Introduction

The Northern Gateway Pipeline Project, which has been in the works since 2005, received a major setback on June 23 with the federal court of appeal’s judgment in Gitxaala Nation v. Canada. The court quashed Canada’s approval of the Project because Canada failed in its duty to adequately consult with affected First Nations. While the court praised Canada’s framework for consultation, it determined that its execution of that framework “fell well short of the mark”.[1] In so doing, the court looked at the substance of Canada’s consultation efforts and provided guidance on what constitutes responsive, meaningful, consultation.

This decision is significant in light of the numerous proposed interprovincial and transcontinental oil and gas pipeline projects, including Kinder Morgan’s Trans Mountain Expansion and TransCanada’s Energy East. The court has signalled to the Crown that meaningful consultation is ongoing; during all phases of project approval, the Crown must remain engaged. After gathering information regarding a project’s effects on Aboriginal and Treaty rights, the Crown must undertake First Nation-specific consultation marked by the badges of honourable dialogue that is open, transparent, responsive and accountable.

Background

The Northern Gateway Project consists of two 1,178 kilometer pipelines and associated facilities. One pipeline proposes to transport oil from Bruderheim, Alberta, to Kitimat, British Columbia, and subsequently onto tankers for delivery to export markets. The other pipeline would carry condensate from the these tankers for distribution to Alberta markets.

The Project is supported by 26 Aboriginal equity partners, representing almost 60% of the identified Aboriginal communities along the pipelines’ right-of-way. Notwithstanding the level of support secured by Northern Gateway, eight First Nations (Gitxaala Nation, Haisla Nation, Gitga’at First Nation, Kitasoo Xai’Xais, Heiltsuk Tribal Council, Nadleh Whut’en and Nak’azdli Whut’en, and Haida Nation) challenged the Governor in Council’s approval of the Project by bringing nine applications for judicial review seeking to overturn the decision.

The court acknowledged at the outset that the “challenges associated with the approval process for the Project were immense.”[2] A framework for consultation with Aboriginal groups was established, with consultation to occur in five phases throughout the regulatory process. In 2006, the Minister of the Environment referred the Project to a Joint Review Panel to prepare a report for the Governor in Council and to conduct an environmental assessment. The Joint Review Panel’s report, which was issued in December 2013, found that the Project was in the public interest and recommended that the National Energy Board be directed to issue certificates allowing the project to move forward subject to 209 conditions. The Joint Review Panel also presented the Governor in Council with recommendations based on an environmental assessment.

The court determined that the parties had ample opportunity to participate in the joint review process and generally availed themselves of it.[3] However, the First Nations took issue with Phase IV of the consultation framework: consultation subsequent to the Joint Review Panel’s report but prior to the Governor in Council’s decision. During Phase IV, the Crown was required to consult affected First Nations regarding the Joint Review Panel’s report as well as any other project-specific concerns that were not addressed in the joint review.

The First Nations asserted that Canada failed in its consultation duty during Phase IV. The court was required to determine: (1) whether under the legislative scheme the Governor in Council must consider the adequacy of Crown consultation before issuing its Order in Council and (2) whether, on the facts of the case, Canada fulfilled its duty to consult during Phase IV.

The court conducted a lengthy review of administrative law principles in the duty to consult context. Ultimately, the court determined that Canada failed to fulfill its duty to consult, quashing the Order in Council and the National Energy Board’s Certificates and remitting the matter to the Governor in Council for redetermination. Phase IV must be redone, and the Governor in Council cannot reorder the certificates until Canada has adequately consulted with the affected First Nations.

Issue 1: Can the Governor in Council consider issues related to the Adequacy of Consultation?

Before determining whether the Crown failed in its consultation duties, the court undertook an extensive review of the legislation affecting the Governor in Council’s decision and the administrative law principles to be applied in the context of the duty to consult. The court determined that the Governor in Council was required to determine whether the Crown met its consultation obligations when considering a project under the National Energy Board Act. Further, the Governor in Council has the power to accommodate the concerns of First Nations by imposing conditions on any certificate it directs the National Energy Board to issue. This conclusion was bolstered by the relationship between the Crown and the Governor in Council, which is frequently the starting point for the Crown’s exercise of its authority.

Issue 2: Did the Crown fail to Act in Accordance with the Honour of the Crown?

Turning to the central issue in this case—whether Phase IV was executed properly—the court noted that perfection in consultation is not required.[4] Rather, there must be reasonable efforts to inform and consult.[5] The court identified several errors in Canada’s consultation efforts during Phase IV.

The First Nations asserted that Canada failed to adequately consult them during Phase IV in four key ways:

  1. The Joint Review Panel’s Report left too many issues affecting First Nations to be decided after the Project was approved;
  2. The consultation process was too generic: Canada and the Joint Review Panel looked at First Nations as a whole and failed to address adequately the specific concerns of particular First Nations;
  3. After the Joint Review Panel’s Report was finalized, Canada failed to adequately consult with First Nations about their concerns and failed to give adequate reasons; and
  4. Canada did not assess or discuss title or governance rights and the impact on those rights.[6]

The court highlighted the importance of Phase IV in the consultation process. First, the Joint Review Panel’s report raised specific issues that required feedback from the First Nations. Second, the Joint Review Panel’s Report did not cover every subject on which consultation was required. Third, Phase IV was Canada’s first and last opportunity to engage in direct substantive consultation with the First Nations before the Governor in Council made its decision.

