Environmental Appeal Board

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1 Environmental Appeal Board Fourth Floor 747 Fort Street Victoria British Columbia V8W 3E9 Telephone: (250) Facsimile: (250) Mailing Address: PO Box 9425 Stn Prov Govt Victoria BC V8W 9V1 Website: DECISION NOS WAT-002(a) to 2014-WAT-007(a) In the matter of six appeals under section 92 of the Water Act, R.S.B.C. 1996, c BETWEEN: Harrison Hydro Project Inc. Fire Creek Project Limited Partnership Lamont Creek Project Limited Partnership Stokke Creek Project Limited Partnership Tipella Creek Project Limited Partnership Upper Stave Project Limited Partnership APPELLANTS AND: Comptroller of Water Rights RESPONDENT BEFORE: DATE: APPEARING: A Panel of the Environmental Appeal Board James S. Mattison, Panel Chair Conducted by way of written submissions concluding on December 8, 2014 For the Appellants: For the Respondent: Nicholas R. Hughes, Counsel Christopher Rolfe, Counsel APPEALS [1] Harrison Hydro Project Inc., Fire Creek Project Limited Partnership, Lamont Creek Project Limited Partnership, Stokke Creek Project Limited Partnership, Tipella Creek Project Limited Partnership, and Upper Stave Project Limited Partnership (collectively, the Appellants ) appealed the December 17, 2013 order (the Order ) of Glen Davidson, Comptroller of Water Rights (the Comptroller ), Ministry of Forests, Lands and Natural Resource Operations (the Ministry ). [2] In the Order, the Comptroller concluded that the water rental billed to Harrison Hydro Project Inc. ( Harrison ), as the licensee for five licences that authorize the diversion of water from five different streams for use in hydro power projects, was done in accordance with the Water Act and the Water Regulation. Harrison sought to have the Fire Creek Project Limited Partnership, Lamont Creek Project Limited Partnership, Stokke Creek Project Limited Partnership, Tipella Creek Project Limited Partnership, and Upper Stave Project Limited Partnership (collectively, the Limited Partnerships ) be named as the licensee in each respective water licence, and be billed separately for water power rental in relation to each water licence. If the Limited Partnerships are named as the individual

2 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 2 licensees, the Ministry would charge a lower rate for water power rental, compared to the rate charged if Harrison holds all five licences. [3] These appeals were considered on the basis of written submissions. [4] The Environmental Appeal Board has the authority to hear appeals under section 93 of the Environmental Management Act and section 92 of the Water Act. Section 92(8) of the Water Act provides that, on an appeal, the Board may: (a) send the matter back to the comptroller, regional water manager or engineer, with directions, (b) confirm, reverse or vary the order being appealed, or (c) make any order that the person whose order is appealed could have made and that the board considers appropriate in the circumstances. [5] The Appellants request that the Board set aside the Order, direct the Comptroller to name the Limited Partnership that owns each hydro power project as the licensee in the respective licence, and issue certain other directions to the Comptroller related to the differential in water rental rates. BACKGROUND [6] The background facts that are relevant to the issues in these appeals are relatively straight-forward and not in dispute. The following are the essential facts. [7] The five hydro power projects that are central to this appeal are located on separate streams in the Ministry s South Coast Region: Fire Creek, Stokke Creek, Tipella Creek, Lamont Creek and the Stave River. The Stave River project is referred to as the Upper Stave Project. [8] All of the projects are situated on Crown land, and each project came to the attention of government upon receipt of applications for water licences under the Water Act, and Crown land tenures under the Land Act. [9] Each water licence is appurtenant to the Crown land specified in the associated Crown land tenure. The works authorized under each licence include an intake for water diversion, a penstock, access roads, a powerhouse, a tailrace, and a transmission line. [10] Harrison holds all of the Crown land tenures associated with the five water licences, and is the general partner for each of the Limited Partnerships. However, according to the Appellants, each hydro power project is separately owned by the respective Limited Partnership for the project. [11] The Comptroller maintains that the Order is based on his finding that Harrison is the registered owner of the interests in the land to which the five water licences are appurtenant, and that the power produced at the plants on those lands should be aggregated for the purpose of calculating water rentals in accordance with section 16(4)(c) of the Water Regulation, B.C. Reg. 204/88 (the Regulation ). Section 16(4) of the Regulation states as follows:

3 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 3 16 (4) For the commercial and general categories, there shall be separate rental charges at the rates for the calendar year when the determination is made, with the charge or charges being based on (a) the licensee's construction capacity, if any, (b) the balance of the authorized capacity other than construction capacity, and (c) subject to subsection (5), the total of the output from all power developments owned or operated by a single licensee during the preceding calendar year. [underlining added] [12] The Appellants submit that the Comptroller erred when he interpreted the words owner and licensee in the Water Act by reference to the definition of owner under the Land Title Act, R.S.B.C. 1996, c. 50, and when he relied on the single licensee criterion in administering section 16(4)(c) of the Regulation. The Appellants also submit that, from 2007 until events that led to the issuance of the Order, the Ministry recognized each Limited Partnership as the licensee in respect of the water licence and the Crown land tenure for each project, and the Ministry billed water rentals on that basis. [13] To fully appreciate the parties submissions, it is helpful to review the history of the hydro power projects, the water licences, the tenures over Crown land, and the business relationships between the Appellants and certain other business entities. These matters are summarized below. Events leading to the issuance of the water licences [14] Although none of the water licence applications were provided to the Panel, it is obvious from the correspondence that all five projects were not initiated by the Appellants; rather, they were initiated by other business entities and/or persons. [15] From 2004 to 2006, applications for the five water licences and other associated approvals were made by certain former owners of the hydro power projects, including Cloudworks Energy Inc. ( Cloudworks ) or its principals, David Andrews and Nick Andrews. [16] In August 2005, the Regional Water Manager issued the water licences for the Fire Creek Project and the Stokke Creek Project, which did not require environmental assessment certificates. The Tipella Creek Project, the Lamont Creek Project, and the Upper Stave Project were included in the environmental assessment of the Upper Harrison Water Power Project, and were named in Environmental Assessment Certificate E06-05 (the Certificate ), which was issued in September After the Certificate was approved, the Deputy Comptroller of Water Rights (the Deputy Comptroller ) issued the water licences for these projects to Cloudworks. More information regarding these events is provided below. Fire Creek Project [17] On August 23, 2005, conditional water licence ( CWL ) for the Fire Creek Project was issued by the Regional Water Manager. The face of this licence

4 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 4 does not name a licensee, but the letter accompanying the licence was addressed to David Andrews of Cloudworks, and the Regional Water Manager said it was her decision to issue Cloudworks Energy Inc. a new water licence. Therefore, Cloudworks was the initial licensee. [18] The accompanying letter advised that CWL contained conditions under which the project could be operated, including the requirement that land tenure is required for all works located on Crown land. Clause (g) of CWL states: g) This licence is appurtenant to the land on which the powerhouse of the Fire Creek Generating System is situated, described as that parcel or tract of unsurveyed foreshore or land covered by water being part of the bed of Fire Creek, Group 1, New Westminster District, containing 0.60 hectares, more or less, as shown on sketches attached to the Licence of Occupation tenured under the Land Act, held under Lands File No Stokke Creek Project [19] Also, on August 23, 2005, the water licence for the Stokke Creek Project (CWL ) was issued by the Regional Water Manager. The face of this licence does not name a licensee, but the letter accompanying the licence was addressed to David Andrews of Cloudworks, and the language in the cover letter is the same as that of Fire Creek, indicating that the licensee was Cloudworks. [20] The letter accompanying CWL contained similar conditions under which the project could be operated, including the requirement that land tenure is required for all works located on Crown land. Clause (g) of CWL states: g) This licence is appurtenant to the land on which the Powerhouse of the Stokke Creek Generating System is situated, described as that parcel or tract of land and unsurveyed foreshore or land covered by water being part of the bed of Stokke Creek together with that part of Block B, District Lot 6862, Group 1, New Westminster District, as shown on sketches attached to the License of Occupation tenured under the Land Act, held under Lands File No , or any tenure issued in substitution thereof. Energy Purchase Agreements [21] On August 31, 2006, an Energy Purchase Agreement ( EPA ) was executed between BC Hydro and UPPER STAVE ENERGY LIMITED PARTNERSHIP, a limited partnership formed under the laws of British Columbia represented by its general partners, Cloudworks Energy Inc. and Upper Stave Energy Inc., corporations under the laws of British Columbia ( the General Partners ). Appendix 5 of the EPA, Seller s Plant Description, states The Seller s Plant is located at Upper Stave River and Lamont Creek. Further information in the EPA gives approximate latitude and longitude of the sites of the powerhouses, and also the preliminary legal descriptions of the land units. [22] Also, on August 31, 2006, an EPA was executed between BC Hydro and KWALSA ENERGY LIMITED PARTNERSHIP, a limited partnership formed under the laws of British Columbia represented by its general partners, Cloudworks Energy

5 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 5 Inc. and Kwalsa Energy Inc., corporations under the laws of British Columbia ( the General Partners ). Appendix 5 of the EPA, Seller s Plant Description, states The Seller s Plant is located at: the north end of Harrison Lake specifically on Douglas Creek, Tipella Creek, Fire Creek, Stokke Creek and Douglas Indian Reserve No. 8. Further information in the EPA gives approximate latitude and longitude of the sites of the powerhouses, and also the preliminary legal descriptions of the land units. The Douglas Creek Project does not form part of these appeal proceedings. Environmental Assessment Certificate [23] Previously, on September 1, 2005, the BC Environmental Assessment Office issued an order under the Environmental Assessment Act, S.B.C. 2002, c. 43, setting the scope and procedures for an environmental assessment of Cloudworks proposal to construct the Upper Harrison Water Power Project. A schedule attached to that order describes the Upper Harrison Water Power Project as five interconnected run-of-river hydroelectric power plant facilities in the vicinity of the north end of Harrison Lake (Upper Fire Creek, Tipella Creek, Upper Stave River, NW Stave and Lamont Creek) with a combined capacity of up to 110 MW. Thus, the proposal that was subject to the environmental assessment included three projects that are part of the present appeals: the Tipella Creek Project, the Upper Stave Project, and the Lamont Creek Project. [24] On September 21, 2006, the Minister of Environment and the Minister of Energy, Mines and Petroleum Resources approved the Upper Harrison Water Power Project, and issued the Certificate for this project to Cloudworks. The Certificate included approval for what is now known as the Tipella Creek Project, the Lamont Creek Project, and the Upper Stave Project, among others. [25] On November 20, 2006, the Deputy Comptroller wrote to Nick Andrews of Cloudworks, advising of his decision: to issue five separate water licences from your applications, collectively referred to as the Upper Harrison Waterpower Project. The Environmental Assessment Certificate E06-05 (the certificate) was issued on September 21, Enclosed is a copy of five Conditional Water Licences , , , , and , which authorize Cloudworks Energy Inc. to construct works and divert [water] from Lamont Creek, Stave (Upper) River, Tipella Creek, Fire Creek, and Stave (Northwest) River respectively. Lamont Creek Project [26] On November 20, 2006, the Deputy Comptroller issued CWL to Cloudworks on Lamont Creek, authorizing the construction of works to generate power at the Lamont Creek Generating Station. Clause (g) of CWL states: g) This licence is appurtenant to: 1. the undertaking of the licensee to construct and operate the Upper Harrison Water Power Project approved under Environmental Assessment Certificate E06-05 (the Certificate ) issued under the Environmental Assessment Act; and

