Fourth Floor 747 Fort Street Victoria British Columbia Environmental Telephone: (250) 387-3464 Facsimile: (250) 356-9923 Mailing Address: Appeal Board PO Box 9425 Stn Prov Govt Victoria BC V8W 9V1

DECISION NO. 2012-WAT-013(c) In the matter of an appeal under section 92 of the Water Act, R.S.B.C. 1996, c. 483.

BETWEEN: Chief Sharleen Gale in her own right and on APPELLANT behalf of the members of the Fort Nelson First Nation

AND: Assistant Regional Water Manager RESPONDENT

AND: Nexen Inc. THIRD PARTY AND: EOG Resources Canada Inc. PARTICIPANTS Devon Canada Corporation BEFORE: A Panel of the Environmental Appeal Board Alan Andison, Chair Les Gyug, Member Reid White, Member

DATES: October 21 - 25, October 28 - November 1, November 18 - 22, November 25 - 29, December 18 - 20, 2013; January 21, 2014

LOCATIONS: Fort Nelson and Victoria, B.C.

APPEARING: For the Appellant: James Tate, Nathan Hume, and Michelle Bradley, Counsel For the Respondent: Keith Phillips, Monna Huscroft, and Anna Peacock, Counsel For the Third Party: Nexen Inc. Wally Braul and Robbie Armfield, Counsel For the Participants: EOG Resources did not appear Devon Canada did not appear

DECISION NO. 2012-WAT-013(c) Page 2 TABLE OF CONTENTS

Appeal ...... 4 Background ...... 4 Issues ...... 30 Relevant Legislation ……………………………………………………………………….. 30 Discussion and Analysis ...... 31 1. Whether the Licence should be reversed because it is inconsistent with the purposes of the Water Act, there is inadequate data to properly assess its impacts, and/or, it is based on a flawed design ...... 31 Parties' submissions ...... 31 Panel's findings ...... 38 A. The nature of the appeal process, and is the Panel limited to reviewing the Manager’s decision for errors? ...... 38 B. The purposes of the Water Act and the statutory framework for licensing .... 39 C. What information is needed to assess a water licence application, and how much certainty should there be about the potential impacts of the licence before it may be issued? ...... 42 D. Technical merits of the Licence ...... 46 General hydrology ...... 48 Terms and conditions in the Licence ...... 53 Fish and fish habitat ...... 67 Riparian wildlife and riparian habitat ...... 73 Conclusion on the technical merits of the Licence ...... 77 2. Whether the provincial Crown’s consultation with the First Nation before the Licence was issued was inadequate because the Crown failed to ascertain the nature and scope of the First Nation’s treaty rights, failed to properly assess the potential impacts of the Licence on the First Nation’s treaty rights, and/or failed to properly discharge the duty to consult ...... 78 Parties' witnesses and evidence ...... 78 Parties' submissions ...... 86 Panel's findings ...... 97 A. The level of consultation that was required in this case ...... 99 B. The consultation process ...... 101 C. The Crown’s obligation to ascertain the nature and scope of the First Nation’s treaty rights ...... 103 D. The First Nation’s capacity to respond during the consultation period ...... 104 E. The First Nation failed to disclose relevant information about the exercise of its treaty rights that was within the knowledge of its members ...... 105 DECISION NO. 2012-WAT-013(c) Page 3 F. The First Nation possessed sufficient information to inform the Crown of the potential impacts of Nexen’s proposal on their treaty rights ...... 107 G. The Crown’s failure to consult in good faith ...... 108 H. What is the appropriate remedy in the circumstances? ...... 112 3. Whether the Panel should order the Ministry to pay the First Nation’s costs associated with the appeal ...... 113 Decision ...... 115 Appendix A - Map of Tsea River Watershed ...... 116 Appendix B - Conditional Water Licence C127986 ...... 117 DECISION NO. 2012-WAT-013(c) Page 4 APPEAL

[1] On June 11, 2012, Chief Sharleen Gale1, in her own right and on behalf of the members of the Fort Nelson First Nation (the “First Nation”), appealed a May 11, 2012 decision to issue Conditional Water Licence C127986 (the “Licence”) to Nexen Inc. (“Nexen”). The Licence was issued pursuant to section 12(1) of the Water Act by Robert M. Piccini, Assistant Regional Water Manager (the “Manager”), Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”). The Licence authorizes Nexen to divert water from North Tsea Lake for storage in dugouts and industrial use in oilfield injection. Nexen’s use of the water in oilfield injection is for shale gas fracturing, also known as fracking. One of the conditions of the Licence is that it expires on December 31, 2017. [2] The Environmental Appeal Board has the authority to hear this appeal under section 92(1) of the Water Act. Section 92(8) of the Water Act provides that the Board may confirm, reverse or vary the water licences under appeal, send the matter back to the Manager with directions or make any order that the Manager could have made and that the Board considers appropriate under the circumstances. Also, under section 92(7) of the Water Act, the Board may conduct an appeal by way of a new hearing. [3] The First Nation submits that the Licence is flawed and will cause harm to the environment, and that the provincial Crown breached its constitutional duty to consult with and accommodate the First Nation regarding the potential impacts of the Licence on the First Nation’s treaty rights. The First Nation requests that the Board reverse the Manager’s decision to issue the Licence. Alternatively, the First Nation requests that the Board suspend or reverse the Licence, and send the matter back to the Manager with certain directions. In addition, the First Nation requests that the Board order the provincial Crown to pay the First Nation’s costs in relation to the appeal, pursuant to section 95(2)(a) of the Environmental Management Act. [4] The Manager and Nexen acknowledge that the provincial Crown had a duty to consult with the First Nation before the Licence was issued. However, they submit that the Licence will have no significant adverse environmental effects, and that the provincial Crown’s consultation with the First Nation was adequate given that the Licence will have no adverse effects on the First Nation’s treaty rights.

BACKGROUND

The Tsea River watershed and Treaty 8 [5] The Tsea River watershed is located approximately 90 km northeast of Fort Nelson, B.C. The Tsea River is a low gradient, winding river that flows in a northeasterly direction. The Tsea River connects the Tsea Lakes. The Tsea River flows north from South Tsea Lake, through Mid Tsea Lake, on through North Tsea

1 By a letter dated February 4, 2013, the First Nation requested that the Board change the name of the representative appellant from “Chief Kathi Dickie” to “Chief Sharleen Wildeman.” By a further letter dated October 14, 2013, the First Nation requested that the Board change the name of the representative appellant to “Chief Sharleen Gale.” DECISION NO. 2012-WAT-013(c) Page 5 Lake, and then eventually converges with the Petitot River, which flows into the Liard River and ultimately into the Arctic Ocean. Gote Creek flows into the Tsea River downstream of North Tsea Lake, but before the Tsea River converges with the Petitot River. The Tsea River and the Tsea Lakes are surrounded by muskeg, and portions of the Tsea River are affected by beaver dams. A map of the area, including the locations of gauging stations that are relied on for the operation of Nexen’s water withdrawal scheme, is attached as an Appendix to this decision. [6] North Tsea Lake has a surface area of approximately 13 hectares, and is approximately 1.7 metres deep at its deepest point. The drainage area upstream of the point at which North Tsea Lake flows out to the Tsea River is approximately 74 square kilometres2. [7] The Tsea River watershed is within the First Nation’s traditional territory. During the appeal hearing, the First Nation provided evidence that some of its members hunt, fish, trap, gather plants, inhabit cabins, and travel in the Tsea River watershed on a seasonal basis, as their families did in the past. In addition, the Tsea Lakes are within a trapline area that is registered to members of the First Nation, who operate different portions of the trapline. [8] There are oil and gas developments within the Tsea River watershed. This watershed is part of a larger area known, for oil and gas purposes, as the Horn River Basin. Although portions of the Tsea River watershed have been affected by road construction, seismic lines, and other oil and gas developments, the First Nation asserts that this watershed has been less affected by such developments than some other parts of the First Nation’s traditional territory. [9] The Tsea River watershed is also within the area covered by Treaty 8, which was entered into by negotiators for the Government of Canada and representatives of various aboriginal peoples in 1899. The First Nation’s ancestors adhered to Treaty 8 in 1910. The treaty rights of aboriginal peoples in Canada are recognized and affirmed under section 35(1) of the Constitution Act, 1982. [10] According to the language in Treaty 8, the aboriginal signatories agreed to surrender their lands to the Crown in exchange for certain benefits, including the continued rights to pursue their traditional activities within the surrendered lands, except where such lands are “taken up” by the Crown. Treaty 8 contains the following clause: And Her Majesty the Queen HEREBY AGREES with the said Indians that they shall have right to pursue their usual vocations of hunting, trapping and fishing throughout the tract surrendered as heretofore described, subject to such regulations as may from time to time be made by the Government of the country, acting under authority of Her Majesty, and saving and excepting such tracts as may be required or taken up from time to time for settlement, mining, lumbering, trading or other purposes.

2 Estimates of the drainage area vary. The 2011 Water Plan states that the drainage area upstream of the diversion point on North Tsea Lake is 85 km2, but the Panel has relied on the 2009 AMEC Earth and Environmental Report, which estimated the drainage area to be approximately 74 km2. DECISION NO. 2012-WAT-013(c) Page 6 [underlining added] [11] In the present appeal, the First Nation has not argued that the Licence amounts to a “taking up” of land by the Crown. Rather, the appeal focuses on the potential impacts of the Licence on the environment and the First Nation’s treaty rights in the Tsea River watershed, and particularly its right to hunt, trap, fish, and engage in other activities associated with the exercise of those rights, such as travelling by canoe, gathering certain plants, and maintaining shelter. [12] In Mikisew Cree First Nation v. Canada (Minister of Canadian Heritage), [2005] 3 S.C.R. 388 [Mikisew], at paras. 25 and 27, the Court stated as follows regarding the promises made in Treaty 8: There was thus from the outset an uneasy tension between the First Nations’ essential demand that they continue to be as free to live off the land after the treaty as before and the Crown’s expectation of increasing numbers of non-aboriginal people moving into the surrendered territory. It was seen from the beginning as an ongoing relationship that would be difficult to manage, as the Commissioners acknowledged at an early Treaty 8 negotiation at Lesser Slave Lake in June 1899… … Thus none of the parties in 1899 expected that Treaty 8 constituted a finished land use blueprint. Treaty 8 signaled the advancing dawn of a period of transition. The key, as the Commissioners pointed out, was to “explain the relations” that would govern future interaction “and thus prevent any trouble” (Mair, at p. 61). [13] Indeed, the present appeal confirms that Treaty 8 is not a “finished land use blueprint”, and that reconciliation between the Crown and the signatories to Treaty 8 is an ongoing process. The Crown’s duty to consult with aboriginal peoples [14] Treaty 8 provides not only substantive rights to hunt, trap and fish, but also procedural rights. As stated in Mikisew at para. 57: … the honour of the Crown infuses every treaty and the performance of every treaty obligation. Treaty 8 therefore gives rise to Mikisew procedural rights (e.g. consultation) as well as substantive rights (e.g. hunting, fishing and trapping rights). Were the Crown to have barrelled ahead with implementation of the winter road without adequate consultation, it would have been in violation of its procedural obligations, quite apart from whether or not the Mikisew could have established that the winter road breached the Crown’s substantive treaty obligations as well. [italics in original] [15] Thus, when the Crown contemplates conduct that may affect the treaty rights of aboriginal people, the Crown has a duty to consult with the aboriginal people, and if appropriate, accommodate their treaty rights. [16] The nature of the Crown’s duty to consult varies with the circumstances. In Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73 [“Haida”], the DECISION NO. 2012-WAT-013(c) Page 7 Court used the concept of a spectrum to describe the varying nature of the consultation that is required in different circumstances. As stated in Haida at para. 43, at the low end of the spectrum “the only duty on the Crown may be to give notice, disclose information, and discuss any issues raised in response to the notice.” At the high end of the spectrum, “deep consultation” may be required. As stated at para. 44 of Haida, deep consultation “may entail the opportunity to make submissions for consideration, formal participation in the decision-making process, and provision of written reasons to show that Aboriginal concerns were considered and to reveal the impact they had on the decision.” Good faith is required by both the Crown and aboriginal people at all stages of the consultation process. [17] In the present appeal, the Crown engaged in consultation with the First Nation, but the parties disagree on whether the Crown’s efforts fulfilled its duty to consult with the First Nation, and whether the First Nation met its reciprocal obligations in the consultation process. The parties also disagree on the level of consultation that was required in the circumstances, which is tied to the question of whether, or to what degree, the Licence may adversely affect the environment and the First Nation’s treaty rights. Nexen’s application for the Licence [18] On April 6, 2009, Nexen applied for a licence under section 12 of the Water Act, to withdraw surface water from the Tsea Lakes. Nexen originally sought to divert water from five locations: three locations on the Tsea Lakes (one on each lake), and two locations on the Tsea River. Nexen proposed to pipe water to a borrow pit for storage and use in the oilfield injection process, also known as hydraulic fracturing or “fracking”. [19] When Nexen applied for the Licence, Nexen already held a short-term (one year) approval issued under section 8 of the Water Act, authorizing Nexen to withdraw water from North Tsea Lake, Middle Tsea Lake, South Tsea Lake, and two locations on the Tsea River. Section 8 approvals for the oil and gas industry are issued by the Oil and Gas Commission, and not the Ministry. The section 8 approvals set a limit of 0.1 metre maximum drawdown for lakes. Specifically, water withdrawals must cease if the drawdown of the lake’s water surface exceeds 0.1 metres relative to the water level documented at the commencement of withdrawal activities. [20] On April 7, 2009, Nexen submitted a report titled “Water Development and Management Plan, Tsea Lakes, Northeast British Columbia” (the “2009 Water Plan”), in support of its application for the Licence. The 2009 Water Plan states that Nexen intended to use the same points of diversion that were authorized under its existing section 8 approvals. The 2009 Water Plan also proposed the same seasonally variable (i.e., May 1 to August 15, August 16 to September 30, and October 1 to April 30) licensed withdrawal volumes that were authorized under the section 8 approvals. Based on water volume, most of the withdrawal occurred, and was proposed to occur, between May 1 and September 30. The 2009 Water Plan states at page 20 that “the annual estimated water requirement is 768,000 m3/year from the Tsea Lakes under a full development scenario, given no other sources or recycling.” However, it also states that a finalized hydrometric assessment would be delivered in 2010, and would propose seasonal licensed water extraction volumes from the Tsea basin “based on the defined natural variability for the system.” DECISION NO. 2012-WAT-013(c) Page 8 [21] Initially, Nexen hired AMEC Earth and Environmental (“AMEC”) to conduct hydrological data sampling and analysis in support of the application for the Licence. In May 2009, AMEC prepared a report titled “Water Availability Assessment for Nexen Inc. Horn River Basin, British Columbia” (the “2009 AMEC Report”). The AMEC Report attempted to estimate runoff volume at several prospective water supply locations, including three locations in the Tsea River watershed, based on regression equations for data derived from other creeks in the Horn River Basin. [22] In May 2010, AMEC prepared a report (the “2010 AMEC Report”) that analyzed data including precipitation measured at certain locations, and water levels at locations in certain lakes and rivers, in the Horn River Basin during April to October 2009. In particular, daily discharge at two locations on the Tsea River was estimated based on water levels at those locations. Also, water levels in the three Tsea Lakes were monitored from late April until early October 2009. [23] Similarly, in January 2011, AMEC prepared a report (the “2011 AMEC Report”) that analyzed data collected in 2010, including precipitation measured at certain locations, and water levels in certain lakes and rivers from May to mid- October 2010. The 2011 AMEC Report applied a rating curve3 to the water level data recorded in 2009 and 2010 at two locations on the Tsea River, to estimate the daily discharge at those locations. Rating curves are discussed in detail later in this decision, under Issue 1. [24] On March 11, 2011, Nexen prepared a revised Water Plan (the “2011 Water Plan”), based on updated information including certain hydrometric information provided by AMEC. The 2011 Water Plan is a lengthy technical document, and is discussed in detail later in this decision. The Manager considered the 2011 Water Plan when he decided to issue the Licence. Some key elements of the 2011 Water Plan are summarized below. [25] The 2011 Water Plan sets out a flow-weighted withdrawal method whereby the amount of water that Nexen withdraws from North Tsea Lake at a given time depends on the rate of water flow at a point downstream in the Tsea River. The 2011 Water Plan sets out graduated rates of withdrawal based on a flow of 0.918 cubic metres per second (the “Inferred Median Flow”) in the Tsea River. Essentially, a greater percentage of the stream flow may be diverted when the rate of flow in the Tsea River is higher. Withdrawals are supposed to cease when the flow in the Tsea River falls below 0.351 cubic metres per second (the “Zero Withdrawal Limit”). The Zero Withdrawal Limit is 30% of the mean annual flow of 1.17 cubic metres per second where North Tsea Lake flows into the Tsea River, based on calculations done in 2010. [26] The 2011 Water Plan contains some of the information and data that Nexen relied on to determine the total amount of water available for diversion, and to create the flow-weighted withdrawal method. Because Nexen only began collecting hydrometric data flow on the Tsea River in 2009, Nexen also used Water Survey of Canada information about water flows on Adsett Creek, which is located approximately 150 km south of North Tsea Lake. The Adsett Creek data was used

