Drainage Referee rules CPR not exempt from Drainage Act assessment

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE: 

The history of Ontario's Drainage Act stretches back to 1834 with the enactment by the Upper Canada Legislature of “An Act to regulate Line Fences and Watercourses”.  The legislation is provincial and predates Canada’s Confederation in 1867 by over three decades.  Under the British North America Act, 1867, the foundational law passed by British Parliament to create the Dominion of Canada, the federal Parliament was given jurisdiction over interprovincial undertakings (connecting provinces or going beyond the limits of the province) including railways.  And so arose what should have been an age-old constitutional question: are interprovincial railways like CP and CN subject to the provincial Drainage Act?  Are they obligated to pay assessments for municipal drains?

Despite history having long ago set up the showdown between provincial interests in managing surface water and federal interests in moving freight and passengers across the country, the question of a federal railway’s responsibility to pay an assessment on a municipal drain was the subject of a hearing held before the Acting Drainage Referee in October, 2025.  The dispute centred on whether CP is constitutionally exempt from paying assessments levied under the Drainage Act for drainage works crossing its railway right-of-way.  CP was made aware by the Municipality of the proposed drainage works (involving lowering and increasing the capacity of an existing drain crossing the right-of-way lands), but CP elected not to participate in any of the Drainage Act proceedings and did not exercise any of its appeal rights (including with respect to the assessment of costs of the drain).  After the Municipality applied to the Referee for an order permitting the crossing of the CP right-of-way, CP served a Notice of Constitutional Question.

The evidence before the Referee was that until sometime in 2020, railways like CP and CN paid assessments under the Drainage Act and had for a century.  From 2020 forward, however, the railways have refused to pay assessments and have declined to accommodate municipal drainage projects under the Drainage Act unless the municipality accedes to the demands of the railways that they bear none of the costs.  The Referee noted that, as a result, many Drainage Act projects have not proceeded or have been deferred.  At least six municipalities have sued CP or CN for unpaid assessments.  Besides CP and the Municipality, the hearing involved several intervenors: the Attorney General of Ontario, CN, the Ontario Federation of Agriculture, and the Rural Ontario Municipal Association.

As noted by the Referee, the question of whether railways must pay Drainage Act assessments is an important one for rural municipalities:

Many of the affected municipalities are smaller, often rural communities with a limited municipal tax base. It is not just a matter of the railways targeting small municipalities that lack the resources to resist. Stormwater management in larger urbanized communities is typically handled through storm sewers in road allowances, which are financed by the municipality through general municipal taxation and/or development charges. Smaller rural municipalities depend upon the Drainage Act for their stormwater management and rural farm drainage to support their agribusinesses; these municipalities are otherwise hard-pressed to afford to provide the drainage works, much less absorb the cost of maintaining the Drainage Act infrastructure, if railway assessments were to evaporate.

The Referee’s conclusion on the constitutional question was that federally regulated railways are required to pay costs assessed to them for municipal drains in Ontario.  The Referee found that the Drainage Act’s assessment provisions do not “trench” on the protected core of federal railway jurisdiction. The Act is a law of general application, designed to allocate costs for local drainage works among all benefiting landowners, including railways. The assessment is akin to a local improvement levy or property tax, not a regulatory interference with railway operations. The Referee emphasized that federal undertakings are not “enclaves immune from provincial laws of general application,” and there is no precedent for immunity from such assessments.  Further, the Referee concluded that Drainage Act assessments do not impair the core of federal railway jurisdiction. The financial impact on CP is negligible compared to its revenues, and there is no evidence of operational impairment. The doctrine of interjurisdictional immunity (where federal undertakings are immune from provincial regulation) is to be applied with restraint and only in exceptional circumstances, which were not present in this situation.

The Referee also analyzed whether there is an operational conflict or frustration of federal purpose between the Drainage Act and federal statutes authorizing and governing interprovincial railways – the Transportation Act and the Railway Safety Act.  The Referee found that the provincial and federal legislative schemes can operate concurrently and complementarily.  The federal Transportation Agency’s authority is limited to apportioning costs for the physical crossing of the railway right-of-way, while the Drainage Act governs the broader watershed and cost allocation among all affected properties.  The Referee rejected CP’s argument that the federal scheme precludes provincial assessments, noting that the Drainage Act’s assessment of costs is a zero-sum exercise.  All landowners involved in the municipal drain are assessed their proportionate share of the costs.  If one owner doesn’t pay, the cost is thrust upon everyone else.

