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Overview
In Sierra Club Canada Foundation v Canada (Environment and Climate Change Canada), 2026 FCA 110("Sierra Club"), the Federal Court of Appeal dismissed an appeal of a legal challenge to the federal government's 2022 approval of the Bay du Nord Development Project (the "Project"), a major offshore oil project about 500 kilometers off Newfoundland.
Sierra Club Canada Foundation and Mi'gmawe'l Tplu'taqnn Inc. ("MTI") challenged the approval on two grounds: 1) the decision was unreasonable because it was based on an environmental assessment under the Canadian Environmental Assessment Act, 2012 ("CEAA"), which did not consider marine shipping or the effects of downstream greenhouse gas emissions from extracted oil, and 2) the Crown had not adequately consulted or accommodated MTI. The Federal Court had dismissed the judicial review. The Court of Appeal dismissed the further appeal.
While Sierra Club addressed an environmental assessment under CEAA, the decision is relevant for parties involved in future impact assessments ("IAs") under the Impact Assessment Act. In particular:
- Jurisdiction shapes the scope of IA: Where Canada lacks legislative authority, such as over marine shipping in international waters, reviewing courts will not fault an IA for not assessing it.
- Timing matters: Parties participating in the IA should raise concerns early, because delay or non-responsiveness may affect how a court views the importance of the concerns on judicial review.
- Legal framing matters: If a judicial review challenge occurs, the reviewing court's focus is the reasonableness of the decision-maker's final decision and in the case of Indigenous consultation, whether the Crown met the legal test for consultation, not whether the IA or consultation process could have been generally improved.
Background
The Project is a major offshore oil development expected to produce about 300 million barrels of crude oil over 30 years. The proponents, Equinor Canada and Husky Oil, submitted the project description in 2018. To approve the project, the Minister had to determine whether the Project was likely to cause "significant adverse environmental effects." In 2022, the Minister relied on the Impact Assessment Agency's report (the "Report") to conclude that the Project was not likely to cause said adverse effects if certain conditions were met, and Indigenous consultation was consistent with the honour of the Crown.1
Sierra Club and MTI challenged the approval on two grounds:
- the Minister's decision was unreasonable because the Report failed to consider Project-related marine shipping and the environmental effects of downstream greenhouse gas emissions; and
- the Crown failed to fulfill its duty to consult MTI.
Decision and practical takeaways
1. Territorial jurisdiction and practicality influence impact assessments
The challengers argued that marine shipping was an essential element of the Project, particularly the transport of oil from the facility using marine vessels, and that the Agency had not explained why it excluded this activity the from impact assessment.2 The Federal Court and Court of Appeal found that the Report and decision had reasonably relied on this exclusion, in part due to "issues of territorial jurisdiction,"3 specifically, because Parliament "has no authority over the waters in issue."4 In this regard, the Project is located about 500 kilometers (270 nautical miles) offshore, beyond Canada's exclusive economic zone.5 However, Parliament does have legislative authority over marine installations like the Project, which are attached to Canada's continental shelf.6
Both courts also addressed a practical element: for marine shipping, the Agency could not know where the tankers would be taking oil off the Project site. This supported the courts' findings that it was reasonable for the Agency not to assess the impacts. The courts similarly found that it was reasonable for the Report not to include assessments of downstream greenhouse gas emissions because "[t]he origin and destination of tankers is not yet known," meaning that attempts to assess downstream emissions would be "an exercise in speculation."7 Of note, the primary reason that downstream emissions did not need to be considered was because CEAA did not require it.
Practical takeaway: Parties should ensure an activity of concern falls within federal jurisdiction and is included in an IA's scope before expecting it to carry weight either in the IA or on judicial review. The distinction may be subtle: here, jurisdiction as between the seabed and international waters mattered. Practical considerations may also limit whether, and if so how an issue can be included in an IA.
2. Raise environmental and consultation concerns early
Equinor argued that the challengers' arguments around marine-shipping and downstream-emissions should not be entertained at all because they had been raised too late in the EA process.8 The Court of Appeal did not accept that late-raised issues met the high bar to trigger the equitable "clean hands" doctrine, but emphasized that in some cases delay or non-responsiveness might affect whether a reviewing court sees an issue as important enough to make the final decision unreasonable.9
The Court of Appeal tied this concern around timeliness to CEAA's purpose of timely assessment and to related common law administrative law principles.10 It further held that the same timeliness expectation applies when Indigenous consultation is involved and added that Indigenous parties cannot hold concerns in reserve or use consultation processes tactically to try to veto a project.11
Practical takeaway: Parties participating in an IA must raise concerns promptly and responsively. Where an interim flaw in an IA risks causing irreversible prejudice or leaving no adequate remedy at the end of the process, it may be in all parties' interest to determine whether, and if so how, the circumstance might be addressed at the administrative level or by a court before the process progresses further, recognizing that courts may dismiss premature applications for judicial review.
3. Environmental assessment challenges must be framed around the appropriate legal test
The Court of Appeal made "opening observations" on how the challengers framed their submissions.
The challengers' first ground was whether the Minister's decision was reasonable in view of his reliance on the Report. The question is whether the Report was so "materially deficient" that it was unreasonable to treat it as a valid "report" under CEAA.12 The Court of Appeal noted that the challengers' submissions instead focused at times on whether the Minister could have reached a different conclusion.13
Respecting the duty to consult, the issue was whether the Agency had correctly identified the existence and scope of the duty and whether it was reasonable to conclude that consultation within the environmental assessment was sufficient, rather than whether it could have been improved in some respect.14 The Court of Appeal reiterated that the duty to consult does not require "the Crown to reach agreement, need not be perfect, and can be addressed through ongoing and future processes."15
Practical takeaways: A decision-maker asked to decide an IA approval must be relying on a report that substantively meets the requirements of the Impact Assessment Act and the scope of the duty to consult owed to Indigenous peoples. Similarly, any challenge to an IA approval must focus on the decision-maker's reliance on the report and identify any material deficiencies that make the reliance on the report unreasonable. Whether grounded in statutory requirements or consultation, a challenge cannot simply disagree with the outcome or ways the process could have been improved.
Conclusion
Sierra Club reinforces that the defensibility of IA decisions may turn on whether concerns have been raised early in the IA process, whether the IA accounted for clear jurisdictional limits and practical barriers to assessment, and whether the final decision can withstand the often-deferential standard applied by courts on judicial review.
Read the original article on GowlingWLG.com
Footnotes
2.Sierra Club Canada Foundation v Canada (Environment and Climate Change), 2023 FC 849 at paras 72, 75; Sierra Club Canada Foundation v Canada (Environment and Climate Change), 2026 FCA 110 [Sierra Club FCA] at para 25.
3.Sierra Club FCA at para 29.
4.Sierra Club FCA at para 29.
5.See Oceans Act, S.C. 1996, c. 31 [Oceans Act], s 13 (the exclusive economic zone is generally 200 nautical miles and begins at the outer limit of the territorial sea, which is about 12 nautical miles from shore).
6.Oceans Act, ss 17, 20.
7.Sierra Club FCA at para 23.
8.Sierra Club FCA at paras 46-47.
9.Sierra Club FCA at paras 61-62.
10.Sierra Club FCA at paras 65-67, 70.
11.Sierra Club FCA at para 73.
12.Sierra Club FCA at para 13.
13.Sierra Club FCA at para 12.
14.Sierra Club FCA at para 17.
15.Sierra Club FCA at para 18.
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