3 A rating curve is a graphical or statistical curvilinear relationship established using stream flow estimates at various gauged water heights. DECISION NO. 2012-WAT-013(c) Page 9 to develop an Inferred Median Flow for the Tsea River. At pages 28 - 29, the 2011 Water Plan states as follows: Following the precautionary principle, the inferred median has been assessed using the Adsett Creek dataset, and “inferred” to the Tsea basin at the gauged locations using basin size for correlation. Only data associated with the ice-free season (e.g. May – October) has been incorporated. Using full annual data would significantly reduce the mean annual flow estimate, and lend a greater environmental risk to extraction activities at these lower flow levels. As data continues to be gathered through in-field monitoring, the inferred median and mean annual flow measures will be further enhanced by site specific information. … The current Zero Withdrawal Limit is conservatively proposed at 0.351 m3/second using 30% of the Mean Annual Flow, rather than 0.24 m3/second using 30% of the inferred median. … As previously illustrated, precipitation trends between Adsett and Tsea are aligned, although the magnitude is greater at Tsea. As such, when extrapolating Tsea flows to 1 in 10-year conditions, we conservatively trended the data with the magnitudes observed in the Adsett area although we’ve seen that Tsea basin receives more annual precipitation. … [27] The parameters in the flow-weighted withdrawal method were determined based on the estimated “real time” water flow at gauging station “DS-2” in the Tsea River, approximately 6 km downstream of the diversion point on North Tsea Lake. Estimates of water flow are made by determining stream cross sectional area multiplied by stream velocity at a number of points and depths over that cross section. This is time consuming to measure manually, so the 2011 Water Plan uses water height on a gauge as a proxy for water flow, as the AMEC Reports did in 2009 for gauging station “DS-3”, 23 km downstream of North Tsea Lake, and in 2010 for DS-2 and DS-3. These stations were known as “W32” and “Tsea River at Geetla”, respectively, in the AMEC reports. To estimate water flow at DS-2, the gauged water height is superimposed onto a “rating curve”, which is the graphical or statistical curvilinear relationship established using water flow estimates at various gauged water heights. Because the drained area is larger at DS-2 than at the diversion point 6 km upstream, the estimated flow at DS-2 is then scaled down relative to drainage size to estimate the flow at the diversion point on North Tsea Lake. Later in 2011, after the 2011 Water Plan was prepared, station “DS-1” was established approximately 5 km downstream of North Tsea Lake as the closest practical water monitoring gauge to North Tsea Lake. [28] Based on the water withdrawal method and water availability models in the 2011 Water Plan, Nexen proposed to withdraw up to 4 million cubic metres of water per year from North Tsea Lake, given adequate water availability. However, at page 32, the 2011 Water Plan states that the maximum volume available for withdrawal during a “1 in 10-year” dry year would only be 1.2 million cubic metres based on the flow-weighted withdrawal scheme. At pages 29/71 to 30/71, the 2011 Water Plan also states that “Continuous stream flow and lake level monitoring… will provide direction for the adaptive management of withdrawal limits.” DECISION NO. 2012-WAT-013(c) Page 10 [29] The 2011 Water Plan includes a discussion of the potential impact of the water withdrawals on the habitat of certain fish and wildlife, and wetland habitat. Specifically, the 2011 Water Plan states that Trumpeter Swans were observed on South Tsea Lake, and it recommends measures to mitigate the impact of disturbances to their feeding and nesting activity. The 2011 Water Plan also discusses Boreal Caribou, but it indicates that impacts on Boreal Caribou are not anticipated to be significant. [30] In regard to fish habitat, the 2011 Water Plan states, in part, that “withdrawal will be managed so that the majority of the volume required to meet operational needs is acquired during periods of high flow, therefore reducing demand during periods of low flow when fish habitat is most at risk from water withdrawal.” The 2011 Water Plan also states that fisheries monitoring will take place every three years. Appendix IV of the 2011 Water Plan contains a fish survey conducted by Diversified Environmental Services (“Diversified”) in August 2009. The survey was conducted in several areas where Nexen was operating or planned to operate, including the upper Tsea River, to determine fish species distribution and assign stream classifications pursuant to the Forest and Range Practices Act. For example, in August 2009, adult Northern Pike were visually observed in North Tsea Lake. In regard to potential impacts on the muskeg ecosystem, the 2011 Water Plan states that a shallow groundwater monitoring program would be implemented in the spring of 2011 to identify changes in the moisture regime around the water withdrawal point at North Tsea Lake. [31] In January 2012, Nexen advised the Ministry that it sought to revise its application, as it proposed to withdraw a maximum of 2.5 million cubic metres of water per year from North Tsea Lake, rather than 4 million cubic metres per year. [32] Meanwhile, from 2009 until the Licence was issued in 2012, Nexen withdrew water from North Tsea Lake under its section 8 approvals. Nexen was authorized to withdraw up to 1.45 million cubic metres per year under its section 8 approvals. However, according to Nexen’s evidence, the amounts actually withdrawn under section 8 approvals were: 27,000 cubic metres in 2009; 394,000 cubic metres in 2010; 865,000 cubic metres in 2011; and 185,000 cubic metres in 2012 until the Licence was issued (a further 538,000 cubic metres was withdrawn under the Licence in 2012). Communications and consultations following Nexen’s application [33] For approximately three years after Nexen applied for the Licence in April 2009, representatives of the provincial Crown (primarily Ministry staff), the First Nation, and Nexen exchanged communications regarding Nexen’s application by way of telephone, email, letter, and in-person meetings. The Ministry also sent Nexen’s application to other government agencies and one other First Nation for review and comment. A substantial number of documents regarding those communications were entered as evidence in the appeal hearing, and witnesses for all parties testified regarding the consultation process. A partial summary of that evidence is provided below, for background purposes. The evidence is further discussed under Issue 2 in this decision. [34] On May 26, 2009, the Ministry sent a referral package, including Nexen’s application and the 2009 Water Plan, to the Ministry’s Ecosystems Section, and Fisheries and Oceans Canada. Fisheries and Oceans Canada did not respond. DECISION NO. 2012-WAT-013(c) Page 11 [35] On June 3, 2009, Graham Suther, an Ecosystem Biologist with the Ministry’s Fort St. John office, responded to the referral. Among other things, he provided information regarding the critical nesting period for songbirds, and how to avoid impacts on Trumpeter Swans. He also expressed concerns regarding the long-term withdrawal of water without baseline data on the pre-existing seasonal hydrological processes in the area. [36] On June 2, 2009, the Ministry sent a referral package, including Nexen’s application and two maps, to both the First Nation and the Dene Tha First Nation. The Dene Tha First Nation did not respond. [37] On August 4, 2009, the Ministry received a letter from Veronica Capot Blanc, a Referral Assessor with the First Nation’s Lands and Resources Department, requesting further information regarding Nexen’s application and an additional two weeks to review the referral package. [38] On August 18, 2009, Darren DeFord, a Water Stewardship Officer with the Ministry, provided Ms. Capot Blanc with copies of the 2009 Water Plan and the AMEC Report. Mr. DeFord also advised that, in the coming months, Nexen would likely be making changes to its application for the Licence, based on monitoring data and other project information. [39] In August 11, 2009, a representative of Nexen met with, and provided information to, representatives of the First Nation regarding its application for the Licence. [40] On September 1, 2009, Ms. Capot Blanc telephoned Mr. DeFord and requested more time to review Nexen’s application for the Licence. She advised that she was just returning to work after being ill for a few weeks, and the First Nation was in the process of hiring a new director to deal with referrals. [41] In a September 29, 2009 letter to the Ministry, Ms. Capot Blanc stated that Nexen’s application had been brought before the First Nation’s Chief and Council for review, and the First Nation opposed the application for the following reasons: 1. The FNFN [First Nation] has numerous concerns with the Horn River Basin (HRB) and supporting development, and the amount of fresh water sources that have been and will be utilized for drilling purposes without any consideration to our Nation and how this type of activity directly impacts our constitutionally protected Treaty and Aboriginal Rights to the land to hunt, fish, trap, and [for] gathering purposes. We have concerns about the adverse impact of uncontrolled water use on the ecology of our territory and the integrity of moose and other wildlife habitat…. 2. The application is inconsistent with a coordinated approach to development in our territory. 3. This area has been identified as an area of sensitivity and holds great cultural significance. 4. FNFN requires more time and capacity to adequately assess the application. … DECISION NO. 2012-WAT-013(c) Page 12 Given that the cumulative impacts and negative effects on the land base, hydrology, and the environment have not been taken into consideration, the application is inconsistent with a coordinated approach to development in our territory. We are concerned that an uncoordinated approach to oil and gas development will result in the diminution of the quality of wildlife in the area, the fragmentation and destruction of fish, wildlife and plant habitat, the disruption of wildlife migration patterns, and ultimately, the loss of culturally and commercially significant wildlife and vegetation in our territory. We are concerned that our territory will be compromised by the uncoordinated, piece-meal approach demonstrated in this application to the point that there will be no meaningful exercise of our Aboriginal and Treaty rights in our lands and we can no longer pass our cultural teachings on to our children. … the FNFN does not have enough time or capacity to gather the traditional knowledge required for adequate assessment of this application. A Traditional Use Study (TUS) that is vetted by the FNFN community would be of assistance in determining the exact nature of the potential impacts of the proposed activity on the exercise of our Aboriginal and Treaty rights. We believe that a TUS would inform the proponent of the nature of our Aboriginal and Treaty rights in the area and help ensure that FNFN concerns are adequately addressed prior to your making a decision regarding this application. … Therefore, we request a meeting to discuss how we can move towards adequate and meaningful consultation regarding this application. Please find enclosed our Consultation Protocol; we expect that this document is respected. [42] On October 5, 2009, Mr. DeFord sent an email to Ms. Capot Blanc, acknowledging receipt of her September 29, 2009 letter, and advising that the Ministry would be in contact with the First Nation and Nexen “to discuss next steps.” He also asked whether Ms. Capot Blanc could provide “any initial specific concerns to comment on” regarding Nexen’s application, including whether “a TUS would be for the broader region or specific to each application?” [43] In October and December 2009, Nexen provided project updates to the First Nation. [44] On January 7, 2010, Ms. Capot Blanc sent an email to Mr. DeFord, reiterating the First Nation’s opposition to Nexen’s application for the Licence, and requesting information about the status of that application and some other water licence applications in the Horn River Basin. She stated that the First Nation was “inundated with applications for our traditional area” and that the “current process for your office to communicate with ours is lacking a standard approach”. She requested a meeting on January 20, 2010 to discuss those matters. [45] On January 13, 2010, Mr. DeFord replied to Ms. Capot Blanc’s email. He stated that the applications she had mentioned were still being adjudicated, and representatives of the Ministry were unable to meet on January 20, 2010. He proposed a meeting once the Ministry had received further information from the applicants “which will include the results of their current monitoring programs and DECISION NO. 2012-WAT-013(c) Page 13 other application advancements that will be taking place in the coming weeks.” He stated that the “apparent lack of communication from our department can be attributed to the ongoing nature of these applications in which we at Water Stewardship Division are still awaiting the results.” He also stated “as requested in my October 5, 2009 email…, could you supply some initial information about specific concerns you have related to these applications in the areas related to each application?” [46] On February 24, 2010, the First Nation sent a letter to Nexen requesting payment of a $300 “Referral Processing Fee” in regard to the application for the Licence. The letter states that the fee was required “in order to conduct a preliminary review of the potential impact and infringement on the traditional territories and aboriginal and treaty rights of the FNFN of your proposed activity…” and upon receipt of the fee, the First Nation “will assess your Referral and respond within the appropriate regulatory timeline.” The letter also states that, if a more in- depth review was required, the First Nation would “notify you, the proponent, after our preliminary review and the parties will negotiate an agreement to implement a consultation process for your proposed activities.” The letter states that the Haida decision “puts the onus on the First Nations to specifically identify areas of infringement.” [47] On April 1, 2010, Nexen confirmed by email that it was processing the referral fee. [48] On June 10, 2010, Mr. DeFord and representatives of the First Nation participated in a site visit that included driving to Nexen’s camp and flying over the Tsea Lakes area. [49] During the remainder of 2010, Mr. DeFord had limited communication with the First Nation regarding Nexen’s application for the Licence. [50] On January 10, 2011, Lana Lowe, Director of the First Nation’s Lands and Resources Department, wrote a letter to Doug Konkin, the Ministry’s Deputy Minister, expressing concern about water withdrawals under licences and section 8 approvals by oil and gas companies in the First Nation’s territory. The letter states that “at the present time there is no formal consultation process in place whereby we are provided the time and resources to adequately examine and comment on industrial water applications that could significantly affect our aboriginal and treaty rights….” Ms. Lowe requested a meeting with the Deputy Minister and representatives of the Ministry’s water stewardship division to discuss those matters. She also requested a complete listing of all water licence applications in the First Nation’s territory, the baseline data on water resources that applicants were being asked to provide, and what was being done to determine the cumulative impacts of the water licences and short-term approvals in the First Nation’s territory. [51] No response was provided by the Deputy Minister. However, in a February 24, 2011 letter to Ms. Lowe, Mr. DeFord stated, in part, as follows: We are in continued receipt of water licence applications within the Horne River Basin from natural gas producers. Although these applications are adjudicated individually, we do consider the sum of applications in a given basin to ensure that water resources are not over allocated. We also apply a precautionary principle or holistic DECISION NO. 2012-WAT-013(c) Page 14 approach, to the potential allocation of water. Some examples are, among others, the utilization of minimum in-stream flow requirements (ie. Tenant and/or Tessman Methods) or scientifically supported clauses that might include restrictions on the proportion of stream flow, or restrictions on the percentage of available under-ice water. Many licences also have clauses requiring ongoing monitoring as a licence condition. … To apply these concepts, hydrologic information is required. As you know, this area of British Columbia does not have comprehensive hydrometric information available at this time. Water management staff utilize available information and proponents are also providing water data for specific application areas. Proponents also undertake surface water monitoring programs…. … we are confident that the understanding of the water resources is improving. … We are willing to discuss water licensing questions and concerns with your office in the future. We have discussed these issues with [Ministry] staff in Fort Nelson and they will be contacting you shortly to determine the need for a meeting to discuss water issues and answer your questions. [52] According to Nexen’s submissions, Scott Wagner, Nexen’s Senior Advisor – Shale Gas, Community Consultation and Regulatory Affairs, sent a copy of the 2011 Water Plan to the First Nation on or about March 11, 2011. However, it is unclear whether the First Nation received the 2011 Water Plan at that time. In any event, the First Nation received the 2011 Water Plan sometime before October 2011, when Nexen and the First Nation jointly initiated a third party external review of the 2011 Water Plan. [53] On March 15, 2011, Ms. Lowe sent an email to Mr. DeFord, requesting copies of several water licence applications, including Nexen’s application for the Licence. She also asked how the Ministry planned to determine or weigh cumulative impacts, and what opportunity there would be for the First Nation to comment on the adequacy, or lack thereof, of baseline data. In addition, she stated that “our request for a meeting to discuss how [the Ministry] plans to determine cumulative effects on shared water resources during your deliberations on water licence applications remains unanswered.” [54] On March 16, 2011, Mr. DeFord provided copies of the requested licences to Ms. Lowe, and he responded, in part, as follows: In regards to cumulative impacts, I would refer back to the second paragraph of my [February 24, 2011] letter that outlines considerations included in adjudicating a water licence. This aspect of cumulative effects assessment is from a quantity basis within the system. To include and consider cumulative impacts on a larger landscape basis, I don’t have any direct information regarding this. … … we are working towards including our Ministry staff in Fort Nelson to assist in consultation efforts with stakeholders, and hope to have a plan in place sooner than later. In the meantime, in regards to the DECISION NO. 2012-WAT-013(c) Page 15 opportunity to comment on ‘baseline data’, I would suggest contacting the applicants directly to discuss this. [55] In June 2011, the Manager and Mr. DeFord met with Ms. Lowe to discuss water licensing in the First Nation’s traditional territory. [56] On July 4, 2011, representatives of Nexen met with representatives of the First Nation to discuss Nexen’s water licence applications. [57] In a July 4, 2011 email, Ms. Lowe advised Mr. DeFord that she had met with Nexen’s representatives that day to discuss their water licence applications, and she requested “all of the relevant information” that the Ministry had on those applications because “[w]e will be doing a third party review of their applications….” [58] On August 3, 2011, two representatives of the Ministry, including Mr. DeFord, and two representatives of the First Nation, including Ms. Lowe, toured some water developments in the Horn River Basin by helicopter. They landed at North Tsea Lake and walked to the site of the water withdrawal, where they viewed the pump, water pipeline, and other equipment that was in place. [59] In October 2011, the Oil and Gas Commission issued a short-term water use approval to Nexen, authorizing the diversion of up to 13,140 cubic metres of water per day from North Tsea Lake for storage and oilfield injection purposes, to a maximum of 1,400,000 cubic metres of water per year. [60] On October 12, 2011, Mr. Wagner sent an email to Mr. DeFord, with a copy to Ms. Lowe, advising that Nexen and the First Nation had jointly initiated a review of the 2011 Water Plan by Dr. Sean Carey, Associate Professor of Hydrology at the University of Waterloo. Mr. Wagner’s email described the scope of Dr. Carey’s review. Among other things, he stated that Dr. Carey was to provide a “detailed and unbiased review” of the 2011 Water Plan and supporting data, and work with the First Nation “to develop a plain language understanding of the principles involved in the proposed plan.” The review was funded by Nexen. [61] On October 27, 2011, Dr. Carey provided a draft review of the 2011 Water Plan to Nexen and the First Nation, for their review and comment. His report consisted of two parts: a “Plain Language Report” and a “Technical Summary.” In response, Nexen provided comments to Dr. Carey. The First Nation provided no comments to Dr. Carey. [62] On December 20, 2011, a final version of Dr. Carey’s review of the 2011 Water Plan (the “Carey Report”) was issued. Among other things, the Carey Report raised questions about the sufficiency of the baseline data on the Tsea River watershed’s hydrology and ecosystem. Dr. Carey declined to comment on the quality or adequacy of the 2011 Water Plan’s fish, caribou and vegetation surveys, stating that those matters were outside of his expertise. However, he concluded that “… overall, I believe that their [Nexen’s] estimates of flow in the Tsea are conservative and, if so, the plan [is] sustainable.” Some sentences in Dr. Carey’s draft report were deleted or altered in the final report. The Carey Report is further discussed later in this decision. [63] On January 17, 2012, Mr. Wagner sent an email to Mr. DeFord, the Manager and other staff in the Ministry and Nexen, following a teleconference call they had participated in earlier that day regarding Nexen’s application. Among other things, Mr. Wagner confirmed that Nexen would provide further information including DECISION NO. 2012-WAT-013(c) Page 16 updated median and mean discharges for the Tsea watershed using the monitoring data for 2011. Mr. Wagner stated that they had discussed Mr. DeFord finalizing a “30-day letter” to the First Nation regarding Nexen’s application, and that an “approved licence should be achievable by March 2012, allowing sufficient time for equipment purchase, transportation, and installation prior to spring freshet.” Mr. Wagner also advised that Nexen would draft a letter summarizing its water licensing efforts over the past three years “that justifies the need for approval by March 1st.” [64] On January 20, 2012, Allan Chapman, a hydrologist and water resource specialist with the Oil and Gas Commission, provided Mr. DeFord with a comparison of the estimated annual discharge for North Tsea Lake (site W7, now known as DL- 1) and the Tsea River at Geetla (site DS-3) using the North East Water Tool (“NEWT”), a model that the Oil and Gas Commission uses to determine long-term average monthly and yearly run-off for streams when assessing applications for section 8 approvals in northeast B.C. The modeled run-off results for the open water season (May to October) from NEWT versus Nexen’s 2011 Water Plan were as follows: • North Tsea Lake: 17,668,000 cubic metres (2011 Water Plan model); 17,360,000 cubic metres (NEWT model) • Tsea River at Geetla: 55,593,000 cubic metres (2011 Water Plan model); 58,638,000 cubic metres (NEWT model) [65] Further to the January 17, 2012 teleconference, Mr. DeFord sent a letter to the First Nation on January 27, 2012, advising that the Ministry had conducted a preliminary review of Nexen’s application based on technical factors and other information, including a Treaty 8 Traditional Use Study. Enclosed with the letter was a copy of the 2011 Water Plan and the AMEC Reports from 2009, 2010 and 2011. Mr. DeFord’s letter states, in part: … Based on a preliminary review of the above technical factors, it appears that the potential for adverse impact on water availability to fish, fish habitat and the surrounding environment of this river system is minimal. As you are aware, Nexen will be using a real-time adaptive management and withdrawal program, essentially withdrawing more water during times of greater quantity, and less to none at lower quantity. This program would include rigorous monitoring and reporting requirements annually to WSD [Water Sustainability Division of the Ministry]. Aside from the technical information noted above, the following information was considered when assessing impacts to your Treaty 8 First Nations’ rights …: previous consultation, Treaty 8 Traditional Use Study, RAAD [Remote Access to Archaeological Data], CAD [Consultation Area Database], and FNQ2 [First Nations Quick Queries]. From this review, Water Stewardship is aware that FNFN [Fort Nelson First Nation] exercises Treaty 8 rights in and around the Tsea Lakes and the potential for archeological sites in the Tsea Lakes area is high, although not specifically identified. Technical representatives from Water Stewardship are available to continue to work with FNFN for the purpose of addressing any concerns. The Province has taken into consideration the above noted preliminary assessment and believes that the proposed water license application does not appear to have an DECISION NO. 2012-WAT-013(c) Page 17 appreciable adverse effect on FNFN’s ability to continue to exercise their Treaty 8 rights in and around the Tsea Lakes area. We would welcome further input that FNFN may have on the preliminary conclusions made above. … [66] The letter requested that the First Nation respond within 30 days of receiving the letter. [67] In February 2012, there was an exchange of emails between Mr. DeFord, Ms. Lowe, and other staff of the First Nation. According to Ms. Lowe, the First Nation did not receive Mr. DeFord’s January 27, 2012 letter, which the Ministry had sent by courier. However, according to Mr. DeFord, someone in the First Nation’s mail room had provided a signature acknowledging receipt of the letter. [68] In any event, Mr. DeFord subsequently sent an electronic version of the letter to Ms. Lowe, which she received on February 22, 2012. Ms. Lowe requested 30 days from that date for the First Nation to respond. However, on February 23, 2013, Mr. DeFord advised that waiting 30 days would result in unreasonable delay, and requested that the First Nation respond by March 9, 2012. [69] On March 19, 2012, Wayne Giles, the Ministry’s Manager of First Nations Relations in the Omineca Region, sent an email to Ms. Lowe acknowledging the First Nation’s concerns regarding Nexen’s application (and two other water licence applications by oil and gas companies), and requesting a meeting with her and other representatives of the First Nation to discuss those matters. He asked whether she was available on March 20, 2012 to speak with him over the telephone. According to an affidavit sworn by Mr. Giles, he attempted to contact Ms. Lowe to arrange a meeting, but was unsuccessful at that time. [70] By a letter dated April 3, 2012, Mr. DeFord notified the First Nation that the Ministry was proceeding to make a decision on Nexen’s application. The letter states: The Province of British Columbia is informing the Fort Nelson First Nation that the Province is proceeding with a decision on the Nexen North Tsea Lake application. Fort Nelson First Nation will be notified when a decision is made. In undertaking consultation with the Fort Nelson First Nation, a response was requested within 30 calendar days of receipt of my January 27, 2012, letter. … You indicated you would be able to provide a response within 30 calendar days, or March 22, 2012. I have received no response. As noted in my letter of January 27, 2012, consultation on this application was initiated by letter [dated] June 2, 2009. Since that date I have met with Fort Nelson First Nation on several occasions and had discussions regarding this and other applications. Detailed technical information about the proposed application was shared June 2, 2009 as part of the application package including a Water Development and Management Plan. Results from the Archaeological Impact Assessment conducted were also provided and additional information has been provided through phone conversations, letters and emails. Additionally, the third party review by Dr. Sean Carey initiated by Fort Nelson First Nation indicated that the proposed withdrawal program, in association with rigorous data gathering, was reasonable and sustainable. The information provided to you from these reports form the basis for my analysis DECISION NO. 2012-WAT-013(c) Page 18 of the impacts this proposal may have on Fort Nelson First Nation’s rights recognized and affirmed by section 35(1) of the Constitution Act, 1982. Based on consultation with the Fort Nelson First Nation since June 2009, for reasons stated in my January 27, 2012 letter, my preliminary assessment of the proposed activity on Fort Nelson First Nation’s rights… is that the application will have no impact. The applicant will be utilizing a real-time adaptive management and withdrawal program, essentially withdrawing more water during times of greater quantity, and less to none at lower quantity. The proposed withdrawal represents approximately 4% of the annual discharge. Consideration has been given to the cumulative effect the proposed licence will have on the Tsea Lakes system and downstream and it is my belief that the flow regime will be marginally affected and will not impact Fort Nelson First Nation rights recognized and affirmed by section 35(1) of the Constitution Act, 1982. Fort Nelson First Nation has raised concerns regarding impacts to fish and navigation on lakes and rivers. Having received no further information from Fort Nelson First Nation it remains my assessment that there would be no impact to Fort Nelson First Nation rights recognized and affirmed by section 35(1) of the Constitution Act, 1982 given the requested withdrawal of water from North Tsea Lake in relation to the total flow within the Tsea River watershed and given [that] appropriate screened intakes will be installed. Seasonal fluctuations in flow and fluctuations in the water withdraw[al] amount were considered in reaching this conclusion. [71] Mid-day on April 3, 2012, Ms. Lowe responded by email to Mr. DeFord’s letter. She objected to the approval of Nexen’s application pending further consultation between the Crown and the First Nation. She expressed concerns about the effects of water withdrawals on the First Nation’s treaty rights and cultural practices. She requested a meeting to discuss Nexen’s application before a decision would be made. [72] In the afternoon of April 3, Mr. Giles sent an email to Mr. DeFord and some other Ministry staff. His email states, in part: An update from this AM. We did receive a response from FNFN [the First Nation] with respect to our latest letter on the Nexen file (attached). Generally the same message regarding concerns re process, importance of area and water to treaty rights etc. I don’t believe further discussion at this point will produce any change with respect to consultation on the file, either positive or negative. However, given [the] big picture on water as I believe was discussed on your call this AM we would like to meet with FNFN to discuss other files and path forward on water to avoid deadlock. Given our general desire to meet we will attempt to arrange a meeting next week with no expectation that we are delaying our decision making on the Nexen file. Also, I don’t anticipate having to ponder additional concerns and go for further MAG [Ministry of Attorney General] review post meeting. This approach remains true to our latest letter and if litigated shows responsiveness in process on our part. I have attempted to contact FNFN but not [sic] luck yet. Should we not connect next week we are in a position to continue to decision, DECISION NO. 2012-WAT-013(c) Page 19 or depending on that exact timing, try to accommodate a meeting beyond next week. … [73] Mid-day on April 4, 2012, Mr. Giles sent an email to Ms. Lowe, indicating that he would like to coordinate a meeting with her and other representatives of the First Nation to discuss their concerns about water licensing in general and some specific licence applications, including Nexen’s. He proposed a meeting on April 12, 2012. [74] In the afternoon of April 4, 2012, Ms. Lowe responded that the First Nation would like to meet as soon as possible, but she would be on vacation starting April 9. She advised that she would be back in the office on May 1, 2012, and she suggested that Mr. Giles send her an invitation for a meeting in May. [75] In an April 4, 2012 letter to Mr. DeFord, Ms. Lowe advised that the First Nation wished to meet as soon as possible to discuss two other water licence applications, and that she would be back in the office on May 1, 2012. She also advised that the First Nation’s view was that the Ministry had not taken meaningful steps toward ascertaining the scope of the First Nation’s treaty rights, and had not undertaken meaningful consultation with the First Nation. [76] In a letter dated April 11, 2012, the Manager acknowledged Ms. Lowe’s April 4, 2012 letter. In regard to Nexen’s application, he stated that “sufficient opportunity has been provided to the Fort Nelson First Nation for further engagement on this application and no response has been received.” He advised that the Province was in the process of making a final decision on Nexen’s application, but the Ministry was still willing to meet with the First Nation to discuss “water related matters” and would be in contact to arrange a meeting in May. [77] By a letter dated April 13, 2012, the First Nation’s Chief (who was Kathi Dickie at that time) responded to the Manager’s April 11, 2012 letter on behalf of the First Nation, and stated, in part: You have stated in previous correspondence that your alleged consultation process on the Nexen/North Tsea Lake application began as early as 2009. As you are aware, we dispute that there has been any real consultation with us, beyond sending us letters which appear to have reached a foregone conclusion. However, now you indicate that accommodating FNFN’s meeting schedule by a couple of weeks will cause “unreasonable delay” to the proponents. Your rush to make a decision follows a long period where the Province has failed to sit down with us on a timely basis to ascertain the scope of our treaty rights and to talk with us about how impacts to our water systems will be managed going forward. … In any event, it is the Crown’s constitutional obligation to meaningfully consult with us, and that means actually sitting down with us to discuss the concerns we have raised. [78] On April 13, 2012, the Manager forwarded the Chief’s letter to Mr. Giles, and requested ideas on how to respond to the Chief’s letter. [79] On April 16, 2012, Mr. Giles replied to the Manager. His email states, in part, as follows: As I see it shaping up on the technical side we are in a position to make a decision on Nexen, and despite this letter, are likely still on DECISION NO. 2012-WAT-013(c) Page 20 track as these issues in my mind concern ‘higher level’ issues that need to be discussed, but for which we aren’t holding permitting. On this file, with the third party work completed and the staged withdrawal system proposed as previously indicated we do not believe further consultation will yield any new information. We could respond with a decision letter including a rationale. [underlining added] [80] On April 26, 2012, Peter Grant, legal counsel to the First Nation, sent a letter to the Chief Negotiator, Ministry of Aboriginal Relations and Reconciliation (“MARR”), expressing concern about the impending approval of water licences within the First Nation’s territory, despite the Province’s commitment that water licences would be part of a Comprehensive Consultation Process Agreement that was being negotiated with the First Nation. The letter stated that the First Nation was “very concerned” that the Ministry “not take any steps to complete approvals of long-term water permits [licences] within the Fort Nelson First Nation Consultation Area until we have an agreement on the Consultation process.” On April 26, 2012, MARR forwarded the letter to Mr. Giles, and requested information about water licence applications in the Fort Nelson area. [81] On April 27, 2012, Mr. Giles responded to MARR, and advised that Ministry staff were “hoping” to issue a water licence to Nexen the following week. [82] By a letter dated May 7, 2012, MARR’s Chief Negotiator replied to the First Nation’s April 26, 2012 letter. He advised that the process for consultation and potential approval of water licences is managed by the Ministry, and stated that the Province “supports the proposal that Fort Nelson First Nation should have an opportunity to engage with the… provincial ministries… in broader discussions of Fort Nelson First Nation water use concerns.” His letter also states that he looked forward to meeting with the First Nation on May 8, 2012, to initiate dialogue on the development of a Consultation Protocol Agreement to address how water licence consultation is managed between the Province and the First Nation. [83] Meanwhile, on April 26, 2012, Mr. DeFord completed a technical report regarding Nexen’s application (the “Technical Report”), to assist the Manager in assessing the application. Among other things, the Technical Report states at page 5, regarding hydrological information: … As mentioned, the flow weighted withdrawal program is designed to retain a pre-determined minimum flow for the protection of ecology and hydrology based on the Tennant Method of 0.351 m3/sec (30% MAD) [mean annual discharge] according to data current at the time of this report with extensive real-time monitoring to ensure that this level is maintained, supported by an operational plan which includes multiple redundant gauges that convey information in real-time to the pumps. More water will be withdrawn from the system as more is available. No impacts to fish or habitat is [sic] anticipated although ecological monitoring will be performed throughout the term of the licence to relate withdrawals to potential impacts. The potential reissuance of this 5 year termed licence will consider these ecological parameters as well as hydrological parameters recorded and reported annually (April 1 of each year). If WSD [Water Sustainability Division of the Ministry] is not satisfied with monitoring, reporting, analysis, DECISION NO. 2012-WAT-013(c) Page 21 etc. by Nexen, or finds that the results of the withdrawal and monitoring program do not support the licensed extraction volumes, as the licence is termed at five years, we can reduce or not re-issue a subsequent licence [as] we see fit to protect the water source. In the meantime, Nexen is withdrawing water under a precautionary principle using the combination Tennant Method/flow-weighted extraction program which will protect the water source. This water extraction program has been third-party reviewed by Dr. Sean Carey… [who] believes the proposed withdrawal approach is sustainable. [84] In addition, the Technical Report states as follows at pages 5 to 6, regarding ecological considerations: Nexen has proposed a framework for determining sustainable water withdrawal limits in a flow-weighted withdrawal program…. Ongoing monitoring and reporting will be used to assess potential impacts, using indicators of Hydrological Alteration method (Richter et al., 1996, see WDP [the 2011 Water Plan]). Reporting to WSD office for the previous years data collection and assessment will take place on April 1 of each year. [85] In conclusion, the Technical Report recommends that the Manager grant Nexen’s application. [86] To further assist the Manager, Mr. Giles prepared a First Nation Consultation Report (the “Consultation Report”), which was sent to the Manager on May 9, 2012. The Consultation Report summarized the possible impacts of the Licence on the First Nation’s rights and interests, and the communications between representatives of the provincial Crown and the First Nation in regard to Nexen’s application up to May 11, 2012. The Consultation Report concludes with the following recommendation: Further discussions and information sharing with the FNFN would not likely reveal any additional information with respect to potential impacts on treaty rights. Consultation was undertaken as per provincial procedures. FNFN legal counsel wrote MARR requesting water permitting be suspended while discussion continued toward agreements that may include relevant clauses to water permitting and consultation. MARR responded that permitting will not be held [up] to conclude agreement negotiation. This file was reviewed by MAJ [Ministry of Attorney General] staff. Consultation with FNFN is considered complete. The Licence [87] On May 11, 2012, the Manager issued the Licence pursuant to section 12 of the Water Act. A copy of the Licence is attached as an Appendix to this decision. [88] The Licence authorizes Nexen to divert water from North Tsea Lake into storage dugouts for industrial (oilfield injection) and storage (non-power) purposes, for a term expiring on December 31, 2017. Water may be diverted from April 1 to October 31 of each year, and the stored water may be used for oilfield injection during the whole year. The Licence authorizes the diversion of a maximum of 60,000 cubic metres of water per day, and a maximum of 2,500,000 cubic metres DECISION NO. 2012-WAT-013(c) Page 22 per year. A maximum of 2,500,000 cubic metres of water may be held in storage. The authorized works are a screened intake, pump, pipe, flow meter device and dugouts. Those works were constructed under the previous section 8 approvals, and were in use when the Licence was issued. A map attached to the Licence indicates that the point of diversion is located in the northwest corner of North Tsea Lake. Clause (e) of the Licence states that “Withdrawals will cease when water discharges at Tsea River at North Tsea Lake fall below 0.351 cubic metres per second.” It also states that “Daily withdrawal limits will be as per the flow- weighted extraction method as outlined in” the 2011 Water Plan, which has been summarized above. The Panel will consider the details of the flow-weighted withdrawal scheme later in this decision. [89] Condition (j) of the Licence requires Nexen to keep records of its actual water use, and report that information to the Manager annually. However, the Licence contains no requirement to conduct any other sort of monitoring, and it does not refer to any of the monitoring proposed in the 2011 Water Plan, such as fisheries monitoring and the continuous monitoring of stream flow at specific gauging stations. [90] Also, on May 11, 2012, the Manager sent a letter to the First Nation advising that the Licence had been issued, and providing a rationale for his decision. A copy of the Licence was attached as an appendix to his rationale. In his rationale for issuing the Licence, the Manager generally explained that, in his opinion, the consultation with the First Nation was adequate, and the Licence was expected to have no impacts on fish, fish habitat, ecological values, or the First Nation’s treaty rights. The Manager’s rationale states, in part, as follows: Issues Considered in my Decision An initial review of the existing information suggested the potential for adverse impact on the Fort Nelson First Nation’s treaty rights due to this proposed water licence would be minimal. This initial review was shared with the First Nation. However, Fort Nelson First Nation (FNFN) has expressed concerns regarding the seriousness of potential impacts resulting from this project. Based on the complexity of the water issues in the Horn River basin and the concerns raised by FNFN, consultation staffs [sic] were prepared to engage fully with FNFN and did undertake numerous meetings and exchanges via phone and e- mails. FNFN did not respond in a timely fashion to some requests for information. Through those letters and e-mails with FNFN, a number of concerns and issues were raised. My consideration of these concerns is presented below: 1. Cumulative effects of water withdrawal within traditional territory The proposed withdraw[al] of water ranges from 4.5% to 14% of the annual discharge on the Tsea River system. A staged withdrawal system which allows for controlled management of water to ensure adequate water supplies to the Tsea River system will be implemented. Withdraws in this range and as managed under the staged water withdrawal system will not impact FNFN’s treaty rights to hunt, fish, and trap. The proponent has also DECISION NO. 2012-WAT-013(c) Page 23 designed and is committed to long-term monitoring of this network of stations to ensure the quantity and health of this water ecosystem. The water licence will be limited to a 5-year term, with conditions to monitor and supply data in support of their water use. A third party reviewer… showed no major concerns with this proposal. The analysis indicated that the water withdrawal would have negligible impacts to the total annual discharge of the source – up to 4% reduction to Tsea River. Cumulatively, there would be an additional .02% withdrawal from Tsea River [in his appeal submissions, the Manager advised that this should be 0.2%]. Given the analysis that has been done and the controls that Nexen Inc. will put in place, I believe that this proposed licence, in relation to other existing water licences on Tsea River, will not impact FNFN’s ability to practice their treaty right to hunt, fish and trap. 2. Contamination of water systems due to hydraulic fracturing and related practices … 3. Transportation (navigation on Tsea Lakes and Tsea River) … The level of the Tsea Lakes and Tsea River will be maintained within the bounds of natural variation through the staged withdrawal system operated by real time methods at levels that are not anticipated to impact navigation on the waterways in question. The water licence will be limited to a 5-year term, with conditions to monitor and supply data in support of their use, including information supporting the maintenance of adequate base elevation levels. No impacts to FNFN’s treaty rights to hunt, fish and trap are anticipated. 4. Fish and fish habitat … The staged withdrawal system is designed to support a water ecosystem with no impacts to fisheries values. A review of the proposal by provincial experts anticipated no impacts to fish or fish habitat. The third party reviewer of the proposal also anticipated no impacts to fish or fish habitat. No impacts to FNFN’s treaty right to fish are anticipated. 5. Ecological Values Ecological values were considered in both a site specific way and, as in the consideration of 1 and 2 above, in a more broad view. In a review conducted by provincial experts no ecologically sensitive features were identified as related to site specific project impacts. The applicant has identified an adaptive management approach to monitoring and using the water resource in this watershed. They have also designated and are committed to long-term monitoring of this network of stations to ensure the quantity and health of this water ecosystem. The water licence will be limited to a 5-year term, with conditions to monitor and supply data in support of their use. Under the water withdrawal ranges and the staged withdrawal DECISION NO. 2012-WAT-013(c) Page 24 systems proposed broader impacts to the ecological values and to FNFN’s treaty rights to hunt, fish and trap are not anticipated. 6. Broad cultural impacts As noted in 1 to 5 above, no impacts to FNFN’s treaty rights to hunt, fish and trap are anticipated based on the mitigation measures in place, including, but not limited to, the proposed staged withdrawal system. Adequacy of Consultation Consultation was initiated with FNFN on June 2, 2009, and since that time, communication has included various meetings, phone calls, and e-mails related to this file, including a flight over the proposed project area. Most recent attempts to engage FNFN were outlined in an April 3, 2012 letter to the FNFN Lands Department. The FNFN raised concerns as outlined above, and has indicated that they believe the consultation process was not sufficient, and that the province does not adequately understand their rights and the impacts this project would have on their rights. These most recent communications have raised no new concerns. Through a review of the consultation undertaken, I believe that consultation has been undertaken according to Haida principles, and as outline[d] in provincial procedures, and that no impacts to FNFN treaty rights are anticipated, as outlined above, under the heading, “Issues Considered in my Decision”. Therefore, I believe that consultation has been adequate in relation to the decision before me. [91] On June 7, 2012, at Nexen’s request, the Oil and Gas Commission cancelled Nexen’s section 8 approval, which would have expired in October 2012. [92] Meanwhile, in March and April 2012, Mr. Wagner of Nexen had received two reports from Matrix Solutions Inc. (“Matrix”). Nexen hired Matrix to replace AMEC as Nexen’s contractor for conducting hydrological studies and monitoring. The 2012 reports from Matrix contained data and analysis regarding the hydrological data collected in 2011, but Nexen did not provide those reports to the Manager or the First Nation before the Licence was issued. This is important because the 2012 Matrix reports were the first presentations of the data and rating curve for point DS-1, which was only established in 2011 and which was intended to be the primary station to estimate water flow according to the methodology outlined in the 2011 Water Plan, and which the Licence relies on. The appeal [93] On June 11, 2012, the First Nation appealed the Licence. The First Nation appealed on two main grounds: (1) the Manager failed to adequately assess the potential direct and cumulative impacts of the Licence on the Tsea River watershed; and (2) the Manager failed to uphold the honour of the Crown through meaningful consultation with the First Nation before issuing the Licence. In its Notice of Appeal, the First Nation submits that the withdrawal of 2.5 million cubic metres of water per year from North Tsea Lake in accordance with the Licence “represents a serious infringement of FNFN’s Treaty Rights, warranting consultation with the FNFN DECISION NO. 2012-WAT-013(c) Page 25 at the highest and deepest level, and the careful development of meaningful accommodation measures.” [94] As the licensee, Nexen was offered, and accepted, Third Party status in the appeal. [95] When the Licence was issued, Devon Canada Corporation held a water licence which authorized it to withdraw 115,716 cubic metres of water per year from the Tsea River downstream from Nexen’s point of withdrawal, and it had an application to withdraw an additional 600,000 cubic metres per year from the Tsea River. Consequently, the Board offered Devon Canada Corporation participant status in the appeal, which it accepted. [96] Similarly, at that time, EOG Resources Canada Inc. held a short-term water use approval in the Tsea River watershed. It was offered, and accepted, limited participant status to monitor the proceedings. The preliminary applications [97] When the First Nation filed its Notice of Appeal, it also requested a stay of the Licence pending the Board’s decision on the merits of the appeal. Shortly after receiving the Notice of Appeal, the Board set a schedule for the parties and participants to provide written submissions on the stay application. [98] When the Manager provided his submissions on the stay application, he also submitted that the First Nation did not have standing under section 92(1) of the Water Act to appeal the Licence. [99] As a result, the Board suspended the stay submissions pending a decision on the First Nation’s standing. The Board provided all parties and participants with an opportunity to make written submissions on the issue of standing. The Board’s decisions on the preliminary applications [100] In a decision dated November 6, 2012, the Board found that the First Nation had standing to appeal the Licence under section 92(1)(b) of the Water Act: Chief Kathi Dickie et al v. Assistant Regional Water Manager (Decision No. 2012-WAT- 013(a)). Also on November 6, 2012, the Board advised that it would be resuming the written hearing of the First Nation’s application for a stay. [101] In a decision dated December 5, 2012, the Board denied the First Nation’s application for a stay of the Licence pending the Board’s decision on the merits of the appeal: Chief Kathi Dickie et al v. Assistant Regional Water Manager (Decision No. 2012-WAT-013(b)). Events after the appeal was filed – the Order and the 2013 Water Plan Addendum [102] Northeastern B.C. experienced drought conditions and extremely low river levels during the summer of 2012. [103] On July 26, 2012, the Oil and Gas Commission issued an Information Bulletin to oil and gas operators, including Nexen, alerting them to low river levels in northeast B.C. [104] On August 2, 2012, the Oil and Gas Commission issued a Directive to oil and gas operators, including Nexen, suspending water withdrawals under section 8 approvals on most rivers and lakes in northeast B.C., due to low precipitation and DECISION NO. 2012-WAT-013(c) Page 26 low river flows. Withdrawals of stored water from dugouts were not suspended. The suspension continued until January 23, 2013 for most water bodies in the Horn River Basin. [105] By a letter dated August 10, 2012, Ms. Lowe expressed concern to the Ministry regarding ongoing withdrawals under water licences, given the Oil and Gas Commission’s suspension of withdrawals under short-term approvals. In addition, she advised that during a flight over the Tsea Lakes, First Nation’s staff observed water discharging into Nexen’s dugout. She requested confirmation as to whether Nexen was withdrawing water from North Tsea Lake under the Licence, and if so, that the Ministry provide the flow monitoring data from the Tsea River and the water level in North Tsea Lake as soon as possible. [106] On August 25, 2012, Nexen ceased pumping water from North Tsea Lake. [107] On October 15, 2012, the Ministry requested Nexen’s data on water withdrawals under the Licence from May 11 to September 30, 2012. [108] On November 21, 2012, the Ministry received Nexen’s water withdrawal data. A review of that data led the Ministry to request further information from Nexen, which it provided in late December 2012. [109] On January 9, 2013, the Ministry received a report titled “2012 Open Water Season Flow on the Tsea River”, prepared by Nexen’s contractor, Matrix, (the “2013 Matrix Report”). The 2013 Matrix Report concluded that beaver activity in the Tsea River, combined with in-channel weed growth, created “backwater effects” that caused the water level to increase and the water flow to decrease at DS-1. Once backwater effects were occurring, the rating curve became unreliable for estimating water flow based on water depth at that location. [110] The Ministry referred Nexen’s data and the 2013 Matrix Report to Mr. Chapman of the Oil and Gas Commission. Mr. Chapman provided a technical review on January 21, 2013 (the “Chapman Review”). The Chapman Review states, in part, as follows: The information provided by Nexen on November 21 shows the discharge of the Tsea River below Tsea Lake (at a site referred to by Nexen as DS-1) falling steadily and rapidly from June 13 to July 8, 2012…. By July 5, 2012, the Tsea River was below the “zero withdrawal” threshold of 0.351 m3/s. Nexen’s data then reports the discharge as beginning to rise on July 8, 2012, and continuing to rise slowly and steadily until the end of the data record on September 17, 2012…. This increase in discharge on the Tsea River at site DS-1 as reported by Nexen is occurring at a time when the water level on North Tsea Lake continues to fall steadily…. … The gradual and continual increase in water level on the Tsea River at DS-1 appears to be consistent with a backwater effect. … The information presented by Nexen… provides discharge measurements made for Nexen by Matrix Solutions Inc. on June 12, June 18, July 12, and August 18, 2012. … The measurement made on July 12, 2012 recorded a discharge of 0.054 cubic metres per second DECISION NO. 2012-WAT-013(c) Page 27 at site DS-1. This is only 15% of the “zero withdrawal” threshold specified in Nexen’s water licence. Despite this field measurement that discharge of the Tsea River was well below the threshold at which Nexen should have ceased withdrawals, this did not cease until August 26. The measurement made by Matrix Solutions Inc. on August 18, 2012, recorded a zero discharge at site DS-1, with a field note saying “no detectable flow”. Despite this recording of zero discharge, Nexen continued to withdraw for another eight days. The Jan 2013 Matrix Solutions Inc. report acknowledges that the rating curve at site DS-1 was no longer valid after July 7, 2012, due to backwater effects associated with beaver activity. As a point of professional practice, this should now be clear… that the process by which they are determining discharge at site DS-1 is no longer valid and cannot be used as the basis by which Nexen determines if it is compliant with the requirement to cease withdrawing water when the flow at site DS-1 falls below 0.351 m3/s. … … During this time, Nexen continued to withdraw water from North Tsea Lake. Data provided by Nexen indicate that they withdrew a total of 182,785 cubic metres of water over a 45 day period of July 12 – August 25, 2012, when there should have been no withdrawals. … … During the period of July 12 – August 25, 2012, the water level on North Tsea Lake fell by 0.45 metres (45 cm) as Nexen withdrew water. During the full period of Nexen’s withdrawing from North Tsea Lake (May 4 – Aug 25, 2012) the water level on North Tsea Lake dropped a total of 0.53 metres (53 cm). This is a notable item. As a condition of short term water use approvals issued by the Oil and Gas Commission for withdrawals from lakes, lake drawdown is limited to 10 cm. … [111] In conclusion, Mr. Chapman recommended that conditions be added to the Licence requiring frequent channel inspections during the open water season, and steps to address beaver activity within 1 km upstream and downstream of the flow monitoring gauge. He also recommended that the Licence should require Nexen to do real-time monitoring of the water level at their primary Tsea River monitoring gauge and on North Tsea Lake during the open water season. [112] On February 4, 2013, Robert Kopecky, Regional Water Manager for the Northeast Region, responded to the First Nation’s August 10, 2012 letter. Mr. Kopecky apologized for the delay in responding, and advised that he would provide further information pending completion of the review of Nexen’s data. [113] On the same day, Mr. Kopecky wrote to Nexen. He stated that the Ministry had reviewed Nexen’s data, and had “significant concerns” about Nexen’s water withdrawals during the summer of 2012. He noted that Nexen had breached the Licence given that “the discharge of the North Tsea River below North Tsea Lake fell below the ‘zero withdrawal’ threshold on July 5th, 2012 and remained below this threshold until the end of record in mid-September, 2012.” He notified Nexen that DECISION NO. 2012-WAT-013(c) Page 28 the Ministry was considering issuing an order under the Water Act that would require Nexen to comply with a number of requirements before it commenced water withdrawals under the Licence in 2013. [114] On March 5, 2013, Mr. Kopecky advised the First Nation of the results of the Ministry’s review, and he invited the First Nation to provide comments on a draft order that he proposed to issue to Nexen. On that same day, the Ministry provided the First Nation with the flow monitoring data from the Tsea River and the water level data from North Tsea Lake from the summer of 2012. [115] On April 18, 2013, Mr. Kopecky issued an order to Nexen under sections 85(2) and 88 of the Water Act (the “Order”), and he provided a copy of the Order to the First Nation. The Order required Nexen to implement six “remedial measures within the adaptive management framework under the Water Development Management Plan (WDMP), described in… [the Licence]… prior to resuming its licensed diversion and use of water in the 2013 season”. The remedial measures include: the installation of real-time hydrometric gauges on the Tsea River at two points downstream from DS-1 (i.e., DS-2 and DS-3); describing steps that will be taken to ensure that the integrity of the hydrometric monitoring is maintained during unforeseen events that compromise the validity of the rating curve; daily field measurements during low flow periods to verify real time hydrometric gauge data; monthly recording and quarterly reporting of water withdrawals; and, the retention of an independent environmental monitor to observe, analyze, audit and report on aspects of the Water Plan that relate to hydrologic, ecological, and environmental monitoring and reporting under the Licence. [116] On May 13, 2013, Nexen provided the Ministry with a 13-page addendum to the 2011 Water Plan (the “2013 Water Plan Addendum”), to address the remedial measures required by the Order. [117] On May 18, 2013, Mr. Kopecky advised Nexen that it had met the requirements of the Order, and could resume withdrawals from North Tsea Lake. The parties’ positions on the appeal [118] The First Nation submits that the Manager relied on incomplete and inadequate information and analysis when he decided to issue the Licence, and as a result, the Licence is flawed and creates serious risks for the Tsea River watershed and the First Nation’s treaty rights. The First Nation submits that, as a result of those flaws, it was impossible for the Manager to assess or mitigate the potential effects of water withdrawals under the Licence. Furthermore, the First Nation submits that the Licence does not serve the purposes of the Water Act in preserving the public interest in water. [119] In addition, the First Nation argues that the provincial Crown breached its duty to consult with the First Nation. The First Nation submits that the Crown failed to properly ascertain the First Nation’s treaty rights and assess the potential impacts of the Licence on those rights, and therefore, the Crown failed to understand the scope of its duty to consult with the First Nation. Moreover, the Crown failed to act in good faith, establish a process for consultation, and consider the First Nation’s capacity to engage in consultation. [120] The First Nation also raises concerns regarding the Order issued in 2013. Among other things, the First Nation argues that the Crown breached its duty to consult with the First Nation in respect of the Order. DECISION NO. 2012-WAT-013(c) Page 29 [121] The Manager submits that he engaged in a comprehensive analysis of the application for the Licence. The Manager submits that the 2011 Water Plan was independently assessed and reviewed by Dr. Carey, who concluded that the water withdrawals would be sustainable. The Manager acknowledges that the Licence was not perfect, but he submits that there was sufficient scientific certainty for the Licence to be issued, and it was intended that the remaining scientific uncertainty would be addressed through ongoing monitoring and adaptive management. The Manager also submits that the Licence has been enhanced by the Order, which imposed additional conditions on Nexen. [122] In regard to consultation with the First Nation, the Manager submits that the level of consultation required in this case was at the low end of the spectrum, because the diversion and use of water under the Licence will not affect the First Nation’s exercise of its treaty rights, either generally or at North Tsea Lake. The Manager submits that, in this context, the consultation process was adequate. In addition, the Manager argues that the First Nation failed to provide specific information on how their rights may be impacted by the Licence, and that the First Nation’s claims of impacts on their treaty rights are undefined and speculative. Further, the Manager submits that the Licence conditions address potential hydrological and environmental impacts, and provide adequate accommodation of the First Nation’s rights. [123] Nexen submits that the Manager’s jurisdiction to issue a licence under section 12(1) of the Water Act is focused on allocating water rights, and in doing so, the Manager has the discretion to balance public interests in environmental protection and industrial development. Nexen submits that the Licence reflects the Manager’s balancing of those interests, as the Licence grants rights to use water for industrial and storage purposes, subject to conditions that provide environmental safeguards. Nexen submits that the Water Act does not require a cumulative effects assessment, and it is unlike environmental assessment legislation that requires statutory decision-makers to apply prescribed environmental standards or principles. Moreover, Nexen submits that the Manager obtained comments regarding Nexen’s proposal from professionals within and outside of government before he issued the Licence. [124] In regard to consultation, Nexen submits that, in addition to the Ministry’s consultation efforts, Nexen consulted with the First Nation for three years, and it funded Dr. Carey’s review of the 2011 Water Plan at the First Nation’s request. Nexen argues that the First Nation alleges speculative impacts on its treaty rights, and has failed to provide substantive information to establish that the Licence may have a prima facie effect on its treaty rights. Nexen submits that the Manager correctly assessed the nature and extent of the First Nation’s treaty rights in the Tsea Lakes area, and he properly considered the potential effects of the Licence on those rights. Nexen also submits that many of the First Nation’s concerns have been substantially accommodated. [125] In regard to remedies, Nexen submits that suspending or reversing the Licence would cause substantial prejudice to Nexen, and there is no need to send the matter back to the Manager with directions to amend the Licence, which has already been amended as a result of the Order. Nexen submits that the appeal should be dismissed. Alternatively, if the Panel finds that the consultation in this DECISION NO. 2012-WAT-013(c) Page 30 case was inadequate, Nexen submits that the Panel should issue a declaration to that effect. [126] Neither Devon Canada Corporation nor EOG Resources Canada Inc. provided submissions on the merits of the appeal.

ISSUES

[127] The Panel finds that, in deciding the appeal of the Licence, it is beyond the Board’s jurisdiction to make findings regarding the merits of the Order, including the adequacy of any consultation that was required regarding the Order. The Order is a separate decision from the Licence. Specifically, the Order was issued almost one year after the Licence, was made pursuant to different statutory powers under the Water Act, and is a separate appealable decision under the Water Act. The First Nation did not appeal the Order, despite the fact that the First Nation was invited to provide comments on the draft Order, and the First Nation received a copy of the Order when it was issued. Consequently, the Panel has considered the Order, and the events leading up to or arising from the Order, only to the extent that those matters are relevant to the appeal of the Licence. [128] In deciding this appeal, the Panel has addressed the following issues: 1. Whether the Licence should be reversed because it is inconsistent with the purposes of the Water Act, there is inadequate data to properly assess its impacts, and/or it is based on a flawed design. 2. Whether the provincial Crown’s consultation with the First Nation before the Licence was issued was inadequate because the Crown failed to ascertain the nature and scope of the First Nation’s treaty rights, failed to properly assess the potential impacts of the Licence on the First Nation’s treaty rights, and/or failed to properly discharge the duty to consult. 3. Whether the Panel should order the Ministry to pay the First Nation’s costs associated with the appeal.

RELEVANT LEGISLATION

[129] The following sections of the Water Act are relevant to this appeal. Other relevant sections are reproduced where they are referred to in the body of this decision. Rights acquired under licences 5 A licence entitles its holder to do the following in a manner provided in the licence: (a) divert and use beneficially, for the purpose and during or within the time stipulated, the quantity of water specified in the licence; (b) store water; (c) construct, maintain and operate the works authorized under the licence and necessary for the proper diversion, storage, carriage, distribution and use of the water or the power produced from it; (d) alter or improve a stream or channel for any purpose; DECISION NO. 2012-WAT-013(c) Page 31 (e) construct fences, screens and fish or game guards across streams for the purpose of conserving fish or wildlife.

…

Powers of comptroller or regional water manager respecting applications 12 (1) With respect to an application, whether objections to it are filed or not, the comptroller or the regional water manager may (a) refuse the application, (b) amend the application in any respect, (c) grant all or part of the application, (d) require additional plans or other information, (e) require the applicant to give security for the purposes and in the amount and form the comptroller or the regional water manager considers in the public interest, and (f) issue to the applicant one or more conditional or final licences on the terms the comptroller or the regional water manager considers proper.

DISCUSSION AND ANALYSIS

1. Whether the Licence should be reversed because it is inconsistent with the purposes of the Water Act, there is inadequate data to properly assess its impacts, and/or, it is based on a flawed design.

