A-481-77
Saskatchewan Power Corporation and Many
Islands Pipe Lines Ltd. (Appellants)
v.
TransCanada PipeLines Limited and the National
Energy Board (Respondents)
and
Attorney General of Canada and Attorney General
of Saskatchewan (Intervenors)
Court of Appeal, Thurlow C.J., Pratte J. and Kerr
D.J.—Ottawa, April 1, 2 and May 29, 1980.
Crown — Appeal from decision of National Energy Board
ordering that appellants pay for gas purchased from respond
ents at a price higher than the contract price — Whether the
Board has jurisdiction under the National Energy Board Act
to alter the terms of a contract — Whether ss. 50, 53 and 61 of
the National Energy Board Act are ultra vires — National
Energy Board Act, R.S.C. 1970, c. N-6, ss. 2, 18(1), 50, 51, 52,
53, 54, 60, 61, as amended — Petroleum Administration Act,
S.C. 1974-75-76, c. 47, s. 63 — The British North America
Act, 1867, 30 & 31 Vict., c. 3 (U.K.) [R.S.C. 1970, Appendix
II, No. 51, s. 92(10)(a) — Natural Gas Prices Regulations,
SOR/77-13.
This is an appeal from an order by the National Energy
Board on an application by the respondent TransCanada Pipe
Lines Limited made pursuant to sections 50 and 53 of the
National Energy Board Act for orders fixing just and reason
able tolls and disallowing any existing tariffs or rates or tolls.
Appellants claim that the Board was wrong in prescribing a
price at which Alberta gas, which was to be delivered under the
terms of a contract fixing a much lower price therefor, might
be sold by TransCanada to the appellants. Appellants' counsel
argues first that the National Energy Board Act does not
confer upon the Board any jurisdiction to alter the terms of a
contract, here, the price for gas to be redelivered by Trans-
Canada as distinguished from a toll to be paid for the carriage
of gas, and second, that sections 50, 53 and 61 of the Act, if
interpreted as the statutory basis for the Board's jurisdiction
over the price, are ultra vires the Parliament of Canada. What
is in issue is the portion of the new rates and tolls approved by
the Board which sets out "Imputed Alberta Border Price".
Held, the appeal is dismissed. Sections 50 and 53 of the
National Energy Board Act do not give the Board authority to
prescribe or interfere with the selling price of gas beyond what
may be involved in requiring the carrier to charge the appropri
ate transportation tolls prescribed by the Board. However, the
fact that the parties have contracted for the sale of gas at a
certain price with no reference in the contract to any portion of
the price being a transportation toll, does not deprive the Board
of its authority under section 53 to disallow the contract as a
tariff of tolls when it considers that an unduly low, let alone
negative tariff, is contrary to the provisions of the Act requiring
that tolls be just and reasonable. Having disallowed the con
tract as a tariff, the Board's authority with respect to it and the
effect of section 61 of the Act were spent. In this view of the
scope of Part IV of the Act, it is unnecessary to consider the
submission that the Act is ultra vires in so far as it authorizes
the Board to regulate the price at which the gas referred to in
the contract may be sold. As for the "Imputed Alberta Border
Price", it serves only as information as to an element of a price
that has been or is about to be prescribed by the Governor in
Council under the Petroleum Administration Act.
Per Pratte J.: Section 61 of the National Energy Board Act
clearly empowers the Board to prescribe, in the circumstances
contemplated by that section, the price at which gas may be
sold by a pipeline company. With respect to the constitutional
validity of section 61, it is clear that it is, in pith and substance,
legislation relating to the operation of an interprovincial under
taking since it was enacted on the assumption that one of the
normal ways of operating an undertaking such as a gas pipeline
is for the operator to transmit and sell its own gas.
APPEAL.
COUNSEL:
G. Henderson, Q.C., M. Sychuk, Q.C. and Y.
Hynna for appellants.
G. D. Finlayson, Q.C. and J. H. Francis, Q.C.
for TransCanada PipeLines Limited.
T. B. Smith, Q.C. and P. G. Griffin for
Attorney General of Canada and the National
Energy Board.
E. Binavince for Attorney General of Sas-
katchewan.
SOLICITORS:
Gowling & Henderson, Ottawa, for appel
lants.
McCarthy & McCarthy, Toronto, for Trans-
Canada PipeLines Limited.
Deputy Attorney General of Canada for
Attorney General of Canada.
F. Lamar, Q.C., Ottawa, for National Energy
Board.
Gowling & Henderson, Ottawa, for Attorney
General of Saskatchewan.
