British Columbia Hydro and Power Authority v. Canada (Attorney General), docket T-1171-97

Date: 19980603 Docket: T-1171-97

BETWEEN:

BRITISH COLUMBIA HYDRO AND POWER AUTHORITY,

-and­

Applicant,

THE ATTORNEY GENERAL OF CANADA and THE MINISTER OF FISHERIES AND OCEANS,

Respondents,

- and -

THE STEELHEAD SOCIETY OF BRITISH COLUMBIA,

Intervenor.

REASONS FOR JUDGMENT

McGILLIS, J. INTRODUCTION

[1]         On May 2, 1997, the Minister of Fisheries and Oceans ("Minister"), by his delegate Alan Lill, issued a Minimum Flow Order under subsection 22(3) of the Fisheries Act, R.S.C. 1985, c. F-14, as amended, specifying a water flow release schedule for the safety of the fish and the ova in the Cheakamus River in British Columbia. The British Columbia Hydro and Power Authority ("B.C. Hydro") has challenged by way of judicial review the issuance of the Minimum

Page: 2 Flow Order. As one of its grounds of review, B.C. Hydro has alleged that the Minister's delegate breached the duty of procedural fairness.

FACTS

[2]         B.C. Hydro is a British Columbia Crown Corporation, continued under the Hydro and Power Authority Act, R.S.B.C. 1996, c. 212. B.C. Hydro has the statutory authority, among other things, to generate and supply power, including hydroelectric power, as well as to develop power sites, projects and plants. In fulfilling those aspects of its statutory mandate, B.C. Hydro operates several dams throughout the province.

[3]         In early 1953, B.C. Hydro's predecessor, British Columbia Electric Co. Ltd. ("B.C. Electric") began to study the potential of the Cheakamus River to generate hydro-electric power. In due course, it developed a proposal to impound Daisy Lake with a dam located sixty kilometres north of Vancouver on the Cheakamus River, upstream from the confluence of the Cheakamus and Squamish Rivers. In May 1954, it advised the federal Department of Fisheries ("Department"), as it was then called, about the project. Shortly thereafter, the Department provided information to B.C. Electric about the salmon spawning grounds downstream from the proposed dam, and the anticipated negative impact on the fish and their habitat.

[4]         In September 1954, B.C. Electric applied to the Provincial Water Comptroller ("Water Comptroller") for the issuance of water licences necessary to permit it to construct and operate the Daisy Lake Dam ("Dam"). One month later, the Department registered objections to that

Page: 3 application. In filing its objections, the Department sought to protect the fishery interests by ensuring that there would be a sufficient flow of water below the Dam. The Department subsequently withdrew its objections, subject to the condition that the Dam would be capable of releasing such quantity of water downstream as the Department deemed essential for the preservation of the fishery.

[5]         In December 1954, B.C. Electric obtained water licences from the Water Comptroller which permitted it to impound water behind the Dam, to store 45,000 acre feet of water, and to divert 700,000 acre feet of water per year from the Cheakamus River and its downstream tributary Rubble Creek for the purposes of power generation. The water licences contained a condition that the Water Comptroller would issue an order on June l, 1956, providing for "...the quantity and time of water releases to be made through the impounding dam for the purposes of maintaining a flow of water in the Cheakamus River for fish propagation." That date was extended to June 1, 1957. To date, no such order has been made.

[6]         The Dam, which was built between 1955 and 1958, impounds Daisy Lake. The water required to generate electricity is diverted from the Daisy Lakereservoir through an eleven kilometre tunnel to the power generating station on the Squamish River. The generating station can generate approximately 155 megawatts of electricity at full load. The Daisy Lake reservoir has a licenced diversion capacity much greater than its storage capacity. It could be emptied in ten days at maximum power generation, in the event that all of the water was diverted to the generating station and no water was flowing into the reservoir. Due to its storage limitations,

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water must be spilled every year.

[7]           The Dam and its power plant, which form the Cheakamus River-hydroelectric project, perform a very important role within the B.C. Hydro integrated electrical system. Given its proximity to Vancouver, which is the major centre of electrical demand in British Columbia, the Cheakamus River project has lower electrical losses during transmission, requires less maintenance of transmission lines, and increases voltage stability within the system. Furthermore, it helps to meet the daily peaks in demand for electricity during the winter months, when the requirements for power are at their highest levels.

[8]         For many years, B.C. Hydro and its predecessor B.C. Electric diverted more than the 700,000 acre feet of water per year permitted under the terms of the -water licences, but paid the fees and charges due to the Water Comptroller based on the actual amounts of water used, as opposed to the amount stipulated in the licences. Diversions were made according to the demand for power production. For example, more water was diverted in the winter months to satisfy the higher demand for electricity at that time of the year.

[9]         In or about 1982, B.C. Hydro realized that it had been diverting more water than permitted, and that it was not properly licensed to use the generating station to its full potential, as it had been doing for many years.

[10]       In 1990, the Department recognized that there was a need to compile information

Page: 5 concerning the effects of hydroelectric projects on the fishery resource in British Columbia. As a result, the Department retained Dr. S.M. Hirst, a fishery consultant, to prepare such a report.

[11]       In mid to late 1990, B.C. Hydro and the Department entered into discussions concerning the minimum flow of water required in the Cheakamus Riverfor fishery purposes. They were unable to agree on an appropriate minimum flow regime, and decided to commission a study. In 1991, B.C. Hydro retained Triton Environmental Consultants Ltd. to conduct the study.

[12]       On June 6, 1991, Dr. Hirst released his report entitled "Impacts of the Operating of Existing Hydroelectric Developments on Fishery Resources in British Columbia("Hirst Report"). The Hirst Report noted, among other things, that the "[o]peration of the Cheakamus River hydroelectric development affects salmon habitats but the extent of this needs to be quantified before any steps to seek remedial actions can be attempted." The Hirst Report recommended that several rivers, including the Cheakamus, "...should receive priority attention in establishing suitable water budgets and restoring more optimum flow conditions...".

[13]       In 1992, B.C. Hydro initiated formal discussions with the Water Comptroller concerning the adequacy of its licences and its desire to use the generating station to full potential, as it had been doing for many years.

[14]         In 1993, the Government of British Columbia directed B.C. Hydro to review, as part of the Electric Systems Operation Review, the impacts of its operations throughout its integrated

Page: 6 electricity system. The impact caused by the Dam was examined as part of that review. Following that review, the Government directed B.C. Hydro, among other things, to formalize a water flow release plan for the Cheakamus River.

[15]         In September 1993, Triton Environmental Consultants Ltd. released its draft report to various federal and provincial agencies, including the Department and the Ministry of Environment, Lands and Parks ("B.C. Ministry"). Following their review of the draft report, the Department and the B.C. Ministry identified several concerns with the recommended flows of water, and questioned the validity of the draft report. Triton acknowledged some of the shortcomings, and indicated that it would conduct further studies. The Department and the B.C. Ministry decided to consider alternative methodologies to identify appropriate water flows for the Cheakamus River. As a result, Mr. Stephen Macfarlane of the Department and Dr. Marvin Rosenau of the B.C. Ministry began to work on the development of a new proposal.

[16]       On February 16, 1994, the B.C. Ministry filed an application with the Water Comptroller for a water licence for the remainder of the water in the Cheakamus River which was not authorized to be diverted by the original B.C. Hydro water licences. The application noted that it was made for the purpose of "fisheries conservation", for "fish spawning and rearing."

