Court File and Parties

Citation: East Durham Wind, Inc. v. The Municipality of West Grey, 2014 ONSC 4669 Divisional Court File No.: DC-14-116 Date: 2014-08-14

Ontario Superior Court of Justice Divisional Court

Before: Then, Aston, Harvison Young JJ.

Between:

East Durham Wind, Inc. Applicant

– and –

The Municipality of West Grey Respondent

Counsel: John Laskin, Sarah Shody, for the Applicant Michael Miller, Edward Velotboom, for the Respondent

Heard at Toronto: June 13, 2014

Reasons for Judgment

Then J.

Overview

[1] The applicant East Durham Wind Inc. ("East Durham Wind") applies for judicial review of two municipal by-laws that, both in design and application, prevent it from proceeding with construction of a wind energy project in the Municipality of West Grey (the "Municipality"). East Durham Wind holds a Renewable Energy Approval ("REA") to construct a 14 turbine wind farm (the "project") but claims it cannot proceed with construction until it receives certain permits from the Municipality. The application raises the question of when and how a municipal by-law or policy may frustrate the purpose of a provincial legislative instrument. The factual backdrop for this legal question is the ongoing renewable energy revolution in Ontario that was ushered in by the Green Energy Act, S.O. 2009, c. 12 ("GEA"). This revolution has spawned much litigation, particularly around wind energy projects.

[2] A developer wishing to build a wind energy project cannot do so without a REA, the provincial instrument that is the comprehensive approval required for renewable energy projects in Ontario. The REA application process has been crafted through detailed regulations and the power to issue a REA is exclusively held by delegates of the provincial Minister of Environment. Despite the existence of this all-in-one provincial approval process, in practice a developer will need to get various operational permits from the local municipality in order to construct the approved project. Where a municipal government is opposed to wind energy projects generally, there potential for conflict is obvious.

[3] In this case, the applicant East Durham Wind, Inc. ("East Durham Wind") applies for judicial review of two municipal by-laws it claims prevent it from constructing a provincially authorized wind energy project in the Municipality of West Grey (the "Municipality"). The by-laws authorize the Municipality to grant two types of municipal permits that, as a practical matter, East Durham Wind must acquire in order to construct its project.

Background

[4] East Durham Wind, a wholly owned subsidiary of NextEra Energy Canada ULC, received a REA for its 14 turbine wind energy project on January 31, 2014. The validity of the REA itself is currently the subject of an appeal brought by a private citizen before the Environmental Review Tribunal ("ERT"); the Municipality has "participant" status in that proceeding.

[5] To construct its project East Durham Wind will require "entrance permits" to connect access roads on private lands where the turbines will be located to public highways in the Municipality. The Project will also require "oversize/overweight haulage permits" to allow for the conveyance of large and heavy project materials by truck along public highways.

[6] Before describing East Durham Wind's efforts to acquire these permits, we pause to note East Durham Wind's submissions to this Court about what it claims is the Municipality's pattern of opposition to the development of any wind energy projects in its jurisdiction, and in particular its project. Some of the events cited by East Durham Wind predate the events relevant to this application but they nevertheless provide useful context to the issues currently dividing the parties.

[7] Briefly, on October 12, 2012, the Municipality's council ("Council") passed a resolution declaring it "is not a willing host for any further industrial wind turbines." In March 2013, the Municipality amended a by-law to require a $100,000 performance bond for each new wind turbine constructed in the municipality. The amendments also imposed other fees on wind projects. East Durham Wind brought an application for judicial review challenging these amendments in June 2013 and, in July 2013, the Municipality rescinded the by-law.

East Durham Wind's application for entrance permits

[8] In anticipation of receiving a REA for its project, East Durham Wind first submitted applications for entrance permits to the Municipality on August, 8, 2013 and October 7, 2013. From 1999 until February 2014 entrance permits were controlled not through a by-law but through the Municipality's entrance permit policy. Relevant aspects of the Municipality's entrance permit policy at the time East Durham Wind submitted its applications included the following:

• The application form required applicants to indicate whether the proposed entrance was for: (1) Commercial, (2) Residential, (3) Field/Bush, or (4) Public Street use. No "Industrial" use category existed.
• Council amended the policy on July 15, 2013, to make Council, not an administrative delegate of Council, responsible for approving entrance permits intended for "Industrial" use.
• The maximum width for any entrance was set at 8 metres "measured along the street line," with "street line" being an undefined term in the policy.