The following are the reasons for judgment
rendered in English by
THURLOW C.J.: This is an appeal under subsec
tion 18(1) of the National Energy Board Act
(N.E.B. Act), R.S.C. 1970, c. N-6, as amended,
from order TG-1-76 made by the National Energy
Board on November 26, 1976 on an application by
the respondent TransCanada PipeLines Limited,
(TransCanada). The appellants' case is that the
Board exceeded its jurisdiction by prescribing a
price at which Alberta gas, which was to be deliv
ered under the terms of a contract fixing a much
lower price therefor, might be sold by Trans-
Canada to the appellants.
The contract was made in 1969 and is the
contract which was involved in Saskatchewan
Power Corp. v. TransCanada Pipelines Ltd.
[ 1979] 1 S.C.R. 297. Under it Saskatchewan
Power Corporation (SPC) sold gas to Trans-
Canada for some years at 23.50¢ to 24.50¢ per
M.C.F. and in 1976 became entitled to call for
delivery to it by TransCanada, over a period of
years of an equivalent quantity of gas at 23.50¢
per M.C.F. Between 1969 and 1976 the price of
Alberta gas acquired by TransCanada for delivery
to its customers rose very sharply. In the meantime
in 1975, Natural Gas Prices Regulations, SOR/
75-630, made under the Petroleum Administra
tion Act, S.C. 1974-75-76, c. 47, came into effect
and prescribed the prices at which gas produced in
Alberta and entering into international and inter-
provincial trade might be sold.
Almost all of the gas transported via Trans-
Canada's pipeline is owned by TransCanada which
buys it from suppliers, mostly in Alberta, and sells
it to distributing companies. The difference be
tween the price at which the gas is sold and the
price paid for it represents TransCanada's gross
earnings from acquiring, transporting and selling
such gas. Minor quantities of gas owned by others
are transported via the pipeline at rates fixed by
the Board.
The Board's order read as follows:
UPON an application by the Applicant dated the 16th day of
July, 1976, inter alia, for Orders under sections 50 and 53 of
the National Energy Board Act fixing the just and reasonable
rates or tolls the Applicant may charge for or in respect of gas
sold by the Applicant in Canada and for transportation services
to Saskatchewan Power Corporation, Greater Winnipeg Gas
Company, Consolidated Natural Gas Limited and Gaz Mé-
tropolitain, inc. and disallowing any existing tariffs or rates or
tolls or portion thereof that are inconsistent with the just and
reasonable rates or tolls so fixed, effective the 1st day of
January, 1977; and an Order approving the tariff provisions
filed with the application and disallowing any provisions exist-
ing in the present tariff or in contracts for the various services
under consideration in the said application which are inconsist
ent with the tariff provisions so approved;
IT IS ORDERED THAT:
1. The Applicant shall charge in respect of gas sold by it in
Canada and in respect of its T-Service and Transportation
Service, the rates and tolls specified in Schedule A hereto.
2. The Applicant's proposed tariff amendments in respect of
its General Terms and Conditions, its Rate Schedules, and its
Transportation Contracts, all as more particularly set forth
under Tabs 1 to 7 inclusive under the heading "Tariff ' in the
said application, and as set forth in Exhibit No. 54 filed at the
hearing of the said application, be and the same are hereby
approved.
3. The Applicant's proposed tariff amendments to its Rate
Schedules and its Transportation Contracts, all as more par
ticularly set forth in Exhibit No. 55 filed at the hearing of the
said application, be and the same are hereby disallowed.
AND IT IS FURTHER ORDERED THAT:
4. The Applicant shall forthwith file with the Board and serve
upon all parties to the hearing of this application, new tariffs,
tolls and rates conforming with this Order.
5. Notwithstanding the filing of the said new tariffs, tolls and
rates, the same shall remain suspended and be of no effect until
the 1st day of January, 1977.
6. Those provisions of the Applicant's tariffs, tolls and rates,
or any portion thereof, that are contrary to any provisions of
the National Energy Board Act, or to any Order of the Board
including this Order, be and the same are hereby disallowed,
such disallowance to be effective on the 31st day of December,
1976.
The material parts of Schedule A are:
SCHEDULE A
TRANSCANADA PIPELINES LIMITED
RATES AND TOLLS FOR CANADIAN SALES,
TRANSPORTATION & T-SERVICE
EFFECTIVE: 1 January 1977.
TRANSPORT- TRANSPORT- IMPUTED
ATION ATION ALBERTA
DEMAND COMMODITY BORDER
PARTI- RATE RATE RATE PRICE
CULARS SCHEDULE (S/MCP/M0) (¢/MCF) (¢/MMBTU)
Saskatchewan
Zone cD 0.711 0.975 105.228
The words "Transportation & T-Service" in the
title refer to tolls for transporting gas not owned
by TransCanada and neither they nor the rates
and tolls to which they refer (which I have not set
out) are significant for present purposes. Nor is
the Transportation Demand Rate 0.711 or the
Transportation Commodity Rate 0.975 challenged.
