Canada: A Triumph Of Form Over Substance? The Federal Court Of Appeal's Decision To Quash The Trans Mountain Expansion Approval

On August 30, 2018, the Federal Court of Appeal (the Court) released its decision1 on the federal government's approval of the Trans Mountain Expansion Project (TMX). The Court quashed the approval on two grounds:

  1. The National Energy Board (NEB or Board) unjustifiably defined the scope of the project not to include project-related tanker traffic, such that the government could not rely on the NEB's report; and  
  2. The federal government's consultation with Indigenous peoples after the NEB issued its report, but before it made its decision to approve the project, was inadequate.

In this post, we will discuss the first of these reasons for the Court quashing the approval (exclusion of marine shipping). We will discuss the second reason (inadequate Indigenous consultation) in a subsequent post.

Introduction

Under section 52 of the National Energy Board Act (NEB Act), Trans Mountain was required to apply to the NEB for a "certificate of public convenience and necessity" (CPCN) and the NEB was required to submit to federal cabinet a report which set out the NEB's recommendation as to whether the CPCN should be granted and any terms and conditions the NEB considered the CPCN should be subject to. In doing so, the NEB was required to take into account "whether the pipeline is and will be required by the present and future public convenience and necessity".2 This is essentially a broad, public interest assessment.

The TMX was also a "designated project" pursuant to section 2 of the Canadian Environmental Assessment Act, 2012 (CEAA), which meant that the NEB was also required to carry out an environmental assessment (EA) of the TMX under CEAA. Under CEAA, a "designated project" is defined, in section 2, by reference to the carrying out of "physical activities" and any physical activity "that is incidental to those physical activities". The construction of an on-shore pipeline greater than 40 kilometres in length is listed as a designated project.3

The Scoping Decision

The question was whether increased marine shipping related to the construction of the pipeline was properly part of the "designated project" under CEAA. In a preliminary "scoping decision" (Scoping Decision), the NEB determined that it was not. However, the NEB stated "it would consider the effects of increased marine shipping under the [NEB Act]. To the extent there was potential for environmental effects of the designated project to interact with the effect of the marine shipping, the NEB would consider those effects under the cumulative effects portion" of CEAA.4 In other words, project-related marine shipping was considered by the NEB, just not as part of the EA under CEAA.

Should marine shipping have been included as being part of the "designated project" under CEAA?

At the outset, the Court stated that the parties agreed that the issue of whether project-related marine shipping ought to have been included as part of the designated project "turns on whether Project-related marine shipping is a "physical activity that is incidental" to the pipeline component of the Project".5 The Court then went on to say that question "is not a pure issue of statutory interpretation. Rather, it is a mixed question of fact and law heavily suffused by evidence" [emphasis added].6 This is interesting because it should have meant that the Court would accord some deference to the NEB's decision, when it does not appear to have done so.

First, the Court addressed the NEB's explanation that it did not include project-related marine shipping as part of the "designated project" under CEAA because it does not have "regulatory oversight" over marine vessel traffic; other agencies such as Transport Canada do.7 The Court rejected the Board's rationale, on the basis that there is no authority for the proposition that a responsible authority conducting an EA under CEAA "must itself have regulatory oversight of a particular subject matter".8

The Court also criticized the Board for failing to address the core issue of whether project-related marine-shipping is in fact an activity "incidental" to the project (i.e., building the pipeline).  The Court suggested that had the Board done so, it would have come to a different conclusion.9

Whether you agree with this Court's analysis or not, in our view it is clear that notwithstanding its preliminary comment about the issue being one of mixed fact and law "heavily suffused by evidence", the Court did not accord the NEB any deference on this point.  One cannot escape the feeling that the Court believed that assessing the environmental effects of marine shipping under the NEB Act was markedly inferior to assessing them under CEAA and its conclusion on this issue was driven by that view.

Was the NEB's assessment of marine shipping "substantially adequate"?

Trans Mountain and the federal government also argued — and this, in our view, was really the crux of the case — that in any event the NEB did conduct an extensive review of marine shipping, as part of the exercise of its public interest jurisdiction under section 52 of the NEB Act. In other words, the NEB's assessment of marine shipping was substantively adequate, such that federal government was entitled to rely on it.

