International Restructuring Newswire
This issue features articles from four different countries of the Norton Rose Fulbright network.
On August 30, the Federal Court of Appeal (FCA or Court) denied the federal government’s approval of the Trans Mountain pipeline expansion project (Project).
The decision is another failure of Canada’s approval process for large and complex projects. Trans Mountain filed its project description in May 2013 and pursued approval through a lengthy review process, only to have it quashed as deficient. Pending any appeal, the decision has several implications for proponents of significant resource projects:
Neither the National Energy Board (NEB) nor the proponent failed in its consultation duties, and all attacks on the NEB process but one (limited review of marine impacts) were rejected. Supreme Court of Canada decisions in 2017 re-confirmed that structured environmental assessment and regulatory processes could discharge the Crown’s duty to consult, if properly structured.1 These decisions were cited by the Court, but ultimately appeared to receive little weight in the final analysis. As with the FCA’s 2016 decision in Gitxaala Nation,2 the Court held the Crown to a high standard when consulting after the completion of the NEB’s regulatory process.
The decision highlights the risk to proponents when latter-stage consultation is carried out by the Crown, with only limited proponent participation. The Crown’s duty to consult and accommodate will not be met when the Crown simply engages in “note taking.” It must be “meaningful” and the Crown must grapple with the often technical information it obtains and concerns that Indigenous groups raise, engage in a “responsive, considered and meaningful” two-way dialogue that reflects a “demonstrably serious consideration of accommodation,” and be willing to make changes to proposed actions.
The FCA’s decision reflects the same consultation process design risk that surfaced in the Gitxaala Nation decision for the Northern Gateway project (despite the FCA confirming design adequacy in each case). While Phases II and III may have been intended to be mutually reinforcing, Phase III was arguably individually held to a higher standard than the Crown intended, or perhaps was capable of meeting. Indeed, the FCA has set a standard that the federal government may not be able to meet for mega-projects, in that there may simply not be enough government officials with either authority to accommodate Indigenous interests, or technical and scientific support, to consult with and accommodate hundreds of potentially impacted groups after the NEB process concludes.
The framework employed by the Crown is therefore unlikely to be used again (even if another mega-project were on the horizon). Also, Bill C-69 is before the Senate. It would replace both the National Energy Board Act and the Canadian Environmental Assessment Act, 2012 (CEAA 2012) with new structures and processes that appear likely to give regulators a greater role in the consultation processes that have challenged cabinet.
Cabinet approvals risk being found “unreasonable” and quashed by courts if they are based on flawed reports produced by regulators such as the NEB, but courts’ review of those reports may not defer to the regulator’s technical expertise, as would typically be the case in a direct challenge of the report.
In a throwback to adverse court decisions under the legislation that preceded CEAA 2012, project scoping remains a significant source of risk. While a proponent may wish to limit the scope of project review to allow an application to be dealt with more expeditiously and to limit risk, the failure to adequately expand the scope carries risks of its own because courts may interfere with regulatory bodies’ scoping decisions at the end of the process, leading to further delay and additional costs.
On August 30, the Court released its much-anticipated decision in Tsleil-Waututh Nation v. Canada, 2018 FCA 153.
The decision concerns the proposed expansion of the approximately 1,150-kilometre Trans Mountain pipeline system, which moves crude oil, refined and semi-refined petroleum products from Edmonton, Alberta, to marketing terminals and refineries in the central region and lower mainland areas of British Columbia, as well as to the Puget Sound area in Washington state.
The Project contemplates 987 kilometres of “twinned” new pipeline, largely along existing rights-of-way, but also some new pipeline corridors and expanded docking facilities. It represents an increase from 300,000 barrels per day to 890,000 barrels per day in the system’s overall capacity, and a five to six factor increase in the number of tankers loaded.
Following an extensive review and public hearing process by the NEB under its enabling legislation and CEAA 2012, cabinet accepted the NEB’s recommendation and issued a Certificate of Public Convenience and Necessity approving the Project, subject to 157 conditions.
A number of First Nations, two cities, and two non-governmental organizations commenced applications for judicial review challenging cabinet’s decision to approve the Project. The attorney general of British Columbia and the attorney general of Alberta also participated as interveners.
In a lengthy decision, a unanimous panel of the FCA allowed certain applications for judicial review and quashed the cabinet’s approval of the Project.
The FCA’s judgment turned on two central conclusions: first, cabinet’s decision was based on a materially flawed report from the NEB; and second, the Crown did not fulfill its duty to consult and accommodate Indigenous peoples.
