[1996] 2 F.C. 263
A-545-95
Westcoast Energy Inc. (Appellant)
v.
National Energy Board and Attorney General of Canada (Respondents)
A-606-95
IN THE MATTER of the National Energy Board Act, AND IN THE MATTER of a reference by the National Energy Board pursuant to section 18.3 and subsection 28(2) of the Federal Court Act
Indexed as: Westcoast Energy Inc. v. Canada (National Energy Board) (C.A.)
Court of Appeal, Pratte, Hugessen and Stone JJ.A.” Vancouver, January 8, 9, 10; Ottawa, February 9, 1996.
Constitutional law — Distribution of powers — Processing plants to be constructed by company in natural gas pipeline transportation business within jurisdiction of Parliament of Canada pursuant to Constitution Act, 1867.
Energy — Jurisdiction in National Energy Board over processing plants to be constructed by company in business of transportation of natural gas by pipeline as within jurisdiction of Parliament of Canada pursuant to Constitution Act, 1867 — Facilities within definition of “pipeline” in National Energy Board Act, s. 2.
Westcoast, whose business was the transportation of natural gas by pipeline for the account of others, proposed to construct two processing plants in the Peace River region of northeastern British Columbia. In each case, the proposed facilities may be described as the expansion of Westcoast’s gathering facilities for the transportation of “raw” gas from the point of delivery by the producers thereof, and the construction of new and expanded processing plants, one in the Fort St. John area and another in the Grizzly Valley area, in which the “fuel” gas, basically methane, was separated from the other components of the raw gas. One of the matters was an appeal from a decision of the National Energy Board that it did not have jurisdiction over the greater part of Westcoast’s proposed new facilities in the Fort St. John area. The other matter was a reference by that Board to this Court pursuant to section 18.3 of the Federal Court Act seeking the Court’s answer to a similar question of disputed federal jurisdiction over the Grizzly Valley area facilities and a subsidiary question relating to the interpretation of the Board’s jurisdiction under its governing statute, the National Energy Board Act.
Two issues fell to be determined. The first was whether the proposed facilities would constitute undertakings connecting the province with any other province or extending beyond the limits of the province. That question gave rise to the further inquiry as to whether Westcoast was conducting one or more than one undertaking. If there was a single undertaking, there could be no question that such undertaking met the requirements of 92(10)(a) of the Constitution Act, 1867 for it extended at both its upstream and downstream ends beyond the limits of British Columbia. If, on the other hand, it was determined that Westcoast was conducting more than one undertaking, the question became to know if the undertaking the proposed facilities will form part of fell within federal jurisdiction. The second issue, which would arise only if the first was determined in favour of federal jurisdiction, turned on the question whether the proposed processing plants could properly be considered to be included within the expression “real and personal property and works connected therewith” in the definition of pipeline in section 2 of the National Energy Board Act.
Held, the appeal should be allowed and the two questions should be answered in the affirmative.
The first determination to be made in answering the constitutional question was whether the relevant facilities of Westcoast constituted one undertaking or more than one. On the facts, the facilities constituted only one undertaking. It was not the difference between the activities and services but the inter-relationship between them, and whether or not they have a common direction and purpose which will determine whether they form part of a single undertaking. On the basis of the following facts, Westcoast was engaged in a single undertaking comprised of the business of gathering, processing and transporting natural gas: (1) It was a provider of services only; (2) Processing was required to facilitate the transportation service provided by it; (3) Processing was offered as a service exclusively to shippers on Westcoast’s mainline transmission facilities; (4) The fuel gas which went into Westcoast’s mainline transmission facilities was, by far, the major component of the raw gas gathered and processed by Westcoast; (5) Westcoast’s facilities were not only physically interconnected and interdependent, they were, in some cases, interchangeable; (6) Fuel gas could be contractually delivered across provincial borders from all Westcoast processing plants; (7) The same personnel worked on both the gathering and mainline transmission pipelines and, they, together with the personnel of the processing plants, were subject to a unified operational control and direction; (8) Westcoast was the owner of all the facilities in question. So this was a very strong case for federal jurisdiction. Ownership is not determinative of constitutional jurisdiction but it certainly is not irrelevant.
In sum, the combination of ownership, direction and control in the hands of Westcoast, together with the other previously enumerated factors, lead ineluctably to the conclusion that Westcoast was a single undertaking engaged in the interprovincial and international transportation of natural gas. As such, it was subject to federal jurisdiction by virtue of the combined effect of sections 91(29) and 92(10)(a) of the Constitution Act, 1867.
Even on the most broad and generous interpretation, section 92A could not be read as preventing the exercise of federal jurisdiction over a transportation undertaking which received raw gas from the producers thereof after it has been extracted from the ground, dehydrated, and transported to delivery points. Such federal jurisdiction was entirely compatible with the exercise of the provincial powers mentioned in section 92A.
Even if one were to consider Westcoast’s gathering operations as being a separate undertaking from its processing and mainline transmission operations (a position found to be incorrect), that undertaking, including the operations in the Fort St. John and Grizzly Valley areas, must be regarded as interprovincial because such transportation took place on a regular and continuous basis across provincial boundaries. Nor was the fact that only a relatively small part of Westcoast’s gathering facilities extended into Yukon, the Northwest Territories and Alberta of any constitutional significance.
Where there is a finding that there is a single undertaking, it is not necessary that every integral part of that undertaking should also be “vital” or “essential” thereto. However, a finding that the gathering and processing facilities owned and operated by Westcoast were a part of its transportation undertaking did not necessarily establish that the gathering and processing operations carried on by others were vital or essential to the Westcoast undertaking so as to become themselves subject to federal jurisdiction. That was a question which did not need to be answered.
Finally, the definition of pipeline in section 2 of the National Energy Board Act included the Westcoast processing plants. Once it was determined that Westcoast was a single undertaking, the processing plants had to be considered as being an integral part of the pipelines to which they were connected on each side. Although processing plants were not mentioned expressly in the definition, the general words of the definition were broad enough to cover processing plants. The Board’s jurisdiction accordingly extended to the processing plants in issue here.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix II, No. 5], ss. 91, 92, 92A, Sixth Schedule.
Federal Court Act, R.S.C., 1985, c. F-7, s. 18.3 (as enacted by S.C. 1990, c. 8, s. 5).
National Energy Board Act, R.S.C., 1985, c. N-7, s. 2 “pipeline” (as am. by R.S.C., 1985 (3rd Supp.), c. 28, s. 299).
CASES JUDICIALLY CONSIDERED
APPLIED:
Attorney-General for Ontario v. Israel Winner, [1954] A.C. 541 (P.C.); Toronto Corporation v. Bell Telephone Company of Canada, [1905] A.C. 52 (P.C.); The Queen in the Right of the Province of Ontario v. Board of Transport Commissioners, [1968] S.C.R. 118; (1967), 65 D.L.R. (2d) 425; Luscar Collieries Ltd. v. McDonald, [1927] A.C. 925 (P.C.); Dome Petroleum Ltd. v. National Energy Board (1987), 73 N.R. 135 (F.C.A.); Flamborough v. National Energy Board, Interprovincial Pipe Line Ltd. and Canada (1984), 55 N.R. 95 (F.C.A.); Ontario Hydro v. Ontario (Labour Relations Board), [1993] 3 S.C.R. 327; (1993), 107 D.L.R. (4th) 457; 66 O.A.C. 241; 93 CLLC 14,061; 158 N.R. 161; [1993] O.L.R.B. Rep. 1071; Ottawa-Carleton Regional Transit Commission and Amalgamated Transit Union, Local 279 et al., Re (1983), 44 O.R. (2d) 560 (C.A.).
CONSIDERED:
United Transportation Union v. Central Western Railway Corp., [1990] 3 S.C.R. 1112; (1990), 76 D.L.R. (4th) 1; 91 CLLC 14,006; 119 N.R. 1; Canadian Pacific Railway Company v. Attorney-General for British Columbia and Attorney-General for Canada, [1950] A.C. 122 (P.C.); National Energy Board (Re), [1988] 2 F.C. 196 (1987), 48 D.L.R. (4th) 596; 81 N.R. 241 (C.A.).
REFERRED TO:
Northern Telecom Ltd. v. Communications Workers of Canada, [1980] 1 S.C.R. 115; (1979), 98 D.L.R. (3d) 1; 79 CLLC 14,211; 28 N.R. 107.
AUTHORS CITED
Hogg, Peter W. Constitutional Law of Canada, 3rd ed. (supplemented). Scarborough, Ont.: Carswell, 1992.
APPEAL from a decision of the National Energy Board that it did not have jurisdiction over the greater part of Westcoast Energy Inc.’s proposed new processing facilities in the Fort St. John area of British Columbia. Appeal allowed.
REFERENCE by the Board as to whether processing facilities proposed to be constructed by Westcoast in the Grizzly Valley area of British Columbia fall under federal jurisdiction and therefore, interpreting the National Energy Board Act, under the Board’s jurisdiction. Both questions are answered in the affirmative.