According to a news release published on December 5, 2025 by the Rural Ontario Municipal Association, CP plans to appeal the Referee’s decision.  More to follow.

Read the decision at: 2025 ONDR 12 (CanLII).

When the Drainage Act and Conservation Authorities Clash

In a case decided in September, 2015, the Agriculture, Food and Rural Affairs Appeal Tribunal examined the interplay between the Drainage Act and conservation authorities in Ontario.  The matter involved a farmer who wanted to drain cleared, cultivated agricultural land through a low, wet bush and a cattle-tramped low run that happened to contain 28 minnows.  The farmer initiated a process under the Drainage Act, and was then assessed a bill of nearly $50,000 for an "environmental impact study" that was allegedly required for a permit from the local conservation authority ("CA").

Under the Drainage Act, a conservation authority or government may request an "environmental appraisal" for a new drain, but the party making the request is responsible for the cost.  In this case, the farmer did not request the "environmental impact study" and did not apply for any permits from the CA.  However, as the Tribunal noted, "the CA took over jurisdiction, admittedly ignorant of certain parts of the Drainage Act.  The CA prosecuted its own CA mandate over the farmer and his drain request with great earnestness, if not zealously."

In the hearing of the farmer's appeal of the assessed cost, the CA argued essentially that the Tribunal had no jurisdiction over it.  The CA candidly pleaded its ignorance of the drainage laws and, furthermore, that the CA's statutes are more recent and consequently take precedence.  Lastly, the CA argued that its work related to an "environmental impact study" and not an "environmental appraisal".

The Tribunal found that it did not have jurisdiction over the CA in this case.  It also found that the Municipality involved (which sought to put the cost of the "environmental impact study" on the landowner) should bear the cost of the environmental study.

In examining the jurisdiction issue, the Tribunal noted that the CA had notice of the Drainage Act process initiated by the farmer, but waited more than a year later to demand an "environmental impact study" under its own legislative regime.  The CA did not request an "environmental appraisal" under the Drainage Act.  The tribunal concluded the following:

What the Tribunal has ascertained under law (rather than equity) is that there are 2 parallel regulatory schemes.  Neither is inconsistent with the other.  Technically phrased: obedience to one does not necessitate disobedience to the other.  The CA has the right to request an environmental appraisal under the Drainage Act or its own regulatory scheme.  There is no overt or even nuanced conflict between the regulatory regimes.  Even though the CA dithered regarding the petition process under the Drainage Act, it could still invoke the processes under the Conservation Authorities Act.

 The tribunal is acutely aware that this interpretation allows the CA to potentially circumvent or thwart the Drainage Act processes.  It makes the petition process, especially section 6 moot.  That means the CA can avoid the intrinsic balance of costs and demands legislatively fixed in the Drainage Act with over a century of experience.  Then again the Tribunal expects that the knowledge of this decision will become wide spread amongst the drainage and conservation communities.  Ignorance and indifference can no longer be pled.  Perhaps as is the case with maintenance of drains, the drainage and conservation communities can establish policies that are respectful of both mandates.

Having no jurisdiction over the CA, the Tribunal then decided the issue of responsibility for the cost of the environmental report between the farmer and the municipality.  The Tribunal ordered that the municipality bear the full cost of the report, finding that the excessive cost could have been avoided if the municipality had properly facilitated the drainage proposal.

There was a dissenting opinion from one of the members of Tribunal.  That member would have found that the Tribunal did have jurisdiction over the CA and would have ordered the full cost of the report to be borne by the CA.

Read the decision at: Darmar-Tamlin Municipal Drain (RE).