Despite this critical timing, Canada engaged in a consultation process in Phase IV that was rushed and fatally lacking in meaningful dialogue.

The first error identified by the court concerned the timing of Phase IV. Canada allowed 45 days for the Phase IV consultation process so that the Governor in Council could issue its decision within the timeframe established by the National Energy Board Act. Canada did not respond to First Nations’ concerns that this timeline was arbitrarily short and insufficient. The court noted that the deadline could have been extended, but that Canada never asked the Governor in Council to do so.

The court was also troubled by the fact that, in at least three instances, information was given to the Governor in Council that inaccurately portrayed the concerns of the First Nations. Canada was not willing to discuss these inaccuracies or to correct the information.

Another concern to the court was the lack of meaningful dialogue between the First Nations and Canada. Canada sent representatives to consultation meetings who did not have decision-making authority and were present simply to gather information. In so doing, Canada failed to “engage, dialogue and grapple with the concerns expressed to it in good faith” and that “missing was a real and sustained effort to pursue meaningful two-way dialogue.”[7] This left a number of very legitimate concerns unconsidered and undiscussed.[8]

The court rejected Canada’s assertion that two letters sent to the affected First Nations could serve as a substitute for meaningful dialogue, stating that the letters, which contained errors, could “best be described as summarizing at a high level of generality the nature of some of the concerns expressed.”[9] The First Nations were entitled to “much more in the nature of information, consideration and explanation”[10] regarding the concerns that they expressed to Canada.

Further, Canada failed to share necessary information that it had regarding the affected First Nations’ strength of claims to rights and title. The court stressed that this information is vital to meaningful consultation as it defines the subjects that must be discussed between the Crown and First Nations as well as the level of dialogue that must occur. Without this information, a First Nation cannot assist the Crown in determining the potential impact of a Project so that those impacts can be properly mitigated and accommodated. By repeatedly failing to share information with the affected First Nations, many effects of the Project on the First Nations’ rights and title were “left undisclosed, undiscussed and unconsidered.”[11]

Finally, the Order in Council failed to give sufficient reasons regarding the adequacy of consultation, a subject that the Governor in Council was required to consider and assess before approving the Project. The Order in Council contained only a single recital on the duty to consult which stated that consultation had been undertaken by the Crown. Missing was an opinion on whether consultation had been adequate and an explanation demonstrating that the First Nations’ concerns were considered and evaluated by the Governor in Council in reaching its determination.

Given these substantial errors in the Phase IV process, the court concluded that Canada’s consultation efforts fell well below the standard of what would be reasonable under the circumstances.[12]

What are the Implications of this Decision?

The immediate effect of the court’s decision is that the Northern Gateway Project is now on hold. However, this decision has significant, broader implications for First Nations, for the Crown and for Proponents seeking to construct and operate major oil and gas transportation infrastructure with the view of accessing external markets.

First, while the decision provides a useful reiteration of the salient principles of administrative and constitutional law in the duty to consult context, it does not change the existing law. Rather, it provides guidance to the Crown regarding the content and scope of its substantive consultation obligations where deep consultation is required. Because this case was decided in the context of a Project requiring “deep consultation”, it may be of limited assistance for projects that occur on the lower end of the consultation spectrum.

However, for projects requiring deep consultation, the Crown is now on notice that consultation must occur within a meaningful dialogue where all parties are well-informed through good-faith information sharing. Further, Canada must send the proper people because “[i]n order to comply with the law, Canada’s officials needed to be empowered to dialogue on all subjects of genuine interest to affected First Nations, to exchange information freely and candidly, to provide explanations, and to complete their task to the level of reasonable fulfillment.”[13] The adequacy of the Crown’s efforts in this regard must be determined before project approval.

Moving forward, it will be important to keep an eye on the steps that Canada and its representatives take in order to rectify its past failings.

Third Party Engagement

As we know, the Crown may delegate only procedural elements of consultation to third parties seeking to develop resource and energy projects within a First Nations’ territory. Nevertheless, this decision ought to emphasize the need and value of direct industry engagement with Indigenous Nations. Given the increased uncertainty related to relying upon Canada to carry out its obligations, Proponents would be well advised to seek a framework for meaningful engagement and to also collaborate with First Nations in project-specific requests of government. Indeed, this is further supported by the Truth and Reconciliation Commission of Canada calling for corporations to incorporate reconciliation frameworks into corporate policies and guidelines. It is perilous for a company to engage First Nations by using a minimalist approach given that the law in this area is fast evolving.

Nation-to-Nation Engagement

The court has indicated a willingness to hold Canada accountable by examining what consultation activities, in substance, actually look like. This is important as Canada will have to hold up the mirror to itself and examine its own engagement activities critically prior to making high-level decisions. Not only will it have to do this, it will have to share the results with First Nations. Canada will have a chance to self-reflect and evaluate how its Interim Measures Approach is working. Canada’s Interim Measures Approach currently relates to the Northern Gateway Project, Kinder Morgan’s Trans Mountain Expansion Project, TransCanada’s Energy East Project and potentially other major oil and gas infrastructure projects. We are confident that moving forward in a more accountable manner will be seen as an opportunity to ensure that the current government can fulfill its many commitments made to Indigenous Nations to date.