COUNSEL:
W. Ian C. Binnie, Q.C. and Robin M. Sirett for appellant Westcoast Energy Inc.
Judith B. Hanebury for respondent National Energy Board.
Anne Michaud for respondent Attorney General of Canada.
W. Stanley Martin, Cal Johnson, D. G. Cowper for B.C. Gas Utility Ltd.
George H. Copley for Her Majesty the Queen in right of the Province of British Columbia.
James J. Quail for Consumers Association of Canada (B.C. Branch).
SOLICITORS:
McCarthy Tétrault, Toronto and Vancouver, for appellant Westcoast Energy Inc.
Legal Services National Energy Board, Calgary, for respondent National Energy Board.
Deputy Attorney General of Canada for respondent Attorney General of Canada.
Russel & Du Moulin, Vancouver, for B.C. Gas Utility Ltd.
Ministry of the Attorney General, Victoria, for Her Majesty the Queen in right of the Province of British Columbia.
B.C. Public Interest Advocacy Centre, Vancouver, for Consumers Association of Canada (B.C. Branch).
Code Hunter Wittmann, Calgary, for the Aitken Creek Group.
Legal Services Alberta Department of Energy, Calgary, for Alberta Department of Energy.
Macleod Dixon, Calgary, for Alberta Natural Gas Company Ltd.
Robert C. Beattie, Vancouver, for Canwest Gas Supply Inc.
Bull, Housser & Tupper, Vancouver, for Council of Forest Industries, Methanex Corp. and Cominco. Ltd.
Guild, Yule and Company, Vancouver, for Export Users Group.
Lidstone, Young, Anderson, Vancouver, for Peace River Regional District.
Legal Services Petro-Canada, Calgary, for Petro-Canada.
Legal Services Progas Limited, Calgary, for Progas Limited.
Carter, Lock & Repka, Grande Prairie, Alberta, for Mr. Calloway Roller and Mrs. Yvonne Roller.
Legal Services Shell Canada Limited, Calgary, for Shell Canada Limited.
Milner Fenerty, Calgary, for Tumbler Ridge Shippers Group.
Legal Services Unocal Canada Limited, Calgary, for Unocal Canada Limited.
The following are the reasons for judgment rendered in English by
Hugessen J.A.:
Introduction
These two matters are respectively an appeal from a decision of the National Energy Board and a reference by that Board to this Court pursuant to section 18.3 of the Federal Court Act.[1] Both relate to certain facilities proposed to be constructed by Westcoast Energy Inc. (Westcoast) in the Peace River region of northeastern British Columbia.
The appeal is from a majority (2-1) decision of a panel of the National Energy Board (the Board) which determined that the Board did not have jurisdiction over the greater part of Westcoast’s proposed new facilities in the Fort St. John area. The reference seeks the Court’s answer to a similar question of disputed federal jurisdiction over other Westcoast proposed facilities in the Grizzly Valley area; in the event of a finding of federal jurisdiction, the reference also subsidiarily asks a question relating to the interpretation of the Board’s jurisdiction under its governing statute, the National Energy Board Act.[2]
The business of Westcoast is the transportation of natural gas by pipeline for the account of others. In each case, the proposed facilities may be described, in general terms, as the expansion of Westcoast’s gathering facilities for the transportation of “raw” gas from the point of delivery by the producers thereof, and the construction of new or expanded processing plants in which the “fuel” gas, basically methane, is separated from the other components of the raw gas. Some of those components e.g. liquid hydrocarbons such as propane, are themselves commercially useful; others, notably hydrogen sulphide, can be and are converted into a marketable product: sulphur.
The principal components of the raw gas, expressed in “mole fractions,” for each of the two proposed facilities are as follows:[3]
| Component |
Fort St. John project (Aitken Creek plant) |
Grizzly Valley project (Pine River plant) |
| Nitrogen Carbon Dioxide Hydrogen Sulphide Methane Ethane Propane |
0.0048 0.0172 0.0132 0.8618 0.0619 0.0232 |
0.0037 0.0787 0.1005 0.8148 0.0022 0.0001 |
We were told at the hearing that the rule of thumb for obtaining the actual percentage composition of raw gas was to multiply the “mole fraction” by 100, so that, for example, on the above table, the percentage of methane in the raw gas would be 86.18 for the Aitken Creek plant and 81.48 for the Pine River plant.
Both Westcoast proposals include some relatively minor changes and additions to its mainline fuel gas transmission facilities downstream of the processing plants in question. In both, the proposed new processing facilities represent by far the most important and expensive part of the work to be undertaken.
In three significant respects, the two proposed expansion facilities differ from one another:
1) In the Fort St. John project, the raw gas contains significant amounts of hydrocarbon liquids; this affects not only the operation of the gathering pipelines, which must have the liquids flushed through them to avoid clogging, but also the proposed new processing plant at Aitken Creek which will include facilities for extraction, fractionation, and handling of the hydrocarbon liquids. Hydrogen sulphide, on the other hand, is a relatively minor component of the raw gas produced in the Fort St. John area. By contrast, the raw gas to be handled by the proposed Grizzly Valley project contains no hydrocarbon liquids but a relatively high proportion (approximately 10%) of hydrogen sulphide; accordingly, the new facilities in the Pine River processing plant do not include any facilities for handling hydrocarbon liquids;
2) The Grizzly Valley project includes an extension to an existing fuel gas pipeline (the Sukunka line) which carries fuel gas back upstream from the processing plant to fuel the production facilities (notably dehydration) in the Grizzly Valley area. There is no equivalent facility in the Fort St. John area. The Board asserted jurisdiction over the Sukunka line in an earlier decision which has not been contested and it has not been asserted that the proposed extension of that line changes the overall constitutional jurisdiction with regard to the Grizzly Valley project;
3) In the Fort St. John project the gas will be moved through the gathering pipelines and into the new Aitken Creek plant by means of new compression facilities which will be installed upstream of the Aitken Creek plant. By contrast, the movement of the additional volumes of gas through the Grizzly Valley gathering pipelines will be assisted by the addition of new compression facilities downstream of the Pine River plant on the mainline transmission pipeline itself.
The parties and the proceedings before the Board
Initially, Westcoast applied to the Board for approval of both projects at the same time. For reasons which need not concern us, the application in respect of the Grizzly Valley project was adjourned and only the Fort St. John application proceeded. At the public hearing called to consider that application, B.C. Gas Utility Ltd. (B.C. Gas) raised the question of the Board’s jurisdiction over the existing and proposed gathering and processing facilities of Westcoast.[4] B.C. Gas’ objection to the Board’s jurisdiction was twofold. In the first place, it took issue on constitutional grounds with the Board’s assertion of jurisdiction over gathering and processing facilities entirely situated within the limits of the province of British Columbia. Those facilities, it was submitted, were purely local works and undertakings relating to the production and development of natural resources in the province and were not part of an interprovincial or international transportation undertaking so as to bring them within the ambit of federal jurisdiction by the combined effect of sections 91(29) and 92(10)(a) of the Constitution Act, 1867.[5] B.C. Gas’ second objection related only to Westcoast’s proposed processing facilities (which, as indicated, represent by far the most important part of Westcoast’s proposed investment); the contention was that the processing plant does not come within the Board’s statutory jurisdiction as it does not form part of a “pipeline” as that term is defined in section 2 [as am. by R.S.C., 1985 (3rd Supp.), c. 28, s. 299] of the National Energy Board Act , supra, the Board’s governing statute:
2. …
“pipeline” means a line that is used or to be used for the transmission of oil or gas, alone or with any other commodity, and that connects a province with any other province or provinces or extends beyond the limits of a province or the offshore area as defined in section 123, and includes all branches, extensions, tanks, reservoirs, storage facilities, pumps, racks, compressors, loading facilities, interstation systems of communication by telephone, telegraph or radio and real and personal property and works connected therewith;
After holding a hearing, the Board, by a majority, on May 26, 1995, gave effect to the constitutional objection and declined jurisdiction on those grounds. That being the case, it was not necessary for the Board to deal with the question of statutory jurisdiction and the Board left that question unanswered. Leave to appeal to this Court was granted August 24, 1995.
Following the Board’s decision on the Fort St. John application, Westcoast caused the Grizzly Valley application to be revived and applied to the Board to refer the question of its jurisdiction to this Court. The Board, after inviting and receiving written representations from all interested parties, including both B.C. Gas and the Attorney General of British Columbia,[6] on September 21, 1995 issued an order stating in very considerable detail the facts upon which it would base a decision and referring the following questions to the Court:
(1) Are the facilities proposed to be constructed and operated by Westcoast Energy Inc. within the jurisdiction of the Parliament of Canada pursuant to the Constitution Acts, 1867 to 1982?
(2) If so, do such facilities fall within the definition of “pipeline” in section 2 of the National Energy Board Act?
The appeal and the reference were joined and heard together. Besides Westcoast and B.C. Gas, representations were also received from the Attorney General of Canada, the Attorney General of British Columbia, the Consumers’ Gas Company Ltd. and the Consumers’ Association of Canada (B.C. Branch).