What is in issue is the portion which sets out
"Imputed Alberta Border Price (¢/MMBtu)
105.228".
The appellants' first submission, as set out in
their memorandum, was that
(a) the National Energy Board Act does not confer upon the
Board any jurisdiction to alter the terms of a contract, in the
instant case, the price which the appellants under the contract
should pay for gas to be redelivered by TransCanada under the
contract as distinguished from a toll which is to be paid for the
carriage of gas;
(b) sections 50, 53 and 61 of the National Energy Board Act, if
interpreted as the statutory basis for the Board's jurisdiction
over the price in the contract, are ultra vires the Parliament of
Canada.
In presenting his argument on (a), counsel, as I
understood him, conceded the jurisdiction of the
Board to fix the transportation tolls set out as
Demand Rate and Commodity Rate but contended
that what is referred to as the Imputed Alberta
Border Price is not a rate or toll for the transporta
tion of gas but represents the value of the gas as a
commodity and is the commodity element in the
total price at which the gas is to be delivered by
TransCanada to the appellants. I agree with this
position. In my view, the item, whatever its precise
characterization may be, is not a rate or toll for
the transportation of gas. It is the value or price,
or part of the price to be paid for the gas.
I turn now to the extent of the authority of the
Board under Part IV of the N.E.B. Act. The Part
is entitled "Traffic, Tolls and Tariffs" and it
applies to the transportation of gas and oil. It
includes sections 50, 53 and 61.
At the relevant time the word "toll" was defined
in section 2 as follows:
"toll" includes any toll, rate, charge or allowance charged or
made for the shipment, transportation, transmission, care,
handling or delivery of hydrocarbons, or for storage or
demurrage or the like.
The word "tariff' was not defined. In the con
text in which it is found in Part IV its ordinary
meaning, in my opinion, is simply that of a list of
tolls or rates. In some contexts it can connote a toll
or rate but it does not bear that meaning as well in
the context in which it is found in Part IV. Part IV
speaks of tolls and rates and when it uses the word
"tariff' it does so, in my view, only in the sense of
a list of tolls or rates.
Sections 50 to 54 inclusive and 61 provide:
50. The Board may make orders with respect to all matters
relating to traffic, tolls or tariffs.
51. (1) A company shall not charge any tolls except tolls
specified in a tariff that has been filed with the Board and is in
effect.
(2) Where the gas transmitted by a company `through its
pipeline is the property of the company, the company shall file
with the Board, upon the making thereof, true copies of all the
contracts it may make for the sale of gas and amendments from
time to time made thereto, and the true copies so filed shall be
deemed, for the purposes of this Part, to constitute a tariff
pursuant to subsection (1).
52. All tolls shall be just and reasonable, and shall always,
under substantially similar circumstances and conditions with
respect to all traffic of the same description carried over the
same route, be charged equally to all persons at the same rate.
53. The Board may disallow any tariff or any portion thereof
that it considers to be contrary to any of the provisions of this
Act or to any order of the Board, and may require a company,
within a prescribed time, to substitute a tariff satisfactory to
the Board in lieu thereof, or may prescribe other tariffs in lieu
of the tariff or portion thereof so disallowed.
54. The Board may suspend any tariff or any portion thereof
before or after the tariff goes into effect.
61. Where the gas transmitted by a company through its
pipeline is the property of the company, the differential be
tween the cost to the company of the gas at the point where it
enters its pipeline and the amount for which the gas is sold by
the company shall, for the purposes of this Part, be deemed to
be a toll charged by the company to the purchaser for the
transmission thereof.
In my opinion these provisions are concerned
entirely with the rates or tolls to be charged by a
carrier in respect of the transportation of oil and
gas. The rates and tolls are in respect of the
transportation of gas and oil in international and
interprovincial trade and what the Board may
prescribe under sections 50 and 53 are the rates
and tolls for such transportation. That, I think,
becomes apparent from a perusal of the statute
and, particularly Part IV, as a whole. There is no
requirement that the price at which gas or oil is
sold shall be just or reasonable or that it be
charged equally to all persons at the same rate.
Nor is there any authority given to the Board by
these provisions to prescribe or interfere with the
price at which oil or gas is to be sold beyond what
may be involved in requiring the carrier to charge
the appropriate transportation tolls prescribed by
the Board. On the other hand, the fact that parties
have contracted for the sale of gas at a price to be
paid for it at the point where it is to be delivered,
with no reference in the contract to any portion of
the price being a transportation toll, cannot
deprive the Board of its undoubted authority under
section 53 to disallow the tariff of transportation
tolls represented by the contract, to require the
carrier to substitute a tariff satisfactory to the
Board and to prescribe a tariff of tolls for the
transportation of the gas which is the subject
matter of the contract in place of the tariff that
has been disallowed.
