SYNCRUDE CANADA LTD Applicant v. THE ATTORNEY GENERAL OF CANADA, 2014 FC 776

Date: 20140806 Docket: T-1643-11 Citation: 2014 FC 776 Ottawa, Ontario, August 6, 2014 PRESENT: The Honourable Mr. Justice Zinn BETWEEN: SYNCRUDE CANADA LTD Applicant And THE ATTORNEY GENERAL OF CANADA Respondent JUDGMENT AND REASONS TABLE OF CONTENTS Para . I. Introduction ..................................................................................................... 1 II. Factual Background ........................................................................................... 2 III.

Issues ................................................................................................................. ................................................................................................................. 10 IV. Analysis ............................................................................................................... ................................................................................................................. 11 A. Constitutionality of the RFR vis-à-vis Syncrude ................................... 11

(1) The Dominant Matter - Pith and Substance ................................ 17 (

a) The Purpose of the RFR .................................................. 17 (

b) The Effect of the RFR .................................................... 40 (

c) Conclusion on Pith and Substance .................................. 54

(2) Categorizing the Law: Heads of Power Analysis ...................... 55 (

a) Criminal Law Power ....................................................... 56 (

b) Conclusion on Constitutionality ...................................... 86 (

c) Ancillary Powers Doctrine .............................................. 87 Heads of Power ............................................................... 91 Nature of the Provision ................................................... 93 History of Legislating ..................................................... 95 B. Statutory Validity of Subsection 5(2) RFR ............................................ 98

(1) Was the Condition Precedent in Subsection 140(2) Observed? .. 103

(2) Was a Strategic Environmental Assessment Required? .............. 119

(3) Is the RFR Inconsistent with the Object of CEPA? ................... 124 C. Was there a denial of procedural fairness? .............................................. 138

(1) Syncrude’s Notice of Objection Not Filed in Time .................... 140

(2) No Duty of Fairness is Owed Within the Legislative Process .... 144

(3) The Decision to Convene a Board is Not Administrative in Nature ............................................................................. 157

(4) Conclusion on Procedural Fairness ............................................. 161 D. Minister’s

Interpretation of “danger” and “substance” ........................... 162 E. Reasonableness of the Decision on the Merits ........................................ 166 V. Conclusion ........................................................................................................... ................................................................................................................. 179 Judgment Annex A I. Introduction [ 1 ] Federal regulations require diesel fuel produced in Canada to contain at least 2% renewable fuel.

Syncrude Canada Ltd. [Syncrude] produces diesel fuel at its oil sands operations in Alberta which it uses there in its vehicles and equipment. Syncrude challenges the validity and applicability to it of the 2% renewable fuel requirement. II. Factual Background

[ 2 ] The relevant statutory provisions are reproduced in Annex A. [ 3 ] Subsection 139(1) of the Canadian Environmental Protection Act, 1999, SC 1999 c 33 [CEPA] provides that “[n]o person shall produce, import or sell a fuel that does not meet the prescribed requirements.” Subsection 272(1) of CEPA makes it an offence to contravene subsection 139(1) .

If prosecuted by way of indictment, Syncrude would be liable to a fine for a first offence of not less than $500,000 and not more than $6,000,000, and on a second or subsequent offence, to a fine of not less than $1,000,000 and not more than $12,000,000: CEPA subsection 272(3) . [ 4 ] Subsection 140(1) of CEPA provides that the Governor in Council, on the recommendation of the Minister, may make regulations “for the purposes of

section 139.” In 2010, the Governor in Council promulgated the Renewable Fuels Regulations, SOR/2010-189 [RFR]. Subsection 5(2) of the RFR requires that diesel fuel produced, imported or sold in Canada must contain renewal fuel of at least 2% by volume. That requirement came into effect on July 1, 2011. That renewable fuel requirement may be met by blending diesel with biodiesel, a fuel made from biological waste matter, such as cooking oil, or from feed stocks such as canola, soy or other crops.

The requirement may also be met by purchasing compliance units from those who have more than 2% renewable fuel in their diesel fuel. Syncrude has been meeting this 2% requirement by purchasing compliance units. [ 5 ] Syncrude produces synthetic crude oil and other substances by mining and processing oil sands within the Athabasca oil sands region in Alberta.

This involves the excavation of oil sands from open pit mines, the extraction of bitumen from the oil sand, the conversion of bitumen to crude oil components, the upgrading and sweetening of the produced oil streams, the combining of the oil streams into synthetic crude oil, and the rehabilitation and reclamation of the mine and operations areas that have been completed. [ 6 ] Syncrude uses a fleet of custom equipment to perform its extraction operations. To power this equipment, it purchases diesel fuel but also produces much of its own diesel fuel on site.

The fuel it produces on site is used only by Syncrude and only in the Province of Alberta.

In 2010, Syncrude’s operations consumed more than 361 million litres of diesel fuel, of which more than 204 million litres were produced from its own operations. [ 7 ] After the promulgation of the RFR but prior to subsection 5(2) coming into effect, Syncrude on April 26, 2011, filed a notice of objection to the proposed regulation and requested that a board of review be established “to inquire into the nature and extent of the danger posed by the substance in respect of which the … regulation … is proposed.” [ 8 ] The Minister responded on August 18, 2011, denying Syncrude’s request to convene a board of review, stating: Your comments were considered in the preparation of the final Regulations Amending the Renewable Fuels Regulations .

Responses to the comments received were included in the Regulatory Impact Analysis Statement submitted with the final Regulations, which were published in the Canada Gazette on July 20 [2011]. [ 9 ] Syncrude challenges the constitutional validity and statutory validity or vires of subsection 5(2) of the RFR . It also submits that it was denied procedural fairness by the Minister in making the decision to not convene a board of review, and further says that the Minister’s decision in this regard is unreasonable. III.

Issues [ 10 ] In addition to the question of the applicable standard of review, the following are the issues to be addressed: 1. Does Parliament have constitutional authority to apply the biodiesel blending requirement prescribed by subsection 5(2) of the RFR to Syncrude’s diesel fuel? 2. Is the RFR ultra vires the regulation-making authority of the Governor in Council under

section 140 of CEPA ? 3. Was there a denial of procedural fairness by the Minister in making the decision not to convene a board of review due to a failure to provide reasons and a failure to consult with Syncrude? 4. Did the Minister err in interpreting the words “danger” and “substance” in

section 333 of CEPA ? 5. Was the Minister’s decision unreasonable on the merits? IV. Analysis A.

Constitutionality of the RFR vis-à-vis Syncrude [ 11 ] Questions going to constitutional authority and the division of powers between a province and the federal government are determined on the standard of correctness: Dunsmuir v New Brunswick , 2008 SCC 9 , para 58 . [ 12 ] The Minister correctly notes in his Memorandum that “Syncrude only challenges the constitutionality of subsection 5(2) of the RFR , and only as it relates to its operations.” The Minister submits that “ subsection 5(2) is in pith and substance a legitimate use of the federal criminal law power to suppress the evil of air pollution by mandating a 2% renewable fuel content in diesel fuel produced.” Syncrude submits that the dominant purpose and effect of subsection 5(2) of the RFR is to regulate non-renewable resources and promote the economic benefits of protecting the environment, “more precisely, its dominant purpose and dominant effect is to create a demand for biofuels in the Canadian market place” and any prohibition of harm that flows from the subsection is merely ancillary. [ 13 ] For the reasons that follow, I find that the RFR are intra vires the federal government as a valid exercise of Parliament’s

criminal law power. [ 14 ] The Supreme Court of Canada in Québec (Procureur Général) v Canada Procureur (Procureur Général) , 2010 SCC 61 , [2010] 3 SCR 457 [ Re: Assisted Human Reproduction ] provides the framework for determining division of powers questions such as that raised here. The Chief Justice at para 16 observes that when, as here, the challenge is only to one or more of the provisions of the legislation, and not its entirety, a court might begin by examining the challenged provisions because if they do not intrude into the other’s jurisdiction, there is no need to make any further inquiry.

She went on to observe, however, that in order to make sense of the challenged provisions, it may be necessary to examine the entire scheme of the legislation for the “impugned provisions must be considered in their proper context.” [ 15 ] Subsection 5(2) of the RFR , read alone and without reference to its enabling statute, is a prohibition on the production, importation, or sale of diesel fuel that contains less than 2% renewable fuel, and thus one could suggest, as Syncrude does, that it deals with local works and undertakings, property and civil rights, matters of a merely local or private nature, or the development of non- renewable natural resources – matters that fall within provincial, rather than federal jurisdiction.

However, as the Supreme Court has cautioned, one must go further and ask what the purpose and effect of that provision is and how it fits into the regulatory scheme. As the Chief Justice stated in Ward v Canada (Attorney General) , 2002 SCC 17 , [2002] 1 SCR 569 [ Ward ] at para 19 : “The question is not whether the Regulations prohibit the sale so much as why it is prohibited.” Answering that question requires that the subsection be viewed in its proper context which in this case requires that one examine not only the RFR but also CEPA .

The Court must examine the legislative scheme as a whole and determine whether it is a valid exercise of federal jurisdiction. Then the Court must examine whether the specific subsection complained of is also valid. [ 16 ] The validity assessment is undertaken in two steps. First, the dominant matter – the pith and substance – of the legislation must be determined. Once that has been done, one must determine whether it falls under one of the heads of power of the federal government or the provinces. The pith and substance of legislation is determined by examining the purpose and the effect of the legislation.

As the Chief Justice noted at para 22 of Re: Assisted Human Reproduction referencing an

article by D.W. Mundell: “One must ask, ‘[w]hat in fact does the law do and why?’”

(1) The Dominant Matter – Pith and Substance (

a) The Purpose of the RFR [ 17 ] The RFR is subordinate legislation and as such it is relevant to consider the stated purpose of its enabling legislation, CEPA . While not determinative of the pith and substance of the RFR, it provides informative background and context. The following excerpts from the

preamble to CEPA are instructive and identify that CEPA is designed, in part, to address environmental degradation, protect the environment and human health, and place the cost and responsibility of pollution on the polluter.

It sets out that in developing laws to achieve these goals, a variety of interests will be considered contemporaneously, including environmental, health, social, economic, and technical issues: Whereas the Government of Canada is committed to implementing the precautionary principle that, where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation … Whereas the Government of Canada recognizes the importance of endeavouring, in cooperation with provinces, territories and aboriginal peoples, to achieve the highest level of environmental quality for all Canadians and ultimately contribute to sustainable development ; … Whereas the Government of Canada recognizes the integral role of science, as well as the role of traditional aboriginal knowledge, in the process of making decisions relating to the protection of the environment and human health and that environmental or health risks and social, economic and technical matters are to be considered in that process . … Whereas the Government of Canada recognizes the responsibility of users and producers in relation to toxic substances and pollutants and wastes, and has adopted the “polluter pays” principle. [emphasis added] [ 18 ] Also informative is the

preamble to the RFR which focuses on the reduction of air pollution: Whereas the Governor in Council is of the opinion that the proposed Regulations could make a significant contribution to the prevention of, or reduction in, air pollution resulting from, directly or indirectly, the presence of renewable fuel in gasoline, diesel fuel or heating distillate oil; … [ 19 ] The Supreme Court has unequivocally held that the Regulatory Impact Analysis Statement [RIAS] accompanying regulations can also be considered by courts in determining the purpose of the regulations and their intended application: Bristol-Myers Squibb Co v Canada (Attorney General) , 2005 SCC 26 , [2005] 1 SCR 533, at para 157 . [ 20 ] The various RIASs that were published relating to the RFR indicate that Greenhouse Gas [GHG] emissions were the primary concern of the Minister when proposing the RFR.

[ 21 ] In 2005, six GHGs were added to

Schedule 1 of CEPA which lists toxic substances. The RIAS accompanying the 2005 amendments to

Schedule 1 published in the Canada Gazette

Part II , Vol 139, No 24, explained at p 2627 that they were added to the toxic substances list because they “have significant global warming potentials (GWPs), are long-lived and therefore of global concern… [and] have the potential to contribute substantially to climate change.” Additionally, it noted at p 2634 that there has been a substantial rise in the concentrations of GHGs “as a result of human activities, predominantly the combustion of fossil fuels,” which could lead to an increase in frequency and intensity of heat waves, that in turn could “lead to an increase in illness and death.” [ 22 ] A notice of intent to develop the RFR was introduced in 2006 in the Canada Gazette

Part I , Vol 140, No 52. The notice stated: Use of renewable fuels offer significant environmental benefits, including reduced greenhouse gas (GHG) emissions, less impact to fragile ecosystems in the event of a spill because of their biodegradability and reduction of some tailpipe emissions, such as carbon monoxide, benzene, 1,3-butadiene and particulate matter.

However, ethanol use may result in increased emissions of volatile organic compounds, nitrogen oxides and acetaldehyde. [ 23 ] Under the heading “Rationale for Action” the notice focused first on the reduction of GHG emissions: Use of renewable fuels can significantly reduce emissions of greenhouse gases. This environmental benefit is projected to increase as next-generation feedstocks and technologies come online.

Achieving a renewable volume equal to 5% of Canada’s transportation fuel pool would result in an additional 1.9 billion litres of renewable fuels per year, over and above the effects of provincial regulations already in place.

This represents incremental lifecycle GHG emission reductions of 2.7 million tones per year (the equivalent of almost 675,000 vehicles). [ 24 ] The notice set out additional rationale for the proposed regulations, including benefits to the economy and to Canadian farmers: Early entry into the renewable fuels market and the wider bio-economy may bring short- and long-term benefits to the Canadian economy, as well as allowing farmers to find new markets, offset financial losses, and diversify income sources.

The emerging global bioeconomy is an opportunity to diversify farm incomes by creating market opportunities for Canadian farmers as both developed and developing countries move away from dependence on traditional petroleum based fossil fuels in favour of more sustainable options.

The economic potential of the bioeconomy is significant; by 2050, the global market for renewable fuels and bio- energy alone is expected to grow from $5 billion to well over $150 billion per year. [ 25 ] The proposal recognized that the provinces were also regulating renewable fuel content and providing tax incentives to promote renewable fuels production and use.

However, it was stated that federal regulation was also desirable to “address inconsistencies created by a patchwork of provincial fuel requirements” which could “create barriers to interprovincial trade, e.g. by favouring the use of biofuels produced within a certain province.” [ 26 ] In April 2010, a draft of the RFR was published in

Part I of the Canada Gazette. The public was given an opportunity to file comments or notices of objection. The RFR was published in the Canada Gazette

Part II , Vol 144, No 18 in September 2010. [ 27 ] The RIAS accompanying the RFR [September 2010 RIAS] explicitly states that the issue being addressed is the emission of GHGs: Greenhouse gasses (GHGs) are primary contributors to climate change. The most significant sources of GHG emissions are anthropogenic, mostly as a result of combustion of fossil fuels.

The emissions of GHGs have been increasing significantly since the industrial revolution and this trend is likely to continue if no action is taken. … The Government of Canada is committed to reducing Canada’s total GHG emissions by 17% from 2005 levels by 2020. Existing Government of Canada initiatives on renewable fuels have had limited success in achieving significant reductions in GHG emissions.

In view of the environmental concerns related to climate change, additional actions are required to further reduce these emissions. … The objective of the Regulations is to reduce GHG emissions by mandating an average 5% renewable fuel content based on gasoline volume, thereby contributing towards the protection of Canadians and the environment from the impacts of climate change. … The Regulations fulfill the commitments under the Renewable Fuels Strategy of reducing GHG emissions from liquid petroleum fuels and create a demand for renewable fuels in Canada… … The Regulations will promote an integrated and nationally consistent approach, and make a significant contribution to reduction in air pollution from GHGs to protect the health and environment of Canadians. [ 28 ] Substantially similar explanations were provided in the RIAS accompanying the 2011 amendments to the RFR which set July 1, 2011, as the date on which the 2% biodiesel requirement in subsection 5(2) of the RFR would come into force: Canada Gazette

Part I , Vol 145, No 9. [ 29 ] As earlier noted, the purpose of CEPA is to promote environmental quality, address threats of environmental damage, to achieve the highest level of environmental quality for all Canadians, and ultimately contribute to sustainable development.

[30] The RFR is consistent with all of those aims. The RIAS for both the RFR and its amendment which set the date subsection5(2) became effective make clear that GHG emissions pose a significant, enduring effect on the environment, have high global warmingpotentials, and can directly affect the health of Canadians. The RIASs also explain that renewable fuels have been shown to make asignificant contribution to lowering GHG emissions on a life-cycle basis.

While the provinces currently have regulations imposingrenewable fuels requirements, Parliament was of the view that federal regulation could contribute above and beyond the provincialcontributions and would fill gaps and address inconsistencies in provincial legislation. [31] Undoubtedly, the RFR was also intended to increase the demand for renewable fuels and develop new market opportunitiesfor agricultural producers and rural communities – the RIAS explicitly states that this is part of the plan.

However, the RIAS also makesclear that these economic effects are part of a four-pronged Renewable Fuels Strategy, one purpose of which is to reduce GHGemissions: Canada Gazette

Part II, Vol 144, No 18 at pp 1684-1685. These same goals were set out in Questions & Answers –Renewable Fuels Regulations, which was prepared to explain the RFR. [32] Canadian jurisprudence has held that the economy and the environment are not mutually exclusive – they are intimatelyconnected.

The Supreme Court of Canada in Friends of Oldman River Society v Canada (Ministry of Transport), (SCC), [1992] 1 SCR 3 at para 93 stated: “The environment, as understood in its generic sense, encompasses the physical, economic andsocial environment touching several heads of power assigned to the respective levels of government.” The Court went on at para 96 tosay that “it defies reason to assert that Parliament is constitutionally barred from weighing the broad environmental repercussions,including socio-economic concerns, when legislating with respect to decisions of this nature.” This is consistent with the expression inthe

preamble of CEPA which states that “environmental or health risks and social, economic and technical matters are to be considered.” [33] Syncrude points to significant expenditures by the federal government to promote the renewable fuels industry as evidencethat the dominant purpose of the RFR was to create a market for renewable fuels.

Among other expenditures, the Government of Canadacontributed $200 million over four years for capital expenditures on construction or expansion of renewable fuel production facilities,$1.5 billion over nine years to support renewable fuels production in Canada, $500 million over eight years to produce next-generationrenewable fuels, and $10 million over two years for scientific research and analysis. [34] In my view, Syncrude takes a myopic view of the role of the RFR in ultimately reducing GHG emissions.

Part of the long-term strategy was to create a demand for renewable fuels that would drive development of next generation technologies. Parliamentexpected that these next generation technologies would contribute to greater reductions of GHG emissions in the long term.

However, ithad to create the “conditions necessary to drive these next-generation technologies to market.” These conditions include establishing ademand for renewable fuels to “give industry the certainty needed in order to secure investments and a supply of renewable fuels for theCanadian market:” Questions & Answers – Renewable Fuels Regulations. [35] Creating a demand for renewable fuels was therefore a necessary part of the overall strategy to reduce GHG emissions, but itwas not the dominant purpose.

The reason the government wanted to create a demand for the fuels was to make a greater contribution tothe long term lowering of GHG emissions. [36] As the Minister of the Environment stated in an interview on May 23, 2006, “what we’re looking for is, number one, that thetechnology that we’re looking to invest in provide the maximum opportunity for emissions reductions” [emphasis added]. In the sameinterview, when asked whether there would be “a net benefit to the environment,” the Minister went on to say: “Yes. And that’s why webrought these three components together.

We can’t do this framework without the three components of energy, environment, andagriculture” [emphasis added]. [37] The underlying reason for contributing to infrastructure costs, production of renewable fuels, and investment in nextgeneration technologies was to “generate greater environmental benefits in terms of GHG emission reductions:” Canada Gazette

Part I,Vol 145, No 9 at p 699. Creating economic and agricultural opportunities were necessary components of achieving these goals. [38] Syncrude recognizes at para 76 of its Amended Memorandum of Fact and Law that part of the objective of the RFR was toencourage next-generation renewable fuels production and create capital incentives to provide opportunities to farmers in the biofuelssector. It observes that these and other incentives collectively create a demand for biofuels.

What Syncrude overlooks is that the marketdemand for renewable fuels and advanced renewable fuels technologies has to be created to achieve the overall goal of greater GHGemissions reduction. [39] In my view, for the reasons stated above, the dominant purpose of the RFR was to make a significant contribution to thereduction of air pollution, in the form of reducing GHG emissions. (

b) The Effect of the RFR [40] The second step of the pith and substance analysis is to examine the effect of the law on those who are subject to it. TheCourt may consider both its legal effect and its practical effect: Kitkatla Band v British Columbia (Minister of Small Business, Tourismand Culture), 2002 SCC 31 , [2002] 2 SCR 146 at para 54. [41] Syncrude submits that, at best, the effect of the law from an environmental perspective was unknown at the time the RFR wasintroduced.

There was conflicting evidence regarding the actual quantity of GHG emissions reductions that renewable fuels generated incomparison to traditional fuels.

Syncrude submits that there was some evidence available that suggested that the creation and use ofrenewable fuels actually generated increased emissions compared to traditional fuels. [42] The Minister submits that the pith and substance analysis is not concerned with the efficacy of the law or whether it actuallyachieves its goals – this is a concern properly directed to and considered by Parliament. [43] I agree with the Minister that it is not for this court to assess the efficacy of the law in achieving its stated purpose, as has beenstated by the Supreme Court in Ward at para 18:

The pith and substance analysis is not technical or formalistic. It is essentially a matter of

interpretation. The court looks at the wordsused in the impugned legislation as well as the background and circumstances surrounding its enactment. In conducting this analysis,the court should not be concerned with the efficacy of the law or whether it achieves the legislature's goals [references omitted andemphasis added]. [44] Syncrude’s effort to present evidence that undermines the conclusions as to the actual savings to GHG emissions by theintroduction of renewable fuels is in vain: the efficacy of the law or whether it achieves the legislature’s goals is an irrelevantconsideration.

As the Supreme Court of Canada stated in Reference re Firearms Act (Can), 2000 SCC 31 , [2000] 1 SCR 783[Firearms Reference], at para 18 “efficaciousness is not relevant to the court’s division of powers analysis.” [45] Even if the Court were to consider the efficacy of the law, Syncrude has failed to present convincing evidence to show that theblending of renewable fuels would not “make a significant contribution to the prevention of, or reduction in, air pollution” as required bysection 140 of CEPA.

Syncrude did not lead any expert evidence to support its position that the data undermines the conclusion thatthere would be a significant contribution to the reduction of air pollution. [46] Syncrude points to evidence that the environmental impact of land use changes would outweigh the benefits of renewablefuels. In certain countries, in order to allow for the production of the feedstocks used to produce renewable fuels, there needs to be somechange in land use.

There was some evidence to suggest that land use changes may blunt some of the upside to renewable fuels, that theenvironmental impacts from land use changes might actually outweigh the benefits of renewable fuels production, and that agriculturalland should not be converted to land used for biofuels crops. However, this evidence does not apply to Canada because no land usechanges need occur here. The February 26, 2011 RIAS made clear that the RFR “are not expected to result in changes in land use:”Canada Gazette

Part I, Vol 145, No 9 at p 719. Moreover, the evidence relied on by Syncrude was in the context of the European Unionwhere they had higher targets of 10% renewable fuel content compared to the Canadian targets of 2% for biodiesel and 5% for gasoline. [47] Syncrude’s submission also ignores the evidence that exists to support the conclusion that incorporating renewable fuelswould reduce both GHG emissions on a life-cycle basis and certain other emissions including acetaldehyde (in the case of biodiesel),Volatile Organic Compounds [VOCs], and fine particle pollutants [PM2.5].