The issues
As can be seen from the foregoing, two issues fall to be determined in these proceedings.
The first, and by far the most important, is the constitutional question which may be stated in the terms of section 92(10)(a) of the Constitution Act, 1867, supra, as whether the proposed facilities will constitute undertakings connecting the province with any other province or extending beyond the limits of the province. That question, in its turn, gives rise to the further inquiry as to whether Westcoast is conducting one or more than one undertaking. If there is a single undertaking, there can, as will be seen, be no question that such undertaking meets the requirements of section 92(10)(a) for it extends at both its upstream and downstream ends beyond the limits of British Columbia. If, on the other hand, it is determined that Westcoast is conducting more than one undertaking, the question becomes to know which undertaking the proposed facilities will form part of and if they meet the second branch of the two-part test enunciated by Dickson C.J. in United Transportation Union v. Central Western Railway Corp.:[7]
There are two ways in which Central Western may be found to fall within federal jurisdiction and thus be subject to the Canada Labour Code. First, it may be seen as an interprovincial railway and therefore come under s. 92(10)(a) of the Constitution Act, 1867 as a federal work or undertaking. Second, if the appellant can be properly viewed as integral to an existing federal work or undertaking it would be subject to federal jurisdiction under s. 92(10)(a). For clarity, I should point out that these two approaches, though not unrelated, are distinct from one another. For the former, the emphasis must be on determining whether the railway is itself an interprovincial work or undertaking. Under the latter, however, jurisdiction is dependent upon a finding that regulation of the subject matter in question is integral to a core federal work or undertaking. [Emphasis in original.]
The second issue, which only arises if the first is determined in favour of federal jurisdiction, is very much narrower. It turns on the question of whether the proposed processing plants can properly be considered to be included within the expression “real and personal property and works connected therewith” in the definition of pipeline in section 2 of the National Energy Board Act, supra.
Westcoast and the Attorney General of Canada contended for an affirmative answer to the Board’s jurisdiction on both questions. B.C. Gas and the Attorney General of British Columbia contended for negative answers to both questions. The Consumers’ Association of Canada (B.C. Branch) contended for a negative answer to the constitutional question, but, in the event that constitutional jurisdiction was found to lie with the federal Parliament, for an affirmative answer to the question of statutory interpretation. The Consumers’ Gas Company Ltd. took no position on either of the questions but instead submitted a series of general principles which, in its view, should govern the Court’s consideration.
The Westcoast system
In its order of reference the Board described in great and careful detail Westcoast’s pipeline transmission system in the following terms:
11. Westcoast owns and operates physically connected natural gas facilities extending from gas receipt points in the Yukon Territory, the Northwest Territories, the Province of Alberta and the Province of British Columbia, to delivery points in the Provinces of British Columbia and Alberta and at the international boundary between Canada and the United States near Huntingdon, British Columbia. Westcoast’s raw gas transmission pipelines receive the raw gas produced by gas producers at various producer field locations. The raw gas which contains substances such as hydrogen sulphide and carbon dioxide is transported through Westcoast’s raw gas transmission pipelines to Westcoast’s processing (treatment) plants where these substances are removed. In some instances however, raw gas transmission pipelines owned by others transport raw gas to a processing plant owned by Westcoast, and in one instance, raw gas transmission lines owned by Westcoast connect for backup service to a processing plant owned by Pacific Northern Gas. Processing (treatment) results in the production of residue (sales) gas and sulphur and liquids which may then be transported to markets. The residue gas is delivered into Westcoast’s mainline transmission pipeline for transportation to markets.
12. The Westcoast pipeline and processing facilities include the following:
• approximately 2 576 kilometres of mainline transmission pipelines located in the Provinces of Alberta and British Columbia, with 17 mainline compressor stations;
• approximately 2 488 kilometres of raw gas transmission or “gathering” pipelines located in the Provinces of Alberta and British Columbia, the Yukon Territory and the Northwest Territories, with 17 field compressor or “booster” stations; and
• five gas processing (treatment) plants located in British Columbia at Fort Nelson, Taylor, Pine River, Aitken Creek and in the Sikanni area northwest of Fort St. John. A sixth gas processing plant owned by Westcoast at Boundary Lake, British Columbia is not currently in operation.
…
14. As shown on the Westcoast Facilities Map, Westcoast’s mainline transmission pipeline commences at the international boundary near Huntingdon, British Columbia (east of Vancouver), where the mainline connects with the interstate gas pipeline owned and operated in the United States by Northwest Pipeline Corporation.
15. From Huntingdon, Westcoast’s mainline transmission pipeline extends north to Compressor Station No. 2 where it divides into three branches. One branch (the Fort Nelson Mainline) extends north to the Fort Nelson Plant, at Fort Nelson, British Columbia, with pipelines connecting Westcoast’s Sikanni Plant and the Aitken Creek Plant to the Fort Nelson Mainline near Compressor Station N4. The Fort Nelson Mainline also connects with the Buckinghorse Plant which is owned by Westcoast Gas Services Inc., a subsidiary of Westcoast, not regulated by the Board. The second branch (the Pine River Mainline) extends southeast to the Pine River Plant near Chetwynd, British Columbia. The third branch (the Fort St. John Mainline) extends northeast to Compressor Station No. 1 adjacent to the McMahon Plant at Taylor, British Columbia (near Fort St. John) where the mainline transmission pipeline divides into two branches extending into Alberta. The more northerly of these lines (the 16 inch Boundary lake Mainline) extends approximately 1.6 kilometres into Alberta where it connects with the gas pipeline owned and operated by NOVA Gas Transmission Ltd. (“NOVA”). The more southerly of these lines (the 26 inch Alberta Mainline) extends approximately 6.6 kilometres into Alberta where it connects with pipeline facilities owned by Westcoast Transmission Company (Alberta) Ltd. (“Westcoast Alberta”), a wholly owned subsidiary of Westcoast. The Westcoast Alberta pipeline facilities, in turn, connect with the NOVA pipeline facilities approximately 19 kilometres east of the Alberta/British Columbia border. In addition, the Westcoast Alberta pipeline facilities connect gas fields in the Peace River area of Alberta to the Westcoast raw gas transmission pipeline facilities. Westcoast Alberta has no employees and all of its facilities are operated by Westcoast as part of its pipeline facilities.
16. From the time that Westcoast’s pipeline and processing facilities commenced operation in 1957, sales gas produced in Alberta was delivered west, through the Westcoast Alberta pipeline facilities and later also through the NOVA pipeline facilities into Westcoast’s mainline transmission pipeline for delivery to markets in British Columbia and at the international boundary for export to the United States. Gas produced in British Columbia can also be transported from Compressor Station No. 1, (adjacent to the McMahon Plant) east through the Westcoast and Westcoast Alberta facilities, to the NOVA pipeline facilities for delivery to markets in Alberta and to markets in Canada east of Alberta and in the United States.
17. Westcoast raw gas transmission pipelines lie behind four processing plants: the Fort Nelson Plant; the Aitken Creek Plant; the McMahon Plant; and the Pine River Plant. The Aitken Creek and McMahon Plants are both located in the Fort St. John area and the Pine River Plant is in the Grizzly Valley area. There is no interconnection between the gathering lines in the Fort Nelson, Fort St. John and Grizzly Valley areas. There are no raw gas transmission pipelines upstream of the Pine River Plant and the Aitken Creek/McMahon Plants which transport gas across the provincial boundary to those plants. Some of the raw gas transmission pipelines transporting gas to the Fort Nelson plant cross the provincial boundary. The raw gas transmission pipelines upstream of the Sikanni processing plant are owned by producers.
18. As shown on the Westcoast Facilities Map, Westcoast owns and operates the following raw gas transmission facilities:
(a) The Fort Nelson raw gas transmission pipelines in the Fort Nelson resource area consisting of approximately 856 kilometres of pipeline facilities which extend north and east of the Fort Nelson Plant and related compression facilities.
(b) The Fort St. John raw gas transmission pipelines in the Fort St. John resource area consisting of approximately 1 372 kilometres of pipeline facilities extending north of the McMahon Plant at Taylor, British Columbia and the Aitken Creek Plant and related compression facilities.
(c) The Grizzly Valley raw gas transmission pipelines in the Grizzly Valley resource area consisting of approximately 179 kilometres of pipeline facilities which extend from the Pine River Plant to gas fields in the Grizzly Valley resource area southeast of the plant. A map of the Grizzly Valley resource area entitled “Grizzly Valley Resource Area” is attached as Appendix 5 (on the map the producer “gathering” pipelines are shown in black). Westcoast’s pipelines in this resource area range from 8 inches to 24 inches in diameter. There are 30 wells delivering gas in the resource area and Westcoast receives that gas into its raw gas transmission pipelines at 11 field receipt points. Some of the raw gas transmission pipelines owned by Westcoast in the Grizzly Valley area can serve as a backup supply of gas to the natural gas processing plant owned by Pacific Northern Gas that serves the town of Tumbler Ridge. The primary source of gas for the plant is from producer-owned gathering lines that are not subject to Board regulation. Gas from the Westcoast raw gas transmission pipelines would only be used if the primary source of supply is unavailable. Pacific Northern Gas is a subsidiary of Westcoast and is not regulated by the Board. [Case Book, at pages 3-6.]
