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Environmental Appeal Board

Fourth Floor 747 Fort Street Victoria British Columbia V8W 3E9 Telephone: (250) 387-3464 Facsimile: (250) 356-9923 Mailing Address: PO Box 9425 Stn Prov Govt Victoria BC V8W 9V1 Website: www.eab.gov.bc.ca E-mail: [email protected]

DECISION NOS. 2014-WAT-002(a) to 2014-WAT-007(a)

In the matter of six appeals under section 92 of the Water Act, R.S.B.C. 1996, c. 483.

BETWEEN: Harrison Hydro Project Inc. Fire Creek Project Limited Partnership Lamont Creek Project Limited Partnership Stokke Creek Project Limited Partnership Tipella Creek Project Limited Partnership Upper Stave Project Limited Partnership

APPELLANTS

AND: Comptroller of Water Rights RESPONDENT

BEFORE: A Panel of the Environmental Appeal Board James S. Mattison, Panel Chair

DATE: Conducted by way of written submissions concluding on December 8, 2014

APPEARING: For the Appellants: For the Respondent:

Nicholas R. Hughes, Counsel Christopher Rolfe, Counsel

APPEALS

[1] Harrison Hydro Project Inc., Fire Creek Project Limited Partnership, Lamont Creek Project Limited Partnership, Stokke Creek Project Limited Partnership, Tipella Creek Project Limited Partnership, and Upper Stave Project Limited Partnership (collectively, the “Appellants”) appealed the December 17, 2013 order (the “Order”) of Glen Davidson, Comptroller of Water Rights (the “Comptroller”), Ministry of Forests, Lands and Natural Resource Operations (the “Ministry”).

[2] In the Order, the Comptroller concluded that the water rental billed to Harrison Hydro Project Inc. (“Harrison”), as the licensee for five licences that authorize the diversion of water from five different streams for use in hydro power projects, was done in accordance with the Water Act and the Water Regulation. Harrison sought to have the Fire Creek Project Limited Partnership, Lamont Creek Project Limited Partnership, Stokke Creek Project Limited Partnership, Tipella Creek Project Limited Partnership, and Upper Stave Project Limited Partnership (collectively, the “Limited Partnerships”) be named as the licensee in each respective water licence, and be billed separately for water power rental in relation to each water licence. If the Limited Partnerships are named as the individual


licensees, the Ministry would charge a lower rate for water power rental, compared to the rate charged if Harrison holds all five licences.

[3] These appeals were considered on the basis of written submissions.

[4] The Environmental Appeal Board has the authority to hear appeals under section 93 of the Environmental Management Act and section 92 of the Water Act. Section 92(8) of the Water Act provides that, on an appeal, the Board may:

(a) send the matter back to the comptroller, regional water manager or engineer, with directions,

(b) confirm, reverse or vary the order being appealed, or

(c) make any order that the person whose order is appealed could have made and that the board considers appropriate in the circumstances.

[5] The Appellants request that the Board “set aside” the Order, direct the Comptroller to name the Limited Partnership that owns each hydro power project as the licensee in the respective licence, and issue certain other directions to the Comptroller related to the differential in water rental rates.

BACKGROUND

[6] The background facts that are relevant to the issues in these appeals are relatively straight-forward and not in dispute. The following are the essential facts.

[7] The five hydro power projects that are central to this appeal are located on separate streams in the Ministry’s South Coast Region: Fire Creek, Stokke Creek, Tipella Creek, Lamont Creek and the Stave River. The Stave River project is referred to as the “Upper Stave Project”.

[8] All of the projects are situated on Crown land, and each project came to the attention of government upon receipt of applications for water licences under the Water Act, and Crown land tenures under the Land Act.

[9] Each water licence is appurtenant to the Crown land specified in the associated Crown land tenure. The works authorized under each licence include an intake for water diversion, a penstock, access roads, a powerhouse, a tailrace, and a transmission line.

[10] Harrison holds all of the Crown land tenures associated with the five water licences, and is the general partner for each of the Limited Partnerships. However, according to the Appellants, each hydro power project is separately owned by the respective Limited Partnership for the project.

[11] The Comptroller maintains that the Order is based on his finding that Harrison is the registered owner of the interests in the land to which the five water licences are appurtenant, and that the power produced at the plants on those lands should be aggregated for the purpose of calculating water rentals in accordance with section 16(4)(c) of the Water Regulation, B.C. Reg. 204/88 (the “Regulation”). Section 16(4) of the Regulation states as follows:


16 (4) For the commercial and general categories, there shall be separate rental charges at the rates for the calendar year when the determination is made, with the charge or charges being based on

(a) the licensee's construction capacity, if any,

(b) the balance of the authorized capacity other than construction capacity, and

(c) subject to subsection (5), the total of the output from all power developments owned or operated by a single licensee during the preceding calendar year.

[underlining added]

[12] The Appellants submit that the Comptroller erred when he interpreted the words “owner” and “licensee” in the Water Act by reference to the definition of “owner” under the Land Title Act, R.S.B.C. 1996, c. 50, and when he relied on the “single licensee criterion” in administering section 16(4)(c) of the Regulation. The Appellants also submit that, from 2007 until events that led to the issuance of the Order, the Ministry recognized each Limited Partnership as the licensee in respect of the water licence and the Crown land tenure for each project, and the Ministry billed water rentals on that basis.

[13] To fully appreciate the parties’ submissions, it is helpful to review the history of the hydro power projects, the water licences, the tenures over Crown land, and the business relationships between the Appellants and certain other business entities. These matters are summarized below.

Events leading to the issuance of the water licences

[14] Although none of the water licence applications were provided to the Panel, it is obvious from the correspondence that all five projects were not initiated by the Appellants; rather, they were initiated by other business entities and/or persons.

[15] From 2004 to 2006, applications for the five water licences and other associated approvals were made by certain former owners of the hydro power projects, including Cloudworks Energy Inc. (“Cloudworks”) or its principals, David Andrews and Nick Andrews.

[16] In August 2005, the Regional Water Manager issued the water licences for the Fire Creek Project and the Stokke Creek Project, which did not require environmental assessment certificates. The Tipella Creek Project, the Lamont Creek Project, and the Upper Stave Project were included in the environmental assessment of the Upper Harrison Water Power Project, and were named in Environmental Assessment Certificate E06-05 (the “Certificate”), which was issued in September 2006. After the Certificate was approved, the Deputy Comptroller of Water Rights (the “Deputy Comptroller”) issued the water licences for these projects to Cloudworks. More information regarding these events is provided below.

Fire Creek Project

[17] On August 23, 2005, conditional water licence (“CWL”) 121116 for the Fire Creek Project was issued by the Regional Water Manager. The face of this licence


does not name a licensee, but the letter accompanying the licence was addressed to David Andrews of Cloudworks, and the Regional Water Manager said it was her decision “…to issue Cloudworks Energy Inc. a new water licence….” Therefore, Cloudworks was the initial licensee.

[18] The accompanying letter advised that CWL 121116 contained conditions under which the project could be operated, including the requirement that land tenure “…is required for all works located on Crown land.” Clause (g) of CWL 121116 states:

g) This licence is appurtenant to the land on which the powerhouse of the Fire Creek Generating System is situated, described as that parcel or tract of unsurveyed foreshore or land covered by water being part of the bed of Fire Creek, Group 1, New Westminster District, containing 0.60 hectares, more or less, as shown on sketches attached to the Licence of Occupation tenured under the Land Act, held under Lands File No. 2408236.

Stokke Creek Project

[19] Also, on August 23, 2005, the water licence for the Stokke Creek Project (CWL 121115) was issued by the Regional Water Manager. The face of this licence does not name a licensee, but the letter accompanying the licence was addressed to David Andrews of Cloudworks, and the language in the cover letter is the same as that of Fire Creek, indicating that the licensee was Cloudworks.

[20] The letter accompanying CWL 121115 contained similar conditions under which the project could be operated, including the requirement that land tenure “…is required for all works located on Crown land.” Clause (g) of CWL 121115 states:

g) This licence is appurtenant to the land on which the Powerhouse of the Stokke Creek Generating System is situated, described as that parcel or tract of land and unsurveyed foreshore or land covered by water being part of the bed of Stokke Creek together with that part of Block B, District Lot 6862, Group 1, New Westminster District, as shown on sketches attached to the License of Occupation tenured under the Land Act, held under Lands File No. 2408237, or any tenure issued in substitution thereof.

Energy Purchase Agreements

[21] On August 31, 2006, an Energy Purchase Agreement (“EPA”) was executed between BC Hydro and “UPPER STAVE ENERGY LIMITED PARTNERSHIP, a limited partnership formed under the laws of British Columbia represented by its general partners, Cloudworks Energy Inc. and Upper Stave Energy Inc., corporations under the laws of British Columbia (“the General Partners”)….” Appendix 5 of the EPA, “Seller’s Plant Description”, states “The Seller’s Plant is located at Upper Stave River and Lamont Creek”. Further information in the EPA gives approximate latitude and longitude of the sites of the powerhouses, and also the preliminary legal descriptions of the land units.

[22] Also, on August 31, 2006, an EPA was executed between BC Hydro and “KWALSA ENERGY LIMITED PARTNERSHIP, a limited partnership formed under the laws of British Columbia represented by its general partners, Cloudworks Energy


Inc. and Kwalsa Energy Inc., corporations under the laws of British Columbia (“the General Partners”)….” Appendix 5 of the EPA, “Seller’s Plant Description”, states “The Seller’s Plant is located at: the north end of Harrison Lake – specifically on Douglas Creek, Tipella Creek, Fire Creek, Stokke Creek and Douglas Indian Reserve No. 8. Further information in the EPA gives approximate latitude and longitude of the sites of the powerhouses, and also the preliminary legal descriptions of the land units. The Douglas Creek Project does not form part of these appeal proceedings.

Environmental Assessment Certificate

[23] Previously, on September 1, 2005, the BC Environmental Assessment Office issued an order under the Environmental Assessment Act, S.B.C. 2002, c. 43, setting the scope and procedures for an environmental assessment of Cloudworks’ proposal to construct the Upper Harrison Water Power Project. A schedule attached to that order describes the Upper Harrison Water Power Project as “five interconnected run-of-river hydroelectric power plant facilities in the vicinity of the north end of Harrison Lake (Upper Fire Creek, Tipella Creek, Upper Stave River, NW Stave and Lamont Creek) with a combined capacity of up to 110 MW.” Thus, the proposal that was subject to the environmental assessment included three projects that are part of the present appeals: the Tipella Creek Project, the Upper Stave Project, and the Lamont Creek Project.