This evidence was referred to in the RIAS accompanying theRFR. The reduction of GHGs is only one part of the overall goal to reduce “air pollution.” [48] Additionally, and consistent with the

preamble of CEPA, the RFR admits that Parliament did not necessarily have a fullcomprehension of the GHG emissions of various types of renewable fuels, but acknowledged a willingness to adjust the requirements asthat evidence became available: Canada Gazette

Part II, Vol 144, No 18 at p 1725. There is nothing unconstitutional about Parliamenttaking steps to address the threat of GHGs in the way it thought best, based on the evidence available to it at the time. The scientificmethod is based on the assumption that what is known today may not necessarily be what is known tomorrow. CEPA recognizes this,particularly in the environmental context. But, as the

preamble to CEPA states, Parliament must act to address environmental threats onthe best evidence available at the time, and not await scientific certainty. There is nothing preventing Parliament from adjusting orrepealing the RFR if conclusive evidence is presented that renewable fuels do not reduce GHG emissions, but that is a decision forParliament, not for the courts. [49] Syncrude further argued that because the RFR did not actually produce the alleged intended effect of reducing GHGemissions, the dominant purpose must have been to create a demand for renewable fuels and benefit farmers.

However, Syncrude hasnot demonstrated that the introduction of renewable fuels has not led to reduced GHG emissions. Therefore, this submission must alsofail. [50] Finally, Syncrude says that there is evidence that it would achieve significant GHG emissions reductions if the RFR did notapply to it because it produces and uses all of its own diesel on site thereby saving on the GHG emissions resulting from transportingfuel.

Apart from the fact that Syncrude provided no evidence to the Minister before the RFR was promulgated that there would be anincrease in GHG emissions if the RFR applied to Syncrude, this is simply an attempt to re-brand the efficacy argument. The SupremeCourt of Canada in Ward stated at para 26 that “the purpose of legislation cannot be challenged by proposing an alternate, allegedlybetter, method for achieving that purpose.” [51] At its most basic level, the argument is that since the RFR applied to Syncrude would not achieve its stated purpose, the RFRis unconstitutional.

Again, the Court is not the arbiter of whether or not the means Parliament has chosen are effective or adequate. Ananalysis of the legal and practical effects of the law is relevant only for the purpose of determining the pith and substance of the law.

Asthe Supreme Court of Canada stated in Global Securities Corp v British Columbia (Securities Commission), 2000 SCC 21 ,[2000] 1 SCR 494 at para 23, “the effects of the legislation may also be relevant to the validity of the legislation in so far as they revealits pith and substance.” Although Syncrude can request an exemption from the application of the RFR, failure by the Minister to providesuch exemption does not render the RFR unconstitutional. [52] However, even if the RFR as applied to Syncrude would increase Syncrude’s GHG emissions, this is not evidence that theRFR overall would not decrease GHG emissions.

Syncrude led evidence that, together with Suncor, their combined productionaccounted for 12% of western Canada’s distillate production and that the amount used on-site accounted for only 3% of westernCanada’s distillate production. Even accepting Syncrude’s arguments at face-value, it is a stretch to infer that the RFR will not achieve areduction in GHG emissions even with Syncrude’s alleged increased emissions. [53] For these reasons, I find that the effect of the RFR is to reduce GHG emissions by requiring renewable fuels to be blendedwith traditional fuels. (

c) Conclusion on Pith and Substance [54] The pith and substance of the RFR and of subsection 5(2) is the reduction of GHG emissions, and potentially other emissions. The dominant purpose is to reduce GHG emissions; the benefits to the economy and the renewable fuels industry are a necessary, butsecondary component of the plan to achieve reduced GHG emissions, and an intermediary step to introducing next generation

technologies that will provide even greater GHG reductions. The effect of the RFR is to reduce GHG emissions on a life-cycle basisboth in the short term and the long term by incorporating renewable fuels.

(2) Categorizing the Law: Heads of Power Analysis [55] Having determined the pith and substance of the law, the second stage requires the Court to identify which heads of power areengaged by the law: Re: Assisted Human Reproduction at para 19. (

a) Criminal Law Power [56] The Minister argues that the RFR and its subsection 5(2) fall under the federal criminal law power under subsection 91(27) ofthe Constitution Act, 1867 [Constitution]. [57] Syncrude challenges the validity of enacting the RFR under the criminal law power, stating that the pith and substance of theRFR is directed at regulating “non-renewable resources (petroleum fuels)” and promoting “the benefits of protecting the environment bycreating a demand for biodiesel in the Canadian marketplace.” This analysis arguably engages the provincial heads of power for: (1)local works and undertakings; (2) property and civil rights; and (3) matters of a merely local or private nature under subsections 92 (10),(13) and (16) of the Constitution respectively.

It also engages the development of non-renewable natural resources under paragraph92A(1)(b). [58] When the Federal head of power in issue is Parliament’s criminal law power under subsection 91(27) of the Constitution, para27 of the Firearms Reference teaches that the matter is a valid exercise of the criminal law power if there is: (1) a prohibition; (2) backedby a penalty; (3) with a criminal law purpose. [59] There is no dispute between the parties that the first two criteria are met.

The determinative issue is whether the RFR wasenacted with a valid criminal law purpose. [60] In order to have a valid criminal law purpose, the law must address a public concern relating to peace, order, security,morality, health, or some similar purpose: Re: Assisted Human Reproduction para 43.

It must suppress an evil or safeguard a threatenedinterest such as public peace, order, security, health, or morality, stopping short of pure economic regulation: Reference re: DairyIndustry Act (Canada), s 5(a), (SCC), [1949] SCR 1. [61] Relying on Canada (Procureure générale) v Hydro-Québec, (SCC), [1997] 3 SCR 213 [Hydro] and Re:Assisted Human Reproduction, the Minister submits that the RFR addresses a valid criminal law purpose because it aims to suppressGHG emissions that cause harm to the environment “since unblended diesel fuel releases more GHGs on a life cycle basis than that withrenewable fuel content.” [62] Prohibitions directed at protecting the public from environmental hazards have been considered valid criminal law purposes inthe past, see for example Hydro, where a unanimous Supreme Court of Canada (although split in its decision on other issues), agreed atpara 123 that “the protection of a clean environment is a public purpose … sufficient to support a criminal prohibition … to put it anotherway, pollution is an ‘evil’ that Parliament can legitimately seek to suppress.” [63] In Hydro, the Supreme Court made clear at para 43 that: To the extent that Parliament wishes to deter environmental pollution specifically by punishing it with appropriate penal sanctions, it isfree to do so, without having to show that these sanctions are ultimately aimed at achieving one of the ‘traditional’ aims of criminal law… the protection of the environment is itself a legitimate basis for criminal legislation [emphasis added]. [64] At issue in Hydro were provisions of the Environmental Protection Act, RSC 1985, c 16 (4th Supp), regarding the designationand regulation of toxic substances, as well as a provision that permitted the Minister to issue an interim order directing that a substancebe temporarily placed on the toxic substances list and regulating that substance, where the Minister is of the opinion that immediateaction is required. [65] The dissent agreed that protection of the environment was a legitimate public purpose, but found that the impugned provisionswere more of an attempt to regulate environmental pollution than to prohibit or proscribe it.

In particular, the dissent found that theprohibitions were ancillary to the regulatory scheme and not the other way around. It further concluded that the impugned provisionswere not focused on specifically prohibiting toxic substances, but rather, regulating and controlling the manner in which they are allowedto interact with the environment.

Finally, it noted the seemingly unlimited breadth of the impugned provisions owing to the broaddefinition of “toxic substance” and “substance” in the Act. [66] The majority held that “environmental protection legislation should not be approached with the same rigour as statutes dealingwith less complex issues in applying the doctrine of vagueness developed under s. 7 of the Charter” in relation to criminal law cases, andthat “the effect of requiring greater precision would be to frustrate the legislature in its attempt to protect the public against the dangersflowing from pollution.” It agreed with the dissent that in certain cases, sweeping prohibitions “could be so broad or all-encompassing asto be found to be, in pith and substance, really aimed at regulating an area falling within the provincial domain and not exclusively atprotecting the environment,” but ultimately determined that the provisions demarcated a restricted number of substances.

The use ofthese substances in a manner contrary to the regulations was ultimately prohibited, and this was a specific targeting of substances withoutresort to unnecessarily broad prohibitions. [67] On its face, the RFR appears to be more regulatory in nature than prohibitory. However, like the majority in Hydro, I am ofthe view that this particular evil – GHG emissions by combustion of fossil fuels – is not well addressed by specific prohibitions.

Forexample, much of society runs on fossil fuels and Parliament should not be expected to prohibit the use of fossil fuels entirely in order tomeet progressive goals of GHG emission reduction.

