Written By David Bursey, Brad Gilmour, Radha Curpen, Jessica Mathewson and Francco De Luca

On June 23, 2016, the Federal Court of Appeal delivered the Northern Gateway Project another procedural setback in its decision on Gitxaala Nation v Canada (2016 FCA 187). In a 2-to-1 split decision, the court overturned the federal Cabinet's June 2014 approval of Enbridge’s Northern Gateway Pipeline. The majority of the court thought the government’s aboriginal consultation framework was inadequate - "fell well short of the mark". The dissenting judge disagreed.

This decision grapples with issues arising from the intersection of the duty to consult, environmental assessment, and administrative tribunal process. The court asserted that it was not extending any existing legal principles or fashioning new ones. However, the decision responds to many questions about what the duty to consult entails in the context of an environmental assessment that have not been answered until now.

The court singled out the government consultation preceding the Cabinet decision as the weak link in the approval chain. This decision has important practical implications for the review of major energy projects, and those who participate in those reviews. It also has broader implications for the efficient and responsible development of Canada's resources.

Overview of the Process Leading to the Decision

The regulatory process for this project began in 2006, when a Joint Review Panel was established to review the project under the National Energy Board Act (NEB Act) and the Canadian Environmental Assessment Act (CEAA). In 2009, the Canadian Environmental Assessment Agency released a comprehensive consultation framework to outline how the federal Crown would consult with affected aboriginal communities.

The consultation framework established consultation phases

• Phase I - Preliminary Phase: consultation on the mandates and process
• Phase II - Pre-hearing Phase: information given to aboriginal groups
• Phase III - Hearing Phase: opportunity for aboriginal groups to participate in the hearing
• Phase IV - Post Report Phase: Crown consultation on the JRP Report and issues outside the JRP mandate, led by the Canadian Environmental Assessment Agency (CEA Agency)
• Phase V - Regulatory/Permitting Phase: consultation on the subsequent regulatory permits and authorizations.

In December 2013, after an 18-month hearing, the Joint Review Panel issued its report, recommending that the project be approved subject to 209 conditions. Phase IV of the government’s consultation program began after the release of the report. During this phase, representatives from the CEA Agency held meetings with First Nation’s representatives to discuss their concerns. In April 2014, those officials prepared a Crown Consultation Report for Cabinet.

In June 2014, the Federal Cabinet approved the project subject to the conditions set out in the Joint Review Panel’s report.

18 Legal Challenges Consolidated into One Proceeding

Numerous First Nations and non-governmental organizations challenged many elements of the regulatory process. The applicants, in various combinations, challenged three separate administrative decisions on the grounds the Crown did not fulfill its duty to consult with aboriginal peoples:

• the report of the Joint Review Panel,
• the federal Cabinet Order in Council, and
• the Certificates issued by the NEB.

This case consolidated the 18 different applications into a single proceeding that was by the court's account "one of the largest proceedings ever prosecuted by the Court", with over 250,000 documents and multiple parties.

The FCA's Analysis and Decision

Which Administrative Decision Should Be Challenged?

The court concluded that the "primary attack must be against the Governor in Council's Order in Council"¹ - the Cabinet's decision in June 2014. The court observed, "No one but the Governor in Council decides anything."²

After considering the other administrative decisions, the court found

• no decisions about legal or practical interests were made in the Joint Review Panel Report. Any deficiency in the report was to be considered by the Governor in Council alone, not the court.³ The challenges to the JRP Report were dismissed.
• once the Cabinet decides to approve a project, it issues an Order in Council instructing the NEB to grant a Certificate. The NEB does not have any discretion once Cabinet has made its decision.⁴ The challenges to the NEB certificates were dismissed.

The question of which administrative decision may be challenged is important and perplexing in a major project review, given the numerous procedural steps and the interplay between the administrative and executive branches of government. Further, determining how and where the duty to consult is discharged is linked to this analysis of the Crown’s decision-making process.

The Court noted at paragraph 142

In Canada, executive authority is vested in the Crown - the Crown also being subject to the duty to consult Aboriginal peoples - and the Governor in Council is the advisory body, some might say the real initiator, for the exercise of much of that executive authority.