There is a similar but briefer and less detailed description of the Westcoast system in the decision of the majority on the Fort St. John application where the Board summarizes counsel’s outline of the relevant jurisdictional facts and states that it accepts them as “an accurate general description” (Appeal Book, at pages 4646-4647).
The decision of the Board on the Fort St. John application
The majority of the panel, after citing the relevant constitutional texts and the two-part test enunciated by Dickson C.J. in Central Western Railway, supra, went on to examine B.C. Gas’ submission that Westcoast’s gathering and processing activities “are a different kind of business and do not form part of the same undertaking” as Westcoast’s unquestionably federal mainline interprovincial and international transmission facilities. They said:
In the Board’s view, gas processing and gas transmission are fundamentally different activities or services. Processing is one of the operations that result in the production of residue gas, sulphur and liquids, which are then transported to markets by various means. Gathering is a transportation activity, but in the view of the Board it is related to the production process rather than the mainline transmission activity.
Westcoast’s business practices reflect the different services that it offers. Customers can contract for Westcoasts’s transmission services separately from its gathering and processing services. Gathering, processing and mainline transmission services are tolled separately and there are distinct methodologies for deriving each toll. Westcoast’s facilities are operated in a coordinated manner, but in the Board’s view this is a universal feature of the natural gas industry and would occur between connected facilities regardless of ownership. Westcoast accepts residue gas from gas processing plants operated by others, which involves a similar degree of coordination and cooperation. Furthermore, producers may own gathering lines that connect with Westcoast gathering lines and the lines feeding into the Sikanni plant are all owned by producers.
Some of the plants now operated by Westcoast were previously owned and operated by others under provincial jurisdiction. Although “a change of corporate control can be significant … where it leads to alterations in the operation of the activity in question” (Central Western at 1131), there is no evidence that the transfer of ownership and control to Westcoast has made a significant difference in the overall manner of operation of these facilities.
Counsel for the Aitken Creek Group suggested that it would be difficult to separate the management of the transportation, processing and gathering functions. However facilities owned by others tie into Westcoast’s facilities and it is apparent that the entire gathering and processing infrastructure that feeds into Westcoast’s mainline transmission system includes components that are separately owned and managed. There is ample authority that ownership, by itself, is not determinative of the constitutional issue: Northern Telecom Limited v. Communication Workers of Canada, [1980] 1 S.C.R. 115 at 134; Northern Telecom Limited v. Communications Workers of Canada, [1983] 1 S.C.R. 733 at 757; Alberta Government Telephones, v. C.R.T.C., [1989] 2 S.C.R. 225 at 263.
For these reasons, the Board is of the view that the proposed facilities would not be part of Westcoast’s mainline transmission undertaking, with the exception of the proposed loop of the Aitken Creek pipeline that would connect the new Aitken Creek plant with Westcoast’s main transmission line. [Appeal Book, at pages 4652-4653.]
The majority then went on to examine the possible impact in jurisdictional terms of the fact that some of Westcoast’s gathering lines also crossed provincial borders into Alberta, Yukon and the Northwest Territories. In their view, it was not necessary to determine the extent of federal jurisdiction over such facilities since the proposed gathering and processing facilities in the Fort St. John area, the only ones with which the Board was then concerned, would “not form part of the same undertaking” (Appeal Book, at page 4653). The Board noted that the proposed facilities in the Fort St. John area would not be connected to the interprovincial gathering lines except through the mainline transmission system.
Having concluded that the proposed Fort St. John facilities would not be themselves federal works or undertakings, the majority went on to consider the next question, namely, whether the proposed facilities would be integral and essential to Westcoast’s mainline transmission undertaking. Their reasoning and conclusion, on this point, is as follows:
The Board is of the view that the proposed gathering and processing facilities, whether considered separately or together with the existing gathering and processing facilities in the Fort St. John area as a single undertaking or possibly two undertakings, are not integral to Westcoast’s mainline transmission undertaking in the necessary constitutional sense. Physical connection will not by itself result in federal jurisdiction: “…something more than physical connection and a mutually beneficial commercial relationship with a federal work or undertaking is required … ” (Central Western, at 1147). The mainline transmission system is dependent at its upstream end on the gas wells and the gathering and processing infrastructure that feed into it, just as it is dependent on the facilities of local gas distribution companies at its downstream end. Of necessity, the transmission system and the upstream and downstream connecting infrastructures are operated in a coordinated manner, regardless of ownership. In the Board’s view, this dependence and coordination is an inevitable feature of the natural gas industry and does not result in the connected facilities being essential and integral in the constitutional sense. [Appeal Book, at page 4654.]
One member of the Board dissented from the conclusion of the majority. In his view, “the entire Westcoast system is one indivisible undertaking” (Appeal Book, at page 4656). The core of his reasoning is as follows:
Westcoast’s processing services are provided solely for its shippers and are essential to the transmission of gas. Processing is essential to the transmission function because engineering, safety and economic factors make it impractical to transport raw sour gas to markets. The hydrogen sulphide contained in the raw gas requires that pipe, welds and associated equipment have special metallurgical properties in order to resist corrosion, embrittlement and cracking. This adds considerably to the cost of a pipeline transporting raw gas. In addition, hydrogen sulphide is poisonous and therefore the potential consequences of a rupture of a line carrying raw gas are more serious than would be the case for a line carrying residue gas. Since Westcoast’s main transmission line eventually passes through populated areas in the southern mainland, the transportation of raw sour gas would create an unacceptable risk to the public.
The raw gas also contains liquids that tend to result in the formation of semi-solid substances known as hydrates. These may result in constrictions or plugging in a pipeline. Furthermore, slugs composed of hydrates can potentially rupture a line when they encounter a restriction or a sharp bend. It is therefore necessary to remove hydrates from the major gathering lines by “pigging” the lines. It would be impractical and more hazardous to do this on the main transmission line.
For these reasons, it is essential that the raw gas be processed before it is introduced into the main transmission line.
The processing plants are also integrated with the gathering system. The location and design of both the plants and the gathering system are interdependent; compared to similar areas in Alberta, Westcoast’s gathering system in northeastern British Columbia is more extensive so that processing can be accomplished using a small number of large scale plants. The planning of major capacity expansions invariably involves both processing and gathering capacity, as in the present application.
…
Westcoast’s processing plants are essential to the transportation of gas to market; they are provided solely for the benefit of shippers on the system; they are provided by the owner of the transportation undertaking, that is, Westcoast; and, in my view, they are an integral and essential part of the system. As I indicated at the beginning, it is my view that the entire Westcoast system is a single undertaking. [Appeal Book, at pages 4657-4658.]
How many undertakings?
As indicated above, the first determination to be made in answering the constitutional question is whether the relevant facilities of Westcoast constitute one undertaking or more than one. This involves an inquiry into the actual operation of the Westcoast system as it presently exists and functions. The cases make it plain that the question is not how the enterprise might have been structured or how other people in fact operate and structure different enterprises. Thus, in Attorney-General for Ontario v. Israel Winner,[8] it was said:
No doubt the taking up and setting down of passengers journeying wholly within the province could be severed from the rest of Mr. Winner’s undertaking, but so to treat the question is not to ask is there an undertaking and does it form a connexion with other countries or other provinces, but can you emasculate the actual undertaking and yet leave it the same undertaking or so divide it that part of it can be regarded as inter-provincial and the other part as provincial.
The undertaking in question is in fact one and indivisible. It is true that it might have been carried on differently and might have been limited to activities within or without the province, but it is not, and their Lordships do not agree that the fact that it might be carried on otherwise than it is makes it or any part of it any the less an interconnecting undertaking.
It is clear, of course, that the simple fact that it is Westcoast which carries out the various operations does not by itself make those operations into one undertaking. This was made plain in Canadian Pacific Railway Company v. Attorney-General for British Columbia and Attorney-General for Canada[9] (the Empress Hotel case):
The question for decision, therefore, is, in their Lordships’ view, whether the Empress Hotel is a part of the appellant’s railway works and undertaking connecting the province of British Columbia with other provinces or is a separate undertaking. A company may be authorized to carry on, and may in fact carry on, more than one undertaking. Because a company is a railway company it does not follow that all its works must be railway works or that all its activities must relate to its railway undertaking.
By the same token, however, the fact that there may be different activities or services being carried on does not prevent them from forming part of a single undertaking: Toronto Corporation v. Bell Telephone Company of Canada:[10]
The undertaking authorized by the Act of 1880 was one single undertaking, though for certain purposes its business may be regarded as falling under different branches or heads. The undertaking of the Bell Telephone Company was no more a collection of separate and distinct businesses than the undertaking of a telegraph company which has a long-distance line combined with local business, or the undertaking of a railway company which may have a large suburban traffic and miles of railway communicating with distant places.