[17] On May 4, 1994, B.C. Hydro, the Department and other agencies met to discuss appropriate flow regimes for the Cheakamus River. The participants in the meeting agreed to begin discussions concerning the water flow required for fish and fish habitat on the Cheakamus

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River.

[18]          By letter dated May 19, 1994, B.C. Hydro requested additional information to assist in preparing for the water flow discussions.

[19]       In the following months, scientists from the Department developed a flow release schedule which established the quantity and times of water release necessary for the preservation of fish in the Cheakamus River. On September 18, 1994, the Department provided B.C. Hydro with a fisheries benefit statement in a draft entitled "Proposed Cheakamus River Flow Agreement".

[20]       By letter dated January 9, 1995, Stephen Macfarlane from the Department and Dr. Marvin Rosenau of the B.C. Ministry recommended a new water flow regime, based on the premise that the flow of water downstream from the Dam should resemble the natural hydrograph, which is a graphical depiction of the natural flow of the river over time, in order to preserve fish and fish habitat. Since a natural hydrograh was unavailable due to the diversion of water from the system for power generation purposes, biologists from the Department developed a modified hydrograph intended to mimic the natural flow of the Cheakamus River. The recommendation made by Mr. Macfarlane and Dr. Rosenau was provided to B.C. Hydro in a revised fisheries benefit statement entitled "Cheakamus River Flow Management Study: (Proposed Flow Release Schedule)" ("Macfarlane-Rosenau Report"). In their letter accompanying the report, they advised B.C. Hydro that, in their opinion, the proposed flow release schedule, which would require the discharge into the Cheakamus River of 45.906% of the inflow into Daisy Lake at any given time throughout the

Page: 8 year, was "...biologically sound and would move significantly towards restoring the fisheries resource of the Chéakamus River to its historic level without drastically infringing upon the water rights currently held by [B.C. Hydro]..." under its water licences.

[21]       During long periods each winter since 1957, the Cheakamus River had not received water

flows similar to its natural flow, due to the diversion by B.C. Hydro of high proportions of water

flow to the generating station for power production. In order to correct that problem, the

Macfarlane-Rosenau Report recommended a winter water flow five times higher than some of

the actual flows recorded following the construction of the Dam, and sought B.C. Hydro's

agreement to release continuously 45.9% of the inflow to Daisy Lake, in order that the

downstream flows would resemble the natural hydrograph. In that regard, the proposed flow

release schedule stated, in part, as follows:

In our opinion the proposed flow regime should resemble the natural hydrograph of the Cheakamus River in order to best suit the flow requirements during the various life cycle stages of fish that are known to utilize the Cheakamus River. Our underlying assumption is that the seven species of salmonids and other fishes in the Cheakamus River are genetically adapted to a natural flow regime.

The mean-monthly discharge in the Cheakamus River past the Daisy Lake Dam in the peak discharge month of June has been calculated to be 45.906% of the inflow into the Daisy Lake reservoir. The balance of the inflow is assumed to be diverted through the tunnel to the generating station by the Squamish River. ...

Our proposed discharge into the Cheakamus River, at the dam during all other months of the year, is calculated using the same proportion of total reservoir inflow for the corresponding months. That is 45.906% of the inflow into Daisy Lake would be directed through/over the dam and into the Lower Cheakamus River at any given time throughout the year.

[22]          The Macfarlane-Rosenau Report also stated that the implementation of the proposed flow

release schedule would enable B.C. Hydro to use 97.4% of the amount of water permitted to be diverted under its water licences.

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[23]       With respect to the "calculation of fish benefits", the Macfarlane-Rosenau Report noted

that the Dam had been a major factor in the decline of salmon stocks in the Cheakamus River.

In particular, the Report stated as follows:

The economic value of the Cheakamus River salmon stocks should be based on the value of the potential production of the river given that an appropriate flow release schedule and a program of restoration/enhancement can be implemented that will restore stocks to historic levels. We cannot assume that present salmon stocks are stable and experience in the USA has shown that salmon populations can be eroded over a number of decades due to hydro development effects which can ultimately lead to total collapse of the fish populations. Hydro impacts can be incremental and cumulative over time.

Arguably, naturally produced pink and chinook populations in the Cheakamus River have largely collapsed and wild chum and coho populations are presently being supported by significant habitat restoration efforts undertaken by [the Department]. Although chum populations in the Cheakamus River appear to be stable, geographically near by stocks have improved significantly in recent years due to better [departmental] management in reaching escapement targets. This would suggest that chum populations in the Cheakamus River continue to be depressed in numbers.

The vast majority of chinook, pink and to a lesser degree coho salmon that are presently returning to the Cheakamus River can be attributed to production from Tenderfoot Hatchery. Steelhead populations would seem to have been significantly reduced since dam construction and would still appear to be on the decline.

While all these declines cannot be assigned to the hydroelectric development alone, it is likely that it has been the major impact in this system and when taken with the other activities in the watershed the cumulative effects have precipitated the population instability.

The economic value assigned to a new agreement should assume a worse case scenario that with no action the stocks will continue to decline to a point that they become non-viable. This leads to the conclusion that rather than estimating incremental benefits of certain scenarios it is wiser to view the agreement as a program to halt the stock declines and begin the rebuilding of the populations to historic levels of productivity.

[24]         By letter dated February 9, 1995, B.C. Hydro indicated that it was in the process of

evaluating the proposal contained in the Macfarlane-Rosenau Report. Over the next four months, the Department requested B.C. Hydro, on several occasions, to respond to the Report.

[25]       On June 26, 1995, representatives from B.C. Hydro, the Department, and the B.C.

Page: 10 Ministry participated in a meeting. At that meeting, B.C. -Hydro presented a chart, outlining fourteen alternative water flow proposals. In the ensuing discussion, B.C. Hydro and the Department indicated that they preferred different possible water flows for the Cheakamus River.

[26]       By letter dated July 27, 1995, B.C. Hydro rejected the flow release schedule proposed in

the Macfarlane-Rosenau Report for the following reasons:

It is our understanding that your proposal is based on the concept that a natural flow regime would provide the most benefit to the fisheries. While this does result in the largest incremental fish benefit, it does not meet the minimum differential criteria during the spawning/incubation period, nor does it provide stable minimum flows during the rearing period. There is no consensus among the many biologists who have assessed the health of the fish stocks in the river that mimicking a natural hydrograph with 45.9% of the annual inflow to Daisy Reservoir will provide a suitable environment for substantial rehabilitation of all fish species.

B.C. Hydro has been directed by the Provincial Government to evaluate alternatives and make decisions on the basis of net social benefit to the people of British Columbia and in this case, the prime accounts are power, fish and flood control. Your proposal has an incremental fish benefit of $500,000 (based on your January 9 analysis and Triton's estimate of the value of the existing fishery) and a power cost of $8 million. The cost of implementing this proposal would have to be achieved either through a rate increase to our customers of 0.4%, which is unlikely to be granted by the B.C. Utilities Commission, or through a reduction in the dividend paid to the Province of British Columbia. Therefore, B.C. Hydro cannot accept your proposal and its impact on our customers and the Province.

[27]       B.C. Hydro further indicated in its letter that the apparent difficulty in arriving at a water

flow agreement was due, in part, "...to the lack of established management initiatives..." for the

Cheakamus River. As a result, it proposed certain management objectives, but declined to make

any proposed flow release schedule until a "decision making framework" had been developed.

