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:

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: