Originally published in Blakes Bulletin on Energy -
Oil & Gas/Litigation, May 2008
As described in the March 2008 Blakes Bulletin on
Environmental Law entitled Environmental Assessments and Greenhouse Gas
Emissions, in a decision released on March 5, 2008,
the Federal Court held that the Report of the Joint Review
Panel approving Imperial Oil's Kearl Oil Sands Project
(Kearl Project), did not provide a rationale for its
conclusions on greenhouse gas emissions. As a result, the Court
remitted the matter back to the same Panel with a direction to
provide a rationale for its conclusions. Following the Federal
Court's decision, the Department of Fisheries and
Oceans (DFO) (which had initially granted the Authorization for
the Kearl Project to proceed) wrote to Imperial Oil advising
that its Authorization was, as a result, a nullity and advised
that the Kearl Project could not proceed.
From April 11 to May 6, 2008, the Panel was reconstituted
and on May, 6, 2008 (the day before the hearing of Imperial
Oil's application to reinstate the DFO's
Authorization), it issued an Addendum to its initial Report.
Based on its review of Imperial Oil's Environmental
Impact Assessment (EIA), the proposed mitigation measures, as
well as the federal and provincial governments'
initiatives on air emissions, the Panel reaffirmed its
conclusion in its initial Report that the Kearl Project
"is not likely to result in significant adverse
environmental effects to air quality, provided that the
mitigation measures and recommendations proposed are completed
and implemented." A major factor relied upon in supporting
the Panel's conclusions was its determination that the
projections in Imperial Oil's EIA were conservative and
over-predicted potential effects. In addition, the Panel
emphasized the onus on the governments of Canada and Alberta to
implement a regulatory framework for greenhouse gas
Notwithstanding the Panel's reconsideration in
favour of Imperial, the DFO refused to reinstate its
Authorization. Imperial Oil challenged the DFO's
opinion and sought to proceed to develop the Kearl Project on
the basis of the Authorization already provided. In a decision
released May 14, 2008, Mr. Justice Campbell of the Federal
Court denied Imperial Oil's application.
The Court held that the Authorization issued by the DFO was
a nullity since it was based on a "fundamentally flawed
Report which, thereby, could not lawfully receive the approval
of the Governor in Council." Accordingly, the Court held
that a valid Authorization could not be granted until the Panel
completed its Report and submitted it for a new Authorization
from the DFO. In addition, the Court considered whether the DFO
had the legal authority to revoke or rescind an Authorization
which remained legally valid. The Court held that in light of
the fact that the issuance of the Authorization was a nullity,
the subsequent letter from the DFO confirming that fact to
Imperial did not constitute a revocation of the Authorization,
but rather was an "expression of opinion based on
operation of law".
As a result, the Panel's completed Report must once
again be submitted for approval by the Federal Cabinet. If the
new Report receives approval, a new authorization must then be
granted by the DFO. Both steps are estimated to take months,
not to mention the additional delays if a decision is appealed
or an application for judicial review is brought (it took five
months for the government to approve the Panel's
initial Report and then an additional six months to obtain the
The overall effect of the Court's decision for major
projects, including oil sands such as the Kearl Project, will
be a greater emphasis on the importance of the initial
regulatory approval process and the decision rendered as a
result of that process. The impact of this decision may likely
result in material delays associated with the overall
regulatory process for these projects.
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