The NEB Report
The Court held that the NEB’s scoping of the Project was too narrow and fatally deficient, and that measures to protect southern resident orcas were mandatory under the Species at Risk Act.
The NEB report considered the environmental impacts of Project-related marine shipping. Potential impacts on southern resident orcas were identified; however, the NEB ultimately concluded that no significant adverse environmental impacts would result from the Project because it scoped the Project to exclude marine shipping activities. No mitigation measures were therefore recommended by the NEB to protect southern resident orcas. If the NEB had scoped the Project more broadly – to include marine shipping – measures to prevent or lessen impacts on southern resident orcas would have been mandatory under the Species at Risk Act.
The Governor-in-Council was held to have “lacked the necessary information to make the decision required of it” and it erred unreasonably by relying on a deficient environmental assessment and NEB report. The FCA concluded that the standard of review applicable to the Governor-in-Council’s decision on this point was “reasonableness,” but the Court did not analyze whether any deference to the NEB’s technical scoping decision under CEAA 2012 was appropriate (and dismissed the direct challenges to the NEB’s report itself).
If this point surfaces during any appeal, it is noteworthy that the Supreme Court of Canada has specifically indicated it may provide novel direction concerning the role of reviewing courts in judicial review of decisions like project approvals, following three cases scheduled to be heard in early December.3
The Duty to Consult and Accommodate
The FCA closely examined the four-phase consultation framework adopted by Canada. It concluded that the framework was sufficient to enable Canada to make reasonable efforts to inform itself about the concerns of, consult with, and potentially accommodate Indigenous peoples.4
However, the Court went on to find that Canada’s execution of late-stage “Phase III” consultation (post-NEB report) was “unacceptably flawed” and fell short of the standard prescribed by the Supreme Court of Canada in previous cases.5 A similar conclusion was reached in the Gitxaala Nation decision concerning the Northern Gateway project. In this case, the Court specifically noted:
the absence of meaningful dialogue or responses from Canada in response to Indigenous applicants’ concerns;6
Canada’s “closed-mindedness” about and unwillingness to depart from the NEB’s findings and recommendations. Canada failed to understand Indigenous applicants’ concerns and failed to genuinely and adequately consider and respond to those concerns;7 and
Canada’s erroneous view that the Governor-in-Council could not impose additional conditions on the proponent, beyond the conditions that were recommended by the NEB, which was contrary to precedent and wrongly limited the scope of consultation.8
Ultimately, the Court concluded that although government is “not to be held to a standard of perfection in fulfilling its duty to consult,” Canada’s efforts fell well short of the “deep consultation” required.9 The Court found no genuine and sustained effort to pursue a two-way dialogue. This was reflected in the lack of meaningful responses from Canada’s representatives in consultation meetings, generic written responses, and the absence of representatives from Canada with the authority to discuss accommodation measures.10
The FCA quashed the Governor-in-Council’s approval of the Project and remitted the matter to the Governor-in-Council for redetermination. It was held that any redetermination by the Governor-in-Council would require referring issues to the NEB for reconsideration – specifically, issues relating to the Project’s impacts on at-risk species. The Court further held that Canada must “re-do” its late-stage consultation.
Any redetermination by the Governor-in-Council must therefore be preceded by supplementary regulatory and consultative processes, which are likely to be lengthy and costly. Canada has also been urged to appeal the decision to the Supreme Court of Canada by multiple provincial governments and industry participants.
The authors wish to thank law student Scott Thorner for his help in preparing this legal update.
1 Clyde River (Hamlet) v. Petroleum Geo-Services Inc., 2017 SCC 40 and Chippewas of the Thames First Nation v. Enbridge Pipelines Inc., 2017 SCC 41.
2 2016 FCA 187.
3 Minister of Citizenship and Immigration v. Alexander Vavilov (37748; Bell Canada, et al. v. Attorney General of Canada (37896); and National Football League, et al. v. AG Canada (37897).
4 Ibid, at paras. 513-549, 753 (“[T]he consultation framework selected by Canada was reasonable and sufficient. If Canada properly executed it, Canada would have discharged its duty to consult”).
5 Ibid, at para. 557.
6 Ibid,at para. 559
7 Ibid,at paras 558-561, 603. (“For the most part, Canada’s representatives limited their mandate to listening to and recording the concerns of the Indigenous applicants and then transmitting those concerns to the decision-makers.”)
8 Ibid, at paras 560, 634 and Gitxaala Nation v. Canada, 2016 FCA 187.
9 Ibid,at para. 762.
10Ibid, at paras. 754-760.
This issue features articles from four different countries of the Norton Rose Fulbright network.