[ 68 ] Nor should Parliament be expected to adopt more specific prohibitions against the components of diesel or gasoline; for example, it would be prohibitively costly to determine which hydrocarbons (out of the many constituents of diesel and gasoline fuels) specifically contribute to GHG emissions. It would be even more costly for industry to comply with such specific prohibitions, and for the Minister to monitor such a scheme of prohibitions. [ 69 ] The same can be said of the components of the renewable fuels.

This was specifically noted in Questions & Answers – Renewable Fuels Regulations , released in September 2010 which states: [Question] The regulations do not include requirements that renewable fuels used have lower greenhouse gas emissions than conventional fuels. Why not? [Answer] The impact of a renewable fuel on emissions of greenhouse gases vary depending on the feedstock used to produce the fuel, what processes are used to produce the fuel, and where it is produced in relation to where it is used.

There is considerable controversy as to methodologies for estimating lifecycle emissions of various renewable fuels. The Government has decided that for the present the regulations will not have any such explicit requirements; however, in the future, when there is more information available, such requirements may be introduced into the regulations. [ 70 ] Additionally, the majority in Hydro at para 150 accepted that regulations “providing for or imposing requirements respecting the quantity or concentration of a substance listed in

Schedule I that may be released into the environment either alone or in combination with others from any source ” were valid [emphasis added].

In this case, the RFR is structured in the same way – it imposes requirements respecting the concentration of renewable fuels in fossil fuel mixtures and in this way, controls the “manner and conditions of release” of GHG emissions (on a life cycle basis) that would otherwise result from the use of fossil fuels with no renewable content. [ 71 ] I observe that the structure of the RFR is different in that it does not explicitly reduce the concentration of fossil fuels in a fuel mixture – it does so only by mandating the addition of an alternative fuel source, thereby implicitly reducing the concentration of the target fuel source.

In my view, this is an insignificant difference because the ultimate effect is the same – fossil fuel use will be reduced by the proportion of renewable fuels introduced. Put another way, the RFR prohibits the use of 100% crude diesel/gasoline for the supplier’s average total distillate pool for each period. [ 72 ] The fact that companies would be permitted to use 100% crude diesel/gasoline in the winter months and make up for it by using larger renewable fuel content in the summer months, or by purchasing compliance units, does not detract from the prohibition.

Compliance units are only created by someone over-mixing renewable fuels, thereby compensating for another user’s emissions and the net effect is therefore the same. [ 73 ] Additionally, the concerns of the minority in Hydro do not apply here. First, the prohibitions are not ancillary to the regulatory scheme.

Part 7 of CEPA is concerned with controlling pollution and managing waste. Within

Part 7, Division 4 is specifically directed towards pollution and waste created by fuels. Gasoline and diesel – the precursors to GHG emissions – are being regulated by prohibiting uses in manners contrary to the regulations, much like the regulation of toxic substances in Hydro . [ 74 ] Syncrude does not argue that the definition of “air pollution” in section 140(2) of CEPA is overbroad. In any event,

section 140 is sufficiently precise and not overbroad given that the “air pollution” in issue must result directly or indirectly from “the fuel or any of its components” or “the fuel’s effect on the operation, performance, or introduction of combustion or other engine technology or emission control equipment.” This is even more specific than the definition of “substance” and “toxic substance” at issue in Hydro , which the majority found to be sufficiently precise. Accordingly, regulations made under

section 140 would not have unlimited breadth. [ 75 ] Finally, if Syncrude’s argument stands, then it applies to the whole of Division 4 which seeks to regulate fuels generally. However, Syncrude does not challenge even subsection 5(2) of the RFR , nor the RFR as a whole, let alone the entirety of Division 4 of CEPA . In fact, it actually concedes that other prohibitions enacted under ss. 139 and 140 of CEPA (for example, the Sulphur in Diesel Fuel Regulations , SOR/2002-254, which limits the concentrations of sulphur in diesel fuel) are valid exercises of the discretion granted under those provisions.

In my view, there is nothing to distinguish a prohibition of sulphur concentration from the imposition of a certain level of renewable fuel content. Both seek to prevent the emission of toxic substances (sulphur dioxide and GHG emissions) or air pollution.

As noted previously, I am not convinced that a direct prohibition and an indirect prohibition are sufficiently different to warrant different treatment. [ 76 ] Questions & Answers – Renewable Fuels Regulations , released in September 2010 also addresses the difference between the RFR and the Sulphur Regulations : [Question] Why are the limits on an average basis rather than per-litre limits like under the Sulphur in Diesel Fuel Regulations ? [Answer] The Renewable Fuels Regulations are concerned with reducing greenhouse gases, a global national issue.

It is the overall quantity of petroleum fuels displaced by renewable fuels that provides the greenhouse gas benefit …. [ 77 ] To summarize, protection of the environment is itself a valid criminal law purpose, and in this case, there are sufficiently precise prohibitions and penalties. That it is the overall quantity of crude fuels displaced that provides the greenhouse gas benefit does not render the RFR an invalid use of the criminal law power. [ 78 ] As an aside, Syncrude argues that subsection 5(2) of the RFR does not raise a reasoned apprehension of harm in this case.

Syncrude submits that the production and consumption of petroleum fuels is not dangerous and does not pose a risk to human health or safety. Syncrude concedes that regulating substances such as PCBs and sulphur which are dangerous and pose a risk to human health, are valid exercises of the criminal law power. [ 79 ] In Syncrude’s view, there is no evil to be suppressed, but even if there were, subsection 5(2) of the RFR does nothing to prohibit the emission of harmful substances in the environment.

If this were a valid exercise of the criminal law power, Syncrude submits that it would give “limitless definition” to criminal law that the dissent of the Supreme Court of Canada cautioned against in Re:

Assisted Human Reproduction at paras 239-240. [ 80 ] First, “reasonable apprehension of harm” is a concept originating in criminal laws enacted under the purpose of protecting public health. As the case law demonstrates, protection of the environment is its own valid criminal law objective, and therefore, the RFR do not need to be justified under the same constraints or concepts from the public health purpose. [ 81 ] Second, I disagree with Syncrude that subsection 5(2) would unbind the limits of the criminal law power.

As stated above, subsection 5(2) accords with the form of a valid exercise of the criminal law power, despite the fact that it comes in the form of a mandatory inclusion of a substance rather than a prohibition of another substance. [ 82 ] Third, the dissent’s comments in Re: Assisted Human Reproduction are of no assistance because those comments were directed towards the assessment of morality instead of health.

The dissent cautioned that in a multicultural society, differing attitudes ought to be considered when addressing “moral problems.” [ 83 ] Fourth, even being mindful of the dissent’s concerns, there is a real evil and a reasonable apprehension of harm in this case. The evil of global climate change and the apprehension of harm resulting from the enabling of climate change through the combustion of fossil fuels has been widely discussed and debated by leaders on the international stage.

Contrary to Syncrude’s submission, this is a real, measured evil, and the harm has been well documented. [ 84 ] Further, the Supreme Court’s guidance at paras 55-56 of Re: Assisted Human Reproduction is instructive. There is no constitutional threshold level of harm that constrains Parliament’s ability to target conduct causing these evils, provided that Parliament can establish a reasonable apprehension of harm.

More importantly, Parliament is entitled to target conduct that elevates the risk of harm to individuals, even if it does not always crystallize in injury. [ 85 ] For these reasons, I find that the dominant purpose and effect of subsection 5(2) of the RFR is to make a significant contribution to the reduction of air pollution, in the form of reducing GHG emissions. Parliament chose to do so by using its criminal law power.

Protection of the environment is itself a valid criminal purpose, and the impugned provision creates a valid prohibition backed by a penalty, although the prohibition does not take the form of a direct, targeted, restrictive prohibition. (

b) Conclusion on Constitutionality [ 86 ] Therefore, I find that the RFR is intra vires the federal government and is constitutionally valid. (

c) Ancillary Powers Doctrine [ 87 ] Having found that the RFR is constitutional under Parliament’s criminal law power, it is unnecessary to consider the ancillary powers doctrine which occupied a significant portion of Syncrude’s submissions.

