Decision Date: December 6, 2012

Panel: Alan Andison

Keywords: Water Act – s. 92(9); preliminary decision; stay application; licence; aboriginal treaty rights; Crown duty to consult aboriginal people; hydraulic fracturing

Chief Kathi Dickie, in her own right and on behalf of the members of the Fort Nelson First Nation (the “First Nation”), appealed a decision of the Assistant Regional Water Manager (the “Water Manager”), Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”), to issue a water licence to Nexen Inc. (“Nexen”). The Licence authorizes Nexen to divert water from North Tsea Lake during April 1 and October 31 for five years, pipe it to storage dugouts, and use it throughout the year in the hydraulic fracturing or “fracking” process to obtain natural gas from underground. North Tsea Lake is located northeast of Fort Nelson, within the First Nation’s traditional territory. The First Nation is an adherent to Treaty 8, and its members have treaty rights to hunt, fish and trap within their traditional territory. The First Nation asserted that its members conduct traditional activities including hunting, fishing, and trapping in the vicinity of North Tsea Lake.

Since 2007, Nexen has been diverting water from North Tsea Lake and piping it to storage dugouts for use in the fracking process. Before the Licence was issued, Nexen was diverting and using water under short-term (one-year) water use approvals issued under the Water Act.

In April 2009, Nexen applied for the Licence. Over the next three years, various telephone conversations, exchanges of correspondence, and meetings occurred between representatives of the Ministry, the First Nation, and Nexen. Also, the Ministry referred Nexen’s proposed water management plan to an independent expert for review. By May 2012, the First Nation was still expressing concern about the proposed Licence and sought further consultation with the Ministry. However, the Water Manager decided that the First Nation had been given sufficient opportunity for consultation, and had failed to provide information about how its treaty rights may be affected by the Licence. The Water Manager decided that the Licence would have no impact on the First Nation’s treaty rights, and issued the Licence.

Under the Licence, Nexen may divert up to 60,000 cubic metres of water per day, to a maximum of 2,500,000 cubic metres per year, from North Tsea Lake, subject to certain conditions including a requirement that withdrawals cease when the flow of water from North Tsea Lake to the Tsea River falls below 0.351 cubic metres per second. The works authorized under the Licence were in use under the previous short-term approvals. However, the maximum amount of water that may be diverted under the Licence is greater than under the short-term approvals.

The First Nation appealed the Licence on the grounds that the Ministry failed to uphold the Crown’s duty to consult with the First Nation before the Licence was issued, and the Water Manager failed to adequately consider and assess the impacts that the Licence would have on the environment and the First Nation’s treaty rights. In its Notice of Appeal, as a preliminary matter, the First Nation requested a stay of the Licence pending the Board’s decision on the merits of the appeal.

Before the stay application was decided, the Water Manager requested that the appeal be dismissed on the basis that the First Nation did not have standing under section 92(1) of the Water Act to appeal the Licence. Section 92(1) specifies the categories of persons who may appeal a decision to the Board. After considering written submissions from all parties, the Board concluded that the First Nation had standing to appeal the Licence: Chief Kathi Dickie et al v. Assistant Regional Water Manager et al (Decision No. 2012-WAT-013(a), issued November 6, 2012).

Accordingly, the Board proceeded to consider the First Nation’s application for a stay of the Licence pending the Board’s decision on the merits of the appeal.

The Regional Manager and Nexen opposed the stay application. The Participants provided no submissions on the stay application.

In determining whether the stay application ought to be granted, the Board applied the three-part test set out in RJR-MacDonald Inc. v. Canada (Attorney General). With respect to the first stage of the test, the Board found that the appeal raised serious issues to be decided, including whether the Licence will have adverse effects on the First Nation’s treaty rights, and whether the Crown met its duty to consult with the First Nation. Consequently, the Board proceeded to consider the next part of the test.

Regarding the second part of the test, the Board found held that the First Nation was not required to establish with certainty that its interests would suffer irreparable harm if a stay is denied, but it had to provide sufficient evidence to establish a likelihood or reasonable possibility of irreparable harm to its interests. The Board held that the existence of scientific uncertainty, in itself, about the effects of the Licence, or speculative assertions of irreparable harm, were insufficient to establish irreparable harm. The Board also found that the works authorized by the Licence were in place before the Licence was issued, and therefore, a stay would not prevent the construction of those works or any impacts that may have arisen from their construction. Consequently, the Board focused on whether the diversion and withdrawal of water from North Tsea Lake in accordance with the Licence was likely to cause irreparable harm to the First Nation’s interests, pending a final decision on the merits of the appeal. The Board that the First Nation failed to establish that denying a stay would result in irreparable harm to the First Nation’s interests. Specifically, the Board found that the First Nation made assertions as to how its treaty rights or opportunities for reconciliation with the Crown might be affected if a stay was denied, but it provided insufficient evidence to support those assertions.

Turning to the third part of the test, the Board weighed the potential harm to the First Nation’s interests, if a stay was denied, against any potential harm to the interests of the Regional Manager or Nexen if a stay was granted. The Board found that the balance of convenience favoured denying a stay. In particular, the Board found that a stay would prevent Nexen from diverting water from North Tsea Lake into storage dugouts, and using any water that was already stored in the dugouts. As a result, granting a stay would prevent Nexen from withdrawing stored water, which Nexen is authorized to use throughout the year in the fracking process. Also, given that the Licence allows Nexen to divert water from North Tsea Lake from April 1 to October 31 of each year, and that a decision on the merits of the appeal may not be issued before April 1, 2013, granting a stay may prevent Nexen from diverting water from North Tsea Lake during some or all of the 2013 window. Although Nexen could apply for a short-term water use approval as an alternate way to obtain water, if a stay was granted, there was no assurance that an approval would be granted. Also, even if Nexen received a short-term approval, there was no assurance that it would be able to divert any surface water, because the Oil and Gas Commission had issued a regional prohibition on surface water withdrawals under short-term approvals. Consequently, the Board found that, if a stay was issued, Nexen would incur additional operating costs as a result of having to seek other means of supplying water to its operations, either by applying for a short-term approval or, alternatively, by trucking water in from other sources. Although the magnitude of those additional expenses was unclear, there was no indication that Nexen would be able to recover the expenses if it was successful on the merits of the appeal. As such, the Board found that Nexen would suffer irreparable financial harm, if a stay was granted, whereas the First Nation would not suffer irreparable harm if a stay was denied.

Accordingly, the stay application was denied.