We recently commented on one of the two key bases for the Federal Court of Appeal’s ruling last week that quashed the Federal Government’s approval of the Trans Mountain Expansion Project (the “TMEX”) – specifically, Canada’s failure to meet its duty to consult Indigenous Nations.

Below we discuss the other key basis for the court’s ruling – namely, that the Governor in Council (“GIC”) unreasonably relied on a materially deficient and flawed report from the National Energy Board (the “Board”) in approving the TMEX. In particular, the court found that the Board’s report was flawed from the outset due to the Board’s failure to properly carry out the project scoping process, a critical preliminary stage of the environmental assessment process under the Canadian Environmental Assessment Act, 2012 (“CEAA 2012”). The court found that the GIC was “on notice” that the Board’s report was flawed, yet relied on it anyway, rendering its decision to approve the TMEX invalid.

Board’s Role as the Environmental Assessment Authority

The Board is established under the National Energy Board Act (“NEB Act”) and has an important role in overseeing the Canadian energy sector and the safety of pipelines.  Part of its role includes being designated as the sole “responsible authority” for environmental assessments (“EAs”) of certain projects, including the TMEX. Following the completion of an EA, the Board must make a recommendation to the GIC on the existence of significant adverse environmental effects, and whether those effects can be justified in the circumstances (from CEAA 2012, ss. 29(1) and 31(1)(a)).

Board’s Scoping Decision Excluded TMEX-Related Marine Shipping

One of the preliminary decisions in all EAs is the scope of the project that is subject to the EA. Under CEAA 2012, the project scope must include the specific project (e.g the TMEX pipeline), and also “any physical activity that is incidental to” the main physical activities (from CEAA 2012, s. 2). The question of what is “incidental”, and in particular whether TMEX-related marine shipping was “incidental” to the TMEX pipeline, was a core issue in the court’s analysis of the GIC’s TMEX approval.

In its scoping decision, the Board excluded TMEX-related marine shipping from the scope of the project undergoing the EA.  Instead, the Board considered the impacts from TMEX-related marine shipping by way of (i) its consideration of the public interest under the NEB Act, and (ii) the potential for interaction of project and marine related effects under the cumulative effects portion of the EA.

By excluding TMEX-related marine shipping from the EA, the Board was able to conclude that, notwithstanding the significant adverse effects of TMEX-related marine shipping on the Southern resident killer whales, the TMEX project itself was not likely to cause significant adverse environmental effects and that approval should be granted by the GIC.

Unjustified Exclusion of Marine Shipping Activities from Project Scope

In evaluating the Board’s scoping decision, the court acknowledged the importance of this preliminary stage of the EA process, observing that “[t]he definition of the designated project truly frames the scope of the Board’s analysis.”

The court carried out a thorough review of the facts, noting the scope and size of various marine shipping activities related to the TMEX, including (i) the construction of a new and expanded dock facility, (ii) a seven-fold increase in tanker traffic, and (iii) the tripling of capacity to transport diluted bitumen through the pipeline and marine vessels. This, the court found, demonstrated that “marine shipping is, at the least, an element that accompanies the Project” (from Paragraph 396 of the FCA decision).

Although TMEX-related shipping was not included within the scope of the Board’s EA, the Board nonetheless considered:

• the effects of Project-related marine shipping on Southern resident killer whales;
• the significance of such 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 (from Paragraph 438 of the FCA decision).

Trans Mountain and Canada argued that the above considerations demonstrated “substantial” compliance with legislative requirements. The court disagreed, finding that despite the steps the Board took, the exclusion of TMEX-related marine shipping from the EA was unjustifiable and flawed.

A Flawed Scope, a Flawed Report, and a Flawed Decision

In reaching its decision on this issue, the court found that by excluding TMEX-related shipping from the EA scope, the Board failed to comply with its obligations under the Species at Risk Act to ensure that if the GIC granted the TMEX approval, measures be taken “to avoid or lessen’ the Project’s effects on the Southern resident killer whale and to monitor those measures”(from Paragraph 454 of the FCA decision). As the Board only considered mitigation measures through “the limited lens of its regulatory authority”, it (i) failed to take proper account of mitigation measures that could be taken outside of its regulatory authority, (ii) did not recommend any specific mitigation measures in its report, and (iii) simply encouraged other regulatory authorities to “explore any such initiatives” (from Paragraph 456 of the FCA decision).

As a result of the Board’s flawed scoping decision, the court found that it failed to engage all necessary legal requirements and thereby failed to provide the GIC with a legally sufficient report.  Further, the Court found that the report and recommendations contained therein were sufficient to put the GIC “on notice that the Board had unjustifiably excluded Project-related shipping from the Project’s definition” (from Paragraph 468 of the FCA decision), and by simply relying on the Board’s flawed report, the GIC – who had the ultimate decision-making authority – “could not functionally make the kind of assessment of the Project’s environmental effects and the public interest that the legislation requires” (from Paragraph 470 of the FCA decision). Accordingly, the court quashed the GIC’s approval of the TMEX.

Some Key Take-Aways

This decision highlights the importance of proper scoping of projects for the purpose of EAs.  Regardless of whether a “responsible authority” (such as the Board) takes certain steps in compliance with the CEAA 2012, if the scope of the EA is not appropriate from the outset, it will be very difficult to demonstrate substantial compliance with applicable legal requirements.

Secondly, reinforcing the 2016 Gitxaala decision from the same court, this case emphasizes the necessity of the GIC playing an active role regarding proposed projects and not passively relying on the recommendations of the applicable regulatory authority (such as the Board). In particular, the GIC must determine whether such authority’s EA process is sufficient to enable it to rely on its report – particularly when it is put “on notice” of significant adverse environmental effects.

Finally, this case is a good reminder of the vital role that our courts play in ensuring that public authorities conduct themselves in accordance with governing legislation, particularly with matters related to the environment and constitutional obligations to Indigenous peoples.

Want More?

Stay tuned here for more of what we have to say, or you can always get in touch!