First Nation’s submissions [130] The First Nation submits that the Manager made a series of errors when he decided to issue the Licence. Among other things, he failed to gather the information and perform the analyses necessary to understand and assess the potential hydrological and environmental effects of the proposed water withdrawals. He also failed to consider all relevant factors, including cumulative environmental impacts, and potential impacts on groundwater and key species such as moose and beaver. The First Nation argues that the Licence contains no environmental monitoring or mitigation obligations, and does not incorporate the environmental monitoring proposed in the 2011 Water Plan. The First Nation submits that, as a result of those errors, the Licence contains fundamental defects, including water withdrawal parameters that are unrelated to the conditions in North Tsea Lake and the Tsea River. [131] More specifically, the First Nation maintains that: • the Licence and the 2011 Water Plan are fundamentally flawed because the hydrological data in the Tsea River basin was insufficient in quality and quantity to determine the appropriate amount of withdrawals and the base environmental flow (Zero Withdrawal Limit) under the flow-weighted withdrawal scheme; • Nexen did not disclose the March and April 2012 Matrix reports to the Manager before he issued the Licence, and those reports contained relevant DECISION NO. 2012-WAT-013(c) Page 32 information – specifically, they found that the relationship between the Tsea River and the comparator streams in the region was insufficient to predict water flows at DS-1; • the flow-weighted withdrawal scheme is unsuitable for North Tsea Lake given the difficulties in developing a flow rating curve and establishing a flow gauging station for North Tsea Lake, and this inadequacy was apparent in 2012 when water withdrawals continued after the Zero Withdrawal Limit was reached, such that North Tsea Lake was drawn down by 0.53 metres; • substituting data from comparator watersheds (in particular Adsett Creek) or using the NEWT model to justify water withdrawals in the ungauged Tsea River watershed is inadequate; and • the flow-weighted withdrawal scheme is the only portion of the 2011 Water Plan referred to in the Licence, and the 2011 Water Plan is not a legal document and is no substitute for an enforceable withdrawal scheme in a water licence. [132] The First Nation submits that the Licence’s full impact on water resources remains unknown because there is insufficient information to understand the hydrology of the Tsea Lakes and River system, or calculate a water mass balance for North Tsea Lake. In addition, under the 2013 Water Plan Addendum, the Licence still relies on a flow rating curve for DS-1 to determine the allowable rate of water withdrawals from North Tsea Lake, despite the fact that DS-1 proved to be unreliable in 2012. [133] The First Nation also submits that the Licence is contrary to the purposes of the Water Act. The First Nation argues that the purposes of the Water Act include the allocation and regulation of water rights to preserve the public interest in water, and the conservation and protection of water and riparian resources. The First Nation submits that the Board has previously held that the first relevant factor in a decision under the Water Act is “the impact or effect of an application on water flow and hydrology.” (0707814 BC Ltd. v. Assistant Regional Water Manager, [2008] B.C.E.A. No. 1 (QL) [0707814 BC Ltd.], at para. 156). The First Nation submits that those impacts are unknown regarding the Licence, and therefore, the Licence is contrary to the public interest in water. Moreover, the First Nation submits that the Licence is contrary to the public interest in water because it allocates up to 2.5 million cubic metres of water per year to Nexen, which is more than double the amount of water per year that Nexen claims to need for its operations. Moreover, Nexen was only able to pump 570,999 cubic metres in 2013 before the Zero Withdrawal Limit was reached. [134] The First Nation submits that the Board has previously held that the Water Act is a piece of environmental legislation that seeks to address broader stream health issues by protecting riparian habitat (0707814 BC Ltd. at para. 157; Burgoon v. Regional Water Manager, [2010] 53 C.E.L.R. (3d) [Burgoon], at para. 136). The First Nation submits that the environmental values relevant to the Water Act’s environmental purpose include “water quality, quantity, usage, and preservation, as well as the broader vegetation and natural environment in or near a stream or stream bed and banks” (0707814 BC Ltd., at para. 159). The First Nation argues that the Licence is inconsistent with this environmental purpose because the inadequate data and defective design of the monitoring program make it impossible DECISION NO. 2012-WAT-013(c) Page 33 to identify, assess, and manage those impacts. In this regard, the First Nation contends that Nexen: • did not collect environmental data about pre-withdrawal conditions because studies of water quality and wetland vegetation did not start until 2011, when Nexen withdrew 800,000 cubic metres of water under its section 8 approval; • did not collect adequate baseline data about fish and fish habitat before water withdrawals began; • did not collect any baseline data about other important environmental features such as the beaver population and habitat, or the moose population and habitat in the area; and • did not set forth a monitoring plan capable of identifying and assessing the environmental impacts of withdrawals. [135] The First Nation submits that, in light of these defects, it will be impossible to determine the environmental effects of the Licence, and it is impossible to claim that the Licence protects stream health or riparian habitat values in a manner that is consistent with the purposes of the Water Act. [136] The First Nation also submits that the Manager relied heavily on professionals hired by Nexen to collect the information necessary to support the application for the Licence, contrary to the public interest in water. The First Nation submits that, unlike some environmental legislation, the Water Act does not establish a “professional reliance” model of regulation, and does not explicitly assign responsibilities to specific types of registered professionals. Further, the First Nation maintains that, even if the Water Act contained a regulatory scheme with professional reliance and such reliance was warranted in this case (which the First Nation disputes), the Licence still presents serious and poorly understood risks to the hydrology and ecology of the Tsea Lakes and River system. [137] Based on the fundamental flaws in the Licence, the First Nation requests that the Board reverse the Licence. Alternatively, the First Nation requests that the Board suspend or reverse the Licence, and send the matter back to the Manager with numerous directions. The Panel has summarized the directions that the First Nation requests regarding the technical aspects of the Licence (the First Nation requested additional directions regarding the consultation issue, which are set out later in this decision), as follows: • direct Nexen to: • quantify the uncertainty in all measurements, calculations, and estimates in accordance with standard scientific practice; • make conservative assumptions about all flow data on the basis of confidence intervals defined by reference to relevant uncertainty bounds; • calculate an appropriate water mass balance; • propose an alternate point(s) of diversion outside of the Tsea Lakes, that would have fewer and less significant impacts on the First Nation’s treaty rights; and if an alternate diversion point is located on a lake, the Manager will consider the drawdown in the context of both the natural range of water levels and the frequency of lower levels in that lake; DECISION NO. 2012-WAT-013(c) Page 34 • propose a plan to address any potential backwater effects at the point(s) of diversion to ensure reliable and accurate measurement of the water level and flow; • collect (or direct the Manager to collect) and provide pre-operational data about the alternate point(s) of diversion and proposed water withdrawal program that is sufficient for the Manager to assess potential hydrologic impacts from the water withdrawals; • establish a formal monitoring plan that contains a comprehensive study design for detecting changes in important ecological values, determining the cause of those changes, and dealing with uncertainty; • direct the Manager to: • establish new daily and annual maximum withdrawal volumes based on water availability at the point(s) of diversion, Nexen’s annual operating requirements of 1 to 1.2 million cubic metres, and any other relevant factors based on meaningful consultation with the First Nation; • establish new withdrawal parameters by reference to the hydrograph at the new withdrawal point, the relevant scientific literature on in-stream flow needs, and the requirements of any critical species at the new location; • collect (or direct Nexen to collect) baseline information to assess ecological impacts of the water withdrawals, including impacts on wetland vegetation, fish and fish habitat, and critical species and their habitat; • examine the effect of proposed withdrawals together with other activities that may have ecological or hydrological effects on the lake or stream, such as the construction of roads, bridges or pipelines; and • revise the Licence to explicitly incorporate key operational elements of Nexen’s withdrawal program, including any monitoring program.

Manager’s submissions [138] The Manager submits that he considered the potential environmental and hydrological effects of the Licence in accordance with section 12 of the Water Act. He argues that he appropriately exercised his discretion to issue the Licence based on the information available to him. The Manager submits that there was sufficient information regarding potential environmental effects to issue the Licence, and Nexen has committed to, and undertaken, an intensive monitoring program to ensure that its operations do not adversely affect the Tsea River system, including monitoring potential impacts to fish and fish habitat, vegetation, wildlife, and groundwater. [139] Moreover, the Manager submits that the Board has the benefit of new evidence which demonstrates that the Licence provides a sustainable approach to water withdrawals. He argues that there is more than sufficient information available for the Board to conclude that the terms of the Licence, including the flow- weighted withdrawal approach as amended by the 2013 Water Plan Addendum, are appropriate and sufficiently protect environmental or “in-stream flow” needs. DECISION NO. 2012-WAT-013(c) Page 35 [140] The Manager acknowledges that northeast B.C. has relatively few stream gauges and is “data sparse” in terms of long-term stream flow records. He submits that, in these circumstances, Nexen took a reasonable approach in modeling the estimated flow of the Tsea River based on regional comparator streams, and applying an adaptive management approach whereby new data from the Tsea River would allow for improved management practices over time. The Manager argues that it would be impractical to require licence applicants to undertake lengthy monitoring programs to develop stream flow records over a number of years before a water licence could be issued. [141] The Manager maintains that, under the 2011 Water Plan, withdrawals are reduced as stream flow decreases, and withdrawals stop during critical low flow periods. The Manager submits that the Zero Withdrawal Limit is based on 30% of the average open season (i.e., ice-free season from May to October) discharge, and therefore, it is more conservative than the Tennant method (discussed further below), which is based on 30% of mean annual discharge. [142] The Manager notes that, in January 2012, Mr. Chapman provided a comparison of the estimated annual discharge for North Tsea Lake and the Tsea River at Geetla (DS-3) using the NEWT model, and those results were very similar to the results obtained from the model in the 2011 Water Plan. The Manager submits that the similarity between the results generated by the NEWT model and the 2011 Water Plan model gave him confidence in the data submitted by Nexen. [143] Regarding the reliability of the rating curve and the use of the water height gauging station at DS-1 to determine stream flow for the purpose of the Licence, the Manager submits that the 2011 Water Plan, together with the 2013 Water Plan Addendum, contain sufficient safeguards to confirm stream flows and determine the allowable withdrawal rates under clause (e) of the Licence. He notes that the 2013 Water Plan Addendum imposes additional monitoring requirements on Nexen, including installing real-time water gauges at two sites on the Tsea River (DS-2 and DS-3) in addition to the real-time gauge at DS-1, conducting daily field measurements during low flow periods to verify the data from water gauges, and retaining a qualified professional as an independent environmental monitor. [144] The Manager argues that, although he has discretion under section 12 of the Water Act to attach terms and conditions to a licence, he did not include ecological monitoring requirements in the Licence itself because he relied on the monitoring commitments in the 2011 Water Plan. The Manager submits that this approach was appropriate, and provides Nexen with flexibility to adjust the monitoring program within the adaptive management framework as more results and analysis become available. If the monitoring program had been made a term of the Licence, Nexen would have to apply for Licence amendments to make changes to the monitoring program, which imposes undue administrative burdens on all parties. [145] Regarding the purposes of the Water Act, the Manager submits that his jurisdiction under section 12 is focused on the allocation of water, and extends to consideration of the impacts of any proposed works and activities in the stream and stream channel, as well as conducting a supply/demand analysis of the water source. In terms of cumulative effects, the Manager submits that he considered the effect of Nexen’s application in the context of the total licensed water demand on the stream, including an existing licence held by Devon Canada Corporation and a pending licence application by it. In terms of total licensed demand, he also DECISION NO. 2012-WAT-013(c) Page 36 considered existing withdrawals upstream in the Tsea River watershed under section 8 approvals. The Manager submits that, unlike the Environmental Assessment Act, the Water Act does not require the consideration of cumulative environmental effects in water licensing decisions of this scale, and the cumulative impacts on resources other than water are not part of the Manager’s jurisdiction under the Water Act. In support of those submissions, the Manager referred to the Board’s decision in Chief Harry v. Assistant Regional Water Manager [2013], 2013 Carswell BC 431 [“Chief Harry”], at paras. 256-257. [146] In conclusion, the Manager submits that the application for the Licence was subject to a comprehensive analysis, and that Nexen’s proposal was independently assessed by Dr. Carey, who concluded that the proposed water withdrawals would be sustainable. The water withdrawals are subject to a monitoring program that adapts to real-time changes in stream flow, and the previous operational shortcomings in the monitoring program were addressed by the 2013 Water Plan Addendum. The Manager submits that, in all of the circumstances, Nexen’s application was properly reviewed, and the Licence was validly issued.

Nexen’s submissions [147] Nexen submits that there were no fatal or fundamental flaws in the methodologies used in the studies it conducted, and that the First Nation is asking for a standard of perfection to be met. Nexen contends that the studies it conducted provided a substantial body of data that reasonably identified and addressed the potential impacts of the Licence. Nexen argues that the criticisms of its studies are largely of a theoretical nature, are not site specific, and do not undermine the substance of the Licence regime. [148] Nexen submits that the withdrawal parameters under the Licence are sound. Nexen submits that it was appropriate for the Manager to use the Adsett Creek comparator data as a basis for a larger analysis to develop the 2011 Water Plan. Nexen submits that the Adsett Creek comparator data was subjected to various models including the Tennant method, the Modified Tennant method, and the Alberta Desk-top Q80 model (all of which are discussed further below), to establish conservative withdrawal parameters. Nexen argues that the NEWT analysis in early 2012 confirmed that the withdrawal parameters in the 2011 Water Plan were reasonably sound, and the Carey Report concluded that the approach in the 2011 Water Plan was “prudent and cautious.” Moreover, the data collected in real time at DS-1 is used to inform and refine Nexen’s approach to water withdrawals. Regarding the flow rating curve, Nexen submits that, although the rating curve became unreliable in the summer of 2012 due to backwater effects, the collection of more data in the Tsea watershed has allowed the rating curve to be updated and refined. Nexen submits that the current flow rating curve meets and exceeds the standards of the B.C. Resources Information Standards Committee (“RISC”)4.

4 The B.C. Resources Information Standards Committee establishes standards for natural and cultural resource inventories, including the collection, storage, analysis, interpretation and reporting of inventory data. Several of the reports presented by the parties refer to the B.C. RISC’s “Manual of British Columbia Hydrometric Standards”, published on March 12, 2009 by the Ministry of Environment. DECISION NO. 2012-WAT-013(c) Page 37 [149] Nexen submits that the adaptive management approach which is referred to in the 2011 Water Plan is relevant and consistent with accepted practices in areas that are “data sparse”, such as the Tsea River watershed. Nexen submits that the adaptive management regime involves focused data collection and analysis that may lead to changes in the water withdrawal parameters, followed by testing of new parameters. Nexen submits that the 2013 Water Plan Addendum enhanced the adaptive management approach by improving Nexen’s data monitoring and reporting, and imposing requirements to enhance the flow estimate for DS-1. Nexen acknowledges that the next logical step, once an adequate body of data is collected, is to select “keystone species” for monitoring and a “cause-and-effect analysis” under different water withdrawal scenarios. [150] Nexen also submits that the staged water withdrawal scheme under the Licence is far more cautious and responsive than a section 8 approval, which would simply require compliance with a 0.1 metre maximum drawdown of the lake level, and monthly and annual reporting. [151] Nexen acknowledges that the Water Act is environmental legislation in a general sense, but Nexen submits that the primary purpose of section 12 of the Water Act is to allocate water rights. Nexen submits that, in allocating water rights, the Manager has the discretion to balance two or more public purposes – environmental protection and industrial development in this case – provided that his decision-making process is fair and considered. Nexen submits that the Licence reflects such a balance, given that the Licence authorizes water diversion for “industrial (oilfield injection) and storage (non-power)” purposes, but also imposes numerous environmental requirements. [152] Regarding the jurisdiction to consider environmental impacts in the context of a licensing decision under section 12 of the Water Act, Nexen contends that the Board has previously held that section 12 contemplates “limited” environmental jurisdiction: Anderson v. British Columbia (Assistant Regional Water Manager), 2002 Carswell BC 2565, at para. 96. Nexen submits that, in Anderson, the Board held that the licensing provisions in the Water Act primarily focus on allocating, protecting, preserving and managing water, as well as considering impacts on fish habitat. Nexen argues that its application for the Licence was not required to undergo an environmental assessment under the Environmental Assessment Act, and therefore, a formal and complete assessment of its environmental impacts is not required. [153] Further, Nexen submits that the Board held in Burgoon that, under the Water Act, a manager may consider whether a proposed water licence will increase the risk of hazards to the water resource or environmental values in the area. Nexen submits that, in the present case, any risk has been minimized by the Licence and the water withdrawal parameters. [154] Nexen contends that no adverse effects have been identified as resulting from the water withdrawals during two summers of operations under the Licence, and the First Nation has provided no evidence of possible or real adverse effects on fish or fish habitat. Moreover, Nexen argues that the Tsea River watershed is intensively monitored, including: three flow gauges in the Tsea River; two flow stations in Gote Creek, a tributary to the Tsea River; two lake level gauges; three climate stations; real-time water quality monitoring; fish and fish habitat monitoring; shallow groundwater monitoring; and wetland vegetation monitoring. DECISION NO. 2012-WAT-013(c) Page 38 [155] In conclusion, Nexen submits that there is no need to send the Licence back to the Manager with directions to add new conditions, and that the annual review of the Licence is the appropriate forum for assessing and evolving the Licence regime. Alternatively, Nexen advises that it does not object to the Panel directing the Manager to do the following: • bring together subject matter experts to assess the withdrawal parameters, and design a cause-and-effect study for keystone species; • invite the First Nation to the next annual review of the Licence; • consult over capacity funding to enable the First Nation to bring one or two experts to the annual review of the Licence; • assess whether certain elements of the 2011 Water Plan and the 2013 Water Plan Addendum should be directly incorporated into the Licence; • consider whether the 2.5 million cubic metre maximum is too high; • consider the need for more frequent and regularly scheduled meetings to review the Licence; • consider developing a water mass balance for the watershed; • consider a parameter regarding the water level in North Tsea Lake; and • consider whether different point(s) of diversion may be appropriate.

Panel’s findings [156] Many of the First Nation’s submissions on this issue assert that the Manager committed errors, and the Licence is flawed due to inadequacies in the information and analysis that the Manager considered. The First Nation also frames those arguments in the context of the Water Act’s purposes. The Panel finds that these arguments raise three general points that need to be addressed before considering the technical merits of the Licence: • What is the nature of the appeal process, and is the Panel limited to reviewing the Manager’s decision for errors? • What are the purposes of the Water Act, particularly in regard to the water licensing scheme? • In the context of the Water Act, how much information is required to properly assess a water licence application?

A. The nature of the appeal process, and is the Panel limited to reviewing the Manager’s decision for errors? [157] The Board’s powers and procedures for hearing and deciding an appeal under the Water Act are not limited to reviewing the appealed decision, or the decision- making process that led to that decision, for errors. The Board is authorized under section 92(7) of the Water Act to conduct an appeal as a new hearing. As such, the Panel may consider evidence that was not before the Manager, as well as any information that the Manager considered. Indeed, in the present appeal, the evidence before the Panel consisted of 19 days of oral evidence (over 2,000 pages of transcript) and 42 exhibits, some of which were short documents or maps, and some were multi-volume sets running to hundreds or thousands of pages. Both DECISION NO. 2012-WAT-013(c) Page 39 expert opinions and published hydrological literature were included in the evidence provided to the Panel. Moreover, under section 92(8) of the Water Act, the Board has broad remedial powers in deciding an appeal. In the present case, the Panel may make any decision that the Manager could have made and that the Panel considers appropriate in the circumstances. [158] Consequently, the Panel is not limited to determining whether there were errors or inadequacies in the Manager’s decision-making process or his decision to issue the Licence. Rather, the Panel is entitled to consider the technical merits of the Licence based on all of the relevant information presented at the appeal hearing, including information that became available after the Licence was issued, and the changes that were made in the 2013 Water Plan Addendum. As such, the Panel’s findings on the technical merits of the Licence will focus on assessing the extensive body of evidence that is before the Panel, rather than simply deciding whether the Manager’s decision or his decision-making process was flawed. [159] However, in regard to Issue 2, the Panel notes that the Board, as a quasi- judicial tribunal, does not conduct consultations with First Nations. Thus, the Panel’s decision regarding the adequacy of the provincial Crown’s consultations with the First Nation involves reviewing the information that was available to the Manager, and the adequacy of the consultations that occurred, before the Licence was issued.

B. The purposes of the Water Act and the statutory framework for licensing [160] To determine the purposes of the Water Act, particularly in regard to licensing, the Panel has reviewed the provisions of the Water Act that regulate and manage the use of surface water. Section 2 of the Water Act states: Vesting water in government 2 (1) The property in and the right to the use and flow of all the water at any time in a stream in British Columbia are for all purposes vested in the government, except only in so far as private rights have been established under licences issued or approvals given under this or a former Act. (2) No right to divert or use water may be acquired by prescription. [161] As such, the water in a stream is a public resource, but private rights to use water in a stream may be granted under the Water Act. A “stream” is broadly defined in section 1 of the Water Act, and “includes a natural watercourse or source of water supply, whether usually containing water or not, and a lake, river, creek, spring, ravine, swamp and gulch”. A person may acquire rights to use water in a stream for a number of purposes defined in section 1 in the Water Act, including “industrial purpose” and “storage purpose”. Licences issued under section 12 of the Water Act may grant long-term rights to use water in a stream (section 8 approvals previously granted rights for one year or less, and now grant rights for two years or less). Part 2 of the Water Act contains numerous provisions that specify who may acquire licences, what conditions may be imposed in licences, the procedure for acquiring licences, and the rights and responsibilities under a licence, among other things. [162] Thus, the main purpose of the licensing scheme in the Water Act is to allocate and regulate private rights to use water in a stream. The Board previously DECISION NO. 2012-WAT-013(c) Page 40 reached this conclusion in Murray Wood v. Engineer under the Water Act (Decision No. 2008-WAT-003(b), March 19, 2009) at para. 40: Based on the relevant statutory provisions, the Panel finds the main purpose of the licensing provisions in the Water Act is to control and regulate the use of water for beneficial purposes. The Panel finds that this approach is consistent with the findings in DeBeck [DeBeck (Re), [1976] 72 D.L.R. (3d) 581 (B.C.S.C.)] at paragraph 12, where the Court stated that the main purpose of the licensing provisions was to “control and regulate the use of water for beneficial purposes and to impose an annual fee for that use.” [underlining added] [163] However, in deciding whether to issue a licence, the potential effects of the licensed water use on aquatic and riparian species and their habitat may be a relevant consideration. Water is a finite resource which may be subject to competing demands from private users, and adequate water quantity and quality is critical for maintaining aquatic ecosystems, including fish and fish habitat. Licensed water use may affect not only the amount of water available in a stream, but also the physical characteristics of the stream channel and banks. For example, under section 5 of the Water Act, the rights granted under a licence may include the right to alter a stream or channel. Section 1 of the Water Act defines “changes in and about a stream” to mean: (a) any modification to the nature of a stream including the land, vegetation, natural environment or flow of water within a stream, or (b) any activity or construction within the stream channel that has or may have an impact on a stream; [underlining added] [164] Section 1 also defines “stream channel” to mean “the bed of a stream and the banks of a stream, whether above or below the natural boundary and whether usually containing water or not, including all side channels”. Thus, the impacts of licensed water use on the nature of a stream or stream channel (i.e., the bed and banks of a stream) are relevant considerations when assessing an application for a water licence. The inclusion of the words “land”, “vegetation” and “natural environment” in reference to the phrase “nature of a stream” indicates that impacts on the land, vegetation and natural environment in and about a stream’s bed and banks are relevant considerations. Similarly, section 42 of the Water Regulation provides for the protection of “habitat” when changes are made in and about a stream, and “habitat” is defined in section 36 of that regulation as follows: “habitat” means the areas in and about a stream including (a) the quantity and quality of water on which fish or wildlife depend directly or indirectly in order to carry out their life processes, and (b) spawning grounds and the nursery, rearing, food supply and migration areas; [165] In Burgoon, at paras. 136 to 137 the Board recognized that it is appropriate to consider impacts on habitat in and about a stream when considering applications to make changes in and about a stream: DECISION NO. 2012-WAT-013(c) Page 41 … The Water Act is primarily legislation to allocate, protect, preserve and manage water as a resource. However, there are indications that the Act also seeks to address broader stream health issues by protection of riparian habitat values. … The Panel agrees that when considering an application to, among other things, make changes “in or about a stream” under the Water Act, a regional water manager must weigh the applicant’s stated purpose for the changes to the stream against the impacts to the water resources and the environmental values of the affected area. [underlining added] [166] Similarly, in 0707814 BC Ltd., the Board stated at para. 157: Thus, the Panel finds that the Water Act is not limited to the relatively simple issues of water use and flow, it reflects a broader legislative intent to protect various aspects of the natural environment: water quality, quantity, usage, and preservation, as well as the broader vegetation and natural environmental in or near a stream or stream bed and banks. [underlining added] [167] In addition, the Panel notes that most water licences authorize certain works, such as water pumps, water pipelines, water storage pits, or dams, associated with the use of the water under the licence. The environmental impacts of those works may also be relevant considerations in a licensing decision. [168] In regard to cumulative environmental impacts, the Manager testified that he considered the total water demand on the water source from existing and pending water licences and section 8 approvals. The Panel finds that it is consistent with the purposes of the Water Act to consider the total demand from all authorized water uses on the water source, and the impact that the total demand may have on stream flow as well as habitat in and about the stream. [169] However, the Panel finds that the Water Act does not require that licensing decisions consider environmental impacts which do not arise from the licence itself. In Chief Harry, the Board held as follows at para. 256: The Panel concludes that there is no foundation in the law for a determination that the Manager was obliged, in the circumstances of this Commercial Water Licence application, to consider the broad cumulative environmental impacts of human activity upon the Bear River. Rather, the Manager was authorized, and obliged, by the Water Act to consider the impacts, including environmental impacts, of this Commercial Water Licence application on water resources, fish and aquatic habitat in the Bear River, and on any licensees, applicants for licences, and riparian owners on the Bear River. [underlining added] [170] Applying the above reasoning to the present case, the Panel finds that there is no basis under the Water Act for a manager, in assessing a water licence application, to consider the broad cumulative environmental effects of oil and gas developments, such as roads, gas pipelines and gas wells, in the watershed. Those DECISION NO. 2012-WAT-013(c) Page 42 activities, and their environmental impacts, are regulated under other legislation, including the Oil and Gas Activities Act. Consequently, the Panel finds that, in deciding the present appeal, the Board has no jurisdiction to order the Manager or Nexen to “examine the effect of proposed withdrawals together with other activities that may have ecological or hydrological effects on the lake or stream, such as the construction of roads, bridges or pipelines,” as requested by the First Nation. [171] In summary, the Panel finds that the Water Act serves multiple purposes, and licensing decisions made under section 12 involve allocating and regulating private rights to use water in a stream while taking into account the potential impacts of the licensed water use and any licensed works, including potential impacts on stream flow, other licensees, and aquatic and riparian species and their habitat. However, there is no basis under the Water Act for a manager, or the Board, to consider the potential environmental impacts of other activities that are regulated by other legislation.

C. What information is needed to assess a water licence application, and how much certainty should there be about the potential impacts of the licence before it may be issued? [172] The First Nation argues that the data and studies that Nexen provided to the Manager, and that the Manager relied on, were insufficient and inadequate to understand the potential impacts of the Licence, not only in terms of hydrological impacts but also potential impacts on species that the First Nation depends on for the exercise of its treaty rights. In contrast, Nexen submits that it provided a very substantial body of data and analysis in support of the application for the Licence, and the First Nation’s demands for more studies raise questions about how section 12 of the Water Act should be administered. [173] In assessing all water licence applications, a water manager must be mindful of the objectives of section 12, which the Panel has discussed above. The Panel has already found that a manager need not consider the potential environmental impacts of other activities that are not regulated by the Water Act. Below, the Panel has reviewed other relevant provisions of the Water Act and the Water Regulation that address licence applications. [174] Section 10 of the Water Act requires an applicant for a water licence to do the following: 10 (1) Subject to subsection (2), a person who applies for a licence must, within the time prescribed by regulation, (a) comply with any requirements established by regulation, (b) comply with the directions of the comptroller or the regional water manager with respect to filing the application, giving notice of it by posting, service or publication and paying the prescribed fees, and (c) provide the plans, specification and other information the comptroller or the regional water manager requires. [underlining added] [175] Further to section 10(1)(a) of the Water Act, specific requirements for licence applications are prescribed in section 2 of the Water Regulation: DECISION NO. 2012-WAT-013(c) Page 43 Application for licence 2 (1) An application to the comptroller or regional water manager for a licence must be signed by the applicant or the applicant's agent and must include the following information: (a) the full name of the applicant, a mailing address and a telephone number where the applicant or his agent may be contacted; (b) the official name or a clear description of the proposed reservoir or source of supply or reservoir and source of supply; (c) the stream or body of water, if any, to which the proposed source of supply discharges or is immediately tributary; (d) the purpose for which the water is to be used; (e) the quantity of water proposed to be diverted or stored, or diverted and stored, or the amount of power to be generated; (f) the legal description of the land, mine or location where the water is to be used; (g) the applicant’s title to or interest in the land, mine or location where the water is to be used; (h) the area of land to be irrigated, if applicable; (i) the location of the point of diversion or storage, or diversion and storage, relative to some other known point; (j) details of the proposed works and the legal description of all lands on which it is proposed to construct works, or that will be affected by flooding; (k) an accurate, labeled drawing showing the land, mine or location where water is proposed to be used, the approximate location of the proposed works and any land that may be physically affected. [176] The Panel notes that section 2 of the Water Regulation does not require an applicant to provide information about the potential environmental impacts of the proposed licence. The information required under section 2 focuses on identifying the applicant, the water source, the intended amount of the water to be used, the purpose of the use, the location of the diversion point and the water use, and the locations of any works to be built and any land that may be physically affected by the water use. However, a manager has broad discretion to issue directions to the applicant and to require further information pursuant to sections 10(1)(b) and (c) of the Water Act. Given the purposes of the Water Act discussed above, additional information about the potential impacts of a licence on the water source, including aquatic and riparian species and their habitat, may be relevant to assessing a licence application, depending on the circumstances of a particular application. [177] The Panel has also considered that each water licence must be considered based on its circumstances, including the characteristics of the water source, the quantity of water to be licensed, the works to be licensed, the other licensed (and possibly unlicensed) demands on the water source, and the potential impacts of the licence. The amount and type of information needed to properly assess an application to divert 500 gallons of water per day for domestic use may be quite DECISION NO. 2012-WAT-013(c) Page 44 different from the amount and type of information needed to properly assess an application to divert 2.5 million cubic metres of water per year for industrial use. [178] In the present case, Nexen sought to use a large volume of water from a relatively small lake (i.e., not a major river or reservoir) for several years. There was no history of licences of a similar nature to provide guidance in assessing Nexen’s application, and there was limited hydrological information about northeast B.C., and almost no hydrological information about the Tsea River before 2009. Consequently, there was a high level of uncertainty regarding the potential effects of the Licence, and an elevated level of risk associated with those potential effects. In these circumstances, the Panel finds that additional information concerning the potential impacts of the Licence was warranted. While it is prudent in such circumstances to ask an applicant to provide further information about the water source and the potential impacts of the proposed licence, the Panel finds that it is impractical, and inconsistent with the objective of the licensing provisions in the Water Act, to expect applicants to delay developments indefinitely pending studies that attempt to conclusively predict impacts. [179] Regarding potential impacts, the First Nation submits that the Licence and the flow-weighted withdrawal scheme do not comply with the precautionary principle, and they rely on Dr. Jack Stanford’s testimony that the precautionary principle means that “it’s incumbent on the proponent… to demonstrate that the project will not have consequences for the integrity of that ecosystem, in the absence of scientific consensus.” However, the Panel finds that the precautionary principle is not mentioned in the Water Act and there is no indication that the Legislature intended this principle to apply to water licensing decisions. At para. 129 of Burgoon, the Board rejected the proposition that the precautionary principle is one of the factors that must be taken into account in deciding whether to issue a water licence under section 12 of the Water Act. The Panel agrees with that finding in Burgoon. [180] Moreover, the Panel notes that placing excessively onerous requirements on an applicant to gather data and conduct studies before a licence may be issued could simply result in the applicant seeking a number of section 8 approvals over a period of years, instead of a licence that lasts for a period of years. In the present case, Nexen could have continued to apply annually for section 8 approvals, as it had done since 2009, rather than applying for the Licence. Nexen’s section 8 approvals imposed far less onerous requirements than the Licence. Nexen’s section 8 approvals simply required compliance with a 0.1 metre maximum drawdown of the lake level, measured from the commencement of operations, and monthly and annual reporting. From a water manager’s perspective, a water licence provides a means to take a longer-term approach to regulating water use and monitoring impacts. In general, a longer-term approach to managing and regulating water use will better serve the objective of conserving water resources and protecting aquatic and riparian ecosystems. [181] The First Nation also criticized the Manager’s reliance data and analyses provided by qualified professionals that were hired by Nexen. Although the Water Act does not expressly contemplate a “professional reliance” model whereby specific types of external (outside of government) professionals may be relied on for certain purposes, the Water Act’s approach to licensing does not prohibit a manager from considering information provided by professionals who were hired by DECISION NO. 2012-WAT-013(c) Page 45 the applicant to conduct studies or gather data in support of the licence application. As noted above, section 10(1)(c) of the Water Act provides a manager with broad discretion to require information from an applicant. When exercising discretion under section 12, a manager is obliged to objectively and fairly assess the information provided by the applicant, as well as relevant information from any other sources. In the present case, information and analyses about Nexen’s application were provided not only by Nexen’s staff and consultants, but also by specialists within the Ministry, a hydrologist with the Oil and Gas Commission, and Dr. Carey, an external hydrologist jointly selected by Nexen and the First Nation to review Nexen’s proposal. It was appropriate for the Manager to consider all of that information. Whether the Manager properly assessed that information is a separate question. However, the issue is no longer whether the information considered by the Manager was sufficient to warrant issuing the Licence. The Panel has the benefit of more information, including more field data and evidence from external professionals who reviewed Nexen’s data and analyses on behalf of the First Nation, and it is up to the Panel to decide the merits of the Licence. [182] Consequently, the Panel finds that the Water Act and the Water Regulation do not expressly require an applicant to provide information about the potential impacts of a proposed water licence. However, section 10(c) of the Water Act provides water managers with broad discretion to require further information from applicants, and in some circumstances additional information about potential impacts that may be a relevant consideration when considering an application under section 12 of the Water Act. Reliable and accurate hydrological and environmental data will reduce the uncertainty associated with the impacts of a licence, and can inform strategies for mitigating the potential impacts that are identified, but some degree of uncertainty will remain when making most water licensing decisions. I.G. Jowett , in a report titled “Instream Flow Methods: a Comparison of Approaches”, published in 1997 in Volume 13, pages 115-127, Regulated Rivers: Research and Management, summarized the nature of this decision-making conundrum at page 125, as follows: The understanding of biological systems is not complete. Many factors influence stream ecosystems (Orth, 1987) and, practically, flow assessments can only consider the most important and influential. Methods are often criticized for failing to consider some aspect of the stream environment. None of the methods consider temperature, water quality or biotic interactions explicitly and any change to the stream environment could potentially cause unexpected results. Flow assessments can only make use of the best available knowledge, and if necessary be conservative. One answer is inevitable—there would be no aquatic ecosystem or instream uses without water in a river. However, because of the degree of diversity in a river and flexibility of most aquatic organisms, there is probably no sharp cut-off or single ‘minimum flow’. Environmental response to flow is a gradient along which a decision must be made. It is unlikely that the state of knowledge of biological systems will ever reach a degree where the effect of flow changes on stream populations can be predicted with certainty. Experience, case studies, environmental risk and out-of-stream benefits all play a part in the decision-making process. [underlining added] DECISION NO. 2012-WAT-013(c) Page 46 [183] The Panel finds that this statement aptly summarizes the dilemma that decision-makers often face when making licensing decisions under the Water Act. Given the uncertainty involved in estimating stream flows and attempting to predict the potential impacts of a licence on the aquatic and riparian environment, a manager should take a conservative or cautious approach to making licensing decisions and setting conditions in a licence. [184] Next, the Panel will discuss the technical merits of the Licence based on the information that is before it, and in light of the changes made under the 2013 Water Plan Addendum. In doing so, the Panel is mindful of the findings above regarding the purposes of the Water Act in the context of water licensing.