6 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 6 Upper Stave Project 2. the lands on which the Lamont Creek Powerhouse is to be located described as that parcel or tract of land in the vicinity of Stave River, Group 1, New Westminster District, containing approximately hectares, Licence , Land Act tenure on File [27] Also, on November 20, 2006, the Deputy Comptroller issued CWL to Cloudworks on the Stave River, authorizing the construction of works to generate power at the Upper Stave River Generating Station. Clause (g) of CWL states: g) This licence is appurtenant to: Tipella Creek Project 1. the undertaking of the licensee to construct and operate the Upper Harrison Water Power Project approved under Environmental Assessment Certificate E06-05 (the Certificate ), issued under the Environmental Assessment Act; and 2. the lands on which the Upper Stave River Powerhouse is to be located described as that that parcel or tract of land in the vicinity of Stave River, Group 1, New Westminster District, containing approximately hectares, Licence , Land Act tenure on File [28] Also, on November 20, 2006, the Deputy Comptroller issued CWL to Cloudworks Energy Inc. on Tipella Creek, authorizing the construction of works for the generation of power at the Tipella Creek Generating Station. Clause (g) of CWL states: g) This licence is appurtenant to: 1. the undertaking of the licensee to construct and operate the Upper Harrison Water Power Project approved under Environmental Assessment Certificate E06-05 (the Certificate ), issued under the Environmental Assessment Act; and 2. the lands on which the Tipella Creek Powerhouse is to be located described as that part of District Lot 1682, together with that parcel or tract of land in the vicinity of Tipella Creek, Group 1, New Westminster District, containing approximately hectares, Licence , Land Act tenure on File [29] The fourth licence associated with the Certificate, CWL , authorizes water use on Fire Creek (Fire Lake) in the Upper Fire Creek Generating Station. This is not the same as CWL on Fire Creek, which was issued by the Regional Water Manager in Only CWL is involved in the issues of these appeals. Similarly, the fifth licence associated with the Certificate, CWL , authorizing water use on the Stave River at the Northwest Stave River Powerhouse, is not part of the matters under appeal.

7 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 7 The Limited Partnerships [30] On March 2, 2007, a number of Limited Partnerships were created through the registration of a Certificate of Limited Partnership with the Registrar of Companies for British Columbia: 1. Fire Creek Project Limited Partnership, Registration Number Stokke Creek Project Limited Partnership, Registration Number Tipella Creek Project Limited Partnership, Registration Number Lamont Creek Project Limited Partnership, Registration Number Upper Stave Project Limited Partnership, Registration Number [31] Each of the above Certificates of Limited Partnership names Harrison as the general partner. Each Certificate was amended and restated on June 7, 2007, and again on December 28, [32] On December 28, 2007, an Amended and Restated Limited Partnership Agreement was executed for each of the Limited Partnerships. Each of those agreements name Harrison as the general partner, and they contain almost identical clauses describing the business of the partnership, the relationship between the parties, limitation of liability, units of the partnership and issue of units, amendment of the agreement, unit certificates, registration and transfer of units, capital accounts, participation in profits and losses, management of the partnership, partnership meetings, etc. The differences in the language in these agreements pertain to the naming of the relevant Limit Partnership and its associated project. Given that the agreements are almost identical, they are referred to, for convenience, as the Limited Partnership Agreement. [33] On June 22, 2007, the holder of the Certificate was changed from Cloudworks to Tipella Creek Project Limited Partnership, Lamont Creek Project Limited Partnership, and Upper Stave Project Limited Partnership. This change was made in response to letters from Nick Andrews of Cloudworks, requesting that the three projects and their associated approvals be transferred to those entities in order to secure financing for the projects. Crown land tenure [34] Initially, licences of occupation ( LOOs ) over Crown land were obtained for the five projects from the Provincial government land agency at the time. These LOOs provided the proponents with access to the Crown land specified in each LOO for site exploration, survey and environmental data collection, and site preparation. They also provided an interest in land to support a water licence application. LOOs do not grant exclusive use and occupancy of land. [35] After obtaining the water licences and, where necessary, the Certificate, the proponents obtained a more secure and exclusive form of tenure for the projects. In each case, the Crown raised a title and then granted the land to itself. A Crown lease was then prepared for the granted parcel, and issued under terms and conditions set by the Crown. This process was followed for each project, as explained below.