Grain Farmers of Ontario v. MOECC decision now available

Grain Farmers of Ontario ("GFO") has now posted a copy of the decision dismissing its challenge of Ontario's new neonicotinoid regulations at its website: 2015 ONSC 6581. GFO alleged that the regulations in their current form would cause irreparable harm to Ontario corn and grain farmers, and asked for a stay of the regulations until May, 2016 or "such time as the requirements of the Regulation can be met."  Justice S.A.Q. Akhtar of the Superior Court heard the case and declined to order a stay.  He also allowed the cross-motion by the Ontario Ministry of the Environment and Climate Change ("MOECC") ruled that GFO's application disclosed no reasonable cause of action. The application was dismissed on that basis.

On review of the GFO application, Justice Akhtar was "of the view that the application is concerned with the economic interests of the affected farmers rather than any property rights.  Prior to the Regulation, the farmers did not have an unrestricted right to use their lands as they wished but were subject to a highly regulated pesticide regime. ... If there is no constitutional challenge or allegation of ultra vires, then what is GFO's aim in making the application? ... In my view, GFO is not asking for a determination of rights that depend on the interpretation of the Regulation but a re-writing of that Regulation in a manner that would permit the effects of the Regulation to be delayed to its advantage.  It is not the job of this court to pronounce on the efficacy or wisdom of government policy absent the aforementioned constitutional or jurisdictional challenges, neither of which are made here...".

Thankfully for GFO, the MOECC did not seek any costs of the court proceeding against GFO (though GFO will most likely have incurred its own legal costs in the matter).  According to its website, GFO is evaluating its options and says that it has not conceded on this matter.

Timelines to appeal Ontario environmental orders are strict - miss the deadlines at your peril

Another decision of the Environmental Review Tribunal ("ERT") has confirmed that the process and deadlines for appealing orders made by Provincial Officers are strict; failure to comply with the process and deadlines means that the ERT has no jurisdiction to hear an appeal.

In a July, 2015 decision, the ERT dismissed a proposed appeal on the basis that the proceeding related to matters outside the jurisdiction of the ERT (Rule 119).  A Provincial Officer with the Minister of the Environment and Climate Change ("MOECC") had issued an Environmental Protection Act ("EPA") order on May 13, 2015 against the appellant.  On June 3, 2015, the appellant wrote to the ERT to appeal the order.

Under the EPA, a person may seek the review of a Provincial Officer's order to be conducted by the MOECC Director (one step above the Provincial Officer); the request must be made within seven days of the order.  It is only the decision of the Director on the review that can then be appealed if necessary to the ERT.  In the case commenced before the ERT in June, no written request directly to the Director for a Director's review had been made.  There was evidence that the appellant had made an oral request for the review to the Provincial Officer and that the appellant's lawyer had then written to the Provincial Officer to request an "indulgence with respect to the timelines in the Provincial Officer's Order."

Before the ERT, the appellant argued that it had effectively requested a Director's review of the Provincial Officer's Order (through the oral request followed by the written request for an indulgence, although both requests were made to the Provincial Officer).  Alternatively, the appellant argued that the information sheet on the review process provided by the Provincial Officer was vague and misleading and led to an assumption that, if a review was not requested within seven days, the Provincial Officer's Order would be deemed to be confirmed by the Director.  Under the EPA, if a request for a review is made and no decision is issued by the Director within seven days, the Director is deemed to have confirmed the Provincial Officer's Order (and that deemed decision can be appealed to the ERT). 

An appeal to the ERT from the Director's order or decision (deemed or otherwise) must be commenced within 15 days of the date on which the appellant was served with the Director's Order (or the date on which it was deemed to have been made).  There is provision for the ERT to extend the time for appealing, but only where, "in the Tribunal's opinion, it is just to do so because service of the order or decision on the person did not give the person notice of the order or decision."  

Where there was no Director's decision at all, there is no jurisdiction for the ERT to hear an appeal whether it was filed on time or not.  In the recent case, the ERT ruled that the written request for an indulgence cannot be considered a written confirmation of the oral request for a review that was made by the appellant to the Provincial Officer.  The EPA allows for an oral request followed-up by a written confirmation, but the written confirmation must be sent to the Director.  Further, the written follow-up in this case did not include other information required by the EPA (e.g. details of the order to be reviewed).  The ERT concluded that there was no deemed confirmation of the Provincial Officer's Order by the Director and, therefore, there was no Director's order or decision that could be appealed to the ERT.