[24] On September 21, 2006, the Minister of Environment and the Minister of Energy, Mines and Petroleum Resources approved the Upper Harrison Water Power Project, and issued the Certificate for this project to Cloudworks. The Certificate included approval for what is now known as the Tipella Creek Project, the Lamont Creek Project, and the Upper Stave Project, among others.

[25] On November 20, 2006, the Deputy Comptroller wrote to Nick Andrews of Cloudworks, advising of his decision:

…to issue five separate water licences from your applications, collectively referred to as the Upper Harrison Waterpower Project. The Environmental Assessment Certificate E06-05 (the certificate) was issued on September 21, 2006. Enclosed is a copy of five Conditional Water Licences 116413, 116414, 118858, 119030, and 120900, which authorize Cloudworks Energy Inc. to construct works and divert [water] from Lamont Creek, Stave (Upper) River, Tipella Creek, Fire Creek, and Stave (Northwest) River respectively.

Lamont Creek Project

[26] On November 20, 2006, the Deputy Comptroller issued CWL 116413 to Cloudworks on Lamont Creek, authorizing the construction of works to generate power at the Lamont Creek Generating Station. Clause (g) of CWL 116413 states:

g) This licence is appurtenant to:

1. the undertaking of the licensee to construct and operate the Upper Harrison Water Power Project approved under Environmental Assessment Certificate E06-05 (the “Certificate”) issued under the Environmental Assessment Act; and


2. the lands on which the Lamont Creek Powerhouse is to be located described as that parcel or tract of land in the vicinity of Stave River, Group 1, New Westminster District, containing approximately 122.4 hectares, Licence 239955, Land Act tenure on File 2408816.

Upper Stave Project

[27] Also, on November 20, 2006, the Deputy Comptroller issued CWL 116414 to Cloudworks on the Stave River, authorizing the construction of works to generate power at the Upper Stave River Generating Station. Clause (g) of CWL 116414 states:


1. the undertaking of the licensee to construct and operate the Upper Harrison Water Power Project approved under Environmental Assessment Certificate E06-05 (the “Certificate”), issued under the Environmental Assessment Act; and

2. the lands on which the Upper Stave River Powerhouse is to be located described as that that parcel or tract of land in the vicinity of Stave River, Group 1, New Westminster District, containing approximately 54.77 hectares, Licence 239959, Land Act tenure on File 2408815.

Tipella Creek Project

[28] Also, on November 20, 2006, the Deputy Comptroller issued CWL 118858 to Cloudworks Energy Inc. on Tipella Creek, authorizing the construction of works for the generation of power at the Tipella Creek Generating Station. Clause (g) of CWL 118858 states:


1. the undertaking of the licensee to construct and operate the Upper Harrison Water Power Project approved under Environmental Assessment Certificate E06-05 (the “Certificate”), issued under the Environmental Assessment Act; and

2. the lands on which the Tipella Creek Powerhouse is to be located described as that part of District Lot 1682, together with that parcel or tract of land in the vicinity of Tipella Creek, Group 1, New Westminster District, containing approximately 84.24 hectares, Licence 239953, Land Act tenure on File 2408474.

[29] The fourth licence associated with the Certificate, CWL 119030, authorizes water use on “Fire Creek (Fire Lake)” in the Upper Fire Creek Generating Station. This is not the same as CWL 121116 on Fire Creek, which was issued by the Regional Water Manager in 2005. Only CWL 121116 is involved in the issues of these appeals. Similarly, the fifth licence associated with the Certificate, CWL 120900, authorizing water use on the Stave River at the Northwest Stave River Powerhouse, is not part of the matters under appeal.


The Limited Partnerships

[30] On March 2, 2007, a number of Limited Partnerships were created through the registration of a Certificate of Limited Partnership with the Registrar of Companies for British Columbia:

1. Fire Creek Project Limited Partnership, Registration Number 445177-07 2. Stokke Creek Project Limited Partnership, Registration Number 445180-07 3. Tipella Creek Project Limited Partnership, Registration Number 445173-07 4. Lamont Creek Project Limited Partnership, Registration Number 445175-07 5. Upper Stave Project Limited Partnership, Registration Number 445170-07

[31] Each of the above Certificates of Limited Partnership names Harrison as the general partner. Each Certificate was amended and restated on June 7, 2007, and again on December 28, 2007.

[32] On December 28, 2007, an Amended and Restated Limited Partnership Agreement was executed for each of the Limited Partnerships. Each of those agreements name Harrison as the general partner, and they contain almost identical clauses describing the business of the partnership, the relationship between the parties, limitation of liability, units of the partnership and issue of units, amendment of the agreement, unit certificates, registration and transfer of units, capital accounts, participation in profits and losses, management of the partnership, partnership meetings, etc. The differences in the language in these agreements pertain to the naming of the relevant Limit Partnership and its associated project. Given that the agreements are almost identical, they are referred to, for convenience, as the “Limited Partnership Agreement”.

[33] On June 22, 2007, the holder of the Certificate was changed from Cloudworks to Tipella Creek Project Limited Partnership, Lamont Creek Project Limited Partnership, and Upper Stave Project Limited Partnership. This change was made in response to letters from Nick Andrews of Cloudworks, requesting that the three projects and their associated approvals be transferred to those entities in order to secure financing for the projects.

Crown land tenure

[34] Initially, licences of occupation (“LOOs”) over Crown land were obtained for the five projects from the Provincial government land agency at the time. These LOOs provided the proponents with access to the Crown land specified in each LOO for site exploration, survey and environmental data collection, and site preparation. They also provided an interest in land to support a water licence application. LOOs do not grant exclusive use and occupancy of land.

[35] After obtaining the water licences and, where necessary, the Certificate, the proponents obtained a more secure and exclusive form of tenure for the projects. In each case, the Crown raised a title and then granted the land to itself. A Crown lease was then prepared for the granted parcel, and issued under terms and conditions set by the Crown. This process was followed for each project, as explained below.


Fire Creek Project

[36] For the Fire Creek Project, LOO 238932 was issued to Cloudworks Energy Limited Partnership on July 15, 2004. LOO 238932 was assigned to Cloudworks on February 3, 2005. On May 29, 2007, LOO 238932 was assigned to Fire Creek Limited Partnership.

[37] Crown grant no. 9860/1368 was executed on August 19, 2008 for District Lot 8104, Group 1, New Westminster District, containing 0.883 hectares at Fire Creek. The grantee is the Province of British Columbia.

[38] Crown lease BB0703733 for the land covered by Crown grant no. 9860/1368 was issued on July 30, 2008. The application form for this lease indicates that Fire Creek Project Limited Partnership was the applicant. Fire Creek Project Limited Partnership was also originally named on the application form as the transferee, but this was struck out, and “Harrison Hydro Project Inc. C Inc No. 0780807” was hand written on the application and initialed twice.

[39] A state of title certificate dated April 28, 2014, states that the Registered Owner in Fee Simple of the area covered by Crown grant no. 9860/1368 is Her Majesty the Queen in Right of the Province of BC (i.e., the Crown), and lease BB0703733 is an interest in the land registered to “Harrison Hydro Project Inc., Incorporation No. 780807” (i.e., Harrison).

Stokke Creek Project

[40] For the Stokke Creek Project, LOO 238933 was issued to Cloudworks Energy Limited Partnership on July 15, 2004, and subsequently assigned to Cloudworks on February 3, 2005. On January 27, 2007, LOO 239945 was issued to Cloudworks for additional lands on Stokke Creek. On May 29, 2007, LOO 239945 was assigned to Stokke Creek Limited Partnership. The land as described in LOO 239945 was subsequently twice modified as the project was developed.

[41] Crown grant 9878/1368 was issued on September 29, 2008, for Block C, District Lot 6862, Group 1, New Westminster District, containing 0.997 hectares located at Stokke Creek. The grantee is the Province of British Columbia.

[42] Crown lease BB0730890 for the land covered by Crown grant 9878/1368 was issued on October 1, 2008. Again, the application form for this lease indicates that Stokke Creek Project Limited Partnership was the applicant. Stokke Creek Project Limited Partnership was also originally named on the application form as the transferee but this was crossed out multiple times. Also, in the space on the form for naming the transferee, the words: “…as represented by Harrison Hydro Project Inc., Inc. No. BC0780807” is not crossed out.

[43] A state of title certificate dated April 28, 2014 states that the Registered Owner in Fee Simple of the area covered by Crown grant no. 9878/1368 is Her Majesty the Queen in Right of the Province of BC (i.e., the Crown), and lease BB0730890 is an interest in the land registered to “Harrison Hydro Project Inc., Incorporation No. 0780807” (i.e., Harrison).


Tipella Creek Project

[44] For the Tipella Creek Project, LOO 239953 was issued on January 25, 2007, to Cloudworks. On May 29, 2007, the LOO was assigned to Tipella Creek Project Limited Partnership. On July 16, 2007, the LOO was modified to include an additional area of land. Subsequent modifications occurred on July 16, 2007, April 4, 2008, June 10, 2008, and January 25, 2009, all in the name of Tipella Creek Limited Partnership.

[45] Crown grant 9949/1369 was issued on February 9, 2009 for Block A, District Lot 1682, Group 1, New Westminster District, for 0.827 hectares. The grantee is the Province of British Columbia.

[46] Crown lease BB763339 for the land covered by Crown grant 9949/1369 was issued on March 16, 2009. Again, the application form for this lease indicates that Tipella Creek Project Limited Partnership was the applicant, and the transferee was originally named as “Tipella Creek Project Limited Partnership … as represented by Harrison Hydro Project Inc. (BC0780807) …”, but everything before “Harrison Hydro Project Inc. (BC0780807)” has been struck out, leaving only Harrison as the transferee.


Lamont Creek Project

[48] For the Lamont Creek Project, LOO 239955 was issued on January 25, 2010, to Cloudworks. On May 29, 2007, LOO 239955 was assigned to Lamont Creek Limited Partnership.

[49] Crown grant 30/1370 was issued on July 30, 2009 for District Lot 8116, Group 1, New Westminster District, containing 0.765 hectares located at Upper Stave (the map attached to the grant document shows DL 8116 at the confluence of Stave River and Lamont Creek). The grantee is the Province of British Columbia.

[50] Crown lease BB034726 for the land covered by Crown grant 30/1370 was issued on August 13, 2009. On the application form for this lease, Lamont Creek Project Limited Partnership is named as the applicant, and the transferee is named as “Harrison Hydro Project Inc. (BC0780807)….” Nothing has been struck out.


Upper Stave Project

[52] For the Upper Stave Project, LOO 239959 was issued on November 20, 2006, to Cloudworks. On May 29, 2007, LOO 239959 was assigned to the Upper Stave Limited Partnership.