8 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 8 Fire Creek Project [36] For the Fire Creek Project, LOO was issued to Cloudworks Energy Limited Partnership on July 15, LOO was assigned to Cloudworks on February 3, On May 29, 2007, LOO was assigned to Fire Creek Limited Partnership. [37] Crown grant no. 9860/1368 was executed on August 19, 2008 for District Lot 8104, Group 1, New Westminster District, containing hectares at Fire Creek. The grantee is the Province of British Columbia. [38] Crown lease BB for the land covered by Crown grant no. 9860/1368 was issued on July 30, The application form for this lease indicates that Fire Creek Project Limited Partnership was the applicant. Fire Creek Project Limited Partnership was also originally named on the application form as the transferee, but this was struck out, and Harrison Hydro Project Inc. C Inc No was hand written on the application and initialed twice. [39] A state of title certificate dated April 28, 2014, states that the Registered Owner in Fee Simple of the area covered by Crown grant no. 9860/1368 is Her Majesty the Queen in Right of the Province of BC (i.e., the Crown), and lease BB is an interest in the land registered to Harrison Hydro Project Inc., Incorporation No (i.e., Harrison). Stokke Creek Project [40] For the Stokke Creek Project, LOO was issued to Cloudworks Energy Limited Partnership on July 15, 2004, and subsequently assigned to Cloudworks on February 3, On January 27, 2007, LOO was issued to Cloudworks for additional lands on Stokke Creek. On May 29, 2007, LOO was assigned to Stokke Creek Limited Partnership. The land as described in LOO was subsequently twice modified as the project was developed. [41] Crown grant 9878/1368 was issued on September 29, 2008, for Block C, District Lot 6862, Group 1, New Westminster District, containing hectares located at Stokke Creek. The grantee is the Province of British Columbia. [42] Crown lease BB for the land covered by Crown grant 9878/1368 was issued on October 1, Again, the application form for this lease indicates that Stokke Creek Project Limited Partnership was the applicant. Stokke Creek Project Limited Partnership was also originally named on the application form as the transferee but this was crossed out multiple times. Also, in the space on the form for naming the transferee, the words: as represented by Harrison Hydro Project Inc., Inc. No. BC is not crossed out. [43] A state of title certificate dated April 28, 2014 states that the Registered Owner in Fee Simple of the area covered by Crown grant no. 9878/1368 is Her Majesty the Queen in Right of the Province of BC (i.e., the Crown), and lease BB is an interest in the land registered to Harrison Hydro Project Inc., Incorporation No (i.e., Harrison).

9 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 9 Tipella Creek Project [44] For the Tipella Creek Project, LOO was issued on January 25, 2007, to Cloudworks. On May 29, 2007, the LOO was assigned to Tipella Creek Project Limited Partnership. On July 16, 2007, the LOO was modified to include an additional area of land. Subsequent modifications occurred on July 16, 2007, April 4, 2008, June 10, 2008, and January 25, 2009, all in the name of Tipella Creek Limited Partnership. [45] Crown grant 9949/1369 was issued on February 9, 2009 for Block A, District Lot 1682, Group 1, New Westminster District, for hectares. The grantee is the Province of British Columbia. [46] Crown lease BB for the land covered by Crown grant 9949/1369 was issued on March 16, Again, the application form for this lease indicates that Tipella Creek Project Limited Partnership was the applicant, and the transferee was originally named as Tipella Creek Project Limited Partnership as represented by Harrison Hydro Project Inc. (BC ), but everything before Harrison Hydro Project Inc. (BC ) has been struck out, leaving only Harrison as the transferee. [47] A state of title certificate dated April 28, 2014 states that the Registered Owner in Fee Simple of the area covered by Crown grant no. 9949/1369 is Her Majesty the Queen in Right of the Province of BC (i.e., the Crown), and lease BB is an interest in the land registered to Harrison Hydro Project Inc., Incorporation No (i.e., Harrison). Lamont Creek Project [48] For the Lamont Creek Project, LOO was issued on January 25, 2010, to Cloudworks. On May 29, 2007, LOO was assigned to Lamont Creek Limited Partnership. [49] Crown grant 30/1370 was issued on July 30, 2009 for District Lot 8116, Group 1, New Westminster District, containing hectares located at Upper Stave (the map attached to the grant document shows DL 8116 at the confluence of Stave River and Lamont Creek). The grantee is the Province of British Columbia. [50] Crown lease BB for the land covered by Crown grant 30/1370 was issued on August 13, On the application form for this lease, Lamont Creek Project Limited Partnership is named as the applicant, and the transferee is named as Harrison Hydro Project Inc. (BC ). Nothing has been struck out. [51] A state of title certificate dated April 28, 2014 states that the Registered Owner in Fee Simple of the area covered by Crown grant no. 30/1370 is Her Majesty the Queen in Right of the Province of BC (i.e., the Crown), and lease BB is an interest in the land registered to Harrison Hydro Project Inc., Incorporation No (i.e., Harrison). Upper Stave Project [52] For the Upper Stave Project, LOO was issued on November 20, 2006, to Cloudworks. On May 29, 2007, LOO was assigned to the Upper Stave Limited Partnership.