This decision, like many before it, confirms that the environmental legislation in Ontario (the EPA and the Ontario Water Resources Act) provides very narrow windows of opportunity to appeal orders made by Provincial Officers.  If an order is issued to you and you wish to dispute it, do not delay in seeking legal advice and requesting a review in the manner required by the legislation.  Miss the deadlines and you lose your right to appeal.

Read the decision at: COX FARMS LTD. V. ONTARIO (MOECC).

Divisional Court tells Municipality of West Grey to change by-laws and grant permits required for local wind farm

The applicant wind farm developer (NextEra Energy Canada ULC) sought judicial review of two municipal permitting by-laws that prevented it from proceeding with the construction of a project; in order to complete the development, the applicant said that it required permits from the Municipality of West Grey.  The Divisional Court hearing the application noted: "The application raises the question of when and how a municipal by-law or policy may frustrate the purpose of a provincial legislative instrument.  The factual backdrop for this legal question is the ongoing renewable energy revolution in Ontario that was ushered in by the Green Energy Act, S.O. 2009, c. 12.  This revolution has spawned much litigation, particularly around wind energy projects."

 

The applicant received the Renewable Energy Approval (REA) from the Ontario Ministry of the Environment for its 14-turbine project in January, 2014.  However, the applicant would also need "entrance permits" to connect access roads on private lands to the public highways within the municipality, as well as "oversize/overweight haulage permits" to allow for the conveyance of large and heavy project materials by truck along public highways.  The municipality declined to grant the required permits, in part on the basis of changes it had made to its by-laws.

 

The applicant argued to the Divisional Court that it holds a valid REA from the province and that, since the municpal by-laws are in direct conflict with the REA, the by-laws are inoperative to the extent of the conflict (under Section 14(1) of the Municipal Act, 2001).  The Court noted that a municipality can only exercise its powers by by-law, and the Municipal Act, 2001 provides that a by-law cannot frustrate the purpose of a provincial or federal Act, regulation or instrument. 

 

Based on the Court's interpretation of the REA, it found that the municipality's permitting by-laws did prevent the project from being built.  Therefore, the by-laws frustrated the purpose of the REA and must be held inoperable, but only to the extent of the conflict with the REA. 

 

However, the Divisional Court did not accept the applicant's alternative argument that the municipality had acted in bad faith in refusing to grant the required permits.  As the Court stated, "The Municipality is a democratic body accountable to its constituents.  It has a broad legislative discretion to enact by-laws governing issues that regulate daily life and the built infrastructure within its jurisdiction ... Council's call for a moratorium on wind energy projects in Ontario and its declaration that it is an "unwilling host" for such projects are not acts that, in and of themselves, support a finding of bad faith."

 

Read the decision at: East Durham Wind, Inc. v. The Municipality of West Grey.

Enbridge Gas Distribution ordered to pay back Metrolinx over $2.3 million in pipeline relocation costs

Enbridge Gas Distribution was recently ordered by the Superior Court of Justice to pay back to Metrolinx more than $2.3 million that Metrolinx had earlier paid Enbridge for pipeline relocation costs.  Metrolinx operates an urban rail transit service in the Greater Toronto Area and required the relocation and/or removal of certain parts of Enbridge's gas distribution system in the vicinity of the rail lines.  The question before the Court in this application was who should bear the costs of relocation and removal.  Metrolinx had paid the costs to Enbridge without prejudice to its right to go to Court to try to recoup them.

Metrolinx referred to crossing agreements that had been made between its predecessor, Canadian National Railway (CN), and Enbridge's predecessor, Consumers Gas, that provided that Enbridge would bear the cost of any relocation or removal.  For instance, a 1958 Agreement and a 1963 Agreement both provided:

Should it become necessary or expedient for the purposes of repair or improvement on the said railway that the said pipe crossing be temporarily removed or relocated the applicant [now Enbridge] shall upon request of the railway and at the sole cost and expense of the applicant forthwith remove or relocate the works.