D. Technical merits of the Licence [185] As noted above, the Panel heard 19 days of oral evidence and received 42 exhibits. Much of the evidence focused on the technical merits of the Licence. Several witnesses were qualified by the Panel as experts. [186] The following witnesses testified in support of the First Nation’s technical submissions: • Dr. Robert Daniel Moore, the Forest Renewal B.C. Chair of Forest Hydrology at University of British Columbia, who was qualified as an expert in the areas of stream flow, catchment hydrology, regional hydrology of Western Canada, hydrometry, hydrological data analysis, adaptive management pertaining to hydrology, and prediction in ungauged basins. Dr. Moore wrote a review of the 2011 Water Plan, and presented other evidence and expert opinion to the Panel. Dr. Moore also wrote a response to the review by Dr. Wilford and Mr. van Geloven of his review of the 2011 Water Plan. • Dr. Jack Stanford, Professor of Ecology at the University of Montana’s Flathead Lake Biological Station, who was qualified as an expert in aquatic ecosystems, which includes lakes, rivers and wetlands, including the plants, wildlife and other species in wetlands, fish and fish habitat, and adaptive management. Dr. Stanford wrote a report reviewing the potential ecological impacts of water withdrawals on the Tsea watershed, and he presented this evidence and expert opinion to the Panel. • Dr. Sean Carey, Associate Professor of Hydrology at McMaster University, and author of the Carey Report. Dr. Carey was also called as a witness by Nexen, but he only appeared once before the Panel. Dr. Carey provided evidence on the process of producing the Carey Report, which reviewed the 2011 Water Plan, and he commented on the substance of the report. • Dr. Bram Noble, Professor in the Department of Geography of the University of Saskatchewan, who was qualified as an expert in environmental assessment with special expertise in cumulative effects assessment. Dr. Noble wrote a report considering the potential cumulative effects of the 2011 Water Plan, the Licence, and other potential impacts on the Tsea Watershed, and he presented it to the Panel. [187] The following witnesses testified in support of the Manager’s submissions: • Dr. David Wilford, P. Geo, R.P.F., Research Hydrologist with the Ministry’s Skeena Region. DECISION NO. 2012-WAT-013(c) Page 47 • Chelton van Geloven, R.P.F., Source Water Protection Hydrologist with the Ministry’s Northern Region. Dr. Wilford and Mr. van Geloven appeared before the Panel together, as they wrote three joint reports reviewing the reports submitted by Dr. Moore, Dr. Stanford and Dr. Noble. They also provided additional evidence to the Panel on their involvement in the licensing process and the issuance of the Order. • Allan Chapman, P. Geo, Hydrologist and Resource Water Specialist with the Oil and Gas Commission. Mr. Chapman provided evidence on his involvement in the licensing process and the issuance of the Order, as well as hydrological conditions in northeast B.C. and the development of the NEWT. • Graham Suther, Ecosystem Biologist with the Ministry’s Northern Region. Mr. Suther provided evidence on his involvement in the licensing process. He also provided a written review of the environmental aspects of the Licence prepared in July 2013. • Darren DeFord, Water Stewardship Officer with the Ministry. Mr. DeFord provided evidence on his involvement in the licensing process. • Robert Piccini, the Manager that issued the Licence. Mr. Piccini provided evidence on his involvement in the licensing process. Due to restructuring within the Ministry, as of summer 2012, Mr. Piccini handed over duties as manager of this Licence to Robert Kopecky. • Robert Kopecky, the water manager responsible for this Licence as of summer 2012. Mr. Kopecky provided evidence commencing with his first involvement with the Licence in the summer of 2012, primarily with regards to the process leading to issuance of the Order. [188] The following witnesses testified in support of Nexen’s submissions: • David Cooper, P. Eng., Principal Hydrotechnical Engineer with Matrix, who was qualified as an expert in the areas of hydrology, river engineering and hydraulics, fisheries habitat enhancement, environmental assessment and adaptive management. Mr. Cooper provided written comments on Dr. Moore’s review, evidence on a number of Matrix hydrology reports, and his own involvement with the operation of the Licence after 2012. • Michael Whelen, R.P. Bio., a biologist/project manager with Triton Environmental Consultants (“Triton”), who was qualified as an expert in fisheries biology as it applies to measuring fish and fish habitat inventory in freshwater. Mr. Whelen provided written comments on Dr. Moore’s and Dr. Stanford’s reports, as well as evidence and opinion on fish and fish habitat in the Tsea Lakes system. • Scott Wagner, Senior Advisor – Shale Gas, Community Consultation and Regulatory Affairs, with Nexen. As the guiding mind behind Nexen’s licence application, Mr. Wagner provided evidence on the licensing process, the details of the 2011 Water Plan, and the operation of the Licence. [189] The Panel has organized its summary and analysis of the technical evidence into four sub-issues: i. General hydrology ii. Terms and conditions in the Licence DECISION NO. 2012-WAT-013(c) Page 48 iii. Fish and fish habitat iv. Riparian wildlife and riparian habitat [190] Within those four sub-issues, a number of further sub-issues are discussed.