The Standard of Review for Cabinet Decisions - Reasonableness - "Widest Margin of Appreciation"

In arriving at its decision on the project, Cabinet had to balance a broad variety of public interests, “most of which are more properly within the realm of the executive, such as economic, social, cultural, environmental and political matters”.⁵

The Court found the standard of review for such decisions - founded on the widest consideration of policy and public interest - is reasonableness, based on the principles the Supreme Court of Canada (SCC) outlined in the Dunsmuir case. The court held the Cabinet is entitled to the “widest margin of appreciation” in making its discretionary decision under sections 53 and 54 of the National Energy Board Act.”⁶

In the end, the court concluded the Cabinet’s decision to approve the project was reasonable on the basis of administrative law principles. The deficiency was found in the consultation.

Adequacy of Crown Consultation - Reasonable, Not Perfection, Standard

To set the foundation for its analysis, the court reaffirmed the principles established in the Haida case and then reaffirmed in the Rio Tinto case⁷

• The duty to consult arises when the Crown has actual or constructive knowledge of the potential existence of aboriginal rights or title and contemplates conduct that might adversely affect those rights.
• The extent or content of the duty to consult is fact specific. The depth of consultation increases with the strength of the prima facie aboriginal claim and the seriousness of the potential adverse effect on the claimed right.
• Parliament may delegate procedural aspects of the duty to consult to an administrative tribunal.
• The governing statute will determine the mandate of the tribunal and the role it plays, if any, in fulfilling the Crown's duty to consult.
• When the Crown relies on a regulatory or environmental assessment process to fulfil the duty to consult, such reliance is not a delegation of the Crown's duty. It is the means by which the Crown can be satisfied that aboriginal concerns have been heard.
• The consultation process does not give aboriginal groups a veto over what can be done with the land. Perfect satisfaction is not required. The question is whether the regulatory scheme, viewed as a whole, accommodates the aboriginal right in question.

Many aspects of the overall consultation efforts were challenged. In the end, the court found only the Phase IV consultation to be lacking. Before turning to that analysis, it is instructive to review the court's analysis of the other challenges:

• Cabinet prejudged the approval of the Project because of public statements by the Minister in 2011 saying the project is in the public interest. The court thought that one Minister’s comment made years before the decision at issue was insufficient to establish that the outcome of the Governor in Council’s decision was predetermined.
• The framework of the consultation process was unilaterally imposed upon the First Nations. The court held the Crown has discretion as to how it structures the consultation process and how the duty to consult is met. Canada also did provide information and seek comments on the consultation process in the draft Joint Review Panel Agreement and revised the agreement as a result.
• Groups had inadequate funding for participation in the Joint Review Panel and consultation processes. The court agreed the level of funding provided constrained participation, but there was no evidence the funding was so inadequate that it rendered the consultation process unreasonable.
• The consultation Process was over-delegated because the Crown relied on the JRP process to discharge, at least in part, its duty to consult. The court disagreed.
  • The SCC decision in Rio Tinto confirmed that participation by affected First Nations in a forum created for other purposes can fulfil the Crown’s duty to consult.
  • Phase IV allowed for direct consultation between Canada and affected aboriginal groups following the JRP process.
  • The JRP process offered affected aboriginal groups the opportunity to learn in detail about the Project and its potential impacts, while also offering an opportunity to voice their concerns.
• Canada failed to conduct or share its legal assessment of the strength of First Nations claims to aboriginal rights or title. The court rejected this argument. There was no evidence to support the assertion that the Crown did not assess the strength of the claims. Further, the Crown is not obliged to share its legal assessment. It is required to share non-legal information on the strength of claims and discuss it with affected First Nations. On this last point, the court found the Crown fell short.
• Crown consultation did not reflect the terms, spirit and intent of the Haida Agreements. The court found that Canada correctly acknowledged its obligation to consult deeply with the applicant/appellant First Nations, including the Haida. The Haida Agreements do not modify or add to that obligation.

The four remaining concerns related to Canada’s consultation during Phase IV. The majority decision dealt with these concerns together and found the Phase IV consultation was unacceptably flawed, for the following reasons.

1. The timelines for First Nations to respond with their concerns about the JRP Report were too short
   First Nations were given 45 days to advise Canada of their concerns in responses that could not exceed 2-3 pages in length. Although some asked for more time, no extension was allowed. There was no evidence that Canada gave any thought to extending the time.
2. The Crown Consultation Report given to Cabinet did not accurately portray the concerns of the affected First Nations
   The court noted the report had at least three inaccuracies. Several inaccuracies were expressed to the Crown Consultation Coordinator, but the inaccuracies were conveyed to Cabinet only on the day Cabinet approved the Project.
3. The dialogue during the Phase IV consultation was not meaningful
   Aboriginal groups were told repeatedly that the Crown Consultation Report must be completed by April 16, 2014, and the Cabinet decision must be made by June 17, 2014. The officials tasked with consulting were only gathering information and were not authorized to make decisions. Given these factors, the court found it was no surprise that important concerns were not considered or discussed.

