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Pipelines, Environmental Assessment and the Rule of Law

The Federal Court of Appeal recently overturned the Government of Canada’s approval of Kinder Morgan’s proposal to triple the capacity of the Trans Mountain pipeline system that currently runs from Alberta to the British Columbia coast.

In a lengthy judgment, the Court ruled that the federal government did not fulfill its duty under section 35 of the Constitution Act 1982 to meaningfully consult Indigenous communities and to accommodate their concerns about the project.

In addition, the Court found that the National Energy Board (which held public hearings and recommended conditional approval of the project) committed a “critical error” under the Canadian Environmental Assessment 2012 (CEAA 2012) by failing to consider the potential adverse environmental effects of increased marine shipping attributable to the project.

Similarly, the Court concluded that the NEB did not comply with its legal obligation under the Species at Risk Act to identify mitigation and monitoring measures aimed at preventing harmful impacts upon endangered killer whales as a result of project-related increases in marine traffic.

To date, the federal government has not announced whether it intends to seek leave to appeal the Court’s decision to the Supreme Court of Canada.

In the meantime, the Indigenous, political, regulatory, and climate change implications of the Trans Mountain judgment have been canvassed by lawyers, academics, environmental groups and other commentators across Canada.

In CELA’s view, the case largely turns on the rule of law. In essence, the Court found that the Trans Mountain approval was unlawfully issued due to non-compliance with applicable legal requirements, as described above.

However, it is also instructive to review the Court’s judgment in the context of current and proposed environmental assessment (EA) requirements at the federal level.

The EA of the Trans Mountain project was conducted by the NEB under CEAA 2012. This statute had been enacted by the previous federal government as part of the Bill C-38 omnibus legislation, which was strongly criticized at the time by CELA and other stakeholders as an unjustifiable rollback of national environmental laws.

For example, CELA objected that CEAA 2012 would “greatly increase reliance upon narrowly focused regulatory agencies in the energy sector despite their traditional lack of environmental assessment expertise or experience.”

CELA also predicted that CEAA 2012 “will likely create more – not less – delay, uncertainty and unpredictability as proponents attempt to navigate controversial projects through the fragmented federal process envisioned by Bill C-38.”

These concerns were amply demonstrated in the Trans Mountain case when the NEB decided to “scope” the project under review by determining that the EA process would not consider the potential environmental effects of increased tanker traffic related to the project.

The Federal Court of Appeal held that this project-scoping determination was unreasonable and contrary to the purposes and provisions of CEAA 2012. In particular, this law specifically provides that the project to be assessed “includes any physical activity that is incidental to” the project. In this case, the Court noted that proponent itself had acknowledged that project implementation would result in a significant increase in tanker traffic in order to transport diluted bitumen to overseas markets.

Because the NEB improperly excluded project-related increases in marine shipping, the Court concluded that the NEB’s resulting EA Report was deficient and failed to provide the federal Cabinet with a comprehensive review of the full range of adverse environmental effects that may be caused by the Trans Mountain project. In turn, this deficiency undermined the Cabinet’s ability to make an informed decision on whether the project’s adverse effects were “justified in the circumstances,” as required by CEAA 2012.

CELA further observes that the NEB’s scoping decision in this case can be characterized as “project splitting.” This term generally denotes an improper attempt to define a project in a manner that excludes contentious project components, or that avoids assessing impacts that may be caused, induced or facilitated by the project.

It is also noteworthy that project-splitting was expressly disallowed by the Supreme Court of Canada in the 2010 MiningWatch decision, where federal officials unsuccessfully tried to exclude the mine (and processing mill) from an EA of a proposed gold/copper mining project.

Interestingly, in the Trans Mountain case, the NEB suggested that its project-scoping determination was based on its lack of regulatory oversight over marine shipping. The NEB’s proposition that it needed authority over shipping in order to consider shipping-related impacts was firmly rejected by the Federal Court of Appeal, which held that this approach was inconsistent with CEAA 2012.

On this point, CELA notes that the Court’s decision accords with the seminal 1992 decision in Oldman River. In this case, the Supreme Court of Canada affirmed that there are no constitutional or jurisdictional constraints on the scope of the information-gathering aspects of the federal EA process, provided that the project engages one or more areas of federal interest.

While the Trans Mountain litigation has been underway, the federal government has taken steps to enact the Impact Assessment Act, which would repeal and replace CEAA 2012. However, the proposed law contains many of the same elements (and flaws) as CEAA 2012, as noted by CELA in previous blogs and submissions.

Therefore, it remains doubtful that the new Act will effectively address or avoid the serious problems identified by the Federal Court of Appeal in the information-gathering and decision-making process used to issue the ill-fated approval of the Trans Mountain project under CEAA 2012.

For example, under the Impact Assessment Act, members of the NEB’s proposed successor (the Canadian Energy Regulator) must be appointed to review panels that will conduct assessments and prepare advisory reports on major pipeline projects. Similarly, Cabinet members will still be making the final decision under the new Act on whether such projects should be allowed to proceed, based on broad “public interest” considerations.

These arrangements directly conflict with the 2017 recommendations of the federal government’s own Expert Panel on EA reform. Among other things, the Expert Panel correctly recommended the establishment of an independent authority to conduct assessments and to make binding decisions on whether projects should be permitted to proceed.

This recommendation was based on the Expert Panel’s finding that there is widespread public mistrust of EA’s conducted by regulators, especially in light of concerns over regulatory capture and the prospect of overpoliticized decision-making.

The Impact Assessment Act has received Third Reading in the House of Commons, and is currently under review by the Senate. Accordingly, CELA calls upon the Senate to substantively strengthen the Act prior to its passage to ensure that the fundamental problems that plagued the Trans Mountain EA (e.g. inadequate Indigenous consultation/accommodation, improper project scoping, and non-compliance with endangered species legislation) do not recur in future federal assessment processes.