i. General hydrology [191] The Panel heard from Dr. Moore, Dr. Carey, and Dr. Wilford that hydrology describes the quantity of water and the flow of water in a watershed, and how the quantity and flow are distributed throughout the year. Knowledge of a watershed’s hydrology is the foundation for allocating water. [192] The First Nation raised concerns about several hydrological aspects of the Licence. Those concerns generally relate to: • the lack of available hydrological data; • the assumptions made to fill gaps in the data; • the water withdrawal amounts and flow-weighted scheme, based on the analysis of the hydrological data and associated assumptions; • the lack of suitable specific proposals and methods to gather, analyze, interpret and incorporate further hydrological data into the Licence regime; and • the unsuitability of North Tsea Lake for the water withdrawal scheme. [193] All parties acknowledge that a lack of site-specific or accurate hydrological information should not result in halting all water withdrawals of any size; rather, withdrawals should proceed cautiously in such circumstances. How to proceed cautiously with less than perfect data is at the heart of the technical issues before the Panel. [194] The Panel heard from Dr. Moore that historic stream flows are used to estimate expected future stream flows, which are the basis of apportionment for various licensed and unlicensed water uses. In gauged watersheds, historic stream flow is established by recording daily flows over a number of years. In un-gauged watersheds, there are limited or no daily flow records, and therefore, the history must be estimated using models or by comparing various characteristics including flow measurements, of the un-gauged watershed, to gauged watersheds. [195] The Panel heard evidence from Dr. Moore and Mr. Cooper that predicting water discharges and flows in un-gauged watersheds is challenging. Possible solutions include: 1) the use of a gauged comparator basin with similar characteristics; 2) the use of regional groups of comparators (i.e., local groups of gauged basins); or 3) the use of hydrological models developed from gauged basins. All three of these methods were applied to the Licence application to estimate the mean annual discharge or median discharge for Tsea River basin. a. Measuring stream flows [196] The Panel heard evidence from Dr. Moore on the technical aspects of measuring the flow of water in streams using gauging stations, and the use of rating curves to describe the relationship between a stream’s water level and stream flows at a specific location. The Panel also heard evidence from Dr. Moore on the development, use, and reliability of rating curves, which are then used to DECISION NO. 2012-WAT-013(c) Page 49 determine flow by measuring the height of water in a stream rather than the flow directly. [197] Nexen used rating curves for the Tsea River in two ways: to collect flow data for estimating average annual flow and for the purpose of operating the flow- weighted withdrawal scheme in compliance with the Licence. For either purpose, it is necessary to be on site to make flow measurements over the entire range of flows of interest; this means multiple site visits are necessary to capture the range of flows. Mr. Cooper testified that, for operational purposes, it is sufficient for the rating curve to be accurate for flows within the operational range of the Licence; i.e., above the Zero Withdrawal Limit and below the maximum daily flow, which is less than the entire range of possible flows. Dr. Moore stressed that there must be measurements at high flows to be confident that a rating curve represents high flows, as well as at low flows to avoid errors in estimating the total annual discharge of the stream. [198] The evidence focused on the rating curves for three hydrometric stations downstream of North Tsea Lake: DS-1, DS-2 (also known as W32), and DS-3 (also known as Geetla). These stations are, respectively, 5 km, 6 km, and 27 km downstream of North Tsea Lake. When the rating curve in the 2011 Water Plan was prepared, DS-2 was the closest station to the point of diversion on North Tsea Lake; DS-1 was established later, in May 2011, because it was closer to North Tsea Lake. [199] The Panel heard evidence from Dr. Moore and Mr. Cooper that a rating curve could change from year to year, and during a season. A rating curve may become inaccurate if the shape of the stream channel changes due to scour from ice-floes in early spring, or when high water flows during freshet cause scouring and deposition of material in the stream bed. Also, the rating curve may be affected by vegetation growth in the stream or by beaver dams, which can cause water to back up to, or alternatively de-water, the area near the gauge. The former is termed “backwater” effects, and will result in a water height reading at the gauge that overestimates the actual stream flow. Mr. Cooper stated that it is standard practice to “shift” the rating curve to accommodate known backwater conditions. Frequent site visits may be required to confirm that a rating curve is not affected by backwater effects, or to re-establish a valid rating curve if the shape of the stream channel changes. [200] Dr. Moore questioned the accuracy of the rating curve that was developed for DS-2 (W32) based on 2010 data, because it was based on only four stream measurements within a relatively narrow range of flows. The Panel notes that the 2011 AMEC Report, when presenting the DS-2 (W32) rating curve, states at page 5 that “confidence in the rating curve is low for discharges higher than those measured manually”. [201] The Panel finds that the lack of data points at higher flows means that the rating curve for DS-2 (W32) in the 2011 Water Plan should be used with caution, and cannot be relied on as the sole basis for estimating the average open season discharge. [202] The 2011 AMEC Report also presented a rating curve for DS-3 (Geetla). This rating curve used 10 data points from 2009 and 2010, over the full range of possible stream flow in a more stable section of the river. The Panel finds that this rating curve is, therefore, more reliable than the curve for DS-2 (W32) in the 2011 Water Plan. The Panel also heard evidence from Mr. Cooper that DS-3 has a very DECISION NO. 2012-WAT-013(c) Page 50 different and rocky stream substrate, and therefore, it should be possible to develop a rating curve for DS-3 that is stable over the long term. Mr. Cooper’s Rebuttal Expert Report states that DS-3 is “Grade A for stream channel conditions.” Under the B.C. RISC standards, Grade A corresponds to a stable channel, relatively straight reach, minimal weeds or boulders, and measurements that are consistent with the rating curve. [203] Stream gauge data collected for the 2011 and 2012 seasons was provided to the Panel in Matrix’s reports. Data for the 2013 season at DS-1 was provided to the Panel in Mr. Cooper’s Rebuttal Expert Report. This information, which was not available to the Manager when he issued the Licence, provides more insight into the reliability of the flow rating curves for DS-1, DS-2, and DS-3. Mr. Cooper states in his Rebuttal Expert Report that the three stream flow monitoring stations “now have an adequate number of points to define their rating curves over a range of flows and conditions.” As of July 2013, DS-1 had 50 data points over discharges ranging from nearly zero to over 5.5 cubic metres per second, DS-2 had 15 data points, and DS-3 had 28 data points. Mr. Cooper acknowledged in his report that stations DS-2 and DS-1 are, according to the B.C. RISC hydrometric standards, “Grade B to C for stream conditions due to hydraulic problems associated with beaver dam impacts and weed growth.” Under the B.C. RISC standards, Grade B corresponds to minor hydraulic problems related to channel instability, weed growth or occasional boulders, and measurements that are not consistent with rating curve. Grade C corresponds to an unstable channel due to erosion or aggradations, variable backwater, turbulence, significant weed growth or boulder bed. Mr. Cooper states as follows at page 5 of his Rebuttal Expert Report: Due to the unstable nature of the rating curves on this river, ongoing manual monitoring checks will be required over the duration of the licensed withdrawal periods to confirm flows and define allowable withdrawal rates. [204] In his testimony, Mr. Cooper stated that DS-1, the primary gauging station for controlling pumping activities in 2012 according to Nexen’s flow-weighted withdrawal scheme, may never have a stable rating curve, because the stream channel is vulnerable to scour from year to year. [205] The Panel’s assessment of the almost daily manual flow measurements taken in 2013 at DS-1, as presented in Mr. Cooper’s Rebuttal Expert Report, compared to the prior years’ data, indicates that a stable rating curve at DS-1 from year to year may not be possible. The Panel finds that the same may be true at DS-2, where virtually the same conditions apply; namely, slow-moving water, muskeg vegetation, and beaver activity. Although it appears to be possible to develop a rating curve for DS-3 that is stable over the long term, the Licence still relies on DS-1 as the primary station for estimating stream flow for the purposes of flow- weighted withdrawal scheme and complying with the Zero Withdrawal Limit in the Licence. [206] In summary, the Panel finds that rating curves for DS-1 and DS-2 may well be valid for only a year, or a portion of a year. However, a high degree of reliability may be obtained by conducting manual flow measurements on a daily basis, as occurred in 2013 when flows approached the Zero Withdrawal Limit. To ensure that stream gauge measurements are reliable, site visits should include downstream inspections to ensure that backwater effects are not occurring. DECISION NO. 2012-WAT-013(c) Page 51 b. Comparator basins [207] Dr. Moore gave evidence that comparing a basin of unknown hydrology to a basin with known hydrology is commonly done to estimate the unknown basin’s hydrologic characteristics. The 2009 AMEC Report, which was prepared before flow data was available for Tsea River, used a group of gauged basins to estimate the Tsea River’s flows by the simple method of comparing their total flows and watershed areas to the watershed area of the Tsea River. Dr. Carey stated in his report (at pages 3 to 4) that “The method used is completely flawed and thankfully the approach was later abandoned. … By correlating total flow with watershed area, all other factors that affected flows among basins were overwhelmed.” [208] The 2011 Water Plan used open season flow data at DS-2 from 2010, as presented in the 2011 AMEC Report, and scaled it down by basin size to North Tsea Lake as the long-term average flow. The 2011 Water Plan presented the 2010 DS- 2 flow as representative of the long-term average by comparing Adsett Creek’s 2010 seasonal flows to Adsett Creek’s long-term average; i.e., using Adsett Creek as a comparator basin. However, the Panel notes that the 2011 Water Plan does not make any statistical comparison of Adsett Creek’s 2010 flows versus Adsett Creek’s long term flows, nor does it provide the necessary information to make such a comparison. Consequently, the Panel finds that it is unclear how the 2011 Water Plan concluded that 2010 was an average runoff year at Adsett Creek. The Adsett Creek watershed, located approximately 150 km south of the Tsea River watershed, was selected as a comparator basin because it is in the same region and has a similar size to the Tsea River watershed. As stated at page 3 of the Carey Report, the “overall proposition of the WDMP [2011 Water Plan] is that the flows from the Tsea River at the point of water extraction (W7) and the flows at Adsett Creek… can be directly related.” The 2011 Water Plan also used long-term Adsett Creek flow data to estimate long-term year-to-year variability in the flows at Tsea River. [209] Dr. Carey expressed reservations about this approach. At page 3 of the Carey Report, he stated that he had “some concerns that Adsett Creek is not the ideal comparator to Tsea River due to general shape, physiography and precipitation patterns/amount.” He also stated, “There are many assumptions in this approach that require careful consideration, and I believe the results presented in the WDMP [2011 Water Plan] are preliminary and subject to considerable uncertainty.” At page 11 in the technical summary section of his report, he concluded that the estimates of flows for the Tsea River were “conservative.” However, he also stated that “The greatest weakness is the estimates of flows for the Tsea River over the longer term, which is a cause for concern. As outlined, there is considerable room for error, and the analysis could be more rigorous and thoughtful.” [210] Dr. Moore gave evidence that there was no significant correlation among annual runoff estimates from 2009 to 2012 between the Tsea River and any of the other six gauged stations in northeast B.C., based on the data provided in Matrix’s July 2013 Report. Matrix’s March 2012 Report, which used 2011 field data, came to the same conclusion, stating that, “The statistical relationship was insufficient to allow for the prediction of DS-1 flows at this time, and indicates a need to generate a greater understanding of the physical processes to predict variability in the basin over time.” DECISION NO. 2012-WAT-013(c) Page 52 [211] Based on the evidence, the Panel finds that Adsett Creek should not be assumed to be representative of the Tsea River’s discharge or runoff, either in amount or between-year variability. The Panel finds that the Tsea River’s discharge or runoff cannot be adequately modeled by simple correlational comparison to Adsett Creek or to the other gauged watersheds in northeast B.C. The Inferred Median Flow, which was based on Adsett Creek and is a key element of the flow- weighted withdrawal scheme, is discussed below. c. Hydrological models [212] One model that the Manager considered when estimating the annual discharge of the Tsea River at North Tsea Lake was the NEWT model, which is commonly used to estimate monthly and annual runoff for water licence and section 8 approval applications in northeast B.C. According to the Manager, the results from the NEWT model provided greater confidence in Nexen’s estimate of the open or ice-free season (May to October) discharge of the Tsea River at North Tsea Lake, due to the similarity between the results generated by the NEWT model and the 2011 Water Plan. [213] The Panel has concerns about the reliability of the results generated by the NEWT model for ungauged watersheds. The basis of the NEWT model was explained in a paper by Mr. Chapman, Mr. B. Kerr and Dr. Wilford, published in GeoScience BC Summary of Activities 2011, GeoScience BC, Report 2012-1, pages 81-86 (the “NEWT Paper”). The NEWT Paper discusses the level of uncertainty in the results generated by NEWT for annual and monthly runoff estimates. For annual discharge estimates, the paper states: Preliminary results for the annual runoff modelling indicate a mean error of 5.5%, with 75% of the calibration basins having estimates within ±20% of the measured mean annual runoff. [214] For the monthly discharge estimates, the paper states: … In general, the monthly runoff modelling is quite good, with hydrograph fits that are visually accurate (Figure 2), and with reasonable statistics (median Nash-Sutcliffe efficiency = 0.94, with 65% of calibration basins having Nash-Sutcliffe efficiency statistics of >0.90). [215] After reviewing the NEWT Paper, Dr. Moore stated as follows regarding the quotes above: Both these statements refer to comparisons with the calibration data set; there is no mention of a formal cross-validation or split-sample approach to assess the uncertainty in any operational application. Therefore it is likely that the prediction errors established from the testing of NEWT, as reported by Chapman et al. (2012), actually underestimate the magnitude of possible error when applied to a catchment that is outside the calibration data set because they appear to be based solely on a comparison with the calibration data and not a formal cross-validation or split-sample test. [216] The Panel finds that the uncertainties discussed in the NEWT Paper regarding the results generated by the model only apply to gauged basins. The reliability of the NEWT model is only well known when predicting flows in basins from which the data was developed. The evidence is inconclusive as to the degree of uncertainty in DECISION NO. 2012-WAT-013(c) Page 53 the NEWT results for basins outside of the data set. This is not to say that NEWT is not useful, but at this time there is no way of knowing the accuracy of results generated by NEWT. [217] The Panel concludes that NEWT is a helpful administrative tool when making water allocation decisions. However, NEWT should not be relied upon as the primary tool for estimating hydrologic characteristics at a point of interest, such as estimating the annual long-term discharge for the Tsea River at North Tsea Lake. [218] In summary, while the Panel recognizes that it is common practice to use comparator watersheds and models for estimating the annual discharge for streams with limited or no data, the Panel finds that these approaches should be used with caution, bearing in mind their limitations and the reliability of their results. The ongoing collection of field data in the Tsea River watershed is necessary to gain more accurate estimates of the Tsea River’s annual discharge at North Tsea Lake. ii. Terms and conditions of the Licence a. Maximum annual volume of withdrawal [219] Condition (e) of the Licence authorizes a maximum diversion of 2,500,000 cubic metres of water per year. [220] Regarding Nexen’s need for water for its operations, the Executive Summary of the 2011 Water Plan states: Nexen Inc. is currently planning development according to the following schedule: one pad per year with 18 wells per pad. An average of 18 to 20 stages will be drilled per well, with optimal production using between 3000 and 5000 m3 of water per stage. The total volume of water required to complete production in 2011 will be approximately 1 400 dam3, or 8% of the river volume in an average year. This development schedule has the potential to increase as market demand for natural gas increases, and a maximum withdrawal limit of 4 000 dam3 [4,000,000 cubic metres] is proposed. [221] However, in January 2011, Mr. Wagner advised Mr. DeFord that Nexen’s proposed withdrawals had been reduced to 2,500,000 cubic metres per year. Consequently, the Manager assessed Nexen’s application based on a projected need for 2,500,000 cubic metres per year. [222] Mr. Wagner testified that, for a number of reasons, during the next three years (i.e., 2015 through 2017), he believed Nexen would develop at least one 18 well pad, requiring a maximum of 1.2 million cubic metres of water per pad. [223] According to Nexen’s water withdrawal records, Nexen has never diverted more than 900,000 cubic metres of water per year under the Licence or the previous section 8 approvals. Further, Mr. Wagner estimated that Nexen’s beneficial use of water under the Licence for the next three years would be 1,200,000 cubic metres per year. The 2011 Water Plan states at page 32 that, under the flow-weighted withdrawal scheme, the maximum volume available for withdrawal during a “1 in 10-year” dry year would be 1,200,000 cubic metres of water, although the Panel has already found this analysis to be based on a flawed estimate of annual average flow and flawed estimates of variability based on an inappropriate comparison to Adsett Creek. The evidence is that the maximum DECISION NO. 2012-WAT-013(c) Page 54 volume of withdrawal under the flow-weighted withdrawal scheme during dry years may be much lower. In 2012, which had summer drought conditions, Nexen only withdrew a total of 723,000 cubic metres. In 2013, which also had summer drought conditions, Nexen only withdrew 570,000 cubic metres, ending withdrawals in mid-June when flows approached the Zero Withdrawal Limit. [224] Based on this evidence, the Panel finds that Nexen’s licensed water needs can be met by allowing the diversion and storage of a maximum of 1,200,000 cubic metres of water per year, rather than the current maximum of 2,500,000 cubic metres per year. Consistent with the purposes of the Water Act, including the objective of maintaining stream flows for aquatic and riparian species and their habitat, and the requirement that licensees must make beneficial use of the water allocated to them, the Panel finds that clause (e) of the Licence should only allow the diversion and storage of a maximum of 1,200,000 cubic metres of water per year. b. Maximum daily volume of withdrawal versus maximum rate of withdrawal [225] The Licence does not contain a condition that expressly limits the maximum rate of withdrawal. However, condition (e) of the Licence authorizes the diversion of a maximum of 60,000 cubic metres per day. If that daily limit is divided by the number of seconds in a day, it equates to a maximum continuous withdrawal rate of 0.694 cubic metres per second over the course of one day. [226] The 2011 Water Plan states on page 8 that specific details regarding pump size and capacities were still being decided. Table 7.1 in the 2011 Water Plan describes a scenario estimating an average, minimum, and maximum daily volume of withdrawal. The paragraph above Table 7.1 explains that Table 7.1 gives an example of withdrawal rates based on monitoring data from 2010, a maximum storage capacity of 800,000 cubic metres, and a “presumed maximum pumping capacity of 60,000 m3/day at high flows”. Table 7.1 shows a maximum pumping volume of 60,000 cubic metres per day with an associated maximum withdrawal rate of 0.694 cubic metres per second. Except for Table 7.1 and the paragraph above it, there is no further discussion in the 2011 Water Plan of a daily maximum volume of withdrawal or a 60,000 cubic metres per day limit. [227] The Manager’s rational for his decision provides no discussion about daily withdrawal rates or daily maximums. [228] Condition (i) of the Licence requires that the licensee make regular beneficial use of the water authorized to be diverted. Condition (i) of the Licence also states that the authorized works have been constructed. [229] Mr. Wagner testified that “... the importance of the 60,000 cube a day cap is an effort to further protect the flushing or peak flow regime of the Tsea system, the Tsea system upstream where we're withdrawing water and where we have DS-1 and DS-2 located is a silty bottom, muskeg-dominated system.” Mr. Wagner also testified that the works were installed, and higher capacity pumps may be used in the future. [230] The Panel finds that, contrary to Mr. Wagner’s testimony, the maximum daily withdrawal limit of 60,000 cubic metres per day is not principally intended to limit withdrawals during peak flows to benefit aquatic or riparian habitat; rather, it is linked to the presumed capacity of the pumps to divert water. DECISION NO. 2012-WAT-013(c) Page 55 [231] The Panel finds that the conditions in the Licence should reflect the works that can realistically be expected to be in place to divert water for beneficial purposes, as well as the importance of protecting the flushing that naturally occurs during peak flows, and therefore, the maximum withdrawal rate (expressed in cubic metres per second) should be specified in the Licence, in addition to the maximum daily withdrawal volume (which is expressed in cubic metres per day). The Panel finds that the Licence should have included a condition specifying a maximum withdrawal rate of 0.694 cubic metres per second. c. Zero Withdrawal Limit and methods for estimating environmental base flows [232] The Licence does not expressly address the minimum amount of stream flow that is needed to protect aquatic and riparian species and their habitat. However, condition (e) of the Licence specifies the Zero Withdrawal Limit of 0.351 cubic metres per second, and the Panel heard evidence regarding whether the Zero Withdrawal Limit ensures the minimum in-stream flow that is necessary to protect ecosystem values. The Panel also heard evidence regarding methods that have been used in B.C. and Alberta for estimating the minimum in-stream flow that is necessary to protect ecosystem values, and whether those methods would be appropriate for use in the Tsea River watershed. [233] The Executive Summary of the 2011 Water Plan states that, to protect fish habitat, a conservative minimum in-stream flow threshold of 30% of the average open season discharge has been established, meaning that water withdrawal must cease at flows lower than 0.351 cubic metres per second, which is the Zero Withdrawal Limit set out in condition (e) of the Licence. [234] According to the 2011 Water Plan, the average open season discharge was estimated to be 1.17 cubic metres per second based on the 2010 DS-2 data adjusted by basin size to North Tsea Lake. The Zero Withdrawal Limit included in the Licence was calculated as 30% of the average open season discharge. The Panel heard evidence from Dr. Moore, Dr. Wilford, and Mr. van Geloven that the 30% factor is based on the Tennant method, which uses historic stream flows to estimate mean annual discharge, and applies a percentage to the mean annual discharge to determine the minimum stream flow necessary to protect stream habitat. [235] Based on studies of habitat retention at different stream flows, Tennant (1976) wrote a report titled “Instream flow regimens for fish, wildlife, recreation and related environmental resources” published in Volume 1, pages 6-10, Fisheries. Tennant found that approximately 60% of stream substrate was covered with water when the stream was at 30% of the average annual flow. During the April to September season, Tennant rated flows that maintain only 10% of average annual flows as ‘Poor’ or ‘Minimum’, 30% as ‘Fair’ or degrading, 40% as ‘Good’, 50% as ‘Excellent’, 60% as ‘Outstanding’, and 60 to 100% as ‘Optimum’. Tennant also recommended using “undepleted” hydrology data; i.e., in pristine conditions before dams, diversions, pumps, etc. [236] The Zero Withdrawal Limit in the Licence is based on the average open season discharge (i.e., approximately May 1 to October 31), whereas the Tennant method is based on mean annual discharge. Since the majority of the flow in the Tsea River occurs in the spring of the open season, the average open season discharge would be greater than the mean annual discharge for the Tsea River. In their report, Dr. Wilford and Mr. van Geloven used the NEWT estimate of 0.55 cubic DECISION NO. 2012-WAT-013(c) Page 56 metres per second for mean annual discharge of Tsea River at North Tsea Lake. Given that value, they estimated that the Zero Withdrawal Limit of 0.351 cubic metres per second is 63% of the mean annual discharge, which they labeled “an exceptionally conservative value.” As such, the Panel finds that the current Zero Withdrawal Limit is greater, and therefore more conservative, than if it was based on mean annual discharge. [237] In addition, based on flow data from 2009 to 2012, Mr. Cooper stated in his Rebuttal Expert Report that the average open season flow was re-estimated to be 0.93 cubic metres per second. In his testimony, he further re-estimated the average open season discharge, including the 2013 flow data, to be 0.86 cubic metres per second. Both of those revised estimates are slightly lower than the original estimate of 1.17 cubic metres per second. On that basis, Mr. Cooper concludes that the Zero Withdrawal Limit in the Licence is slightly more conservative than it was originally thought to be. [238] The Zero Withdrawal Limit of 0.351 cubic metres per second, at the point of diversion, amounts to over 40% of the re-estimated average open season discharge of 0.86 cubic metres per second based on 2013 data. Based on this evidence and the data from 2012 and 2013, the Panel finds that, if environmental base flows are defined as a percent of average open season discharge, the Zero Withdrawal Limit of 0.351 cubic metres per second is conservative. [239] Other methods that may be appropriate for determining licensed withdrawal amounts and environmental base flows in northeast B.C. were discussed in the evidence provided to the Panel. One of the alternatives presented was developed for B.C. provincial ministries by Hatfield et al., in a 2003 document titled “Development of instream flow thresholds as guidelines for reviewing proposed water uses” (the “Hatfield Paper”). The Hatfield Paper reviews other environmental flow methods, and is critical of the Tennant method. The Hatfield Paper states as follows at pages 49-50: Critiques of the Tennant Method are numerous, but tend to focus on two aspects: the high degree of professional judgement embedded in the method and the lack of biological validation. Tennant (1976) indicates that his methods have been tested, but many would argue that his “test” has been only vaguely described, and to our knowledge there has been no measurement of fish response to flow changes using his standards. These criticisms are, in fact, valid for most instream flow methods—all techniques require subjective judgements during the collection of data and in the final recommendation of an instream flow schedule, and in practise exceedingly few decisions are adequately assessed after they are implemented. Given the poor fit between Tennant’s flow recommendations and the natural hydrographs [in B.C.] it would likely be difficult to specify a relationship between his criteria and a “no HADD” [harmful alteration, disruption or destruction of fish habitat under the federal Fisheries Act] threshold. The disadvantages of modified Tennant Methods are similar to the original method: the high degree of professional judgement embedded in the method and the lack of biological validation. [240] The Hatfield Paper goes on to develop an in-stream flow method for B.C. based on exceedance values; i.e., percentiles of flow. The flow recommendations DECISION NO. 2012-WAT-013(c) Page 57 for fish-bearing streams are for seasonally-adjusted thresholds, calculated according to a complex formula that includes a maximum diversion rate of 80th percentile flow, and flow thresholds that vary by month from 90% of mean daily flows in lowest flow month to 20% of mean daily flows in the highest flow month. [241] The Hatfield Paper states at page 60 that the recommended flow thresholds for fish-bearing streams: … are calculated as percentiles of natural mean daily flows for each calendar month. These percentiles vary through the year to ensure higher protection during low flow months than during high flow months. As a result more water is available for diversion during high flow months than during low flow months. … calculations must be based on a minimum of 20 years of continuous flow records, and maximum diversion rates are less than or equal to the 80th percentile of mean natural daily flows over the period of record. [242] At page 62, the Hatfield Paper states that “This flow threshold does not apply where data requirements cannot be met.” However, the Hatfield Paper states at page 57 that, if empirical historic flow records are not available, natural flows can be estimated or synthesized as long as “a reasonable attempt at validation will be made, and measurement biases and errors will be described.” [243] At page 62, the Hatfield Paper also states that when the proposed fish- bearing stream diversion rule was modeled for a set of B.C. streams, withdrawals ranged from 12% to 32% of total stream flow for the test streams, and on average allowed for approximately 22% of flows to be diverted. The Panel notes that, although withdrawing 22% of the flow is greater than the 15% recommended by NEWT, the test streams discussed in the Hatfield Paper all had 20 years or more of continuous flow records, and therefore, the data used by Hatfield provided greater certainty with respect to mean annual discharges than is provided by NEWT. [244] The Panel notes that at page 4 of the August 2013 paper written by Mr. van Geloven and Dr. Wilford, which was prepared in reply to Dr. Moore’s July 2013 review of the water withdrawal scheme, they considered the water withdrawal scheme in light of the Hatfield Paper’s approach, as follows: When we consider Hatfield, T. et al, (2003) however, the extraction scheme provided does appear to follow the guidance suggested. Specifically, flow weighted extraction maintains “the most important features of a natural hydrograph from a biological and physical perspective (Hatfield T., et al. 2003).” [245] The Hatfield Paper recommends that 20 years of natural flow data are required before estimating the flow threshold for streams. However, at page 62, the Hatfield Paper states that where this data is not available, natural flows can be estimated or synthesized as long as “a reasonable attempt at validation will be made, and measurement biases and errors will be described.” The Hatfield Paper further recommends, at page 62, that “… where synthesized data are used, the diversion rules be annually adjusted during a period of at least five years, based on continuous discharge data collected from a gauge installed on the target stream.” DECISION NO. 2012-WAT-013(c) Page 58 [246] The Panel finds that the approach in the Hatfield Paper provides one method that a water manager could use to set thresholds for a licence to withdraw water in northeast B.C., including in situations such as the Tsea River where natural flows must be synthesized or estimated due to a lack of historic flow data. [247] Another alternative method, which was developed by Locke and Paul (2011), is set out in a paper titled, “Alberta Desk-top Method for Establishing Environmental Flows in Alberta Rivers and Streams” (the “Alberta Desk-top Method”), co-published by Alberta ministries of Environment and of Sustainable Resource Development. This method is applied to streams in Alberta where no detailed studies of in-stream flow needs have been completed. At pages 21 and 22, the Alberta Desk-top Method describes two environmental flows: a maximum percentage of in-stream flow that may be withdrawn; and a minimum in-stream flow (ecosystem base flow). [248] The Alberta Desk-top Method allows withdrawals of up to 15% of the instantaneous flow, as long as the flow is above the weekly or monthly “Q80” value. The Q80 value is the flow that is equaled or exceeded 80% of the time for that week or month, based on historic daily flow data. The paper by Locke and Paul states as follows at page 21: Pending further investigation, and given the uncertainty in the science, plus a desire to protect the aquatic ecosystem, the most conservative percent-of-flow reduction recommendation from all studies carried out in Alberta to date is recommended. The per cent of natural flow component for a “desktop” method would be, … a 15 per cent instantaneous reduction from natural flow. [underlining added] [249] The authors of the Alberta Desk-top Method state at page 28 that, “The unique hydrology for any river can greatly affect the recommended EBF [environmental base flow].” After reviewing a number of studies, they concluded at page 30: Given the uncertainty in the science and the desire to fully protect the aquatic ecosystems, until further investigation is completed, the most conservative EBF recommendation value from all studies completed in Alberta to date is recommended, … the 80 per cent exceedance natural flow based on a weekly or monthly time step depending on the availability of hydrology data. [underlining added] [250] The Panel notes that the Alberta Desk-top Method recommends a 15% withdrawal rate, as does Mr. Chapman in the NEWT model used to estimate potential for water allocation. This information was provided by Mr. Chapman to Mr. DeFord to prepare the Technical Report which the Manager used as the basis for the maximum annual withdrawal specified in the Licence. [251] In his testimony, Mr. van Geloven expanded on the Alberta Desk-top Method, stating that it could be applied not only to monthly or weekly flows, but also instantaneous flows. In response to questions from the Panel, Mr. Chapman stated that he favours the rate of withdrawal derived from the Alberta Desk-top Method being applied to future water licence applications considered by the Oil and Gas Commission. DECISION NO. 2012-WAT-013(c) Page 59 [252] The Panel notes that, based on this method, the ecosystem base flow varies, and depends on the natural flow levels that are exceeded 80% of the time (80% exceedance flow). Stated as an inverse, the ecosystem base flow would be the 20th percentile of observed flows in a given week or month. Below this level, no water should be withdrawn. In a high-flow month such as May, when high flows occur due to freshet, this base flow is likely to be higher than in lower-flow months such as August to October. [253] The Panel finds that the caveats described by the authors of the Alberta Desk-top Method also apply to the Tsea River watershed. For example, they state at page 33 that a “one-size-fits-all” method “may not fully address all riverine parameters (biological, chemical, and physical)”. The Panel notes that the Alberta Desk-top Method cites studies from river systems that are not low-gradient, beaver-dominated muskeg systems. Thus, the applicability of the Alberta Desk-top Method to the Tsea River system should be approached with caution. Nevertheless, the Panel finds that the Alberta Desk-top Method is an appropriate method for a water manager to consider in calculating water withdrawal rates and ecosystem base flows for a licence to withdraw a significant volume of water in northeast B.C., subject to the caveats described in the method. [254] A further consideration is that Dr. Wilford and Mr. van Geloven provided the Panel with a draft Ministry document entitled “Environmental Flow Needs Policy”. This draft policy describes three levels of risk management. For fish-bearing streams, the in-stream flows are considered low sensitivity when flows are 20% of mean annual discharge or greater, and are in the lowest risk management level where the withdrawal is 15% or less than the in-stream flow. The Licence sets a minimum in-stream flow of 30% of average open season discharge, which is greater than 20% of mean annual discharge. If withdrawals were limited to 15% of in-stream flows, the Licence regime would be classified at the lowest level of risk management. If this document has now become an approved policy, it may provide useful guidance in licensing decisions. [255] The Panel notes that all of the methods for estimating environmental base flows, and the Zero Withdrawal Limit, refer to free-flowing streams and maintaining sufficient watered habitat for fish within a typical stream cross-section. It is unclear to the Panel whether any of the methods are well suited to low gradient, muskeg dominated streams where the water is typically impounded by beaver dams, and therefore, water depths in some locations do not necessarily fluctuate directly with flow rates. What adequate environmental base flows should be in this situation is, therefore, uncertain. Further field investigation will be needed to determine the minimum flows that must be maintained to protect riparian and aquatic species and their habitat in this type of environment. However, based on the information that is currently available, the Panel finds for the reasons provided above that the Zero Withdrawal Limit in the Licence is conservative, and is consistent with taking a cautious approach in the absence of empirical flow data. d. Flow-weighted extraction method [256] The different water withdrawal rates contemplated in the flow-weighted withdrawal scheme are not expressly specified in the Licence. Condition (e) of the Licence states that “Daily withdrawal limits will be as per the flow-weighted extraction method as outlined in the [2011 Water Plan] provided by Nexen Inc.” DECISION NO. 2012-WAT-013(c) Page 60 [257] The 2011 Water Plan describes a methodology for increasing the volume of water that is diverted as the flow in the Tsea River increases, and decreasing the volume diverted as the stream flow decreases, while not exceeding a maximum withdrawal volume of 60,000 cubic metres per day, and ceasing withdrawals when the stream flow reaches the Zero Withdrawal Limit. [258] The withdrawal parameters in the flow-weighted withdrawal scheme are set out in Table 6.1 of the 2011 Water Plan. The Panel has summarized all the withdrawal parameters as follows: i. Withdrawals cease when flows in the Tsea River at North Tsea Lake fall below the Zero Withdrawal Limit of 0.351 cubic metres per second; ii. Up to 10% of the mean daily discharge may be withdrawn when the stream flow is “normal” (i.e., less than the Inferred Median Flow, but greater than the Zero Withdrawal Limit); iii. Up to 15% of the mean daily discharge may be withdrawn when the stream flow is “high” (i.e., greater than the Inferred Median Flow but not >180% of the Inferred Median Flow); and iv. Up to 25% of the mean daily discharge may be withdrawn when the stream flow is at “flood stage” (i.e., >180% of the Inferred Median Flow). [259] Under Table 6.1 is the following explanatory paragraph: Figure 6.1 is useful to more clearly illustrate how these limits work. As an example, a hypothetical mean daily discharge of 0.500 m3/s falls between the inferred median (0.918 m3/s) and the minimum withdrawal threshold (0.351 m3/s). This is considered to be average flow conditions and the daily withdrawal is 10% of the mean daily discharge (0.050 m3/s). [260] At the outset, and before considering whether the parameters are appropriate, although condition (e) of the Licence refers to the “flow-weighted extraction method” outlined in the 2011 Water Plan, the Panel finds that reference to an external document may create difficulties in enforcing the Licence. For example, the location where the flow is to be measured, and how often the flow is to be monitored by field inspections, should have been specified in the Licence. [261] The 2011 Water Plan uses percentage withdrawals in a novel way, by increasing the percentage of the stream flow that may be withdrawn as the stream flow increases. The 2011 Water Plan references Jowett (1997) as the source of the scheme, but there is no evidence before the Panel that Jowett reviewed or recommended such a method. The 2011 Water Plan simply states at page 27/71 that “models were generated for a number of withdrawal scenarios” and hypothetical withdrawals from North Tsea Lake were “evaluated based on the amount of water delivered for operational needs and the extent of impact to downstream flow.” It also states that the “concept follows the logic that the risk of potential downstream impacts are greater when flows are normal or low, compared with when flows are higher or at flood conditions.” In their testimony, neither Mr. Wagner nor Mr. Cooper could explain how the highest withdrawal percentage (i.e., 25% of mean daily discharge when stream flow is greater than 80% of the Inferred Median Flow) was determined. In his Rebuttal Expert Report, Mr. Cooper stated as follows at page 9: DECISION NO. 2012-WAT-013(c) Page 61 While no specific justification for the graduated flow percentages are [sic] given, a review of the values compared with the flow regime of the Tsea River would suggest they are based upon common sense. The upper 25% withdrawal limit would only occur during short high flow periods. … [262] Based on the evidence, the Panel finds that although the 15% withdrawal parameter is relevant under the Alberta Desk-top Method (discussed above) and the 30% threshold for the Zero withdrawal Rate is tied to the Tennant method (also discussed above), the 10% and 25% withdrawal parameters are arbitrary. Furthermore, no precedent or scientific basis for the overall flow-weighted withdrawal scheme was provided, and there is no clear rationale for this approach in the 2011 Water Plan or its supporting documents. At best, the 10% and 25% withdrawal percentages, and the overall concept of increasing the withdrawal rate as the flow in the stream increases, is based on a general and untested theory. The Panel finds that the flow-weighted extraction method in general, and the 10% and 25% withdrawal percentages in particular, are not supported by either scientific theory, appropriate and reliable stream flow modelling, or adequate field data. [263] Given that the Inferred Median Flow is an integral feature of the withdrawal scheme, the Panel has closely examined it. The Inferred Median Flow is estimated to be 0.918 cubic metres per second in the 2011 Water Plan. [264] The only statement about its derivation in the 2011 Water Plan is at page 28/71, as follows: Following the precautionary principle, the inferred median has been assessed using the Adsett Creek dataset, and “inferred” to the Tsea basin at the gauged locations using basin size for correlation. Only data associated with the ice-free season (e.g. May – October) has been incorporated. … As data continues to be gathered through in-field monitoring, the inferred median… will be further enhanced by site- specific data. [265] The Panel notes that this statement does not explain how the Adsett Creek data was “assessed” or how the approach was deemed to be “precautionary”. Moreover, the Panel has already found that the data from Adsett Creek has limited correlation to the Tsea River. [266] Mr. Wagner testified that, in early December 2013, Nexen staff attempted to reproduce the calculations that resulted in the Inferred Median Flow value. He stated that adjusting the open season data for Adsett Creek to the Tsea River watershed based on their relative basin areas gave a “regionalized” median, and the Inferred Median Flow value is approximately 40% greater than the regionalized median. However, the data and calculations that Mr. Wagner referred to were not provided to the Panel. In the absence of additional evidence, the Panel finds that the back-calculation described by Mr. Wagner for deriving the Inferred Median Flow value is not helpful, and in any event, no justification was provided for the Inferred Median Flow value to be 40% greater than the “regionalized” median. [267] The Panel finds that it is unclear how the numerical value of the Inferred Median Flow (0.918 cubic metres per second) was calculated. [268] Dr. Carey stated at page 11 in the technical summary portion of his report that the “greatest uncertainty in withdrawal scheme is defining what the inferred DECISION NO. 2012-WAT-013(c) Page 62 median discharge is.” The Panel agrees. Furthermore, the Panel finds that there was no evidence of a scientific rational for the use of a median flow as a trigger for changing the withdrawal percentage from 10% to 15% of the mean daily discharge. Likewise, there is no rational for choosing 180% of the Inferred Median Flow, as opposed to some other value, as a trigger to increase the withdrawal percentage from 15% to 25% of the mean daily discharge at DS-1. Regardless of whether the collection of more Tsea River flow data would give a better estimate of median flows, the Panel finds that the rational for using a median flow value as the basis for adjusting the withdrawals is not supported by the evidence. [269] The Panel finds that, while a percentage of an average daily in-stream flow may be an appropriate withdrawal criterion in a flow-weighted withdrawal method, based on the evidence and a lack of rational justification, the Inferred Median Flow in this case cannot be used as a trigger to set or modify withdrawals measured as a percentage of mean daily discharge. [270] The Panel also considered whether the differences in the drainage areas at the point of diversion and at the gauging stations are reflected in the Zero Withdrawal Limit and the withdrawal percentages. [271] The average discharge for North Tsea Lake was estimated by scaling down the average discharge at DS-2, based on the relative size of the two drainage areas. The drainage area at the point of diversion (74 km2) is smaller than the drainage area at DS-2 (102.6 km2). The Zero Withdrawal Limit of 0.351 cubic metres per second was calculated as 30% of this scaled down average discharge and then applied to DS-1, without similar scaling for the drainage area at DS-1 (90 km2). The Zero Withdrawal Limit for DS-1 should be 30% of the average flows at DS-1, not 30% of a smaller flow upstream. The effect of not scaling for the differences in drainage areas is that the stream flow reserved for the ecosystem at DS-1 is lower than what it should be based on the average flows at DS-1. [272] Withdrawals at North Tsea Lake are based on a percentage of flow measured at DS-1; no area adjustments were made to these withdrawal rates to reflect the differences in drainage areas between the gauging station and the point of diversion at North Tsea Lake. As a result, the withdrawals are greater than they should be if they were based on the flow at North Tsea Lake. [273] The Panel finds the failing to systematically make appropriate area adjustments based on drainage basin size results in an inaccurate Zero Withdrawal Limit for DS-1 and inaccurate allowable withdrawals at North Tsea Lake, rendering the entire withdrawal scheme inaccurate. e. Compliance point – the location of gauging station DS-1 [274] Although condition (e) of the Licence states that “Withdrawals will cease when water discharges at Tsea River at North Tsea Lake fall below the zero withdrawal limit…”, the Licence does not specify the site at which the flow in the Tsea River is measured for the purposes of condition (e) of the Licence. [275] The Panel asked the Manager where the compliance point was located, and where the phrase “Tsea River at North Tsea Lake” referred to. He replied “I understand it to be at DS-1, but it isn't that clear in this [Licence] condition.” When asked how far downstream from the point of diversion would be too far to be a compliance point, the Manager responded that “My interpretation is that that Zero DECISION NO. 2012-WAT-013(c) Page 63 Withdrawal Limit is what's measured at station DS-1, so it would be at that point, specifically.” [276] The Panel has also considered that the point of diversion in North Tsea Lake is upstream of DS-1, the gauging station for the purposes of condition (e) of the Licence. Given that water is withdrawn upstream of gauging station DS-1, the flow measured at DS-1 is the flow that remains after withdrawal has occurred. [277] The Panel finds that estimating percentage withdrawal from flows at DS-1 (after water has been withdrawn at North Tsea Lake) will consistently underestimate the withdrawal amount because the percentage is being calculated without accounting for the water withdrawn at North Tsea Lake. There is no evidence that water withdrawals at North Tsea Lake were factored into the downstream flow measurements used to calculate percentage withdrawals. The Panel’s reading of the 2011 Water Plan is that percentage withdrawals were to be based on river flows, not on the river flow minus the withdrawal amount. [278] The Panel finds that, for the purposes of ensuring compliance with condition (e) of the Licence, the Licence should have specified the gauging station (currently DS-1) where the flow in the Tsea River is to be measured for the purposes of condition (e). This could be done in the same way that the point of diversion is indicated in a water licence; i.e., by marking the gauging station on the map attached to the Licence. f. Lake level [279] A further hydrological parameter that was discussed in the evidence, but is not included in the Licence, is the drawdown of the water level in North Tsea Lake. [280] Mr. Cooper gave evidence that there are no suitable locations to measure the flow of the Tsea River immediately into, or out of, North Tsea Lake. Dr. Wilford and Mr. Wagner gave similar testimony. While flows into and out of the lake may be difficult to measure, the water level in the lake can be readily measured; yet, lake levels are not part of Licence. [This para. was under “Area adjustments”] [281] Mr. Chapman gave evidence that a 0.1 m drawdown limit for lakes is used by the Oil and Gas Commission, but is not well supported except by studies of lakes in the Yukon, where no more than 10% of the lake volume should be drawn down over the winter. Mr. Chapman gave evidence that, for section 8 approvals, the 0.1 m drawdown limit is measured from the date when withdrawals commence in a given year. However, he stated that the Oil and Gas Commission is moving away from applying a uniform 0.1 m drawdown limit measured from when withdrawals start, in favour of drawdown levels based on the average open season water level for a lake. [282] Mr. Wagner gave evidence that Nexen wanted to move away from the 0.1 m limit because lake water levels have a high degree of natural variability, and the 0.1 m limit results in drawdown amounts that were unrelated to ecological sustainability. For example, operators who started withdrawing water during freshet, when the water levels in lakes are naturally high, would usually have to stop withdrawals shortly after freshet ended, because lake levels would naturally drop more than 0.1 m. Those operators would only be able to withdraw water for a short portion of the year. Consequently, operators started trying to ‘beat’ the system, and in some cases started withdrawals under the ice layer early in the spring, when lake levels are naturally very low. In that case, they could usually DECISION NO. 2012-WAT-013(c) Page 64 continue to withdraw water for much of the year, as the lake level would not be that low again until the next winter. [283] Based on this evidence, the Panel finds that measuring drawdown based on a lake’s water level when withdrawals start leads to arbitrary results, because it depends on the point in the year when withdrawals start. However, as discussed below, the Panel was provided with evidence that lake levels may be a useful indicator within a hydrological system. [284] In their July 2013 report, Mr. Van Geloven and Dr. Wilford described various aspects of the relationship between the water level at North Tsea Lake and the downstream water flow. They stated as follows at pages 7 and 8: The 2012 Addendum does speak to further developing the relationships between lake level and discharge gauges but they require further refinement. We understand that it has been somewhat difficult for the proponent to establish a durable relationship between lake level measured at DL-1 and discharge at DS-1 or DS-2 (W32). The fact is, and it has been demonstrated in both the March 15, 2011 Supplemental Information and the 2013 Addendum, that a relationship does exist. The problem with the relationship is that lakes are prone to obstructions at their outlets… so conceptually, one day’s lake level could be different than another day’s level yet the discharge could be the same. … In brief, the point is that changes in lake level indicate that something is going on, and if that something cannot be explained with confidence remotely, then a field visit is necessary to confirm the phenomenon and the resultant effect on discharge at the North Tsea Lake outlet or DS-2 (W32). … We consider it to be a missed opportunity to not incorporate these trends into the licensee’s water management frame work and this exposes the licensee to making decisions based on potentially erroneous data supplied by the downstream gauges. All indications throughout the monitoring program have suggested that it has been difficult to maintain a stable rating curve downstream from North Tsea Lake. Although lake level cannot act as a direct surrogate for discharge monitoring and compliance, lake level trends, if understood, could be an excellent indicator of expected discharge trends and would be particularly easy for a pump operator to interpret and act upon. [underlining added] [285] In his testimony, Dr. Wilford also stated that it was a missed opportunity for the 2013 Order not to have included lake level as one of the conditions in the licence. The Panel agrees. The fact that the Licence only considers discharge from the lake, and not the lake level itself, misses an essential component of the hydrological system. The Panel also agrees with Dr. Wilford and Mr. van Geloven that, given the instability of the rating curve at DS-1 and DS-2, lake level trends could be a helpful indicator of expected discharge trends, and would be easy for a pump operator to observe and act upon. However, the question becomes whether the 0.1 m drawdown limit, or some other limit, is appropriate for North Tsea Lake, DECISION NO. 2012-WAT-013(c) Page 65 and whether the baseline from which to measure this limit should vary seasonally given natural seasonal lake level fluctuations. [286] The Panel heard evidence that a consistent relationship between the water level in North Tsea Lake and the flow at DS-1 was not supported by graphs in the 2011 Water Plan and the Matrix documents for 2011 and 2012. Mr. Cooper testified that approximately 15 to 20 beaver dams existed between North Tsea Lake and the gauging station at DS-1, and downstream beaver dams may cause the lake level to be high and the flow at DS-1 to be low. There is no evidence that such a dam actually controls the lake level of North Tsea Lake, but Mr. Cooper stated that a beaver dam close to the outlet of Mid Tsea Lake did control that lake level at times. Although there should be some correlation between downstream flows and the lake level, the Panel finds that it is not a simple correlation. The Panel agrees with Mr. Cooper that a correlation is not discernible from the available data pertaining to stream flow and lake level. [287] Mr. Cooper’s Rebuttal Expert Report states that water levels in some lakes in the region naturally fluctuate by more than 0.1 m. For example, he states that daily monitoring of Mid Tsea Lake in 2012 showed that its water level dropped by more than 0.4 m during the open season. While the Panel accepts that the water level in some lakes in the region may naturally drop by 0.1 m, the Panel notes that 2012 was not a typical or average year, as there was a drought during the summer of 2012. [288] The Panel finds that the water level in North Tsea Lake is a direct response to all of the water gains and losses into and out of the lake, and as such, the Panel finds that the Licence should have included a condition specifying a maximum drawdown level, expressed as an elevation. [289] The Panel finds that determining whether a 0.1 m drawdown limit, or some other drawdown level, is appropriate for North Tsea Lake would require on-site investigations of: the naturally occurring fluctuations in the lake level; fish and wildlife habitat related to lake level; and, other ecosystem functions at North Tsea Lake connected to the lake level. It would also require monitoring for the potential effects of beaver activity. For future guidance, the Panel finds that 0.1 m is a conservative and appropriate drawdown limit for North Tsea Lake based on the normal lake level after freshet. g. Monitoring and reporting [290] Condition (j) of the Licence requires the licensee to keep records on “actual water use”, and to submit this information annually to the Manager. The Manager testified that, while other information that Nexen collects could be useful to the Ministry, all that is required by the present wording of the Licence is a record of withdrawals. The Panel finds that only reporting withdrawals is inadequate for a licence that authorizes the withdrawal of a significant percent of available flow, particularly given that the licensee is conducting monitoring for operational, compliance, and hydrological purposes. [291] Nexen’s hydrometric monitoring program has three broad purposes: (1) flows are measured to determine allowable withdrawal rates; (2) flows are recorded to create a record for compliance and reporting purposes; and, (3) flow data are analyzed to improve the estimates of hydrologic parameters such as average monthly, weekly, or annual discharges. DECISION NO. 2012-WAT-013(c) Page 66 [292] The Panel considered Nexen’s hydrometric monitoring program and the use of gauges to determine the instantaneous water withdrawal rate. Several improvements to Nexen’s water monitoring program, as proposed in the 2011 Water Plan, were required pursuant to the Order issued in 2013. The Order required Nexen to implement six “remedial measures” before the 2013 season, including: the installation of real-time hydrometric gauges at DS-2 and DS-3; taking steps to ensure that the integrity of the hydrometric monitoring is maintained during unforeseen events that compromise the validity of the rating curve; daily field measurements during low flow periods to verify real time hydrometric gauge data; monthly recording and quarterly reporting of water withdrawals; and, the retention of an independent environmental monitor to observe, analyze, audit and report on aspects of the 2011 Water Plan that relate to hydrologic, ecological, and environmental monitoring and reporting under the Licence. The Manager concluded that the 2013 Water Plan Addendum addressed the requirements in his Order. However, these requirements were not incorporated into the Licence either expressly or by reference to the hydrometric monitoring plan in the 2011 Water Plan and the 2013 Water Plan Addendum. [293] The Panel finds that the Licence should have required that hydrometric, withdrawal, storage, usage data related to the Licence be monitored and reported to the Manager. [294] In addition, the Panel heard evidence that Nexen’s independent environmental monitor is Mr. Cooper, who is the project manager for Matrix, which is under contract to Nexen to operate their hydrological monitoring and gauging activities. When Mr. Cooper was asked how he would fulfill the audit function of the independent environmental monitor, he stated he would have to appoint someone else. [295] The Panel recognizes that the Order, and the phrase “independent monitor” in the Order, were crafted to satisfy the Manager’s concerns. Although the Manager testified that he was satisfied with Mr. Cooper acting as the independent monitor, the Panel finds that it would be more appropriate to have an arm’s length monitor or auditor of practices and results. h. Summary and conclusions regarding the terms and conditions of the Licence [296] In summary, the Panel finds that many of the errors and inadequacies in the 2011 Water Plan were not resolved by subsequent data and analyses, or the 2013 Water Plan Addendum, including: • the assumption that 2010 was an average year in northeast B.C., and that it was suitable to extrapolate from 2010 data and use it in the NEWT analysis as if it were long-term data for the purpose of estimating the annual discharge of the Tsea River at North Tsea Lake; • the assumption that Adsett Creek hydrological data is suitable to apply to the Tsea River at North Tsea Lake based on the similarity in their basin sizes; • the use of unreliable rating curves at DS-1 and DS-2 to estimate the open season discharge at North Tsea Lake, and to regulate water withdrawal rates according to the flow-weighted withdrawal scheme; • clause (e) of the Licence should only have allowed the diversion and storage of a maximum of 1,200,000 cubic metres of water per year, consistent with DECISION NO. 2012-WAT-013(c) Page 67 the Water Act’s purposes of conserving public water resources, maintaining environmental base flows, and the requirement that licensees must make beneficial use of the water allocated to them; • the Licence does not specify a maximum withdrawal rate (expressed in cubic metres per second); • the use of the Inferred Median Flow as a water withdrawal parameter, despite the fact that there is no explanation of how it was calculated or how it will be revised in light of further field data; • the use of a novel and untested flow-weighted withdrawal method without sufficient justification or explanation for the withdrawal thresholds or percentages; • the application of the Zero Withdrawal Limit, other critical points within the flow-weighted scheme, and the percentages used to calculate allowable withdrawals to flows measured at a gauging station well downstream of the diversion point, without adjusting for differences in the basin size between the gauging station and the diversion point; • the Licence does not specify the gauging station (currently DS-1) where the flow in the Tsea River is to be measured for the purposes of condition (e); • the Licence does not specify a maximum drawdown level (expressed as an elevation) for North Tsea Lake; and • the Licence does not require that hydrometric, withdrawal, storage, usage data related to the Licence be monitored and reported to the Manager. The Licence should have included these monitoring requirements, and should have required an independent monitor or auditor who operates at arm’s length from Nexen and its hydrology contractor. [297] The Panel finds that the hydrological aspects of the Licence and the 2011 Water Plan, even taking into account the changes made as a result of the Order, are poorly rationalized, and there is insufficient basis to conclude that they provide a reasonable level of accuracy and reliability in estimating the mean annual discharge at the point of diversion, the mean annual open season discharge at the point of diversion, or the appropriate rate(s) of water withdrawal as a percentage of the instantaneous flow at or near the point of diversion. iii. Fish and fish habitat [298] Fish habitat surveys were conducted from August 7 to 9, 2009, and reported in the 2009 Diversified report that was an appendix to the 2011 Water Plan. The purpose of the 2009 Diversified report was to “determine fish species distribution within each area and assign stream classifications to stream reaches….” In the Tsea Lakes area, the stream morphology was observed to be low-gradient (<0.5%), large channel and meandering, and the stream bed substrate is typically composed of 100% fines and organic accumulation. Suitability for most fish species was considered to be limited by high summer temperatures, low dissolved oxygen levels, and poor quality over-wintering habitat (due to limited winter flows) and spawning habitat. Eight fish species were found in the lower Tsea River near the confluence of Tsea River and Gote Creek (also known as Geetla or DS-3) where riffle-run habitat with cobble-gravel substrate was dominant. In North Tsea Lake, DECISION NO. 2012-WAT-013(c) Page 68 adult Northern Pike were observed. Minnow traps, which are designed to catch smaller fish, were not set in North Tsea Lake. [299] The 2011 Water Plan briefly discusses in-stream flows for fish, at page 43/71: Water withdrawal will be managed so that the majority of the volume required to meet operational needs is acquired during periods of high flow, therefore reducing demand during periods of low flow when fish habitat is most at risk from water withdrawal. Conservative minimum in-stream flow rates have been established to further protect fish habitat from excessive withdrawal. Using IHA [indicators of hydrologic alteration] analysis to manage withdrawal rates will help to maintain a range of flow, including the high velocities that produce flushing and scouring action. This is critical for maintaining spawning and fish rearing habitat in the lower reaches of the Tsea River. [300] The Panel considers this to be is a conceptual statement, which does not refer to specific data on fish or fish habitat. An analysis discussing the potential impacts of the proposed water withdrawals on fish and fish habitat was not provided. [301] The Manager’s rationale for his decision states as follows regarding fish and fish habitat: … the staged water withdrawal system is designed to support a water ecosystem with no impacts to fisheries values. A review of the proposal by provincial experts anticipated no impacts to fish or fish habitat. The third party reviewer of the proposal also anticipated no impacts to fish or fish habitat. No impacts to FNFN’s treaty right to fish are anticipated. [302] However, the Manager testified that, contrary to the statements above, no reviews regarding impacts on fish and fish habitat were undertaken by provincial experts or the third-party reviewer, Dr. Carey. Indeed, the Carey Report stated that Dr. Carey declined to comment on the quality or adequacy of the 2011 Water Plan’s fish, caribou or vegetation surveys, as those matters were outside of his expertise. In terms of provincial experts, Mr. Suther testified that he was not asked to review the 2011 Water Plan until 2013, more than a year after the Licence was issued. The Panel finds that the Manager appears to have relied entirely on the retention of base environmental flow levels and the flow-weighted withdrawal scheme in making his conclusions that there would be no impacts on fish or fish habitat. [303] Additional information regarding fish and fish habitat became available after the Licence was issued. The new information that was provided to the Panel is discussed below. [304] In 2012 and 2013, Nexen retained Triton to re-sample Diversified’s 2009 sample sites, and to build upon the data that was collected. Triton surveyed fish and fish habitat at sites in the Tsea River watershed in 2012 and 2013, and summarized the data in reports dated December 4, 2012 (the “2012 Triton Report”), and September 23, 2013 (the “2013 Triton Report”). Triton interpreted this data in a September 27, 2013 report titled, “Preliminary Analyses of the DECISION NO. 2012-WAT-013(c) Page 69 Potential Effects of Water Withdrawal on Fish and Fish Habitat in the Tsea Watershed (2013 Addendum)” (the “Triton Addendum”). [305] Triton’s monitoring plan involved sampling the sites that Diversified had surveyed in 2009 as well as two additional sites, at the same time of year (low flows in late summer). Triton used the sites at Gote Creek (which joins the Tsea River 14 km downstream from North Tsea Lake) as the control sites, and the sites at the Tsea River upstream from the confluence of Gote Creek as the impact sites. The 2009 fish and fish habitat data was used as a baseline for comparing data from both the control (Gote Creek) and impact (Tsea River) sites. Triton added an additional sample site at DS-1, and moved one of Diversified’s sites about 3 km upstream to a beaver pond complex on an unnamed tributary of the Tsea River above the confluence with Gote Creek. Water quality measurements including water temperature, pH, and dissolved oxygen content were measured at the surface and bottom of each sampling site. Channel characteristics such as gradient, channel width, water depth, and features such as riparian vegetation were also recorded. The Triton Addendum compared fish species diversity, species richness, and the relative abundance of all fish species together, and of Arctic Grayling in particular. The 2013 Triton Report states that both Arctic Grayling and Northern Pike occur in the Tsea River and Gote Creek watersheds, and are recognized as species of “cultural and recreational significance.” [306] North Tsea Lake was surveyed on September 13, 2012, and from August 27 to 29, 2013. The 2012 and 2013 Triton Reports state that, at the time of sampling, water withdrawals were not occurring. The average water temperature at North Tsea Lake was 8.64oC in 2012, and 13.3oC in 2013. Northern Pike were captured and/or observed in 2012 and 2013, as they had been in 2009. Minnow traps were set, but no smaller fish were captured or observed. Water quality measurements indicated minimal difference between the surface and the bottom of the water column. The 2012 Triton Report states that “The lake appeared to be drawn down judging by the dry muskeg shoreline.” [307] Regarding the aquatic habitat at North Tsea Lake, the 2013 Triton Report states at page 25: Water quality conditions and maximum lake depths are likely to support all life stages of Northern Pike and cyprinid [small fish] populations through the winter. There may be good spawning habitat available for Northern Pike at the outlets of the Tsea Lakes. Migration between lakes appeared to be good, with no barriers observed. … [308] At page 33, the 2013 Triton Report further states: Forage species such as Brook Stickleback and Finescale Dace have not been captured in the Tsea Lakes… over the three study years. Northern Pike appeared to be abundant in these lakes. In Trail Lake [at the headwaters of Gote Creek], Northern Pike has never been captured and is likely not present; however, Brook Stickleback and Finescale Dace are abundant. Aside from waterfowl, no natural predators have been observed on Trail Lake, allowing forage species populations to thrive. In Tsea Lakes… it is probable that there are small populations of forage species suppressed by Northern Pike predation. DECISION NO. 2012-WAT-013(c) Page 70 [309] Sites in the Tsea River were surveyed from September 6 to 9, 2012, and from August 27 to September 4, 2013. According to the 2012 and 2013 Triton Reports, at DS-1, Slimy Sculpin were captured and Northern Pike were observed in 2012 (this location was not sampled in 2009), and this location provides excellent habitat for all life stages of Northern Pike. Arctic Grayling were not found at DS-1 in 2012. In 2012, a dry section of channel was observed 100 m upstream of DS-1, the stream flow was described as “indiscernible”, and the average water temperature was 13.7oC. In 2013, no fish were observed or captured at DS-1, the average water temperature was 15.1oC, and the stream flow was 0.335 cubic metres per second. [310] Further downstream at DS-2, according to the 2012 and 2013 Triton Reports, Northern Pike and Slimy Sculpin were captured and observed in 2009 and 2012, and the site has good habitat potential for rearing, holding, spawning, and overwintering by Northern Pike. However, only Arctic Grayling were captured and observed at DS-2 in 2013. No fish were captured in minnow traps at DS-2 in 2012 or 2013. The average water temperature at DS-2 was 9.7oC in 2012, and 12.2oC in 2013. [311] The Triton Addendum attempts to examine the potential effects of the water withdrawals by comparing differences in factors such as the relative abundance of fish, fish species diversity, and fish community composition, between years. At page 16, the Triton Addendum concludes as follows: Analysis provided no evidence that fish species, composition, diversity, relative abundance, or fish habitat conditions have changed measurably between baseline and operational conditions to 2013. … The analyses performed in this report were unable to show that the fish community and habitat conditions have changed measurably between 2009 and 2013 in either the Tsea River or Gote Creek, however the ability to detect differences between years was limited by small sample sizes. … Small sample size generally increases standard error, which reduces the power to detect differences between sample years, meaning that only large changes would be detected. It is recommended that in the future the experimental design should include increased fish sampling in order to allow more robust analysis. In particular, increasing the number of sampling sites would provide better representation of overall stream conditions. This would also increase the confidence in the results of analysis and also allow for better detection of more subtle changes. [312] Nexen’s expert witness, Mr. Whelen of Triton, testified regarding the Triton Reports and the Triton Addendum. He was not an author of the reports, but he reviewed the 2013 Triton Report and the Triton Addendum before they were finalized. He also discussed his September 6, 2013 memorandum, which was prepared in response to the expert report by Dr. Moore and a July 22, 2013 report by Dr. Stanford (discussed below). [313] Mr. Whelen’s memorandum responded to concerns expressed by Dr. Moore that water withdrawals can increase the temperature in a stream during warm summer weather, and that high water temperatures can be detrimental to fish such as Arctic Grayling. At page 7, his memorandum states that Arctic Grayling can tolerate water temperatures up to 24.5oC, and Northern Pike can tolerate water DECISION NO. 2012-WAT-013(c) Page 71 temperatures up to 33oC. For Northern Pike, he found this limit to be 11oC higher than the maximum water temperature measured in the Tsea River for the period of record based on daily data collected at DS-1 from April to November of 2011 through 2013, and spot measurements taken at fish sampling sites in 2009, 2012, and 2013. For Arctic Grayling, he found it to be 2.5oC higher. He goes on to state that maximum water temperatures of 20 to 22oC in Tsea River occurred in July, when average monthly flows would typically allow for up to 15% withdrawal rates. In referring to the spawning period in April and May, when measured water temperatures were 4 to 15oC, Mr. Whelen stated that “it seems unlikely that even at a maximum withdrawal rate (25% of mean daily flow) that water temperature would be significantly affected.” Arctic Grayling occurred at DS-2 in 2013, and both upstream and downstream of DS-3 in all three years of sampling. Appendix G1 in both the 2012 and the 2013 Matrix Reports include graphs of 2011 and 2012 daily mean, minimum, and maximum water temperatures. The daily 2013 water data had not yet been summarized, and was not available to the Panel. The available evidence indicates maximum water temperatures in 2011 of approximately 21oC at DS-2, and approximately 20oC at DS-2, and in 2012 of approximately 27oC at DS-2, and approximately 26oC at DS-3. The Panel finds that, despite Mr. Whelen’s evidence, the maximum water temperatures at DS-2 and DS-3 in 2012 did exceed the stated thermal limits for Arctic Grayling. [314] The First Nation’s expert witness, Dr. Stanford, gave evidence that these temperature tolerance levels are actually maximum tolerances or mortality levels, and as temperature increases towards those levels, fish are physically stressed and will leave the area if possible. He stated that this was particularly the case in brown (tannic) water systems (such as the Tsea Lakes and the Tsea River) where the dark water heats up quickly. The Panel finds that a thorough consideration of the possible effects on fish of water withdrawals, which may elevate stream temperature, should also consider sub-lethal effects, not just whether maximum limits may have been exceeded. [315] Dr. Stanford also testified that he agreed with the statement in the Triton Addendum that the analyses were unable to show that the fish community and habitat conditions changed measurably between 2009 and 2013 in the Tsea River or Gote Creek. However, he was critical of Triton’s approach to fish monitoring. Among other things, he stated that the approach relied on faith that, if there were effects, they would show up over time, and that the monitors would be able to discern whether the observed changes were caused by water withdrawals or by other factors. Dr. Stanford also stated that it would likely take many years before a trend would be statistically significant for a site, because of the low numbers of fish sampled. In addition, Dr. Stanford stated that the fish monitoring program does not specifically relate Nexen’s water withdrawals to the variables that are measured. Dr. Stanford noted that, although North Tsea Lake is presumably where the impacts of withdrawals would be the greatest, this location is not the focus of the monitoring program. [316] In his memorandum, Mr. Whelen acknowledged that the limited data sets do not provide for robust analysis, but he stated that the continued collection and analyses of information will continually improve the accuracy of the analyses. Mr. Whelen testified that, if he had designed the monitoring program, he would have focused more effort on sampling North Tsea Lake, since it is the location of the DECISION NO. 2012-WAT-013(c) Page 72 water withdrawals, rather than simply re-sampling the sites chosen in 2009 by Diversified. [317] In addition, Dr. Stanford stated that fish may not be the best target for monitoring, and that zooplankton may be a better target. He described the fish community of the Tsea River system as not diverse, with only a few species present, and not abundant. In his opinion, these limitations would reduce the power of Triton’s species diversity approach. He would have preferred “variables measured that tell me about the condition of the fish populations or the biotic populations in such a way that they can be traced back to water, the availability of water for those organisms.” In that regard, Mr. van Geloven suggested the monitoring of aquatic invertebrates in the Tsea River watershed and elsewhere in northeast B.C. These invertebrates may be collected using the standardized methodology of the Canadian Aquatic Benthic Invertebrate Network, and may be used to measure stress in an aquatic system compared to reference sites. [318] The Panel notes that the absence of any fish at DS-1 in 2013 (where Northern Pike and Slimy Sculpin had occurred in 2012) followed the excessive withdrawals in July and August of 2012 (contrary to the Zero Withdrawal Limit in the Licence), during which time the stream bed 100 m upstream from DS-1 was dry. This suggests to the Panel that, if withdrawals should result in a dry stream bed for a period of days or weeks, this may cause harm to fish and/or fish habitat in that stretch of the stream and for some distance downstream, even for some time thereafter. This emphasizes the need to ensure that stream flow monitoring requirements are adhered to, and to incorporate such monitoring requirements into the conditions of any future water licence. [319] Aside from the finding above, the Panel finds that there is currently insufficient data or analyses to conclude that the Licence, together with the 2011 Water Plan and the requirements that resulted from the Order, ensure that the minimum stream flows necessary for fish and fish habitat are maintained. Although the analyses performed in the Triton Addendum show no measurable changes in the fish community, the Panel finds that the fish monitoring program has several weaknesses, and the limited data that is available to date does not provide for very reliable analyses. In particular, both the small number of sample sites and small numbers of fish sampled at any given site limit the ability to detect differences between years so that it would likely take many years before a statistically significant trend, if it existed, could be identified. Furthermore, the differences in fish species and distribution between Gote Creek and the Tsea River cast doubt on the suitability of Gote Creek as a control site, assuming that fish are the organisms that should be monitored. For example, Trail Lake (at the head of Gote Creek) lacks Northern Pike but has abundant Brook Stickleback and Finescale Dace, whereas North Tsea Lake has Northern Pike but smaller forage fish have not been found. As recommended in the Triton Addendum, increasing the number of sampling sites would provide better representation of overall stream conditions, and would increase the confidence in the results of analysis and also allow for better detection of more subtle changes. In addition, the Panel finds that strategically placing sampling sites is just as important as increasing their number, and that sampling a wider set of organisms, such as zooplankton or benthic invertebrates, would strengthen the monitoring effort. DECISION NO. 2012-WAT-013(c) Page 73 [320] Mr. Whelen stated that Northern Pike use flooded wetland vegetation for breeding during the spring, and therefore, Northern Pike require high water levels at that time. Northern Pike were observed during every fish survey in North Tsea Lake. However, no fish surveys were conducted during the spring, and therefore, the breeding locations and required spring water levels for Northern Pike at North Tsea Lake have not been determined. Both Dr. Stanford, in a general sense, and the Triton Reports, referring specifically to sites in the Tsea River watershed, reported that beaver dams are significant fish migration barriers. Mr. Whelen indicated that adult Arctic Grayling undergo seasonal migrations: upstream into the Tsea system from the Petitot River in the spring; and downstream to the Petitot River in the fall. While water levels during freshet are likely to meet or exceed that required for spring migration, fall water levels are naturally lower, and therefore, are more critical for Arctic Grayling migration. The fall water levels necessary to provide successful Arctic Grayling migration past any beaver dams or other possible migration obstacles have not been estimated in the Tsea River watershed. [321] In summary, the Panel finds that there is currently limited data regarding the impacts of water withdrawals in accordance with the Licence on fish and fish habitat. However, it is clear that excessive water withdrawals may adversely affect fish habitat and fish populations at or downstream of the point of diversion, as discussed above. Thus, the limited data and information that is available establishes that excessive water withdrawals may cause adverse effects on fish and their habitat, including species such as Northern Pike and Arctic Grayling that the First Nation depend on to exercise their fishing rights. [322] To better understand exactly how, and to what degree, fish and fish habitat may be affected by the water withdrawals, the Panel recommends that requirements for monitoring the effects of the water withdrawals on fish and fish habitat, possibly including the sampling of zooplankton or benthic invertebrates, be included in the terms of any future water licence that authorizes a large volume of withdrawals in this watershed. Fish and fish habitat monitoring plans should include terms related to, but not limited to, an assessment of the seasonal biology of selected fish species to indicate the stream reaches or sections where changes in flow rates are most likely to be critical, and a sampling design taking into consideration natural variability in order to compute the statistical power of the design sufficient to show whether the water withdrawals are having significant biological effects. iv. Riparian wildlife and riparian habitat [323] The 2011 Water Plan states that Trumpeter Swans were observed during helicopter fly-overs of South Tsea Lake. Although no nests were identified, the 2011 Water Plan proposes the establishment of a 200 m buffer around any Trumpeter Swan nests when the birds are actively using the lakes (April to September). In response to the potential that noise from generators may disturb Trumpeter Swans, the 2011 Water Plan noted that generators would be located over 1 km away from the lake. In addition, the 2011 Water Plan proposed that the installation of works and non-critical maintenance be completed before April 15 of each year to avoid the Trumpeter Swan migration period and arrival time, and that helicopter access after that time be avoided if swans were observed using the lake or surrounding area for nesting. DECISION NO. 2012-WAT-013(c) Page 74 [324] The 2011 Water Plan also states that the area is within Boreal Caribou winter range. However, it also states that preliminary analyses indicated that calving Boreal Caribou select lakes that are 1 to 20 hectares in size and that are within 200 m of each other, and that the Tsea Lakes do not meet those criteria. In any event, no significant impacts were anticipated to Boreal Caribou, because existing roads and cutlines would be used as pipeline routes, and noise near the lake would be minimal due to the use of submersible electric pumps. [325] The 2011 Water Plan does not address beaver populations or their habitat, but many of the other hydrological documents prepared for Nexen discuss beaver activity in the Tsea River watershed, especially in terms of impacts on stream flow. [326] Dr. Stanford was critical of the 2011 Water Plan for not considering how the water withdrawals might impact beaver, a keystone species that provides and maintains habitat for many other species. Dr. Stanford stated that the beaver is a critically important species in low-gradient taiga ecosystems such as the Tsea River system, as they affect the landscape and stream dynamics. By building dams, they inundate areas with water and alter hydrology, nutrient flux, and the ability of fish and other aquatic organisms to travel. They are also an important food for carnivores. They create a continually shifting mosaic in the landscape as they dam streams, kill trees by flooding for food or dam material, and eventually move on to other areas. He explained that the overall effect of beavers on hydrology is to reduce variation in flows by damming water and then releasing it slowly. Dr. Stanford testified that “If beavers are deemed to be important landscape engineers that influence the way in which water moves through the system, and we’re removing water from the system, then we ought to have quantitative information on productivity and habitat requirements and availability of beaver.” [327] The Panel agrees with Dr. Stanford that no consideration was given to the possible effects of the water withdrawals on beaver, a keystone species in this landscape, in the 2011 Water Plan, nor in any environmental monitoring that has been undertaken since the issuance of the Licence. However, in the appeal hearing, Nexen advised that it would be willing to conduct studies of keystone species. The Panel finds that the potential effects of Nexen’s water withdrawals on beavers, and other species that rely on beavers’ effects on hydrology and the ecosystem, are currently unknown. The potential effects on beavers should have been considered before the Licence was issued. If a licence authorizing the withdrawal of a large volume of water from this watershed is issued to Nexen in the future, the Panel recommends that the terms of the licence include an effects monitoring plan, approved by the Manager, of keystone species such as beaver. This plan should include a study design that considers natural variability in order to compute statistical power of the sampling design, sufficient to show whether water withdrawals are having significant biological effects on keystone species. [328] Regarding potential impacts on wetland vegetation, the 2011 Water Plan states that a shallow groundwater monitoring program would be implemented in the spring of 2011 to identify changes in the moisture regime surrounding North Tsea Lake, and to mitigate detrimental impacts to peatland and muskeg ecosystems. It states that this monitoring would identify whether water is being drawn exclusively from surface water runoff, or whether shallow groundwater from the surrounding muskeg terrain is flowing toward the withdrawal point. The groundwater monitoring program would define the study area, identify and map DECISION NO. 2012-WAT-013(c) Page 75 wetland plant communities, establish at least one observation plot for each representative plant community, have a soil profile analysis performed for each plot, provide an inventory of plant species and percentage cover in each plot (repeated annually), specify the installation of shallow monitoring wells, and note water table levels during site visits. [329] In July 2013, Mr. Suther provided the following comments on the 2011 Water Plan: . . . how will “detrimental impacts” be determined to “peatland and muskeg ecosystems” and what are (if necessary) options? How was the study area delineated when “Surveys were conducted to identify red and blue-listed species [as defined by the Ministry] or critical habitat within the area (italics mine) designated for water withdrawal”? What were the results of said surveys, define “critical habitat” and what are the “most stringent habitat protection measures” associated with potential water withdrawal? A “function” used in determining the “maximum annual withdrawal limit” is “ecological limits for change”. Are the “limits” for subject change determined by the later described Indicators of Hydrologic Alteration or something different? What methodology will/has been used to determine if there are swan nesting sites that could be impacted by activities associated with water withdrawal for the duration of the associated licence (if issued)? Specific to this particular water withdrawal licence application, how will monitoring “at a regional scale” determine if there is impact to boreal caribou? Will/could information derived from the generally described shallow groundwater monitoring (Section 9) program be used to determine potential impacts to boreal caribou? [330] Mr. Wagner testified that no wildlife field surveys specific to this licence application were carried out, and no waterfowl surveys, and specifically no Trumpeter Swan nest surveys, were undertaken. He stated that water withdrawals are intended to stay within the range of natural variation, and therefore, no wildlife impacts were expected and Nexen did no further wildlife assessments or surveys. Mr. Wagner also stated that he had been to the site “about ten times”. During those visits, he has seen “a variety of ducks, mostly Mallards, Blue-Winged Teal, … Canada Geese, black bear, caribou, moose … Trumpeter Swans ….” The Panel notes these were incidental sightings that were not recorded in a systematic manner and were not part of a wildlife survey. [331] In addition, as will be discussed under Issue 2, several members of the First Nation testified that they had seen Trumpeter Swans, ducks, moose, black bear, and beaver at or near North Tsea Lake. They trap beaver in the Tsea River watershed and the Tsea Lakes area in particular. They hunt moose and gather eggs from ducks in the area as well. Further, certain wetland vegetation is gathered for food, traditional medicine, and other uses such as canoe construction. [332] Based on the document evidence and witness testimony, the Panel finds that beaver, moose, and various types of birds including Trumpeter Swans and waterfowl inhabit North Tsea Lake and the surrounding riparian habitat. However, DECISION NO. 2012-WAT-013(c) Page 76 no wildlife surveys were carried out before or have been done since the Licence was issued. [333] Turning to the wetland vegetation data that has been collected since the Licence was issued, Matrix provided the results from the 2012 wetland vegetation monitoring in a report dated July 2013 (the “Wetland Report”), which also includes an analysis of the 2011 wetland vegetation data. The Wetland Report includes an analysis of what is intended to be a before-after-control-impact (“BACI”) study design, although the Panel notes that no sampling was done before withdrawals began in 2011, and therefore, there is no true “before” in the study design. The treatment plots were in the fens surrounding North Tsea Lake, and the control plots were in the fens surrounding Middle Tsea Lake, where there was no water withdrawal. The baseline data (i.e., “before”) was considered to have been collected in 2011. The intent, as stated at page 1 of the Wetland Report, was “to draw inferences and correlations between changes observed in the vegetation and changes in surface water (quality and quantity).” [334] The Wetland Report found a statistically significant difference in species richness at North Tsea Lake (the “impact” site) between 2011 and 2012, but not at Middle Tsea Lake (the “control” site). At pages 15 to 16, the Wetland Report concludes: These results … suggest that some species may have responded to decreased water levels and drier conditions. Summer to fall of 2012 was a dry period with lower than average rainfall during the months of August and September (Matrix 13a). An additional confounding factor is the increase in size and number of beaver dams along the stretch of the Tsea River that connects Middle Tsea Lake to North Tsea Lake. … Based on results and field observations, decreased water levels in North Tsea Lake could be the result of several factors including environmental or anthropogenic. Species richness and vegetation health within sampled wetlands surrounding North Tsea Lake seem to be responding to the reduced water levels. Given that this monitoring is in its second year, the results are not considered to be conclusive. Data collected over a minimum of 3 years are required before a trend and correlation analysis can be conducted and more conclusions can be reached. … [335] Although the Wetland Report states that the results are “inconclusive” regarding the cause of the statistically significant difference in species richness at the North Tsea Lake sites between 2011 and 2012, the Panel finds that the available data indicates that the most plausible cause was the drop in water levels in North Tsea Lake in the summer of 2012 when Nexen’s water withdrawals continued after the Zero Withdrawal Limit had been reached. In 2012, water levels in North Tsea Lake’s wetland monitoring sites declined continuously over the course of the summer, and were closely tied to dropping lake levels. Nexen continued to withdraw water from North Tsea Lake on or about July 12 until August 25, when flows in the Tsea River were near zero. The water level in North Tsea Lake dropped 0.45 m from July 12 to August 25, whereas water levels in Middle Tsea Lake only dropped 0.135 m during the same period. Once Nexen shut off its pumps in North Tsea Lake on August 25, the water level in North Tsea Lake stopped declining. Water levels monitored at Weed Lake (CL-1) in Nexen’s Cordova Lease in 2012 DECISION NO. 2012-WAT-013(c) Page 77 showed the same slow and slight water level decrease as occurred in Middle Tsea Lake, and were quite different from the trend in North Tsea Lake. In 2009, the only other year for which both Middle and North Tsea Lake’s water levels are available (2009 AMEC Report), the water levels in the two lakes roughly mirrored each other, without the divergence seen in 2012. Similarly, the Triton Report indicates that North Tsea Lake was surveyed in 2012 and 2013, and states at page 15 that “in 2013 water level was noticeably higher than 2012, based on floating muskeg shorelines that were dry in 2012.” [336] Based on all of the evidence, the Panel concludes that the area in and about North Tsea Lake supports a variety of wildlife, including species such as beaver, moose and waterfowl that directly depend on riparian habitat. The Panel finds that there is limited data regarding the impacts of water withdrawals on riparian species and their habitat. The Panel also finds that the limited data and information that is available does not support a conclusion that the Licence, together with the 2011 Water Plan and the changes made following the Order, protect against detrimental impacts on wetland vegetation. Rather, it establishes that excessive water withdrawals may cause adverse effects on the habitat of aquatic and riparian species, including species that the First Nation depends on to exercise its hunting and trapping rights. Some of those potential impacts are discussed further under Issue 2. Although further study is needed to determine the effects of the water withdrawals on wetland vegetation, the Panel finds that limiting the lake drawdown to 0.1 m, as described above, may act as an interim measure to limit the adverse effects on wetland vegetation. However, even this finding would require seasonal adjustment of the baseline from which the drawdown was measured to meet seasonal biological needs in North Tsea Lake.