Enbridge argued that the agreements were not assigned or transferred to Metrolinx and that the agreements related to federally-regulated activities.  Therefore, because Metrolinx was a provincial agency, it could not rely upon the agreements.

The Court disagreed.  It accepted the Metrolinx position that the rights that it claimed and the payment obligations of Enbridge were granted to CN by Consumers Gas as a matter of contract.  Justice Morgan explained:

... like all market transactions, they occurred within a particular regulatory environment, but that fact does not undermine the contractual nature of the rights and obligations in question.  Metrolinx' position accurately reflects the governing documentation and legal state of affairs between the parties.  It may well be the case that the Crossing Agreements were an outgrowth of federal regulations that prevailed at the time of their signing.  Nevertheless they are valid contracts, and remain so whether or not the relevant federal regulations continue to govern either of the parties. 

Read the decision at: Metrolinx v Enbridge Gas Distribution Inc.

Manitoba Court determines that proposed pipeline is provincial, not federal

In a post last December, I reported about a case in Manitoba being fought over the jurisdiction of a proposed pipeline - federal or provincial.  A group of affected landowners had sought leave to appeal a decision of the Surface Rights Board and had also requested the judicial review of Manitoba's decision to approve the pipeline.  The leave to appeal matter was put on hold pending the outcome of the judicial review.  In January of this year, the Court of Queen's Bench issued its decision on the judicial review.

The landowners applied to the Court for an order declaring that the pipeline is interprovincial and, therefore, outside the jurisdiction of the Province of Manitoba.  They had previously applied to the National Energy Board (NEB) for the same order, but that application was rejected.

On the basis of the test set out in the Supreme Court of Canada decision in Westcoast Energy Inc. v. Canada (National Energy Board), the Court ruled that the Manitoba pipeline was provincial in nature and, therefore, within the jurisdiction of the Province.  The Court found that the EOG pipeline (the one at issue in the case) and the MIPL pipeline (the cross-border pipeline to which the EOG pipeline would connect) were not a single federal undertaking, and that the EOG pipeline is not integral to the operation of the MIPL pipeline.  On that basis, the EOG pipeline did not become part of the interprovincial MIPL pipeline for the purpose of determining its jurisdiction.  As the EOG pipeline is located within the boundaries of Manitoba, it is a provincial pipeline.

Read the decision at: Daniels et al v. EOG Resources et al.

OMB declines to award landowner pre-expropriation costs where expropriation did not proceed

The City of Hamilton moved successfully for the dismissal of expropriation-related Notices of Arbitration and Statements of Claim on the basis that the Ontario Municipal Board (OMB) had no jurisdiction to hear the matters; no expropriations had taken place.

The proposed expropriations related to construction in Hamilton for the 2015 Pan American Games, and the landowner claimants had retained counsel to advise them with respect to the land acquisition process.  The City and the landowners then entered into negotiations, and when offers were refused by the landowners, a notice of application for approval to expropriate was served.  However, not longer after that notice was sent the City decided that it did not require the properties in question, though it was still open to purchasing the properties for the amounts previously offered.

By that time, the landowners had incurred legal costs and forwarded to the City a Bill of Costs.  They then served Notices of Arbitration and Statements of Claim to commence a claim to the OMB for consequential damages arising from the City's abandonment of the expropriation.

The City asked the OMB to throw the claims out, which the OMB did.  The OMB confirmed that pre-expropriation costs are compensable when there is an expropriation, but found that costs are not generally compensable under the Expropriations Act where there is no expropriation.  The OMB decided that this was not a circumstance in which it could exercise its discretionary powers to find that the term "expropriation" applies to the overall process for the taking of land (as had been argued by the landowners) and not just to an expropriation commenced by way of a formal Notice of Expropriation.

The OMB concluded:

In the absence of a formal registered expropriation, an expropriating authority should not be bound to compensate for damages or costs in a case where there is a potential for an expropriation. Furthermore, in the absence of a taking of land, negotiations for the purchase of the lands does not, and should not, attract a claim for costs, merely because the potential buyer has the power, if fully exercised, to expropriate.

