Date: 20061004
Docket: A-509-05
Citation: 2006 FCA 320
CORAM: NOËL J.A.
SHARLOW J.A.
MALONE J.A.
BETWEEN:
Flint
Hills Resources, Ltd.
Appellant
and
National Energy Board,
Enbridge Pipelines Inc., Canadian Association of Petroleum Producers, BP Canada
Energy Company, Devon Canada Corporation, EnCana Corporation, Imperial Oil,
Marathon Ashland Petroleum Canada Ltd., Mobil Pipe Line Company, Shell Canada
Limited, Suncor Energy Merketing Inc., Terasen Pipelines Inc., TransCanada
Keystone Pipelines Ltd. and TransCanada PipeLines Limited
Respondents
Heard at Calgary, Alberta, on October
4, 2006.
Judgment delivered from the
Bench at Calgary,
Alberta, on October
4, 2006.
REASONS FOR JUDGMENT OF THE COURT BY: Malone
J.A.
Date: 20061004
Docket: A-509-05
Citation: 2006 FCA 320
CORAM: NOËL
J.A.
SHARLOW
J.A.
MALONE
J.A.
BETWEEN:
Flint Hills Resources, Ltd.
Appellant
and
National Energy Board, Enbridge Pipelines
Inc., Canadian Association of Petroleum Producers, BP Canada Energy Company,
Devon Canada Corporation, EnCana Corporation, Imperial Oil, Marathon Ashland
Petroleum Canada Ltd., Mobil Pipe Line Company, Shell Canada Limited, Suncor
Energy Merketing Inc., Terasen Pipelines Inc., TransCanada Keystone Pipelines
Ltd. and TransCanada PipeLines Limited
Respondents
REASONS FOR JUDGMENT
(Delivered from the Bench at Calgary, Alberta, on October 4, 2006)
MALONE J.A.
I. Introduction
[1]
Flint
Hills Resources, Ltd (Flint Hills) appeals from a June 2005 decision of the
National Energy Board (Board) (RH-1-2005). In its decision, the Board approved
two applications made by Enbridge Pipelines Inc. (Enbridge), to increase the
tolls it charges crude oil shippers using its Canadian mainline system. The
increase would be used to provide US$100 million of financial support to
upgrade two pipelines located in the United States and known as the Spearhead Pipeline and the Mobil Pipeline.
Those upgrades did not require any changes or additions to Enbridge’s mainline
system in Canada.
[2]
Flint
Hills is a shipper of crude oil whose volumes represent approximately ten
percent of the total amount of crude oil transported on the Enbridge mainline
in Canada. That crude oil may be
transported to Flint Hills refinery in Minnesota without recourse to either the Spearhead
or Mobil pipelines.
[3]
During the
course of the Board proceedings, Flint Hills made submissions questioning the
jurisdiction of the Board to approve the recovery of Enbridge’s proposed costs
in its annual tolls. On this particular point, the Board stated the following:
Having found
that it is prudent for Enbridge to enter into the proposed contractual
commitments to provide financial support for the Spearhead and 20” reversal
projects, and to incur the associated costs, and that the costs will result in
general benefits to the Enbridge system and its shippers, the Board finds it
reasonable that the costs be included in the otherwise applicable Enbridge
annual revenue requirement and recovered from all shippers based on Enbridge’s
approved toll design (Board reasons at page 51).
[4]
On appeal,
it is again the position of Flint Hills that the Board lacks the jurisdiction
to have authorized Enbridge to include and recover such costs in its tolls. It
argues that although the Board has broad discretion to determine whether proposed
tolls would be just and reasonable, it cannot act in excess of its statutory
authority when performing that function, and in deciding as it did, the Board
exceeded its jurisdiction.
[5]
As we
understand it, Flint Hills is asking this Court to adopt the following as a
principle of law: The Board, in establishing the revenue requirement used to set
the toll increase sought by Enbridge in this case, exceeded its jurisdiction
when it included in that revenue requirement the cost incurred by Enbridge to
finance infrastructure or infrastructure improvements that are not part of the
Enbridge undertaking to which the toll relates. Counsel for the appellant
explained that this principle is not intended to cast doubt on the notion that the
revenue requirement can include costs referred to as “transportation by
others”, i.e., the cost incurred by Enbridge in using someone else’s pipeline
to move its customers products from the end of one Enbridge pipeline to the
beginning of another Enbridge pipeline.
[6]
It is also
the position of Flint Hills that the Board failed to provide adequate written
reasons to explain the basis upon which it would have the statutory authority
to authorize the inclusion and recovery of such costs in tolls.
