Canada: The Federal Court Of Appeal Quashes The Trans Mountain Pipeline Approval

Last Updated: September 7 2018
Article by Burgandy Dunn and Rizwan Khan​

On August 30, 2018 the Federal Court of Appeal released a decision1 halting the construction of the Trans Mountain Pipeline Expansion (the Project). Finding that the environmental assessment (EA) process was flawed and that the federal government failed to engage meaningfully with Indigenous groups, the Court quashed the approval for the Project. 

The Project involves the looping of the existing Trans Mountain Pipeline between Edmonton, AB and Burnaby, BC, with approximately 987 km of new buried pipeline, to increase the capacity of the existing pipeline from 47,690 m3/day (300,000 barrels/day) to 141,500 m3/day (890,000 barrels/day) of crude petroleum and refined products. Since the Project necessitates the construction and operation of an oil pipeline that is 40 km or more in length and is regulated under the National Energy Board Act, it is listed under item 46 of the Schedule to the Regulations Designating Physical Activities, under the Canadian Environmental Assessment Act, 2012 (CEAA 2012), as a "designated project" for which the National Energy Board (NEB) is the Responsible Authority. As a result, the NEB conducted the necessary EA of the Project under the CEAA 2012. An EA under CEAA 2012 requires the NEB to consider any cumulative effects that are likely to result from the Project in combination with environmental effects from other physical activities that have been or will be carried out. The NEB must also consider the environmental effects of accidents and malfunctions that may occur in connection with the Project.

The NEB determined the Trans Mountain Pipeline Expansion Project application was complete as of April 2, 2014 and, on May 19, 2016, subject to 157 terms and conditions, found that the Project was in Canada's public interest, and recommended the Governor in Council (GIC) approve the Project and direct the NEB to issue the necessary Certificate of Public Convenience and Necessity (CPCN) and amended CPCNs.2

On November 29, 2016, after considering the NEB's recommendation report, the assessment of upstream greenhouse gas (GHG) emissions, and the results of consultation with the public and Indigenous groups, the Canadian federal government approved the Project. Specifically, the GIC: (a) determined that the Trans Mountain Expansion Project is not likely to cause significant adverse environmental effects and directed the NEB to issue an EA decision statement, and (b) directed the NEB, subject to the 157 terms and conditions identified by the NEB, to issue the necessary CPCN3 to Trans Mountain for the proposed construction and operation of the Project.4 The NEB issued the CPCN on Dec 1, 2016, permitting the commencement of construction and operation of the expanded pipeline system.

In the recent Tsleil-Waututh Nation v. Canada decision, released August 30, 2018, a number of First Nations, two large cities, and two non-governmental agencies concerned about the Project and its impact upon them, challenged its approval. In a unanimous decision, the Federal Court of Appeal quashed the Order in Council approving the Project and remitted the matter back to the GIC for proper redetermination. The validity of the Order in Council, the federal government's approval of the Project, was challenged on the grounds that (1) the process and findings of the NEB were so flawed that the GIC could not reasonably rely on the NEB's report and recommendations when assessing the Project's environmental effects and the overall public interest; and (2) that Canada failed to fulfil the duty to consult owed to Indigenous Peoples. The Federal Court of Appeal noted that both the factual record and applicable legal principles were largely uncontested, and concluded that the NEB's report, on which the federal government relied in coming to its decision to approve the Project, made a critical error – unjustifiably defining the scope of the Project under review to exclude Project-related tanker traffic (i.e., marine shipping) which led to "successive, unacceptable deficiencies" in the [NEB's] report and recommendations".5

The Court held that the report was "not the kind of 'report' that could arm the Governor in Council with the information and assessments it required to make its public interest determination and its decision about environmental effects and their justification." The Court also found that this error in turn led to the NEB's erroneous conclusion that section 79 of the Species at Risk Act did not apply to its consideration of the effects of Project-related marine shipping.

The Court noted that the NEB found the operation of Project-related marine vessels is likely to result in significant adverse effects to the Southern Resident Killer Whale (orca). Despite this finding, the NEB concluded the Project (as scoped by the NEB) was not likely to cause significant adverse environmental effects. The Court further noted that this conclusion could only have been reached by the NEB scoping the Project to exclude Project-related shipping – a significant component of the Project. The Court also held that the Federal government's Order in Council indicated an awareness of the manner in which the NEB had scoped the Project to exclude Project-related marine shipping, as well as the significant adverse effects upon both the orca and Indigenous cultural uses of this endangered species.6 Based on the foregoing, the Federal Court of Appeal held that the NEB report did not permit the GIC to make an informed decision about whether the Project is in the public interest and whether the Project is likely to cause significant adverse environmental effects. Since the NEB report was found to be inadequate in informing the Federal government, the Court held that it was unreasonable for the government to have relied upon it.7

The Court also held that the government's duty to consult was not discharged. Although Canada acted in good faith and selected an appropriate consultation framework, in the final phase of the consultation process Canada's efforts failed to meet the test established by the Supreme Court of Canada for adequate consultation by: neglecting to engage meaningfully; failing to understand the real concerns of the Indigenous applicants; and failing to explore possible accommodation for those concerns.