In that regard, B.C. Hydro stated as follows in its letter:

Our current difficulty in arriving at a flow agreement may be due, in part, to the lack of established management objectives for the river. It was proposed at our meeting that management objectives for fish and water be established and agreed to by all those with resource interests on the river. We propose the following objectives that would ideally apply to fishery managers, power producers, recreationalists, local residents and other government agencies:

I.              To comply with regulatory requirements.

2.              To optimize the allocation and use of water to achieve the greatest net annual

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incremental economic and social benefits encompassing generation of electricity, commercial, sport and aboriginal fisheries, and other recreational and commercial uses.

3.              To ensure that adequate management systems are implemented and maintained to promote the conservation of Cheakamus River fish stocks in perpetuity.

At our June 26 meeting you asked that we propose a flow release scenario that would be acceptable to B.C. Hydro. However, we are reluctant to provide a specific proposal until B.C. Hydro and your agencies agree on a decision making framework that we believe should embody the principle of Multiple Account Evaluation (MAE) as required of B.C. Hydro by the Provincial Government, and specific management objectives for the Cheakamus River. After you have had an opportunity to review the material we provided at our June 26 meeting and our proposed management objectives, I suggest that we meet again to discuss the development of a decision making framework and how a flow agreement would relate to an operations fund that may be established to meet the Provincial Government recommendations contained in their response to B.C. Hydro's Electric System Operations Review.

[28]       On August 29, 1995, B.C. Hydro applied to the Water Comptroller for the issuance of an additional water licence on the Cheakamus River. To date, the Water Comptroller has not made a decision on that application or on the application submitted by the B.C. Ministry on February 16, 1994, for the use of water on the Cheakamus River.

[29]       In February 1996, Triton Environmental Consultants Ltd., which had been retained by B.C. Hydro in 1991 to conduct a study concerning the minium flow of water required in the Cheakamus River for fishery purposes, released its final report, entitled "Cheakamus River Fisheries Study 1991-1993" ("Triton Report"). In its recommendations, the Triton Report noted that it had been unable to develop a flow regime acceptable to both B.C. Hydro and the regulatory agencies. As a result, it did not recommend a single flow regime. However, the water flows recommended in the Triton Report did not change significantly from those contained in its draft report issued in 1993, the validity of which had been challenged by the Department and the B.C. Ministry. Accordingly, neither the Department nor the B.C. Ministry supported the

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recommendations contained in the Triton Report.

[30]         In April 1996, B.C. Hydro altered its operations at the Dam to ensure that it only diverted the licensed amount of 700,000 acre feet of water per year to the power generating station.

[31]       In June 1996, a report was released by Ward and Associates ("Ward Report") concerning B.C. Hydro's water diversion practices at the Dam. The Ward Report had been commissioned by the Department and the B.C. Ministry. The Report concluded that B.C. Hydro's water diversions significantly exceeded the licensed flow for the majority of time since 1960. In particular, it noted that B.C. Hydro had diverted water averaging 19-27% in excess of the licensed amount in approximately 33 of the 38 years of record. It also noted that, in 1995, the greatest excess was recorded, with a water diversion that was 51% in excess of the licensed amount.

[32] In or about July 1996, the Government of British Columbia established the Intergovernmental Task Force on Fish-Power Issue Management to review the water licences issued to B.C. Hydro.

[33]       In a letter dated August 22, 1996, B.C. Hydro forwarded to the Department a copy of a press release which it issued concerning an interim flow release for the Cheakamus River. In its letter, B.C. Hydro indicated, among other things, that "[t]he interim flow release has been implemented to provide an improved flow regime for fish habitat in the river while the public

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consultation process is underway on the development of a water use plan for the river." In-its

press release, B.C. Hydro specified the minimum flow that it would maintain in the Cheakamus

River during the fall salmon spawning season. It further stated as follows:

This flow regime is based on scientific studies completed to date and is one of the options discussed with the [Department] and the [B.C. Ministry] following the completion of the Electric System Operations Review in 1994. A final flow release plan will be established through public consultation during the development of the water use plan.

[34]       Prior to issuing its press release, B.C. Hydro had not informed the Department of its

decision to implement the specified interim flow release regime.

[35]       In early November 1996, the Government of British Columbia announced that a review would be conducted at all B.C. Hydro facilities to develop water use plans and to make the necessary revisions to water licences. The Dam was included in a list outlining the first priorities for review within a three year period. In the press release announcing the review, the Government indicated, among other things, that it would "...work together with B.C. Hydro, the public, First Nations and other key stakeholders to develop water use plans which will balance the need for power production with important fish and habitat protection." It further indicated that the final water use plans would specify the conditions required to be implemented at each B.C. Hydro facility. The Interprovincial Task Force, created in July 1996, undertook the project as part of a water use review process. B.C. Hydro participated as a member of that Task Force.

[36]          At its meeting on November 13, 1996, the Intergovernmental Task Force drafted its first set of draft guidelines for the development of water use plans. Over the next year, it developed various other draft guidelines.

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[37]       In several meetings between November 1996 and April 1997, the Intergovernmental Task Force discussed making potential interim orders, under the provisions of the Water Act, R.S.B.C. 1996 c. 483, for several rivers, including the Cheakamus. B.C. Hydro participated in those meetings, and was also aware that an order could be made by the Minister of Fisheries and Oceans ("Minister") under subsection 22(3) of the Fisheries Act to protect fish and ova.

[38]       In that same time frame, Barry Chilibeck of the Department and Dr. Rosenau from the B.C. Ministry prepared another report on the Cheakamus River ("Chilibeck-Rosenau Report"), concerning the impact of the Dam and the water flow requirements of the fish and fish ova in the Cheakamus River.

[39]       On March 11, 1997, a representative of B.C. Hydro told an official from the Department that he "...had heard rumours that [the Department] was considering making a minimum flow order on the Cheakamus River." The departmental official advised him "...that at this particular stage [the Department] had not made a decision to make such an order, but it was always a possibility."

[40]       On April 8, 1997, Stephen Macfarlane, one of the authors of the Macfarlane-Rosenau Report, met with Alan Lill, the Acting Regional Director of the Pacific Region of the Department, to brief him on the ongoing discussions with B.C. Hydro concerning the amount of water required to be released from the Dam in order to protect the fish and ova in the Cheakamus

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River. During the course of that meeting, Mr. Macfarlane indicated that the Department had been

attempting for two years to resolve the matter with B.C. Hydro. He further indicated that B.C. Hydro was proposing a minimum flow of water, which was inadequate, in his opinion, to protect the fish and ova in the Cheakamus River.

[41]       The Chilibeck-Rosenau Report was released on April 22, 1997, and recommended a water

flow release schedule which was similar to the one proposed in the earlier Macfarlane-Rosenau

Report. In particular, the proposed water flow regime in the Chilibeck-Rosenau Report was based

on the natural hydrograph, and required almost half of the natural inflow into Daisy Lake to be

released into the Cheakamus River on a consistent basis. Furthermore, the flows would never be

below a specified minimum level, intended to reflect approximately the minimum natural flow

of the River.         In the period from 1984 to 1995, the water flow releases from the Dam were

considerably less than the minimum natural flow, save and except for spill flows. The Department

believed that the proposed flow regime would permit B.C. Hydro to continue to divert, on

average, 97% of the water specified in the water licences. However, the timing and nature of the

water diversions would be significantly altered, and would deprive B.C. Hydro of the flexibility

to generate a sufficient amount of electricity during the peak demand periods in the winter

months. The executive summary of the Chilibeck-Rosenau Report stated, in part, as follows:

1.              Historically the Cheakamus River was a large producer of salmonids, in particular, pink salmon (catch plus escapement have been estimated at 1 million fish). This occurred under natural river hydrological and fluvial conditions. It is the position of the fisheries agencies that in order to approach historic production of salmon and trout in this river, natural flow conditions and processes must be restored in the Cheakamus River.