[53] Crown grant 29/1370 was issued on July 30, 2009 for District Lot 8112, Group 1, New Westminster District, containing 6.02 hectares also located at Upper Stave. The grantee is the Province of British Columbia.

[54] Crown lease BB034727 for the land covered by Crown grant 29/1370 was issued on August 13, 2009. On the application form for this lease, Upper Stave Creek Project Limited Partnership is named as the applicant, and the transferee is named as “Harrison Hydro Project Inc., Inc. No. BC0780807….” Nothing has been struck out.


The Licensees and the events leading to the Order

[56] As stated above, CWL 121116 (Fire Creek) and CWL 121115 (Stokke Creek), issued by the Regional Water Manager on August 23, 2005, do not state a licensee on the face of the licence, but were issued to Cloudworks as licensee.

[57] Similarly, CWL 118858 (Tipella Creek), CWL 116413 (Lamont Creek) and CWL 116414 (Upper Stave) were issued by the Deputy Comptroller on November 20, 2006, to Cloudworks as licensee.

[58] Subsequently, the licensee name for the Fire Creek project and the Stokke Creek project was changed from Cloudworks to the Fire Creek Project Limited Partnership and the Stokke Creek Project Limited Partnership, respectively.

[59] Also, as stated above, the holder of the Certificate was changed from Cloudworks to Tipella Creek Project Limited Partnership, Lamont Creek Project Limited Partnership and Upper Stave Project Limited Partnership on June 25, 2007.

[60] On October 7, 2009, Chris Morgan, a Water Resource Specialist with the Ministry, wrote to Tipella Creek Project Limited Partnership, Lamont Creek Project Limited Partnership, and the Upper Stave Project Limited Partnership. In his letter, he referred to the amendment of the Certificate, and he stated that the associated water licences were appurtenant to the land on which the powerhouses were situated. Mr. Morgan went on to state as follows:

Information received in this office indicates the Crown land tenure for each of the three powerhouses: Tipella Creek GS, Upper Stave GS, and Lamont Creek GS are in the name of Tipella Creek Project Limited Partnership, Upper Stave Project Limited Partnership and Lamont Creek Limited Partnership, respectively.

In accordance with the EAC amendment and Crown Land tenure information, our records have been updated to show the holder of the following water licences as follows:

• Conditional Water Licences 118858 - Tipella Creek Project Limited Partnership


• Conditional Water Licences 116414 - Upper Stave Project Limited Partnership

• Conditional Water Licences 116413 - Lamont Creek Limited Partnership

[61] The evidence suggests that the Comptroller’s office recognized the Limited Partnerships as licensees from 2010 through 2012 inclusive, because the Limited Partnerships were invoiced separately for their water licence fees.

[62] According to an affidavit sworn by Kym Johnson, a Water Information Technician with the Ministry’s South Coast regional office, she began working with staff responsible for Land Act dispositions in approximately March 2012, to ensure consistency in the information in Ministry records related to water licences and the information related to Crown land tenures, as recorded in the Ministry’s databases. This process continued into the summer of 2013. She states that the primary purpose of the review “…was to ensure that clauses of water licences describing land appurtenant to a particular licence matched the land tenures on which the beneficial use of water diverted under that licence was occurring.” She states that she found inconsistencies related to more than a dozen water licences. She describes in general terms some of those inconsistencies, and she states: “When inconsistencies were identified for land held in the land title system, water licences were also checked for consistency with the Land Title Office records prior to any changes being made.”

[63] Ms. Johnson’s review identified that Harrison held the leases for the Crown land on which the powerhouses for the five projects are located, but the water licenses were held by the respective Limited Partnership.

[64] Meanwhile, on February 15, 2013, the Comptroller wrote to all “Water Power Licensees” advising them of a 1.1% increase in water power rentals, and stating:

The administration of Section 16(4)(c) in the Water Act Regulation is currently under review and will be clarified in a future communication. Specifically, the definition of “single licensee” in determining generation rental is being reviewed for consistency with the definitions of “licensee” (Section 1 in Water Act) and “ownership” under provincial and federal legislations. Generation rental based on generation “during the preceding calendar year” is being reviewed in the context that water rental is billed for the use of water in the current year.

[65] As a result of Ms. Johnson’s review, the Ministry initiated a number of changes to the water licences and the Ministry’s water licensing records. The Panel has summarized those changes, based on Ms. Johnson’s affidavit and other documents before the Panel, as follows:

• On December 17, 2012, the appurtenancy description in CWL 122346 (Stokke Creek) was amended by an order of the Assistant Regional Water Manager, to match the legal description in the Crown lease for the Stokke Creek power plant. On July 25, 2013, the water records were adjusted to show the name of the licensee to be Harrison.

• On March 14, 2013, water records were adjusted to show Harrison as the licensee for CWL 116413 (Lamont Creek), to reflect the name of the entity


holding land tenure for the appurtenant land. By an order dated August 15, 2013, the Assistant Regional Water Manager amended that licence by changing the appurtenancy clause in that licence to accurately reflect the land on which the powerhouse was situated, described as the parcel subject to the Crown lease held under the relevant Lands file.

• On March 14, 2013, water records were adjusted to show Harrison as the licensee for CWL 116414 (Upper Stave), to reflect the name of the entity holding land tenure for the appurtenant land. By an order dated August 15, 2013, the Assistant Regional Water Manager amended that licence by changing the appurtenancy clause of that licence to accurately reflect the land on which the powerhouse was situated, described as the parcel subject to the Crown lease held under the relevant Lands file.

• On August 15, 2013, water records were adjusted to show Harrison as the licensee for CWL 121116 (Fire Creek), to reflect the name of the entity holding the Crown land tenure for the appurtenant land.

• On August 15, 2013, water records were adjusted to show Harrison as the licensee for CWL 118858 (Tipella Creek), to reflect the name of the entity holding the Crown land tenure for the appurtenant land.

[66] Prior to Ms. Johnson’s review, CWL 118858 (Tipella Creek) was amended by an order of the Assistant Regional Water Manager on March 15, 2012, to clarify that the appurtenancy is the land on which the water is to be used at the Tipella Creek powerhouse, and to add a reference to the approximate size of the land. The reference to the Lands file was retained.

[67] To summarize, all five water licences were amended as necessary to ensure they were appurtenant to lands containing the powerhouse where the water was to be used, and to link them to the Lands file under which the Crown land lease was held. Further, the Ministry’s water licensing records were adjusted to show the licensee as the entity that held the land tenure under that Crown lease; namely, Harrison.

[68] As a result, the Ministry made adjustments to the water rentals charged for the five projects. According to the Appellants, the water rental rates based on aggregated water usage for the five projects are approximately 4.7 times higher than the rates applied if each project is assessed separately.

[69] On March 19, 2013, the Ministry sent an invoice to Harrison “c/o Innergex Renewable Energy Inc.” for water rentals for the Lamont Creek Project and the Upper Stave Project. It should be noted that, beginning in or about early 2013, much of the Ministry’s correspondence to Harrison and/or the Limited Partnerships is addressed “c/o” Innergex Renewable Energy Inc. (“Innergex”), and a representative of Innergex responded to the Ministry on behalf of Harrison and the Limited Partnerships. According to Innergex’s Annual Information Form for the year ended December 31, 2013, which was provided to the Panel, Innergex owned a 50.0024% interest in each of the five hydro projects, through its ownership of certain other business entities.


[70] In a letter dated March 28, 2013, Richard Blanchet, Innergex’s Senior Vice President, Western Region, wrote to the Ministry on behalf of the Upper Stave Project Limited Partnership and the Lamont Creek Limited Partnership. He advised that the Upper Stave Project Limited Partnership and the Lamont Creek Limited Partnership were paying the Ministry’s invoices for water rentals “under protest” because these Limited Partnerships “are separate licensees operating separate power projects and therefore the water rentals for the two projects should not be aggregated.” His letter also explains why the Limited Partnerships disagreed with the Ministry recording a transfer of CWLs 116413 and 116414 to Harrison.

[71] In a letter dated May 3, 2013, the Ministry’s Head of Water Licensing responded to Mr. Blanchet’s March 28, 2013 letter. He advised that the Comptroller has statutory authority over water power rental determinations, and was in the process of considering the matter. He also advised that “decisions on the water licences for the two projects remain with the Regional Water Manager….”

[72] In a July 25, 2013 letter addressed to Harrison, the Upper Stave Project Limited Partnership, the Lamont Creek Limited Partnership, and the Tipella Creek Limited Partnership, c/o Innergex, Mr. Morgan advised that it had come to the Ministry’s attention that Harrison held the lease for the Crown lands on which the projects’ powerhouses were located, but Harrison did not hold the related water licences. Mr. Morgan advised that, under the Water Act, licenses may only be issued to the owner of the appurtenant land.

[73] In separate letters dated August 15, 2013, the Assistant Regional Water Manager notified Mr. Blanchet that the water licences for the Lamont Creek Project and the Upper Stave Project had been amended.

[74] Also, in a letter dated August 15, 2013, Ms. Johnson notified Mr. Blanchet that the water licences for the Fire Creek Project and the Tipella Creek Project had been transferred into Harrison’s name.

[75] In a letter dated August 21, 2013, Mr. Blanchet wrote to Mr. Morgan on behalf of Harrison, the Upper Stave Project Limited Partnership, the Lamont Creek Limited Partnership, and the Tipella Creek Limited Partnership, requesting that the water licences for those projects be held by the respective Limited Partnership. He advised that the powerhouse leases associated with the power projects are registered in Harrison’s name “in trust for the benefit of” the respective Limited Partnership, “solely because the BC land title system does not permit the registration of an interest in land in the name of a limited partnership.” He submitted that the respective Limited Partnership is the “beneficial owner” of each powerhouse lease.

[76] In a separate letter dated August 21, 2013, Mr. Blanchet wrote to the Comptroller on behalf of Harrison and all of the Limited Partnerships, requesting a meeting with the Comptroller before he made a formal decision on the transfer of the five water licences.

[77] On October 11, 2013, legal counsel for Harrison and the Limited Partnerships provided the Comptroller with a written submission in support of their argument that the five water licences should be held by the respective Limited Partnership.


The Order and the appeals

[78] On December 17, 2013, the Comptroller issued the Order. The key portions of the Order state as follows:

… I conclude that waterpower rental being billed to [Harrison] as a single licensee for the five hydropower projects in question is in accordance with the Water Act and Water Act Water Regulation. I concur with the decision from the South Coast Regional Office to transfer the water licences for these projects to [Harrison] based on the land tenures as recorded.