The decision of the Federal Court of Appeal means that the NEB CPCN has been nullified, and all construction activity must cease in a manner that minimizes environmental impact. All regulatory processes directly related to the Project have also been halted.8

In order for the Project to continue, the Court's decision requires that a properly scoped EA be conducted and that meaningful consultation with Indigenous groups be undertaken.9 It is unclear how long a corrected EA and consultation in the spirit of reconciliation would take. While it took two years for the impugned process to be completed, addressing the specific concerns of the Federal Court of Appeal will likely require altering shipping routes and diverting the path of the pipeline to accommodate the concerns of the Indigenous communities. The ruling indicated that continuing the Project under the current proposal would have a significant impact on the orcas, a species on the brink of extinction, without altering shipping routes, reducing the number of tankers, and slowing tanker speeds, all of which are set at the discretion of Transport Canada which has indicated it has no current intent to make alterations to shipping lanes or to impose vessel speed restrictions. The ruling also requires the federal government to not only listen to Indigenous concerns, but to properly consider them and provide a genuine response that includes accommodation where necessary – a process that cannot be rushed. The timeframe to conduct an adequate EA and meaningful consultation with Indigenous communities is uncertain, but it is unlikely to be completed, if undertaken at all, before the 2019 federal election.

It is worth noting that prior to the Tsleil-Waututh Nation v. Canada decision, Kinder Morgan Limited, the previous Proponent, had negotiated an agreement to divest itself of the Project to the federal government for $4.5 billion. Following the Tsleil-Waututh Nation decision, Kinder Morgan's board officially agreed to sell the project to the federal government. Finance Minister, Bill Morneau, has recently confirmed that the government will complete the acquisition of the Project and its related assets. It is now left to the governing Liberals to decide whether the perceived commercial benefits of the Project outweigh the burden of undertaking the required remedial actions or whether they will, like their predecessor, abandon the Project. Commenting on the federal government's position following the Tsleil-Waututh Nation decision, the Finance Minister stated that the federal government stands behind the business case for the Project and intends to ensure the project proceeds. Once the high level of risk associated with the Project's construction is overcome, the federal government intends to transfer the Project and related assets to a new private owner. The Minister indicated that the government is "carefully reviewing" the Federal Court's decision. Prime Minister Trudeau has also confirmed the government's commitment to the Project, but didn't specify whether the government intends to rectify the noted deficiencies, introduce new legislation to enable the Project, or appeal the Federal Court's decision to the Supreme Court of Canada.

The choice is particularly fraught for the governing Liberals in a number of ways. First, the Federal government's decision to not only champion the Project, but approve and purchase it for a substantial sum, has been highly criticized by British Columbia as well as Indigenous, environmental, and public interest groups for reneging on campaign promises. Second, the government has also come under harsh criticism by proponents of the fossil fuel sector. In spite of the federal government's insistence that a healthy environment is a precondition to sustainable economic prosperity, the Federal Court of Appeal's decision has led to many arguing that the quashing of the Trans Mountain approval undermines Canadian competitiveness, scares away investment, and evidences the need to simplify Canada's regulatory regime.  Third, the government's stated commitment to transparency, increased public participation in decision-making, and reconciliation with Canada's Indigenous Peoples as a top priority is tarnished by this decision, which concluded that the Canada's consultation process fell "well short of the mark". Further, the federal government's purchase of the Project runs contrary to their commitment to fight climate change and focus on investment in the clean energy sector. In fact, the decision to promote the extraction and combustion of fossil fuels directly undermines efforts to mitigate the effects of climate change and frustrates a burgeoning green economy. Finally, despite the government's insistence that the Project is a good investment, the purported benefits of the Project have been hotly contested and largely debunked. The estimated creation of 15,000 construction jobs per year is closer to 2,500, as provided by Kinder Morgan's own application for approval of the Project. The projected $73.5 billion in increased revenues over 20 years for oil producers and the $46.7 billion in additional tax revenue for the Federal and provincial governments may be without merit as demonstrated in the City of Vancouver's submission to the NEB. Most notably, the Alberta government has itself acknowledged that the Project will provide little economic benefit.

The federal Liberal Party may find its recent choices on the energy and climate files a significant obstacle to re-election in 2019. More importantly however, their decisions indicate a lack of commitment to tackling climate change and meeting our international obligations, as well as favouring the fossil fuel industry, to the tune of $4.5 billion, over the more sustainable renewable and clean energy sectors.

Footnotes

1  Tsleil-Waututh Nation v. Canada (Attorney General), 2018 FCA 153 (CanLII), online: http://canlii.ca/t/htq8p.

2 National Energy Board, "Report-Trans Mountain Project", Decision No. OH-001-2014 (A77045), May 19, 2018, online: https://apps.neb-one.gc.ca/REGDOCS/Item/Filing/A77045.

3 National Energy Board, Certificate of Public Convenience No. Certificate OC-064 (Dec 1, 2016), online: https://apps.neb-one.gc.ca/REGDOCS/Item/View/3084359.

4 Retrieved from the Canada Gazette website, Part I, Vol. 150, No. 50, (Dec 10, 2016) online: http://www.gazette.gc.ca/rp-pr/p1/2016/2016-12-10/html/sup1-eng.html.

5 The NEB did not provide an explicit rationale for excluding Project-related shipping from the scope of the Project. The closest the NEB came to explaining its scoping decision was that the NEB did not have regulatory oversight over marine vessel traffic. As noted by the Court, there is no authority that " a responsible authority conducting an environmental assessment under the Canadian Environmental Assessment Act, 2012 must itself have regulatory oversight over a particular subject matter in order for the responsible authority to be able to define a designated project to include physical activities that are properly incidental to the Project." Tsleil-Waututh Nation v. Canada (Attorney General), 2018 FCA 153, paras 398-402.

6 Tsleil-Waututh Nation v. Canada (Attorney General), 2018 FCA 153, paras 439-440.

7 Ibid, paras 465-473.

8 National Energy Board, "NEB Update to Federal Court Decision" (Aug 31 2018) online: https://www.neb-one.gc.ca/bts/nws/whtnw/2018/2018-08-31-eng.html.

9 National Energy Board, News Release, "Federal Court of Appeal issues Trans Mountain Expansion project decision" (Aug 30, 2018) online: https://www.neb-one.gc.ca/bts/nws/whtnw/2018/2018-08-30-eng.html.

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