2.              B.C. Hydro shall release water into the Cheakamus River from the Daisy Lake in such a proportion that the daily discharge will be equal to 45 percent of the previous daily inflow.

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3.                 The 55 percent of daily inflows allocated for power production reflects the historical proportion of water diverted under license equalling 700,000 acre-feet per annum.

4.              The Daisy Lake Reservoir will be managed in such a fashion that the release of water into the Cheakamus River will not, on average, exceed the 45 percent of the total yearly inflows and spills will be minimized by adopting a flood buffer in the reservoir.

5.              Water allocation for power purposes will result in a licensed mean amount of 700,000 acre­feet per annum as based on historical records. Thus, in any one year, B.C. Hydro will divert less than or greater than 700,000 acre-feet of water. However, over time and using historical records which will be continuously updated, B.C. Hydro will proportionally receive the amount of water allocated by its license for diversion.

6.              Under the model proposed in this document, the relatively high spill events from Daisy Lake Reservoir, which are thought to be damaging to fish and fish habitat, will be reduced. That is, the ratio of minimum discharges to maximum discharges from the Daisy Dam will be significantly mitigated from the current operation. ...

[42]       On April 25, 1997, the Department forwarded the Chilibeck-Rosenau Report to B.C.

Hydro.

[43]       Shortly thereafter, B.C. Hydro delivered to the Department a report dated April 4, 1997,

entitled "Cheakamus River Instream Flow: Proposal for an Interim Flow Regime" ("B.C. Hydro

Report"). The B.C. Hydro Report indicated that thirteen flow proposals had been evaluated

"...based on their ability to meet fish protection, increased fish production potential, and economic

criteria." Eleven of those proposals were rejected in the Report on the basis that they failed to

meet certain fish protection guidelines. With respect to the two remaining proposals, the Report

adopted the proposal which had "...the lowest cost to society, yet met the fish protection criteria

and had a modest population improvement potential." The Report further noted as follows:

The proposal found to have the highest potential for improved fish abundance was that put forward [in the Macfarlane-Rosenau Report]. This conclusion however, was based on their estimate of population increase ( > 600%) which could not be confirmed using available data. The cost of this proposal in terms of foregone energy was estimated to be in excess of $6.5 million.

[44]       In late April 1997, Mr. Lill, the Acting Regional Director General, was informed that

Page: 17 representatives of the Department and B.C. Hydro planned to meet on April 29, 1997. The Department was hopeful that it would either resolve its differences of opinion with B.C. Hydro concerning the minimum required water flow, or that it would at least take positive steps towards reaching an agreement.

[45]       On April 29, 1997, representatives from B.C. Hydro, the Department, the B.C. Ministry,

and other regulatory agencies met to discuss the technical details of the divergent flow proposals

made in the B.C. Hydro Report and the Chilibeck-Rosenau Report, with a view to developing an

interim order under the Water Act for flows to be released from the Dam. A facilitator was

present to assist the participants in their discussions. The purpose of the meeting, as expressed

in the draft notes of the meeting, was as follows:

Purpose of meeting:

To explore biology/science so participants have a common understanding of the issues.

To focus on first steps to improve fish flows with minimal impact on power generation; optimal solutions will be developed as part of the Water Use Planning Process.

To avoid a discussion of legal issues.

[46]       During the course of the meeting, the Department and B.C. Hydro made presentations outlining their respective positions. In the general discussion that followed the presentations, the Department and the B.C. Ministry rejected the "minimalist" approach proposed by B.C. Hydro in relation to water flow on the basis that it would have "...little beneficial impact on fish." As a result, they suggested that it "...was now time to run the project under a new regime for a significant period of time to determine whether there [would be] a recovery of fish habitat and production." With respect to B.C. Hydro's plan to spill water in the spring in order to comply

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with^-its licences, they noted that "[w]hile the precise environmental impacts of the spill [were]

unknown, ...it would likely have a detrimental impact on fish." B.C. Hydro produced a copy of

a letter dated April 22, 1997 to the Director of Water Management indicating that it would

comply with the terms of its water licences. That letter stated, in part, as follows:

In the interim, to remain in compliance with the Cheakamus water license, we plan to divert not more than 700,000 acre feet (10,000 cmsd) through the Cheakamus turbines this calendar year. We have used about 2150 cmsd to date. To ensure that we are able to use the full turbine output for flood control purposes, to meet system demands in November and December, and to use the water in the most economic fashion, we plan to limit the diversion throughout the Spring/Summer Freshet (late April to early September). This means that all inflow to Daisy Lake in excess of that required for the planned generation will be spilled into the Cheakamus River. The attached graph shows the expected inflows for 1997, the Cheakamus diversion capability and the planned diversion for 1997. In order to minimize the effect of spill on spawning Steelhead, we will try to spill this inflow in a regulated fashion, using the reservoir as a buffer to absorb hourly and daily differences in inflow minus outflow.

[47]         At the conclusion of the meeting, B.C. Hydro indicated that it had not completed a detailed evaluation of the Department's two Reports, namely the Macfarlane-Rosenau and the Chilibeck-Rosenau Reports, and that it would require a minimum of two months to complete that task. At the request of the Department and the B.C. Ministry, B.C. Hydro agreed to analyze the recent Chilibeck-Rosenau Report "...to determine the cost ... in terms of lost power generation." The Department offered to hire a consultant to assist B.C. Hydro, in the event that it was unable to undertake its analysis in a timely manner. The draft notes prepared following the meeting indicate, in section 4, as follows:

4.              Actions arising from the meeting

At the request of [the Department] and [the B.C. Ministry], B.C. Hydro agreed to analyse [the Chilibeck-Rosenau] proposal using the in-house B.C. Hydro modelling capability to determine the cost to B.C. Hydro in terms of lost power generation. The need for some sensitivity analysis for fish flows above and below the 45% level was discussed. In the event that B.C. Hydro is unable to undertake the analysis in a timely manner, [the Department] offered to hire a consultant to do the work.

Graeme Matthews [of B.C. Hydro] to get back to Denise [the facilitator] with more on the scope of the work and the likely timeframe for

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completion.

James Bruce [of B.C. Hydro] agreed to search the literature for information on other streams with similar hydrology to identify a suitable reference stream.

All participants to review the B.C. Hydro [Report and the Department and B.C. Ministry] papers and provide comments to Denise [the facilitator]

The Comptroller needs to deal with the issue of potential summer spills which may be detrimental to fish.

[48]       At some point in time shortly after the meeting, the representatives from the Department and the B.C. Ministry determined that B.C. Hydro's current and proposed flows, as well as its "delay", were "unacceptable". In particular, they determined that the proposal in the B.C. Hydro Report would result in "very high and sudden freshet flows" in the Cheakamus River in the spring and summer which would have an adverse impact on the migrating and spawning steelhead salmon remaining in the River. They further determined that "...the impact on the other salmonid species expected to return to spawn in the early and late fall would have been very significant as flows would have been suddenly and substantially reduced later in the year." Finally, with respect to the winter, they determined that the reduced flows would greatly reduce and impact on the habitat available for returning adult salmonids. As a result, they concluded that it was appropriate to seek an order from the Minister, under subsection 22(3) of the Fisheries Act, to ensure that the water flow necessary for the safety of fish and the safety of ova deposited on the spawning grounds was maintained in the Cheakamus River.