In administering s. 16(4)(c) in the Water Act Water Regulation, it is my responsibility and authority to apply the “single licensee” criterion in billing waterpower rental. It is my understanding that a partnership, as an unincorporated business association, is not a distinct legal entity. A determination of whether to bill two different partnerships as two separate licenses must be made in conjunction with other pertinent facts. A water licence is appurtenant to the land where the water is beneficially used, in this case the powerhouse. The land tenures for these projects are issued under the Land Title Act, and the definition of “owner” under that legislation must be taken into account.

[79] On January 15, 2014, the Board received the Appellants’ notice of appeal.

[80] The Appellants submit that:

• The Comptroller erred by determining that the Water Act and the Regulation required that the water licences for each of the five hydro projects be transferred from the Limited Partnership that owned that particular hydro project to Harrison.

• The Comptroller inappropriately interpreted the terms “owner” and “licensee” under the Water Act by reference to the definition of owner under the Land Title Act, R.S.B.C .1996, c. 50.

• The Comptroller inappropriately relied on an artificial legal construct that the Comptroller describes as the “single licensee criterion” in administering section 16(4)(c) of the Regulation so as to apply higher rental rates based on the aggregate total output of the hydro projects combined.

[81] The Respondent characterizes the issues somewhat differently, and submits as follows:

• The core issue in this appeal is whether for the purposes of section 16(4)(c) of the Regulation, the five water power projects should be viewed as being owned or operated by a single licensee, that is by Harrison, or whether each project should be viewed as owned/operated by the Limited Partnership associated with it.

• If Harrison is found to be the owner/operator of all of the developments, section 16(4)(c) requires the rentals to be based on the combined output of all the developments.


• The Board lacks jurisdiction to alter who is the licensee in relation to the water licences because the transfer of the water licences into the name of Harrison occurred by operation of the law, pursuant to section 16 of the Water Act.

• In the alternative, if the Board finds that the transfer of the water licences occurred as a result of an appealable order, the Board has no jurisdiction to hear an appeal of the “decision” because the notice of the transfer occurred at the latest in August 2013, and this appeal was not commenced until January 2014, long after the 30-day appeal period had expired.

ISSUES

[82] In the Order, the Comptroller makes two statements that focus the issues for the Panel. Those statements are as follows.

1. “I conclude that waterpower rental being billed to [Harrison] as a single licensee for the five hydropower projects in question is in accordance with the Water Act and Water Act Water Regulation.”

2. “I concur with the decision from the South Coast Regional Office to transfer the water licences for these projects to [Harrison] based on the land tenures as recorded.”

[83] The Panel has considered the issues in the following manner. Each statement must be examined to see if it is an appealable order under the Water Act. This issue must be dealt with because if an “order” within the meaning of the Water Act was not appealed within the 30-day appeal period, the Board has no jurisdiction over the appeals, and there is no need to decide the issues. If it is found to be an appealable order, the Panel must decide if the Comptroller erred in making this decision. Thus, there are four issues to be decided: for each statement the Panel must consider the question of whether the statement is an order that can be appealed and the question of whether the order was properly made. For reasons that will be obvious from the discussion below, the matter of the Comptroller’s concurrence with the regional office will be examined first.

1. Is the Comptroller’s concurrence with the regional office’s “transfer” of the water licences to Harrison an appealable “order”, and if so, was the order appealed within the 30-day appeal period required by section 92 of the Water Act?

2. If so, based on the relevant provisions in the Water Act, and the facts in this case, should the water licences for the five hydroelectric projects be in the name of Harrison?

3. Is the Comptroller’s conclusion regarding water rental billing an appealable “order”, and if so, was the order appealed within the 30-day appeal period required by section 92 of the Water Act?

4. If so, did the Comptroller properly apply the Water Act and the Regulation to determine the rental rates for the projects?


RELEVANT LEGISLATION

[84] The following sections of the Water Act are relevant to these appeals. Other relevant legislation is set out where it is referred to in this decision.

Definitions

1 In this Act:

…

“licensee” and “holder of a licence” mean an owner of any land, mine or undertaking with respect to which a licence is issued under this or a former Act;

… “order” includes a decision or direction, whether given in writing or otherwise; “owner” means a person entitled to possession of any land, mine or undertaking

in British Columbia, and includes a person who has a substantial interest in the land, mine or undertaking;

… “person” includes a firm, association or syndicate; …

Who may acquire licences

7 A licence for any one, 2 or 3 of the purposes defined in section 1 may be issued by the comptroller or the regional water manager to any of the following:

(a) an owner of land or a mine;

…

Purpose, precedence and appurtenancy of licences

13 The comptroller or regional water manager must ensure that every licence issued on or after June 21, 1995

…

(c) specifies as the appurtenancy of the licence an appurtenancy that

(i) is located entirely in British Columbia,

(ii) consists of land, a mine or an undertaking, or any combination of those things, and

(iii) is adequately described in the licence.

Transfer of licence, approval or permit

16 (1) A licence, approval or permit that is made appurtenant to any land, mine or undertaking and any rights and obligations granted and imposed under the licence, approval or permit pass with a conveyance or other disposition of the land, mine or undertaking.

(2) A person conveying or otherwise disposing of land, a mine or an undertaking to which a licence is appurtenant, or in respect of which an approval or permit was issued or, in the case of a transmission of land, a


mine or an undertaking to the personal representative or other person representing the owner, the personal representative or other person must give written notice of the conveyance or other disposition to the comptroller or regional water manager.

Amendment and substitution of licence or approval

18 (1) Subject to subsection (1.1), on notice to all persons whose rights would be injuriously affected, and after consideration of any objections filed and after notifying the objectors of his or her decision, the comptroller or the regional water manager may amend a licence to do any of the following:

…

(e) correct an error in the licence;

…

Transfer of appurtenancy

19 (1) On the application of the holder of a licence, approval or permit and on compliance by the holder and by the proposed transferee with the comptroller’s or the regional water manager’s directions as to giving notice, the comptroller or the regional water manager, on the terms he or she considers proper, may

(a) transfer all or part of the rights and obligations granted and imposed under the licence, approval or permit from the holder to the proposed transferee, and

(b) issue a new licence, approval or permit to the transferee or transferor, or both, and determine the appurtenancy of the licence, approval or permit.

…

Appeals to Environmental Appeal Board

92 (1) Subject to subsections (2) and (3), an order of the comptroller, the regional water manager or an engineer may be appealed to the appeal board by

(a) the person who is subject to the order,

(b) an owner whose land is or is likely to be physically affected by the order, or

(c) a licensee, riparian owner or applicant for a licence who considers that their rights are or will be prejudiced by the order.

…

(4) The time limit for commencing an appeal is 30 days after notice of the order being appealed is given

(a) to the person subject to the order, or

(b) in accordance with the regulations.


SUMMARY OF EVIDENCE

[85] Because this appeal proceeded by means of written submissions, the evidence was submitted in the form of affidavits with exhibits.

[86] The Appellants provided evidence in the form of affidavits sworn by:

• Matthew Grant Kennedy, Professional Biologist and Vice-President – Environment, Western Region, Innergex, formerly employed by Cloudworks. Mr. Kennedy provided the bulk of the Appellants’ evidence in the form of business records regarding the ownership of the hydro projects, and copies of correspondence with government agencies covering the land tenure and water licence processes for the hydro projects.

• Carolyn Rimes, Legal Assistant, McCarthy Tétrault LLP. Ms. Rimes provided search results from a Water Licence Query on the Provincial water licence database listing information for 769 water licences and water licence applications in the Power-General category.

• Edelina Macaspac, Legal Assistant, McCarthy Tétrault LLP. Ms. Macaspac provided copies of correspondence to and from various representatives of the hydro projects (including the Limited Partnerships) and various government representatives (including the Respondent). In addition, Ms. Macaspac provided correspondence related to a Freedom of Information (“FOI”) request, and included the records obtained regarding the Comptroller’s conclusions and the records he relied upon in making his decision.

[87] The Respondent provided evidence in the form of a Book of Documents, including:

• the December 17, 2013 letter from the Comptroller, with the Order; • copies of the relevant water licences, any amending orders, the Crown lease,

Crown grant, and state of title certificate for each of the five hydro projects; and

• environmental assessment documents and other correspondence.

[88] The Respondent also provided an affidavit sworn by:

• Kym Johnson, Water Information Technician, Water Management Group, South Coast, Ministry of Forests, Lands and Natural Resource Operations. Ms. Johnson described her review comparing the appurtenant land as described on water licences to the land tenure recorded for that land as recorded in the Crown land database. In addition, she described the changes that were made to the Appellants’ water licences as a result of her review.

[89] When the Appellants provided their rebuttal written Submission, they requested permission to enter new evidence in the form of a second affidavit sworn by Ms. Rimes. The Respondent did not object to the admission of the new evidence. Accordingly, the Panel admitted Ms. Rimes’ second affidavit:

• Carolyn Rimes #2. Ms. Rimes provided search results from a Water Licence Query on the Provincial water licence database listing information for 17 water licences and water licence applications in the “Churches/Comm Halls”


category, as well as a copy of the Water Licence Query search form. In addition, she provided a copy of a letter from counsel for the Respondent to counsel for the Appellants, and a copy of one of the enclosures to the letter that included unredacted versions of some documents formerly received under the FOI request, as presented in the affidavit of Ms. Macaspac.

DISCUSSION AND ANALYSIS

1. Is the Comptroller’s concurrence with the regional office’s “transfer” of the water licences to Harrison an appealable “order”, and if so, was the order appealed within the 30-day appeal period required by section 92 of the Water Act?

The Parties’ submissions

[90] The Appellants submit that they are not asking the Board to order a transfer of the water licences; rather, they seek an order rectifying the Order, because the changes to the water licences are the product of administrative decision-making, and not the operation of the law. The Appellants submit that there was no conveyance or disposition of land to trigger section 16 of the Water Act. Specifically, they submit that registration of the Crown leases in Harrison’s name, for the benefit of the Limited Partnerships, does not constitute a conveyance or disposition because the beneficial and substantial interest in the land remained with the Limited Partnerships.

[91] The Appellants note that the Comptroller has the power to determine the appurtenancy of a water licence under section 12 of the Water Act, and the power to amend a water licence to correct an error in the licence under section 18. The Appellants submit that the Order is properly characterized as an exercise of the Comptroller’s power to correct an error in a water licence, after the perceived error was identified by Ministry staff in the regional office.

[92] The Panel notes that the Comptroller is also empowered to amend or revoke orders of staff from regional offices. Section 87 of the Water Act states:

87 (1) The comptroller, at any time on notice, may amend or revoke any order of the comptroller, a regional water manager, an engineer, an officer, the Water Board or the Board of Investigation.