10 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 10 [53] Crown grant 29/1370 was issued on July 30, 2009 for District Lot 8112, Group 1, New Westminster District, containing 6.02 hectares also located at Upper Stave. The grantee is the Province of British Columbia. [54] Crown lease BB for the land covered by Crown grant 29/1370 was issued on August 13, On the application form for this lease, Upper Stave Creek Project Limited Partnership is named as the applicant, and the transferee is named as Harrison Hydro Project Inc., Inc. No. BC Nothing has been struck out. [55] A state of title certificate dated April 28, 2014 states that the Registered Owner in Fee Simple of the area covered by Crown grant no. 29/1370 is Her Majesty the Queen in Right of the Province of BC (i.e., the Crown), and lease BB is an interest in the land registered to Harrison Hydro Project Inc., Incorporation No (i.e., Harrison). The Licensees and the events leading to the Order [56] As stated above, CWL (Fire Creek) and CWL (Stokke Creek), issued by the Regional Water Manager on August 23, 2005, do not state a licensee on the face of the licence, but were issued to Cloudworks as licensee. [57] Similarly, CWL (Tipella Creek), CWL (Lamont Creek) and CWL (Upper Stave) were issued by the Deputy Comptroller on November 20, 2006, to Cloudworks as licensee. [58] Subsequently, the licensee name for the Fire Creek project and the Stokke Creek project was changed from Cloudworks to the Fire Creek Project Limited Partnership and the Stokke Creek Project Limited Partnership, respectively. [59] Also, as stated above, the holder of the Certificate was changed from Cloudworks to Tipella Creek Project Limited Partnership, Lamont Creek Project Limited Partnership and Upper Stave Project Limited Partnership on June 25, [60] On October 7, 2009, Chris Morgan, a Water Resource Specialist with the Ministry, wrote to Tipella Creek Project Limited Partnership, Lamont Creek Project Limited Partnership, and the Upper Stave Project Limited Partnership. In his letter, he referred to the amendment of the Certificate, and he stated that the associated water licences were appurtenant to the land on which the powerhouses were situated. Mr. Morgan went on to state as follows: Information received in this office indicates the Crown land tenure for each of the three powerhouses: Tipella Creek GS, Upper Stave GS, and Lamont Creek GS are in the name of Tipella Creek Project Limited Partnership, Upper Stave Project Limited Partnership and Lamont Creek Limited Partnership, respectively. In accordance with the EAC amendment and Crown Land tenure information, our records have been updated to show the holder of the following water licences as follows: Conditional Water Licences Tipella Creek Project Limited Partnership

11 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 11 Conditional Water Licences Upper Stave Project Limited Partnership Conditional Water Licences Lamont Creek Limited Partnership [61] The evidence suggests that the Comptroller s office recognized the Limited Partnerships as licensees from 2010 through 2012 inclusive, because the Limited Partnerships were invoiced separately for their water licence fees. [62] According to an affidavit sworn by Kym Johnson, a Water Information Technician with the Ministry s South Coast regional office, she began working with staff responsible for Land Act dispositions in approximately March 2012, to ensure consistency in the information in Ministry records related to water licences and the information related to Crown land tenures, as recorded in the Ministry s databases. This process continued into the summer of She states that the primary purpose of the review was to ensure that clauses of water licences describing land appurtenant to a particular licence matched the land tenures on which the beneficial use of water diverted under that licence was occurring. She states that she found inconsistencies related to more than a dozen water licences. She describes in general terms some of those inconsistencies, and she states: When inconsistencies were identified for land held in the land title system, water licences were also checked for consistency with the Land Title Office records prior to any changes being made. [63] Ms. Johnson s review identified that Harrison held the leases for the Crown land on which the powerhouses for the five projects are located, but the water licenses were held by the respective Limited Partnership. [64] Meanwhile, on February 15, 2013, the Comptroller wrote to all Water Power Licensees advising them of a 1.1% increase in water power rentals, and stating: The administration of Section 16(4)(c) in the Water Act Regulation is currently under review and will be clarified in a future communication. Specifically, the definition of single licensee in determining generation rental is being reviewed for consistency with the definitions of licensee (Section 1 in Water Act) and ownership under provincial and federal legislations. Generation rental based on generation during the preceding calendar year is being reviewed in the context that water rental is billed for the use of water in the current year. [65] As a result of Ms. Johnson s review, the Ministry initiated a number of changes to the water licences and the Ministry s water licensing records. The Panel has summarized those changes, based on Ms. Johnson s affidavit and other documents before the Panel, as follows: On December 17, 2012, the appurtenancy description in CWL (Stokke Creek) was amended by an order of the Assistant Regional Water Manager, to match the legal description in the Crown lease for the Stokke Creek power plant. On July 25, 2013, the water records were adjusted to show the name of the licensee to be Harrison. On March 14, 2013, water records were adjusted to show Harrison as the licensee for CWL (Lamont Creek), to reflect the name of the entity