[49]       On May l, 1997, the Department's officials who attended the meeting on April 29, 1997, namely Stephen Macfarlane, Barry Chilibeck and Kim West, prepared a Briefing Note for the Director General concerning the issuance of an order under subsection 22(3) of the Fisheries Act

Page: 20

for release of water from the Dam into the Cheakamus River. That Briefing Note read as follows:

BACKGROUND:

Fish species that are present in the Cheakamus River are chinook, chum, coho, pink, sockeye, steelhead and dolly varden.

Subsequent to the development of the Cheakamus River for hydroelectric power, the populations of salmon and trout in the Cheakamus have experienced substantial declines.

BC Hydro has a licensed diversion of 700,000 acre-feet per annum. Historically, the amount of water diverted for power production has been in excess of the quantity licensed. The generation facility has operated primarily as a peaking plant, but it does operate continuously when high inflows are sustained.

In January 1995, [the Department] and [the B.C. Ministry] jointly forwarded to BC Hydro a proposed flow release schedule for the Chekamus River. It proposed that 46 percent of the daily inflows be released for fish, with the remaining 54 percent used for power generation. Based on historical data this would provide BC Hydro with an average of 700,000 acre-feet per annum for power generation. BC Hydro did not respond to this proposal.

The current average release required from the Daisy Lake Dam is 1.7 cms which is intended to provide a minimum of 14 cms for spawning (March 15-December 31) and 10 cms for incubation (January 1-March 14) measured at Brackendale (approximately 25 km downstream of the dam). The fisheries agencies do not consider these release flows to be adequate for the protection of fish in the Cheakamus River.

Discharges at Daisy Lake have at times risen from a minimum of 1.7 cms to over 400 cms in a matter of 48 hours. These abrupt and massive changes in discharge to the river have had negative fisheries impacts.

CURRENT STATUS:

BC Hydro, [the B.C. Ministry], Water Management Branch and Fisheries Branch, Ministry of Employment and Investment, and [the Department] met April 29, 1997 to discuss the Cheakamus River flow issues. [The Department and the B.C. Ministry], and BC Hydro presented their respective flow proposals.

The intent of the meeting was to develop an agreed flow regime for an Interim Order pursuant to the Water Act. This would serve as a first step to improved management of all BC Hydro facilities recognizing the needs of fish and others. It became apparent at the meeting that BC Hydro was attempting to delay issuance of an Interim Order, and that they intended to continue past operational practices.

Page: 21

BC Hydro does not agree to release the unlicensed water in a manner consistent with the natural hydrological pattern which [the Department] considers necessary for the protection of fish and fish habitat in the Cheakamus River. The BC Hydro proposed flow regime is the current 10 cms and 14 cms, at Brackendale, which is considered inadequate by [the Department]. The [Department's and B.C. Ministry's] proposal entailed releasing, into the Cheakamus River, 45 percent of the previous daily inflow to Daisy Lake.

At the April 29, 1997 meeting a letter (attached) was tabled, dated April 22, 1997 from Paul Adams, BC Hydro to P. Khare Director, Water Management, [ B.C. Ministry]. In the letter BC Hydro states that to remain in compliance, no more than 700,000 acre-feet will be diverted through the turbines. However, BC Hydro's intent is to manage flows to maximize power revenue rather than to provide a flow regime beneficial to fish. Consistent with this, BC Hydro has made an operational decision to conserve their licensed quantity of water by spilling all inflows effective May l, 1997.

[The Department] is concerned with the immediate effect of the spill on spawning steelhead. Most recent stock status information indicates very low returns of steelhead to the system. The possibility remains that BC Hydro may abruptly reduce flows during spawning and incubation of steelhead to generate power.

[The Department] is also concerned that as inflows decrease to the system towards the end of the summer, flows into the Cheakamus will be dropped, to approximately 1.7 cms, as water is diverted for power production. Under BC Hydro's present operating strategy these minimum flows will continue over the winter months. BC Hydro is planning to use its licensed diversion quantity only when power rates and demand are high. This flow regime negatively impacts all salmon species in the system.

[The Department] considers the current operation of the Cheakamus facility with respect to the release of water from the Daisy Lake Dam for fish to be inadequate, and detrimental to fish and fish habitat.

RECOMMENDATION:

Issuance of an Order to BC Hydro and Power Authority pursuant to Section 22(3) of the Fisheries Act for the release of water from the Daisy Lake Dam into the Cheakamus River equal to a minimum of 45 percent of the previous days inflow, into Daisy Lake, with a minimum daily flow of 5.0 cms released from Daisy Lake Reservoir.

[50]         The position of the Department, as summarized in the Briefing Note, evolved over a two

year period, prior to the decision to seek the issuance of a ministerial order under subsection 22(3) of the Fisheries Act.

Page: 22

[51]       On May 2, 1997, the Department continued the environmental screening process which it had previously begun in the context of its two Reports. In order to comply with the provisions of the Canadian Environmental Assessment Act, S.C. 1992, c. 37, the Department communicated with senior representatives of various federal departments respecting the environmental effects, if any, of the proposed minimum flow order under subsection 22(3) of the Fisheries Act. None of the federal departments consulted found any significant adverse environmental effects arising from the proposed minimum flow order. The Department therefore prepared the forms and reports necessary to complete the screening process required under the Canadian Environmental Assessment Act.

[52]       On May 2, 1997, Mr. Lill, the Acting Regional Director General, met with various departmental officials, including Barry Chilibeck and Kim West who had attended the April 29, 1997 meeting with B.C. Hydro and others. Mr. Lill was the Minister's delegate for the purposes of issuing an order under subsection 22(3) of the Fisheries Act. The departmental officials advised Mr. Lill that discussions with B.C. Hydro "...had come to an impasse and that there was little or no hope..." of a timely resolution of the problem. They provided him with the Briefing Note in order to explain the issues concerning the amount of water flow required for the safety of the fish and ova in the Cheakamus River. They also provided him with copies of the Macfarlane-Rosenau Report, together with the accompanying letter dated January 5, 1995 to B.C. Hydro, the Ward Report released in June 1996, the B.C. Hydro Report dated April 4, 1997, the Chilibeck-Rosenau Report dated April 22, 1997, and the letter dated April 22, 1997 from B.C.

Page: 23

Hydro to the Director of Water Management.

[53]       During the course of the meeting, the departmental officials made oral submissions to Mr. Lill in support of the issuance of the order sought. In particular, they reviewed with Mr. Lill each of the points made in the Briefing Note and answered his questions. They also reviewed with Mr. Lill the Department's proposal, as outlined in the Macfarlane-Rosenau Report and the Chilibeck­Rosenau Report, and B.C. Hydro's proposal, as outlined in its Report. They informed Mr. Lill that the Department's proposal permitted B.C. Hydro to use almost all of its water allotment, but required it to alter the timing and the quantities of the water release. Furthermore, they informed Mr. Lill that the situation was "urgent", in that the steelhead population in the Cheakamus River was immediately threatened by the water flow being released by B.C. Hydro. In particular, the water flow would displace the spawning steelhead and would scour their recently deposited redds or egg nests. Finally, they advised Mr. Lill that officials and scientists in the B.C. Ministry approved of the biological and technical principles on which the Department's proposal in the Chilibeck-Rosenau Report was based.