v. Conclusion on the technical merits of the Licence [337] In conclusion, after assessing the evidence regarding the technical aspects of the Licence and the flow-weighted withdrawal scheme set out in the 2011 Water Plan (including the 2013 Water Plan Addendum), the Panel finds that the Licence should be reversed because it is fundamentally flawed in concept and operation. It authorizes a flow-weighted withdrawal scheme that is not supported by scientific precedent, appropriate modelling, or adequate field data. Also, the flow-weighted withdrawal method relies on a set of withdrawal parameters that, except for the Zero Withdrawal Limit and the 15% withdrawal rate, are arbitrary and have no basis in scientific theory or hydrometric modelling. These parameters also rely on an Inferred Median Flow that could not be explained or justified by Nexen or the Manager. In addition, compliance with the withdrawal parameters relies on a hydrometric monitoring program that is not included in the Licence, either as an express condition or by reference to the monitoring plan in the 2011 Water Plan and the 2013 Water Plan Addendum. [338] Further, the Manager’s conclusion that the withdrawals would have no significant impacts on the environment, including fish, riparian wildlife, and their habitat, was based on incorrect, inadequate, and mistaken factual information and modelling results. The new, but still limited, data and information about the Tsea River watershed that became available after the Licence was issued does not support a conclusion that the Licence, together with the 2011 Water Plan and the 2013 Water Plan Addendum, adequately protect against detrimental impacts on the aquatic and riparian environment. Rather, the evidence before the Panel DECISION NO. 2012-WAT-013(c) Page 78 establishes that excessive water withdrawals may cause adverse effects on the habitat of aquatic and riparian species, including species that the First Nation depend on for the exercise of their treaty rights, as discussed further under Issue 2. [339] Although some of the Panel’s findings and recommendations above are directed at the Manager’s decision-making process, some are also intended to provide general guidance, should Nexen apply for a new water licence authorizing the diversion of a significant volume of water from the Tsea River watershed in the future.

2. Whether the provincial Crown’s consultation with the First Nation before the Licence was issued was inadequate because the Crown failed to ascertain the nature and scope of the First Nation’s treaty rights, failed to properly assess the potential impacts of the Licence on the First Nation’s treaty rights, and/or failed to properly discharge the duty to consult.

[340] The parties provided a great deal of evidence regarding consultation with the First Nation, and the nature of the First Nation’s treaty rights. The evidence includes testimony and/or affidavit evidence from several witnesses, and copies of numerous documents. The Panel summarized some of that evidence in the ‘Background’ portion of this decision. Below is the Panel’s summary of further evidence and submissions regarding this issue, followed by the Panel’s findings on this issue.

First Nation’s witnesses and evidence [341] The following witnesses provided evidence in support of the First Nation’s submissions on this issue. Their testimony or affidavit evidence is summarized below. Chief Sharleen Gale [342] Chief Gale is the elected Chief of the First Nation. She testified regarding the First Nation’s organizational structure and traditional practices. She advised that the First Nation has 805 members, and that they consider themselves to be a “river people” with a spiritual connection to the land and water. They traditionally lived in several villages, and used canoes and rafts to travel through their territory. Each family has a watershed in which they conduct activities on the land. Each family also has a trapline, and families have built cabins along their traplines. She and her family hunt, fish, trap, and gather plants for food and medicinal purposes. She explained that elders in each family teach traditional practices and pass down traditional information, but they are reluctant to share sacred information with people they do not trust. [343] In addition, Chief Gale advised that the First Nation’s Lands and Resources Department is responsible for consultation with the Crown, as well as contact with resource companies. She explained that the First Nation is negotiating an Economic Benefits Agreement with the provincial Crown. Lana Lowe [344] Ms. Lowe, Director of the First Nation’s Lands and Resources Department, testified that she has worked in that Department since January 2009, when she DECISION NO. 2012-WAT-013(c) Page 79 began as a researcher. As the Director, she is responsible for facilitating consultation and researching land issues, as well as advising the First Nation’s Council on land matters. She stated that the Department’s main task is to protect the land, and act as an intermediary between the Crown and the First Nation’s Council on land issues. She explained that the Department receives referrals from both provincial and federal government agencies on many types of proposals, and has contact with many different companies. She stated that the peak volume of referrals occurred during 2010 to 2011. Since then, the number of referrals has declined and the Department has hired more staff. The Department currently has eight staff. She stated that the First Nation signed a new Oil and Gas Consultation Process Agreement with the Oil and Gas Commission in June 2012, after the previous agreement expired in 2011. [345] Ms. Lowe also stated that some members of the First Nation are reluctant to share information about the land, depending on why the information is needed and whether they trust the person who wants the information. For that reason, and to protect important sites, the Department may provide maps that indicate general areas of traditional use, rather than the exact sites of traditional activities. [346] In addition, Ms. Lowe discussed some of the impacts of oil and gas activities in the First Nation’s territory. She stated that water quantity and quality have been affected, and elders are concerned that fracking may cause water contamination. She also stated that water withdrawals and associated infrastructure such as pumps may impact ecology and navigation, and visually disturb the landscape. She stated that, based on the First Nation’s traditional activities and treaty rights, the First Nation developed a strategic land use plan in which lakes and riparian zones should be protected from permanent industrial installations, and that the Tsea Lakes are a special management zone. [347] In regard to Nexen’s licence application, Ms. Lowe testified that it was the first referral of this nature that the First Nation had received. She stated that, in 2009, the First Nation had insufficient capacity and time to respond to the referral, and there was no consultation agreement or communication protocol with the Ministry. She stated that the First Nation needed to do a traditional use study to find out from its people what the impacts of the licence could be, but the Crown did not offer funding for such a study. She discussed her memory of the communications and events regarding Nexen’s application during 2010 and 2011. She expressed concern that, during that time, the First Nation’s concerns were either not heard or not responded to by the Ministry, and Nexen’s monitoring data from 2011 was not disclosed to the First Nation. [348] In regard to the Carey Report, Ms. Lowe stated that she was involved in, and satisfied by, the selection of Dr. Carey to conduct the third party review. She thought that the review would help the First Nation to understand ecological and hydrological information, and how treaty rights may be affected by Nexen’s proposal. In her view, the Carey Report was not part of the consultation process. She received Dr. Carey’s draft report in October 2011, and she thought it would assist in consultation with the Crown. However, she felt that a traditional use study was still needed. She acknowledged that the First Nation had an opportunity to comment on Dr. Carey’s draft report, but she stated that the First Nation lacked the capacity to do so at that time. DECISION NO. 2012-WAT-013(c) Page 80 [349] Ms. Lowe also gave evidence regarding Mr. DeFord’s January 27, 2012 letter, which advised that the Ministry had concluded that the proposed water withdrawals would have no appreciable adverse effect on the First Nation’s exercise of its treaty rights, and gave the First Nation 30 days to reply. She testified that the letter came as a surprise to her, and she was previously unaware of the Ministry’s intention to make a decision on Nexen’s application within such a short time frame. Also, she didn’t know that the First Nation’s treaty rights in the Tsea Lakes area had been assessed by the Ministry. She stated that the First Nation was not involved in the Ministry’s preliminary assessment of treaty rights in the Tsea Lakes area, and the Treaty 8 traditional use study cited by Mr. DeFord did not include the First Nation. In her opinion, there was no basis for the Ministry to conclude that there would be no adverse effects on the First Nation’s treaty rights in the Tsea Lakes area. She also testified that no one discussed any alternatives to withdrawing water from North Tsea Lake. [350] Ms. Lowe testified regarding communications between the Ministry and the First Nation from late March 2012 until May 2012, just before the Licence was issued. She stated that, at the time, the First Nation wanted one more chance to meet with the Ministry before the Licence was issued, and she was pleased to receive Mr. Giles’ email on March 21, 2012, indicating that the Ministry wanted to meet. However, on April 3, 2012, Mr. DeFord notified the First Nation that the Ministry was proceeding to make a decision on Nexen’s application, and Ms. Lowe felt this indicated that the Ministry was no longer willing to negotiate. Despite Mr. DeFord’s notification, on April 4, 2012, Mr. Giles again offered to meet before a decision would be made, and he suggested meeting on April 12, 2012. Ms. Lowe reply to Mr. Giles was that the First Nation would like to meet as soon as possible, but that she would be on vacation as of April 9. She advised Mr. Giles that she would be returning to the office on May 1, 2012, and she suggested that he send her a meeting invitation for a date in May. After returning from her vacation, she checked her email on April 26 or 27, expecting to find a meeting invitation from Mr. Giles, but there was none. Meanwhile, on April 13, 2012, then Chief Kathi Dickie sent a letter to the Manager requesting a meeting to discuss potential impacts on treaty rights. The Manager responded by email on April 16, stating that a meeting would be arranged in May. Ms. Lowe testified that she believed the proposed May meeting would occur before Nexen’s application was approved. At that time, she did not know that Mr. Giles had advised Ministry staff that no further meeting with the First Nation was required before approving Nexen’s application, and the Ministry was moving towards approving the application. [351] In regard to the issuance of the Licence, and the Manager’s rationale for the decision, Ms. Lowe testified that she objected to many of the statements in his rationale. In her opinion, the Treaty 8 traditional use study, and other Ministry databases or tools that are referred to in the Manager’s rationale, did not help the Ministry understand the First Nation’s treaty rights in the Tsea Lakes area. She expressed concern about the lack of baseline data on the Tsea River watershed, and the potential effects of the Licence on fish, beaver, and moose in the Tsea Lakes area. [352] Ms. Lowe testified as to some of the known areas of First Nation members’ hunting, fishing, trapping, habitation, and transportation activities in the Tsea Lakes area. She referred to a map, submitted as evidence in the appeal hearing, which showed areas of wildlife habitat and other important ecological values. Only the DECISION NO. 2012-WAT-013(c) Page 81 general areas of activities and values were indicated on the map, with “buffering” to protect exact locations. Ms. Lowe stated that the map was not produced sooner due to capacity issues, but the map may have been prepared if the proposed meeting with the Ministry had occurred. Kathi Dickie [353] Ms. Dickie is an elected Councilor of the First Nation, and was the elected Chief for a number of years, including when the appeal of the Licence was filed. She discussed how oil and gas development has led to more roads and disturbances within the First Nation’s territory. She expressed concern about cumulative effects and the impacts of such developments on water quality and the First Nation’s hunting, fishing and trapping rights. Ms. Dickie stated that “real” consultation takes time, includes the First Nation’s community, and requires meeting in person to build a relationship founded on trust. In her view, consultation also requires listening to what the First Nation’s people are saying about their rights, and openness to learning about the nature of those rights. She testified that, based on the correspondence with the Ministry in April 2012, she understood that a decision on Nexen’s application was pending, but expected that a meeting between the Ministry and the First Nation would take place before a decision was made. [354] On cross-examination, Ms. Dickie answered questions about funding that the First Nation received from 2007 through 2012 through Economic Benefits Agreements with the Province and an Oil and Gas Consultation Agreement. For example, she stated that the funding received through the Economic Benefits Agreement is based on the level of activity in the territory, and it provides the First Nation with a minimum of $800,000 and a maximum of $2.3 million. Adolphus Capot Blanc [355] Mr. Capot Blanc is a member of the First Nation who testified about traditional activities in the Tsea River watershed. He stated that, when he was young, his family would travel through the Tsea River watershed, where they would live off the land by hunting, fishing and trapping. His family had a cabin on the Tsea River, and other cabins elsewhere. His family would hunt for moose and caribou, trap beaver, and fish with nets on the Tsea River. He described how they would use animal hides and other parts of the animals. He also described their use of certain food plants, such as moss to make tea, and their use of certain trees to make canoes, drums, and snowshoes, among other things. He stated that a member of his family is buried in the Tsea River watershed. He also stated that, in the past, he would drink the water anywhere in their territory, but now he drinks bottled water because he is concerned about water quality. He stated that there seems to be less water and fewer animals in the area, compared to the past. He also stated that there are now more roads and aircraft in the area, and the weather seems milder. Laurelle Dettieh [356] Ms. Dettieh is a member of the First Nation, and is employed as an Environmental Monitor in the First Nation’s Lands Department. She testified in person, and provided an affidavit sworn on September 11, 2013, prior to her testimony. Ms. Dettieh previously worked in the oil and gas industry. She lived a traditional lifestyle when she was young, and she described her family’s traditional DECISION NO. 2012-WAT-013(c) Page 82 practices. They hunted primarily for moose, and they would use the entire animal. She still goes on hunting and fishing trips several times per year. [357] Most of Ms. Dettieh’s oral and affidavit evidence focused on her observations of the Tsea Lakes area during a site visit on June 26, 2012, when she walked the Tsea Lakes area and took photographs. At South Tsea Lake, she observed a female moose with two calves. In the South Tsea Lake and Mid Tsea Lake areas, she saw fresh moose droppings and tracks, signs of moose foraging on plants, and signs of activity by beaver and bear. She also saw plants that could be used for food or medicinal purposes. At North Tsea Lake, she observed game trails and Nexen’s water diversion infrastructure. In her opinion, the Tsea Lakes area would be a good place to hunt, based on the wildlife habitat and signs of wildlife in the area, and other suitable features of the area such as its accessibility by road. However, she expressed concern about the quality of water in the area for drinking. In her affidavit, she expressed several concerns, including that “water withdrawals from North Tsea Lake could take water from surrounding lands and deprive the plants, fish, animals that live there”, which “could deprive me and other FNFN members of opportunities for successful hunting trips.” Florence Michel [358] Ms. Michel is a member of the First Nation. She testified that, when she was a child, her family would travel a seasonal route each summer that included the Tsea Lakes. They would travel by horse and river boat. At the Tsea Lakes, they would use canoes, trap beaver, hunt for moose, and use nets to catch fish. At North Tsea Lake, they would gather duck eggs. Part of her trapline is on the Tsea Lakes. [359] Ms. Michel stated that, in 2010 or 2011, she went to the Tsea Lakes and observed people putting a pump in the lake, and she thought they should not be doing that. She had received a referral from Nexen about a pump. She telephoned Nexen in October 2010 to find out who gave them permission to install the pumps. In the spring of 2013, she and her family camped near the Tsea Lakes. She stated that there was more water in the Tsea Lakes area in the past. She used to drink water from the Tsea Lakes, but no longer drinks the water because the pumps are there. She also stated that there seems to be less wildlife than in the past. Raymond Needley [360] Mr. Needley is a member of the First Nation who has taught cultural practices at the community’s school for many years. He stated that he teaches students how to survive on the land by using skills such as gathering plants, hunting, fishing, building tents, and making traditional tools. He testified that he lived off the land when he was a boy. His family had several campsites throughout the territory, and they would travel by boat and dog sled. In the winter, they would go out on their trapline for several days at a time. He still traps on his family’s trapline. Ignace Burke [361] Mr. Burke provided an affidavit sworn on September 11, 2013. He did not testify. Mr. Burke is a member of the First Nation and is one of the holders of a trapline held by several members of the First Nation. In his affidavit, Mr. Burke stated that, ever since he was a boy, he has worked a portion of the trapline which includes the Tsea Lakes and part of the Tsea River. He described how he was taught to hunt, trap, fish, and live off the land. Every two years, he would travel DECISION NO. 2012-WAT-013(c) Page 83 with his stepfather on a seasonal route that included the Tsea Lakes area. They would travel this route on foot and by canoe from mid-October to late December. Along the way, they would camp or stay in one of two cabins. One cabin is located near South Tsea Lake. In the Tsea Lakes area, they would hunt and trap, primarily for moose and beaver, respectively. [362] Mr. Burke also described how he and his wife have used the area as a training ground to teach their children how to trap and live off the land. He still visits the Tsea Lakes area with his family many times each year, mainly during the summer. During those visits, they hunt, fish, and use canoes. He and his family no longer walk to the area, because it is now accessible by road. He stated that he has seen fewer animals in the Tsea Lakes area in the last five years, and he is “concerned that increased activity around the Tsea Lakes is driving the animals away.” He is also concerned that “when water levels in North Tsea Lake drop, the land around it dries out” and “many animals depend on the plants that grow at the edges of the Tsea Lakes.”

Manager’s witnesses and evidence [363] The following witnesses provided evidence, which is summarized below, in support of the Manager’s submissions on this issue. Robert Piccini (the Manager) [364] Mr. Piccini testified that his role on the Nexen file until 2012 was a supervisory one, and that Mr. DeFord did much of the work on the file. Mr. Piccini discussed the June 2011 meeting in Fort Nelson, which he attended with Mr. DeFord and Ms. Lowe. At that meeting, he and Mr. DeFord provided Ms. Lowe with information about Nexen’s application and other water licence applications in the First Nation’s territory, including a map showing the point of water withdrawal on North Tsea Lake. He stated that his intention was for the meeting to last a full day and to engage with the First Nation about Nexen’s application, but the meeting only lasted about 1¼ hours, and they only discussed the bigger picture and dealt with process. During the meeting, Ms. Lowe requested bathymetric survey information about the Tsea Lakes. [365] Mr. Piccini also testified regarding the Ministry’s email, letter, and telephone communications with the First Nation. Among other things, Mr. Piccini stated that he did not review a draft of Mr. DeFord’s January 27, 2012 letter before it was sent; rather, he first saw the letter as part of his decision-making process on Nexen’s application. Regarding Chief Dickie’s April 13, 2012 letter to him, he testified that the letter provided no specific concerns regarding Nexen’s application. He stated that the First Nation had “bigger picture” concerns such as the cumulative effects of projects in the Horn River Basin, and Economic Benefits Agreements. In an April 16, 2012 email to the First Nation, Mr. Piccini acknowledged Chief Dickie’s April 13, 2012 letter, and stated that “We look forward to scheduling a meeting with the Chief, her Lands staff and ourselves, in the coming month ahead.” In regard to that statement, he testified that he thought that a meeting would be appropriate, but there was no explicit mention of Nexen’s application and that the consultation was complete. [366] Regarding the April 26 and May 7, 2012 letters between the First Nation’s legal counsel and the MARR’s Chief Negotiator, Mr. Piccini testified that he saw those letters in the Consultation Report, which he reviewed before issuing the DECISION NO. 2012-WAT-013(c) Page 84 Licence. Mr. Piccini also testified that, on the afternoon of May 9, 2012, he received an email from Mr. Giles, who stated that he had met with a representative of the MARR and there were “no major clangers”. Mr. Piccini testified that he understood this to mean that the MARR had “signed off” on Nexen’s application. [367] Mr. Piccini testified regarding his written rationale for issuing the Licence. He testified that, based on the 2011 Water Plan, the Carey Report, and Mr. DeFord’s Technical Report, the Licence would have minimal impacts on the First Nation’s treaty rights. Furthermore, mitigation measures such as monitoring, adaptive management, and limiting the Licence to a five-year term would protect against cultural impacts. He concluded that the First Nation had been given opportunities to raise specific concerns about Nexen’s application, but they had only raised broad concerns during the consultation process. Darren DeFord [368] Mr. DeFord testified that his role on the Nexen file was to review the licence application and gather information to support the Manager’s decision-making process, except for the Consultation Report that was prepared by Mr. Giles. Regarding consultation with the First Nation, Mr. DeFord testified that he participated in engagement and information sharing until February 2012. He asked the First Nation to provide specific information regarding their treaty rights, but the First Nation only expressed higher level concerns about their rights. In that regard, he referred to his letters of October 5, 2009 and January 13, 2010, in which he asked for specific information about the First Nation’s concerns. Mr. DeFord stated that, in response to Ms. Capot Blanc’s August 2009 request for more information about Nexen’s application, he provided the requested information including a copy of the 2009 Water Plan. He stated that Nexen subsequently provided a copy of the 2011 Water Plan to the First Nation. [369] Mr. DeFord also testified that, before he sent his January 27, 2012 letter to the First Nation, he had received the Carey Report (in late December 2011), and by mid-January 2012 he thought that the technical side of Nexen’s application was complete, but consultation with the First Nation remained a “major hurdle.” Following a telephone call and a January 17, 2012 email from Mr. Wagner of Nexen, Mr. DeFord sent the January 27, 2012 letter to “move consultation along.” Mr. DeFord explained that, in preparing the letter, he reviewed technical information about the proposed water withdrawals, as well as other information including a Remote Access to Archaeological Data (“RAAD”) map and the Consultation Area Database (“CAD”), and he welcomed further input from the First Nation regarding potential effects on their treaty rights. However, he acknowledged that the Treaty 8 traditional use study referred to in his letter did not apply to the First Nation and did not cover the Tsea Lakes area, and he did not share the RAAD map with the First Nation. [370] Mr. DeFord testified that Mr. Giles “took over” the consultation process in February 2012, but the First Nation was not informed of that change. He stated that Mr. Giles drafted Mr. DeFord’s April 3, 2012 letter to the First Nation letter, and Mr. DeFord reviewed the draft letter for accuracy. Mr. DeFord testified that he agreed with the letter. Mr. DeFord stated that he was unaware that Mr. Giles had proposed to meet with Ms. Lowe.

DECISION NO. 2012-WAT-013(c) Page 85 Wayne Giles [371] Mr. Giles, Manager of First Nations Relations for the Ministry’s Omineca Region, provided affidavit evidence only. Most of his affidavit consists of a summary of the consultation process with the First Nation, which primarily involved the Ministry but also involved the MARR on a few occasions. Attached to his affidavit are copies of numerous letters and emails between staff of the Ministry (and occasionally the MARR), the First Nation’s representatives, and in some cases Nexen’s staff, from June 2009 until the issuance of the Licence. Much of that correspondence is summarized in the ‘Background’ portion of this decision.

Nexen’s witnesses and evidence [372] The following witness testified in support of Nexen’s submissions on this issue, and their testimony is summarized below. Scott Wagner [373] Mr. Wagner testified regarding Nexen’s operations in the Fort Nelson area, and its consultation with the First Nation. Regarding possible water sources for Nexen’s fracking operations in the area, Mr. Wagner explained why Nexen considered a water licence to be a good option. He stated that Nexen had considered using saline water from a deep underground aquifer as an alternative to using surface water, but developing that aquifer would be very expensive, and the aquifer contains gases such as hydrogen sulfide which are dangerous and would need to be removed before the water could be used in fracking equipment. Developing that aquifer would also trigger an environmental assessment process. Mr. Wagner testified that, although Nexen was able to obtain short-term water use approvals, approvals are ‘blunt instruments’ that do not account for the natural variability in water flow, and are not ideal for fracking purposes. [374] Mr. Wagner stated that, in December 2006, the Oil and Gas Commission and the First Nation signed a Consultation Protocol Agreement which provided a framework for sharing information and engaging with the First Nation on oil and gas developments regulated by the Oil and Gas Commission. It also provided for payments to the First Nation to provide capacity assistance in reviewing referrals that came to the First Nation. However, that agreement did not cover water licences issued by the Ministry. He testified that the B.C. Provincial Consultation Policy was followed for water licence applications. [375] In regard to the application for the Licence, Mr. Wagner testified that Nexen was willing to share information and meet with the First Nation. He noted that the First Nation has its own Consultation Protocol, which states that the First Nation expects proponents to consult with the First Nation. He stated that Nexen paid the referral processing fee which the First Nation requested to review Nexen’s application. He summarized the June 2010 helicopter flight and site visit that Nexen arranged with representatives of the First Nation, to view the water withdrawal point on the Tsea River. He stated that, during that trip, they discussed water quality and the protection of riparian habitat, as well as the 2009 Water Plan. [376] Mr. Wagner stated that, on June 8, 2011, Nexen offered training for members of the First Nation, so they could participate in the water monitoring program that was proposed in the 2011 Water Plan. In July 2011, representatives of Nexen met with Ms. Lowe and other representatives of the First Nation, and DECISION NO. 2012-WAT-013(c) Page 86 provided a presentation on the 2011 Water Plan and Nexen’s operations in the area. According to Mr. Wagner, the First Nation’s representatives expressed no concerns about the 2011 Water Plan or the licence application during that meeting. However, Ms. Lowe suggested that a third party provide an objective review of the 2011 Water Plan, and produce a plain language report to assist the First Nation. Nexen subsequently agreed to fund that review, and the First Nation chose Dr. Carey to conduct the review. According to Mr. Wagner, the dialogue regarding Nexen’s suggested revisions to Dr. Carey’s draft report was “open and transparent.” [377] In regard to Mr. DeFord’s January 27, 2012 letter to the First Nation, Mr. Wagner referred to the email he sent to the Manager (and copied to Mr. DeFord, among others) on January 17, 2012, summarizing what was discussed during a conference call earlier that day. Mr. Wagner’s January 17, 2012 email states, in part, as follows: To ensure we are all on the same page after our conversation this morning with you, and afterwards with Darren and …, below is a summary of what was discussed. • Darren will make contact with Lana at Fort Nelson First Nation (FNFN) today to follow-up on previous 30 [day] letters that were sent regarding Encana and Taka license applications • Over the next day or two, Darren will finalize drafting the 30- day letter to FNFN regarding Nexen’s license application. This letter will be sent to FNFN ASAP, no later than early next week. • An approved license should be achievable by March 2012, allowing sufficient time for equipment purchase, transportation, and installation prior to spring freshet. [378] Mr. Wagner testified that Nexen was unaware of Mr. Giles’ involvement with the consultation on Nexen’s application until that information was disclosed during the appeal proceedings.

First Nation’s submissions [379] The First Nation submits that the Crown failed to perform a basic requirement for meaningful consultation: it did not ascertain the First Nation’s treaty rights. In addition, the First Nation submits that the Crown failed to satisfy other fundamental requirements of the duty to consult, including the requirement to act in good faith, to establish a consultation process, and to consider the First Nation’s capacity to engage in consultation. The First Nation submits that the Crown alone was ultimately responsible for upholding the honour of the Crown in discharging the duty to consult, because the Crown did not delegate parts of its duty to Nexen, and Nexen’s actions did not constitute proper consultation. The First Nation’s detailed submissions on those points are summarized below. Failure to ascertain the nature and scope of the First Nation’s treaty rights [380] The First Nation submits that, to determine the content of the duty to consult, the Crown must ascertain the nature and scope of the treaty rights in question, and the Crown failed to do so in this case. The First Nation argues that, although aboriginal peoples have a responsibility to share information about their treaty rights, the Crown failed to provide the First Nation with an adequate DECISION NO. 2012-WAT-013(c) Page 87 opportunity to provide information about the nature and scope of their treaty rights. Therefore, the Crown could not properly assess the impacts of Nexen’s proposal on those rights, or otherwise engage in meaningful consultation. [381] The First Nation argues that meaningful and substantive discussion with the Crown was necessary to determine the scope of the First Nation’s treaty rights, so that the Crown could learn how First Nation members engage in their treaty rights to hunt, fish and trap. The First Nation submits that this information is not apparent on the face of Treaty 8, and can only be ascertained by engaging with the First Nation. The First Nation submits that the Crown failed to engage the First Nation in even cursory discussions about their treaty rights. In that regard, the First Nation points to Ms. Lowe’s testimony that the best way for the First Nation to share information with the Crown about traditional and current practices is at a meeting, rather than in writing, because knowledge of the First Nation’s cultural practices is dispersed amongst community members who prefer to share the information orally rather than in writing. [382] In support of those submissions, the First Nation referred to Mr. DeFord’s January 27, 2012 letter to the First Nation. The First Nation argues that, although his letter acknowledged that the First Nation exercises treaty rights in and around the Tsea Lakes, the Crown never met with the First Nation to discuss its treaty rights. Further, the letter referred to a Treaty 8 “traditional use study”, but Mr. DeFord testified that the traditional use study did not apply to the First Nation’s lands and contained no information about the Tsea Lakes. The letter also failed to mention the trapline in the Tsea Lakes area that is registered to members of the First Nation. After receiving the January 27, 2012 letter, the First Nation requested a meeting with the Crown. In an April 4, 2012 email, Mr. Giles promised to meet with the First Nation, and in an April 16, 2012 letter, the Manager mentioned meeting with the First Nation in the coming months. However, the Licence was issued before such a meeting took place. [383] Moreover, the First Nation submits that, even if the promised meetings had occurred and the First Nation had an opportunity to share information about its treaty rights, the Crown would not have seriously considered that information, as indicated by Mr. Giles’ April 3 and 16, 2012 emails to Ministry staff. The First Nation argues that Mr. Giles’ correspondence shows that he wanted the Crown to proceed to issue the Licence, regardless of any further information that the First Nation may have shared at a meeting. [384] The First Nation submits that the Manager’s rationale for issuing the Licence confirms that the Crown failed to ascertain the First Nation’s treaty rights, as it failed to mention the trapline or any ancillary rights to the explicit treaty rights, such as the right to travel through the Tsea Lakes and Tsea River areas or build cabins in the area. Also, the Manager’s rationale makes no reference to the seasonal “round” by First Nation families in the Tsea Lakes and Tsea River system. [385] The First Nation argues that the Manager’s testimony confirms that he had pre-judged the outcome of any further meetings with the First Nation, and he relied on information from Mr. Giles and Mr. DeFord that additional meetings would generate no further information about treaty rights.