In the present case the contract contained no
provision allocating any portion of the 23.50¢ per
M.C.F. as a toll for the transportation of the gas
and as on the material before the Board the cost of
the gas to TransCanada was much more than
23.50¢ per M.C.F., the result of the application of
section 61 was that the toll to be charged was zero.
In my view, it was within the authority of the
Board under section 53 to disallow and disregard
the contract as a tariff of tolls when it considered,
as it did, that such a tariff was contrary to provi
sions of the Act requiring that tolls be just and
reasonable and be charged, under substantially
similar circumstances and conditions with respect
to traffic over the same route, equally to all per
sons at the same rate.
It was also within the authority of the Board to
prescribe the appropriate tolls for the transporta
tion of the gas referred to in the contract and to
require the carrier to file a tariff satisfactory to the
Board.
However, in my opinion, having disallowed the
contract as a tariff, the Board's authority with
respect to it and the effect of section 61 were
spent. The contract had been filed under subsec
tion 51(2). The filed copies thereupon were
deemed to be a tariff. As the contract did not in
fact purport to be a tariff and to fix tolls for
transportation of gas, section 61 applied. But the
result of its application was that there was nothing
that could be regarded as a toll. The Board there
upon disallowed the contract as a tariff and pre
scribed what it regarded as appropriate tolls.
Nothing in the Act, as I read it, authorized any
further interference by the Board with the terms of
the contract. Nor is there any further provision of
the Act which affects or changes it. Moreover, the
structure and purpose of section 61, in my view, do
not lend themselves to an interpretation which
would enable the Board, by the exercise of its
power under section 50 to make orders respecting
tariffs and tolls, to require that a price be charged
for gas sold by TransCanada that would be high
enough to recover the acquisition cost of the gas
plus the transportation tolls so that the difference
between that selling price and the cost of the gas
could be deemed to be a toll. And in any event, the
Imputed Alberta Border Price is not, as I under
stand it, the cost to TransCanada PipeLines of the
gas at the point where it enters TransCanada's
pipeline, within the meaning of section 61, but is
simply a figure arrived at by a mathematical
formula devised for the purposes of the Natural
Gas Prices Regulations.
In this view of the scope of Part IV of the
N.E.B. Act it is unnecessary to consider or deal
with the submission that the Act is ultra vires in so
far as it authorizes the Board to regulate the price
at which the gas referred to in the contract may be
sold.
This brings me to the question of what it is that
the order of the Board purports to do when it
includes in Schedule A an "Imputed Alberta
Border Price" on the same line with the transpor
tation tolls prescribed by the Board. If it was
intended thereby to prescribe the price at which
the gas was to be sold it would, I think, be beyond
the authority of the Board under the N.E.B. Act
and would have no proper place in an order pur
porting to be made under the authority of that
Act. It ought, in that case, to be deleted.
But it is not to be lightly assumed that the
Board exceeded its powers under the N.E.B. Act
and if it is possible to do so the Board's order
should be given an interpretation which is con-
sistent with and within the Board's authority under
the Act.
In its reasons the Board, after reviewing the
facts and submissions of the appellant and refer
ring to the fact that the application of the rule of
section 61 resulted in what the Board character
ized as a negative transportation toll said:
Accordingly, the Board finds that there are not substantially
dissimilar circumstances and conditions involved in the sale of
the gas to SPC under the Contract, such as would warrant a
departure from the statutory requirement for equality of tolls
on the TransCanada pipeline system. Moreover in the Board's
view, an unduly low, let alone negative, transportation toll is no
more just and reasonable than an excessively high one. Having
regard to the evidence adduced respecting this transaction, the
Board finds a negative transportation toll of some 81.98 cents
per Mcf would not be just and reasonable as required by section
52 of the Act.
In view of the various factors considered in the earlier
sections of these Reasons, the Board finds that a just and
reasonable transportation toll in respect of the gas to be sold to
SPC in the test year under the Contract, would be the Sas-
katchewan Zone CD rate set out in Schedule A to Order No.
TG-1-76, which rate is applicable to all volumes of gas sold by
TransCanada to SPC in the Saskatchewan Zone. [Emphasis
added.]
It appears to me that what the Board is express
ing in this passage is that the just and reasonable
transportation toll in respect of the gas is the
Saskatchewan CD rate set out in Schedule A to
the order. But whether or not that is intended to
include the Imputed Alberta Border Price, the
wording of the order itself, that is effective to
prescribe tolls, is that contained in paragraph 1
thereof. For convenience, it is repeated:
1. The Applicant shall charge in respect of gas sold by it in
Canada and in respect of its T-Service and Transportation
Service, the rates and tolls specified in Schedule A hereto.