Likewise, in the Empress Hotel case, supra, the Privy Council said, at page 144:
Their Lordships do not read the authority to carry on business “for the comfort and convenience of the travelling public” as requiring the appellant to cater exclusively or specially for those who are travelling on its system. The appellant is free to enter into competition with other hotel keepers for general hotel business. It appears from the facts stated in the order of reference that the appellant has so interpreted its powers and that in the Empress Hotel it does carry on general hotel business. It may be that, if the appellant chose to conduct a hotel solely or even principally for the benefit of travellers on its system, that hotel would be a part of its railway undertaking. Their Lordships do not doubt that the provision of meals and rest for travellers on the appellant’s system may be a part of its railway undertaking whether that provision is made in trains or at stations, and such provision might be made in a hotel. But the Empress Hotel differs markedly from such a hotel. Indeed, there is little, if anything, in the facts stated to distinguish it from an independently owned hotel in a similar position. No doubt the fact that there is a large and well-managed hotel at Victoria tends to increase the traffic on the appellant’s system; it may be that the appellant’s railway business and hotel business help each other, but that does not prevent them from being separate businesses or undertakings.
Similarily, in The Queen in the Right of the Province of Ontario v. Board of Transport Commissioners[11] (The GO Train case), the Court said:
In the present case, the constitutional jurisdiction depends on the character of the railway line not on the character of a particular service provided on that railway line. The fact that for some purposes the Commuter Service should be considered as a distinct service does not make it a distinct line of railway. From a physical point of view the Commuter Service trains are part of the overall operations of the line over which they run. It is clearly established that the Parliament of Canada has jurisdiction over everything that physically forms part of a railway subject to its jurisdiction.
As we have seen, the majority of the Board were of the view that Westcoast’s gathering and processing facilities were separate undertakings from mainline transmission because “gas processing and gas transmission are fundamentally different activities or services”. With respect, it seems to me that this observation misses the mark; the fact that different activities are carried on or services provided cannot by itself be determinative of whether one is dealing with more than one undertaking. It is not the difference between the activities and services but the inter-relationship between them, and whether or not they have a common direction and purpose which will determine whether they form part of a single undertaking. Hogg[12] puts it thus:
The fact that various business operations are carried on by a single proprietor does not foreclose inquiry as to whether or not those operations consist of more than one undertaking for constitutional purposes. It is the degree to which the operations are integrated in a functional or business sense that will determine whether they constitute one undertaking or not.
More importantly, the majority’s view that gathering and processing are “fundamentally different activities and services” is simply stated as a conclusion and is not supported by any detailed findings of fact which would permit any reasoned analysis of whether one is dealing with a single undertaking or more than one. Fortunately, however, the order of reference contains a meticulous and very detailed statement of facts, a part of which I have already quoted. The following paragraphs of the order contain a very careful description of the gathering and processing facilities and their relationship to one another and to the mainline transmission system:
19. Raw gas which is received by Westcoast contains a mixture of hydrocarbons (primarily methane) and other substances such as hydrogen sulphide and carbon dioxide. In general, the gas is gathered by producers from their individual wells through small diameter pipelines and water is removed from the gas by the producers before it enters Westcoast’s raw gas transmission pipelines. Water removal is a step in the processing of the gas for sale as residue gas and its removal assists in transportation of the gas by reducing the potential for corrosion and the formation of hydrates which can obstruct the flow of gas in the pipeline. Westcoast’s raw gas transmission pipelines transport the raw gas from the producer facilities to Westcoast’s gas processing plants where the gas is processed to remove hydrogen sulphide, carbon dioxide and other substances. The gas processing plants at Fort Nelson, Taylor and Pine River also include sulphur recovery facilities which are required to further process the hydrogen sulphide extracted from the raw gas during the treatment process and thereby ensure compliance with prevailing environmental requirements. In addition, because the gas in the Fort St. John resource area contains hydrocarbon liquids, the McMahon Plant at Taylor, B.C. has stabilization, fractionation and delivery facilities to handle the hydrocarbon liquids (propane, butane and condensate) extracted from the raw gas during the treatment process.
20. Raw gas which contains hydrogen sulphide and carbon dioxide is called “sour” gas. The combination of hydrogen sulphide and carbon dioxide is called “acid gas” and is corrosive. In order to provide resistance to the corrosive properties of acid gas, the steel used in the manufacture of pipe and associated equipment for raw gas pipelines that transport acid gas has different metallurgical properties than that used in the manufacture of pipelines used to transport gas from which acid gas has been removed. In addition, hydrogen sulphide is toxic and presents unacceptable safety and environmental concerns. For these reasons it is necessary to remove the acid gas from the raw gas stream prior to transportation to markets. It is further necessary, for both environmental and safety reasons, to convert the hydrogen sulphide removed from the raw gas by the processing plants, to elemental sulphur so that it can be stored or delivered to the owners of the gas.
21. Raw gas is transported by pipeline in the same manner as residue gas, that is, by compression. The compressor facilities on Westcoast’s raw gas pipelines operate in the same manner, and perform the same functions, as the compressor on Westcoast’s residue gas pipelines.
22. The Westcoast raw gas transmission pipelines and processing facilities are part of a web of facilities in British Columbia, and extending beyond the boundaries of the province, the great bulk of which are owned by Westcoast, but some are owned by others, which result in sales gas which is transported by mainline transmission pipelines to regions of consumption inside and outside the province.
23. Residue gas is equivalent in transportation terms to naturally occurring “sweet” gas which does not contain significant quantities of hydrogen sulphide, carbon dioxide and other substances. “Sweet gas” flows to market without processing except for dehydration at or near the wellhead. Westcoast’s pipeline facilities include some “sweet” gas pipelines southeast of Fort St. John.
Gas Flow
24. Gas delivered through Westcoast mainline transmission pipeline can flow both east to markets in Alberta or south to markets in British Columbia and the United States. Notwithstanding the direction of the physical flow of gas through the pipelines gas can contractually be “transported”, by displacement from any of the four major sources of gas (i.e., Fort Nelson resource area, Fort St. John resource area, Grizzly Valley resource area and Alberta) to either the NOVA pipeline facilities or to points in British Columbia and at the international boundary for export into the United States. The diagram attached as Appendix 6 shows how the “contractual” flow of gas takes place from the various resource areas into the NOVA pipeline facilities in Alberta. The two major junction points which facilitate these physical and contractual gas flows are Compressor Station No. 2 and Compressor Station No. 1.
25. Compressor Station No. 1 is located at Westcoast’s McMahon Plant complex at Taylor, B.C. and is the junction point of the Fort St. John raw gas transmission pipelines, the McMahon Plant, as well as the compression for the transportation of residue gas from the McMahon Plant, the 16 inch Boundary Lake and the 26 inch Alberta Mainlines. Compressor Station No. 1 has seven individual 2,000 horsepower (“hp”) reciprocating compressor units. Three units provide compression of the raw gas at the McMahon Plant and two units provide compression for the 16 inch Boundary Lake and 26 inch Alberta Mainlines. Two compressor units can be operated on either the raw gas transmission pipelines or the mainline transmission pipelines. Compressor Station No. 1 is operated and maintained by the same staff of operating personnel using common control facilities. In addition to Compressor Station No. 1, Westcoast also operates a booster station (Booster Station No. 1) which also compresses raw gas at the McMahon Plant. Booster Station No. 1 has two 3,000 hp units which are used primarily to compress raw gas delivered through the Oak, Fort St. John and Milligan Peejay raw gas transmission pipelines into the McMahon Plant.
26. Compressor Station No. 2 is located in Willow Flats, B.C. and is the junction point of the Fort Nelson Mainline, the Fort St. John Mainline and the Pine River Mainline and provides compression for the on-going transportation of gas through Westcoast’s mainline transmission pipeline. A flow diagram which shows how the flow of gas at Compressor Station No. 2 is accomplished through the compression facilities is attached as Appendix 7.
Sources and Destinations of Gas Transported the Westcoast Facilities
27. With the exception of minor volumes of gas sold by Westcoast under “offline” sales agreements to local distribution utilities in northeastern British Columbia, all gas which is transported through the Westcoast facilities is owned by producers, gas brokers, local distribution utilities, industrial gas users and other customers and is transported by Westcoast on behalf of such entities pursuant to service agreements. Gathering, processing, northern mainline transmission and southern mainline transmission are separate services provided by Westcoast and can be subject to separate agreements or can be provided pursuant to the terms of a single agreement.
28. Ownership of the gas may change at points such as the point at which the residue gas leaves a processing plant. One party may own the raw gas prior to processing while other parties may own the residue gas and other marketable commodities after production in a processing plant. Arrangements for the ownership of the sulphur and natural gas liquids produced in a processing plant may be different than the arrangements for the ownership of the residue gas. Residue gas can be produced in a processing plant owned by other than Westcoast and then transported on the mainline transmission pipeline of Westcoast in exactly the same manner as if the residue gas had been produced in a processing plant owned by Westcoast.
29. Residue gas received by Westcoast from Alberta sources moves through the northern mainline pipeline and the southern mainline pipeline of Westcoast but does not move through any of the gathering or processing facilities owned by Westcoast.