[9] Council took the position that East Durham Wind's permit applications were for industrial use and thus had to be determined by Council. Council then communicated to East Durham Wind, in a letter dated November 21, 2013, that it did not have to decide the applications unless and until a REA had been granted. However, the letter went on to state the applications would have been rejected in any event because the proposed industrial use of the permits did not fit the applications within the "commercial" category. Moreover, the proposed entrances exceeded the 8 metre rule when measured at the line "where the proposed ingress/egress driveway located in municipal property meets the travelled portion of the road" or, in other words, where the border of the gravel shoulder meets the public highway.

[10] East Durham Wind resubmitted its permit applications on January 23, 2014, after receiving its REA. Included in the revised applications was a consultant's memo, commissioned by East Durham Wind, explaining that the redesigned entrance proposals all met the 8 metre rule, and the "angle of intersection" rule, when measured according to East Durham Wind's definition of the "street line." East Durham Wind interpreted the "street line" as the point where a private property line ends and the municipal road allowance begins, not where the shoulder meets the road. The memo also noted that this interpretation was consistent with the definition of "street line" used in the Municipality's zoning by-law and the general practice of other municipalities.

[11] Council rejected the revised applications on February 17, 2014. Subsequent communications confirmed the Municipality's position was that the proposed entrances still violated the 8 metre rule at the street line (based on the Municipality's interpretation of "street line") and also violated the policy's provision on the minimum "angle of intersection," which had to be more than 60 degrees, measured from a focal point along the "street line."

[12] The same day Council passed a new by-law regulating entrance permits (the "entrance permit by-law"). The Municipality stated that the by-law was passed to remedy deficiencies in the old entrance permit policy. Among other things, the new by-law defined "street line" according to the interpretation favoured by the Municipality, permitted entrances significantly wider than 8 metres, and prohibited the granting of permits for "additional entrances" on lots with existing entrances, subject to four exceptions. The parties agree that none of the proposed entrances applied for by East Durham Wind can meet the prescribed exceptions, though the Municipality also notes that East Durham Wind has not applied to widen any of the existing entrances on the private lands to be used for the Project.

East Durham Wind's applications for oversize/overweight haulage permits

[13] The provincial Highway Traffic Act, R.S.O. 1990, c. H-8 ("HTA"), prescribes limits for the size (s. 109) and weight (Part VIII) of trucks that can travel on public highways. The HTA gives municipalities discretion, however, to permit oversize and/or overweight vehicles and loads to travel on roads in their jurisdiction (s. 110). The HTA specifically authorizes municipalities to attach conditions restricting the times during which oversize/overweight vehicles or loads can travel and requiring security for any damage caused to public roads (s. 110(2)). The HTA also provides that the operator of a permitted vehicle is responsible for all damages that may be caused to public highways (s. 110(5)).

[14] The Municipality's by-law for oversize/overweight vehicles, enacted in 2004, allows the Municipality to issue such permits. The by-law contemplates permit conditions requiring, among other things, restricted travel hours, the use of police escorts, and modest amounts of security for damages. A page appended to the by-law also prohibits vehicles defined as "Exceptional Movement Vehicles" from using public roads altogether. An Exceptional Movement Vehicle is defined on that page as a vehicle over 5 metres in width, 45.75 metres in length, or 63,500 KG in weight.

[15] East Durham Wind submitted eight applications for oversize/overweight haulage permits to the Municipality on January 31, 2014. As part of its applications East Durham Wind committed to providing a traffic impact study, escorts, surveys, undertakings to repair any potential damage, and $250,000 in security for any damage caused.

[16] Prior to these applications East Durham Wind and the Municipality had unsuccessfully tried to negotiate a comprehensive "Road Use Agreement" in 2013. The negotiations collapsed when East Durham Wind refused to consent to funding a peer review study on its proposed road use without an express condition prohibiting the use of that study in any appeal of its forthcoming REA.

[17] Council discussed the permit applications on February 17, 2014 and, on February 18, requested clarifications about the $250,000 security. On February 24, East Durham Wind told the Municipality that the $250,000 would be in the form of a performance bond. On March 3, Council met and determined that a security contract would need to be negotiated with East Durham Wind before the permit applications could be considered. The mayor of the Municipality speculated that negotiations could take 6-8 months. The Municipality also revived the issue of a peer review study but no agreement was reached between the parties.