[Emphasis added.]
The rates and tolls specified in Schedule A in
respect of gas sold by the applicant, TransCanada,
are those which follow the title. But as only two of
the figures given are rates and tolls in respect of
the transportation of gas and are clearly so entitled
and as the title above the other figure does not
even purport to indicate that what is below it is a
transportation charge or even that it is a rate or a
toll, I am of the opinion that the third column is
not referred to in the order and is not prescribed
by it, and that it is only the rates and tolls shown
under the headings, "Transportation Demand
Rate" and "Transportation Commodity Rate"
that are prescribed by the order. The figures under
the column headed "Imputed Alberta Border
Price", in my view, serve no purpose in the order
other than as information as to an element of a
price that has been or is about to be prescribed,'
not by the Board by the order under appeal or any
other order of the Board, but by the Governor in
Council (albeit with some assistance from and on
the recommendation of the Board), under the
Petroleum Administration Act. The validity of the
prescription made under that Act is not in issue on
this appeal and does not require consideration.
Further, on examining the items referred to in
paragraph 2 of the order, I find nothing that is
inconsistent with this interpretation of it. By para
graph 2, the applicant's proposed tariff amend
ments are approved and by paragraph 4 Trans-
Canada is ordered to file new tariffs, tolls and
rates conforming with the order. This, I take it,
would require TransCanada to file a new tariff
which would include a paragraph as follows:
3. RATES
3.1 The applicable rates and Rate Schedule for service
hereunder in each zone are as follows:
TRANSPORTATION
Applicable Imputed
Rate Alberta Demand Daily
Schedule Border Commodity Rate Demand
and Rate Price Rate $/Mcf/ Rate per
Zone ¢/MMBtu ¢/Mcf Month MCF
CD-S—Sask.
cD-M—Manitoba
ci-w—Western
CD-N—Northern
cD-E—Eastern
This however, in my view, cannot change what
is in substance a price into a rate or toll for
transportation and I do not think it even purports
to do so. This is not a case of a tariff setting out a
single price which includes both the value of the
commodity and the charge for its transportation.
In this tariff, the several items are specified as
' See Order in Council P.C. 1976-3122 [SOR/77-13] made
on December 16, 1976 and effective from January 1, 1977.
being the Imputed Alberta Border Price and the
several rates for transportation to the various
zones. It is apparent that the Imputed Alberta
Border Price is not a rate or toll for transportation
and its presence in the tariff required to be filed
has no more effect than it has in paragraph 1 of
the order.
In this view, there is nothing of substance wrong
with the order. The figures in question could be
deleted but can equally well be allowed to remain.
But in order to make somewhat plainer what the
scope and effect of the order are, I would vary
paragraph 1 by inserting before the word "rates"
in the third line, the word "transportation" and
paragraph 4 by inserting before the word "con-
forming" in the fourth line the words "for trans
portation". These variations having been made, I
would dismiss the appeal.
Having regard to Rule 1312 there should be no
award of costs.
* * *
The following are the reasons for judgment
rendered in English by
PRATTE J.: I have had the advantage of reading
the reasons for judgment prepared by the Chief
Justice. I regret not to be able to share his views as
to the powers of the National Energy Board and
the meaning of the order under attack.
By that order, as I understand it, the Board has
in effect determined that the appellants would
have to pay, for gas they had purchased from
TransCanada PipeLines Limited for delivery in
1977, a price much higher than the sum of 23.5
cents per Mcf that the parties had agreed upon in
a contract dated November 1, 1969, pursuant to
which those purchases had been made. The appel
lants contest the authority of the Board to make
such an order which, according to them, has the
effect of varying the terms of the contract of
November 1, 1969.
That contract of November 1, 1969, between
the appellants and TransCanada was a long term
gas supply contract made for a period of twelve
years expiring on October 31, 1981. It provided
that, from November 1, 1975, until the expiry of
the contract, the appellants would have the option,
if they so desired, to buy certain volumes of gas
from TransCanada at the price of 23.5 cents per
Mcf. That gas was to be delivered at Trans-
Canada's main transmission line at a point situat
ed near Success, in Saskatchewan. The appellants
took advantage of that option and sent written
notices to TransCanada indicating the volumes of
gas they had decided to buy during the contract
years commencing on November 1, 1976, and
November 1, 1977. TransCanada transmitted
those notices together with the contract of Novem-
ber 1, 1969, to the National Energy Board for
filing pursuant to subsection 51(2) of the National
Energy Board Act. Finally, on July 15, 1976,
TransCanada filed with the National Energy
Board the application which led to the order under
attack. That was an application under sections 50
and 53 of the National Energy Board Act for
orders, inter alia, "fixing the just and reasonable
rates or tolls the Applicant may charge for or in
respect of gas sold by the Applicant in Canada ...
and disallowing any existing tariffs or rates or tolls
or portion thereof that are inconsistent with the
just and reasonable rates or tolls so fixed, effective
January 1, 1977." In that application, Trans-
Canada, after referring to the contract of Novem-
ber 1, 1969, and to the fact that the appellants had
exercised their option under that contract, express
ly requested "disallowance of the sales prices set
out in the said contract and substitution therefor
of the Saskatchewan Zone CD rate proposed in
the present application."