[93] In addition, the Appellants submit that the appeals were commenced in time, as they were filed within 30 days of the Order.

[94] The Respondent submits that the Order is the subject of the appeals, and it is an appealable decision under the Water Act. In general, the Respondent characterizes the Order as a determination of water rentals payable under the Regulation.

[95] However, regarding remedies, the Respondent submits that the Appellants appear to be asking the Board to order that the water licences be transferred to the Limited Partnerships, and the Respondent argues that water licences may only be transferred by means of a conveyance or disposition of appurtenancies under section 16 of the Water Act, or a transfer of appurtenancies under section 19 of the


Water Act. The Respondent maintains, therefore, that the Board has no jurisdiction to order a transfer under section 16, because there was no “order” or “decision” to transfer the water licences. The Respondent submits that transfer of the licences to Harrison occurred by operation of the law pursuant to section 16 of the Water Act. No “order”, “decision” or other action was required by the Comptroller or the Regional Water Manager to give effect to the transfer of the water licences to Harrison, and the changes were simply “record keeping” adjustments to the Ministry’s administrative records to reflect the records of land ownership in the Land Title Office.

[96] Further, the Respondent argues that the Comptroller (and thus the Board) may only transfer appurtenancies under section 19 of the Water Act upon receipt of an application to do so. Therefore, the Board lacks the jurisdiction to alter who is the licensee in relation to the five water licences.

[97] Alternatively, the Respondent submits that, if the Board finds that the transfer of the water licences occurred as a result of an appealable order, the Board has no jurisdiction to hear an appeal of that “decision” because the notice of the transfer occurred in August 2013 at the latest, and these appeals were not commenced until January 2014, long after the 30-day appeal period expired.

The Panel’s findings

[98] In the Order, the Comptroller states that he concurred “…with the decision from the South Coast Regional office to transfer the water licences for these projects….” The Panel finds that those words of the Comptroller do not constitute an appealable “order” under section 92(1) of the Water Act. The Panel finds that the Comptroller is referring to a matter of record keeping, to make the water licences reflect the change in licensee that happened by operation of section 16(1) of the Water Act. For reasons discussed below, the Panel finds that this is what has happened in this case. Furthermore, the Panel does not consider the actions taken by the regional office staff to be an appealable order, but even if it were, no appeal of that order was made within the 30 days required by section 92(4) of the Water Act.

[99] The Appellants submit that the Comptroller has the power to determine the appurtenancy of a water licence under section 12 of the Water Act. The Panel finds that the appurtenancies of the licences are correctly determined under section 12 as the land on which the powerhouse is to be constructed. The concept of “appurtenancy” does not refer to the licensee; rather, as indicated in section 13(c) of the Water Act, it refers to the land, mine or undertaking that the licence is legally attached to. The Panel finds that the Comptroller’s order does not contain a determination of appurtenancy under section 12(3) of the Water Act.

[100] The Appellants submit that the Order should be characterized as an exercise of the Comptroller’s power under section 18(1)(e) of the Water Act to correct a perceived error in a water licence, after the alleged error was noticed by regional staff. Although section 18(1)(e) gives the Comptroller the authority to amend a licence “to correct an error in the licence”, the Panel finds that there was no error in the licences in this case. In many instances, such as CWL 121116 (Fire Creek) and CWL 121115 (Stokke Creek) issued by the Regional Water Manager, no licensee is


named on the face of the licence. The licensee is the owner of the appurtenant land and, under section 16, as discussed below, the licence passes with a conveyance or other disposition of the land.

[101] The Panel also finds that this was not a transfer under section 19 of the Water Act, as this can only occur upon receipt of an application from the holder of a licence, approval or permit, and there was no such application in the present case.

[102] The Panel finds that the Comptroller erred in characterizing the actions of the staff in the regional office as a “decision” to “transfer” the water licences. Section 16(1) of the Water Act states that a water licence which is appurtenant to any land, mine or undertaking will “pass with a conveyance or other disposition of the land, mine or undertaking.” The Panel finds that, although it is not expressly stated in section 16(1), the language in section 16(1) implies that the Ministry need only note the change of licensee in the Ministry’s records upon receipt of the written notification that the licensee or their representative is obligated to provide under section 16(2). No order or action by a statutory decision-maker is required for a licence and its associated rights and obligations to “pass with a conveyance or other disposition of the land…”. In the present case, the alleged error in the name of the licensee in the Ministry’s records and the licences (if a licensee was named in the licence) stems from the licensee’s failure to provide notice under section 16(2). The Ministry only noticed the inconsistency after the regional office’s review of the records.

[103] The Appellants assert that there was no “conveyance or disposition” of land from the Limited Partnerships to Harrison. However, the Panel disagrees. When the five water licences were issued, they were each made appurtenant to an area of land held under a licence of occupation, as listed in a file in the Crown Lands agency. All of the water licences were made appurtenant to land where the powerhouses were to be situated, and all made reference to a file number with the agency responsible for administering the Land Act.

[104] After the Limited Partnerships were formed, an “Assignment/Assumption” agreement was made for each project, assigning the relevant licence of occupation to each Limited Partnership formed for that project. Those agreements were all made on May 29, 2007, and registered with the agency responsible for the Land Act.

[105] Section 16(2) of the Water Act requires “…a person to give written notice of the conveyance or other disposition to the comptroller or regional water manager.” Cloudworks notified the Ministry’s regional office of their assignment of the Crown lands files for the projects to Harrison, for the benefit of the Limited Partnerships. By 2009, each of the Limited Partnerships was listed as the licensee for the water licence for their respective project. The Appellants agree that this was done, and they submit that, as a result of the conveyance of the licences of occupation, and by the action of section 16(1) of the Water Act, the water licence for each of the projects was transferred to each of the Limited Partnerships.

[106] Subsequently, the Crown granted tenure, which it initially held for itself, for the appurtenant lands. Crown land leases for all five projects were then issued. Each Crown lease created an interest in the land registered to Harrison for the lands


where each powerhouse was located, and which was the appurtenant land for the water licences.

[107] At that time, no person gave written notice of the conveyance or other disposition to the Comptroller or the Regional Water Manager. Neither “conveyance” nor “disposition” of land is defined in the Water Act, nor would this be expected as these are Land Act transactions. Section 1 of the Land Act defines “disposition” as follows:

“disposition” means the act of disposal or an instrument by which the act of disposal is effected or evidenced, or by which an interest in Crown land is disposed of or effected, or by which the government divests itself of or creates an interest in Crown land;

[108] The Panel finds that the definition of “disposition” found in the Land Act is applicable in interpreting and applying section 16 of the Water Act for the purposes of the present appeals, given that the lands in this case are Crown lands subject to the Land Act. These lands where the powerhouses are located are subject to tenures issued under the Land Act, authorizing the occupation and use of those Crown lands in order to make beneficial use of water pursuant to the water licences. All of the subject water licences were clearly and intentionally made appurtenant to the land on which the powerhouse is situated, as can be seen in clause (g) of each of the water licences.

[109] Applying this definition of “disposition” to the facts in the present case, the Panel finds that there was a conveyance or disposition of the appurtenant lands as contemplated in section 16 of the Water Act when the Crown grants were made over the appurtenant land, and the licences of occupation were replaced by Crown land leases registered in the name of Harrison.

[110] For the reasons provided above, the Panel finds that a conveyance or disposition of the appurtenant lands did occur with the creation of the Crown grants and the subsequent registration of the Crown leases in the name of Harrison, which required a transfer of the water licences to Harrison by operation of the law pursuant to section 16 of the Water Act.

[111] For all of the reasons provided above, the Panel finds that the Order does not contain an appealable order, decision or direction under the Water Act with respect to the naming of Harrison as the licensee in the subject licences. The Comptroller’s statement “I conclude that waterpower rental being billed to [Harrison] as a single licensee for the five hydropower projects in question is in accordance with the Water Act and Water Act Water Regulation” simply indicates that he concurred with the regional office’s correction of the Ministry’s internal records to reflect the operation of section 16(1) of the Water Act.

[112] Given the Panel’s findings on Issue 1, the Panel need not address Issue 2. However, the Panel has addressed Issue 2 out of an abundance of caution and for greater certainty.


2. Based on the relevant provisions in the Water Act, and the facts in this case, should the water licences for the five hydroelectric projects be in the name of Harrison?


[113] The Appellants assert that the Comptroller erred by determining that the Water Act and the Regulation required that the water licences for each of the five hydro projects be transferred from the Limited Partnership that owned that particular hydro project to Harrison. Further, the Appellants submit that the Comptroller inappropriately interpreted the terms “owner” and “licensee” under the Water Act by reference to the definition of “owner” under the Land Title Act.

[114] Section 1 of the Land Title Act defines “owner” as follows:

Definitions

1 In this Act:

…

“owner” means a person registered in the records as owner of land or of a charge on land, whether entitled to it in the person's own right or in a representative capacity or otherwise, and includes a registered owner;

[115] The Appellants argue that the Comptroller erred because: (1) limited partnerships are entitled to hold water licences; and (2) the Limited Partnerships continue to be the rightful licensees.

[116] Specifically, the Appellants submit that limited partnerships, through their general partner(s), are entitled to enter into contracts, own property, and incur liability. The fact that a partnership is not generally recognized as an entity distinct from its partners does not preclude a partnership from doing such things. The Appellants also submit that a partnership may be recognized as a distinct entity in certain circumstances, and they refer to certain judicial decisions in support of that proposition.

[117] In addition, the Appellants refer to the Partnership Act, R.S.B.C. 1996, c. 348. They submit that the Crown leases in this case fall within that Act’s definition of “partnership property”, and that Harrison is deemed under that Act to be the holder of legal title to those leases in trust and as agent for the Limited Partnerships.

[118] The Appellants note that the Limited Partnership Agreement signed between Harrison and the Limited Partnerships in February 2007 states that Harrison “will hold legal title to the Partnership Property for the benefit of the Partnership…” and Harrison “or [an] other Person holding legal title, as the case may be, will execute one or more declarations of trust thereof in favour of the Partnership….” Also, by the Bare Trust Agreements made on March 3, 2007, Harrison agreed to hold legal title to the property of each Limited Partnership as bare trustee, for the use and benefit of the particular Limited Partnership. Given those arrangements, the Appellants submit that Harrison has no beneficial interest in the property of the Limited Partnerships. They further submit that Harrison is the registered owner for


the Crown leases simply because the BC Land Title Office has a policy of not accepting, for filing, an interest in land in the name of a limited partnership. The Appellants submit that, to “work around” this policy, the “standard practice” is to register the property in the name of a nominee company as a bare trustee on behalf of a limited partnership, and this is why the Crown leases for the powerhouse lands were registered in Harrison’s name at the Land Title Office. The Appellants maintain that Harrison holds legal title to the lands solely in a representative capacity, as agent, bare trustee, and nominee for the Limited Partnerships which own a 99.99% beneficial interest in the Crown leases for the lands.

