Canada: Northern Gateway Project Approval Quashed Due To Inadequate Consultation

In its recent decision in Gitxaala Nation v. Canada, the Federal Court of Appeal (Court) quashed federal approval of the proposed Northern Gateway Project (Project). The Court held that although interested parties had ample opportunity to participate in the Joint Review Panel assessment process, the Government of Canada failed to adequately consult with First Nations before the governor-in-council (Cabinet) approved the Project. Canada may reconsider its approval of the Project, but must fulfil its consultation requirements before coming to any conclusions.

BACKGROUND

The Project would consist of two pipelines between Bruderheim, Alberta and Kitimat, B.C., carrying oil and condensate. The infrastructure would include a marine terminal at Kitimat consisting of oil and condensate storage tanks, and tanker and utility berths. Up to 250 tankers per year would use the marine terminal. The Project is in the traditional territory of numerous First Nations who assert that the Project will significantly affect their aboriginal rights and title. For further information, see our January 2016 Blakes Bulletin: B.C. Has Authority to Impose Conditions on Northern Gateway Pipeline

As the Project includes an inter-provincial pipeline, approval under both the National Energy Board Act and the Canadian Environmental Assessment Act is required. The National Energy Board (NEB) and Canadian Environmental Assessment Agency (CEAA) formed a Joint Review Panel (Panel) in 2010 to review the Project. The Panel was tasked with providing a recommendation as to whether certificates of public convenience and necessity (Certificates) should be issued, and the terms and conditions to be attached to any Certificates.

The Panel ultimately recommended approval of the Project and the issuance of the Certificates, subject to 209 conditions. In June 2014, Cabinet issued an order-in-council (Order) directing the NEB to issue two Certificates for the Project in accordance with the terms and conditions set out in the Panel's report. The Order is the Cabinet's "approval" of the Project, which was ultimately quashed by the Court.

LEGAL ISSUES

The Court consolidated and considered nine applications for judicial review of the Order, five applications for judicial review of the Panel's report, and four appeals of the Certificates issued by the NEB.

Broadly speaking, the Court considered two legal issues: 1) whether the decisions were reasonable under administrative law principles; and 2) whether Canada fulfilled its duty to consult with Aboriginal Peoples before issuing the Order.

The Court found that the Order was defensible on the facts and the law, and was reasonable from an administrative law perspective. However, the majority of the Court (two of the three judges) held that the Order should be quashed because Canada had not fulfilled its duty to consult.

CONSULTATION FRAMEWORK

In February 2009, CEAA released Canada's framework for consulting aboriginal groups regarding the Project (Framework). The Framework outlined a five-phase consultation process:

  • Phase I: Preliminary Phase. Consultation on the draft Panel agreement takes place and information is provided to aboriginal groups on the mandates of the NEB, CEAA and Panel.
  • Phase II: Pre-hearing Phase. Information is given to aboriginal groups concerning the Panel's process.
  • Phase III: Hearing Phase. The Panel holds its hearings. Aboriginal groups participate and provide information. The Crown participates and facilitates the process by providing expert scientific and regulatory advice.
  • Phase IV: Post-Report Phase. Following the release of the Panel's report, the Crown engages in consultation concerning the report and on any Project-related concerns that were outside the Panel's mandate. Cabinet then decides whether Certificates for the Project should be issued.
  • Phase V: Regulatory/Permitting Phase. Further consultation is contemplated concerning permits and authorizations to be granted for the Project, if approved.

COURT'S FINDINGS

The Court addressed a wide range of issues in its 364-paragraph decision. A key aspect of the Court's reasons is that, under the existing NEB legislative regime, the only decision that is reviewable is Cabinet's Order; the report of the NEB (in this case, the Panel), is not subject to judicial review. Accordingly, the Court dismissed the judicial review applications in respect of the Panel's report.

Further, Cabinet is empowered by the legislation to make decisions on the basis of broad public interest considerations, along with economic and policy considerations, and weigh them against detrimental effects. In making such discretionary decisions, Cabinet is granted a broad margin of appreciation by the courts. In this case, under administrative law principles, the Court considered Cabinet's decision to be reasonable.

Turning to aboriginal consultation issues, the Court held that the consultation conducted during the Panel process (Phases I to III of the Framework) was acceptable. It was not unreasonable for Canada to integrate the consultation process into the Panel process, particularly given the existence of Phase IV, in which there was to be direct consultation between Canada and affected aboriginal groups.

However, the majority of the Court held that Canada's execution of Phase IV was unacceptably flawed: it was "brief, hurried and inadequate." Subjects affecting First Nations' "subsistence and well-being ... were left undisclosed, undiscussed and unconsidered." "(I)n the face of the requests of affected First Nations for more time, there was silence." "(M)eaningful dialogue on ... subjects of prime importance to Aboriginal peoples ... did not happen." Canada did not attempt to amend or supplement conditions imposed by the Panel, correct any errors or omissions in the Report, or provide substantive feedback in response to material concerns raised.

As a result, the Court quashed the Order, and the resulting Certificates. The Court sent the matter back to Cabinet for redetermination. Cabinet can now:

  1. Re-direct the NEB to issue the Certificates
  2. Deny the Certificates
  3. Direct the NEB to reconsider any of its recommendations, terms or conditions in the Report. Cabinet can only re-direct the NEB to issue the Certificates after Canada has adequately fulfilled Phase IV consultation. 

The Court acknowledged that the Cabinet decision will be "based on its current views of the broad policies, public interests and other considerations that bear upon the matter." To the extent that Canada's consultation process generates new information, all parties must have an opportunity for input. Although the Court indicated that the consultation process "need not take long", that timing will largely depend on Canada's approach to the matter. Finally, Cabinet will need to provide reasons for its decision (which were perfunctory in the original Order) in order to survive any further judicial scrutiny.

IMPLICATIONS

The Northern Gateway baton has been passed to the new federal government, which campaigned on a rather different platform than the Cabinet that issued the Orders approving the Project. As indicated above, the government may: re-direct the NEB to issue the Certificates; deny the Certificates; or direct the NEB to reconsider any of its recommendations. In making its decision, Cabinet must act consistently with its statutory powers and in a way that upholds the honour of the Crown.

There has been speculation that Canada may simply deny the Certificates. Cabinet has the statutory power to do so. However, that discretion is not unfettered given that the Panel recommended that the Project should proceed. Moreover, some First Nations support the Project, so even a denial of the Certificates may require aboriginal consultation.

The decision also has potential implications for other projects. Over the past decade, federal, provincial and territorial governments have tended to rely heavily on administrative processes to direct aboriginal consultation in conjunction with environmental assessment, before the project is subject to a final ministerial or cabinet-level decision. Unless the Court decision is appealed and overturned, this approach may need to change to provide for meaningful government consultation post-assessment.

Finally, the Court's decision has implications for the recently announced overhaul of the federal government project review process, and its commitment to a renewed relationship with Aboriginal Peoples. The Court's decision highlights the scale and complexity of meeting the Crown's obligations to Aboriginal Peoples on a project the size of Northern Gateway. The federal government will have to grapple with this issue in its revamping of the review process, while still ensuring that the process can be conducted in a time and manner that reflects the commercial realities of the projects under review.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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