Operations and Maintenance
30. For purposes of operating and maintaining its pipelines and related compressor facilities, Westcoast’s mainline transmission pipeline facilities and raw gas transmission pipeline facilities are operated by the same personnel. Westcoast’s pipeline operations are divided into two geographic regions, namely Southern District and Northern District. Southern District personnel operate and maintain the Southern Mainline to and including Compressor Station No. 2, as well as Compressor Station N5 on the Fort Nelson Mainline. Northern District personnel operate and maintain the Fort Nelson Mainline north of Compressor Station No. 2, the Fort Nelson raw gas transmission pipeline facilities, the Fort St. John mainline transmission pipeline, the Fort St. John raw gas transmission pipeline, the 16 inch Boundary Lake mainline transmission pipeline, the 26 inch Alberta mainline transmission pipeline, the Pine River mainline transmission pipeline and the Grizzly Valley raw gas transmission pipelines. In this regard, pipeline crews, directed by the same Westcoast management, work at times on raw gas transmission pipelines and associated compressor facilities and at other times on mainline transmission pipelines and associated compressor facilities. Both Westcoast’s mainline and raw gas pipelines are serviced by common field offices, pipe storage yards, warehouses, compression repair facilities and measurement and pipeline maintenance shops.
31. The personnel who maintain and operate pipelines or compressor facilities of Westcoast may also operate or maintain pipelines or compressor facilities owned by subsidiaries or affiliates of Westcoast which are not regulated by the Board. At times some of them may also undertake work related to the maintenance or operation of Westcoast’s processing plants.
32. The field operation of Westcoast’s processing plants is carried out by Westcoast plant personnel at each plant location under the direction and supervision of management personnel located in the Vancouver office. An exception is the Aitken Creek processing plant which is operated by Unocal Canada Ltd. employees under Westcoast’s direction and supervision.
33. Management personnel located in the Vancouver offices of Westcoast also direct and supervise Westcoast personnel involved in the operation of the facilities of related companies. These facilities have not been subject to regulation by the Board.
34. Westcoast, for the operation of its pipeline and processing facilities uses an extensive telecommunications system. “Main Haul” circuits comprise four full time party line or selective private telephone channels interconnecting all compressor and booster stations, offices, warehouse and other fixed installations throughout its facilities. In those areas where Westcoast’s facilities are not within reasonable range of existing telecommunications systems, Westcoast owns and operates multi-channel point-to-point radio coverage. Westcoast also owns and operates a two-way radio system which provides mobile radio coverage along the pipeline rights-of-way and contiguous highways throughout the extent of the facilities. Two-way radio base stations are provided at all compressor stations, booster stations and gas processing plants to provide coverage to mobile radio-equipped vehicles in the local areas and to provide back-up support to telephone channels. The two-way radio system is controlled from Fort Nelson, Fort St. John, Prince George, Savona and Vancouver and is, when required, remotely connected into a continuous end-to-end communications system.
35. Westcoast’s Gas Control personnel in the Vancouver Gas Control centre are responsible for monitoring and controlling the flow of gas through both Westcoast’s raw gas transmission pipeline facilities and mainline transmission pipeline facilities to ensure that shippers are able to deliver gas into the pipelines and receive that gas off the pipelines.
36. Gas Control personnel monitor and control pressures throughout the raw gas and mainline transmission facilities to ensure that shippers maintain a balance between gas receipts into the raw gas transmission pipelines and deliveries off the mainline transmission pipelines. Maintaining a balance between receipts and deliveries is critical to the safe and efficient operation of the pipeline facilities.
37. To monitor gas flows through the facilities, Westcoast’s Gas Control uses a supervisory control and data acquisition (SCADA) system. The SCADA system provides Gas Control personnel with access to real time information on line pressures at critical locations throughout the pipelines, important operating parameters for compressor and processing plant facilities and gas quality information for gas deliveries into the pipelines. The SCADA system is also used by the Gas Control personnel to remotely start, stop and control the operation of compressor facilities both in the raw gas transmission and mainline transmission facilities. Some compressor facilities are operated manually by field personnel on instruction from Gas Control.
38. This interdependence and co-ordination is a necessary feature of the natural gas industry. The various facilities involved in the production, transportation and distribution of natural gas to the ultimate consumers are physically connected and must be operated in a coordinated manner. This dependency and coordination of facilities is true regardless of ownership. [Case Book, at pages 6-9.]
I must say that I find it impossible to read this description without concluding that Westcoast is engaged in a single undertaking comprised of the business of gathering, processing and transporting natural gas. The following facts, in particular, seem to me to lead inescapably to that conclusion:
(1) Westcoast is a provider of services only; it does not trade or deal in the gas it transports;
(2) Processing is required to facilitate the transportation service provided by Westcoast. In particular, processing,
a) makes long distance transportation easier and safer from the point of view of the physical pipeline facilities themselves and,
b) removes components from the raw gas which would not be acceptable for transportation in populated areas from the point of view of public health and safety;
3) Processing is offered as a service exclusively to shippers on Westcoast’s mainline transmission facilities; while some raw gas comes into some of Westcoast’s processing facilities by means of gathering lines owned and operated by others, all fuel gas coming out of such processing plants is transported onwards by Westcoast;
4) The fuel gas which goes into Westcoast’s mainline transmission facilities is, by far, the major component (over 80%) of the raw gas gathered and processed by Westcoast; the methane does not change[13]13 during processing other than to have removed from it the hydrocarbon liquids, hydrogen sulphide and other components which make transportation difficult or dangerous;
5) Westcoast’s facilities are not only physically interconnected and interdependent, they are, in some cases, interchangeable; some compressors may be used on either the raw gas or the fuel gas sides of the processing plants and some are apparently used on both;
6) Fuel gas may be contractually delivered across provincial borders (by means of displacement) from all Westcoast processing plants, including those which take their raw gas supply from across provincial borders;
7) The same personnel work on both the gathering and mainline transmission pipelines and they, together with the personnel of the processing plants, are subject to a unified central operational control and direction;
8) Westcoast is the owner of all the facilities in question.
Where a local work or undertaking is controlled and operated by and in common with an interprovincial or international transportation undertaking of the same type it in effect becomes part of the latter. This is the effect of the decision of the Privy Council in Luscar Collieries Ltd. v. McDonald:[14]
Their Lordships agree with the opinion of Duff J. that the Mountain Park Railway and the Luscar Branch are, under the circumstances hereinbefore set forth, a part of a continuous system of railways operated together by the Canadian National Railway Company, and connecting the Province of Alberta with other Provinces of the Dominion. It is, in their view, impossible to hold as to any section of that system which does not reach the boundary of a Province that it does not connect that Province with another. If it connects with a line which itself connects with one in another Province, then it would be a link in the chain of connection, and would properly be said to connect the Province in which it is situated with other Provinces.
In the present case, having regard to the way in which the railway is operated, their Lordships are of opinion that it is in fact a railway connecting the Province of Alberta with others of the Provinces, and therefore falls within s. 92, head 10 (a), of the Act of 1867. There is a continuous connection by railway between the point of the Luscar Branch farthest from its junction with the Mountain Park Branch and parts of Canada outside the Province of Alberta. If under the agreements hereinbefore mentioned the Canadian National Railway Company should cease to operate the Luscar Branch, the question whether under such altered circumstances the railway ceases to be within s. 92, head 10 (a), may have to be determined, but that question does not now arise.
In my view, however, this case is even stronger than Luscar, for the gathering and processing facilities are not only operated and controlled by Westcoast, they are actually owned by it. In the reasoning of the majority of the Board, and in the submissions of those contending for provincial jurisdiction, much is made of the undoubted fact that ownership is not, by itself, determinative of constitutional jurisdiction. That, however, is a very different thing from saying that ownership, together with its attendant control and direction, is irrelevant to the question of jurisdiction. In Central Western Railway, supra, Dickson C.J. dealt with this question in some detail, at pages 1131-1133:
A change in corporate control can be significant, however, where it leads to alterations in the operation of the activity in question. The crucial determination is not simply whether there has been a change of corporate control, but whether the work in question can properly be described, with regard to its nature of operations, as being interprovincial.
In this case, the respondents argue that since Central Western had previously been owned by CN the sale to a provincial company cannot remove it from federal jurisdiction. Moreover, in arguing that there exists a significant operational connection between Central Western and CN, they point to the fact that Central Western is connected only with CN, and note that all of the appellant’s freight goes to CN for onward transport. In the same vein, the respondents argue that the various contractual arrangements between the appellants and CN add to the physical connection between the two to establish a functional integration.
The respondents’ points are not without merit, yet neither are they convincing. In my view, while the factors mentioned by the respondents indicate a close commercial relationship between the two railways they do not show that CN operates Central Western. Rather, the sale of Central Western has resulted in a fundamental change in the management of the rail line. Most notably, the difference is manifested in the daily control of the business of the rail line. The distribution of the grain cars along the rail line is handled by the appellant, and CN rail cars do not travel on Central Western, nor does the federal rail company participate in the management of any of the leases connected to the property. Basically, CN exercises no control over the running of the rail line, making it difficult to view Central Western as a federal work or undertaking.