[54]       Mr. Lill had known for many years the departmental officials who briefed him, and he "...had a high level of confidence in their abilities and judgment, and was impressed with the depth and range of their knowledge of the environmental impacts created by hydro-electric developments generally, and the difficulties encountered in the Cheakamus River in particular."

[55]       At the conclusion of the meeting, Mr. Lill was aware that the minimum flow order

Page: 24 proposed in the Briefing Note would have an impact on B.C. Hydro's power generation, and that there may be some impact on its revenues. However, he was satisfied, on the basis of the information provided to him, that the Department's proposal "... was necessary to protect fish and their ova." Specifically, he determined that the Department's proposal "...was necessary to protect the spawning, incubation and rearing of all species of salmon that utilize the Cheakamus River downstream of [the Dam]." He further determined that the Department's proposal "...met the need to protect the threatened steelhead stocks, their spawning in the river, and the spawning chinook stocks that would be utilizing the river in the following months as well as the redds which would be deposited by these fish." Finally, he was satisfied that B.C. Hydro's proposal "...would result in flows which were insufficient for the protection of fish and ova downstream of [the Dam]."

[56]       ' Following his consideration of all of the information provided to him, Mr. Lill formed the

opinion, under subsection 22(3) of the Fisheries Act, that:

...the amount of water sufficient for the safety of fish and for the flooding of the spawning grounds to such depth as will be necessary for the safety of the ova deposited thereon in the Cheakamus River required a release of water from the [Dam] into the Cheakamus River equal to a minimum of 45 per cent of the previous days inflow into Daisy lake, and not less than 5.0 cms released from Daisy Lake Reservoir.

[57]       By letter dated May 2, 1997 to B.C. Hydro, Mr. Lill, acting as the Minister's delegate,

issued the following minimum flow order, under subsection 22(3) of the Fisheries Act

("Minimum Flow Order"):

The Department of Fisheries and Oceans places a high priority on the protection and restoration of salmon stocks in B.C., and has implemented significant conservation and restoration measures in order to increase production of salmon from B.C. rivers. The Cheakamus and Squamish River systems are priority watersheds, and over the

Page: 25

past several years the Department of Fisheries and Oceans and several other partners, including B.C. Hydro, have worked together and invested significant resources to protect and restore salmon in these systems.

After considerable review, the Department has determined a flow release schedule for the Cheakamus River below Daisy Lake Dam that is sufficient to protect the fish and spawning habitats downstream. Accordingly, please be advised that effective 1600 hours PST May 2" ^° 1997, pursuant to section 22(3) of the Fisheries Act, I am ordering the release of water from the Daisy Lake Dam located on the Cheakamus River operated by B.C. Hydro and Power Authority in the manner described below. The daily release of water from the dam into the Cheakamus River shall be equal to a minimum of 45 percent of the previous days inflow into Daisy Lake and not less than 5.0 m'/s.

These measures are required for the safety of inter alia, the threatened steelhead stocks currently spawning in the river, spawning chinook stocks that will be utilizing this river in the coming months, the redds (or eggs) that will be deposited by these fish, and the spawning, incubation and rearing of all species of salmon that utilize the Cheakamus River downstream of the Daisy Lake Dam.

This order is to remain in effect unless amended by another order issued by the Department of Fisheries and Oceans.

[58]       Prior to the issuance of the Minimum Flow Order, the officials from the Department did not inform B.C. Hydro that they were seeking an order from the Minister under subsection 22(3) of the Fisheries Act. B.C. Hydro was therefore unaware that Mr. Lill, as the Minister's delegate, was reviewing documentation and entertaining submissions from his officials concerning the issuance of such an order. Mr. Lill did not notify B.C. Hydro that he was considering issuing an order under subsection 22(3). Furthermore, he did not provide B.C. Hydro with an opportunity to make representations to him prior to the issuance of the Minimum Flow Order.

[59]       From the perspective of B.C. Hydro, the Minimum Flow Order reduces considerably its ability to generate power during the winter months, at which time the demand for electricity is at its highest. During the year, the inflow of water into the reservoir is generally at its lowest level in the winter months, and at its highest level in the spring and summer snow-melt season.

Page: 26 The Minimum Flow Order forces B.C. Hydro to generate more power during the spring and summer snow-melt season, at a time of the year when the demand for electricity is relatively low, in order to use its licenced 700,000 acre feet per year of water. In other words, the Minimum Flow Order deprives B.C. Hydro of the flexibility to generate power according to the fluctuating demand and to ensure that electricity is available for its consumers as required. Furthermore, electricity cannot be stored after it is generated; it must be used. However, electricity cannot even be generated if there is no demand for it, as generating too much or too little electricity would cause very significant problems for the B.C. Hydro integrated electrical system. Given the integrated nature of that system, any increases or decreases in the production of electricity at one generating station must be offset by a corresponding and opposite change at another station, assuming that the demand for electricity remains constant. B.C. Hydro estimates that its cost of complying with the Minimum Flow Order amounts to approximately $2,000,000.00 per year, as compared to its cost of operating strictly in compliance with the terms of its water licences. The Minimum Flow Order renders B.C. Hydro's application for an additional water licence moot, as it disposes of all of the unlicensed water in the Cheakamus River upstream from the Dam.

ISSUES

[60]         The questions to be determined on this application for judicial review are as follows:

i)           whether the Minister breached the duty of procedural fairness owed to B.C. Hydro;

ii)          whether the Minister exceeded his jurisdiction and erred in law by basing his decision, either in whole or in part, on irrelevant considerations;

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iii)          whether the Minister erred in law by misinterpreting the extent of the power accorded to him under subsection 22(3) of the Fisheries Act; and,

iv)         whether the Minister erred in law by failing to adhere to the provisions of the Canadian Environmental Assessment Act.

ANALYSIS

i)           whether a ministerial decision made under subsection 22(3) of the Fisheries Act is reviewable by the Court and, if so, on what grounds

[61]       Prior to considering the issues raised in this judicial review proceeding, it must be determined whether a decision made by the Minister under subsection 22(3) of the Fisheries Act is reviewable by the Court and, if so, on what grounds.

[62]       Section 22 of the Fisheries Act is one of the many statutory provisions which permits the Minister to 'make decisions for the purpose of protecting fish and their habitat. In- particular, section 22 provides the Minister with the power to make various decisions in circumstances where an "obstruction" exists on water. An "obstruction" is defined in section 2 of the Fisheries Act as "...any slide, dam or other obstruction impeding the free passage of fish." Subsection 22(1) permits the Minister, where he "...determines it to be necessary...", to require the owner or occupier of an obstruction "...to provide a sufficient flow of water over the spillway or crest, with connecting sluices into the river below, to permit the safe and unimpeded descent of fish." Subsection 22(2) deals with the construction phase of an obstruction, and requires the owner or occupier to "...make such provision as the Minister determines to be necessary for the free passage of both ascending and descending migratory fish...". Subsection 22(3), which requires an owner or occupier of an obstruction to ensure that there is sufficient water in the river bed below

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the obstruction, provides as follows:

22(3) The owner or occupier of any obstruction shall permit the escape into the river-bed below the obstruction of such quantity of water, at all times, as will, in the opinion of the Minister, be sufficient for the safety of fish and for the flooding of the spawning grounds to such depth as will, in the opinion of the Minister, be necessary for the safety of the ova deposited thereon.

