Alberta (Municipal Affairs) v. TransCanada Keystone Pipeline Limited Partnership, 2011 ABQB 460

Court of Queen ’ s Bench of Alberta Citation: Alberta (Municipal Affairs) v. TransCanada Keystone Pipeline Limited Partnership, 2011 ABQB 460 Date: 20110718 Docket: 1003 21127 Registry: Edmonton Between: The Crown In the Right of the Province of Alberta as Represented by the Minister of Municipal Affairs (Designated Linear Assessor) and Special Areas Board Applicants - and - TransCanada Keystone Pipeline Limited Partnership and the Municipal Government Board Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice R.

Paul Belzil _______________________________________________________ The Application [ 1 ] This is an application for leave to appeal by the Designated Linear Assessor from a decision of the Municipal Government Board (MGB). Counsel for the MGB filed a brief of law, did not actively participate in the application and took no position on its merits. Facts

[2] TransCanada Keystone Pipeline Limited Partnership (TransCanada) has constructed a pipeline to carry oil from Alberta tothe state of Illinois. The construction of the pipeline combined the conversion of an existing natural gas pipeline coupled with newconstruction. [3] The oil being transported originates and is metered near Hardisty, Alberta and is delivered to two locations in Illinois. Thereare no receipt or delivery points between Hardisty and Illinois. Leave to Appeal Application [4]

Section 506 of the Municipal Government Act R.S.A. 200 c. M-26, as amended, (Act) establishes a right of appeal to theCourt of Queen’s Bench on a question of law or jurisdiction from a decision of the MGB. [5] Section 506(5) requires that leave to appeal be obtained, which leave may be granted: . . . if the judge is of the opinion that the appeal involves a question of law or jurisdiction of sufficient importance to merit an appeal andhas a reasonable chance of success. [6] The Alberta Court of Appeal in Pembina Institute for Appropriate Development v.

Alberta (Energy ResourcesConservation Board) 2009 ABCA 322 at para. 7, held that whether leave to appeal should be granted was defined in terms of whether apure legal question could be extricated from a question of mixed fact or law. [7] In Mirror (Village) v. Lacombe (County) Subdivision & Development Appeal Board 2001 ABCA 272 the followingstatement appears at para. 7: Generally, leave will be granted if this Court finds that there is a "reasonably arguable point of law or jurisdiction which could affect theresult": MacGregor-Kennedy v. Provost (Municipal District) No. 52, [2000] A.J.

No. 648, 2000 ABCA 162 (Alta. C.A.). [8] Given that only questions of law or jurisdiction may be appealed, it is of crucial importance to correctly characterize the truenature of the proposed grounds of appeal in considering the issue of leave to appeal. [9] In Law Society of New Brunswick v. Ryan 2003 SCC 20 , [2003] 1 S.C.R. 247 at para. 41 the Supreme Court ofCanada defined a question of mixed fact and law as one involving the application of general principles of a statute to specificcircumstances.

The court also referred to fact in terms of elements within questions of mixed fact and law which do not involve easilyextricated and discretely framed questions of law. [10] The Alberta Court of Appeal in Alberta (Minister of Municipal Affairs) v. Municipal Government Board 2007 ABCA 217 atpara. 4, held that what is part of a pipeline is a mixed question of fact and law. [11] In Bearspaw Petroleum Ltd. v. Alberta (Energy and Utilities Board) 2009 ABCA 3 the court was dealing with s. 41 of theEnergy Resources Conservation Act, R.S.A. 2000, c.

E-10, which provides for an appeal on a question of jurisdictional law which isanalogous to s. 506(5) of the Act. Hunt, J.A. denied leave to appeal and held that the appellant was questioning the application of facts tolegislation which at best raised a question of mixed fact and law.

The MGB Decision [ 12 ] In its decision, rendered on November 12, 2010, the MGB determined that no assessment should have been prepared for the taxation year 2010. [ 13 ] The MGB framed the main issue before it as to whether the Designated Linear Assessor for the Province of Alberta should have assessed the pipeline for the 2010 taxation year, the assessment date for which is October 31, 2009. [ 14 ] The Board observed that this raised three sub-issues: 1. Where does the pipeline begin and end for assessment purposes, and is pipe status outside of Alberta relevant to pipeline assessment? 2.