12 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 12 holding land tenure for the appurtenant land. By an order dated August 15, 2013, the Assistant Regional Water Manager amended that licence by changing the appurtenancy clause in that licence to accurately reflect the land on which the powerhouse was situated, described as the parcel subject to the Crown lease held under the relevant Lands file. On March 14, 2013, water records were adjusted to show Harrison as the licensee for CWL (Upper Stave), to reflect the name of the entity holding land tenure for the appurtenant land. By an order dated August 15, 2013, the Assistant Regional Water Manager amended that licence by changing the appurtenancy clause of that licence to accurately reflect the land on which the powerhouse was situated, described as the parcel subject to the Crown lease held under the relevant Lands file. On August 15, 2013, water records were adjusted to show Harrison as the licensee for CWL (Fire Creek), to reflect the name of the entity holding the Crown land tenure for the appurtenant land. On August 15, 2013, water records were adjusted to show Harrison as the licensee for CWL (Tipella Creek), to reflect the name of the entity holding the Crown land tenure for the appurtenant land. [66] Prior to Ms. Johnson s review, CWL (Tipella Creek) was amended by an order of the Assistant Regional Water Manager on March 15, 2012, to clarify that the appurtenancy is the land on which the water is to be used at the Tipella Creek powerhouse, and to add a reference to the approximate size of the land. The reference to the Lands file was retained. [67] To summarize, all five water licences were amended as necessary to ensure they were appurtenant to lands containing the powerhouse where the water was to be used, and to link them to the Lands file under which the Crown land lease was held. Further, the Ministry s water licensing records were adjusted to show the licensee as the entity that held the land tenure under that Crown lease; namely, Harrison. [68] As a result, the Ministry made adjustments to the water rentals charged for the five projects. According to the Appellants, the water rental rates based on aggregated water usage for the five projects are approximately 4.7 times higher than the rates applied if each project is assessed separately. [69] On March 19, 2013, the Ministry sent an invoice to Harrison c/o Innergex Renewable Energy Inc. for water rentals for the Lamont Creek Project and the Upper Stave Project. It should be noted that, beginning in or about early 2013, much of the Ministry s correspondence to Harrison and/or the Limited Partnerships is addressed c/o Innergex Renewable Energy Inc. ( Innergex ), and a representative of Innergex responded to the Ministry on behalf of Harrison and the Limited Partnerships. According to Innergex s Annual Information Form for the year ended December 31, 2013, which was provided to the Panel, Innergex owned a % interest in each of the five hydro projects, through its ownership of certain other business entities.

13 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 13 [70] In a letter dated March 28, 2013, Richard Blanchet, Innergex s Senior Vice President, Western Region, wrote to the Ministry on behalf of the Upper Stave Project Limited Partnership and the Lamont Creek Limited Partnership. He advised that the Upper Stave Project Limited Partnership and the Lamont Creek Limited Partnership were paying the Ministry s invoices for water rentals under protest because these Limited Partnerships are separate licensees operating separate power projects and therefore the water rentals for the two projects should not be aggregated. His letter also explains why the Limited Partnerships disagreed with the Ministry recording a transfer of CWLs and to Harrison. [71] In a letter dated May 3, 2013, the Ministry s Head of Water Licensing responded to Mr. Blanchet s March 28, 2013 letter. He advised that the Comptroller has statutory authority over water power rental determinations, and was in the process of considering the matter. He also advised that decisions on the water licences for the two projects remain with the Regional Water Manager. [72] In a July 25, 2013 letter addressed to Harrison, the Upper Stave Project Limited Partnership, the Lamont Creek Limited Partnership, and the Tipella Creek Limited Partnership, c/o Innergex, Mr. Morgan advised that it had come to the Ministry s attention that Harrison held the lease for the Crown lands on which the projects powerhouses were located, but Harrison did not hold the related water licences. Mr. Morgan advised that, under the Water Act, licenses may only be issued to the owner of the appurtenant land. [73] In separate letters dated August 15, 2013, the Assistant Regional Water Manager notified Mr. Blanchet that the water licences for the Lamont Creek Project and the Upper Stave Project had been amended. [74] Also, in a letter dated August 15, 2013, Ms. Johnson notified Mr. Blanchet that the water licences for the Fire Creek Project and the Tipella Creek Project had been transferred into Harrison s name. [75] In a letter dated August 21, 2013, Mr. Blanchet wrote to Mr. Morgan on behalf of Harrison, the Upper Stave Project Limited Partnership, the Lamont Creek Limited Partnership, and the Tipella Creek Limited Partnership, requesting that the water licences for those projects be held by the respective Limited Partnership. He advised that the powerhouse leases associated with the power projects are registered in Harrison s name in trust for the benefit of the respective Limited Partnership, solely because the BC land title system does not permit the registration of an interest in land in the name of a limited partnership. He submitted that the respective Limited Partnership is the beneficial owner of each powerhouse lease. [76] In a separate letter dated August 21, 2013, Mr. Blanchet wrote to the Comptroller on behalf of Harrison and all of the Limited Partnerships, requesting a meeting with the Comptroller before he made a formal decision on the transfer of the five water licences. [77] On October 11, 2013, legal counsel for Harrison and the Limited Partnerships provided the Comptroller with a written submission in support of their argument that the five water licences should be held by the respective Limited Partnership.

