Court File and Parties

CITATION: Goldcorp Canada Ltd. v. Ontario Energy Board, 2012 ONSC 3097 DIVISIONAL COURT FILE NO.: 69/12 DATE: 2012-06-05

SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT

RE: Goldcorp Canada Ltd. and Goldcorp Inc. (Goldcorp), Appellant - AND - Ontario Energy Board, Respondent

BEFORE: Swinton, Sachs and Wilton-Siegel JJ.

COUNSEL: Ian Blue, Q.C. and Colin Pendrith, for the Appellant M. Philip Tunley and Justin Safayeni, for the Respondent Robert Warren and Catherine Powell, for the Intervenor Consumers Council of Canada Mark Rubenstein, for the Intervenor Ontario Education Services Corporation

HEARD at Toronto: May 24, 2012

Endorsement

The Court:

Overview

[1] This is an appeal by Goldcorp Canada Inc. and Goldcorp Inc. (collectively, “Goldcorp”) from the decision with reasons and order dated January 23, 2012 (the “Decision”) of the Ontario Energy Board (the “Board”) in respect of its application filed November 4, 2011 seeking, among other things, a determination under s. 19 of the Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sch. B (the “Act”) that certain provisions of the Ontario Energy Board Transmission System Code (the “Code”) dealing with “bypass compensation” are ultra vires the Act.

Factual Background

[2] Goldcorp mines gold in the municipality of Red Lake, where it operates three mining facilities. The main source of energy for those facilities is electricity that it has been receiving from Hydro One Networks Inc. (“Hydro One”).

[3] In 2010, Goldcorp decided that its mining facilities would be better served by a new transmission line and related facilities. Under the Code, Goldcorp was eligible to construct the new transmission line itself. Goldcorp proposed to build the new transmission line and transfer it to Hydro One at no cost. In respect of this proposed arrangement, Goldcorp and Hydro One were required to negotiate a “Connection and Cost Recovery Agreement” (“CCRA”) between them dealing with a number of matters relating to the construction of the new line and its connection to the Hydro One facilities, including the capital cost of the facilities.

[4] In these circumstances, s. 11.2 of the Code also requires a transmitter to obtain “bypass compensation” from Goldcorp on the basis that the existing transmission line of Hydro One is stranded, i.e., Hydro One will no longer receive revenue from the existing transmission line. Section 6.7.7 of the Code sets out how Hydro One is to calculate the bypass compensation. The purpose of the bypass compensation is to compensate Hydro One’s customers for the investment they have effectively made in the stranded transmission line, which will no longer be generating revenue. The payment of bypass compensation was also understood to be addressed in the CCRA to be negotiated.

[5] Goldcorp and Hydro One began negotiating the arrangements pertaining to the new transmission line in April 2010. At the commencement of these negotiations, Hydro One advised Goldcorp of its position that Goldcorp would have to pay bypass compensation. Hydro One estimated this amount to be between $8 and $11 million.

[6] Goldcorp decided to suspend negotiations with Hydro One pending a favourable decision from the Board on its Leave to Construct Application, which was required pursuant to s. 92 of the Act. The Leave to Construct Application was filed with the Board on April 25, 2011. In the course of the proceeding before the Board, Goldcorp provided assurances to the Board that the project was fully compliant with all relevant codes, rules and licences, which includes the Code, and that there would be no financial implications or risks to electricity ratepayers.

[7] A favourable decision was issued by the Board on July 20, 2011. In its reasons, the Board stated (EB-2011-0106 at p. 12),

With respect to the matter of impact on ratepayers, as noted earlier in this Decision and Order, due to the fact that the proponent is paying for the facility, there is no ratepayer impact to be assessed. With regard to the intended future transfer of the assets, Hydro One, as a condition of its licence, is required to comply with the terms of the Transmission System Code Economic Evaluation when entering into the CCRA with Goldcorp thereby holding ratepayers harmless. Hydro One has an ongoing requirement to comply with the Transmission System Code and adherence to the Economic Evaluation provisions is a matter to be examined when Hydro One applies to have assets added to its rate base in a cost of service application.

[8] After the Leave to Construct was granted, Goldcorp and Hydro One were unable to successfully conclude negotiations on a number of matters to be addressed in the CCRA including, in particular, the amount of bypass compensation to be paid by Goldcorp to Hydro One. In response to Hydro One’s continuing demand for bypass compensation in the amount of $8 - $11 million, Goldcorp brought a new application before the Board seeking to have the Board declare the bypass compensation provisions of the Code ultra vires the Act.