Was the pipeline still under construction as of October 31, 2009? 3. Was the pipeline capable of being used for the transmission of oil as of October 31, 2009? [ 15 ] In reaching this decision the Board applied s. 291(2) and concluded that the linear property, being the pipeline, was not completed on or before October 31, 2009 as it was not capable of being used for the transmission of oil. [ 16 ] Underpinning the Board’s decision were the following factual findings:

a) the “beginning” of the continuous string of pipe starts after the meter bank’s outlet valve, upstream of the Hardisty pumping facilities; and

b) the “end” of the continuous string of pipe ends at the point where the pipeline meets the inlet valve at the first receiving facilities in Illinois;

c) the pipeline from Hardisty to Illinois was still under construction as of October 31, 2009 and not completed;

d) the portion of pipeline contained solely within the confines of the borders of the Province of Alberta was still under construction and not completed as of October 31, 2009, on the basis that: (

i) part of the installation of the main line block valves and RTU’s, which are specifically listed components in Section 284(1)(k) (iii)(

A) were not complete; and (ii) installation of the SCADA and leak detection devices, although not specifically listed in Section 284(1)(k)(iii)(A), were items used to protect pipelines against accidents and damage and are therefore included in Section 284(1)(k)(iii), as the MGB found the list set out in that

section to not be exhaustive, but inclusive.

e) the portion of pipeline beyond the Alberta border was still being welded together and therefore not capable of use;

f) the portion of pipeline within the confines of the Province of Alberta was also not capable of being used as of October 31, 2009, on the basis that the pipeline had not been successfully pressure tested. In the circumstances of this case, where NEB approval is

required, of the pressure tests, it cannot be considered successful as at October 31, 2009. Here the NEB had yet to approve the pressure tests as submitted, which did not occur until NEB issued a Leave To Open (an LTO Order). [ 17 ] In its decision, the MGB observed that it and the courts had previously considered the issue of the status of pipeline completion and capability of use to transport product. [ 18 ] The MGB also observed that s. 291 was amended following the decision of the Alberta Court of Appeal in Alliance Pipeline Ltd. v. Alberta (Minister of Municipal Affairs) , 2006 ABCA 9 .

Proposed Grounds of Appeal 30. The Applicants seek leave to appeal with respect to the following proposed grounds: Ground #1 : The Board erred in failing to consider, or in erroneously interpreting, the exclusion contained in s. 284(1)(k)(iii)(

F) applicable to the definition of “linear property pipeline” in s. 284(1)(k)(iii) of the MGA; Ground #2 : The Board erred in interpreting s. 291 of the MGA as providing relief to taxpayers from assessment and taxation until linear property pipeline is capable of use for its intended purpose; Ground #3 : The Board erred in determining that the status of property located outside Alberta is relevant to the application of s. 291 of the MGA to linear property pipeline within Alberta; Ground #4 : The Board erred in interpreting s. 284(1)(k)(iii) of the MGA by determining that SCADA and leak detection devices are included in the definition of “pipeline”; and Ground #5 : The Board erred in interpreting s. 291(4) to mean that “successful pressure testing” is not established until the issuance of a Leave to Open order by the National Energy Board (“NEB”).

Discussion Ground of Appeal #1 [ 19 ] This proposed ground of appeal alleges that the Board misapplied the exclusion in section 284(1)(k)(iii)(

F) of the Act and engages the issues of where the pipeline starts and where it ends. Both parties agreed that the pipeline starts near the Hardisty terminal but disagreed somewhat as to where precisely the starting point is. [ 20 ] The parties had widely differing views as to where the pipeline ends.

The Applicants submitted that the pipeline ends at the Alberta-Saskatchewan border beyond which the assessor has no authority to assess, whereas the Respondent argued that the pipeline ends in Illinois. [ 21 ] While acknowledging that Alberta assessments cannot extend beyond the borders of the province, the MGB did accept that it would consider the physical status of the pipeline beyond Alberta in determining if the pipeline was capable of carrying oil. The Board answered in the negative, noting that portions of the single continuous pipeline in the US were still being constructed.