However, had I found that subsection 5(2) of the RFR was not itself a valid exercise of Parliament’s criminal law power, I would have found it to have been saved by the ancillary powers doctrine. [ 88 ] The ancillary powers doctrine permits administrative or regulatory provisions to be upheld despite the fact that they may, in pith and substance, fall outside of the jurisdiction of the enacting government.

Such provisions may be upheld if they are connected to a valid legislative scheme and further the legislative purpose: Re: Assisted Human Reproduction at para 126. [ 89 ] In assessing validity of provisions, the court must determine whether the provision is rationally and functionally connected to the scheme.

The provision should functionally complement the other provisions of the scheme and fill gaps in the scheme that might otherwise lead to inconsistency, uncertainty, or ineffectiveness, and it need not be shown that the scheme would necessarily fail without the ancillary provisions: Re: Assisted Human Reproduction at para 138. [ 90 ] Paras 129-130 of Re: Assisted Human Reproduction set out three factors that typically ought to be considered when conducting an analysis under the ancillary powers doctrine, although this is not an exhaustive list: 1.

Scope of the heads of power in play and whether they are broad or narrow; 2. Nature of the impugned provision; and 3. History of legislating on the matter in question. The more an ancillary provision intrudes on the competency of the other government, the higher the threshold for upholding it on the basis of the ancillary powers doctrine. Heads of Power [ 91 ] Broad heads of power lend themselves to more overlap: where the legislation is enacted under a broad head of power, the intrusion will be less serious.

Where the head of power being intruded upon is broad, the intrusion will be less serious. [ 92 ] In this case, the federal head of power is the criminal law power and it is broad. The provincial heads of power suggested by Syncrude are (1) local works and undertakings; (2) property and civil rights; (3) matters of a merely local or private nature and (4) the development of non-renewable natural resources. The first three heads of provincial power are broad, but the fourth is relatively narrow.

However, I am not persuaded that the provision intrudes on the development of non-renewable natural resources; rather, it deals with their use . Therefore, the intrusion is “less serious” when considering all factors. Nature of the Provision

[ 93 ] In this case, subsection 5(2) of the RFR is meant to create a minimum standard across all provinces with respect to the use of biodiesel. The RIAS published with the proposed and final regulations acknowledge that the provinces have already legislated to some extent, and that one of the goals of the RFR is to create consistency and fill gaps in the patchwork of provincial legislation.

In this case, Syncrude notes that under Alberta’s Oil Sands Conservation Act , RSA 2000, c O-7 and Renewable Fuels Standard Regulation , Alta Reg 29/2010, it would be excluded from the usual requirement for renewable fuels that apply to fuel producers, importers, and sellers. [ 94 ] Although the overall intention is to complement and supplement provincial legislation, Syncrude’s example shows that the subsection 5(2) will override and intrude on some aspects of provincial regulation in this area, and this suggests that it is a more serious intrusion.

History of Legislating [ 95 ] Parliament has a history of legislating with respect to protecting the environment. In Re: Assisted Human Reproduction , the majority noted that Parliament had a history of legislating with respect to morality, health, and security and invoking its criminal law power to uphold regulatory schemes and provided the examples of the Firearms Reference and Hydro .

In the majority’s view, these historical comparisons suggested that the ancillary provisions only constituted a minor intrusion on provincial powers. [ 96 ] In this case, Parliament has a history of legislating to protect the environment and using the criminal law power to do so. However, with respect to the use of renewable fuels, the provinces have also legislated on the issue.

In my view, this factor is therefore neutral. [ 97 ] Overall, I conclude that had it been found that the RFR was ultra vires the federal government, the intrusion of the ancillary provisions into provincial powers would not be serious enough to warrant striking it down. The regulations are enacted under broad heads of power and only intrude on other broad heads of power. While they override some aspects of provincial legislation, in most respects, they seek to complement it.

Finally, Parliament has a history of legislating to protect the environment and although the provinces have some history of legislating on the issue of renewable fuels, in my view, this is insufficient to demonstrate that the intrusion into provincial powers is serious. B.

Statutory Validity of Subsection 5(2) of the RFR [ 98 ] Syncrude submits that the RFR are ultra vires or invalid because they result from an invalid exercise of the regulation-making authority of the Governor in Council in CEPA . [ 99 ] The RFR were promulgated pursuant to subsection 140(1) of CEPA and the parties appear to agree that the regulations were made in respect of one or more of the following paragraphs of that subsection: (

a) the concentrations or quantities of an element, component or additive in a fuel; (

b) the physical or chemical properties of a fuel; (

c) the characteristics of a fuel, based on a formula related to the fuel’s properties or conditions of use; ( c.1 ) the blending of fuels; (

d) the transfer and handling of a fuel. [ 100 ] Subsection 140(2) of the RFR provides a condition precedent to the making of any regulation respecting the matters that are set out in paragraphs 140(1)(

a) to (d):

(2) The Governor in Council may make a regulation under any of paragraphs (1)(

a) to (

d) if the Governor in Council is of the opinion that the regulation could make a significant contribution to the prevention of, or reduction in, air pollution resulting from (

a) directly or indirectly, the fuel or any of its components; or (

b) the fuel’s effect on the operation, performance or introduction of combustion or other engine technology or emission control equipment. [emphasis added] [ 101 ] Syncrude attacks the legislative validity of the RFR on three bases. It submits that: 1. The Governor in Council failed to form the opinion required by subsection 140(2) of CEPA , a condition precedent to the promulgation of the RFR . Moreover, it submits that contrary to the “intent” under

section 333 of CEPA, the Minister failed to assess the environmental impacts of the RFR by convening a board of review prior to making his recommendation to the Governor in Council; 2. The Minister failed to conduct a Strategic Environmental Assessment [SEA] of the RFR before they were made into law, as required by the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals [ Cabinet Directive ]; and 3. The RFR is inconsistent with the object of CEPA to protect the environment. [ 102 ] For the reasons that follow, I am not persuaded that any of these objections are founded, and I find that the RFR is legislatively valid.

(1) Was the Condition Precedent in Subsection 140(2) Observed? [ 103 ] Where a condition precedent in the statute is not followed, the regulations are ultra vires : Katz Group Canada Inc v Ontario (Health and Long-Term Care , 2013 SCC 64 , [2013] 3 SCR 810 [ Katz ] at paras 24 and 27 . [ 104 ] The standard of review of the validity or vires of regulations on administrative law grounds is correctness: Mercier at paras 78- 79. [ 105 ] Syncrude argues that CEPA sets out a condition precedent to the enactment of regulations.

The Governor in Council must form the opinion that the RFR could make a significant contribution to “the prevention of, or reduction in, air pollution” before it can make a regulation. [ 106 ] Syncrude says that the Minister only considered a “preliminary scan” completed in 2006, which focuses on GHG reductions. It submits that the Minister should have had a complete assessment of non-GHG air pollutant emissions created by the 5% renewable fuel requirement, as they are harmful to human health and no studies have been conducted.

Among other items, it points out that the Minister was aware that in September 2010 the United States Environmental Protection Agency estimated that the use of biofuels would cause 245 premature deaths in the United States because of the adverse impact on air quality.

Syncrude suggests that the Minister’s disinterest in considering other impacts of renewable fuels is demonstrated by the failure to convene a board of review, which could have assessed the overall impact of the RFR on air pollutants, and determined the environmental impact on land and water. [ 107 ] In short, Syncrude argues that because the Minister failed to consider non-GHG pollutants and ignored evidence that the RFR could not make a significant contribution to the prevention of, or reduction in, air pollution, the Governor in Council could not form the required opinion under

section 140 of CEPA , and the regulations are ultra vires . [ 108 ] The Minister agrees that the opinion of the Governor in Council is a condition precedent to it making valid regulations under the CEPA . It argues that the establishment of a board of review is not a condition precedent to the creation of regulations and is otherwise irrelevant to the issue raised. The Minister submits that the Governor in Council met the condition precedent and it is not the role of the Court to second guess it.