With respect to this request, the Board found
(a) that the gas purchased by the appellants
would be transmitted through TransCanada's
pipeline from Alberta to its point of delivery,
near Success, in Saskatchewan;
(b) that the cost of the gas to TransCanada, at
the Alberta border, was the "imputed Alberta
border price" of 105.228¢/MMBtu;
(c) that, under the contract of November 1,
1969, TransCanada was obliged to sell and
deliver that gas to the appellants for a price
considerably lower than that "imputed Alberta
border price";
(d) that there were no reasons why the appel
lants should not pay for gas purchased from
TransCanada, the same price as other people in
Saskatchewan who had to pay the Saskatche-
wan Zone CD rate, which rate included, in
addition to the imputed Alberta price, reason
able transportation charges.
As I understood the argument made by Mr.
Henderson on behalf of the appellants, he did not
contest any of those findings. He merely chal
lenged the conclusion that the Board drew from
those findings, namely, that the appellants would
have to pay the Saskatchewan Zone CD rate for
gas purchased pursuant to the contract of Novem-
ber 1, 1969. Mr. Henderson challenged that con
clusion on two grounds. He said, first, that the
National Energy Board Act did not empower the
Board to vary the terms of a contract for the sale
of gas and, second, that, if that Act were to be
interpreted as conferring that power upon the
Board, then it would be unconstitutional and ultra
vires the Parliament of Canada.
The relevant provisions of the National Energy
Board Act are found in Part IV of that Act, under
the headings "TRAFFIC, TOLLS AND TARIFFS".
Those provisions must, of course, be read in the
light of the definitions found in section 2:
2. In this Act
"Board" means the National Energy Board;
"company" includes
(a) a person having authority under a special act to construct
or operate a pipeline, and
(b) a body corporate incorporated or continued under the
Canada Business Corporations Act and not discontinued
under that Act;
"pipeline" means a line for the transmission of gas or oil
connecting a province with any other or others of the prov
inces, or extending beyond the limits of a province ...;
"toll" includes any toll, rate, charge or allowance charged or
made for the shipment, transportation, transmission, care,
handling or delivery of hydrocarbons, or for storage or
demurrage or the like.
Most of the provisions of Part IV of the Act
apply to companies operating either oil or gas
pipelines. The most important of those provisions
read as follows:
50. The Board may make orders with respect to all matters
relating to traffic, tolls or tariffs.
51. (1) A company shall not charge any tolls except tolls
specified in a tariff that has been filed with the Board and is in
effect.
52. All tolls shall be just and reasonable, and shall always,
under substantially similar circumstances and conditions with
respect to all traffic of the same description carried over the
same route, be charged equally to all persons at the same rate.
53. The Board may disallow any tariff or any portion thereof
that it considers to be contrary to any of the provisions of this
Act or to any order of the Board, and may require a company,
within a prescribed time, to substitute a tariff satisfactory to
the Board in lieu thereof, or may prescribe other tariffs in lieu
of the tariff or portion thereof so disallowed.
54. The Board may suspend any tariff or any portion thereof
before or after the tariff goes into effect.
55. A company shall not make any unjust discrimination in
tolls, service or facilities against any person or locality.
There are three provisions in Part IV, however,
that apply exclusively to gas pipeline companies:
subsection 51(2) and sections 60 and 61. They
read as follows:
51....
(2) Where the gas transmitted by a company through its
pipeline is the property of the company, the company shall file
with the Board, upon the making thereof, true copies of all the
contracts it may make for the sale of gas and amendments from
time to time made thereto, and the true copies so filed shall be
deemed, for the purposes of this Part, to constitute a tariff
pursuant to subsection (1).
60. Where the Board finds such action necessary or desirable
in the public interest, it may direct a company operating a
pipeline for the transmission of gas to extend or improve its
transmission facilities to provide facilities for the junction of its
pipeline with any facilities of, and sell gas to, any person or
municipality engaged or legally authorized to engage in the
local distribution of gas to the public, and for such purposes to
construct branch lines to communities immediately adjacent to
its pipeline, if the Board finds that no undue burden will be
placed upon the company thereby, but the Board has no power
to compel a company to sell gas to additional customers if to do
so would impair its ability to render adequate service to its
existing customers.