22(3) Le propriétaire ou l'occupant d'un obstacle veille à l'écoulement, dans le lit de la rivière en aval de l'obstacle, de la quantité d'eau qui, de l'avis du ministre, suffit à la sécurité du poisson et à la submersion des frayères à la profondeur nécessaire, selon le ministre, pour assurer la sécurité des oeufs qui y sont déposés.

[63]       Counsel for the parties advanced opposing views with respect to the nature of the decision-making power accorded to the Minister under subsection 22(3) of the Fisheries Act. Counsel for the Attorney General of Canada submitted that the ministerial decision contemplated by subsection 22(3) was a legislative or policy decision, which is not normally subject to review by the Court.' Conversely, counsel for B.C. Hydro submitted that the decision was a discretionary administrative decision, subject to review by the Court on the grounds that the decision-maker acted in bad faith, or erred in law, or acted on the basis of irrelevant considerations.

[64]       The question of whether a decision made by the Minister in exercising his powers under the Fisheries Act is reviewable was considered by the Supreme Court of Canada in Comeau's Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans), [1997] 1 S.C.R. 12, in relation to section 7, which provides the Minister with the "absolute discretion" to issue leases and licences.

See Manineau v. Matsqui Institution Disciplinary Board (No. 2), [1980] 1 S.C.R. 602">[1980] 1 S.C.R. 602, 628; Attorney General of Canada v. Inuit Tapirisat of Canada et al., [1980] 2 S.C.R. 735">[1980] 2 S.C.R. 735, 753-754; Attorney General of Canada et al. v. The Canadian Association of Regulated Importers et al., [1994] 2 F.C. 247, 259 (F.C.A.); Hunt (David) Farms Ltd. v. Canada (Minister of Agriculture) (1994), 74 F.T.R. 270, 283 (T.D.), affd (1994), 170 N.R. 75 (C.A.) (leave to appeal to Supreme Court of Canada refused); Kohl v. Canada (Minister ofAgriculture) (1995), 185 N.R. 149, 153-155 (F.C.A.).

See for example Maple Lodge Farms v. Government of Canada, [1982] 2 S.C.R., 2, 7 - 8; Williams v. Canada, [199712 F.C. 646, 678 (C.A.).

Page: 29 In that decision, Major J., writing for the Court, stated as follows, at pages 25 to 26, with respect to the nature of the Minister's decision under section 7 of the Fisheries Act, and the grounds of review:

It is my opinion that the Minister's discretion under s. 7 to authorize the issuance of licences, like the Minister's discretion to issue licences, is restricted only by the requirement of natural justice, no regulations currently being applicable. The Minister is bound to base his or her decision on relevant considerations, avoid arbitrariness and act in good faith. The result is an administrative scheme based primarily on the discretion of the Minister: see Thomson v. Minister of Fisheries and Oceans, F.C.T.D., No. T-113-84, February 29, 1984.

This interpretation of the breadth of the Minister's discretion is consonant with the overall policy of the Fisheries Act. Canada's fisheries are a "common property resource", belonging to all the people of Canada. Under the Fisheries Act, it is the Minister's duty to manage, conserve and develop the fishery on behalf of Canadians in the public interest (s. 43). Licensing is a tool in the arsenal of powers available to the Minister under the Fisheries Act to manage fisheries. It restricts the entry into the commercial fishery, it limits the numbers of fishermen, vessels, gear and other aspects of commercial fishery.

Under the Fisheries Act, the Minister has the additional authority to open and close fisheries (s. 43(a)), identify and prosecute those who damage or destroy fishery habitat (ss. 35-40), order the construction of fish-passes over fish-producing streams (ss. 20-22), or act to enhance fish-producing streams (s. 43(h) and (i)).

[65]       Major J. also noted, at page 29, that the Minister was not exercising a legislative function,

but rather was exercising his wide discretion "...in light of the need to respond to immediate policy concerns affecting the fishery."

[66]       In short, Major J. concluded that section 7 of the Fisheries Act accorded to the Minister the broad power to make a discretionary administrative decision, reviewable on the grounds that the decision-maker acted in bad faith, or erred in law, or acted on the basis of irrelevant considerations.

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[67]       In Carpenter Fishing Corporation et al.       . Canada (Minister of Fisheries and Oceans)

(1997), 221 N.R. 372 (F.C.A.), the Federal Court of Appeal considered various issues raised in

relation to the adoption by the Minister of a quota policy for halibut fishing, and the imposition

of a quota system on licence holders. Decary J.A., writing for the Court, found that the quota

policy, having been developed by the Minister in the exercise of his general duties under the

Fisheries Act, was a decision in the nature of policy or legislative action. Decary J.A. illustrated

the interplay between such a broad, general policy decision and a specific discretionary decision

made by the Minister under the Fisheries Act in the following terms, at pages 379 and 380:

The imposition of a quota policy (as opposed to the granting of a specific licence) is a discretionary decision in the nature of policy or legislative action. Policy guidelines outlining the general requirements for the granting of licences are not regulations; nor do they have the force of law. It flows from the decision of the Supreme Court of Canada in Maple Lodge Farms v. Canada (Government) and Minister of Economic Development ... and from the decision of this court in Canadian Association of Regulated Importers et al. v. Canada (Attorney General) ..., that the Minister, provided he does not fetter his discretion to grant a licence by treating the guidelines as binding upon him, may validly and properly indicate the kind of considerations by which he will be guided as a general rule when allocating quotas. These discretionary policy guidelines are not subject to judicial review, save according to the three exceptions set out in Maple Lodge Farms: bad faith, non conformity with the principles of natural justice where their application is required by statute and reliance placed upon considerations that are irrelevant or extraneous to the statutory purpose.

Once the Minister, through his Department, has defined policy guidelines, what is requested from him when granting a licence is to direct his attention to the applicant and to satisfy himself that the general guidelines may be fairly applied to that applicant. To the extent that the policy is developed by the Minister in the exercise of his general duties under the Fisheries Act ... and that it is not blindly applied by him in the later exercise of his discretion when granting a specific licence, the act of granting the licence, however administrative in nature and otherwise subject to ordinary judicial review as it may be, cannot be challenged under the general rules applicable to administrative actions insofar as its policy component, i.e., the implementation of the quota policy by the Minister is concerned. When examining an attack on an administrative action - the granting of the licence - a component of which is a legislative action - the establishment of a quota policy -reviewing courts should be careful not to apply to the legislative component the standard of review applicable to administrative functions. The line may be a fine one to draw but

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whenever an indirect attack on a quota policy is made through a direct attack on the granting of a licence, courts should isolate the former and apply to it the standards applicable to the review of legislative action as defined in Maple Lodge Farms. [Footnotes omitted]

[68]          In applying the principles enunciated in Comeau's Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans), supra and Carpenter Fishing Corporation et al. v. Canada (Minister of Fisheries and Oceans), supra, I have determined that there is no distinction whatsoever, for practical purposes, in the nature of the discretion accorded to the Minister under section 7 and subsection 22(3) of the Fisheries Act. In other words, there is no effective difference between the expressions "absolute discretion" and "in the opinion of the Minister", respectively found in section 7 and subsection 22(3), each of which accords to the Minister a discretionary power to make a decision. ³ I have therefore concluded that a decision made by the Minister under subsection 22(3) of the Fisheries Act is a discretionary administrative decision made in response to a specific factual situation. As a result, it is subject to review on the grounds that the decision­maker acted in bad faith, erred in law, or acted on the basis of irrelevant considerations. The fact that policy concerns may directly affect the manner in which the Minister exercises his discretion in making a specific decision under subsection 22(3) does not alter its fundamental character as a discretionary administrative decision.

ii) the applicability of procedural fairness

[69]       Having determined the nature of the decision and the grounds of review, the next matter

³         See Everett v. Canada (Minister offisheries and Oceans) (1994), 169 N. R. 100 (F. C. A.), in which MacGuigan J. A., in a concurring judgment, indicated at page 105 that the use of the word "absolute" in the English version of section 7 of the Fisheries Act was redundant.