[119] The Appellants also submit that the granting of Crown leases over the powerhouse lands, for which the Limited Partnerships held the previous licences of occupation, did not involve a “conveyance or other disposition” of land for the purposes of section 16 of the Water Act.

[120] The Appellants submit that, since the date when the Limited Partnerships acquired ownership of the projects, including the land where the works were constructed, the Limited Partnerships have not conveyed or disposed of the land or the undertaking that the water licences are appurtenant to, and therefore, the Limited Partnerships have not ceased to be the rightful holders of the water licences.

[121] The Appellants submit that the granting of Crown leases over areas of land for which the Limited Partnerships held licences of occupation resulted in the Limited Partnerships being granted a longer and more secure tenure. It did not involve the Limited Partnerships “conveying or otherwise disposing” of any interest in the land to Harrison, and therefore, there was not a transfer of the water licences under section 16 of the Water Act.

[122] The Appellants also submit that partnerships, including limited partnerships, can hold water licences under the Water Act. They submit that section 7 of the Water Act states that a licence may be issued to an “owner of land”, and section 1 of that Act defines “owner” as including “a person who has a substantial interest in the land….” Moreover, the Water Act defines “person” as including “a firm, association or syndicate”. On that basis, the Appellants submit that the Water Act expressly contemplates that partnerships, as “firms”, may hold water licences. In particular, the Appellants argue that each Limited Partnership, as a firm, fits the definition of “owner”, because: (i) each is a “person entitled to possession” of the leased land under the Crown leases, which grant rights of possession to those lands to Harrison as agent for the Limited Partnerships; and (ii), each has a “substantial interest” (i.e., a 100% beneficial interest) in the Crown lease land.

[123] In addition, the Appellants submit that there is no legal justification for the Comptroller to apply the definition of “owner” under the Land Title Act, as opposed to applying the definition of “owner” under the Water Act.

[124] The Appellants submit that the definition of “owner” under the Water Act is not ambiguous, and therefore, it should be applied in accordance with its plain and ordinary meaning. There is no basis to require an interpretation of “owner” under the Water Act by reference to a defined term in other legislation. If the legislature


had intended the definition of “owner” under Land Title Act to apply to the Water Act, it would have not used different statutory wording in the Water Act.

[125] The Respondent submits that the Order was based on the Comptroller’s finding that Harrison is the registered owner in the Land Title Office of the interests in land to which the five water licences are appurtenant. Specifically, Harrison is registered as holding the leases for the Crown land where the powerhouses are located, which is where the water is being beneficially used under the water licences.

[126] The Respondent further submits that the Comptroller was correct in refusing to record the Limited Partnerships as the licensees, because:

1) the general partner, Harrison, is the only entity with the authority to manage, possess, occupy or control partnership property, including the appurtenant leases; and

2) the transfer of the water licences to Harrison occurred by operation of law pursuant to section 16 of the Water Act.

[127] The Respondent argues that partnerships are not legal entities separate from their partners, and property held in the name of a partnership is owned by one or more of the partners for the benefit of the partners. While partners may hold property or rights for partnerships, partnerships themselves are not legal entities capable of ownership. Consequently, the true owner of partnership property is one or more of the partners. In the case of limited partnerships, the general partner usually owns partnership property. In support of those submissions, the Respondent refers to various judicial decisions, as well as Halsbury’s Laws of Canada (1st. ed., 2009), which states as follows at para. HPJ-70:

The concept that neither a general, nor a limited partnership, is a legal entity has long been accepted by Canadian and English law and is likely the reason why a limited partnership is required by law to have a general partner through which it normally acts.

[128] In the present case, the Respondent submits that Harrison became the owner of the appurtenant interest in the Crown lease lands, either: (i) when Cloudworks assigned the licences of occupation into the names of the Limited Partnerships, as Harrison is the partner with title to and possession of partnership property; or (ii) when the Province disposed of the Crown leases and identified Harrison as the transferee. Moreover, the Respondent submits that Harrison is the only entity with the authority to manage, possess, occupy or control partnership property, including the Crown lease lands that are appurtenant to the water licences.

[129] Turning to the relevant provisions of the Water Act, the Respondent submits that the inclusion of the word “firm” in the definition of “person” does not indicate that partnerships, as distinct from their partners, should be considered “owners” of land or undertakings, such that they may be “licensees” under section 7 of the Water Act.


[130] The Respondent’s submissions include a review of the BC Partnership Act’s definitions of “firm” and “partnership property”, as well as sections 2 and 23 of that Act. The Respondent submits that those statutory provisions show that:

• a firm is the partners; • the partnership is simply a relationship between legal entities; • “partnership property” does not include property owned by a

partnership distinct from partners, as this is simply not possible under the law; and

• partnership property must be held “by the partners”.

[131] The Respondent submits that the inclusion of “firm” in the definition of “person” in the Water Act, and the inclusion of “person” in the definition of “owner,” simply means that a collectivity of partners can be owners. It in no way suggests that a partnership, distinct from its partners, can own an appurtenancy.

[132] Regarding whether a beneficial interest in land qualifies as a “substantial interest” for the purposes of the definition of “owner”, the Respondent argues that, even where an appurtenant interest in land is held in trust, the scheme of the Water Act requires that the legal holder of the trust property (i.e., Harrison), as the party in possession and the registered owner, be considered the “owner.”

[133] The Respondent submits that the Board has consistently interpreted “owner” in the Water Act to include a possessory element. In support of those submissions, the Respondent refers to several previous decisions of the Board, including the following finding at para. 86 of Chief Kathi Dickie v. Assistant Regional Water Manager (Decision No. 2012-WAT-013(a), issued November 6, 2012) [“Chief Kathi Dickie”]:

The Panel agrees with the Manager that the definition of “owner” is qualified by the requirement of possession. Specifically, the Panel finds that the phrase “substantial interest in the land” means a substantial interest in “the land” to which the person is entitled to possession. …

[134] The Respondent submits that only Harrison has a right of possession to the hydro projects, and entitlement to possession is essential for a person to be an “owner” for the purposes of the Water Act. The Respondent submits that neither partnership law principles, the Limited Partnership Agreements, nor the Bare Trust Agreements between Harrison and the Limited Partnerships give any possessory rights to any person other than Harrison. In support of those submissions, the Respondent refers to clause 3.3 of the December 2007 Limited Partnership Agreement:

3.3 Limitation on Authority of Limited Partners No Partner except the General Partner will:

(a) be or purport to be entitled to take part in the management or control of the Business of the Partnership;

(b) be or purport to be entitled to make any commitment on behalf of or otherwise obligate or bind the Partnership;


(c) otherwise than by voting on a resolution of the Partners, be or purport to be entitled, as such, to make any commitment on behalf of or otherwise obligate or bind any other partner; or

(d) be capable of being party to any litigation involving a claim by or against the Partnership other than in respects of its rights and obligations as a Limited Partner.

[135] The Respondent submits that even if a substantial interest short of a possessory interest were sufficient to find a person to be an “owner” within the context of the definition of “licensee”, those interests must include some right of occupation or right to manage and control. A purely beneficial interest is insufficient.

[136] The Respondent submits that the words “substantial interest” must be interpreted “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”, as stated in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27 [“Rizzo & Rizzo”]. The Respondent submits that “interpreting “owner” as being or including a person with merely a beneficial interest (such as the Limited Partnerships), who has no authority “to take part in the management or control of the Business” (as stated in clause 3.3(a) above), and thus interpreting “licensee” as being that person with the solely beneficial interest, is contrary to the scheme of the Water Act. For example, it is incompatible with section 21 of the Water Act, which requires licensees to exercise reasonable care to avoid damaging land, works and property. A person with no rights to possess, control or manage works would have no ability to avoid damage.

[137] In reply, the Appellants submit that a more reasonable interpretation is that the word “firm” is included in the definition of “person” precisely for the purpose of altering the common law to further the objectives of the Water Act. Although the general rule is that a partnership cannot hold an interest in land in its own name, the word “firm” in the definition of “person” creates a statutory exception to the general rule. This statutory exception allows a partnership to hold a water licence, even if it cannot hold the requisite interest in the appurtenant land.

[138] In addition, the Appellants submit that, although the Limited Partnerships do not have title to the property, they enjoy the “normal” incidents of owning property except for nominal title. Specifically, the Appellants submit that the Limited Partnerships have possession of the land by virtue of the law of agency, the Limited Partnership Agreements, and the Bare Trust Agreements. Also, although Harrison manages the business of the Limited Partnerships, the Limited Partnerships have possession and control of partnership property. Although Harrison has legal title to the appurtenant lands, the Limited Partnerships can replace Harrison and require Harrison to convey and transfer the property to a new general partner.


[139] A key issue in these appeals is whether the Limited Partnerships fall within the definition of “owner” in the Water Act, such that they meet the definition of “licensee” and “holder of a licence” in section 1 of the Water Act, and may, therefore, hold a water licence in accordance with section 7 of the Water Act.


Section 7 lists the categories of persons and certain other entities that may hold a water licence. Section 7(a) is relevant to the present case, as it states that a licence may be issued to “an owner of land or a mine”. Dismissing mines as irrelevant to this appeal, it is clear that the water licences in the present case can only be acquired and held by an “owner” of land.

[140] While the Land Title Act defines “owner” as “a person registered in the records as owner of land or of a charge on land, whether entitled to it in the person’s own right or in a representative capacity or otherwise, and includes a registered owner”, the Water Act defines an owner as “a person entitled to possession of any land, … in British Columbia, and includes a person who has a substantial interest in the land….” The Panel finds that the definition of “owner” in section 1 of the Water Act, which is broader than the definition of “owner” in the Land Title Act, clearly applies for the purposes of interpreting and applying the Water Act.

[141] The first part of the Water Act’s definition of “owner” refers to a person who is “entitled to possession of land”. Black’s Law Dictionary defines “entitle” as follows:

In its usual sense, to entitle is to give a right or legal title to.