Rather, it is submitted that the court must simply confirm that the required opinion was formed: Mercier v Canada , 2010 FCA 167 , 2010 Carswell Nat 1960 [ Mercier ] at para 80 ; leave to appeal refused 417 NR 390 (SCC) . [ 109 ] I agree with the Minister that the failure to establish a board of review under subsection 333(1) if CEPA is not a condition precedent to valid regulation-making. Moreover, it is entirely irrelevant, in my view, to the issue being addressed. [ 110 ] Paragraph 333(1)(

a) provides, in relevant part, as follows: “Where a person files a notice of objection … in respect of a decision or a proposed order, regulation or instrument made by the Governor in Council … the Minister or the Ministers may establish a board of review to inquire into the nature and extent of the danger posed by the substance in respect of which the decision is made or the order, regulation or instrument is proposed” [emphasis added]. [ 111 ] Syncrude submits that notwithstanding the use of the discretionary word “may” in paragraph 333(1)(a), the establishment of the board of review is mandatory and that was the intent of Parliament.

I disagree. Syncrude’s view is simply not supported by the express language Parliament chose to use in

section 333 . [ 112 ]

Section 333 has six subsections, each dealing with the establishment of a board of review in certain express circumstances, as follows:

(1) Where a person files a notice of objection under subsection 77(8) or 332(2) in respect of (

a) a decision or a proposed order, regulation or instrument made by the Governor in Council, or (

b) a decision or a proposed order or instrument made by either or both Ministers … ,

(2) Where a person files a notice of objection under subsection 9(3) or 10(5) in respect of an agreement or a term or condition of the agreement …,

(3) Where a person or government files with the Minister a notice of objection under subsection 332(2) with respect to regulations proposed to be made under

section 167 or 177 within the time specified in that subsection …,

(4) Where a person files with the Minister a notice of objection under subsection 332(2) with respect to regulations proposed to be made under

Part 9 or

section 118 within the time specified in that subsection …,

(5) Where a person files with the Minister a notice of objection under

section 134 within the time specified in that

section …,

(6) Where a person files with the Minister a notice of objection under

section 78 in respect of the failure to make a determination about whether a substance is toxic or capable of becoming toxic. [ 113 ] In each of the circumstances described in subsections 1, 2 and 5, the circumstance is followed by the phrase “the Minister may establish a board of review; however, in each of the circumstances described in subsections 3, 4, and 6, the circumstance is followed by the phrase ‘the Minister shall establish a board of review’” [emphasis added].

It is beyond doubt that Parliament intended to differentiate the circumstances where the Minister is required to establish a board of review and those where he has a discretion to establish a board of review. The circumstances relevant to the facts here did not mandate the Minister to establish a board of review. [ 114 ] The only condition precedent to the RFR is that found in subsection 140(2) of CEPA , namely that the “ Governor in Council is of the opinion that the regulation could make a significant contribution to the prevention of, or reduction in, air pollution.”

[115] The

preamble to the RFR, as published in the Canada Gazette,

Part II on August 23, 2010, reflects that the Governor in Councilhad formed the requisite opinion.

It reads as follows: Whereas the Governor in Council is of the opinion that the proposed Regulations could make a significant contribution to the preventionof, or reduction in, air pollution resulting from, directly or indirectly, the presence of renewable fuel in gasoline, diesel fuel or heatingdistillate oil. [116] Syncrude’s submission is that “[n]othing in the voluminous record on this Application shows the basis for any conclusion thatthe Regulations result in a significant reduction in air pollution when all air contaminants (not only GHGs) are accounted for” [emphasisin the original].

Syncrude takes the position that the Governor in Council could not have formed the required opinion because there wasinsufficient evidence available to support such an opinion. In short, it is asking the court to second guess the opinion of the Governor inCouncil. [117] The Court must presume that the RFR was validly enacted and the burden of proving otherwise rests on Syncrude: Katz at paras25 and 26. There is no evidence that the Governor in Council did not in fact form the opinion stated by it. In reality, what Syncrudechallenges is not the making of the opinion but its validity.

However, as the Minister submits, “this court is not to inquire into thevalidity of the Governor in Council’s opinion that the RFR could result in a reduction of air pollution, whether the Governor in Councilformed its opinion on accurate or misleading information, or whether its opinion is right or wrong:” See Thorne’s Hardware Ltd vCanada, (SCC), [1983] 1 SCR 106, para 13; Canada (Attorney General) v Hallet & Carey Ltd, (UKJCPC), [1952] AC 427 (PC), para 12; Reference re Regulations in Relation to Chemicals, (SCC), [1943] SCR 1, para 22;Teal Cedar Products

(1977) Ltd v Canada, (FCA), [1989] 2 FC 158, [Teal] para 16, leave to appeal refused 100 NR320 (SCC); and Canadian Council for Refugee v Canada, 2008 FCA 229, para 78-80, leave to appeal refused (2009) 395 NR 387 (note). [118] Syncrude has offered no evidence that the opinion required was not made and, as the Federal Court of Appeal stated in Teal, “Ifthe Governor in Council deemed the Order in Council necessary … it matters not that this opinion be right or wrong.” That is a fullanswer to Syncrude’s submission that the condition precedent was not fulfilled.

(2) Was a Strategic Environmental Assessment Required? [119] Syncrude submits the Cabinet Directive imposes a mandatory obligation on a Minister to ensure that a SEA is performed onregulations before implementing any proposal that may result in important environmental effects, either positive, or negative.

It isargued that the Cabinet Directive is a statutory condition precedent that was not followed, and thus, the regulations are invalid. [120] Syncrude argues that the Cabinet Directive is a “regulation” made by or under the authority of the Governor in Council; that theCabinet Directive required a SEA; that the Cabinet Directive was part of the regulation making process under CEPA, and is a conditionprecedent arising from the statute. [121] This submission hinges on section 2(1)(

b) of the

Interpretation Act, RSC 1985, c I-21, which reads: “regulation” includes an order, regulation, rule, rule of court, form, tariff of costs or fees, letters patent, commission, warrant,proclamation, by-law, resolution or other instrument issued, made or established (

a) in the execution of a power conferred by or under the authority of

an Act, or (

b) by or under the authority of the Governor in Council… [122] First, this Cabinet Directive is an administrative policy of general application, passed under the authority of Cabinet, not theGovernor in Council, as is required by the

Interpretation Act. Justice Scarth dealt with a cabinet directive, passed by the provincialCabinet, in the case of Independent Contractors and Business Association of British Columbia v British Columbia (1995), (BC SC), 6 BCLR (3d) 177, [1995] BCJ No 777 at para 14. To paraphrase Justice Scarth’s analysis into the Federal sphere, acabinet directive does not purport to have been enacted in execution of a power conferred under

an Act, nor is it suggested that it wasmade by or under the authority of the Governor in Council, or that any Order-in-Council was approved by the Governor General, actingon the advice of the Cabinet. This Cabinet Directive is merely a policy issued by Cabinet, and does not fall under the definition of“regulation” under

section 1 of the

Interpretation Act. [123] In any event, it is evident from the record that whether “required” or not, an SEA was made and was submitted to Cabinet. TheSEA is attached to an affidavit filed by Leif Stephanson and is entitled: The impact of a federal renewable fuels regulation on airpollution. Accordingly, even if the SEA were a condition precedent, it was met.

(3) Is the RFR Inconsistent with the Object of CEPA? [124] Syncrude submits that the RFR does not accord with the purposes and objects of CEPA, as the RFR does not protect the“environment” as defined in subsection 3(1) of CEPA. The relevant portions of subsection 3(1) read: “environment” means the components of the Earth and includes (

a) air, land and water; (

b) all layers of the atmosphere; (

c) all organic and inorganic matter and living organisms; and (

d) the interacting natural systems that include components referred to in paragraphs (

a) to (c).

[125] Syncrude focuses on the phrase “air, land and water” and argues that regulations under CEPA are required to protect the wholeenvironment—not just the air, but also land and water, due to the above wording. It says that the Governor in Council failed to considerany effects of the RFR on land and water, and as such, the regulations are ultra vires. [126] A challenge to the vires of a regulation requires that it be shown to be inconsistent with the objective of the enabling statute orthe scope of the statutory mandate: Katz at para 24.

Because of the presumption of validity of regulations, the burden is on Syncrude todemonstrate the regulations are invalid. As previously stated, the Court does not inquire into the policy merits to determine whether aregulation is “necessary, wise or effective in practice.” [127] The Supreme Court of Canada elaborated in Katz, at para 28: It is not an inquiry into the underlying “political, economic, social or partisan considerations” (Thorne’s Hardware Ltd. v. The Queen, (SCC), [1983] 1 S.C.R. 106, at pp. 112-13).