14 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 14 The Order and the appeals [78] On December 17, 2013, the Comptroller issued the Order. The key portions of the Order state as follows: I conclude that waterpower rental being billed to [Harrison] as a single licensee for the five hydropower projects in question is in accordance with the Water Act and Water Act Water Regulation. I concur with the decision from the South Coast Regional Office to transfer the water licences for these projects to [Harrison] based on the land tenures as recorded. In administering s. 16(4)(c) in the Water Act Water Regulation, it is my responsibility and authority to apply the single licensee criterion in billing waterpower rental. It is my understanding that a partnership, as an unincorporated business association, is not a distinct legal entity. A determination of whether to bill two different partnerships as two separate licenses must be made in conjunction with other pertinent facts. A water licence is appurtenant to the land where the water is beneficially used, in this case the powerhouse. The land tenures for these projects are issued under the Land Title Act, and the definition of owner under that legislation must be taken into account. [79] On January 15, 2014, the Board received the Appellants notice of appeal. [80] The Appellants submit that: The Comptroller erred by determining that the Water Act and the Regulation required that the water licences for each of the five hydro projects be transferred from the Limited Partnership that owned that particular hydro project to Harrison. The Comptroller inappropriately interpreted the terms owner and licensee under the Water Act by reference to the definition of owner under the Land Title Act, R.S.B.C.1996, c. 50. The Comptroller inappropriately relied on an artificial legal construct that the Comptroller describes as the single licensee criterion in administering section 16(4)(c) of the Regulation so as to apply higher rental rates based on the aggregate total output of the hydro projects combined. [81] The Respondent characterizes the issues somewhat differently, and submits as follows: The core issue in this appeal is whether for the purposes of section 16(4)(c) of the Regulation, the five water power projects should be viewed as being owned or operated by a single licensee, that is by Harrison, or whether each project should be viewed as owned/operated by the Limited Partnership associated with it. If Harrison is found to be the owner/operator of all of the developments, section 16(4)(c) requires the rentals to be based on the combined output of all the developments.

15 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 15 The Board lacks jurisdiction to alter who is the licensee in relation to the water licences because the transfer of the water licences into the name of Harrison occurred by operation of the law, pursuant to section 16 of the Water Act. In the alternative, if the Board finds that the transfer of the water licences occurred as a result of an appealable order, the Board has no jurisdiction to hear an appeal of the decision because the notice of the transfer occurred at the latest in August 2013, and this appeal was not commenced until January 2014, long after the 30-day appeal period had expired. ISSUES [82] In the Order, the Comptroller makes two statements that focus the issues for the Panel. Those statements are as follows. 1. I conclude that waterpower rental being billed to [Harrison] as a single licensee for the five hydropower projects in question is in accordance with the Water Act and Water Act Water Regulation. 2. I concur with the decision from the South Coast Regional Office to transfer the water licences for these projects to [Harrison] based on the land tenures as recorded. [83] The Panel has considered the issues in the following manner. Each statement must be examined to see if it is an appealable order under the Water Act. This issue must be dealt with because if an order within the meaning of the Water Act was not appealed within the 30-day appeal period, the Board has no jurisdiction over the appeals, and there is no need to decide the issues. If it is found to be an appealable order, the Panel must decide if the Comptroller erred in making this decision. Thus, there are four issues to be decided: for each statement the Panel must consider the question of whether the statement is an order that can be appealed and the question of whether the order was properly made. For reasons that will be obvious from the discussion below, the matter of the Comptroller s concurrence with the regional office will be examined first. 1. Is the Comptroller s concurrence with the regional office s transfer of the water licences to Harrison an appealable order, and if so, was the order appealed within the 30-day appeal period required by section 92 of the Water Act? 2. If so, based on the relevant provisions in the Water Act, and the facts in this case, should the water licences for the five hydroelectric projects be in the name of Harrison? 3. Is the Comptroller s conclusion regarding water rental billing an appealable order, and if so, was the order appealed within the 30-day appeal period required by section 92 of the Water Act? 4. If so, did the Comptroller properly apply the Water Act and the Regulation to determine the rental rates for the projects?

16 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 16 RELEVANT LEGISLATION [84] The following sections of the Water Act are relevant to these appeals. Other relevant legislation is set out where it is referred to in this decision. Definitions 1 In this Act: licensee and holder of a licence mean an owner of any land, mine or undertaking with respect to which a licence is issued under this or a former Act; order includes a decision or direction, whether given in writing or otherwise; owner means a person entitled to possession of any land, mine or undertaking in British Columbia, and includes a person who has a substantial interest in the land, mine or undertaking; person includes a firm, association or syndicate; Who may acquire licences 7 A licence for any one, 2 or 3 of the purposes defined in section 1 may be issued by the comptroller or the regional water manager to any of the following: (a) an owner of land or a mine; Purpose, precedence and appurtenancy of licences 13 The comptroller or regional water manager must ensure that every licence issued on or after June 21, 1995 (c) specifies as the appurtenancy of the licence an appurtenancy that (i) is located entirely in British Columbia, (ii) consists of land, a mine or an undertaking, or any combination of those things, and (iii) is adequately described in the licence. Transfer of licence, approval or permit 16 (1) A licence, approval or permit that is made appurtenant to any land, mine or undertaking and any rights and obligations granted and imposed under the licence, approval or permit pass with a conveyance or other disposition of the land, mine or undertaking. (2) A person conveying or otherwise disposing of land, a mine or an undertaking to which a licence is appurtenant, or in respect of which an approval or permit was issued or, in the case of a transmission of land, a

17 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 17 mine or an undertaking to the personal representative or other person representing the owner, the personal representative or other person must give written notice of the conveyance or other disposition to the comptroller or regional water manager. Amendment and substitution of licence or approval 18 (1) Subject to subsection (1.1), on notice to all persons whose rights would be injuriously affected, and after consideration of any objections filed and after notifying the objectors of his or her decision, the comptroller or the regional water manager may amend a licence to do any of the following: (e) correct an error in the licence; Transfer of appurtenancy 19 (1) On the application of the holder of a licence, approval or permit and on compliance by the holder and by the proposed transferee with the comptroller s or the regional water manager s directions as to giving notice, the comptroller or the regional water manager, on the terms he or she considers proper, may (a) transfer all or part of the rights and obligations granted and imposed under the licence, approval or permit from the holder to the proposed transferee, and (b) issue a new licence, approval or permit to the transferee or transferor, or both, and determine the appurtenancy of the licence, approval or permit. Appeals to Environmental Appeal Board 92 (1) Subject to subsections (2) and (3), an order of the comptroller, the regional water manager or an engineer may be appealed to the appeal board by (a) the person who is subject to the order, (b) an owner whose land is or is likely to be physically affected by the order, or (c) a licensee, riparian owner or applicant for a licence who considers that their rights are or will be prejudiced by the order. (4) The time limit for commencing an appeal is 30 days after notice of the order being appealed is given (a) to the person subject to the order, or (b) in accordance with the regulations.