[18] Shortly after this East Durham Wind applied for judicial review of the two permitting by-laws. East Durham Wind claims it will suffer a financial penalty of $3,450 per day under its FIT contract with the Ontario Power Authority if the project is not operational by July 13, 2014. The contract was not submitted as part of the record on this application.

Issues

[19] The main issue on this application is whether the Municipality's by-laws conflict with East Durham Wind's REA by frustrating its purpose. The by-laws are inoperative to the extent of any conflict pursuant to s. 14 of the Municipal Act, S.O. 2001, c. 25. If there is no conflict, a second issue is whether East Durham Wind's permit applications complied with the relevant criteria and should have been considered and/or granted by the Municipality.

Standard of review

[20] The issue of whether the by-laws conflict with East Durham Wind's REA is a question of the vires of the by-laws. The question is not whether the by-laws fall within the scope of the Municipality's authority to regulate, but rather whether the by-laws conflict with a provincial instrument. The Supreme Court of Canada has made it clear that reasonableness, taking its colour from the context, is the standard to be applied when the question is the scope of the authority to regulate: Catalyst Paper Corp. v. North Cowichan (District), 2012 SCC 2, [2012] 1 S.C.R. 5, at para. 15. Where the issue is conflict, this is more akin to the Superior Court of Justice's ability to quash a by-law for illegality under s. 273(1) of the Municipal Act, and therefore the standard of review is correctness: Friends of Lansdowne Inc. v. Ottawa (City), 2012 ONCA 273, 110 O.R. (3d) 1, at para. 14.

[21] Conversely, if the by-laws are not in conflict with a provincial legislative instrument, the secondary issue of whether the Municipality's permitting criteria was complied with concerns an exercise of the Municipality's discretion on a question that is within its jurisdiction. It must be reviewed on a deferential standard of reasonableness: Catalyst Paper, at para. 15; Friends of Lansdowne, at para. 15.

Positions of the parties

[22] East Durham Wind argues that its REA is a provincial legislative "instrument" under the meaning of the term in s. 14(1) of the Municipal Act. The purpose of the REA is to authorize East Durham Wind to build a 14 turbine wind farm, mostly on private lands, in the Municipality of West Grey. It is necessary for East Durham Wind to acquire entrance permits and oversize/overweight haulage permits in order to construct its project and yet the design of the by-laws prevents East Durham Wind from obtaining those permits. East Durham Wind says this puts the by-laws in direct conflict with the REA and, accordingly, the by-laws must be inoperative to the extent of the conflict under s. 14(1), citing Suncor Energy Products v. Town of Plympton-Wyoming, 2014 ONSC 1934. Moreover, the permitting by-laws are in conflict generally with the regime for REAs established under the Environmental Protection Act, R.S.O. 1990, c. E.19 ["EPA"]. Alternatively, East Durham Wind submits that the Municipality has acted in bad faith in enacting and interpreting its by-laws, or in exercising its discretion when considering East Durham Wind's approval applications.

[23] The Municipality makes a preliminary argument that East Durham Wind's requested relief is not available on judicial review. It notes that s. 14 of the Municipal Act only applies to by-laws, not policies, and therefore could not apply to its entrance permit policy which formerly governed the issuance of entrance permits. Even if s. 14 applies to both the new entrance permit by-law and the oversize/overweight haulage permit by-law, the remedy requested by East Durham Wind – a declaration of the invalidity of the by-laws – is not available on judicial review. The only remedy available to East Durham Wind is mandamus to order the granting of the permits, and this is not available because the issuance of the permits is discretionary.

[24] Alternatively, the Municipality argues that its authority to both control entrances from private land onto public highways in its jurisdiction and to permit the travel of oversize and/or overweight vehicles and loads on its roads is unfettered. The permitting by-laws are validly enacted within the Municipality's powers and do not conflict with East Durham Wind's REA or the EPA generally because:

• They relate only to the use of municipal, not private property.
• They were enacted long before East Durham Wind's project took shape and were not designed to thwart wind turbines. (In the case of entrance permits, these were of course controlled by the entrance permit policy prior to the recent enactment of the new entrance permit by-law).
• They have no specific application to wind turbines.

