Overview

The British Columbia Supreme Court has declared that the Province cannot effectively “contract-out” of its environmental certification obligations on proposed energy projects without breaching its duty to consult with affected Aboriginal groups. In Coastal First Nations v. British Columbia (Environment), 2016 BCSC 34, the Court addressed the enforceability of the Equivalency Agreement (the “Agreement”) entered into by the Environmental Assessment Office (“EAO”) and the National Energy Board (“NEB”) in 2010 in respect of Enbridge’s Northern Gateway Pipeline Project (the “Project”). Specifically, the Court was concerned with clause 3 of the Agreement, which provided that any NEB assessment of a project would constitute an equivalent assessment under the Environmental Assessment Act, S.B.C. 2002, c. 43 (“EAA”) and, therefore, would permit the project to proceed without a provincial Environmental Assessment Certificate (“EAC”) – the Province’s “OK” stamp for projects that may have an adverse impact on the environment.

In finding that the Province cannot abdicate its certification role by agreement, the Court engaged in an extensive statutory interpretation analysis of the EAA and concluded that the certification decision is notoptional. The Court issued a declaration that the Agreement is invalid and set aside to the extent it purported to remove the need for an EAC pursuant to clause 3.

Who challenged the Agreement and why?

The legal challenge was brought by way of judicial review. The Petitioners – the Coastal First Nations Great Bear Initiative Society and the Gitga’at First Nation – objected to the EAO’s decision to not address whether an EAC was required for the Project on the basis that an NEB assessment had already been conducted. The Project is a proposed pipeline that would carry an average of 525,000 barrels of diluted bitumen per day from Bruderheim, Alberta to Kitimat, British Columbia. If approved, the Project would traverse the traditional territory of many of the First Nations from the north-central coast of British Columbia and Haida Gwaii that comprise the Coastal First Nations alliance, including that of the Gitga’at First Nation.

The Petitioners argued that the Province could not abdicate its decision-making responsibility under s. 17(3) of the EAA, which requires a certification decision following an environmental assessment. In addition, the Petitioner submitted that the Province had breached its constitutional duty to consult with respect to both the signing of the Agreement and the decision to not consider whether or not to issue an EAC.

Application of the EAA to Interprovincial Pipelines

In Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3, the Supreme Court of Canada commented at paragraph 64 that the environment is “a constitutionally abstruse matter which does not comfortably fit within the existing division of powers without considerable overlap and uncertainty.” The BC Supreme Court relied upon these comments to dismiss the argument that the interprovincial nature of the Project brought it within the exclusive jurisdiction of the federal government and, therefore, any provincial statutory compliance requirements were unconstitutional.

The Court also observed that prohibiting provincial environmental regulation over federal works and undertakings would severely limit the Province’s ability to protect the social, cultural, and economic interests in its lands and waters and would violate the principle of co-operative federalism. While the Court accepted that inter-jurisdictional immunity and paramountcy concerns could arise if the Province imposed strict conditions on the Project pursuant to its authority under the EAA, the Court stated that such a determination could not be made in the absence of awareness of the form such conditions would take.

Statutory Interpretation of the EAA

As noted earlier, the Petitioners took the position that the Province cannot abdicate its jurisdiction under s. 17 of the EAA to make a decision regarding whether to issue an EAC. The Court agreed and dismissed the argument of the Province that ss. 17, 27, and 28 of the EAA, when read together, constituted the requisite authority to enact clause 3 of the Agreement.

Utilizing the “modern approach” to statutory interpretation, the Court concluded that any interpretation of theEAA ought not create a statutory loophole that would function to subvert the EAA’s underlying objective of balancing commercial interests and environmental protections. Once a project has been designated a “reviewable project” under the EAA, s. 8 mandates that no activity may be undertaken in the furtherance of that project except in accordance with an EAC. The only relief from this prohibition is provided by s. 10(1)(b), which permits the Executive Director to obviate the EAC requirement if the project will not have a significant adverse environmental, economic, social, heritage or health effect. According to the Court, these sections establish that a project with potentially adverse environmental effects must both undergo an environmental assessmentand obtain an EAC.

