BC Supreme Court finds $20,000 Mines Act security decision unreasonable

The Supreme Court of British Columbia in Ignace v. British Columbia (Chief Inspector of Mines), 2021 BCSC 1989 recently considered and provided guidance on two important facets of mining projects:

1. the adequacy of financial security for mine reclamation; and
2. the adequacy of Crown-Indigenous consultation at the final stages of the mine permit review process.

In its decision, the Court concluded that the Chief Inspector of Mine's decision was substantively unreasonable as it did not update the $20,000 reclamation security requirement (imposed 25 years earlier, in 1996), despite $27 million in recent anticipated reclamation costs. The Court also found that the Crown failed to adequately consult the Stk'emlupsemc Te Secwepemc Nation ("SSN") on potential adverse impacts of the Mines Act permit amendment on Indigenous rights and interests, and accordingly ordered the Crown to adequately consult to discharge its constitutional duty.

Background

In Ignace, the SSN applied for judicial review of a decision by the Chief Inspector of Mines to issue an amended permit to operate the McAbee Quarry located within the SSN's traditional territory in BC's southern interior. The SSN claim Aboriginal title and rights to the lands in and around the quarry.

Operations at the McAbee Quarry began in 1978. Today, the quarry is owned and operated by Canadian National Railway Company ("CNR"), who extracts ballast from it to maintain its railway lines. In 1996, the Province issued a permit for the quarry pursuant to the Mines Act, which required CNR to pay $20,000 to secure its obligation to reclaim the quarry. CNR purchased further land to expand the quarry in 2008, and in 2009 prepared a reclamation plan. The permit was later amended through Notices of Work ("NoW") in 2010 and 2012. Throughout this time, the permit condition providing for posting of security remained unchanged in the amount of $20,000.

In March 2017, CNR submitted another NoW (the "2017 NoW") for the McAbee Quarry. CNR's application disclosed material changes from prior NoW, including an estimated reclamation cost of $27 million. The 2017 NoW did not provide for progressive reclamation, although it referred to the 2009 reclamation plan that contemplated progressive reclamation to begin in 2020.

From 2017 to 2019, the Province consulted with the SSN on the potential adverse impacts of the 2017 NoW on its claimed Aboriginal title and rights. During consultation, SSN contended that the 2017 NoW could not be considered for approval until CNR entered into a formal agreement with the SSN which scope extended beyond activities at the McAbee Quarry. In 2019, CNR proposed certain impact benefits to SSN, which SSN rejected. Shortly thereafter, CNR wrote to the Chief Inspector asserting its understanding that the Ministry of Mines, Energy and Petroleum Resources ("MEMPR") had completed its consultation and that CNR had engaged as directed with SSN; accordingly, CNR sought MEMPR's approval of the 2017 NoW on an expedited basis.

In April 2019, Mines Inspector Rick Adams, acting as delegate for the Chief Inspector of Mines, approved the 2017 NoW and issued the amended permit for the McAbee Quarry. Mr. Adams attached conditions to the NoW, 17 of which he describes as conditions added as a result of the consultation process. SSN petitioned for judicial review to set aside the amended permit, arguing those conditions were unresponsive to its concerns and ineffective to mitigate the impact of the amended permit on its members.

The decision

In its decision, the Court considered the adequacy of the Crown's consultation with the SSN as a matter of constitutional law, and reviewed the amended permit for substantive reasonableness as a matter of administrative law.

The failure to increase security & require progressive remediation was substantively unreasonable

The Court reviewed the substance of the Chief Inspector's decision to issue the amended permit on a standard of reasonableness. The SSN submitted that it was unreasonable for the Chief Inspector to issue the amended permit without requiring CNR to progressively reclaim the quarry and without requiring CNR to pay additional security beyond $20,000 to secure its anticipated $27 million cost to reclaim the site.

The Court held that the Chief Inspector's decision failing to require CNR to implement progressive reclamation was unreasonable for failing to accord with the Health, Safety and Reclamation Code for Mines in British Columbia. Further, the Court held that the decision was unreasonable for failing to require payment of additional security. On this point, the Court found:

"There is nothing to connect the $20,000 of security required in the Amended Permit to the $27 million of anticipated costs, a difference of more than three orders of magnitude. […] the decision was not rationally grounded in the evidence and departs from internal policy without apparent justification. The departure from policy carries particular weight in the case of a policy that is expressly intended to promote transparency to First Nations."[1]

Accordingly, the Court set aside the requirement on CNR to post $20,000, and sent the matter back to the Chief Inspector for redetermination.

To further the ultimate objective of reconciling Crown and Indigenous interests, more consultation was required

The Court emphasized that the object of reconciliation in consultation imposes obligations on both sides: Crown and Indigenous peoples must commit to consult in good faith and to clearly communicate. The Court held that the duty to consult analysis is not limited to the question of whether or not the Crown discharged its duty to consult, but also includes the question of whether the Crown was able to fulfill its consultation obligations taking into account the efforts of the Indigenous group to productively participate and engage in the process.