The respondents, however, rely on a number of cases in support of their argument on this point. One of these is Luscar Collieries Ltd. v. McDonald, [1927] A.C. 925 (Luscar), which is said to aid the contention that the appellant’s ownership of Central Western does not immunize the railway from federal jurisdiction. Luscar concerned a short branch line railway that was situated within Alberta. The line was owned and built by a provincial coal company, Luscar Collieries, but was operated by CN and had been constructed for the purpose of future sale to CN. In these circumstances the railway was held to fall under federal jurisdiction, but in delivering the judgment of the Privy Council, Lord Warrington of Clyffe appeared to base his decision on the fact that the local railway was operated by the national company. He stated, at pp. 932-33:
It is, in their [Lordships’] view, impossible to hold as to any section of that system which does not reach the boundary of a Province that it does not connect that Province with another. If it connects with a line which itself connects with one in another Province, then it would be a link in the chain of connection, and would properly be said to connect the Province in which it is situated with other Provinces.
In the present case, having regard to the way in which the railway is operated, their Lordships are of opinion that it is in fact a railway connecting the Province of Alberta with others of the Provinces, and therefore falls within s. 92, head 10(a) of the Act of 1867 … If under the agreements hereinbefore mentioned the Canadian National Railway Company should cease to operate the Luscar Branch, the question whether under such altered circumstances the railway ceases to be within s. 92, head 10(a), may have to be determined, but that question does not now arise.
As the above quotation indicates, the Privy Council in Luscar viewed the operation of the line as the determinative factor. This reading of the decision was supported by the Court in British Columbia Electric Railway, supra, at pp. 169-70. Left open by Luscar, however, is the very issue before the Court on this appeal, namely, whether a transfer of ownership of the rail line could result in a change of jurisdiction. Although there is a connection between the business of the appellant and CN, the arrangement is different from that in Luscar. Most obviously, while the railway in Luscar was owned by a provincial company, it was operated in common with the federal work or undertaking. That is not the case here. CN does not operate Central Western nor does it have any future plan or expectation to take over the railway, as was the case in Luscar. [Emphasis in original.]
Central Western Railway, was, of course, a case where ownership changed from a federal interprovincial railway company to a purely local company. The result in that case, namely that the change in ownership resulted in a transfer to provincial jurisdiction, is enough to explain[15] why gathering and processing facilities which are not owned by Westcoast have never been subject to the Board’s jurisdiction. The present case does not, of course, involve a change of ownership but is analogous to the situation in Central Western Railway before the sale took place.
This Court has had occasion to discuss the importance of ownership (always, of course, where it is accompanied by direction and control) on more than one occasion. In Dome Petroleum Ltd. v. National Energy Board,[16] Mahoney J.A., speaking for the Court, said:
As I appreciate it, the undertaking of the joint venture’s pipeline, Cochin, is the transportation of the products it is authorized to carry from Fort Saskatchewan to Sarnia and intermediate points. There must be means of taking product from the line if the product in it is to move; without that there can be no transportation. The Judicial Committee observed, in Canadian Pacific Rly. v. A.G. for British Columbia, at p. 144:
“It may be that, if the appellant chose to conduct a hotel solely or even principally for the benefit of travellers on its system, that hotel would be a part of its railway undertaking. Their Lordships do not doubt that the provision of meals and rest for travellers on the appellant’s system may be a part of its railway undertaking whether that provision is made in trains or at stations, and such provision might be made in a hotel. But the Empress Hotel differs markedly from such a hotel.”
The relationship of the storage caverns to Cochin’s undertaking differs markedly from that of the Empress Hotel to Canadian Pacific’s railway undertaking.
The terminalling facilities of a pipeline, whoever provides them and whatever the ultimate destination of shipments, are provided solely for the benefit of shippers on the line. In my opinion, when they are provided by the owner of the transportation undertaking, they are part and parcel of that undertaking. That is the case here. The joint venture’s storage caverns are an integral and essential part of its Cochin system. [Emphasis added.]
Likewise, in National Energy Board (Re),[17] the Court had to deal with a “bypass” pipeline built by a local consumer of gas to connect its operations directly to the interprovincial undertaking of Trans-Canada Pipelines Ltd. The finding was in favour of provincial jurisdiction but MacGuigan J.A. clearly implied that the result would have been different if the bypass had been built and operated by the interprovincial undertaking:
In fact, the closest parallel to the Winner situation in the instant reference would be an application by TCPL to build and operate the bypass pipeline as its own. Failing that situation, it seems to me that the bypass line must meet the necessary nexus test in order to establish federal jurisdiction under 92(10)(a).
Finally, the fact that the gas transported in Westcoast’s interprovincial and international lines is the very same gas as over 80% of what is transported in the gathering lines, and that the processing plants simply remove those components that make transportation difficult or dangerous, makes this case analagous to, but stronger than, the situation which this Court considered in Flamborough v. National Energy Board, Interprovincial Pipe Line Ltd. and Canada:[18]
The evidence is beyond question that NGL consists of 35% propane with the balance being made up of butane and condensate. The fractionation process at Dome Petroleum’s facilities is simply one of separation. It is a non-chemical process and there is no chemical change in the propane. When fractionation is completed the specification propane is nothing more than the propane which was in the stream raised to a concentration needed for market by the removal of the substances with which it was mixed. It remains the substance which Interprovincial has already transported by pipeline from the prairie provinces to Sarnia and which it is entitled to transport by pipeline further east.
In my view, the combination of ownership, direction and control in the hands of Westcoast, together with the other factors which I have enumerated above, lead ineluctably to the conclusion that Westcoast is a single undertaking engaged in the interprovincial and international transportation of natural gas. As such, it is subject to federal jurisdiction by virtue of the combined effect of sections 91(29) and 92(10)(a).
The foregoing is enough to dispose of the constitutional question. There were, however, a number of matters raised in argument which should be mentioned for the sake of completeness. They are respectively the effect of section 92A of the Constitution Act, 1867, supra, the significance of the fact that some of Westcoast’s gathering pipelines extend across provincial borders, and whether or not the second branch of the Central Western Railway test has been met. I now turn to those matters.
Section 92A of the Constitution Act, 1867
This text, which was added to the Constitution in the repatriation process, must be read together with the definition found in the sixth schedule. They read as follows:
92A. (1) In each province, the legislature may exclusively make laws in relation to
(a) exploration for non-renewable natural resources in the province;
(b) development, conservation and management of non-renewable natural resources and forestry resources in the province, including laws in relation to the rate of primary production therefrom; and
(c) development, conservation and management of sites and facilities in the province for the generation and production of electrical energy.
(2) In each province, the legislature may make laws in relation to the export from the province to another part of Canada of the primary production from non-renewable natural resources and forestry resources in the province and the production from facilities in the province for the generation of electrical energy, but such laws may not authorize or provide for discrimination in prices or in supplies exported to another part of Canada.
(3) Nothing in subsection (2) derogates from the authority of Parliament to enact laws in relation to the matters referred to in that subsection and, where such a law of Parliament and a law of a province conflict, the law of Parliament prevails to the extent of the conflict.
(4) In each province, the legislature may make laws in relation to the raising of money by any mode or system of taxation in respect of
(a) non-renewable natural resources and forestry resources in the province and the primary production therefrom, and
(b) sites and facilities in the province for the generation of electrical energy and the production therefrom,
whether or not such production is exported in whole or in part from the province, but such laws may not authorize or provide for taxation that differentiates between production exported to another part of Canada and production not exported from the province.
(5) The expression “primary production” has the meaning assigned by the Sixth Schedule.
(6) Nothing in subsections (1) to (5) derogates from any powers or rights that a legislature or government of a province had immediately before the coming into force of this section.
…
THE SIXTH SCHEDULE
Primary Production from Non-Renewable
1. For the purposes of section 92A of this Act,
(a) production from a non-renewable natural resource is primary production therefrom if
(i) it is in the form in which it exists upon its recovery or severance from its natural state, or
(ii) it is a product resulting from processing or refining the resource, and is not a manufactured product or a product resulting from refining crude oil, refining upgraded heavy crude oil, refining gases or liquids derived from coal or refining a synthetic equivalent of crude oil; and
(b) production from a forestry resource is primary production therefrom if it consists of sawlogs, poles, lumber, wood chips, sawdust or any other primary wood product, or wood pulp, and is not a product manufactured from wood.
As was made plain by the Supreme Court of Canada in Ontario Hydro v. Ontario (Labour Relations Board),[19] this section must be read in conjunction with the other sections of the Constitution, and the powers that it grants to the provincial legislatures are, like other provincial legislative powers, subject to the federal declaratory power under section 92(10)(c). By the same token, it would seem to me that, while any consideration of federal powers under section 92(10)(a) must bear in mind the various grants of exclusive provincial powers, including those in section 92A, the latter cannot in any sense be said to override the federal powers.