[25] Moreover, East Durham Wind has not shown positively that it cannot construct the project without the permits. East Durham Wind has failed to show that materials could not enter the private lands by way of existing entrances (obviating the need of entrance permits) or that materials could not be broken into smaller loads and taken to the private lands separately (obviating the need for oversize/overweight haulage permits).

Analysis

[26] We do not accept the Municipality's submission noted in paragraph 23 above. First, under s. 5(3) of the Municipal Act all powers of a municipality must be exercised by by-law. If entrance permitting powers were being exercised merely on the basis of a policy, without a foundational by-law, those powers were exercised without lawful authority. Second, to quote from Brown and Evans, Judicial Review of Administrative Action in Canada, vol. 3 loose-leaf (Toronto: Canvasback Publishing, updated December 2013) at 15:32 – 83:

Like other forms of administrative legislation, a Rule, policy, guideline, letter of understanding, manual, or directive will be invalid if it is inconsistent with or in conflict with a statutory provision … whether or not it imposes duties enforceable in the courts. [emphasis added]

The entrance permit policy pre-dating the by-law enacted February 17, 2014 can be found invalid on this basic principle of administrative law, even if a policy is not subject to the specific wording of s. 14 of the Municipal Act.

[27] The test for conflict between a municipal by-law and provincial legislative instruments is set out in section 14 of the Municipal Act:

14. (1) A by-law is without effect to the extent of any conflict with,

(b) an instrument of a legislative nature, including an order, licence or approval, made or issued under a provincial or federal Act or regulation.

(2) Without restricting the generality of subsection (1), there is a conflict between a by-law of a municipality and an Act, regulation or instrument described in that subsection if the by-law frustrates the purpose of the Act, regulation or instrument.

[28] There is no question that the REA in this case is "an instrument of a legislative nature" within the meaning of s. 14(1) of the Municipal Act.

[29] We do not accept the Municipality's submission that the by-laws are immune from a challenge on the basis that they only pertain to municipal property, not private property, or that its discretion over its own property is unfettered. Its powers can only be exercised by by-law. The test is whether the permitting by-laws frustrate the purpose of the REA, regardless of how. A municipality's general authority to regulate its own property under sections 27 and 35 of the Municipal Act does not trump the specific restrictions in s. 14(2) of that Act.

[30] The test for conflict prescribed in s. 14 mirrors the two-pronged test used for determining whether conflict exists between federal and provincial laws: Croplife Canada v. Toronto (City) (2005), 2005 15709 (ON CA), 75 O.R. (3d) 357 (C.A.), at para. 63. A by-law can be ultra vires for (1) operational conflict, or (2) frustration of the purpose of a provincial legislative instrument.

[31] Operational conflict is determined according the impossibility of dual compliance test, which is met where compliance with the municipal by-law makes it impossible to simultaneously comply with the provincial legislative instrument: Croplife Canada, at para. 60. While East Durham Wind argues that this prong of the conflict test, codified in s. 14(1), is met, we find that the REA does not impose standards on entrances or the sizes and weights of trucks/loads, and therefore there can be no conflict of an operational nature between the REA and the by-laws. Nor is there operational conflict between the by-laws and the GEA. While the GEA amended the Planning Act, R.S.O. 1990, c. P.13, to exempt renewable energy projects from many municipal controls, including zoning by-laws, the GEA did not deal with the sort of permitting by-laws at issue here.

[32] This focuses the analysis on the second prong – whether the by-laws frustrate the purpose of the REA, as a provincial legislative instrument. Determining whether the purpose of the REA is frustrated by the by-laws is, fundamentally, an interpretive exercise. The Supreme Court of Canada recently described this exercise in Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R. 536 ["COPA"], at para. 66. In that case the issue was whether provincial legislation governing the uses of agricultural land frustrated the purpose of the federal Aeronautics Act, R.S.C. 1985, c. A-2, thereby invoking the doctrine of interjurisdictional immunity. While the interjurisdictional immunity doctrine has no place in the analysis of conflict between municipal by-laws and provincial legislative instruments because municipalities are creatures of statute, the Court's words are nonetheless helpful in outlining the analysis on the issue of frustration:

The question, therefore, is whether the provincial legislation is incompatible with the purpose of the federal legislation. To determine whether the impugned legislation frustrates a federal purpose, it is necessary to consider the regulatory framework that governs the decision to establish an aerodrome. The party seeking to invoke the doctrine of federal paramountcy bears the burden of proof. That party must prove that the impugned legislation frustrates the purpose of a federal enactment. To do so, it must first establish the purpose of the relevant federal statute, and then prove that the provincial legislation is incompatible with this purpose. The standard for invalidating provincial legislation on the basis of frustration of federal purpose is high; permissive federal legislation, without more, will not establish that a federal purpose is frustrated when provincial legislation restricts the scope of the federal permission. [Citations omitted]

[33] Here, East Durham Wind must establish the purpose of the legislative instrument (the REA) and then prove that the permitting by-laws are incompatible with this purpose. In COPA the Supreme Court noted that the standard for invalidating provincial legislation on the basis of frustration of federal purpose is high where federal legislation is permissive in a general sense. Similarly, the Ontario Court of Appeal has directed that courts should not "struggle to create a conflict where none exists" between a municipal by-law and provincial legislative instrument: Brantford (City) Public Utilities Commission v. Brantford (City) (1998), 1998 1912 (ON CA), 36 O.R. (3d) 419. Rather, they should require a "clear demonstration" of the by-law's invalidity: Friends of Lansdowne, at para. 14.

[34] What is the purpose of East Durham Wind's REA? Answering this question requires consideration of the regulatory framework created by the Green Energy Act that governs the issuances of REAs, as well as consideration of the REA itself.

[35] The introduction and key features of the GEA were summarized in Suncor by Justice Garson, at paras. 5-7 and 10-13:

[5] In 2009, Ontario enacted the Green Energy and Green Economy Act, 2009, S.O. 2009 C.12 ("GEGEA"), which amended several acts including the EPA. The GEGEA encouraged the development of renewable energy and generally removed barriers for renewable energy projects within the province. Three important steps in this regard were:

1. The creation of a feed-in tariff program ("FIT") to procure energy from renewable sources like wind farms.
2. The creation of the Renewable Energy Approval ("REA") process as prescribed in O. Reg. 359/09 made pursuant to the EPA and administered by the Ministry of the Environment ("MOE").
3. The placing of restrictions on municipal authority under the Planning Act and the Municipal Act when such projects are at issue.

[6] Section 47.3 of the EPA mandates that an REA is required prior to any construction, installation, use, operation, or changing of the wind facility.

[7] O. Reg. 359/09 sets out the requirements of the REA process. In short, it requires that proponents undertake detailed environmental studies and prepare corresponding technical reports that are prescribed in the regulation for review and approval by appropriate provincial ministries prior to a complete REA application package being submitted to a "Director" as appointed by the MOE. It includes requirements for consultation with the public and local authorities and posting of applications on the Environmental Registry website. It provides for public input prior to a decision by the Director.

[10] Under ss. 47.4 and 47.5 of the EPA, the Director makes the final call on the issuance and/or terms of an REA, having regard to "public interest".

[11] Once issued, an REA may be appealed to the Environmental Review Tribunal by any person, resident in Ontario, on grounds that engaging the project approved by the REA will cause serious harm to human health, or serious and irreversible harm to plant life, animal life, or the natural environment. A further appeal can then be taken to the Divisional Court or the Minister of the Environment.

[12] If there is a conflict between any provision of the EPA or its regulations and any other Act or regulation, s. 179 of the EPA sets out that its provisions or regulations prevail.

[13] Normally, zoning by-laws may be passed by the councils of local municipalities under the provisions of Part V of the Planning Act. Those powers include controls on the use of land and on the erection of structures. However, s. 62.0.2(6) of the Planning Act specifically provides that a by-law passed under Part V does not apply to a renewable energy undertaking, which includes a renewable energy project and a renewable energy generation facility.

[36] In Hanna v. Ontario (Attorney General), 2011 ONSC 609, 105 O.R. (3d) 11 (Div. Ct.), this Court described, at para. 27, the GEA's "main purpose" as streamlining the process for developing green energy projects:

The Government of Ontario has a long-standing policy aimed at the reduction of annual greenhouse gas emissions for the purpose of protecting the environment and the health of the general public. One initiative is to work towards replacement of coal-fired electricity generation by increasing electricity generation capacity from renewable energy sources such as industrial wind turbines. The policy development process that began in 2003 culminated in the enactment of the Green Energy Act, 2009, S.O. 2009, c. 12, Sch. A ("GEA") on May 14, 2009. The main purpose of the GEA is to streamline the process for developing green energy projects, including wind facilities. The GEA did this by amending the EPA to add Part V.0.1, which deals with renewable energy. The GEA amended the EPA to establish processes for the approval of renewable energy projects, such as wind turbines, and the authorization of regulations governing those projects.