[9] It is understood that the new transmission line is substantially complete. At the hearing of this appeal, Goldcorp provided the Court with a copy of the CCRA that it has entered with Hydro One. With respect to bypass compensation, the agreement provides that Goldcorp shall pay bypass compensation in accordance with the methodology set out in s. 6.7.7 of the Code unless a final order of the Board or a court of competent jurisdiction states that it is not required to do so.

The New Goldcorp Application

[10] As mentioned, in its new application, filed on November 4, 2011, Goldcorp sought, among other things, an order of the Board under s. 19 of the Act that ss. 4.1.3, 6.7.6, 6.7.7 and 11.2 of the Code are ultra vires the Board’s powers under the Act, and an order under s. 19 of the Act declaring that Goldcorp is not under any legal obligation to pay bypass compensation to Hydro One and that Hydro One may not demand such compensation from Goldcorp.

[11] Following receipt of the Goldcorp application, the Board determined that before addressing the merits of the issues raised, it would hear argument from Goldcorp and intervenors on the following “threshold” procedural questions:

A1 Does section 19 of the Act, in and of itself, provide a statutory basis for Goldcorp’s Application?

A2 If section 19 of the Act does not provide a statutory basis on which Goldcorp may bring its Application, should the Board nonetheless proceed, on its own motion, to hear and determine the matters raised by the Goldcorp Application under s. 19(4) of the Act?

[12] The relevant parts of s. 19 of the Act state:

19(1) The Board has in all matters within its jurisdiction authority to hear and determine all questions of law and of fact.

(4) The Board of its own motion may, and if so directed by the Minister under section 28 or otherwise shall, determine any matter that under this Act or the regulations it may upon an application determine and in so doing the Board has and may exercise the same powers as upon an application.

[13] The Board issued its decision on January 23, 2010. This is the decision under appeal.

[14] The threshold issue before the Board was whether s. 19(1) of the Act allowed freestanding or standalone cases to be brought before the Board, i.e., applications that do not have an explicit origin in a section of the Act (or any other act which confers jurisdiction on the Board) that gives rise to specific forms of relief. However, in its decision, the Board determined that Goldcorp’s application was not a standalone application, in that it related directly to another Board proceeding.

[15] In reaching this conclusion, the Board stated (at p. 7):

In the case of Goldcorp, the application it has brought to have the Board declare sections of the Transmission System Code ultra vires is directly linked to its recent leave to construct application respecting the Red Lake mines (EB-2011-0106). It is clear to the Board that the reason for Goldcorp’s current application is its dissatisfaction with the process leading to the creation of and performance of a CCRA. Specifically the company is dissatisfied with the requirement to pay a bypass compensation levy to Hydro One. During the oral argument, counsel for Goldcorp acknowledged that it was dissatisfied with the amount it would have to pay to Hydro One.

In the Board’s view, Goldcorp’s application is not “freestanding”, but rather is an attempt to reopen the leave to construct proceeding respecting the Red Lake mines.

[16] The Board also referred to the findings made in the Leave to Construct decision concerning the respective obligations of Goldcorp and Hydro One to give effect to the bypass compensation provisions of the Code. In this regard the Board’s decision in the Leave to Construct proceeding specifically noted (at p. 7),

However, where a proponent builds and then transfers a facility to a licensed transmitter (as is the case here), the rate impacts are addressed in the context of the Connection and Cost Recovery Agreement (“CCRA”). The Board notes that Goldcorp has provided assurances that the intent is for the CCRA, which will ultimately be entered into by Goldcorp and Hydro One, to hold provincial ratepayers harmless. The Board also notes that the terms of the CCRA are governed by the Transmission System Code and are a condition of Hydro One’s licence. Further, parties will have an opportunity to examine the transfer of assets and the associated cost recovery in a future Hydro One rate application.

[17] From these references, it is clear that the Board understood that the earlier Leave to Construct decision proceeded on the basis that Goldcorp acknowledged, and would be complying with, the bypass compensation provisions of the Code. Accordingly, the Board considered that Goldcorp’s decision to challenge its obligations to comply with these provisions of the Code amounted to a change in a fundamental condition upon which the Leave to Construct decision was granted, i.e., the absence of any ratepayer impact.

[18] The Board laid out three potential options by which Goldcorp could seek a determination of the merits of its application that did not involve proceeding under s. 19(1):

1. A review of Goldcorp’s Leave to Construct Decision pursuant to ss. 42-45 of the Board’s Rules of Practice and Procedure;
2. An application to amend Hydro One’s licence to exempt it from the requirement that it must collect bypass compensation pursuant to s. 74 of the Act; or
3. An application to amend the Code by removing the sections related to bypass compensation pursuant to the Board’s code-making authority under ss. 70.1 to 70.3 of the Act.