   … the parties were entitled to much more in the nature of information, consideration and explanation from Canada regarding the specific and legitimate concerns they put to Canada.⁸

4. The Crown did not share it strength of claim information
   The Crown assessment of a group's strength of claim affects the scope and the depth of consultation. Despite a commitment from the Minister of Environment to provide a strength of claim assessment and depth of consultation assessment, none were provided.
5. The Crown did give adequate reasons for its decision
   The Court held that Canada was obliged to give reasons. The reasons given for granting approval based on the public convenience and necessity were sufficient, but "fell well short of the mark" in relation to the duty to consult.⁹ The Order in Council had one recital on the duty to consult, and it records that consultation was pursued. The lack of reasons caused the court to question if Cabinet had considered the consultation issue and was satisfied that the duty had been fulfilled. The court characterized this absence of information as "a troubling and unacceptable gap".¹⁰

In the end, the majority of the court concluded that

Canada offered a brief, hurried and inadequate opportunity in Phase IV - a critical part of Canada's consultation framework - to exchange and discuss information and to dialogue.¹¹

The court also offered that an extension of time in the "neighbourhood of four months" during Phase IV might have been sufficient to resolve the deficiencies.

The Dissenting View

Mr. Justice Ryer did not agree that the Order in Council should be set aside on the basis that Crown consultation during Phase IV was inadequate. He concluded that the alleged imperfections were insufficient to demonstrate that the Crown’s consultations were inadequate. He reaffirmed that the standard to be met in assessing the duty to consult is adequacy, not perfection.

Even if the imperfections had been established, when taken together, they were insufficient to render the Phase IV consultations inadequate.

• The timelines for the Phase IV consultations were statutorily imposed. The Crown had no obligation to request an extension.
• Because of Cabinet confidence, it was not possible for the court to assess the adequacy of the materials that were before the Governor in Council when it made its decision.
• Assertions of imperfections in the Phase IV consultations represented an attack on the Joint Review Panel Report in a forum neither designed nor equipped to adjudicate its merits.
• The Crown made no error in failing to disclose its strength of claim assessments. There is little to distinguish between the Crown’s “legal” assessment of a First Nation’s claim and “information” the Crown has about the strength of such a claim. Solicitor-client privilege extends to the Crown’s information upon which its legal assessment is based
• The brevity of the reference to Crown consultation in the Order in Council was no basis to doubt that the Governor in Council considered and determined the critical issue of whether the Crown had met its duty to consult obligations.

The Remedy

The Court quashed the Order in Council, which also nullified the NEB Certificates. The matter was remitted back to Cabinet for redetermination.

If Cabinet wishes to order the NEB to issue certificates for the project, it must redo the Phase IV consultation. All affected parties must also have an opportunity to comment on any new recommendations that the coordinating Minister proposes to make to Cabinet.

Implications

This case confirms the importance of meaningful consultation with each aboriginal group affected by a proposed project, and also the importance of documenting the consultation carefully. While the Crown will not be held to a standard of perfection, the concerns of aboriginal groups must be accurately represented and meaningfully considered at each stage of the regulatory process.

This decision is a setback for Northern Gateway and a reminder of the challenges and uncertainty proponents face in developing large energy projects in Canada. Many years of study and review of a project do not matter if the consultation with affected aboriginal communities is inadequate. In this case, the efforts of Enbridge and the Joint Review Panel were not the issue. The critical consultation during Phase IV was in the hands of federal government officials.

The inevitable judicial challenges associated with any major project review also add to the uncertainty, time and effort to develop resources and get them to market. The resulting constraint on efficient and responsible economic development diminishes Canada's global competitiveness.

If you have any questions about this decision and how it may affect your organization, please contact one of our regulatory lawyers.

Notes

1. Paragraph 127
2. Paragraph 121
3. Paragraph 125
4. Paragraph 126
5. Paragraph 140
6. Paragraph 155
7. See paragraphs 170 to 181
8. Paragraph 287
9. Paragraph 313
10. Paragraph 322
11. Paragraph 325