Landowners in Ontario should question whether to engage in any negotiations whatsoever with an expropriating authority prior to receiving a Notice of Expropriation without an agreement in place requiring the authority to pay the landowner's legal costs of the negotiations.

Read the decision at: Marsdin v. Hamilton (City).

Is the pipeline provincial or inter-provincial?

Every so often, the question of whether a pipeline is subject to provincial regulation or to federal regulation (by the NEB) comes before the courts.  The issue is now before the courts in Manitoba according to a recent decision of the Manitoba Court of Appeal.  A number of landowners affected by a proposed pipeline filed applications for leave to appeal a decision of the Surface Rights Board of Manitoba to the Court of Appeal.  They then brought a motion seeking to adjourn the leave to appeal applications pending a decision of the Manitoba Court of Queen's Bench regarding a judicial review of the decsion by Mantioba's Minister of Innovation, Energy and Mines (the "Minister") to grant a permit to EOG Resources Canada Inc. (EOG) to construct the pipeline.

The intended purpose of the pipeline, which would cross through the landowners' properties, is to link up to another proposed pipeline that would cross the Manitoba-Saskatchewan border (the "MIPL Pipeline").  The MIPL pipeline project requires approval from the NEB as it is an interprovincial (federal) pipeline.

EOG maintains that, although its pipeline would connect directly to the interprovincial MIPL Pipeline, its pipeline is intended to be wholly within the province of Manitoba.  Therefore, the EOG pipeline would be subject to provincial approval, as was granted by the Minister.  The landowners contest the jurisdiction of the Minister and brought an application for judicial review of the Minister's decision to approve the pipeline on constitutional grounds.

EOG opposed the adjournment of the leave to appeal applications, asserting that a delay would cause it prejudice.  The Court disagreed.  It found that it was not a practical use of judicial resources to have two cases ongoing with respect to the same issues.  It also reasoned that the Court of Queen's Bench proceeding may result in additional evidence necessary to determine the constitutional issue (i.e. the jursidiction of the proposed pipeline).  The Court of Appeal found that these reasons outweighed any potential prejudice to EOG.

Read the decision at: EOG Resources Canada Inc. v. Saskitoba.

NS Farm Practice Board decision on overspray upheld

Justice Scanlan of the Supreme Court of Nova Scotia heard an appeal of a decision of the Farm Practices Board (FPB) involving the following facts:

The matter arose as a result of two instances where [JW] sprayed a field directly across the road from the [N] property with what I understand to have been a herbicide. The Appellants argue this was done at a time when the wind speed and direction caused an overspray to spread onto their property, allegedly damaging raspberry canes and allegedly causing personal injury to both Mrs. [N] and to her horses. In addition, the Appellants complain about the impact of ditch excavation, as carried out by Mr. [W], and as to the placement of bales of hay or straw in the ditch, the escape of organic materials onto their property together with the impact or the potential impact that might have had on their well water. I emphasize repeatedly the word “allegedly.” The Appellants also allege, as I noted, that the herbicide impacted the health of their horses, specifically mares in foal. They say the mares were impacted and perhaps may have aborted as a result of the overspray. They allege, as I understand it, although I'm not reviewing in any great detail the allegations in the statement of claim, that it was not just the existing pregnancies that were impacted but the fertility of the mares on a go forward basis.

The issue that had been before the FPB was whether or not the farmer in this case complied with normal farm practices, in which case the practice would be protected from certain civil actions for damages or injunctive relief.  However, the farm protection legislation does not address "the potential impact of chemical use or misuse, including the impact on neighbouring properties."

In the end, Justice Scanlan determined that the FPB decision was reasonable, but pointed out its limitations - it did not deal with all of the allegations made by the complainants, including allegations about overspray.  Those other allegations would still have to be dealt with, if at all, in the civil action that the complainants had also commenced against the farmer in this case.  That action had been stayed pending the outcome of the FPB proceeding.

Read the decision at: Nauss v. Nova Scotia (Farm Practice Board).

Federal Cabinet will have power to approve projects denied by NEB

Read the CBC News article at: "Cabinet to get final say on pipeline projects": Little-noticed change to send all National Energy Board decisions to federal cabinet for review.