It was faced with competing expert testimony and preferred one expert over another in reaching its decision.

[ 22 ] As noted in para. 17 above the Alberta Court of Appeal in Alberta (Minister of Municipal Affairs) v. Municipal Government Board held that what is part of a pipeline is a mixed question of fact and law. Surely what is part of a pipeline must comprise the issue of where the pipeline starts and finishes. The decision by the MGB on this issue was at best a question of mixed fact and law which engages no extricable question of law or jurisdiction.

Ground of Appeal #2 [ 23 ] This ground of appeal alleges that the MGB, while acknowledging the amendments to s. 291(2) of the Act , actually applied the previous legislation. [ 24 ] Reduced to its essence, the Applicants question the application of a legislative test to findings of fact. [ 25 ] This is at best a question of mixed fact and law with no extricable question of law or jurisdiction identified. Ground of Appeal #3 [ 26 ] The Applicants submit that the finding by the Board that the pipeline is one continuous string of pipe is a question of jurisdiction.

However, as noted by the Alberta Court of Appeal in Alberta (Minister of Municipal Affairs) v. Municipal Government Board , what is part of a pipeline is a mixed question of fact and law. This ground of appeal raises no extricable question of law or jurisdiction. Ground of Appeal #4 [ 27 ] This proposed ground of appeal engages the issue of what comprises the pipeline; specifically with reference to block valves, RTUs (Remote Telemetry Units) and SCADA systems (Supervisory Control and Data Acquisition), which systems had not been wired or energized as of October 31, 2009.

The MGB was faced with conflicting expert testimony on these subjects and preferred one opinion over the other. [ 28 ] The MGB concluded that these components comprised part of the installation of linear property as the term is used in s. 291(3)(

b) which defines construction as meaning: the building or installation, or both, of linear property, but does not include the commissioning, operation or use of linear property. [ 29 ] The MGB concluded that construction was not complete for these items and thus the Alberta portion of the pipeline was not completed construction as of October 31, 2009. [ 30 ] The Applicants allege that the Board erred in determining that SCADA and leak detection devices are including in the definition of pipeline.

Similar to the analysis under the third ground of appeal, the Court of Appeal decision in Alberta (Minister of Municipal Affairs) v. Municipal Government Board is a complete answer to this question. Clearly this involves at best a question of mixed fact and law with no extricable issue of law or jurisdiction identified. Ground of Appeal #5 [ 31 ] This ground of appeal deals with pressure testing and deals with finding of fact in connection with pressure testing. No extricable question of law or jurisdiction has been identified.

Do the Applicants have a Reasonable Chance of Success on Appeal? [32] Although the merits of an appeal are not considered on an application for leave, the issue of whether an appellant has areasonable chance of success on judicial review is closely linked to the standard of review a reviewing court would apply. In Gendron v.Calgary (City) 2009 ABCA 367 the following statement appears in para. 15: I am not satisfied, however, that the appeal has a reasonable chance of success.

In making that assessment it is common to consider thestandard of review likely to be applied to the issues in relation to which leave to appeal is sought. [33] The Supreme Court of Canada in Dunsmuir v.

New Brunswick 2008 SCC 9 revised standards of review in administrative lawand at para. 34 held that there are two standards of review of administrative decisions, correctness and reasonableness. [34] The following passages at paras. 51 & 55 are instructive in determining the standard of review: 51 Having dealt with the nature of the standards of review, we now turn our attention to the method for selecting the appropriatestandard in individual cases.

As we will now demonstrate, questions of fact, discretion and policy as well as questions where the legalissues cannot be easily separated from the factual issues generally attract a standard of reasonableness while many legal issues attract astandard of correctness.

Some legal issues, however, attract the more deferential standard of reasonableness. 55 A consideration of the following factors will lead to the conclusion that the decision maker should be given deference and areasonableness test applied: - A privative clause: this is a statutory direction from Parliament or a legislature indicating the need for deference. - A discrete and special administrative regime in which the decision maker has special expertise (labour relations for instance). - The nature of the question of law.