[142] Based on this dictionary definition, the Panel recognizes that the phrase “entitled to possession” in the Water Act’s definition of “owner” may be satisfied by holding title; i.e., registration in the Land Title Office. However, the Board has previously held that the definition of “owner” in the Water Act is not restricted to persons registered as owners of land or of a charge on land. In Chief Kathi Dickie, the Board held at para. 95 that the Water Act’s definition of “owner” “includes persons who are in possession of, or occupy, land.” In that case, the Board found that a First Nation with treaty rights to hunt, trap and fish on defined areas of land was an “owner” of that land for the purposes of the Water Act, because the First Nation’s treaty rights were legally recognized and protected interests in the land, and the First Nation was entitled to possession of that land, insofar as its members were entitled to physically occupy the land on a continuing basis for the purpose of exercising the treaty rights. It did not matter that the First Nation’s interests were not registered with the Land Title Office. The Panel agrees with that reasoning, and finds that the key word in the definition of “owner” is “possession”. Based on the dictionary definition of “entitle”, entitlement to possession may be through “a right or legal title” [emphasis added]. Thus, a person may have a right to possess land even if they do not have title to the land.

[143] There is a further part to the Water Act’s definition of “owner”. It is clear from the definition of “owner” in the Water Act that it only includes “persons”.

[144] Section 1 of the Water Act defines “person” as “includes a firm, association or syndicate”. Black’s Law Dictionary defines “firm” as follows:

Business entity or enterprise. Unincorporated business. Partnership of two or more persons.

[145] The Concise Oxford Dictionary defines a “firm” as follows:

Partners carrying on business.


[146] The Panel finds that these dictionary definitions of “firm” clearly include a partnership, including a limited partnership. The Panel also finds that these dictionary definitions are consistent with the BC Partnership Act, which defines “firm” as “a collective term for persons who have entered in partnership with one another”.

[147] For these reasons, the Panel finds that a limited partnership is not barred from acquiring a water licence if, on the facts, it can qualify as a licensee under the Water Act by being an owner entitled to possession of the appurtenant land. The question of whether the Limited Partnerships may hold the water licences, based on the facts in this case, is further examined below. Based on all of these considerations, the key question at this stage of the analysis is whether a limited partnership is capable of being entitled to possession of the lands appurtenant to a water licence.

[148] Before turning to that question, the Panel also has considered the plain meaning of the phrase “and includes a person who has a substantial interest in the land” in the Water Act’s definition of “owner”. This is relevant because the Appellants assert that the Limited Partnerships hold the beneficial interest in the Crown lands where the powerhouses are located and the water is used, and Harrison holds no beneficial interest in the property of the Limited Partnerships. They assert that Harrison, as the general partner, only holds the Crown leases as a bare trustee, nominee, and agent for the Limited Partnerships. The Panel notes that the phrase “substantial interest in the land” is preceded by the phrase “and includes”, which means that a “substantial interest in the land” is an interest that entitles the person to possession of the land. Thus, entitlement to possession of the land that is appurtenant to a water licence is essential to the ability to hold a water licence. The Panel notes that the Board reached a similar conclusion in Chief Kathi Dickie at para. 86, where the Board stated as follows:

… the definition of “owner” is qualified by the requirement of possession. Specifically, the Panel finds that the phrase “substantial interest in the land” means a substantial interest in “the land” to which the person is entitled to possession.

[149] The Panel has also considered the plain meaning of “interest” and “substantial”, as follows. Black’s Law Dictionary defines “interest” as follows:

The most general term that can be employed to denote a right, claim, title, or legal share in something. In its application to lands or things real, it is frequently used in connection with the terms “estate”, “right”, and “title.” More particularly it means a right to have the advantage accruing from anything; any right in the nature of property but less than title.

[150] Black’s Law Dictionary defines “substantial” as follows:

Of real worth and importance of considerable value; valuable. Belonging to substance; actually existing; real; not seeming or imaginary; not illusive; solid; true; veritable.


[151] Based on the dictionary definitions of the word “substantial”, it is unclear whether the Limited Partnerships’ beneficial interest in the land covered by the Crown leases qualifies as a “substantial interest in the land”. However, as discussed above, an entitlement to possession of the land in question is a key requirement of the Water Act’s definition of “owner”. The “substantial interest” referred to in the definition of “owner” must be a substantial interest in land to which the person is “entitled to possession”. Moreover, the Panel finds that the phrase “includes a person who has a substantial interest in the land” must be interpreted not only based on the plain meaning of the words, but “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of” the Legislature: Rizzo & Rizzo. Thus, other provisions of the Water Act that relate to licensing must be considered, and are discussed below.

[152] The Panel notes that section 5(c) of the Water Act entitles a licensee to “construct, maintain, and operate the works authorized under the licence…”. Indeed, it is an offence for a person to interfere with the works of a licensee (section 93(2)(i) of the Water Act). Also, a licensee must exercise reasonable care to avoid damaging land, works, trees or other property… (section 21(1) of the Water Act). A holder of a licence for power purpose may fell and remove any tree and remove any rock or other thing that endangers the holder’s works (section 21(2) of the Water Act). The Panel finds that these rights and obligations of a licensee can only be carried out by a person entitled to physical possession, occupancy and control of the appurtenant land.

[153] Section 3.3 of the Limited Partnership Agreement, reproduced above, assigns all management and control of the business of the partnership to the general partner (i.e., Harrison). In particular, section 3.3(a) states that “No Partner except the General Partner” (i.e., Harrison) will “be or purport to be entitled to take part in the management or control of the Business of the Partnership”. The phrase “Business of the Partnership” is defined in the Limited Partnership Agreement to mean “the business described in sections 2.2 and 18.4 [of the Limited Partnership Agreement]”. Section 2.2 of the Limited Partnership Agreement describes the business of the Partnership as follows:

(a) to develop, construct, own and operate, or any of the foregoing, a run-of-river hydroelectric project on … [name of stream] in British Columbia…(herein, the “… Project”);

(b) to sell the power generated by the … Project to British Columbia Hydro and Power Authority or others;

(c) to enter into the Indenture (as defined in Section 18.1 of this Agreement;

(d) to carry out the activities contemplated in the Transaction Documents (as defined in the Indenture) to which it is a party; and

(e) transacting such other lawful business that is incidental, necessary and appropriate to accomplish any of the foregoing.


[154] When section 3.3(a), section 2.2, and the definition of “Business of the Partnership” in the Limited Partnership Agreement are read together, it is clear that only the general partner is entitled to physical possession, occupancy and control of the appurtenant land, and only the general partner is capable of carrying out the rights and obligations of a licensee described in the Water Act sections discussed above. Based on that language in the Limited Partnership Agreement, the Panel finds that only Harrison, as the general partner, could exercise the above-noted rights of a licensee and undertake the obligations of a licensee.

[155] Further, the Panel notes that section 21(1) of the Water Act requires that a licensee must make full compensation to the owners (of other property) for damage or loss resulting from construction, maintenance, use, operation or failure of the works. Also, section 25 of the Water Act states as follows:

25 The abandonment, suspension, termination or cancellation of all or part of the rights held under a licence or approval does not relieve the owner of the land, mine or undertaking to which the licence or approval is or was appurtenant of liability for damage resulting from the works constructed, operated or maintained by the owner, or from a defect, insufficiency or failure of the works.

[156] Sections 4.1 and 4.2 of the Limited Partnership Agreement state as follows:

4.1 Unlimited Liability of General Partner

The General Partner will have unlimited liability for all debts and other liabilities and obligations of the Partnership.

4.1 Limited Liability of the Limited Partners

Subject to the provisions of the Partnership Act, the liability of a Limited Partner for the debts, liabilities and obligations of the Partnership will be limited to the unpaid amount of the Subscription Price in respect of each Unit held by such Limited Partner, and undistributed income, if any, and a Limited Partner will not as otherwise be liable for any further claim, assessment or contribution to the Partnership save and except as provided in this Agreement.

[157] It is clear from these sections in the Limited Partnership Agreement that the intention is for the general partner (i.e., Harrison) to hold the liability for the partnership. This again points to the general partner being the licensee for the purposes of sections 21(1) and 25 of the Water Act.

[158] While the Limited Partnerships hold a beneficial interest in the appurtenant land, and that beneficial interest is a substantial interest in a financial context, the Panel finds that it is insufficient to constitute a “substantial interest” in the context of the definition of “owner” in the Water Act. In the context of the Water Act, “substantial interest” means one that involves possession, occupancy and control of the land. In the present case, only the general partner (i.e., Harrison) has a substantial interest (as the lease holder, and based on the terms of the Limited Partnership Agreement) in the lands to which the water licences are appurtenant, such that it has possession, occupancy and control of those lands.


[159] The Panel finds that Harrison, as the general partner, qualifies as an “owner” within the meaning of the Water Act, as it holds legal title of the Crown lease, and Harrison is the only person with a substantial interest in land for the purposes of the Water Act. Harrison is the holder of the leases to the Crown land where the powerhouses are located, and the arrangements in the Limited Partnership Agreement provide only Harrison with the ability to exercise possession and control of the appurtenant lands, and the ability to exercise the rights and undertake the responsibilities of a licensee under the Water Act. Therefore, the Panel finds that Harrison is the “owner” of the appurtenant land for the purposes of the Water Act, and is the proper licensee of the subject water licences.

3. Is the Comptroller’s conclusion regarding water rental billing an appealable “order”, and if so, was the order appealed within the 30-day appeal period required by section 92 of the Water Act?


[160] In the Order, the Comptroller concluded “that waterpower rental being billed to [Harrison] as a single licensee for the five hydropower projects in question is in accordance with the Water Act and Water Act Water Regulation.” The Appellants submit that the Comptroller erred in reaching that conclusion, by inappropriately relying on an artificial legal construct that the Comptroller describes as the “single licensee criterion” in administering section 16(4)(c) of the Regulation, so as to apply higher rental rates based on the combined total output of the five hydro projects.

[161] The Respondent submits that the Order was made under sections 4 and 16(4)(c) of the Regulation, and Part 3 of Schedule to the Regulation. The Respondent also submits that, in issuing the Order, the Comptroller exercised his powers under section 16(2) of the Regulation by ordering that water power billings for the five water licences would be billed to Harrison as a single licensee. Overall, the Respondent characterizes the Order as a determination of the water rentals payable under section 16 of the Regulation.


[162] In the Order, the Comptroller referred to previous correspondence and meetings that were held with the Appellants’ representatives and staff from the Comptroller’s office, including the Comptroller. In addition, he states that he had reviewed the information provided, and had received advice from the Ministry of Justice. He then states:

I conclude that waterpower rental being billed to HHPI as a single licensee for the five hydropower projects in question is in accordance with the Water Act and Water Act Water Regulation

[emphasis added]

[163] The Panel has considered the Comptroller’s statement quoted above, and whether the Order constitutes an appealable “order” within the meaning of section 92(1) of the Water Act.