II. Standard of Review
[7]
Flint Hills
characterizes the Board’s decision as jurisdictional in nature and submits that
such a question should be answered on a correctness standard. It cites the
Supreme Court of Canada in ATCO Gas & Pipelines Ltd. v. Alberta (Energy
& Utilities Board), 2006 SCC 4, for the proposition that jurisdictional
questions contain no polycentric considerations and therefore, the expertise of
the Board is not engaged when determining the scope of its statutory authority.
Flint Hills also notes the weak privative clause found in sections 22 and 23
of the National Energy Board Act (the Act), R.S., 1985, c. N-7.
[8]
In view of
our conclusion that the appeal should be dismissed, it is not necessary to
conduct an extensive standard of review analysis. Even on the most intrusive
standard of review (i.e. correctness), it has not been demonstrated that the
Board erred in law.
III. Analysis
Issue 1: Jurisdiction
[9]
A line of
cases in this Court have considered the Board’s powers to determine tolling and
to interpret provisions of the Act, its enabling legislation. For
example, in Trans Mountain Pipe Line Company Ltd. v. National Energy Board
et al., [1979] 2 F.C. 118 (C.A.), Pratte J.A. stated:
Whether or
not tolls are just and reasonable is clearly a question of opinion which, under
the Act, must be answered by the Board and not by the Court. The meaning of the
words “just and reasonable” in section 52 is obviously a question of law, but
that question is very easily resolved since those words are not used in any
special technical sense and cannot be said to be obscure and need
interpretation. What makes difficulty is the method to be used by the Board and
the factors to be considered by it in assessing the justness and reasonableness
of tolls. The statute is silent on these questions. In my view, they must be
left to the discretion of the Board …
[10]
More
recently, Rothstein J.A., then a member of this Court, in Transcanada
Pipelines Ltd. v. Canada (National Energy Board), 2004 FCA 149 at paragraph
31, specifically noted that the Board is not required to adopt any specific
methodology in determining tolls. As long as the tolls charged are just and
reasonable in accordance with section 59 of the Act, then the Board will
be afforded broad discretion to determine tolls.
[11]
Under
section 59, Parliament has given the Board the power to make orders setting
tolls in relation to pipelines. The term “toll” is defined in the Act as
including any toll for the transportation, transmission and delivery of a
commodity through a pipeline. The power to set tolls is circumscribed by
sections 62 and 67, that is any toll allowed by the Board must be just and
reasonable and not discriminatory. Beyond this, the Board must stay within the
confines of the Constitution Act, 1982, being Schedule B to the Canada
Act 1982 (U.K.), 1982, c. 11, by ensuring the tolls it establishes do not
become taxes and that they do not somehow stray into provincial jurisdiction.
So long as the Board meets the requirements of the Act and the Constitution
Act, it has discharged its jurisdictional burden.
[12]
When
regard is had to the statutory context and background, there is, in our view,
no basis for the proposition that in setting tolls under Part IV, the Board is
barred from taking into account costs incurred by pipeline operators on the basis
that they serve to improve infrastructure belonging others. This is sufficient
to dispose of the first argument.
Issue 2: Adequacy of Reasons
[13]
We turn
then to the adequacy of the Board’s reasons. The specific passage setting out
the Board’s opinion as to its jurisdiction states:
After a
careful consideration of the legal submissions of parties, the Board does not
find persuasive the argument of Flint Hills that the Board lacks authority to
approve the recovery of the proposed costs in tolls. Having found that the
costs will be reasonably and prudently incurred in relation to the operation of
the Canadian system, it would be inconsistent and contrary to well established
rate-making principles for the Board to find that the same costs could not be
recovered from the users of that system (Board’s reasons at page 51).
[14]
Flint
Hills submits that this one paragraph dismissal of its jurisdictional argument
is entirely without any supporting reasoning or analysis.
[15]
The
practical test as to whether reasons are adequate is whether there are
deficiencies in the reasons that would prevent meaningful appellate review (see
R. v. Sheppard, [2002] 1 S.C.R. 869 at paragraph 29). In past cases
involving issues of jurisdiction, this Court has stated that the parties must
be able to clearly discern from the reasons whether the tribunal exercised its
jurisdiction under the relevant statutory provision (see Rothstein J.A. in Novell
Canada Ltd. v. Canada (Minister of Public Works), (2000) 257 N.R. 179 at
paragraphs 3, 10 and 15).
[16]
The
Board’s decision in this case accords with its broad tolling powers that allow
it to take into account considerations that further the interests of the
Canadian energy sector. In our analysis, there is sufficient information in the
written reasons and the submissions and evidence referred to by the Board, to
ascertain the reasoning of the Board and to allow meaningful appellate review.
IV. Conclusion
[17]
The appeal
will be dismissed with costs.
“B. Malone”