A question of law that is of “central importance to the legal system ... and outside ...specialized area of expertise” of the administrative decision maker will always attract a correctness standard (Toronto (City) v. C.U.P.E.,at para. 63). On the other hand, a question of law that does not rise to this level may be compatible with a reasonableness standard wherethe two above factors so indicate. [35] In Law Society of New Brunswick v.

Ryan at para. 55 Iacobucci, J. explained that a decision would be unreasonable: ... only if there is no line of analysis within the given reasons that could reasonably lead the tribunal from the evidence before it to theconclusion at which it arrived. If any of the reasons that are sufficient to support the conclusion are tenable in the sense that they canstand up to a somewhat probing examination, then the decision will not be unreasonable and a reviewing court must not interfere (seeSoutham, (SCC), [1997] 1 S.C.R. 748, supra, at para. 56).

This means that a decision may satisfy the reasonablenessstandard if it is supported by a tenable explanation even if this explanation is not one that the reviewing court finds compelling (seeSoutham, supra, at para. 79). [36] In Dunsmuir at para. 62 the court established a two step process for judicial review:

62 In

summary, the process of judicial review involves two steps. First, courts ascertain whether the jurisprudence has already determined in a satisfactory manner the degree of deference to be accorded with regard to a particular category of question. Second, where the first inquiry proves unfruitful, courts must proceed to an analysis of the factors making it possible to identify the proper standard of review. [ 37 ] The Alberta Court of Appeal in Alliance at para. 77 applied a standard of review of correctness to the statutory

interpretation of s. 291(2)(a). The court acknowledged that there was some inconsistency in court decisions dealing with a standard of review of decisions of the MGB. [ 38 ] In Alberta (Minister of Municipal Affairs) v. Telus Communications Inc. 2002 ABCA 199 the court noted the need to bear in mind the realities of the marketplace and applied the deferential standard of review of patent unreasonableness to a question of mixed fact and law. [ 39 ] The Alberta Court of Appeal in University of Alberta v.

Edmonton (City) 2005 ABCA 147 applied a standard of review of reasonableness to the decision of a tribunal involving a question of mixed fact and law. [ 40 ] As earlier noted in Alberta (Minister of Municipal Affairs) v. Municipal Government Board , the Alberta Court of Appeal held that the MGB was entitled to deference on the issue of what is part of a pipeline as this involves a mixed question of fact and law. [ 41 ] In Alberta (Minister of Municipal Affairs) v.

Alberta Oil Sands Pipeline Ltd. 2007 ABQB 652 the court applied a standard of review of reasonableness to the MGB decision that a pipeline was not yet capable for use for the transmission of oil. [ 42 ] Alberta (Municipal Affairs) v. Access Pipeline Inc. , 2011 ABQB 144 postdates Dunsmuir .

The judge on judicial review applied a standard of review of reasonableness to a decision of the MGB that a pipeline was not yet assessable under the Act . [ 43 ] Given that case law in this area is not entirely consistent as to the standard of review, it is necessary to establish a standard of review, the process for which is outlined in Dunsmuir at para. 64 : 64 The analysis must be contextual. As mentioned above, it is dependent on the application of a number of relevant factors, including: (1) the presence or absence of a privative clause: (2) the purpose of the tribunal as determined by

interpretation of enabling legislation; (3) the nature of the question at issue, and; (4) the expertise of the tribunal. . . [ 44 ] At paras. 48 & 49, the court emphasized the need for courts to recognize and respect the expertise of administrative tribunals: 48 The move towards a single reasonableness standard does not pave the way for a more intrusive review by courts and does not represent a return to pre- Southam formalism. In this respect, the concept of deference, so central to judicial review in administrative law, has perhaps been insufficiently explored in the case law.