[37] We find that the purpose of the GEA regime as a whole is to encourage and facilitate the development of renewable energy projects in Ontario, including wind energy projects. The GEA provides a complete regime for carrying out the government's policy in this regard. It features an economic incentive for project developers (the FIT program); a comprehensive approval process to scrutinize the potential effects of each project on the health of humans, plants and animals and to identify any conditions that might be necessary to account for local conditions (the REA); and an appeal process for REAs that utilizes a specialized tribunal (the ERT) and the oversight of the courts on questions of law. To maintain this streamlined system the ability of municipalities to restrict renewable energy development through various powers under the Planning Act and the Municipal Act has been curtailed.

[38] The purpose of East Durham Wind's REA in particular is to authorize "the construction, installation, operation, use and retiring" of its 14 turbine wind energy project on lands in the Municipality of West Grey. In other words, the purpose of the REA is to authorize East Durham Wind to build its particular wind energy project, which will contribute to the overall policy goals underlying the GEA regime. The project application went through the streamlined process described above and a REA was granted by the Director, having regard to the "public interest." The REA itself contains 20 pages of detailed terms and conditions, including three dealing with "Traffic Management Planning" that require East Durham Wind to create a Traffic Management Plan and to make reasonable efforts to reach a "Road Users Agreement" with the Municipality and Grey County based on this plan. As noted earlier, the efforts between East Durham Wind and the Municipality to reach such an agreement have proved fruitless.

[39] We do not accept the Municipality's submission, noted in paragraph 25 above, that East Durham Wind has not shown positively that the permits are required to construct the project. In its letter of November 21, 2013 the Municipality acknowledged that "Council understood that the proposed entrances were required to facilitate construction (initially) and then ongoing maintenance of the Industrial Wind Turbines." It seems clear from the record before us that the necessity of the entrance permits and oversize/overweight haulage permits have never been an issue.

[40] Based on our interpretation of the purpose of East Durham Wind's REA we find the permitting by-laws do prevent the project – which has been duly authorized by the province under a regulatory regime designed to encourage and facilitate the building of renewable energy projects in Ontario – from being built. Accordingly, we find that the permitting by-laws frustrate the purpose of East Durham Wind's REA and must be held inoperable, but only to the extent of their conflict with East Durham Wind's REA.

[41] We accept, based on the record before us, that East Durham Wind requires entrances connecting public highways to access roads located on private lands in order to construct the project. The Municipality argues that, even if East Durham Wind cannot meet the exceptions for "additional entrances" under the new by-law, its application to this Court should be dismissed because it has not applied to widen existing entrances on the private lands it requires access to. These existing entrances, however, are designed for existing residential or agricultural uses, not to efficiently connect trucks carrying heavy construction equipment with the project sites. Equally, we accept that during construction oversize/overweight vehicles and/or loads will need to travel on public roads in order to deliver large materials necessary for the project's construction and ongoing operation. While two of the hauls proposed by East Durham Wind will not engage the prohibition on Exceptional Move Vehicles, there is no reason to believe the materials required to construct the project can be delivered other than via truck over public highways. These two key aspects of the project cannot be accommodated under the permitting by-laws.

[42] The Municipality's position when East Durham Wind first applied for entrance permits was that the project amounted to an industrial use that was not contemplated by the permitting scheme. The new entrance permit by-law does no better. Specifically, the by-law classifies any new entrance on a lot with existing entrances as an "additional entrance" (defined as "an Entrance which would increase the number of Entrances to a lot and which Entrance is not a New Entrance") and does not authorize the Municipality to permit an additional entrance unless it:

• provides access to a portion of the lot separated by a "physical feature such as a cliff, steep slope, ravine, water course, etc."
• is approved by the Municipality under the Planning Act
• is for residential use, or
• is for agricultural use.

None of the entrances required to construct East Durham Wind's project meet these criteria, nor could they.

[43] As for the oversize/overweight permitting by-law it simply prohibits the travel of "Exceptional Move Vehicles" over a certain size and weight. Most of the hauls required for East Durham Wind to construct its project would be caught by this prohibition and it therefore frustrates the purpose of East Durham Wind's REA.