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to be considered is whether the Minister is bound to adhere to the precepts of procedural fairness

in exercising his administrative discretion under subsection 22(3) of the Fisheries Act.

[70]       In Williams v. Canada (Minister of Citizenship and Immigration), [1997] 2 F.C. 646

(C.A.), the Federal Court of Appeal considered various issues in relation to subsection 70(5) of

the Immigration Act, R.S.C. 1985, c. I-2, as amended, which deprives certain persons of a right

to appeal to the Immigration Appeal Division "...where the Minister is of the opinion that the

person constitutes a danger to the public in Canada...". In considering the question of whether the

requirements of natural justice or procedural fairness apply to the making of a discretionary

administrative decision, Strayer J.A., writing for the Court, stated as follows at page 678:

I believe it is fair to assume that the requirements of "natural justice" are subsumed under the general category of "fairness", particularly in respect of an administrative decision such as this. It is beyond debate that the requirements of fairness depend on the seriousness of the decision being taken.

The decision making authorized by subsection 70(5) is not judicial or quasi judicial in nature involving the application of pre-existing legal principles to specific factual determinations, but rather the formation of an opinion in good faith drawn from the probabilities as perceived by the Minister from an examination of relevant material and an assessment as to the acceptability of the probable risk. In such circumstances the requirements of fairness are minimal and have surely been met for the same reasons as I have concluded that requirements of fundamental justice, if applicable, have been met.

[71]       In my opinion, the approach taken by Strayer J.A. is applicable in the present case. In the

circumstances, I have concluded that the Minister owed a minimal duty of fairness to B.C. Hydro in making his discretionary decision under subsection 22(3) of the Fisheries Act.

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iii) were the minimal requirements of procedural fairness met by the Minister

[72]       Counsel for the Attorney General of Canada submitted, among other things, that B.C. Hydro was afforded a number of opportunities to make its views known to the Department during the ongoing discussions which had taken place since 1990. He therefore submitted that any minimal duty of procedural fairness had been met by the Minister.

[73]       A review of the evidence in the record indicates that B.C. Hydro, as the owner of the Dam, had engaged in ongoing discussions with the Department, the B.C. Ministry, and other regulatory agencies, from 1990 to immediately prior to the issuance of the Minimum Flow Order on May 2, 1997. Over the course of the years, several studies were conducted, by or on behalf of B.C. Hydro, the Department, and the B.C. Ministry, reports were prepared and meetings were held, in an attempt to arrive at a consensus that balanced the competing-fishery and power interests. In a meeting chaired by a facilitator on April 27, 1997, B.C. Hydro, the Department and the B.C. Ministry discussed various matters, including the B.C. Hydro Report, dated April 4, 1997, and the Chilibeck-Rosenau Report, dated April 22, 1997. In that meeting, the participants agreed to a course of action which accorded B.C. Hydro an additional period of time to analyse the implications of the recent Chilibeck-Rosenau Report. The participants further agreed to review all Reports, and to provide their comments to the facilitator. Within three days of that meeting, the Department's officials, who had agreed to the course of action with B.C. Hydro, unilaterally determined that B.C. Hydro's recent proposal and its "delay" were "unacceptable." Despite the course of action agreed to at the meeting, they chose not to notify B.C. Hydro of their change in plans, and proceeded to take the necessary steps to secure the issuance of a ministerial order

Page: 34 under subsection 22(3) of the Fisheries Act. The Minister's delegate issued the Minimum Flow Order on May 2, 1997, three days after the Department's officials had agreed to provide B.C. Hydro with an additional period of time to review the implications of the recent Chilibeck­Rosenau Report. At no time did the Minister's delegate notify B.C. Hydro that he was considering the issuance of an order under subsection 22(3) of the Fisheries Act, nor did he provide B.C. Hydro with an opportunity to make representations to him.

[74]       In my opinion, given the ongoing discussions and the agreement by the Department's officials to provide B.C. Hydro with an additional period of time to analyse the implications of the Chilibeck-Rosenau Report, the Minister's delegate was obliged, as a minimal requirement of fairness, to provide B.C. Hydro with notice and with an opportunity to make written representations to him, prior^-to the issuance of an order under subsection 22(3) of the Fisheries Act. Even though the Department's officials apparently formed the opinion subsequent to the meeting that the situation had become urgent, the Minister's delegate could nevertheless have required B.C. Hydro to make its representations to him on an urgent basis. Indeed, Ministers and other decision-makers routinely respect that minimal requirement of procedural fairness prior to making their discretionary administrative decisions without suffering any undue inconvenience, even in situations where time is of the essence. I have therefore concluded that, given the particular circumstances of this case, the Minister's delegate breached the minimal duty of fairness owed to B.C. Hydro.

Page: 35 [75]    In light of my conclusion that there was a breach of the minimal duty of fairness owed to B.C. Hydro, it is unnecessary for me to consider the other issues raised in these proceedings.

DECISION

[76]       The application for judicial review is allowed with costs. The Minimum Flow Order issued on May 2, 1997, by the Minister's delegate Alan Lill, is quashed, without prejudice to the right of the Minister, or his delegate other than Alan Lill, to make a further order under subsection 22(3) of the Fisheries Act in accordance with these Reasons for Judgment.

OTTAWA June 3, 1998

D. McGidlis

Judge

FEDERAL COURT OF CANADA TRIAL DIVISION

NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD

CQURT FILE NO.:                       T-1171-97

STYLE OF CAUSE:                     BRITISH COLUMBIA HYDRO AND POWER AUTHORITY -and -

THE ATTORNEY GENERAL OF CANADA AND THE MINISTER OF FISHERIES AND OCEANS

PLACE OF HEARING:                VANCOUVER, B.C.

DATE OF HEARING:                   MAY 19, 1998

REASONS FOR JUDGMENT OF THE HONOURABLE MADAME JUSTICE McGILLIS DATED:           JUNE 3, 1998

APPEARANCES:

MR. LEONARD T. DOUST, Q.C.

MR. WARREN MILLMAN                               FOR APPLICANT

MR. HARRY J. WRUCK, Q.C.

MR. MICHAEL HEWITT                                   FOR RESPONDENTS

MR. RANDY CHRISTENSEN                          FOR INTERVENOR

SOLICITORS OF RECORD:

McCARTHY TÉTRAULT

VANCOUVER, B.C.                                          FOR APPLICANT

GEORGE THOMSON

DEPUTY ATTORNEY GENERAL

OF CANADA                                                     FOR RESPONDENTS

SIERRA LEGAL DEFENCE FUND

VANCOUVER, B.C.                                       FOR INTERVENOR