For present purposes, the relevant part of section 92A is in paragraph 92A(1)(b) relating to the development, conservation and management of non-renewable natural resources and the rate of primary production therefrom. Even on the most broad and generous interpretation, I cannot read this as preventing the exercise of federal jurisdiction over a transportation undertaking which receives raw gas from the producers thereof after it has been extracted from the ground, dehydrated, and transported to delivery points. Such federal jurisdiction is entirely compatible with the exercise of the provincial powers mentioned in section 92A.
Gathering lines which cross provincial borders
It will be recalled that the majority of the Board did not consider this question because they were of the view that Westcoast’s gathering facilities in the Fort St. John area would “not form part of the same undertaking” as Westcoast’s gathering facilities which extended into Alberta, Yukon and the Northwest Territories.
With respect, I find this reasoning to be quite extraordinary. It is one thing to assert, as the Board did, that gathering and processing are different undertakings from mainline transmission. It is quite another to say that the gathering activities of Westcoast conducted in one part of British Columbia are a different undertaking from the identical activities conducted under a common management and direction by the same company in another part of British Columbia. I can find no warrant for such a view in any of the cases.
That being so, it is my view that even if one were to consider Westcoast’s gathering operations as being a separate undertaking from its processing and mainline transmission operations (a position which, for the reasons given, I do not think is correct) that undertaking, including the operations in the Fort St. John and Grizzly Valley areas, must be regarded as interprovincial because such transportation takes place on a regular and continuous basis across provincial boundaries. Nor is the fact that only a relatively small part of Westcoast’s gathering facilities extend into Yukon, the Northwest Territories and Alberta of any constitutional significance. In Ottawa-Carleton Regional Transit Commission and Amalgamated Transit Union, Local 279 et al., Re,[20] Cory J.A. (as he then was) said:
The appellant contended that since the extent of the extraprovincial operation was very small when compared to the total operation that this, in itself, should be sufficient to exempt the undertaking from the provisions of s. 92(10)(a). This contention cannot be accepted. If the extraprovincial operation is regular and continuous, as it is here, then the undertaking falls within the section.
Later, in the same case, Cory J.A. continued, at page 570:
There are difficulties inherent in a quantitative approach. For example, the question must always arise, where should the line be drawn in any particular case? Should the crucial ratio be 80-20, 90-10, 95-5 or 60-40? If a quantitative approach is to be taken, then should a very large corporation with a small but regular extraprovincial business representing 4% of its operations be in a different category from a small concern with the same amount of extraprovincial business but, because of its smaller total operation, the extraprovincial work amounting to 50% of its total? Should the labour relations of the smaller concern be regulated by a different body than those of the larger business? In my view, the quantitative approach should not be adopted. Rather, the determination of the essential issue as to whether the undertaking connects provinces should be based upon the continuity and regularity of the connecting operation or extraprovincial business.
In my view, the Board erred on this point as well. At a minimum, all Westcoast’s gathering facilities are subject to federal jurisdiction.
The second branch of the Central Western Railway test
Because I have concluded that Westcoast’s facilities constitute a single undertaking subject to federal jurisdiction, it is not necessary for me to deal with the second branch of the Central Western Railway test which inquires whether an undertaking which is not itself federal becomes subject to federal jurisdiction because it is essential and integral to a core federal undertaking. In Central Western Railway, supra, Dickson C.J., quoting from his earlier decision in Northern Telecom Ltd. v. Communications Workers of Canada,[21]21 summarized this part of the test as follows, at page 1139:
First, one must begin with the operation which is at the core of the federal undertaking. Then the courts look at the particular subsidiary operation engaged in by the employees in question. The court must then arrive at a judgment as to the relationship of that operation to the core federal undertaking, the necessary relationship being variously characterized as “vital”, “essential” or “integral”.
However, where, as here, there is a finding of a single undertaking, it is not in my view necessary that every integral part of that undertaking should also be “vital” or “essential” thereto. Or, to come at the matter the other way, it is not necessary that the federal undertaking itself should be dependent upon the existence and operation of all of its parts. Those questions need only be asked in connection with the second branch of the Central Western Railway test.
An undertaking may well include activities and services which are not vital or essential to it. Those activities and services will, however, still be part of the same undertaking if they are functionally and operationally integral to it and if there is a sufficient commonality of purpose. No one would suggest that a railway could not operate if it did not run station restaurants; but since the purpose of such restaurants, namely the comfort and convenience of passengers on trains, is the same as one of the purposes of the train operations themselves, they form part of the same undertaking. By the same token, Westcoast’s processing plants, which offer a service to shippers of raw gas to enable their product to be carried on to market, are part of its transportation undertaking within the first branch of the Central Western Railway test.
It follows, in my view, that a finding that the gathering and processing facilities owned and operated by Westcoast are a part of its transportation undertaking does not necessarily establish that the gathering and processing operations carried on by others are vital or essential to the Westcoast undertaking so as to become themselves subject to federal jurisdiction. That is a question for another day and I express no opinion on it.
The statutory question
This brings me finally to the question of statutory interpretation.
For convenience, I reproduce the definition of “pipeline” in section 2 of the National Energy Board Act:
2. …
“pipeline” means a line that is used or to be used for the transmission of oil or gas, alone or with any other commodity, and that connects a province with any other province or provinces or extends beyond the limits of a province or the offshore area as defined in section 123, and includes all branches, extensions, tanks, reservoirs, storage facilities, pumps, racks, compressors, loading facilities, interstation systems of communication by telephone, telegraph or radio and real and personal property and works connected therewith;
The question is to know whether this definition includes the Westcoast processing plants.
In my view, a part of the answer lies in the findings on the constitutional question; once it is determined that Westcoast is a single undertaking, it seems to me to be much easier to view the processing plants as being an integral part of the pipelines to which they are connected on each side. Indeed, the only argument of substance put forward against such a view is that the enumeration of facilities in the second part of the definition should be read as controlling the very general words at the end.
I do not agree. The second part of the definition is in its terms inclusory and should not be read so as to restrict the more general words which both precede and follow it. Those words are in themselves very broad and quite adequate to cover processing plants. Furthermore, it seems to me that there is a sound constitutional reason why the processing plants should not have been included in the enumeration: such plants are ordinarily local works subject to provincial jurisdiction; they only become subject to federal jurisdiction by reason of their being part of a federal interprovincial transportation undertaking. It would be unusual for Parliament to include in the definition works which would not normally be subject to its jurisdiction and only became so by reason of factors external to the legislation.
In my view, the Board’s jurisdiction extends to the processing plants in issue here.
Disposition
I would allow the appeal (Court file A-545-95), set aside the decision of the Board declining jurisdiction, and return the matter to the Board for a decision on the merits of the application.
In the reference (Court file A-606-95) I would answer both questions in the affirmative.
No special reasons having been shown, I would make no order as to costs.
Pratte J.A.: I agree.
Stone J.A.: I agree.
[1] R.S.C., 1985, c. F-7 [as enacted by S.C. 1990, c. 8, s. 5].
[2] R.S.C., 1985, c. N-7.
[3] The table is a simplified version of information found at Appeal Book, p. 968.
[4] Federal jurisdiction over the proposed expansion of the mainline transmission pipeline facilities downstream of the Aitken Creek plant (as indeed over the analogous facilities downstream of the Pine River plant in the Grizzly Valley project) was not and has not been questioned at any stage of the proceedings. Those facilities are, however, a relatively minor part of both the proposed expansions.
[5] 30 & 31 Vict., c. 3 (U.K.) [as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1 [R.S.C., 1985, Appendix II, No. 5]].
[6] These two parties both moved to quash the reference on the grounds of alleged procedural irregularities. We dismissed those applications from the Bench on the first day of the hearing of this appeal.
[7] [1990] 3 S.C.R. 1112, at pp. 1124-1125.
[8] [1954] A.C. 541 (P.C.), per Lord Porter, at pp. 581-582.
[9] [1950] A.C. 122 (P.C.), per Lord Reid, at p. 143.
[10] [1905] A.C. 52 (P.C.), per Lord Macnaghten, at p. 59.
[11] [1968] S.C.R. 118, at p. 127.
[12] Peter W. Hogg, Constitutional Law of Canada, 3rd ed. (supplemented) (Scarborough, Ont.: Carswell, 1992), at p. 22-11.
[13] The hydrogen sulphide undergoes a significant change when it is converted into elemental sulphur, but this only takes place after it has been separated from the fuel gas.
[14] [1927] A.C. 925, per Lord Warrington of Clyffe, at pp. 932-933.
[15] If any explanation is needed; the failure to assert jurisdiction in the past is of very marginal relevance to a determination as to whether such jurisdiction exists.
[16] (1987), 73 N.R. 135 (F.C.A.), at pp. 139-140.
[17] [1988] 2 F.C. 196(C.A.), at p. 218.
[18] (1984), 55 N.R. 95 (F.C.A.), per Mahoney J.A., at pp. 102-103.
[19] [1993] 3 S.C.R. 327.
[20] (1983), 44 O.R. (2d) 560 (C.A.), at p. 568.
[21] [1980] 1 S.C.R. 115 (Northern Telecom No. 1).