In addressing this argument, the Court began by making the following observation about the NEB's assessment of marine shipping:

"It noted that while it assessed the potential environmental and socio-economic factors of increased marine shipping as part of its public interest determination under the [NEB Act], the Board "followed an approach similar to the environmental assessment conducted under [CEAA] ... to the extent it was appropriate, to inform the Board's public interest determination".10 [emphasis added]

Further, while the direct environmental effects of project-related marine shipping were considered under the NEB Act, but following an approach similar to that followed under CEAA, there were indirectly considered under CEAA as part of the cumulative effects of the TMX.

The Court then spent eight pages of its decision canvassing how the NEB addressed project-related marine shipping in its report, including its potential environmental effects both generally (e.g. spill prevention) and on the endangered Southern resident killer whale population in the Salish Sea (Georgia Strait) specifically. Following this, the Court summarized:

"[438] This review of the Board's report has shown that the Board in its assessment of Project-related marine shipping considered:

  • the effects of Project-related marine shipping on Southern resident killer whales;
  • the significance of the effects;
  • the cumulative effect of Project-related marine shipping on the recovery of the Southern resident killer whale population;
  • the resulting significant, adverse effects on the traditional Indigenous use associated with the Southern resident killer whale;
  • mitigation measures within its regulatory authority; and,
  • reasonable alternatives to Project-related marine shipping.

[439] Given the Board's approach to the assessment and its findings, the Board's report was adequate for the purpose of informing the Governor in Council about the effects of Project-related marine shipping on the Southern resident killer whales and their use by Indigenous groups. The Board's report adequately informed the Governor in Council of the significance of these effects, the Board's view there were no direct mitigation measures Trans Mountain could apply to reduce potential adverse effects from Project-related tankers, and that there were potential mitigation measures beyond the Board's regulatory authority and so not the subject of proper consideration by the Board or conditions."

Yet this was not good enough for the Court, in large part because it found that the NEB's assessment of the environmental effects of marine shipping under the NEB Act did not allow for a proper consideration of the Species at Risk Act (SARA).

The Species at Risk Act

Section 79(2) of SARA requires every person who is required to ensure that an assessment of the environmental effects of a project is conducted to (i) identify the adverse effects of the project on species at risk and their critical habitat; and (ii) if the project is carried out, ensure that measures are taken to avoid or lessen those effects and to monitor them.

Trans Mountain and the federal government argued, and the Court accepted, that in its report the NEB considered the adverse impacts of marine shipping on species at risk and their critical habitat; all reasonable alternatives to marine shipping that would reduce impact on the species at risk critical habitat; and measures to avoid or less any adverse impacts.

The problem is that the NEB lacks authority to impose conditions or otherwise ensure that measures will be taken to avoid or lessen the effects of marine shipping on species at risk:  "Thus, while the NEB could identify potential mitigation measures, and encourage the appropriate regulatory authorities to take further action, it could not ensure compliance with" section 79(2) of SARA.11 Therefore, the NEB's consideration of the project's impact on resident killer whales failed to "substantially comply" with its obligations under section 79.12

Conclusion

There seems no doubt but that the NEB heard substantial evidence on, and gave significant consideration to, the potential adverse effects of project-related marine shipping on the environment in general and killer whales specifically. All of this is laid out clearly in its report to the federal government. However, because the NEB's assessment was conducted under the NEB Act rather than CEAA, the Court found it to be deficient.

With respect, the Court failed to articulate compelling reasons why the NEB's assessment of marine shipping under the NEB Act was so inferior to the EA conducted under CEAA. Therefore, the Court's finding that the NEB's consideration of project-related marine shipping was not "substantially adequate" is hard to accept. Finally, given that the NEB's report laid out all of its findings on the issue in some detail, it also difficult to accept that the report was so deficient the federal government could not rely on it. The Court's decision appears to be a triumph of form over substance.

Footnotes

1 Tsleil-Waututh Nation et al v Canada et al, 2018 FCA 153 [Tsleil-Wauthuth].

2Ibid, at para. 55.

3Regulations Designating Physical Activities SOR 2012-147, Schedule, sec. 46.

4Tsleil-Wauthuth, at para. 83.

5Tsleil-Wauthuth, at para. 391.

6Ibid.

7 Tsleil-Waututh, at para. 398

8 Tsleil-Waututh, at para. 401

9 Tsleil-Waututh, at paras. 403-408.

10 Tsleil-Waututh, at para. 420.

11 Tsleil-Waututh, at para. 452.

12 Tsleil-Waututh, at para. 453.

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