[44] Despite this prohibition, the record shows the Municipality nevertheless believes it has authority to issue permits for the proposed hauls. The real issue has not been the prohibition but, rather, the parties' inability to successfully negotiate conditions to the permits, including the amount of financial security necessary to sufficiently protect public roads. The Municipality's request for reasonable conditions, including financial security, is within its authority and at least implicitly included in the terms and conditions of the REA. We note, however, that the Municipality's concerns about the size and nature of any agreement on security may be overblown given East Durham Wind's commitment to providing a significant amount of security and its ultimate liability for any damage caused under s. 110(5) of the HTA.

[45] Finally, we reject East Durham Wind's argument that the Municipality has acted in bad faith. The Municipality is a democratic body accountable to its constituents. It has a broad legislative discretion to enact by-laws governing issues that regulate daily life and the built infrastructure within its jurisdiction: Catalyst Paper, at para. 19. We agree with the observation of Justice Garson in Suncor, at para. 128, that Council's call for a moratorium on wind energy projects in Ontario and its declaration that it is an "unwilling host" for such projects are not acts that, in and of themselves, support a finding of bad faith. Moreover, a finding of bad faith is not required to ground our conclusion that the by-laws frustrate the purpose of East Durham Wind's REA.

[46] Given our conclusion on the issue of conflict, it is not necessary to deal with the issue of whether the Municipality's permitting criteria was actually complied with by East Durham Wind its various applications.

Conclusion

[47] We find both by-laws inoperative to the extent that they frustrate the purpose of East Durham Wind's REA, which is to authorize the building of the project in furtherance of the province's goal of increasing renewable energy generation. The entrance permit by-law cannot de facto prohibit the access required to build renewable energy projects on private lands in the Municipality's jurisdiction. Similarly, the oversize/overweight haulage permit by-law cannot de facto prohibit the hauls necessary to get construction materials to these private lands via the public highways. As noted, this conclusion does not affect the parties' abilities to engage in good faith negotiations around reasonable conditions, including sufficient financial security, regarding East Durham Wind's proposed use of the public highways.

[48] The decisions of the Municipality rejecting two approval applications of East Durham Wind dated January 23, 2014 are quashed. The Municipality is ordered to reconsider those applications, or fresh applications, in light of the direction provided in these reasons. In our view, the entrance permit by-law in effect on January 23, 2014 is the governing by-law, unless the municipality is considering a fresh application by the applicant, in which case the new by-law passed February 17, 2014 would govern.

[49] While the Municipality has not acted in bad faith up to this point, the failure to reasonably consider and determine any future applications (or resubmitted applications) by East Durham Wind for entrance permits or oversize/overweight haulage permits according to by-laws that do not frustrate the purpose of East Durham Wind's REA could be grounds for a finding of bad faith. In order not to continue to frustrate the applicants REA and in order to comply with the decision of this court we expect that the Municipality will see fit to interpret or modify the relevant by-laws which impede the issuance of permits as expeditiously as possible as since the applicant is subject to monetary penalties for not proceeding with the project.

[50] The Municipality must discharge its public duties in accordance with the intent and purpose of the Municipal Act, and acting without a rational appreciation of that intent and purpose, or for an improper purpose, will mean it acts in bad faith: Roncarelli v. Duplessis, 1959 50 (SCC), [1959] S.C.R. 121 at p. 143. The Municipal Act does not allow for conflict between municipal by-laws and provincial legislative instruments. Thus, any attempt to determine future permit applications by East Durham Wind according to unchanged versions of the permitting by-laws, which have been found to frustrate its REA, would be in bad faith. Additionally, any alteration of the permitting by-laws that amounts to an attempt to circumvent the effect of this Court's order would also constitute bad faith: Chippewas of Saugeen First Nation v. Keppel (Township) (1994), 1994 7508 (ON SC), 117 D.L.R. (4th) 419 (Ont. Gen. Div.), aff'd (1998), 1998 17658 (ON CA), 164 D.L.R. (4th) 511 (Ont. C.A.); Markham v. Sandwich South (Township) (1998), 1998 5312 (ON CA), 160 D.L.R. (4th) 497 (Ont. C.A.).

[51] The parties have agreed that the successful party in this application should be granted $15,000 in costs. Accordingly, the Municipality shall pay $15,000 in costs to East Durham Wind within 30 days.

Then J. Aston J. Harvison Young J.

Released: August 14, 2014