DECISION NO. 2012-WAT-013(c) Page 88 Failure to assess potential impacts on the First Nation’s treaty rights [386] The First Nation submits that, due to the Crown’s failure to properly ascertain the First Nation’s treaty rights, the Manager could not properly assess the potential impacts of the Licence on those rights. Thus, the Manager erred by concluding that the Licence would have no impacts on the First Nation’s treaty rights. Moreover, the Manager’s conclusions about fish, fish habitat, and ecological values were based on alleged reviews by provincial experts and Dr. Carey, when no such reviews were actually conducted by provincial experts or Dr. Carey. [387] In addition, the First Nation submits that the Manager could not properly ascertain the impacts of the Licence on the First Nation’s treaty rights because he did not have all of the relevant information regarding the potential hydrological and ecological impacts of the water withdrawals. In particular, Nexen did not disclose the March and April 2012 Matrix Reports, which found that there was insufficient statistical relationship to derive the DS-1 flow estimates from the Adsett Creek data, and that the rating curve for DS-1 was preliminary. The First Nation argues that the Manager would have placed less reliance on the Carey Report, which relied on the accuracy of data “inferred” from Adsett Creek, if he had reviewed those reports. Further, certain critical elements were removed from the final version of the Carey Report, the 2011 Water Plan contained inadequate data on fish, fish habitat, critical wildlife species, and none of the information before the Manager provided a mass water balance. [388] In support of those submissions, the First Nation referred to Dr. Stanford’s testimony that none of the documents provided to the Manager contained a water mass balance, without which the Manager’s conclusion that the withdrawals would have “no impacts” on fish and wildlife is “indefensible.” The First Nation submits that, according to Dr. Stanford, the information considered by the Manager did “not allow identification and quantification of impacts.” Dr. Stanford testified that the ecological impacts of the water withdrawals will likely be greatest in and around North Tsea Lake, but there may be impacts in the wetlands that surround the Lake and the Tsea River. [389] The First Nation submits that the water withdrawals may have the following impacts, which may affect their treaty rights and their ability to practice their mode of life: • by affecting wetland vegetation on which moose and other species rely, which may affect the First Nation’s right to hunt; • by altering water levels in the Tsea Lakes and Tsea River, which can affect beaver habitat and distribution, and which may affect the First Nation’s right to trap; • by reducing water flow, water level, and water quality, while increasing water temperature, which may affect fish habitat and fish populations, thereby affecting the First Nation’s right to fish; • by reducing water in the riparian zone and harming nesting birds, which may affect the First Nation’s right to gather food; and • by reducing water levels, which may affect the First Nation’s right to travel through the Tsea Lakes and Tsea River by boat.

DECISION NO. 2012-WAT-013(c) Page 89 Failure to discharge the duty to consult and act honourably [390] The First Nation did not clearly address what level of consultation was owed by the Crown in the circumstances. However, the First Nation submits that, even if the scope of the duty to consult was at the lower end of the spectrum, which the First Nation does not concede, the Crown failed to discharge its duty because the Crown: • failed to discuss or establish a consultation process; • failed to act in good faith; • failed to establish a transparent process; • failed to meet with the First Nation; • failed to share information; • provided inadequate information; and • failed to provide accommodation. [391] The First Nation argues that the Crown is obligated to discuss a consultation process with the First Nation, and then to establish a consultation process, before any operational decisions are made: Huu-Ay-Aht First Nation v. The Minister of Forests, 2005 BCSC 697 [Huu-Ay-Aht], at para. 113. However, the First Nation submits that, in the present case, the Crown proceeded in an ad hoc fashion through intermittent correspondence and engagement, despite the First Nation expressing concerns about establishing a consultation process and wanting to meet with the Crown. [392] In addition, the First Nation submits that the Crown made no allowances for the First Nation’s stated lack of capacity for dealing with the high number of referrals it was receiving: Moulton Contracting Ltd. v. British Columbia, 2013 BCSC 2348, at para. 293. The First Nation notes that Ms. Capot Blanc’s September 29, 2009 email to Mr. DeFord advised the Crown that the First Nation was “inundated with applications.” [393] Regarding the obligation to act in good faith, the First Nation submits that, in April 2012, Mr. Giles and the Manager promised to meet with the First Nation before the Licence was issued, yet Mr. Giles’ April 3 and 16, 2012 emails to Ministry staff expressed his view that further discussion with the First Nation would produce no new information and may cause delay. The Manager subsequently issued the Licence without meeting with the First Nation to discuss the scope of their treaty rights or the potential impacts on their treaty rights. The First Nation submits that the internal correspondence and the Manager’s rationale for his decision reveal that the Crown intended to make a decision regardless of the promised meetings, and had no intention to substantially address the First Nation’s concerns. The First Nation argues that this conduct is inconsistent with the honour of the Crown. [394] In regard to transparency, the First Nation submits that the Crown never clearly indicated to the First Nation who was responsible for carrying consultation regarding the Licence. The First Nation submits that it was referred to, or contacted by, several different Ministry staff regarding the Licence, including Mr. DeFord, staff from the Ministry’s Fort Nelson office, and Mr. Giles. The First Nation argues that, as a basic procedural element for meaningful consultation, the Crown is obligated to indicate who is responsible for discharging the duty to consult: Ke- DECISION NO. 2012-WAT-013(c) Page 90 Kin-Is-Uqs v. British Columbia (Minister of Forests), 2008 BCSC 1505 [Ke-Kin-Is- Uqs], at para. 147. [395] In regard to sharing information, the First Nation submits that the Ministry: failed to disclose Mr. Suther’s concerns outlined in his June 3, 2009 emails; failed to respond to the First Nation’s January 10, 2011 letter requesting information on the baseline hydrological data that licence applicants were being asked to provide, and the actions being taken to determine the cumulative impacts of water licences in the First Nation’s territory; and, failed to reveal certain information that was referred to in Mr. DeFord’s January 27, 2012 letter (including a Treaty 8 traditional use study, and the provincial databases ‘RAAD’, ‘CAD’, and ‘FNQ2’) and the Manager’s rationale (including a review by “provincial experts” and “data collection and analysis” by Nexen’s consultants). [396] Moreover, the First Nation argues that the information the Crown provided was inadequate, because it was not in a form that was useful or comprehensible to the First Nation. For example, Mr. DeFord’s February 24, 2011 letter to Ms. Lowe did not explain how the precautionary principle would be applied to measure cumulative effects, did not explain what the Tennant method and/or Tessman models were, did not set out the minimum in-stream flows or explain how hydrological information was being collected, and did not advise how the First Nation could provide comments on the baseline data. Further, Mr. DeFord’s January 27, 2012 letter provided inadequate information, and did not provide the First Nation with the means or information to understand the hydrological data presented. [397] In regard to the Crown accommodating the First Nation’s treaty rights, the First Nation submits that, without properly ascertaining the scope of the treaty rights or the potential impacts of the Licence on those rights, it was impossible for the Crown to provide appropriate accommodation. The First Nation submits that even at the low end of the consultation spectrum, the Crown has an obligation to minimize potential adverse impacts on treaty rights. Accommodation that minimizes impacts can only follow proper consultation including, at a minimum, “listening carefully” to the First Nation’s concerns: Mikisew, at para. 64. The First Nation suggests that the following measures are examples of accommodation that could have been considered before the Licence was issued, but are now constrained or precluded due to the issuance of the Licence: • collecting pre-operational baseline data that would be adequate to identify and assess impacts on values of critical importance to the First Nation, such as water level and flows, wetland vegetation, and the populations and habitat of fish, beaver, and moose; • a complete assessment of alternate water sources for Nexen’s operations, including identification of alternate water diversion point(s) that would have fewer or less significant impacts on the First Nation’s treaty rights; and • a decision to preserve the Tsea Lakes and/or Tsea River system in a relatively pristine and less impacted state, as compared to other parts of the First Nation’s territory that are already under heavier use. Nexen did not discharge the Crown’s duty to consult [398] According to Haida, the procedural aspects of consultation may be delegated by the Crown in certain circumstances. However, the First Nation argues that, if DECISION NO. 2012-WAT-013(c) Page 91 the Crown delegates certain aspects of the consultation process to a proponent, the Crown is obligated to do so expressly, so that the First Nation is at least aware of an intention to delegate. The First Nation submits that, in the present case, there is no evidence that the Crown delegated any aspects of the duty to consult to Nexen, or notified the First Nation of such delegation, and therefore, Nexen’s communications with the First Nation cannot enable the Crown to discharge its duty. The First Nation argues that, even if some aspects of the duty to consult were delegated to Nexen, Nexen did not discharge the duty because, among other things, Nexen did not ascertain the scope of the First Nation’s treaty rights or share critical information with the First Nation regarding the proposed water licence. Requested remedies [399] The First Nation requests that the Board reverse the Licence. Alternatively, the First Nation requests that the Licence be reversed or suspended, and the matter be sent back to the Manager with certain directions regarding appropriate consultation and accommodation. If the Licence was to be returned to the Manager with directions, the First Nation provided a list of several directions regarding consultation, as well as 13 directions regarding the technical aspects of the Licence. [400] In regard to any alleged prejudice to Nexen if the Licence is reversed or suspended, the First Nation submits that any such prejudice is speculative, and in any event, it should not take priority over the First Nation’s constitutionally protected treaty rights or the public interest in water resources.

Manager’s submissions [401] The Manager submits that the Crown’s consultation process with the First Nation was adequate, and the Licence should be confirmed. Alternatively, the Manager submits that the Panel should provide directions regarding consultation. [402] The Manager submits that the seriousness of any adverse impact on a treaty right is relevant to the level of consultation required: Mikisew, at para. 55. Also, there must be a causal relationship between the government’s decision and the risk of an adverse impact, and the onus is on the aboriginal people to show the “causal relationship between the proposed government conduct or decision and the potential for adverse impacts” on a treaty or aboriginal right: Rio Tinto Alcan Inc. v. Carrier Sekani Tribal Council, [2010] 2 S.C.R. 650 [Rio Tinto], at para. 45. In that regard, the Manager argues that the First Nation has not demonstrated a causal relationship between the Licence and the potential for impacts on their treaty rights, because the First Nation has provided insufficient site-specific information. [403] The Manager submits that he properly considered the existing state of affairs in North Tsea Lake by assessing the potential impact on the Tsea River of the withdrawals proposed under the Licence, given the existing and pending water allocations. The Manager submits that consideration of the potential for adverse effects on the First Nation’s rights is relevant to the level of consultation required. Moreover, the Manager submits that, even if there is some scientific or other uncertainty, this uncertainty should not cause the proposed activity to be halted if the process for considering the First Nation’s views was fair: Kwicksutaineuk/Ah- kwa-mish Tribes v. Canada (Minister of Fisheries and Oceans), 2012 FC 517; Blaney et al v. British Columbia (The Minister of Agriculture, Food and Fisheries) et al, 2005 BCSC 283, at paras. 44 – 45. DECISION NO. 2012-WAT-013(c) Page 92 [404] In regard to the potential impacts of the Licence, the Manager argues that the circumstances in West Moberly First Nations v. British Columbia (Chief Inspector of Mines), 2011 BCCA 247 [West Moberly] are distinguishable from the present case. In particular, there is no evidence that the First Nation is or will be unable to harvest a particular resource or carry on any traditional activities in the North Tsea Lakes area as a result of the Licence, whereas in West Moberly there was a demonstrable adverse impact to a species that was important to the aboriginal peoples’ seasonal round. In addition, the Manager submits that the Licence is not a step in a process that will lead to future development, unlike the exploration permit in West Moberly. Furthermore, Nexen’s subsequent use of the water for oil and gas activities is subject to consultation with the First Nation under an Oil and Gas Consultation Agreement dated June 12, 2012, in which the Crown is represented by the Minister of Energy and Mines and by the Oil and Gas Commission. [405] The Manager also notes that West Moberly was recently considered in Adams Lake Indian Band v. British Columbia (Ministry of Forests, Lands and Natural Resource Operations), 2013 BCSC 877 [Adams Lake]. The Manager submits that, in Adams Lake, the Court held that consultation was confined to the two licences in issue, and the Court rejected the petitioner’s argument that West Moberly stands for the proposition that consultation must be in regard to the cumulative effects of a development, as well as reasonably foreseeable future development. [406] Similarly, the Manager cites the Court of Appeal’s decision in Louis v. British Columbia, 2013 BCCA 412 [Louis II], as authority for the proposition that, when the Crown’s statutory mandate is limited to considering individual applications, it does not have a duty to engage in consultation about an entire project, and it is appropriate to consult on an application-specific basis. Applying that to the present case, the Manager submits that consideration of a water licence does not require a review of all oil and gas activity in the Tsea River watershed. [407] In addition, the Manager submits that consultation is a ‘two-way street’ in which the First Nation has reciprocal obligations. Aboriginal people have a duty to “express their interests and concerns once they have had an opportunity to consider the information provided by the Crown, and to consult in good faith by whatever means available to them”: Halfway River First Nation v. British Columbia, 1999 BCCA 470 [Halfway River], at para. 161. A First Nation is required to conduct itself reasonably in the consultation process. If a First Nation is intransigent or unresponsive to the Crown’s attempts to consult, the Crown’s efforts may be found to be reasonable even if they do not ‘bear fruit’: R. v. Douglas, 2007 BCCA 265; R. v. Tommy, 2008 BCSC 1095; R. v. Aleck, 2008 BCSC 1096. As stated by the BC Supreme Court in Louis v. British Columbia, 2011 BCSC 1070 [Louis I], at para. 224, “while a First Nation may (for whatever reason) decide to take a hard- bargaining position, categorically object to a project and not share all relevant information in the consultation process, it risks entering into a situation where concerns arising from that information will not be taken into account in Crown’s decision-making.” [408] Moreover, the Manager submits that at para. 85 in Adams Lake, the Court rejected the petitioner’s argument that consultation was inadequate as a result of the Crown’s refusal to provide capacity funding. The petitioner maintained that such funding was necessary to obtain site-specific information that had been DECISION NO. 2012-WAT-013(c) Page 93 requested by the Ministry. The Court found that information about where members made use of land was within the petitioner’s knowledge, and further studies were unnecessary given the limited scope of the licences in issue, which were licences to occupy Crown land (and the associated licences to cut timber) for the purpose of building additional ski runs at an existing ski resort. [409] Turning to the present case, the Manager submits that the Ministry sought to determine, through three years of consultation efforts, the potential impacts of the proposed licence on the First Nation’s treaty rights. Despite the Ministry making several requests to the First Nation for comments on site–specific impacts, the First Nation provided no site-specific information regarding potential adverse effects on their treaty rights. In the absence of such site-specific information, the Manager made a decision based on the information before him, including the First Nation’s general comments and concerns, and he concluded that the proposed water withdrawals would not have an appreciable adverse effect on the First Nation’s ability to exercise their treaty rights in and around the Tsea Lakes area. The Manager further submits that, even during the appeal process, the information provided by the First Nation regarding members’ activity in and around the Tsea Lakes area is generalized and does not indicate matters such as relative importance or frequency of use, similar to the situation in Dene Tha’ First Nation v. British Columbia (Minister of Energy and Mines), 2013 BCSC 977, at paras. 47 – 48. [410] In addition, the Manager submits that the Ministry communicated to the First Nation that consultation on Nexen’s application would involve an iterative process, and the Ministry ensured that the First Nation received all relevant information about the application as it became available. The Manager also submits that the Ministry took the First Nations responses seriously, and the Ministry made it clear that, if the First Nation provided information regarding potential impacts on their treaty rights, such information would inform the Ministry’s assessment of Nexen’s application. In support of those submissions, the Manager referred the Panel to correspondence between the Ministry and the First Nation from 2009 through 2011, as well as some correspondence between Nexen and the First Nation during that period. The Manager also referred to the testimony of Mr. DeFord and Mr. Wagner. [411] In regard to the Carey Report, the Manager referred to Mr. Wagner’s evidence that the Carey Report was intended to include a plain language summary that would assist the First Nation in understanding the 2011 Water Plan, but the First Nation provided no comments on the draft version of Dr. Carey’s report that was provided to the First Nation. The Manager submits that the First Nation’s witnesses provided no explanation for the First Nation’s lack of comments on the draft report. The Manager refers to Ms. Lowe’s testimony that the Carey Report was not shared with the First Nation’s community, although she agreed that it was intended for that purpose. [412] In regard to events in 2012, the Manager notes that Mr. DeFord’s January 27, 2012 letter set out a preliminary assessment that the Licence would have no impacts on the First Nation’s treaty rights, and requested comments from the First Nation within 30 days; however, by the end of March the First Nation had not responded. [413] In summary, the Manager submits that the level of consultation required in this case was at the low end of the spectrum, mainly because the Licence was not expected to affect the First Nation’s treaty rights generally or in the North Tsea DECISION NO. 2012-WAT-013(c) Page 94 Lake area. The Manager submits that, during the three-year consultation period, the First Nation expressed general opposition to Nexen’s licence application, but failed to provide site-specific information regarding members’ exercise of treaty rights around the North Tsea Lake area, and the First Nation avoided substantive engagement by focusing on discussing “process” as a prerequisite to providing specific information. Furthermore, during the appeal hearing, First Nation witnesses who were familiar with the Tsea Lakes area testified, but their evidence revealed no indication that water withdrawals under the Licence have had, or will have, any adverse impact on the exercise of treaty rights in the Tsea Lakes area. The Manager argues that the intersection of traditional use areas with water use under the Licence does not establish a probability of interference with the First Nation’s treaty rights. Although the Manager considered the potential for adverse impacts on the First Nation’s treaty rights to be low, he included measures in the Licence, such as the flow-weighted withdrawal parameters and limiting withdrawals to the open water season, to address the potential for adverse impacts on ecological values that are tied to the exercise of treaty rights. Also, Nexen committed to an extensive monitoring and reporting program directed at reviewing the need for revisions or refinements to the 2011 Water Plan. The Manager submits that, in the absence of site-specific information about the First Nation’s exercise of its treaty rights or the potential for adverse impacts on those rights, the accommodation provided is appropriate given the First Nation’s level of engagement in the process.

Nexen’s submissions [414] Nexen submits that the collective consultation efforts of the Crown and Nexen, as a delegate of the Crown, should be considered when assessing consultation in this case. Nexen submits that it carried out consultation and accommodation in many ways, including site visits, meetings, engaging Dr. Carey to review the 2011 Water Plan, and including recommendations made by the First Nation on the 2013 Water Plan Addendum. [415] Nexen acknowledges that there is a dispute between the First Nation and the Manager as to certain communications in the weeks before the Licence was issued, but Nexen submits that it was unaware of the specific communication issues until the evidence was disclosed in the appeal process. Also, Nexen acknowledges that the Panel might conclude that the Crown acted dishonourably in respect of those communication issues, and find that the Crown failed to adequately consult with the First Nation. However, Nexen argues that the Licence should not be suspended or reversed. Rather, Nexen submits that the Panel should consider that: a) the Crown’s consultations are held to a standard of reasonableness (not perfection), which should be assessed based on all consultation, including by Nexen; and, b) Nexen, as the Crown’s delegate, conducted enough substantive and good faith consultation with the First Nation to cure any defect in the direct consultation between the Crown and the First Nation. [416] Specifically, Nexen submits that there is evidence that the Crown impliedly or expressly delegated some aspects of the consultation process to Nexen. In particular, Nexen referred the Panel to Mr. DeFord’s testimony that he expected Nexen to consult, and some email communication between Nexen and Mr. DeFord, and Mr. DeFord and Ms. Capot Blanc. In any event, Nexen argues that the First Nation expected proponents to deal directly with it, regardless of whether the DECISION NO. 2012-WAT-013(c) Page 95 Crown delegated some aspects of consultation. In support of that submission, Nexen referred to the First Nation’s Consultation Protocol, which Ms. Capot Blanc provided to Mr. DeFord on September 29, 2009. It states, in part, that “it is in the best interests of the Proponent to engage in consultation with FNFN to demonstrate a commitment to good relationship building, open communication and good business practice.” [417] Nexen submits that it engaged with the First Nation over water issues in general for approximately eight years, including in regard to short-term approvals that were issued before Nexen applied for the Licence. Nexen maintains that pre- application engagement, including regular meetings between Nexen and the First Nation in Fort Nelson, gave Nexen an enhanced understanding of the First Nation’s concerns about capacity and the importance of water in the Tsea River watershed. In regard to consultation about Nexen’s application for the Licence, Nexen submits that its efforts included: • meetings and communications from early 2009 to early 2012 regarding the 2009 Water Plan, the 2011 Water Plan, and the proposed Licence, and seeking concerns from the First Nation; • payment of the First Nation’s referral fee to review the Licence application; • a helicopter trip with members of the First Nation to review the proposed withdrawal sites in June 2010; and • funding of Dr. Carey’s review of the 2011 Water Plan, and providing opportunities to comment on his draft report. [418] Nexen submits that the Carey Report was part of the consultation process between Nexen and the First Nation. Nexen submits that the First Nation supported having a third party review the 2011 Water Plan, and Nexen accommodated the First Nation’s interest in the review by paying for Dr. Carey’s review. Moreover, Nexen argues that the First Nation was given a reasonable opportunity to comment on Dr. Carey’s draft report, and Nexen accommodated a number of Dr. Carey’s recommendations including enhancing the rating curves, using real-time data, and doing more groundwater monitoring. [419] In addition, Nexen submits that it and the Manager substantially accommodated many of the First Nation’s concerns by, among other things, using a staged withdrawal program, conducting long-term monitoring, paying the First Nation’s referral processing fee, and funding Dr. Carey’s review. Nexen also submits that it provided capacity support to the First Nation by funding Dr. Carey’s review, to assist the First Nation in understanding and assessing the Water Plan. Nexen submits that, if the First Nation had a need for capacity support to follow up with any issues identified in the Carey Report, it could have requested further capacity support from Nexen, but it did not do so. [420] In regard to the First Nation’s obligations in the consultation process, Nexen submits that the First Nation had a duty to engage in consultation reasonably and in good faith (Louis II; Halfway River), and the First Nation could have met this reciprocal duty by expressing “interests and concerns in a meaningful and substantive way”: Chartrand v. The District Manager, 2013 BCSC 1068 [Chartrand]. Nexen also submits that the First Nation had the onus of showing that the proposed Licence might have prima facie effects on its treaty rights (Rio Tinto, at para. 44), DECISION NO. 2012-WAT-013(c) Page 96 and although the First Nation had ample opportunity to provide site-specific concerns about Nexen’s proposal, it failed to do so. [421] In particular, Nexen submits that the First Nation provided no comments on the draft versions of the Carey Report. Nexen also submits that the First Nation provided no tangible information to indicate, even on a prima facie basis, that the Licence has or could adversely affect the First Nation’s treaty rights, despite two seasons of water withdrawals (2010 and 2011) under short-term approvals before the Licence was issued, and two seasons of withdrawals (2012 and 2013) since the Licence was issued. Nexen argues that the First Nation knew, or should have known, that some aspects of the consultation process were delegated to Nexen, and should have engaged more meaningfully with Nexen before the Licence was issued rather than raising concerns through the appeal process. Nexen argues that an affected party cannot complain if they refuse to be consulted or remain silent during consultation, in hopes of bringing up unaddressed concerns at a later stage of the proceedings: Cheslatta Carrier Nation v. British Columbia, [1998] BCJ No. 178 (SC), at paras. 72 and 73. [422] Nexen acknowledges that members of the First Nation use the Tsea Lakes area, and that the First Nation’s evidence includes affidavits from Mr. Burke and Ms. Dettieh describing the First Nation’s use of resources in the area. However, Nexen submits that the appropriate time and place for disclosing such information is during the consultation process rather than the appeal process, and in any case, the two affidavits do not discharge the onus of showing how the Licence will or could have specific adverse effects on the First Nation’s rights to hunt, fish or trap in specific areas. Nexen argues that, although the affidavits provide a broad picture of how members of the First Nation use the land, there is an absence of any link between Nexen’s water withdrawals and the First Nation’s use of the land. Moreover, Nexen submits that, although Mr. Burke’s affidavit mentions alleged impacts in the Tsea Lakes area, none of those impacts are related to water. Similarly, Ms. Dettieh’s affidavit expresses concern that water withdrawals from North Tsea Lake “could” harm the Tsea Lakes and surrounding land and animals, but she offered no prima facie impacts despite her role as an Environmental Monitor with the First Nation’s Lands Department. In addition, Nexen submits that the land use values map provided by the First Nation during the appeal process does not identify possible site-specific effects of the water withdrawals, or a linkage between any purported land uses and water withdrawals under the Licence. [423] In addition, Nexen submits that the First Nation alleges many speculative impacts that are not supported by substantive information or evidence, and there is no duty to consult over speculative impacts (Rio Tinto, at para. 44). Nexen submits that water withdrawals in accordance with the Licence will have minimal, if any, effect on the ecosystem and the First Nation’s treaty rights, and in any event, the monitoring and reporting requirements of the Licence are designed to reduce speculation about impacts. Even if uncertainty remains about the potential impacts on treaty rights, this does not prevent the Manager from issuing the Licence (Beckman v. Little Salmon/Carmacks First Nation, 2010 SCC 53, at para. 78). [424] Nexen submits that the Manager properly assessed the nature and extent of the First Nation’s treaty rights in the Tsea Lakes area, and he considered the effects of the Licence on the First Nation’s right to hunt, fish, and trap in the Tsea Lakes area. Nexen submits that the Manager had no duty to conduct an assessment of DECISION NO. 2012-WAT-013(c) Page 97 cumulative effects, as he had no obligation to consult regarding past Crown decisions about other projects, and the Water Act does not require the Manager to consider cumulative effects in the context of an application for a commercial water licence (Chief Harry, at paras. 255 – 256). Further, the potential effects of future projects will be the subject of separate applications and future consultation. In any event, the Licence’s flow-weighted withdrawal regime is responsive to future changes in water flow that may be caused by other users. [425] Additionally, Nexen submits that consultation efforts by, and on behalf of, the Crown are not assessed based on a standard of perfection (Ahousaht First Nation v. Canada (Fisheries and Oceans), 2008 FCA 212 [Ahousaht]; Xats’ull First Nation v. Director, Environmental Management Act, Environmental Appeal Board, Decision No. 2006-EMA-006(a), issued May 9, 2008). Nexen submits that, given the lengthy period of consultation over the Licence, there were reasonable efforts to consult and accommodate, and any shortcomings in the process are mainly attributable to the First Nation’s refusal to engage in a reasonable and responsive manner (Ka’A’Gee Tu First Nation v. Canada (Attorney General), 2012 FC 297). [426] In regard to remedies, Nexen requests that the Panel not suspend or cancel the Licence, because this would cause significant prejudice to Nexen, which has invested hundreds of millions of dollars in the Tsea River area as a water source. Nexen submits that the courts have been reluctant to suspend or reverse regulatory decisions where doing so would cause substantial prejudice to a third party, especially if the prejudice to the third party outweighs the detrimental effect of the decision on aboriginal interests (e.g., Hupacasath First Nation v. British Columbia (Minister of Forests), 2005 BCSC 1712) [Hupacasath]. Nexen submits that, if the Panel finds that the duty to consult and/or accommodate was breached, the Panel could issue a declaration to that effect, as the courts have done in some cases (e.g., Haida). Nexen submits that such a declaration would affirm the First Nation’s rights without prejudicing Nexen’s interests, and would inform regulatory processes that are ongoing. [427] Alternatively, if the Panel decides to refer the matter back to the Manager, Nexen suggests certain directions. For example, Nexen advises that it is willing to provide funding and other capacity support to assist the First Nation’s participation in a cause-and-effect analysis of the impacts of the water withdrawals on keystone species, which was recommended by Dr. Stanford. Nexen also suggests that the Manager could be directed to invite the First Nation to take part in a trilateral annual review of the 2011 Water Plan with consultation over capacity funding to enable the First Nation to bring in one or two experts to the annual reviews.