[19] The Board was of the view that, before it could address Goldcorp’s concerns, Goldcorp had to first determine what form of application it wanted to pursue. Each of the potential options has specific procedural and substantive requirements that would have to be satisfied by the applicant, as well as different potential cost consequences. The Board did not indicate a view regarding which course of action Goldcorp should pursue, nor did it issue any further order, other than regarding costs.

[20] The Board also declined to exercise its jurisdiction to hear this matter on its own motion under s. 19(4). The Board expressed the view that a very important consideration in reaching this decision was the fact that Goldcorp “was perfectly content to conform to the requirements of the [Code], and the conditions imposed by the Board until its negotiations with Hydro One became difficult.”

[21] Further, the Board stated that “[w]ere it obliged to make such a finding, the Board would conclude” that s. 19(1), under which Goldcorp purported to bring its ultra vires challenge, does not confer an independent or freestanding jurisdiction on the Board under which a party may bring an application. Parties must base their application on a specific section of the Act or other legislation within the Board’s jurisdiction that addresses a specific subject matter.

[22] The Board awarded costs against Goldcorp in favour of the eligible intervenors. In doing so, the Board reiterated a comment made earlier that it viewed the application as a collateral attack on the Leave to Construct decision and added that it considered Goldcorp’s pursuit of its desired relief through a broad legal challenge of the Code provisions to be opportunistic. The Board found that, in choosing this legal avenue, Goldcorp engaged the participation of many parties who would have had no interest if another course of action had been selected.

The Issues on this Appeal

[23] Goldcorp raised the following arguments:

1. The Board erred in law in finding that Goldcorp’s application was a collateral attack on the Leave to Construct decision.
2. The Board committed a jurisdictional error by declining to hear the application under s. 19(1) of the Act.
3. The Board erred in awarding costs to the intervenors.

The Standard of Review

[24] An appeal lies to this Court only on a question of law or jurisdiction (s. 33(2) of the Act).

[25] We disagree with Goldcorp’s argument that the standard of review is correctness. The Board is a highly specialized tribunal. When it is interpreting the provisions of the Act, its home statute, its decisions are deserving of deference and are reviewable on a standard of reasonableness (Toronto Hydro-Electric System Limited v. Ontario Energy Board, 2010 ONCA 284 at paras. 39-40; Great Lakes Power Limited v. Ontario Energy Board, 2010 ONCA 399 at para. 11; Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61 at para. 39). We are satisfied that the appeal raises no true question of jurisdiction.

Analysis

[26] The Board did not decline to hear the issue raised on Goldcorp’s application, as Goldcorp alleges. All that the Board has determined is that there are three possible applications that Goldcorp can employ to challenge the Code provisions, and the Board has left it to Goldcorp to choose one of these procedural options. The Board also exercised its discretion pursuant to s. 19(4) of the Act not to hear the challenge on its own motion.

[27] The Board reasonably concluded that the proposed challenge was not “genuinely freestanding or standalone”, and that it was “directly related to other conventional Board proceedings”. In particular, it is clear that the new application was linked to the Board’s earlier Leave to Construct decision approving the construction of the transmission line.

[28] In the Leave to Construct proceeding, the Board was required to consider whether the construction of the transmission facilities was in the public interest (Act, s. 96(1). In making that determination, the Board was obligated to consider the interests of consumers with respect to prices and the reliability and quality of electricity service (Act, s. 96(2)). As mentioned earlier, Goldcorp had given assurances to the Board that the construction project was fully compliant with all relevant codes, rules and licences, which includes the Code, and that there would be no financial implications or risks to electricity ratepayers.

[29] We agree with the submission of the Board and the intervenors that the central matters raised in this appeal are not questions of law per se, but rather an attempt to overturn an interlocutory and discretionary procedural decision by the Board as to how the challenge to the vires of certain provisions of the Code should proceed, given the determination that Goldcorp’s application was not a standalone application. Goldcorp has not identified any error of law or true jurisdictional error that can sustain an appeal under s. 33 of the Act in respect of this decision.

[30] Further, the Board’s decision not to proceed with the application under s. 19(4) of the Act was a reasonable one, given what occurred in the Leave to Construct proceedings.

[31] Lastly, as Goldcorp has acknowledged in oral argument, the Board had the discretion to award costs to the intervenors. The Board gave persuasive reasons for doing so. Goldcorp has not identified any error of law by the Board in making such an award.

Conclusion

[32] For these reasons, the appeal is dismissed. Neither the parties nor the intervenors seek costs of the appeal, and none are awarded.

Swinton J.

Sachs J.

Wilton-Siegel J.

Date: June 5, 2012