The Province argued that since s. 17(3) of the EAA makes no reference to environmental assessment agreements entered into with other jurisdictions under s. 27, then there is no requirement for the Province to review or make an EAC decision with respect to any project falling within such an agreement. The Court disagreed with this position and emphasized the distinction between an “assessment” and a “decision based upon an assessment”. Whereas an “assessment” is an “evaluation or an estimate of worth” according to theOxford English Dictionary, s. 17(3) establishes the authority to make a decision on the basis of that assessment. Therefore, regardless of the outcome of the assessment or the existence of a s. 27 environmental assessment agreement, the Province must make a certification decision. In short, a s. 27 agreement (such as the Agreement) does not eliminate the Province’s s. 17(3) responsibility to consider whether or not to issue an EAC. The Court supported this conclusion by observing that nowhere in the EAA did the Legislature combine the assessment and certification processes.

Honour of the Crown

The Court also dismissed the argument of the Province that the duty to consult rested with the federal government due to the fact that it had conducted the Project’s environmental assessment under the Agreement. In support of this contention, the Province cited the Saskatchewan Court of Appeal (“SKCA”) decision in Buffalo River Dene Nation v Saskatchewan (Minister of Energy & Resources), 2015 SKCA 31, where the SKCA stated at paragraph 104 that “actual foreseeable adverse impacts on an identified treaty or Aboriginal right” are required to trigger a duty to consult.

While the Court agreed with the Province that the 2010 signing of the Agreement did not trigger a duty to consult, it held that the decision to terminate or not terminate the Agreement – per clause 6 of the Agreement – had the potential to adversely impact the Petitioner’s Aboriginal rights by virtue of the lack of an EAC requirement. Therefore, the Court found that the Province had a duty to consult once the terms of the Agreement began to impact the decision-making process for the Project and that it breached this duty by failing to adequately respond to requests for information and consultation by the Petitioners.

Where does the Project go from here?

The scope of the Agreement has been dramatically altered. Both the Province and the federal government have been put on notice that attempts to share the burden of ensuring regulatory compliance in areas of overlapping jurisdiction cannot be resolved through abdication of responsibility by either authority. The Province must now fully evaluate the Project and determine whether it should issue an EAC pursuant to s. 17(3) of the EAA.

However, the analysis does not end there. If the Province decides to issue an EAC, it must also consider whether or not to attach conditions to it. Back in December 2013, the Province recommended approving the Project subject to five conditions:

  1. Successful completion of the environmental review process;
  2. Implementation of world-leading marine oil-spill response, prevention, and recovery systems;
  3. Implementation of world-leading land oil-spill response, prevention, and recovery systems;
  4. Establishment of legal protections for Aboriginal and treaty rights, including opportunities to participate in and benefit from the Project; and
  5. A fair share of the Project’s fiscal and economic benefits that reflects the level, degree, and nature of the risk borne by the Province, the environment, and taxpayers.

All but four of the above conditions were left out of the final draft of the formal approval released by the federal government. Therefore, the questions to be answered now become: Should the Province make an EAC subject to these conditions? And if yes, will these conditions raise the inter-jurisdictional immunity and paramountcy concerns discussed by the Court?

What are the Implications of this Decision

The Court’s analysis and disposition that the Equivalency Agreement is invalid to the extent it does away with the requirement for a provincial Environmental Assessment Certificate, suggests that the decision could have adverse implications to those projects in BC that are awaiting approval under an Equivalency Agreement, including but not limited to the Trans Mountain Pipeline Expansion, projects proposed by Spectra Energy (formerly, Westcoast Energy Inc.) and Nova Gas Transmission’s proposed natural gas pipeline from the Horn River Basin.