Good Faith in the Wind

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It is difficult to argue that investment in renewable energy is a bad idea. Yet when it comes time to actually build renewable energy projects, those who would seek to build often find themselves at odds with neighbours. It is not uncommon for municipal governments to take a stand against renewable energy projects. Some builders find themselves facing a "not in my backyard" mentality when trying to work through the municipal approval process to get their projects off the ground.

Matters get more interesting when the Province's green energy initiatives comes up against municipal opposition to development of renewable energy projects. This conflict recently made its way to the Ontario Court of Appeal in wpd Sumac Ridge Wind Incorporated v. The Corporation of the City of Kawartha Lakes ("Sumac v. Kawartha").(1)

Sumac v. Kawartha is a cautionary tale for municipal officials on the limits of municipal jurisdiction in the face of provincial initiatives. The respondent builder, wpd Sumac Ridge Wind Incorporated ("Sumac"), applied for and obtained provincial approval under Ontario's Green Energy and Green Economy Act for its proposal to build wind turbines in the City of Kawartha Lakes (the "City"). As part of its application, Sumac referred to the development and use of a public road allowance known as Wild Turkey Road. Sumac obtained provincial approval for its project in December of 2013.

To complete the project, Sumac required the City's approval on a number of issues, including the upgrading, use and eventual decommissioning of Wild Turkey Road. But in March of 2014 the City passed a resolution (the "Resolution") providing that:

Any request by wpd Canada and/or future successors for the use of the unopened portion of Wild Turkey Road for property access and/or other vehicular traffic to support proposed wind turbine development be refused.(2)

Sumac appealed the City's decision. The Ontario Divisional Court found against the City on two counts: 1) the City breached the Municipal Act by interfering with and frustrating a provincial enactment, and 2) the City acted in bad faith when it passed a by-law clearly intended to prevent Sumac from completing its project.

The Divisional Court referred to the Municipal Act, which provides at Section 14 that:

Conflict between by-law and statutes, etc.

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

(a) a provincial or federal Act or a regulation made under such an Act; or

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

Same

(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.

In effect, this section prevents municipalities from enacting municipal by-laws that would conflict with or frustrate an act of the Province. In Sumac v. Kawartha, the provincial approval for Sumac's wind turbine project was considered to be "an instrument of a legislative nature". Importantly, the provincial approval included approving use of Wild Turkey Road. The Resolution frustrated the Province's approval because it would prevent Sumac from doing what the Province specifically approved. The Divisional Court quashed the Resolution because it violated Section 14 of the Municipal Act.

The Divisional Court quashed the Resolution on another ground - bad faith. The Divisional Court found that the City did not pass the Resolution to govern the use of roads (which is legitimately within the City's jurisdiction). Rather, the Court found that the Resolution was passed in an effort to do indirectly what the City was unable to do directly, namely prevent Sumac's project from going forward.

The Court found that the City acted in bad faith in a number of ways:

1. Sumac attempted to work with the City on the municipal approval for its project before provincial approval had been granted. The City refused, stating it wanted to wait until the provincial approval process was complete.

2. The City was invited to participate in the provincial approval process and, while the City objected generally to the project, it did not refer to any concerns about the use of Wild Turkey Road.

3. The City changed its position regarding Wild Turkey Road. The City initially stated it was an unopened road allowance but then changed its position, suggesting it was a nature trail over private land (though the City acknowledged there was no clear delineation of its legal location).

4. A report to the City counsel that preceded the Resolution noted a number of issues the City would have to address with Sumac if it wished to consider allowing Sumac to use Wild Turkey Road. The City did not engage with Sumac of any of the listed issues, but instead passed the Resolution preventing the use of Wild Turkey Road altogether.

5. The City advised Sumac that it would have to complete a Municipal Class Environmental Assessment. When Sumac received provincial approval it started the Assessment process, but the City passed the Resolution before the Assessment was finished.

The Divisional Court found that, based on the City's actions, the City was attempting to stop Sumac's project from going forward as opposed to exercising legitimate municipal jurisdiction over the use of roads.

The Divisional Court ordered that the matter be reverted back to the City, to consider and decide in good faith Sumac's application for the use of Wild Turkey Road, and to consider and decide in good faith Sumac's applications for municipal permits required for the expeditious construction of Sumac's project.

The City appealed. However, the Ontario Court of Appeal dismissed the appeal, upholding the Divisional Court's findings and orders.(3)

Sumac v. Kawartha is an interesting insight into the interaction between provincial initiatives and the municipal approval process. Municipalities should exercise caution and ensure that their objections to provincial initiatives do not lead to improper use of municipal approval powers.

David Reid is an Associate Lawyer practicing in the Real Estate Department at Brazeau Seller Law. David can be reached at 613-237-4000, ext. 252 or dreid@brazeauseller.com. For more information about Brazeau Seller Law, please visit www.brazeauseller.com.

Disclaimer and Cautionary Note

The foregoing provides only an overview and does not constitute legal advice or establish a lawyer-client relationship with the author or BrazeauSeller.LLP. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained from a qualified lawyer.

(1) 2016 ONSC 4164

(2) ibid.

(3) wpd Sumac Wind Ridge Incorporated v. Kawartha Lakes (City), 2016 ONCA 496

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