Canada: Court Sends Kearl Decision Back For Clarification Of Rationale

The Federal Court has determined that the Joint Review Panel must provide better reasons why compliance with "intensity-based" greenhouse gas emissions targets adequately mitigates the Kearl Project's emissions. The decision also clarifies that uncertainty is a normal part of environmental assessment and is a factor to be managed.

On March 5, 2008 the Federal Court determined that the Joint Review Panel hearing Imperial's Kearl Lake oil sands application failed to provide a sufficient rationale in its report about why greenhouse gas emissions intensity targets adequately mitigated the climate change effect of the proposed project. The court's decision in Pembina Institute for Appropriate Development, et al v. Attorney General of Canada and Imperial Oil Resources Ventures Limited means that the Panel will have to provide reasons why the proposed climate change compliance measures will prevent a "significant adverse environmental effect." Instructive for industry is the fact that the court did not find that reliance on regional environmental management frameworks and thickened tailings technology were reviewable errors.

Background

The Kearl Project is an oil sands mine north of Fort McMurray which includes open pit truck and shovel mines and supporting infrastructure such as bitumen extraction and tailings management facilities. The project required both federal and provincial approvals and environmental reviews. To streamline the review process, a Joint Review Panel was struck to consider the project. After a 16-day public hearing, the Panel issued its joint report on February 27, 2007. Certain environmental non-governmental organizations (ENGOs) sought judicial review of that report on a number of grounds.

Analysis

The ENGOs argued that the Panel erred by accepting mitigation measures that "were not technically and economically feasible" and by not providing rationales for recommendations relating to:

• the use of the Cumulative Effects Management Association (CEMA) for watershed management and landscape remediation;

• endangered species; and

• greenhouse gas emissions.

A continuing theme in the court's decision is that the Panel recommendations were not flawed because the evidence did not eliminate all uncertainty. The court found that the Panel's approach was consistent with the principles of adaptive management because the "ongoing and dynamic nature of environmental assessment" requires proponents to continuously obtain new information and refine mitigation strategies.

The ENGOs argued that Imperial's tailings technology was not workable because it had not yet been successfully demonstrated. The court, however, disagreed with the ENGOs, finding that, if accepted, the ENGOs' arguments would mean that under the Canadian Environmental Assessment Act (CEAA) process, only those technologies that have been used in the past may be proposed. Such an approach would stifle innovation. This finding is significant in that most oil sands operators rely on the same or similar tailings technology.

The court also considered the ENGOs' arguments that "species at risk" concerns were not addressed and that the CEMA could not be relied on in light of the Panel's own critiques. The court disagreed with the ENGOs and found that while the Panel could have provided better reasons concerning endangered species, its treatment was still adequate. Similarly, the court ruled that, despite the problems with CEMA as noted by the Panel, CEMA is the proper vehicle for the development of environmental management frameworks and not properly viewed as a mitigation measure.

The court's approval of the Panel's findings about CEMA and endangered species is of critical importance to industry. Industry relies on CEMA to assist with the planning for, and management of, cumulative effects.

The only successful argument that the ENGOs made was that the Panel failed to provide a rationale for its conclusion that the adverse environmental effects of the Kearl Project's greenhouse gas emissions would be insignificant. The ENGOs had argued that intensity-based reductions do not adequately mitigate greenhouse gas (GHG) emissions. The court held that the Panel's rationale did not support the legal test of "no likely significant adverse effects" given the amount of GHG that will be emitted into the atmosphere (equivalent to 800,000 cars per year). The court also held that, because of production increases, intensity-based targets will not cause a net reduction of GHG emissions. The court also held that an informed decision by a Responsible Authority under the CEAA "must be nourished by a robust understanding of Project effects." The absence of a reasoned basis for its conclusion, as mandated by section 34(c)(i) of the CEAA, was a legal error. However, because this error related only to one of the many issues that the Panel reviewed, the court found it inappropriate and ineffective to require a second full Panel review. The court directed that the Panel must provide better reasons why compliance with the proposed intensity-based greenhouse gas emissions targets adequately mitigates the Kearl Project's emissions.

Significance for Project Proponents

This decision is important because it highlights the fact that project proponents must provide evidence that each specific project effect will not result in a significant adverse environmental effect. In doing so, proponents must ensure that the Panel has the information required to make its decisions under the CEAA and that the Panel understands the rationale that it is putting forward. The court's finding in this case also clarifies that uncertainty is a necessary part of environmental assessment. This theme was applied to endorse the role of (and reliance on) CEMA as well as the use of thickened tailings technology.

Shawn Denstedt is a partner in the firm's Calgary office. Terri-Lee is an associate in the Energy and Litigation groups of the firm's Calgary office. Matthew Keen is an associate in the firm's Calgary office.

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