with the First Nation before issuing the Commercial Water Licence. The Board held that section 11(2) did not require the Manager to hold a hearing; rather, it required the Manager to consider whether the First Nation’s objection to the licence application warranted holding a hearing. The Manager testified that he did not consider whether to hold a hearing.

The Board found that the Manager did not comply with section 11(2). However, the Board held that the First Nation had little basis to expect a hearing, given the generalized nature of its objection, and its failure to respond to the Ministry’s requests for further information about the nature of its concerns. Moreover, the Board held that the appeal process provided the First Nation with a full opportunity to express its concerns, and the Manager’s failure to comply with section 11(2) caused no prejudice to the First Nation. Consequently, the Board rejected this ground for appeal.

Regarding the ELC’s submissions, the Board held that the ministerial reorganization had no effect on the Manager’s legal authority under the Water Act to consider the application for the Commercial Water Licence. Moreover, before the reorganization occurred, the licence application was referred to the Ministry of Environment’s Environmental Stewardship Division, and it provided comments that formed the basis of several conditions in the Commercial Water Licence.

The Board concluded that the Water Act does not require the Manager to consider cumulative environmental impacts when deciding whether to issue a water licence. The Board also found that the Manager did not unlawfully delegate his authority by putting a condition in the Commercial Water Licence that requires BRC to have the constructed water works inspected by a QEP, who must report any environmental concerns to the Manager.

Regarding the remedy for the Crown’s failure to adequately consult with the First Nation about the potential impacts of the water bottling proposal on the First Nation’s Aboriginal rights and title in relation to Indian Reservation No. 8, the Board suspended the Commercial Water Licence pursuant to sections 92(8)(c) and 23(2) of the Water Act, and the matter was returned to the Manager with directions. The Board directed the Manager to ascertain whether any agency of the Crown had adequately consulted with the First Nation regarding the impact of the water bottling project on the First Nation’s rights in relation Indian Reservation No. 8, and if the Manager is not satisfied that adequate consultation was completed, then the Commercial Water Licence will remain suspended until the Crown conducts adequate consultation with the First Nation. Upon completion of that process, the Manager may reinstate, amend or cancel the Commercial Water Licence. If the Commercial Water Licence is reinstated, the Board directed the Manager to extend its termination date to December 31, 2016, to account for the length of the appeal process, and the Manager may further extend the termination date to account for the period of consultation.

The appeal of the Commercial Water Licence was allowed, in part.