What does deference mean in this context? Deference is both an attitude of the court and a requirement of the law of judicial review. It does not mean that courts are subservient to the determinations of decision makers, or that courts must show blind reverence to their

interpretations, or that they may be content to pay lip service to the concept of reasonableness review while in fact imposing their own view. Rather, deference imports respect for the decision-making process of adjudicative bodies with regard to both the facts and the law. . . 49 Deference in the context of the reasonableness standard therefore implies that courts will give due consideration to the determinations of decision makers. . .

In short, deference requires respect for the legislative choices to leave some matters in the hands of administrative decision makers, for the processes and determinations that draw on particular expertise and experiences, and for the different roles of the courts and administrative bodies within the Canadian constitutional system.

[ 45 ] At para. 54 the court observed that deference has a broad scope: 54 Guidance with regard to the questions that will be reviewed on a reasonableness standard can be found in the existing case law.

Deference will usually result where a tribunal is interpreting its own statute or statutes closely connected to its function, with which it will have particular familiarity. . . [ 46 ] At para. 59 the court emphasized that administrative tribunals must be correct in their determination of jurisdiction or vires . [ 47 ] The Supreme Court of Canada revisited the issue of judicial deference to administrative tribunals in Nolan v.

Kerry (Canada) Inc. , 2009 SCC 39 and at para. 34 made the following statement: The inference to be drawn from paras. 54 and 59 of Dunsmuir is that courts should usually defer when the tribunal is interpreting its own statute and will only exceptionally apply a correctness standard when

interpretation of that statute raises a broad question of the tribunal’s authority. [ 48 ] The standard of review is determined using a functional and pragmatic approach considering the following factors: 1. Privative Clause Section 506(5) of the Act incorporates a right of appeal with leave on a question of law or jurisdiction but the MGB is still entitled to substantial deference. 2. Purpose of the Tribunal The MGB must interpret and apply the assessment provisions of the Act in the context of the regulatory scheme for pipelines. 3.

Nature of the Question The MGB must make findings of fact and apply them to relevant statutory provisions. 4.

Expertise of the Tribunal The MGB has developed substantial expertise in the area of assessments for pipelines, including an understanding of operational realities and applying the relevant provisions of the Act in that operational context. [ 49 ] The above factors militate strongly in favour of a standard of review of reasonableness. [ 50 ] In my view, the Applicants do not have a reasonable chance of success on appeal respecting any of the proposed grounds of appeal using the deferential standard of review of reasonableness.

[ 51 ] Moreover, even if a court on judicial review were to apply a standard of review of correctness to all of the proposed grounds of appeal, I do not accept that the Applicants would have a reasonable chance of success on appeal. [ 52 ] On a plain reading of the MGB’s decision, it correctly identified the governing legislative provisions in force as of October 31, 2009.

There is no evidence that the MGB considered any extraneous legislation or exceeded its jurisdiction thus no true issue of jurisdiction is engaged. [ 53 ] There is no evidence that the MGB misapprehended any of the factual evidence it heard or that it considered any extraneous facts. The MGB was fully entitled to accept some opinion evidence and reject other opinion evidence.

Furthermore, there is no evidence that the MGB misstated the main issue before it or any of the sub-issues it identified. [ 54 ] Given the expertise of the MGB, which has been recognized and accepted in many court decisions, it bears remembering that a reviewing court applying a standard of review of correctness would nonetheless still apply substantial deference to the MGB’s decision. ( Dunsmuir at para. 51 and Nolan at para. 34 ) Conclusion [ 55 ] The Applicants have failed to establish that their appeal involves questions of law or jurisdiction of sufficient importance to merit an appeal and that they have a reasonable chance of success. [ 56 ] Accordingly the application for leave to appeal is dismissed.

TransCanada is entitled to costs. The MGB is not seeking costs and is not liable to pay costs. Heard on the 6 th day of July, 2011. Dated at the City of Edmonton, Alberta this 15 th day of July, 2011. R. Paul Belzil J.C.Q.B.A. Appearances: Barry A. Sjolie, Q.C. and Alvin R. Kosak Browlee LLP for Minister of Municipal Affairs

Gilbert J. Ludwig Wilson Laycraft for TransCanada Keystone Pipeline Limited Partnership Mike D’Alquen for The Municipal Government Board