Panel’s findings [428] In deciding this issue, the Panel has reviewed the adequacy of the consultation that occurred before the Licence was issued. Although the Board has the authority to consider evidence that was not before the Manager, the appeal process is not a substitute for consultation with the First Nation: Chief Harry, at paras. 160 – 164. As stated in Rio Tinto at para. 57 in respect of the BC Utilities Commission, “In this case, the tribunal is not itself engaged in the consultation. Rather, it is reviewing whether the Crown has discharged its duty to consult with a given First Nation about potential adverse impacts on their aboriginal interest relevant to the decision at hand.” In the present case, the Panel has considered DECISION NO. 2012-WAT-013(c) Page 98 whether the provincial Crown, as represented by the Manager and others, discharged its duty to consult with the First Nation about potential adverse impacts on its treaty rights that are relevant to the Licence. [429] The Manager acknowledges that the provincial Crown had a duty to consult regarding the potential impacts of the Licence on the First Nation’s treaty rights. As a signatory, the Crown will always have notice of the contents of the treaty, and once the duty to consult is triggered, the question is the extent of the duty: Mikisew at para. 34. Regarding consultation in the context of Treaty 8, Mikisew states at para. 63: The determination of the content of the duty to consult will, as Haida suggests, be governed by the context. One variable will be the specificity of the promises made. Where, for example, a treaty calls for certain supplies, or Crown payment of treaty monies, or a modern land claims settlement imposes specific obligations on aboriginal peoples with respect to identified resources, the role of consultation may be quite limited. If the respective obligations are clear the parties should get on with performance. Another contextual factor will be the seriousness of the impact on the aboriginal people of the Crown’s proposed course of action. The more serious the impact the more important will be the role of consultation. Another factor in a non- treaty case, as Haida points out, will be the strength of the aboriginal claim. The history of dealings between the Crown and a particular First Nation may also be significant. Here, the most important contextual factor is that Treaty 8 provides a framework within which to manage the continuing changes in land use already foreseen in 1899 and expected, even now, to continue well into the future. In that context, consultation is key to achievement of the overall objective of the modern law of treaty and aboriginal rights, namely reconciliation. [underlining added] [430] Thus, in the context of a treaty, the level of consultation is partly determined by the seriousness of the potential impact of the Crown’s proposed action on the First Nation’s treaty rights. [431] Regardless of the level of consultation required, an overarching objective of consultation is to further the process of reconciliation between the Crown and aboriginal people. However, in assessing the adequacy of the Crown’s consultation effort, a standard of perfection is not expected: Ahousaht, at paras. 33 – 34, 54; Haida, paras. 61 - 62. As stated in Haida at para. 63, “The government is required to make reasonable efforts to inform and consult. This suffices to discharge the duty.” [432] The First Nation also has certain obligations in the consultation process. For example, aboriginal people “must not frustrate the Crown’s reasonable good faith attempts, nor should they take unreasonable positions to thwart government from making decisions or acting in cases where, despite meaningful consultation, agreement is not reached”: Haida, at para. 42. Also, if aboriginal people assert that their rights may be adversely affected by the proposed government decision, they are obliged to show a causal relationship between the proposed government decision and the potential for adverse effects on their rights: Rio Tinto, at paras. 45 – 46. DECISION NO. 2012-WAT-013(c) Page 99 A. The level of consultation that was required in this case [433] The Manager proceeded to make a decision about the Licence on the basis that the appropriate level of consultation in this case was “normal,” as stated in the Consultation Report that Mr. Giles prepared for the Manager. It is unclear what is meant by a “normal” level of consultation, but the Manager submitted that the appropriate level of consultation in this case was at the low end of the spectrum. In proceeding to make his decision, the Manager appears to have relied largely on the flow-weighted withdrawal scheme itself, and incorrect information regarding Mr. Suther’s and Dr. Carey’s comments on Nexen’s proposal, to conclude that the Licence would have no adverse impacts on the First Nation’s treaty rights. The Panel has found under Issue 1 that there was, and remains, insufficient evidence to support that conclusion. [434] Uncertainty remains regarding the actual impacts of the Licence on the First Nation’s treaty rights. However, when assessing the seriousness of the potential impact of a Crown decision on an aboriginal right, there need not be conclusive evidence that the decision will result in actual harm to the aboriginal right. The test set out in Haida focuses on conduct that has the potential to cause an adverse effect on aboriginal rights. Thus, the First Nation must show a causal relationship between the Licence and a potential for adverse impacts on their treaty rights. In Hupacasath, the Court stated as follows at paras. 228 to 229: Although there is no evidence that the Hupacasath have experienced problems in exercising specific aboriginal rights on the land since the removal decision, the question is whether a greater potential now exists for such rights to be adversely affected than did before. The authorities reveal that the contemplated adverse effect need not be obvious. … In Gitxsan First Nation #1, Tysoe J. rejected the Crown’s argument that the transfer of a TFL and forest licences was a “neutral” decision that did not require any consultation (para. 82). He held that the potential for an adverse effect did result; the transfer changed the identity of the controlling mind of Skeena and the philosophy of the persons making the decisions associated with the licences and prevented the sale of the licences. [underlining added] [435] The First Nation’s evidence establishes that members of the First Nation continue to hunt for moose, trap beaver, fish, gather food, and temporarily inhabit the North Tsea Lake area on a seasonal basis, and they have done so for many generations. Although they travelled through the area by canoe and on foot historically, the primary means of accessing the area is now by motor vehicle. They use the North Tsea Lake area periodically during the summer months, which coincides with the period of water withdrawal under the Licence. Nexen and the Manager do not dispute the First Nation’s submission that the Tsea Lakes area is less developed than some other parts of the First Nation’s traditional territory. As such, the Panel finds that this area may have higher importance to the First Nation for the exercise of its treaty rights, compared to the more developed parts of their traditional territory. [436] Although the present case does not involve a “taking up” of land by road building (Mikisew) or timber harvesting (Halfway River), the Licence involves DECISION NO. 2012-WAT-013(c) Page 100 resource extraction – the diversion, storage, and industrial use of a significant quantity of water seasonally from a relatively small lake for several years. The percentages of average open season discharge removed at North Tsea Lake were 14% in 2012 (723,000 cubic metres of 5,100,000 cubic metres, which is the DS-1 flow adjusted to DL-1), and 9% in 2013 (571,000 cubic metres of 6,200,000 cubic metres, again DS-1 flow adjusted to DL-1). Also, the Panel notes that the industrial use of water in the fracking process is a consumptive water use – in other words, the water is not returned to the stream after it is used. On its face, this consumptive use of a significant volume of water has the potential to impact aquatic and riparian habitat in and about North Tsea Lake, and for some distance downstream in the Tsea River. Even if the diversion of water in accordance with the Licence has not been conclusively proven to adversely affect the First Nation’s treaty rights, there is a logical causal relationship between the withdrawal and use of water under the Licence and the potential for adverse effects on aquatic and riparian habitat, which may affect species that depend on that habitat, including fish, beaver, moose, and waterfowl that the First Nation depends on for the exercise of its treaty rights. Indeed, the intention of the flow-weighted withdrawal scheme is to reduce the potential for such impacts, by maximizing withdrawals when stream flow is high, taking progressively less water as stream flow decreases, and ultimately stopping withdrawals when stream flow reaches the minimum level needed to maintain ecological function. Whether the scheme actually achieves the intended result is uncertain, for the reasons discussed under Issue 1. [437] Moreover, the Panel finds that the potential for adverse effects on aquatic and riparian species that the First Nation depends on for the exercise of treaty rights is not merely speculative. In addition to the logical causal relationship described above, there is evidence that the water withdrawals in 2012 are likely to have caused or contributed to certain observed changes in riparian vegetation and fish habitat, as discussed under Issue 1. Specifically, the Panel has found that it is likely that the wetland vegetation around North Tsea Lake was adversely affected by the drawdown of the lake’s water level by over 0.4 metres in 2012. Although this occurred, at least in part, in violation of the Zero Withdrawal Limit in the Licence, and Nexen has taken steps since 2013 to improve monitoring and prevent the Zero Withdrawal Limit from being exceeded again, the Licence still contains neither a limit on lake level drawdown nor express monitoring requirements. As such, there is a real risk that withdrawals in accordance with the Licence could have adverse impacts on riparian vegetation, if drawdown exceeds the natural variability of the lake’s water level. This has the potential to affect species such as moose, beaver, and waterfowl that utilize riparian vegetation. [438] Similarly, there is evidence that fish or fish habitat may have been adversely affected at DS-1 after the stream flow ceased and the stream bed went dry upstream of DS-1 in 2012, as discussed under Issue 1, and the Panel has found that the excessive water withdrawals in 2012 likely caused or contributed to this occurring. As stated above, the Panel recognizes that Nexen has taken steps to improve monitoring and prevent the Zero Withdrawal Limit from being exceeded again. However, the monitoring program is not a condition in the Licence, which makes it difficult if not impossible to enforce, and the unstable rating curve for DS- 1 is still relied upon to regulate the withdrawal rates and determine when the Zero Withdrawal Limit has been reached. As such, there is a real risk that withdrawals in accordance with the Licence could adversely affect fish habitat and/or fish, if the DECISION NO. 2012-WAT-013(c) Page 101 rating curve again becomes unreliable and regular on-site monitoring during the open water season is inadequate to prevent stream flow from dropping below the base environmental flows needed to maintain aquatic habitat. [439] On the other hand, there is no evidence that, as a result of the Licence, the First Nation is, or may be, unable to continue fishing, hunting, trapping or conducting other traditional activities in the Tsea Lakes area or the Tsea River. This contrasts with the facts in West Moberly, where there was a demonstrable adverse impact to caribou, a species that was important to the aboriginal peoples’ seasonal round. The Panel finds that, in the present case, as in Chartrand (see paras. 145, 150, 152, 154), the “causal relationship in this case is clear”, in that the Licence has the potential to affect the habitat of fish and wildlife that the First Nation rely on for the exercise of their treaty rights, but the First Nation did not provide the Manager with information about the specific impact of the Licence on those treaty rights (as discussed further below), and the First Nation continues to be able to carry on its traditional and cultural activities in the Tsea Lakes and Tsea River area as they did before the Licence was issued. At paras. 150 and 160 of Chartrand, the Court stated as follows: There was ample evidence before me of concerns on the part of the KFN regarding the potential for the Decisions to interfere with and impair its asserted and treaty rights. However, it was far from clear whether the Decisions would have any actual impact on the KFN’s asserted and treaty rights. … Given the nature of the Decisions and the lack of any evidence of specific impact on treaty and asserted rights, deep consultation was not required. However, more than simply giving notice and providing information was necessary. In my view, the Provincial Crown’s duty to consult that was engaged in respect of the Decisions was at the mid- range of the Haida spectrum. Regardless, balance and compromise was necessary during the consultation process. [underlining in original] [440] Given the relative importance of the North Tsea Lake area, and downstream portions of the Tsea River, to members of the First Nation for the exercise of their treaty rights, and the Licence’s potential to adversely affect the habitat of fish, beaver, moose and waterfowl in that area that the First Nation depend on to exercise their treaty rights, the Panel finds that the level of consultation required in this case was at the mid-range of the spectrum. B. The consultation process [441] Consultation processes must be flexible, because the appropriate level of consultation may change as new information comes to light. As stated at para. 45 of Haida, consultation “must also be approached flexibly, since the level of consultation required may change as the process goes on and new information comes to light.” At the same time, a consultation process must be transparent enough for each party to understand the other parties’ needs and expectations, particularly in terms of informational needs and the expected timelines for responses and decisions. As stated in Ke-Kin-Is-Uqs at para. 147, “The Crown’s duty is to carry on a process that is as transparent as possible.” Transparency may DECISION NO. 2012-WAT-013(c) Page 102 be achieved, in part, by the Crown discussing the process or framework for consultation, ideally early in the process. As stated in Huu-Ay-Aht at para. 113, “The first step in the process is to discuss the process itself ….” [442] Unlike the Oil and Gas Commission, the Ministry had no consultation agreement with the First Nation regarding applications for water diversion by the oil and gas industry, during the relevant time period. Towards the end of the consultation period, the Ministry and the First Nation were apparently negotiating a consultation agreement, but the Licence was issued before an agreement was reached. Although a consultation agreement is not a prerequisite for consultation, such an agreement would have helped each party to understand the other parties’ needs and expectations. [443] In the absence of a consultation agreement, it would have been helpful if the Ministry had at least proposed a framework or process for consulting with the First Nation about Nexen’s application. While a detailed discussion about the consultation process is not required in all circumstances, the Ministry and Nexen acknowledge that Nexen’s flow-weighted withdrawal system was a complex approach and involved withdrawing a substantial amount of water over a period of several years. It was without precedent compared to previous water licences. Thus, Nexen’s application raised novel considerations, especially given the lack of hydrological data for the Tsea River watershed. If the Ministry had intended to follow the Provincial Consultation Policy, the Ministry did not inform the First Nation of how the Ministry planned to proceed based on that policy. For example, there is no evidence of any discussion with the First Nation about the roles of the Ministry and Nexen in the consultation process, or the expected timelines for the First Nation to respond to the Ministry’s inquiries and requests for information. [444] Also, as early as Ms. Capot Blanc’s September 29, 2009 letter, and throughout the consultation period, the First Nation raised concerns about the lack of a clear process for consulting about Nexen’s application, and about water licensing for the oil and gas industry generally. [445] In these circumstances, it was appropriate for the consultation process to be flexible, given the novel nature of Nexen’s application and the ongoing collection of data from 2009 through 2011, but it would have been prudent for the Ministry to have had a discussion with the First Nation, at an early stage, regarding how it intended to proceed with consultations on Nexen’s application. [446] In addition to not discussing with the First Nation, from the outset, the intended consultation process or each party’s roles and expectations, the Ministry did not keep the First Nation regularly informed about the status of the Ministry’s review of Nexen’s application, or changes in how the Ministry intended to proceed with consultation. Updates from the Ministry were intermittent, and sometimes months went by without the First Nation hearing from the Ministry. Moreover, the Ministry sent some ‘mixed messages’ about who within the Ministry the First Nation would be dealing with during the consultation process. For example, Mr. DeFord’s February 24, 2011 letter to Ms. Lowe stated, in part, “We have discussed these issues with [Ministry] staff in Fort Nelson and they will be contacting you shortly to determine the need for a meeting to discuss water issues and answer your questions.” However, the First Nation was not contacted about a meeting with staff in Fort Nelson. Similarly, Mr. DeFord’s March 16, 2011 email to Ms. Lowe stated, “… we are working towards including our Ministry staff in Fort Nelson to assist in DECISION NO. 2012-WAT-013(c) Page 103 consultation efforts with stakeholders, and hope to have a plan in place sooner than later.” However, no such “plan” was provided. Similarly, the First Nation was not advised of Mr. Giles’ role when he took the lead on behalf of the Ministry in the consultation process in February 2012. [447] Also, Nexen’s role in the consultation process was never clearly addressed. Although the Crown may delegate procedural aspects of consultation to industry proponents (Haida, at para. 53), the evidence of the parties’ communications during the consultation process does not indicate, expressly or impliedly, a clear intention by the Ministry to delegate any aspects of the process to Nexen. Although the First Nation’s Consultation Protocol encouraged proponents to consult with the First Nation, and Nexen communicated and met with the First Nation during the consultation period, the Crown has the legal duty to conduct consultation, and it is not up to a First Nation to determine when a proponent is consulting on behalf of the Crown. From the First Nation’s perspective, Nexen may have been involved in consultation simply in furtherance of Nexen’s interests, rather than because Nexen was a delegate of the Crown. [448] While a standard of perfection is not required for consultation to be adequate, the consultation process in this case suffered from an overall lack of understanding and clarity about each party’s needs and expectations. Given the complex and novel nature of Nexen’s licence application, the potential imapcts on the First Nation’s treaty rights, and the fact that the First Nation raised concerns early and throughout the consultation period about the lack of a clear process for consulting about Nexen’s application, the Ministry should have made greater efforts to discuss the parties’ roles and expectations during the consultation process, to ensure that the process was as transparent as possible. C. The Crown’s obligation to ascertain the nature and scope of the First Nation’s treaty rights [449] To ascertain the appropriate level of consultation, the Manager, on behalf of the provincial Crown, needed to consider the potential impacts of the Licence on the First Nation’s treaty rights. To properly understand the potential impacts on the First Nation’s treaty rights, the Manager needed to understand the nature and scope of the treaty rights that could be adversely affected by the Licence. [450] When consultation about Nexen’s application began, the Crown was generally aware that the First Nation holds rights to hunt, trap and fish under Treaty 8, and exercises those rights in the Tsea Lakes area. For example, Mr. DeFord’s January 27, 2012 letter states that “Water Stewardship is aware that [the First Nation] exercises Treaty 8 rights in and around the Tsea Lakes and the potential for archeological sites in the Tsea Lakes area is high, although not specifically identified.” In addition, the Manager’s rationale for issuing the Licence acknowledges the First Nation’s rights to hunt, trap, fish and travel on waterways in the Tsea Lakes area. Although the Manager concluded that the Licence would have no adverse impacts on fishing, transportation via waterways, hunting, or trapping in the Tsea Lakes area, there is no evidence that the Manager considered exactly where, when or how the First Nation’s members exercise treaty rights in that area. For example, the Manager did not consider the actual location, timing, or frequency of the First Nation’s hunting, trapping, fishing, or transportation activities in the Tsea Lakes area. The Manager also did not consider which species of fish, animals or plants are used by the First Nation for those purposes. The absence of such DECISION NO. 2012-WAT-013(c) Page 104 considerations inhibited the Manager’s ability to properly ascertain the nature and scope of the First Nation’s treaty rights that could be affected by the Licence. [451] The question then becomes: who was responsible for the Manager’s failure to properly ascertain the nature and scope of the First Nation’s treaty rights? The Panel finds that the provincial Crown is responsible, in part. The Manager failed to consider site-specific information regarding the First Nation’s treaty rights in the Tsea Lakes area that was known to the provincial Crown. Specifically, the provincial Crown had records of a trapline in the Tsea Lakes area that is registered to First Nation members. Although the Manager recognized the First Nation’s treaty right to trap in a general sense, the trapline is not mentioned in the Consultation Report, the Manager’s decision rationale, or any other document that the Manager considered before the Licence was issued. The Manager acknowledged in his testimony that he should have considered the trapline. Moreover, the Panel finds that the Manager relied on some irrelevant and/or incorrect information. For example, the Treaty 8 traditional use study referred to in Mr. DeFord’s January 27, 2012 letter, which did not include the First Nation and contained no information about the Tsea Lakes area. Also, the alleged review of Nexen’s proposal by “provincial experts” and a “third party reviewer” that “anticipated no impacts to fish or fish habitat”, which the Manager testified was incorrect, as neither Mr. Suther nor Dr. Carey made such comments. [452] However, for reasons discussed below, the Panel finds that the First Nation also bears some responsibility for the Manager not having all of the relevant information to properly assess the nature and scope of the First Nation’s treaty rights in the Tsea Lakes area. D. The First Nation’s capacity to respond during the consultation period [453] Based on the evidence, the Panel finds that, from April 2009 through 2011, the First Nation had a limited capacity to understand Nexen’s proposal and respond to the Ministry’s requests for more specific information. Ms. Lowe testified that the First Nation was understaffed during that time, and the volume of referrals peaked during 2010 to 2011. The Ministry (or any other branch of the provincial Crown) did not offer additional resources to assist the First Nation in understanding and responding to Nexen’s proposal, which involves technical hydrological information and models, and a complex water withdrawal scheme, which requires specialized expertise to fully assess. Nexen provided some assistance to the First Nation in that regard, by funding Dr. Carey’s review of the 2011 Water Plan. The First Nation helped select Dr. Carey as the reviewer, and his review was intended to assist the First Nation in understanding the potential impacts of the Licence. However, his final report was not available until December 2011, and in any event, his review was limited to the hydrological aspects of the 2011 Water Plan. He did not comment on the potential impacts of the water withdrawals on fish or wildlife that the First Nation relies on for the exercise of its treaty rights. Consequently, the First Nation lacked the capacity to fully assess, and respond to, the technical aspects of Nexen’s proposal, until at least the beginning of 2012. [454] Ms. Lowe testified that, after 2011, the number of referrals declined and the First Nation’s Lands and Resources Department hired more staff. Based on the evidence, the Panel finds that there was a period of approximately four months during early 2012 when the First Nation had the capacity to at least provide the Ministry with more specific information about the nature of its treaty rights in the DECISION NO. 2012-WAT-013(c) Page 105 Tsea Lakes area, including how and when members of the First Nation exercise their rights in that area, in response to the Ministry’s requests for more specific information about their concerns. For the reasons discussed below, it is unclear why the First Nation did not do so. E. The First Nation failed to disclose relevant information about the exercise of its treaty rights that was within the knowledge of its members [455] The First Nation asserts that a traditional use study needed to be carried out before the First Nation could respond to the Ministry’s requests for more specific information regarding its concerns about Nexen’s proposal. In Adams Lake, a First Nation maintained that capacity funding was necessary to obtain site-specific information that the government had requested. However, the Court found that information about where First Nation members used the land was within that First Nation’s knowledge, and a study was not required. The Court rejected the First Nation’s argument that the Crown’s refusal to provide capacity funding resulted in inadequate consultation. Similarly, in the present appeal, the Panel finds that information about where, when and how the First Nation’s members exercise treaty rights in the Tsea Lakes area was within the First Nation’s knowledge, and it was unnecessary for the Crown to fund a traditional use study to obtain this information. This information could have assisted the Manager to better understand the scope and nature of the First Nation’s treaty rights in the Tsea Lakes area. [456] During the appeal hearing, several of the First Nation’s witnesses (e.g., Mr. Capot Blanc, Ms. Michel, Ms. Dettieh, and Mr. Burke) described the nature and timing of their (and/or their family’s) hunting, trapping, fishing, gathering, and habitation in the Tsea River watershed and/or the Tsea Lakes area, as well as the species of plants and animals that they utilize for cultural purposes. The First Nation’s witnesses also outlined their concerns about the potential impacts of Nexen’s water withdrawals. Their evidence was not based on new information that did not exist during the consultation period; rather, it reflected many years or decades of personal and family knowledge of cultural activities in the Tsea Lakes and Tsea River area. [457] In addition, although some members of the First Nation were reluctant to share sensitive site-specific information with the Ministry and/or Nexen during the consultation period, the Panel notes that the First Nation could have disclosed such information in a less sensitive form, which still could have assisted the Manager. When Ms. Lowe testified about the First Nation’s traditional activities in and about the Tsea Lakes, she referred to a “Tsea Lake Use Value” map prepared by the First Nation’s Lands and Resources Department. The map states that it was printed on June 21, 2012, less than two weeks after the First Nation filed its appeal on June 11, 2012. The map is attached to a June 26, 2012 letter signed by Ms. Lowe, which states that the map data “has been randomized and buffered where necessary to protect FNFN traditional use site confidentiality.” In the letter, Ms. Lowe states that the map “is a summary of sensitive Traditional Land Use (“TLU”) information shared by FNFN members to the FNFN Lands Department.” She explains that a 500-metre radius buffer was used around linear features, and a 1-kilometre radius buffer was used around point features, to provide assurance to members who would be reluctant to share information about their practices in specific areas. The map shows polygons representing areas where habitation, trapping, hunting, DECISION NO. 2012-WAT-013(c) Page 106 subsistence, transportation, and critical wildlife habitat occur. Her letter also identifies some of the plants and animals that are used by the First Nation in the Tsea Lakes area. For example, her letter states that moose is a “critical food species,” and beaver is an “important animal for consumption, trapping, and cultural/spiritual reasons”. It also states that the area is important to First Nation members for waterfowl and medicinal plants. [458] Although Ms. Lowe testified that this map was not produced sooner due to capacity issues, the Panel has found that the First Nation’s capacity to respond to requests for information had improved by early 2012. Indeed, Ms. Lowe stated that the map might have been produced sooner if the Ministry had met the First Nation in spring of 2012, before the Licence was issued. However, it is unclear to the Panel why the map could not be shared unless there was a meeting with the Ministry, especially given that the important map features are buffered to protect sensitive site-specific information. This map was disclosed to Nexen and the Manager by the First Nation as part of its submissions on the preliminary issue of the First Nation’s standing to appeal the Licence, which was heard by way of written submissions. Given that Ms. Lowe stated that the map could have been prepared in the spring of 2012, and the map was printed on June 21, 2012 for disclosure in a written hearing process involving the Manager and Nexen, it is unclear to the Panel why the First Nation did not disclose this information before the Licence was issued. [459] The Panel notes that First Nations are obliged to “express their interests and concerns once they have had an opportunity to consider the information provided by the Crown, and to consult in good faith by whatever means available to them” (Halfway River at para. 161). Also, as stated in Mikisew at para. 65, there is a “reciprocal onus” on a First Nation “to carry their end of the consultation, to make their concerns known, to respond to the government’s attempt to meet their concerns and suggestions, and to try to reach some mutually satisfactory solution.” Furthermore, as stated in Louis I at para. 224, “while a First Nation may (for whatever reason) decide to take a hard-bargaining position, categorically object to a project and not share all relevant information in the consultation process, it risks entering into a situation where concerns arising from that information will not be taken into account in Crown’s decision-making.” [460] According to Haida, the honour of the Crown requires the Crown to pursue the reconciliation of aboriginal rights with other rights and interests through honourable negotiations, but First Nations have a corresponding obligation to identify their rights, participate in the consultation process, act in good faith, and try to reach a mutually satisfactory solution. At paragraph 42 of Haida, the Chief Justice stated as follows for a unanimous Court: … As for Aboriginal claimants, they must not frustrate the Crown’s reasonable good faith attempts, nor should they take unreasonable positions to thwart government from making decisions or acting in cases where, despite meaningful consultation, agreement is not reached: see Halfway River First Nation v. British Columbia (Ministry of Forests), [1999] 4 C.N.L.R. 1 (B.C.C.A.), at p. 44; Heiltsuk Tribal Council v. British Columbia (Minister of Sustainable Resource Management) (2003), 19 B.C.L.R. (4th) 107 (B.C.S.C.) …. [461] Applying the principles from these judicial decisions to the present case, the Panel finds that the First Nation’s failure to share the relevant information that was DECISION NO. 2012-WAT-013(c) Page 107 within its members’ knowledge created a risk that the First Nation’s concerns related to that information would not be taken into account in the Manager’s decision-making process. Indeed, that is what happened. If the First Nation had at least provided the “Tsea Lake Use Value” map in response to the Ministry’s requests for more specific information, rather than disclosing it after the Licence had been appealed, the Manager could have better understood the nature and scope of the First Nation’s treaty rights in the area. Sharing that information may not have led to a decision that satisfied the First Nation or fully accommodated the First Nation’s concerns, but it could have led to further discussion and better understanding between the Ministry and the First Nation before the Licence was issued. F. The First Nation possessed sufficient information to inform the Crown of the potential impacts of Nexen’s proposal on their treaty rights [462] The duty to consult imposes on the Crown “a positive obligation to reasonably ensure that aboriginal peoples are provided with all necessary information in a timely way so that they have an opportunity to express their interests and concerns …” (Halfway River, at para. 160). The Ministry cannot be expected to disclose information that it did not possess. Specifically, the Ministry did not possess the 2011 data in the 2012 Matrix Reports until after the Licence was issued, and therefore, the Ministry could not have disclosed it before the Licence was issued. However, the Panel finds that the Ministry failed to disclose to the First Nation some relevant information about Nexen’s application, such as Mr. Suther’s comments on the 2009 Water Plan. Nevertheless, the Panel finds that, during the consultation period, the Ministry provided the First Nation with most of the relevant information that the Ministry possessed about Nexen’s proposal. For example, the Ministry disclosed Nexen’s 2009 Water Plan early in the consultation period. By at least late January 2012, the Ministry also disclosed the 2011 Water Plan (which Nexen had already provided to the First Nation), and the 2009 to 2011 AMEC reports. By early 2012, the First Nation had also obtained (from Nexen) copies of Dr. Carey’s draft report and final report. [463] Until 2012, Ministry staff also responded to most of the First Nation’s questions and requests for more information. Although the Ministry was not always prompt in responding, the Ministry was part of a reorganization of government ministries during part of the consultation period, which may partly explain the Ministry’s slow responses. Ministry staff met with Ms. Lowe at least once (June 9, 2011) to share information and listen to concerns, and Ministry staff attended two site visits (June 10, 2010, and August 3, 2011) with representatives of the First Nation. [464] In summary, until 2012, although the Ministry’s efforts were not perfect, the Ministry appears to have been genuinely willing to share the information it possessed, and to respond, to the best of its ability, to the First Nation’s requests for information about Nexen’s application. As discussed below, the Ministry’s approach changed in early 2012. [465] A further consideration regarding the First Nation’s ability to understand the potential impacts of Nexen’s proposal, and to respond to the Ministry’s requests for more specific information, is that Nexen’s application to withdraw water under a licence was not merely a theoretical proposal during the consultation period. Nexen was withdrawing water from North Tsea Lake under section 8 approvals during the consultation period, and did so for at least two open water seasons before the DECISION NO. 2012-WAT-013(c) Page 108 Licence was issued. The works authorized by the Licence were installed under Nexen’s section 8 approvals, and the seasonal window for withdrawals under the section 8 approvals was similar to the one proposed for the Licence. The total annual volume of water that was withdrawn under the section 8 approval in 2011 is actually greater than the amount withdrawn in 2012 (under the Licence together with the section 8 approval) or 2013 (under the Licence). Moreover, the First Nation was aware of the location and operation of those works. Members and staff of the First Nation observed the water withdrawal operations on several occasions between 2009 and when the Licence was issued in 2012, during both organized site visits and visits for personal purposes. In this sense, the information available to the First Nation regarding the water withdrawal operations and their potential (and actual) impacts was not limited by the technical nature of Nexen’s proposal. [466] Although the Panel has found that there is no clear indication that the Ministry delegated any procedural aspects of the consultation process to Nexen, Nexen took steps to assist the First Nation in understanding its proposal. In particular, Nexen met with the First Nation, and funded Dr. Carey’s review of the 2011 Water Plan in response to the First Nation’s request for assistance in understanding Nexen’s proposal. Dr. Carey’s Report was not part of the consultation process, but it may have assisted the First Nation in understanding the hydrological aspects of Nexen’s proposal. [467] The Panel finds that, between the information that was available to the First Nation during the consultation period, and the First Nation’s opportunities to observe the water withdrawal operations for over two years before the Licence was issued, the First Nation had sufficient information by the spring of 2012 to understand, at least on a practical level, the potential effects of the Licence on its treaty rights, such that the First Nation could have been more specific in expressing its interests and concerns to the Crown. G. The Crown’s failure to consult in good faith [468] The Panel has found that the appropriate level of consultation in the circumstances was at the mid-range of the spectrum. Even if the Panel is wrong, and the duty to consult is at the low end of the spectrum, the Crown must always consult in good faith “with the intention of substantially addressing the concerns of the aboriginal peoples whose lands are at issue”: Delgamuukw v. British Columbia, [1997] 3 S.C.R. 1010, at para. 168. At para. 42 of Haida, the Court stated as follows regarding the Crown’s obligation to consult in good faith: At all stages, good faith on both sides is required. The common thread on the Crown’s part must be “the intention of substantially addressing [Aboriginal] concerns” as they are raised (Delgamuukw, supra, at para. 168), through a meaningful process of consultation. Sharp dealing is not permitted. However, there is no duty to agree; rather, the commitment is to a meaningful process of consultation. … [underlining added] [469] For the reasons that follow, the Panel finds that the provincial Crown failed to consult in good faith regarding the Licence, particularly during the final months of the consultation period. [470] Beginning in May 2009, and through to the end of 2011, the consultation process proceeded gradually, generally without hard deadlines for either side to DECISION NO. 2012-WAT-013(c) Page 109 respond, and the Ministry showed a willingness to better understand the First Nation’s perspective, as indicated by the Ministry’s requests for further information about the First Nation’s concerns, and the Ministry’s willingness to meet with the First Nation to discuss Nexen’s proposal. [471] However, the Ministry’s approach changed after the teleconference between representatives of the Ministry and Nexen in mid-January 2012. According to Mr. Wagner’s January 17, 2012 email to the Manager (and copied to Mr. DeFord) following the teleconference, Mr. Wagner understood that “An approved licence should be achievable by March 2012 ….” At that point, in Mr. DeFord’s words, the Ministry believed that the technical side of its assessment was complete, but consultation remained a “major hurdle” and the Ministry agreed to send a “30-day” letter to the First Nation. According to Mr. DeFord, he then sent his January 27, 2012 letter to the First Nation to “move consultation along.” [472] According to Mr. DeFord’s letter, a preliminary review had concluded that Nexen’s application would have no “appreciable adverse effect” on the First Nation’s exercise of treaty rights in the Tsea Lakes area. The First Nation was previously unaware that a preliminary review had been done, and the First Nation was not provided with the information that formed the basis of the Ministry’s conclusions. Mr. Deford’s letter states that, in assessing the potential impacts of the Licence, the Ministry considered a Treaty 8 traditional use study, among other things. However, the Ministry did not disclose a copy of that study to the First Nation, and the Manager has now acknowledged that the study did not include the First Nation’s lands. It only discussed lands within the traditional territory of other Treaty 8 First Nations. [473] Given the relatively slow pace of consultations up to January 2012, and the lack of a clear framework or process for consultations about Nexen’s application, the First Nation was understandably surprised by the 30-day deadline that Mr. DeFord imposed to comment on the Ministry’s “preliminary review.” [474] During mid-January to May 2012, the correspondence within the Ministry, and from the Ministry to the other parties, shows an intention to bring the consultation process to an end and issue the Licence. The Ministry seemed intent on pressing ahead with issuing the Licence, knowing that the First Nation had not fully responded, and despite the fact that the Ministry did not have more specific information about the nature or extent of the First Nation’s treaty rights in the Tsea Lakes area. Ministry staff seemed to have already concluded that the flow- weighted withdrawal scheme would have no impact on the environment or the First Nation’s treaty rights. Key Ministry staff including Mr. Giles, the Manager, and Mr. DeFord, had made up their minds that nothing would be gained by conducting further consultation, and that the consultation that had occurred was adequate because the Licence would have no adverse impacts. The Ministry appeared to take the view that further consultation with the First Nation would simply delay the inevitable issuance of the Licence. [475] In addition, it is apparent from the correspondence that the provincial Crown was saying one thing to the First Nation, but saying another thing internally, regarding its intentions to meet and discuss water licensing concerns during January through early May 2012. The Ministry’s communications with the First Nation during that period continued to express a willingness to meet with the First Nation to discuss its concerns about water licences, including the Licence. Yet, DECISION NO. 2012-WAT-013(c) Page 110 internal government communications amongst key Ministry staff, including Mr. Giles and the Manager, showed an intention to issue the Licence regardless of any future meetings that might occur with the First Nation. [476] Specifically, the Panel finds that in April 2012, Mr. Giles and the Manager promised to meet with the First Nation before the Licence was issued, yet Mr. Giles’ April 3 and 16, 2012 internal emails to Ministry staff expressed his view that further discussion with the First Nation would produce no new information and may delay the intended issuance of the Licence. The internal Ministry correspondence reveals that the Ministry intended to issue the Licence regardless of the promises to meet with the First Nation. This is evident in the correspondence on April 3 and 4, 2012. By a letter dated April 3, 2012, Mr. DeFord notified the First Nation that the Ministry was proceeding to make a decision on Nexen’s application. He stated, in part, Having received no further information from Fort Nelson First Nation it remains my assessment that there would be no impact to Fort Nelson First Nation rights recognized and affirmed by section 35(1) of the Constitution Act, 1982 given the requested withdrawal of water from North Tsea Lake in relation to the total flow within the Tsea River watershed and given [that] appropriate screened intakes will be installed. [477] At mid-day on April 3, 2012, Ms. Lowe responded by email to Mr. DeFord’s letter. Among other things, she objected to the approval of Nexen’s application, and requested a meeting to discuss Nexen’s application before a decision would be made. [478] In the afternoon of April 3, Mr. Giles sent an email to Mr. DeFord and some other Ministry staff. His email states, in part: An update from this AM. We did receive a response from FNFN with respect to our latest letter on the Nexen file (attached). Generally the same message regarding concerns re process, importance of area and water to treaty rights etc. I don’t believe further discussion at this point will produce any change with respect to consultation on the file, either positive or negative. However, given [the] big picture on water as I believe was discussed on your call this AM we would like to meet with FNFN to discuss other files and path forward on water to avoid deadlock. Given our general desire to meet we will attempt to arrange a meeting next week with no expectation that we are delaying our decision making on the Nexen file. Also, I don’t anticipate having to ponder additional concerns and go for further MAG review post meeting. This approach remains true to our latest letter and if litigated shows responsiveness in process on our part. I have attempted to contact FNF but not [sic] luck yet. Should we not connect next week we are in a position to continue to decision, or depending on that exact timing, try to accommodate a meeting beyond next week. [underlining added] [479] The email above shows no intention of substantially addressing any further, or more specific, concerns that the First Nation might have raised. Yet, Mr. Giles sent an email to Ms. Lowe mid-day on April 4, 2012, indicating that he would like to coordinate a meeting with her and other representatives of the First Nation to DECISION NO. 2012-WAT-013(c) Page 111 discuss their concerns about water licensing in general and some specific licence applications, including Nexen’s. He proposed a meeting on April 12, 2012. [480] In the afternoon of April 4, 2012, Ms. Lowe responded that the First Nation would like to meet as soon as possible, but she would be on vacation starting April 9. She advised that she would be back in the office on May 1, 2012, and she suggested that Mr. Giles send her an invitation for a meeting in May. [481] In an April 4, 2012 letter to Mr. DeFord, Ms. Lowe advised that the First Nation wished to meet as soon as possible to discuss two other water licence applications, and that she would be back in the office on May 1, 2012. She also advised that the First Nation’s view was that the Ministry had not taken meaningful steps toward ascertaining the scope of the First Nation’s treaty rights, and had not undertaken meaningful consultation with the First Nation. [482] Moreover, the Consultation Report that Mr. Giles prepared for the Manager’s consideration concludes as follows: Further discussions and information sharing with the FNFN would not likely reveal any additional information with respect to potential impacts on treaty rights. Consultation was undertaken as per provincial procedures. FNFN legal counsel wrote MARR requesting water permitting be suspended while discussion continued toward agreements that may include relevant clauses to water permitting and consultation. MARR responded that permitting will not be held to conclude agreement negotiation. [underlining added] [483] The Manager seems to have agreed with Mr. Giles’ opinion that further discussions or a meeting with the First Nation would produce no information that might warrant delaying the issuance of the Licence. Despite the April 2012 letters from the First Nation’s Chief and legal counsel indicating that the First Nation strongly objected to the issuance of a water licence and that the consultation had been inadequate, and despite the fact that the Manager had virtually no site- specific information about the scope or nature of the First Nation’s treaty rights in the Tsea Lakes area, the Manager proceeded to issue the Licence before the proposed May meeting with the First Nation to discuss water licensing issues. The Manager was apparently unwilling to delay issuing the Licence, despite that fact that a further delay would have caused no significant prejudice to Nexen, which could have kept withdrawing water under its existing section 8 approval. This approach was contrary to good faith consultation, as explained in Huu-Ay-Aht at para. 117: Meaningful, good faith consultation requires willingness on the Crown to make changes based upon information that emerges during the consultation process (Taku at para. 29). Good faith on the part of the Crown means exhibition throughout consultation of a willingness to substantially address Aboriginal concerns as they are raised (Haida at para. 42). Hard bargaining is one thing; sharp dealing is quite another. The former is not offensive, but the latter is. [underlining added] DECISION NO. 2012-WAT-013(c) Page 112 [484] The Panel finds that the Crown failed to consult with the First Nation in good faith. Based on the internal Ministry correspondence and the Manager’s rationale, the Panel finds that by April 2012, the Manager intended to issue the Licence regardless of the promised meetings, and had no intention to substantially address any further concerns or information that may have been provided by the First Nation. The Panel finds that this conduct was inconsistent with the honour of the Crown and the overall objective of reconciliation. [485] In summary, for the reasons provided above, the Panel finds that the consultation process that preceded the issuance of the Licence was inadequate and fundamentally flawed. H. What is the appropriate remedy in the circumstances? [486] The First Nation submits that the fundamental defects in the licensing regime and the Manager’s decision warrant reversing the decision to issue the Licence. Nexen opposes reversing the Licence. Nexen argues that this would cause it to suffer significant prejudice, as it has invested hundreds of millions of dollars in the Tsea River area as a water source. Nexen submits that the courts have been reluctant to suspend or reverse regulatory decisions where doing so would cause substantial prejudice to a third party, especially if the prejudice to the third party outweighs the detrimental effect of the decision on aboriginal interests. In reply, the First Nation submits that any prejudice to Nexen is speculative, and it should not take priority over the First Nation’s constitutionally protected treaty rights or the public interest in water resources. [487] In regard to an appropriate remedy, the Panel notes that the Court stated as follows at para. 61 of Rio Tinto: A tribunal that has the power to consider the adequacy of consultation, but does not itself have the power to enter into consultations, should provide whatever relief it considers appropriate in the circumstances, in accordance with the remedial powers expressly or impliedly conferred upon it by statute. The goal is to protect Aboriginal rights and interests to promote the reconciliation of interests called for in Haida Nation. [underlining added] [488] In Chief Harry, the Board concluded at paras. 280 to 285 that a manager’s consultation with a First Nation about a commercial water licence was flawed, and that the matter was sent back to the manager with directions to ensure that adequate consultation was conducted. The Board suspended the commercial water licence pending adequate consultation, and directed that the term of the commercial water licence should be extended, if it was later reinstated, to reflect the period of suspension. [489] However, the Panel finds that the circumstances in the present case are quite different from those in Chief Harry, where the commercial water licence authorized the withdrawal of no more than 1% of the instantaneous pre-diversion stream flow at the point of diversion, and there was no evidence of a failure to consult in good faith. Rather, the manager’s failure to adequately consult arose, in part, from the failure of another government branch to share with him the information it had received during the consultation process. DECISION NO. 2012-WAT-013(c) Page 113 [490] In contrast, in the present case, the Licence authorizes a much greater percentage of the stream flow from a relatively small water source, and the Panel has found that the Licence and the flow-weighted withdrawal scheme are fundamentally flawed and lacking in technical merit. There remains considerable risk that the licensed water withdrawals could cause harm to aquatic and riparian habitat and species that the First Nation depends on for the exercise of its treaty rights. In addition, the Panel has found that the consultation process was seriously flawed, as the Ministry never explained the process it intended to follow or Nexen’s role in the process, the Manager did not consider critical information that was available to him regarding the First Nation’s exercise of its treaty rights in the Tsea Lakes area, the Manager considered inaccurate and irrelevant information, and the Crown failed to consult in good faith. The Panel finds that suspending the Licence pending further consultation would not necessarily address the serious flaws in the licensing regime, or “protect Aboriginal rights and interests to promote the reconciliation of interests called for in Haida Nation” as stated in Rio Tinto. [491] The Panel has also considered the potential for prejudice to Nexen’s interests as a result of cancelling the Licence. The Panel notes that the works authorized under the Licence were installed before the Licence was issued: they were constructed during the term of Nexen’s short-term water approvals. Consequently, Nexen decided to incur the cost of constructing the water works before Nexen even applied for the Licence. In other words, Nexen would have incurred those costs regardless of whether Nexen received the Licence, and therefore, those costs cannot form part of the prejudice Nexen may suffer as a direct result of the Licence being reversed. The Panel also notes that Nexen has indicated, in its appeal submissions, a willingness to consider alternative surface water sources located outside of the Tsea River watershed. [492] In terms of the benefits Nexen has received so far from the Licence, Nexen has been withdrawing water under the Licence since May 11, 2012. As such, Nexen has enjoyed the benefits of the licensed water withdrawals for more than three years, which is more than half of the term of the Licence (which would have expired at the end of 2017), despite the risks to aquatic and riparian species and their habitat, and the associated risks to the First Nation’s treaty rights. [493] In these circumstances, while the Panel acknowledges that Nexen will likely suffer some prejudice as a result of reversing the Manager’s decision, that prejudice is diminished given Nexen’s use of the Licence for more than half of its term, and given Nexen’s stated willingness to explore other water sources. [494] The Panel has already concluded under Issue 1 that the Licence should be reversed based on its serious technical flaws. The Panel also concludes that the Licence should be reversed based on the serious flaws in the consultation process.

3. Whether the Panel should order the Ministry to pay the First Nation’s costs associated with the appeal.

[495] The Board’s policy on costs is set out in its Procedure Manual, which states as follows at pages 45 - 46: The Board has not adopted a policy that follows the civil court practice of “loser pays the winner’s costs.” The objectives of the Board’s costs policy are to encourage responsible conduct throughout the appeal DECISION NO. 2012-WAT-013(c) Page 114 process and to discourage unreasonable and/or abusive conduct. Thus, the Board’s policy is to award costs in special circumstances. Those circumstances include: (a) where, having regard to all of the circumstances, an appeal is brought for improper reasons or is frivolous or vexatious in nature; (b) where the action of a party, or the failure of a party to act in a timely manner, results in prejudice to any of the other parties; (c) where a party, without prior notice to the Board, fails to attend a hearing or to send a representative to a hearing when properly served with a “notice of hearing”; (d) where a party unreasonably delays the proceeding; (e) where a party’s failure to comply with an order or direction of the Board, or a panel, has resulted in prejudice to another party; and (f) where a party has continued to deal with issues which the Board has advised are irrelevant. A panel of the Board is not bound to order costs when one of the abovementioned examples occurs, nor does the panel have to find that one of the examples must have occurred to order costs. [496] The First Nation submits that, although this is not a case where there has been unreasonable or abusive conduct in the appeal process, the circumstances in this case support an award of costs because: • the Licence, and the activities undertaken by Nexen pursuant to it, are unprecedented; • the appeal, which dealt with events spanning nearly five years and involved an array of individuals, was before the Board as a first instance proceeding requiring voluminous documentary evidence and oral and written testimony; • the appeal raised issues of unique technical and legal complexity, necessitating the commissioning and appearance of numerous experts; • the First Nation has capacity limitations; and • there is significant evidence before the Board demonstrating that the Province failed to uphold the honour of the Crown in its dealings with the First Nation in regard to the Licence. [497] The First Nation argues that, due to these circumstances, it had to allocate significant time and resources to an appeal that was necessitated by the Province’s conduct. [498] The Manager argued that granting costs in this appeal would be a significant departure from the Board’s normal practice of discouraging frivolous conduct in the appeal process, as there was no such conduct in this instance. He further argued that the appeal challenged nearly every technical aspect of the Licence, which required considerable use of technical experts by all parties, leading to added costs for all parties. DECISION NO. 2012-WAT-013(c) Page 115 [499] Nexen did not address this issue. [500] The Panel finds that the Licence was unprecedented, and many of the issues raised in this appeal were novel. This meant that the matter raised complex technical and legal issues for all parties, and not just the First Nation. Although the Panel has found that the Crown failed to uphold the honour of the Crown in its consultation with the First Nation, the Panel has found that the First Nation failed to disclose information that was within the knowledge of its members and that would have assisted the Crown in its consultations. Moreover, the First Nation acknowledges that this is not a case where there has been unreasonable or abusive conduct in the appeal process. [501] In these circumstances, the Panel finds that there is no basis to order the Ministry to pay the First Nation’s costs associated with the appeal.

DECISION

[502] In making this decision, the Panel of the Environmental Appeal Board has carefully considered all of the evidence before it, whether or not specifically reiterated here. [503] For the reasons provided above, the Board reverses the Manager’s decision to issue the Licence, pursuant to section 92(8)(b) of the Water Act except to the extent that Nexen may continue to store and use, in accordance with the conditions of the Licence, any water that was already in storage as of the date of this decision. No further water may be diverted under the Licence, as of the date of this decision. Once all of the water currently in storage has been used, the Licence is cancelled. [504] The appeal is allowed. [505] The First Nation’s application for costs is denied.

“Alan Andison”

Alan Andison, Chair Environmental Appeal Board

“Les Gyug”

Les Gyug, Member

“Reid White”

Reid White, Member

September 3, 2015 DECISION NO. 2012-WAT-013(c) Page 116 APPENDIX A – Map of Tsea River Watershed

DECISION NO. 2012-WAT-013(c) Page 117 APPENDIX B – Conditional Water Licence C127986