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