Decision Date: February 27, 2017

Court: B.C.S.C., Justice B.D. MacKenzie

Citation: 2017 BCSC 320

Harrison Hydro Project Inc. (“Harrrison”) and five limited partnerships (collectively, the “Petitioners”) sought a judicial review by the BC Supreme Court of a decision issued by the Board in 2015. Harrison is the general partner of the five limited partnerships. Each of the limited partnerships is the beneficial owner of a “run of river” hydro project near Harrison Lake, BC. Each hydro project operates under a water licence authorizing the diversion and use of water from a stream for power production. The powerhouse and works for each hydro project are situated on Crown land, and each water licence is appurtenant to that Crown land.

From 2005 through 2006, the water licences were issued under the Water Act to a corporate predecessor of the Petitioners which had received licences of occupation over the Crown land needed for each hydro project. In 2007, the limited partnerships were created with Harrison as the general partner. The licence of occupation for each hydro project was then assigned to the limited partnership that held the respective water licence. Between 2008 and 2009, the licences of occupation were replaced by leases over the same Crown land. All of the leases were issued to Harrison, and Harrison was named in the Land Title Office registry as the lease holder in each case.

From 2009 to 2012, the Ministry’s records listed each limited partnership as the holder of the relevant water licence, and the Ministry billed each limited partnership individually for water rentals. However, when the Ministry discovered that Harrison held the leases for the Crown land to which the water licences were appurtenant, the Ministry launched an investigation. Ministry staff decided that Harrison should be named as the licensee for each water licence, and that water rentals should be billed collectively to Harrison. The water rental rate for each of the projects, if charged on an aggregate basis, is much higher than if each limited partnership is the licensee and is charged on an individual basis.

Harrison and the limited partnerships raised concerns with the Ministry about its new approach to billing, and whether Harrison was properly named as the licensee for all five licenses. The Deputy Comptroller of Water Rights (the “Comptroller”) reviewed the matter, and concluded that naming Harrison as the licensee for all five hydro projects, and billing water rentals for the five licences collectively to Harrison, was in accordance with the Water Act and the Water Regulation.

The Petitioners appealed the Comptroller’s decision to the Board. The main issue was whether Harrison is the proper licensee for all five water licences, as opposed to each limited partnership being the licensee for its respective water licence.

The Board found that section 16(1) of the Water Act, which states that a water licence will “pass with a conveyance or other disposition of the land”, implies that the Ministry simply records a change of licensee in the Ministry’s records upon receipt of notification from the licensee, which the licensee must provide under section 16(2) of the Water Act. Regarding the meaning of “disposition”, the Board applied the definition in the Land Act, given that the appurtenant lands in this case were Crown lands subject to the Land Act.

Turning to the facts, the Board held that a conveyance or disposition of the appurtenant lands, from the limited partnerships to Harrison, occurred when the Crown land leases were issued in replacement for the licences of occupation. From 2009 to 2012, there was an inconsistency between the water licence holders recorded in the Ministry’s records (i.e., the limited partnerships) and the holder of the leases over the appurtenant Crown lands (i.e., Harrison), due to the licensee’s failure to notify the Ministry of the conveyance or disposition of the appurtenant lands.

The Board also considered the language in the Limited Partnership Agreements, and concluded that only Harrison was entitled to physical possession, occupancy and control of the appurtenant lands, and was capable of carrying out the rights and obligations of a licensee as described in the Water Act. Therefore, Harrison was the “owner” of the appurtenant land for the purposes of the Water Act, and was properly named as the holder of the water licences. In addition, section 16(4)(c) of the Water Regulation requires that water rental rates be based on the total output from all projects that are owned or operated by a licensee. Given that Harrison was the proper licensee for all five water licences, the power produced at the hydro projects should be aggregated when calculating water rentals.

The Petitioners sought a judicial review of the Board’s decision. The Petitioners argued that the Board failed to grasp the powers and capacities of the limited partnerships, and improperly interpreted the word “owner” under the Water Act.

The BC Supreme Court held that the Petitioners failed to establish that the Board’s decision fell outside of the range of possible, acceptable outcomes which are defensible in respect of the facts and law. On the contrary, the Board’s decision was reasonable, and accorded with the statutory and common law principles concerning limited partnerships. Accordingly, the petition was dismissed, and the Board’s decision was confirmed.