18 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 18 SUMMARY OF EVIDENCE [85] Because this appeal proceeded by means of written submissions, the evidence was submitted in the form of affidavits with exhibits. [86] The Appellants provided evidence in the form of affidavits sworn by: Matthew Grant Kennedy, Professional Biologist and Vice-President Environment, Western Region, Innergex, formerly employed by Cloudworks. Mr. Kennedy provided the bulk of the Appellants evidence in the form of business records regarding the ownership of the hydro projects, and copies of correspondence with government agencies covering the land tenure and water licence processes for the hydro projects. Carolyn Rimes, Legal Assistant, McCarthy Tétrault LLP. Ms. Rimes provided search results from a Water Licence Query on the Provincial water licence database listing information for 769 water licences and water licence applications in the Power-General category. Edelina Macaspac, Legal Assistant, McCarthy Tétrault LLP. Ms. Macaspac provided copies of correspondence to and from various representatives of the hydro projects (including the Limited Partnerships) and various government representatives (including the Respondent). In addition, Ms. Macaspac provided correspondence related to a Freedom of Information ( FOI ) request, and included the records obtained regarding the Comptroller s conclusions and the records he relied upon in making his decision. [87] The Respondent provided evidence in the form of a Book of Documents, including: the December 17, 2013 letter from the Comptroller, with the Order; copies of the relevant water licences, any amending orders, the Crown lease, Crown grant, and state of title certificate for each of the five hydro projects; and environmental assessment documents and other correspondence. [88] The Respondent also provided an affidavit sworn by: Kym Johnson, Water Information Technician, Water Management Group, South Coast, Ministry of Forests, Lands and Natural Resource Operations. Ms. Johnson described her review comparing the appurtenant land as described on water licences to the land tenure recorded for that land as recorded in the Crown land database. In addition, she described the changes that were made to the Appellants water licences as a result of her review. [89] When the Appellants provided their rebuttal written Submission, they requested permission to enter new evidence in the form of a second affidavit sworn by Ms. Rimes. The Respondent did not object to the admission of the new evidence. Accordingly, the Panel admitted Ms. Rimes second affidavit: Carolyn Rimes #2. Ms. Rimes provided search results from a Water Licence Query on the Provincial water licence database listing information for 17 water licences and water licence applications in the Churches/Comm Halls

19 DECISION NOS WAT-002(a) to 2014-WAT-007(a) Page 19 category, as well as a copy of the Water Licence Query search form. In addition, she provided a copy of a letter from counsel for the Respondent to counsel for the Appellants, and a copy of one of the enclosures to the letter that included unredacted versions of some documents formerly received under the FOI request, as presented in the affidavit of Ms. Macaspac. DISCUSSION AND ANALYSIS 1. Is the Comptroller s concurrence with the regional office s transfer of the water licences to Harrison an appealable order, and if so, was the order appealed within the 30-day appeal period required by section 92 of the Water Act? The Parties submissions [90] The Appellants submit that they are not asking the Board to order a transfer of the water licences; rather, they seek an order rectifying the Order, because the changes to the water licences are the product of administrative decision-making, and not the operation of the law. The Appellants submit that there was no conveyance or disposition of land to trigger section 16 of the Water Act. Specifically, they submit that registration of the Crown leases in Harrison s name, for the benefit of the Limited Partnerships, does not constitute a conveyance or disposition because the beneficial and substantial interest in the land remained with the Limited Partnerships. [91] The Appellants note that the Comptroller has the power to determine the appurtenancy of a water licence under section 12 of the Water Act, and the power to amend a water licence to correct an error in the licence under section 18. The Appellants submit that the Order is properly characterized as an exercise of the Comptroller s power to correct an error in a water licence, after the perceived error was identified by Ministry staff in the regional office. [92] The Panel notes that the Comptroller is also empowered to amend or revoke orders of staff from regional offices. Section 87 of the Water Act states: 87 (1) The comptroller, at any time on notice, may amend or revoke any order of the comptroller, a regional water manager, an engineer, an officer, the Water Board or the Board of Investigation. [93] In addition, the Appellants submit that the appeals were commenced in time, as they were filed within 30 days of the Order. [94] The Respondent submits that the Order is the subject of the appeals, and it is an appealable decision under the Water Act. In general, the Respondent characterizes the Order as a determination of water rentals payable under the Regulation. [95] However, regarding remedies, the Respondent submits that the Appellants appear to be asking the Board to order that the water licences be transferred to the Limited Partnerships, and the Respondent argues that water licences may only be transferred by means of a conveyance or disposition of appurtenancies under section 16 of the Water Act, or a transfer of appurtenancies under section 19 of the