61. Where the gas transmitted by a company through its
pipeline is the property of the company, the differential be
tween the cost to the company of the gas at the point where it
enters its pipeline and the amount for which the gas is sold by
the company shall, for the purposes of this Part, be deemed to
be a toll charged by the company to the purchaser for the
transmission thereof.
As I read them, those provisions were enacted on
the assumption that gas pipelines could normally
be operated in two ways. First, a gas pipeline
company could act merely as a carrier who, for a
remuneration, transports his customers' goods.
That is the method of operation contemplated in
the provisions of Part IV which apply to both gas
and oil pipelines. The second method of operating
a gas pipeline is referred to in subsection 51(2)
and sections 60 and 61, which all contemplate that
the gas pipeline company will operate its undertak
ing by transmitting and selling its own gas. When
a gas pipeline is operated in this manner, section
61 provides that:
... the differential between the cost to the company of the gas
at the point where it enters its pipeline and the amount for
which the gas is sold by the company shall, for the purposes of
this Part, be deemed to be a toll charged by the company to the
purchaser for the transmission thereof.
The effect of that section, which deems the "dif-
ferential" to which it refers to be a toll charged for
the transmission of gas, is to confer on the Board
the same powers with respect to that differential as
those possessed by the Board in relation to mere
transportation tolls. As the Board may disallow a
tariff specifying unreasonable tolls and prescribe
tolls that it considers to be just and reasonable, it
may, in the same manner, disallow a contract for
the sale of gas entered into by a pipeline company
and prescribe the "differential" that must exist
between the cost of the gas to the company and the
price for which it is sold.
This being my interpretation of section 61, it
follows that, in my view, that section clearly
empowers the Board to prescribe, in the circum
stances contemplated by section 61, the price at
which gas may be sold by a pipeline company. For
that reason, I do not find merit in the appellants'
first submission that the Board exceeded the
powers conferred on it by the statute in making the
order here in question.
The appellants' second ground of attack relates
to the constitutional validity of section 61 of the
National Energy Board Act. If that section, it is
said, purports to confer on the Board the authority
to alter the price agreed upon in a contract for the
sale of gas, then it constitutes legislation in rela
tion to property and civil rights exceeding the
constitutional competence of the Parliament of
Canada.
In answer to that proposition, it is first neces
sary to observe that the legislative competence of
provincial legislatures in the field of property and
civil rights is not exclusive and does not extend to
all the matters comprised in that field. Parliament
also has the right to legislate on that class of
subject in all cases where section 91 or paragraph
92(10)(a) of The British North America Act,
1867, [R.S.C. 1970, Appendix II, No. 5] authorize
it to adopt such legislation. Under paragraph
92(10)(a), Parliament has legislative jurisdiction
over interprovincial undertakings like the gas and
oil pipelines to which the National Energy Board
Act applies. It is not disputed that, in the exercise
of that jurisdiction, Parliament is empowered to
regulate the transportation rates to be charged by
pipeline operators and to render ineffective trans
portation contracts providing for rates different
from those fixed in accordance with the scheme
approved by Parliament. Now, the regulation of
the conditions of a contract of transport is as much
a matter of property and civil rights as the regula
tion of the conditions of a contract of sale. There is
nothing sacrosanct in a contract of sale that would
make it less amenable to federal control than other
kinds of contracts. In my view, the sole question to
be determined here is whether section 61, which
subjects in certain cases contracts for the sale of
gas to the regulating authority of the Board, is, in
pith and substance, legislation relating to the oper
ation of an interprovincial undertaking. In my
view, it clearly is since it was enacted on the
assumption, which I believe to be founded in fact,
that one of the normal ways of operating an
undertaking such as a gas pipeline is for the
operator to transmit and sell its own gas. 2
For these reasons, I would dismiss the appeal.
* * *
2 A similar opinion was expressed by Gibson J. in Northern
and Central Gas Corp. v. National Energy Board [1971] F.C.
149.
The following are the reasons for judgment
rendered in English by
KERR D.J.: The relevant facts and issues are set
forth in the reasons of the Chief Justice, which I
have had the benefit of considering.
The National Energy Board, (hereinafter called
the "Board"), is a creature of statute, and the
general principle applicable to such a body is that
its jurisdiction is what the statute gives by express
terms or by necessary implication. There is section
63 of the Petroleum Administration Act which
reads as follows:
63. In the event of a conflict between any price prescribed
under this Part and any price established under Part IV of the
National Energy Board Act, the prescribed price under this
Act prevails.