In Ignace, the Court held that the Crown's consultation preceding the Chief Inspector's decision to issue the amended permit "fell well short of the ideal of clear, honest, good-faith communication with a view to reconciliation."[2] The Court noted that both parties had failed with respect to their respective obligations in the consultation process, as follows:

"…SSN pursued collateral claims, insisted on obtaining concessions from CNR, asserted a veto, and failed to bring forward grounds of concern now advanced. BC pursued a muddled consultative process that languished, and then abruptly terminated the process without notice to SSN and without explaining the decision."[3]

The Court faulted SSN for its lack of focus in consultations, finding that SSN had attempted to use the application to amend the permit as leverage to pursue other objectives and grievances with CNR that extended beyond the quarry to CNR's railway operations across SSN's territory as a whole. As a result, the Court found that SSN bore some responsibility for the failed consultations, because it had attempted to use the sought-after agreement with CNR as a source of veto power against the issuance of the amended permit.

As for the Crown, the Court noted that it failed to follow-up on concerns raised by SSN regarding concerns about its Aboriginal fishery, and failed to follow its own internal consultation protocol. Given that SSN and the MEMPR were party to a Mining and Minerals Agreement that included consultation guidelines, the Court found that the Crown was obliged to follow the consultation stipulated therein.

With regard to the provisions of modern agreements providing for a process of consultation between the Crown and Indigenous peoples, the Court held:

"A modern treaty that establishes a process of consultation shapes the duty imposed by the honour of the Crown […] The same must be true of a formal agreement between the Crown and Indigenous representatives that is intended to guide and regularize consultation . Such agreements provide certainty for both sides and contribute to the task of reconciliation ."[4] [emphasis added]

In Ignace, the Court found that the Chief Inspector failed to comply with the consultation process set out in the Mining and Mineral Agreement by failing to provide SSN written communication of its decision with the results of the consultation process. All that was provided to SSN was a list of conditions attached to the amended permit, none of which had been requested by or discussed with SSN. The Court concluded that this was "unreasonably inadequate in the circumstances."[5]

As a result, the Court ordered that the Chief Inspector further consult with SSN on the issuance of the amended permit. The Court emphasized that it was doing so with "a view to furthering the ultimate objective of reconciliation between BC and the SSN."[6] Since a breach of the Crown's duty to consult undermines the overarching goal of reconciliation, the Court found that properly fulfilling the consultation process was the necessary remedy.

Key takeaways

On Mines Act Permit Security

Ignace is notable as one of the first decisions in which a court has set aside a decision on the quantum of security required pursuant to a Mines Act permit, and emphasized the importance of progressive reclamation. These two matters tend to go hand-in-hand, as progressive reclamation during the life of a mine or quarry can substantively reduce end-of-life reclamation costs. This is specifically recognized in a guidance document to the Province's 2018 Regional Mine Reclamation Bond Calculation Policy, which states that: "To lessen the burden of exceedingly high bond values, it is suggested that permit conditions be written in a manner that promotes progressive reclamation and reduces ongoing environmental liability."[7]

The Court's decision in Ignace may guide the Province in future reviews of mine securities under the Mines Act and in accordance with provincial policy, which suggests that securities be reviewed every five years or whenever significant changes occur at a mine.

On Crown Consultation with Indigenous Peoples

Ignace is also a further case in the application of the law on the duty to consult. Similar to other decisions going back at least as far as the mid-1990's (for example, R. v. Van der Peet, [1996] 2 SCR 507), the Court in Ignace emphasized the importance of furthering the ultimate objective of reconciliation, and that the foundation of the duty to consult lies in the honour of the Crown and the goal of reconciliation. To that end, the Court referred to the seminal decision in Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73, reaffirming that "The controlling question is what is required to maintain the honour of the Crown and to effect reconciliation between the Crown and the Indigenous peoples with respect to the interests at stake."[8]

The Court's decision in Ignace also emphasizes that if parties have an agreed upon consultation process, they must follow it. In this case, SSN and MEMPR were party to a Mining and Minerals Agreement, which set out a specific consultation process. The Court emphasized the important role that such formal agreements have in advancing reconciliation. Given the numerous agreements that the Province has entered into with First Nations across the Province, along with the recent inclusion of the power to advance further agreements in provincial statutes – including in the Declaration on the Rights of Indigenous Peoples Act and the Environmental Assessment Act – we can expect further attention on the specific consultation processes set out therein. Given guidance from the Supreme Court of Canada, including in Beckman v. Little Salmon/Carmacks First Nation, 2010 SCC 53, it will however be important that the Crown ensure that it not erode its constitutional duties through agreements that fall short of what the law requires.

Next steps

We will review with interest and report on other regulatory, judicial, or legislative developments on issues of importance to mine closure. Please contact any member of our Environmental or Indigenous law groups if you wish to discuss these issues further or would like assistance in understanding the implications of this decision on your rights, interests, or project planning.