Nor does the vires of regulations hinge on whether, in the court’s view,they will actually succeed at achieving the statutory objectives (CKOY Ltd. v. The Queen, (SCC), [1979] 1 S.C.R. 2, atp. 12; see also Jafari, at p. 602; Keyes, at p. 266). They must be “irrelevant”, “extraneous” or “completely unrelated” to the statutorypurpose to be found to be ultra vires on the basis of inconsistency with statutory purpose (Alaska Trainship Corp. v. Pacific PilotageAuthority, (SCC), [1981] 1 S.C.R. 261; Re Doctors Hospital and Minister of Health, (1976), (ONSC), 12 O.R. (2d) 164 (Div. Ct.); Shell Canada Products Ltd. v.

Vancouver (City), (SCC), [1994] 1 S.C.R. 231, at p.280; Jafari, at p. 604; Brown and Evans, at 15:3261).

In effect, although it is possible to strike down regulations as ultra vires on thisbasis, as Dickson J. observed, “it would take an egregious case to warrant such action” (Thorne’s Hardware, at p. 111) [emphasisadded]. [128] Syncrude has cited extensively from the record, to attempt to show that land use was not properly considered, that there will beno net reduction in GHG emissions, or that there will be an increase in air pollution, which will result in negative impacts to the land andwater, relative to the air.

Though its submissions were thorough, I am not persuaded that it has met the burden of showing the RFR andthe biofuel requirement is irrelevant, extraneous, or completely unrelated to the statutory purpose of CEPA.

That is a very high burden. [129] The Minister observed that Syncrude’s position, if accepted, would require the Court to find all regulations under CEPA ultravires unless they protect all the components of the “environment” as defined in subsection 3(1) of CEPA, despite being split into partsand divisions that deal with specific components of the environment. [130] The Minister submitted that CEPA does not support such an

interpretation. In oral argument, Syncrude disagreed, and statedthat its position was that certain regulations may be neutral to some aspects of the environment, and have a positive effect on others,which would be acceptable. Its position is that CEPA regulations cannot harm the environment. [131] While I am hesitant to say that CEPA regulations can improve some aspect of the environment at the expense of other aspects, Iagree with the Minister that the structure of CEPA does not support an

interpretation that all factors of the environment must beconsidered for every regulation passed under CEPA. [132] First, although it has chosen to focus on part (

a) of the definition of “environment”, its argument is that all aspects of theenvironment must be considered at all times for all regulations made under CEPA. This would include (b), (c), and (

d) which read: (

b) all layers of the atmosphere; (

c) all organic and inorganic matter and living organisms; and (

d) the interacting natural systems that include components referred to in paragraphs (

a) to (c). [133] It would be prohibitively costly if not nearly impossible to consider the effect of a regulation on all of the above factors for eachand every regulation made under CEPA. In my view, such a burden on the Minister would frustrate rather than further CEPA’sobjectives. [134] Second, the organization of CEPA into specific parts and divisions does not support Syncrude’s position.

Part 7 for exampledeals with “controlling pollution and managing wastes” and Division 4 relates specifically to “fuels.” Within

Part 7, Division 2 relates to“protection of marine environment from land-based sources of pollution”, Division 3 relates to “disposal at sea”, Division 5, “vehicle,engine and equipment emissions”, Division 6, “international air pollution”, and Division 7, “international water pollution.” Theregulation making powers are split into specific compartments in order to restrict the factors that must be considered or taken intoaccount in making regulations for any specific purpose. [135] Third, the title of

Part 7 itself undermines Syncrude’s

interpretation that no regulation can permit harm to be done to any aspectof the environment. “Controlling pollution and managing wastes” implies that some level of pollution and waste is inevitable and thatthe goal is to reduce pollution and waste as much as possible rather than eliminate it. This necessarily entails permitting some harm tosome aspect of the environment. [136] Finally, reading the RIASs, it is clear that some impacts on land and water were considered.

For example, studies wereconducted on the impact of a spill or leak to soil, the impact on water quality in the agricultural sector, and the use of fertilizer. Further,the Governor in Council believed the threat of climate change applied to and affected all three areas of “environment” – air, land andwater.

The December 2006 RIAS makes clear that “Use of renewable fuels can offer significant environmental benefits, includingreduced [GHG] emissions, less impact to fragile ecosystems in the event of a spill because of their biodegradability...” Theconsideration of the impact of the RFR on ecosystems necessarily entails considering all aspects of the environment for those ecoystems. [137] To find the RFR ultra vires CEPA, would require a finding that they are extraneous to the overall purpose of CEPA, and theburden of so doing rests with Syncrude.

I am satisfied that the regulations are within the overall purpose of the statute, and Syncrude hasthus failed to meet its burden. The RFR were therefore not ultra vires the regulation making authority of the Governor in Council.

C. Was there a denial of procedural fairness? [138] Syncrude alleges that upon receiving its notice of objection and its request to establish a board of review, the Minister owedSyncrude a duty of procedural fairness. It argues that the Minister’s decision was of an administrative nature and “affects the rights,privileges or interests of an individual.” It therefore attracts a duty of fairness: Cardinal v Kent Institution, (SCC),[1985] 2 SCR 643, [1985] SCJ No 78 [Cardinal] at para 14.

Syncrude submits that the Minister was procedurally unfair by failing toprovide reasons for his decision to not convene a board of review, and by failing to consult with Syncrude. [139] The Minister’s principal submission is that the discretion to convene a board of review is a decision within the legislativeprocess and that there is no duty of procedural fairness when the decision being reviewed is of a legislative nature. In the alternative, itis submitted that there was no breach of procedural fairness because reasons for the decision were provided both in a letter to Syncrudeand in the RIAS.

Since reasons were provided, even if they are inadequate, that is not a stand-alone reason for quashing a decision asunreasonable.

(1) Syncrude’s Notice of Objection Not Filed in Time [140] Although not raised by the Minister nor relied upon by him, and although not the basis upon which the Court rejects Syncrude’sapplication, the Court observes that Syncrude’s notice of objection was not timely. [141] The RFR was first proposed in the Canada Gazette

Part I on December 30, 2006. The Minister then published a draft versionof the RFR in the Canada Gazette

Part I on April 10, 2010, and members of the public were given an opportunity to file comments andnotices of objection requesting a board of review at that time. The RFR were subsequently published in the Canada Gazette

Part II onSeptember 1, 2010, including subsection 5(2) which mandated the 2% average renewable fuel requirement in diesel fuel. However, nodate was set for the coming-into-force of subsection 5(2) of the RFR. That date was set by Regulations Amending the Renewable FuelsRegulations set out in the Canada Gazette

Part I on February 26, 2011. Syncrude filed its notice of objection on April 26, 2011. [142] Syncrude should have filed its notice of objection within 60 days following April 10, 2010, the date on which the Ministerpublished the draft RFR and invited the public to file comments and notices of objection. In 2010, 114 persons filed notices of objectionand requested a board of review be convened. Syncrude did not. [143] Syncrude’s objection was only filed in respect of the amendment to the RFR which sets the date on which subsection 5(2) is tocome into force.

The amendment does not change the substance of subsection 5(2). Syncrude raises no objection about the date onwhich it is to come into force, but rather objects to the substance of subsection 5(2). In contrast to the comments and notices of objectionreceived in 2010, Environment Canada received 39 letters of comment in response to the 2011 amendment. Syncrude’s letter was theonly one that requested a board of review be convened. In my view, this further supports that Syncrude simply missed its opportunity toobject in a timely manner.

(2) No Duty of Fairness is Owed Within the Legislative Process [144] Even if Syncrude had filed a timely notice of objection, I am of the view that the Minister did not owe it a duty of fairness withrespect to the decision as to whether or not he would convene a board of review because there is a general rule that typical proceduralduties and protections do not apply in the legislative context. [145] In Canadian Assn of Regulated Importers v Canada (Attorney General), (FCA), [1994] 2 FC 247, [1994]FCJ No 1 at paras 18-21 [Canadian Assn], the

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