That section does not confer a power, but there
may be implication in it that the Board has power
under Part IV of the National Energy Board Act
to establish a selling price for gas where necessary
to do so incidentally to the exercise of its regula
tion of tolls.
In Saskatchewan Power Corp. v. TransCanada
Pipelines Ltd. [1979] 1 S.C.R. 297 at page 309,
the judgment of the Supreme Court of Canada set
forth the following addendum to the reasons for
decision of the Board (the same reasons that are
before this Court in this appeal):
Subsequent to the filing of this application with the Board,
the Governor in council prescribed prices at which natural gas
produced in the Province of Alberta is to be sold on and for
delivery in areas or zones of Canada outside that Province,
pursuant to section 51(1) of the Petroleum Administration Act.
By Order in Council, P.C. 1975-2533, as amended by O.C.
1975-2731, the Governor in Council has prescribed prices
applicable to, inter alia, sales in the Saskatchewan zone by
TransCanada of natural gas produced in the Province of Alber-
ta. It appears to the Board that the price stipulated in the 1
November 1969 contract, apart from being subject to regula
tion under Part IV of the National Energy Board Act, is
subject to the prices prescribed pursuant to the Petroleum
Administration Act.
By a further amendment made to the Natural
Gas Prices Regulations on December 16, 1976 the
Governor General in Council prescribed the price
at which TransCanada was to sell gas, inter alia,
under CD service in the Saskatchewan zone effec
tive January 1, 1977. The price so prescribed was
the aggregate of
Imputed Alberta Border Price 105.2280/MMBtu
Transportation Demand Rate $ .711/Mcf/Month
Transportation Commodity Rate .9750/Mcf.
(P.C. 1976-3122 SOR/77-13)
In its reasons for decision the Board stated at
page 2-2:
Under the terms of the Federal/Alberta agreement dated 23
June 1976 the price of Alberta gas sold in TransCanada's
Eastern zone will increase from $1.405/MMBtu's to $1.505 on
1 January 1977 for CD Service at 100 per cent load factor.
and at page 7-12 the Board stated:
... Alberta gas, under the scheme of gas pricing established
under Part III of the PAA would enter the TransCanada
system at the Alberta border at a cost to TransCanada of
105.228 cents per MMBtu, as shown at page 2-2 of these
Reasons.
It is clear that the Board had regard for the
provisions of the Petroleum Administration Act
and the prices prescribed pursuant to that Act.
The prices set forth in the Board's order No.
TG-1-76 under appeal herein were identical to the
prices prescribed by said P.C. 1976-3122, and
effective the same day, January 1, 1977.
The Board evidently reached a conclusion that
the price stipulated in TransCanada's contract of
November 1, 1969 is subject to the prices pre
scribed pursuant to the Petroleum Administration
Act.
I think that it is reasonable to infer from the
Board's reasons and the material before the Court
that it was of the opinion that because of that
conclusion, apart from its conclusion that the price
is subject to regulation under Part IV of the
National Energy Board Act, the prices prescribed
by said P.C. 1976-3122 should be included in the
new tariffs, tolls and rates to be charged and filed
pursuant to its said order.
I have no doubt that the Board has power under
Part IV of the National Energy Board Act to
require, and if need be to prescribe, in relation to
the public interest, tolls for transmission of the gas
to which this appeal relates that in its opinion will
be just and reasonable and not unjustly discrimina
tory. I think also that, in forming its opinion as to
such tolls, (in the cost of service, rate base, rate of
return regulatory method that the Board applies,
which is intended by the Board to be just to users
of the utility's facilities and to provide to the
utility a fair return in the foreseeable circum
stances), many factors have to be taken into
account, including the cost of service, in which the
cost to the utility of the gas owned by it forms a
part.
Whether or not the Board has power under said
Part IV to itself independently fix the selling price
of the gas I think that where the selling price is
otherwise conclusively fixed and is binding on the
Board and on the utility and on the users of the
facilities and services of the utility, there is no
occasion for the Board itself to fix a selling price. I
think that in this case the Board accepted and used
the prices prescribed pursuant to the Petroleum
Administration Act because it was of the opinion
that those prices were the prices lawfully charge
able. That opinion was, I think, well founded, and
if it was I am disposed to think that the Board in
the exercise of its administrative and regulatory
jurisdiction could order that the prices be included
in the new tariffs to be filed. Those prices and the
transmission tolls, in the aggregate, were what
would provide the return that the Board con
sidered TransCanada should be permitted to earn
from its pipeline enterprise. The law does not
dictate the order to be made or what order is
proper in a given case.
Overall, and considering the end result of the
Board's order, I am of the opinion that a sufficient
case has not been made for granting the order
sought by the appellants to set aside the Board's
order.
Therefore, I would dismiss the appeal.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.