[164] Section 92(1) of the Water Act states:

92 (1) Subject to subsections (2) and (3), an order of the comptroller, the regional water manager or an engineer may be appealed to the appeal board…

[165] Section 1 of the Water Act defines the word “order” for the purposes of the Water Act:

“order” includes a decision or direction, whether given in writing or otherwise;

[166] Thus, under section 92(1) of the Water Act, an appealable “order” “includes a decision or direction”.

[167] Under section 100(1) of the Water Act, the Lieutenant Governor in Council (i.e., Cabinet) may, by regulation, establish a tariff of the fees, rentals and charges payable in respect of licences. Under section 100(3) of the Water Act, the Comptroller is charged with the collection fees and rentals under the Water Act. Moreover, section 100(4.2)(b) of the Water Act authorizes the Comptroller to delegate the “determination, collection and receipt” of fees and rentals. By necessary implication, this means that the Comptroller is responsible for the “determination” of fees and rentals.

[168] Sections 100(3) and (4.2) of the Water Act state:

100 (3) The fees, rentals and charges must be paid to the comptroller and may be recovered by the comptroller by suit in a court of competent jurisdiction.

… (4.2) The comptroller may, in writing, authorize any other official or class of

officials employed by the government or a government corporation to exercise the functions, duties and powers of the comptroller in respect of (a) the determination, collection and receipt of fees, rentals and charges,

and (b) the issuance of rental statements.

[169] In addition, section 16 of the Regulation empowers the Comptroller to “determine” water rentals and fees, based on certain considerations provided in that section. In particular, section 16(2) of the Regulation states that “The comptroller may determine the fees, rentals and charges…” for water licences issued for power purposes. The Panel finds that section 16 of the Regulation is consistent with the Comptroller’s powers in sections 100(3) and (4.2) of the Water Act.

[170] The Panel finds that, in the Order, the Comptroller “determined” the water rental fees that were due for the use of water under the water licences, pursuant to sections 100(3) and 100(4.2) of the Water Act together with section 16(2) of the Regulation. In particular, he concluded that waterpower rental being billed to Harrison as a single licensee for the five hydropower projects in question is in accordance with the Water Act and the Regulation.

[171] Further, the Comptroller clearly stated in the Order that he had made a decision. His final sentence reads: “This decision constitutes an order of the comptroller and is subject to appeal.” He is the final authority with respect to the


determination and collection of fees, and he decided in the Order that this was the correct way to do so in this case.

[172] The Panel concludes that, through the Order, the Comptroller exercised his statutory powers to make a “determination” with respect to water rental billings, and his determination constitutes a “decision or direction” within the definition of “order” under the Water Act.

[173] The Appellants’ notice of appeal is dated January 14, 2014, and was received in the Board office on January 15, 2014. This is within the 30-day appeal period specified in section 92(4) of the Water Act, given that the Order is dated December 17, 2013.

[174] In summary, the Panel finds that the Order is an appealable “order”, and the appeal was filed within the 30-day appeal period, as required under section 92 of the Water Act. Therefore, the Board has jurisdiction to hear the appeals in regard to the Comptroller’s determination of rentals for the subject water licences.

4. Did the Comptroller properly apply section 16(4)(c) of the Regulation in making his determination?


[175] The Appellants submit that the Comptroller inappropriately relied on an artificial legal construct that the Comptroller describes as the “single licensee criterion” in administering section 16(4)(c) of the Regulation, so as to apply higher rental rates based on the aggregate total output of the hydro projects combined.

[176] The Appellants made two further points with regard to this issue. First, the Appellants submit that the Comptroller’s analysis appears to have been driven by the desired outcome of invoicing Harrison as a single licensee for all five projects. Further, the Appellants submit that it is inappropriate to override the legislative intent by making an outcome-oriented decision based on policy considerations inconsistent with the wording of the legislation. Additionally, the Appellants submit that there is no such thing as a “single licensee” criteria in the Regulation, beyond the requirement that water rental rates be based on the total output from all projects that are “owned or operated” by a single licensee. All that is required in this regard is a determination under the Water Act of who the licensee is for a particular project and then, if two or more projects have the same licensee, that licensee is to be billed in accordance with the total output from all the projects for which that party is licensee.

[177] The Appellants further refer to the Comptroller’s Order, wherein he writes:

Please also be advised that s. 16(4)(c) in Water Act Water Regulation is currently under review and may be amended. I have also asked for a review of the appropriateness of partnerships holding water licences.

[178] The Appellants submit that the Comptroller was attempting to make a decision in conformity with anticipated changes to the legislative scheme.

[179] The Appellants’ second point refers to the Electricity Purchase Agreements between BC Hydro and the Limited Partnerships. The Appellants submit that those


agreements have a fixed price that can be changed only in very limited circumstances, which do not apply in this case. The Appellants submit that the Comptroller’s decision will alter the commercial balance struck between the Limited Partnerships and BC Hydro in the Electricity Purchase Agreements, in the absence of any legislative foundation for doing so.

[180] The Respondent submits that the Order was based on the Comptroller’s finding that Harrison was the registered owner of the interests in land to which the five water licences were appurtenant. The Comptroller found that, accordingly, the power produced at the power plants located on the appurtenant lands should, under section 16(4)(c) of the Regulation, be aggregated for the purposes of calculating water rentals. The Respondent maintains that the order to aggregate the power produced at the Appellants’ separate power plants was correctly made, having regard to all of the facts and the law.

[181] In response to the Appellants’ submission that the Comptroller’s analysis was driven by the desire to invoice Harrison as a single licensee based on policy considerations that are inconsistent with the legislation, the Respondent submits that these arguments completely misconstrue what has occurred. Further, the Respondent submits that stating that a section is under review is no indication that a decision is based on possible future changes to that legislation. A more obvious interpretation would be that legislation which is core to a decision may be changed, so that the effect of a decision may not be permanent.

[182] The Respondent also submits that it is public knowledge that the provincial government has launched a general water rental review, and that this involves a review of water power rentals, including the possible elimination of Tier 3 water rentals in Fiscal Year 2018 for power production above 3,000,000 megawatt-hours/year (3000 GWh/year). According to the Respondent, related documents are available on the internet, and indicate possible changes to the water power structure.

[183] In addition, the Respondent submits that, after suggesting that the Comptroller has taken into consideration irrelevant factors in making the Order, the Appellants appear to suggest that the Board should take into consideration the commercial ramifications of the decision. The Respondent submits that this would be an irrelevant factor in relation to the determination of annual power rentals which are payable under 16(4) of the Regulation. The Comptroller’s responsibility is to determine what water rentals are payable by licensees based on the law (section 100 of the Water Act). The implications of this determination, due to the manner in which the Appellants have structured their affairs, is not a relevant consideration to that determination.


[184] Section 100 of the Water Act sets out the authority for fees, rentals and charges, as provided below:

100 (2) Each of the following is liable to the government for the fees, rentals and charges in respect of the application, petition, claim, complaint, proceeding, licence, approval, permit, drilling authorization, thing, or water:


(a) an applicant …;

(b) a person holding a licence, approval or drilling authorization; …

(3) The fees, rentals and charges must be paid to the comptroller and may be recovered by the comptroller by suit in a court of competent jurisdiction.

[185] Further, section 16 of the Regulation sets out the procedure for determination of fees, rentals and charges:

16 (2) The comptroller may determine the fees, rentals and charges using

(a) records of operation submitted by the licensee of the power development,

(a.1) power sales records of the licensee and power consumption and output records of adjacent and integrated facilities, necessary to determine that all or any part of the capacity and output of a power development or developments should be charged under the commercial power use category described in section 15 (1) (b) (iii),

(b) information obtained by an inspection pursuant to section 22 of the Act, and

(c) other relevant evidence.

(3) Annual rentals shall be determined at the appropriate rates according to the categories of power use.

(4) For the commercial and general categories, there shall be separate rental charges at the rates for the calendar year when the determination is made, with the charge or charges being based on

(a) the licensee's construction capacity, if any,

(b) the balance of the authorized capacity other than construction capacity, and

(c) subject to subsection (5), the total of the output from all power developments owned or operated by a single licensee during the preceding calendar year.

[186] Scant evidence was presented on the water rental fees collected for the five water licences before 2013. However, it is clear that the Comptroller treated the Limited Partnerships as licensees, and they were billed for rentals based as separate owners. The Panel will not comment further on that, as any previous decision in that regard is not under appeal.

[187] After the creation of the Crown grants and subsequent Crown leases to Harrison, the Comptroller recognized Harrison as the owner of the appurtenant land for the subject projects. Although the Comptroller reached that conclusion for different reasons than the Panel has under Issue 2, the Panel has reached the same conclusion based on the information and evidence presented during the appeal process.


[188] The Panel finds that there is no evidence that there was an improper purpose in the Comptroller’s actions. The Panel finds that the statement in the Order advising that section 16(4)(c) of the Regulation was under review and may be amended simply provided notice of a possible future change in the Regulation, and nothing more.

[189] The Panel finds that the financial implications that may arise for the Appellants as a result of the Order are not a relevant consideration for the Comptroller under the Water Act or the Regulation. The Panel also finds that there is no evidence that the Comptroller considered such implications.

[190] In regard to the so-called “single licensee” criterion, the Order states, in part:

In administering s.16 (4)(c) in the Water Act Water Regulation, it is my responsibility and authority to apply the “single licensee” criterion in billing waterpower rental. It is my understanding that a partnership, as an unincorporated business association, is not a distinct legal entity. A determination of whether to bill two different partnerships as two separate licensees must be made in conjunction with other pertinent facts. A water licence is appurtenant to the land where the water is beneficially used, in this case the powerhouse. The land tenures for these projects are issued under the Land Title Act, and the definition of “owner” under that legislation must be taken into account.

[191] The Panel agrees with the Appellants’ submissions that there is no basis for the “single licensee” criterion in section 16(4)(c) of the Regulation; rather, this section creates a requirement that water rental rates be based on the total output from all projects that are “owned or operated” by a single licensee. However, having found that Harrison is the licensee of the subject water licences, the Panel agrees with the Comptroller’s determination that the power produced at the power plants located on the appurtenant lands should, under section 16(4)(c) of the Regulation, be aggregated for the purposes of calculating water rentals.

[192] For all of these reasons, the Panel concludes that the Comptroller properly applied section 16(4)(c) of the Regulation in making his determination.

DECISION

[193] In making this decision, the Panel has carefully considered all of the submissions and the evidence provided, whether or not specifically reiterated herein.


[194] For the reasons provided above, the appeals are dismissed.

“James S. Mattison”

James S. Mattison Panel Chair Environmental Appeal Board

December 8, 2015