On January 13, 2016, the BC Supreme Court released its decision in Coastal First Nations v. British Columbia (Environment),^[1] which addressed the Province’s role in the environmental assessment (EA) process for the proposed Northern Gateway project, an interprovincial pipeline that will traverse parts of northern British Columbia (Project). While affirming the cooperative approach to EAs undertaken between the BC Environmental Assessment Office (EAO) and the National Energy Board (NEB) in respect of the Project, the Court said that the Province cannot abdicate its responsibility to decide whether to issue an Environmental Assessment Certificate (Certificate) for the Project. As a result, the Court directed the Province to make a decision to issue a Certificate, with or without additional conditions, as well as to consult with the Gitga’at First Nation on potential impacts of the Project on areas of provincial jurisdiction.

While this decision is likely to be appealed, it raises a number of interesting questions regarding the extent to which provinces and the federal government may cooperate in EA processes, and the circumstances in which their regulatory authority may come into conflict. The decision could have potential implications for other projects subject to similar regulatory review processes, but such implications will depend on the terms of the federal-provincial cooperation and the nature of the applicable provincial legislation, particularly with regard to the decision-making discretion afforded to public officials.

Background

The Northern Gateway pipeline project involves the development of a twin pipeline system that will run 1,177 kilometres from northern Alberta to Kitimat, British Columbia for the purposes of exporting petroleum and importing condensate. The NEB and the Canadian Environmental Assessment Agency referred the Project to a joint review panel (JRP) in January 2010 and Northern Gateway filed its Project application with the JRP in May 2010. In June 2010, the EAO and the NEB entered into an agreement (Equivalency Agreement) which provided that the NEB’s assessment of any projects requiring approval under both the BC Environmental Assessment Act (EAA) and the National Energy Board Act would constitute an equivalent assessment under the EAA, with the intention of avoiding a duplicative provincial assessment.^[2] The Equivalency Agreement (clause 3) also provided that any reviewable projects may proceed without a provincial Certificate. The Project is a reviewable project under the EAA.

The Province participated in the federally mandated JRP process as an intervenor and ultimately opposed approval of the Project, as it felt that its minimum standards for the Project had not been met, particularly with respect to its requirements for evidence of a world-class spill response capability. In December 2013, the JRP issued its report (JRP Report) recommending approval of the Project subject to 209 conditions. In June 2014, the federal Governor-in-Council determined that the significant adverse environmental effects of the Project were justified in the circumstances, and directed the NEB to issue Certificates of Public Convenience and Necessity for the Project, on the same conditions as set out the JRP Report.

The Coastal First Nations – Great Bear Initiative Society represents an alliance of coastal First Nations in northern BC. Together with Gitga'at First Nation (Petitioners), they applied for judicial review to set aside the Equivalency Agreement and obtain orders for the Province to make a Certificate decision, and to consult with the Gitga’at First Nation prior to making such decision. The Petitioners also sought an order that no provincial approvals for the Project be granted or given effect until a valid Certificate is issued.

Case Highlights

• The Court held that while the EAA allows cooperation in EAs between provincial and federal jurisdictions, it does not authorize the Province to abdicate its decision-making authority. Accordingly, the Court found that the Equivalency Agreement is valid, except to the extent that it removes the need for reviewable projects to receive a Certificate.
• The Court further held that the Province breached its duty to consult and the honour of the Crown by failing to consult with the Petitioners prior to June 2014, up to which time it had the opportunity to terminate the Equivalency Agreement and accommodate the Petitioners’ outstanding concerns by imposing additional provincial conditions on the Project.
• Northern Gateway submitted that the construction and operation of the Project is within the exclusive constitutional jurisdiction of federal Parliament and the application of the EAA to the Project is therefore ultra vires. The Court dismissed these arguments as premature, finding that while the Project is an interprovincial pipeline under federal jurisdiction, environmental regulation is shared provincial-federal jurisdiction and there is no conflict in the legislation on its face. The Court held that it could not consider whether there is any conflict until the Province has issued a Certificate along with any additional conditions.

The Court’s Decision

1. The Province maintains independent decision-making authority, even in connection with valid equivalent EA processes.

The EAA is the main legal framework for the Province's EA process for proposed major projects. Section 17 of the EAA sets out the basis for decision-making on EA Certificate applications. Applying principles of statutory interpretation and legislative intent to the EAA, the Court found that there is sufficient discretion under the EAA (s. 27) for the Minister to enter into agreements with other jurisdictions to allow for equivalent EA processes. However, the Province cannot abdicate its responsibility to decide whether to issue a Certificate for reviewable projects and whether to impose conditions (under s. 17(3) of the EAA).

If the Province did not maintain the ability to make a s. 17(3) decision, the Court said there would be “no mechanism by which to ensure it meets its objectives and responsibilities with regard to any project” to which the Equivalency Agreement applies.^[3] As a result, the EAO must maintain at least some discretion in respect of every project that has the potential to affect British Columbia and to enforce and uphold its standards.^[4]

For these reasons, the Court said the Equivalency Agreement and other agreements established pursuant to s. 27 of the EAA require a s. 17(3) determination, and reviewable projects must obtain a Certificate before any activity in relation to such projects can begin.^[5]Accordingly, the Court held that clause 3 of the Equivalency Agreement is invalid and ultra vires to the extent that it removes the Province’s jurisdiction to make a decision pursuant to s. 17(3) of the EAA, or in other words, to decide whether to issue a Certificate.^[6] The Court declared that the Province must exercise its s. 17 decision-making authority under the EAA in relation to the Project. The Court also held that the Province has “complete and ultimate” discretion regarding whether to issue a Certificate with or without additional conditions.^[7]

2. The Province must consult the Gitga’at First Nation

The Court acknowledged that First Nations were consulted by the federal Crown through the JRP process and the Province, as intervenor, made submissions to the JRP regarding means of mitigating impacts on, and accommodating, Aboriginal rights.^[8] The Province had also argued that despite delegating its decision-making authority and the duty to consult to the federal Crown through the Equivalency Agreement, it was still able to consult with and accommodate the Petitioners’ rights, such as by implementing policies for a world-leading spill preparedness and response regime.

Despite the Province’s efforts, the Court found that they were inadequate for achieving meaningful consultation, which must occur as policy choices are developed rather than after the fact. The Court concluded that the Province breached the honour of the Crown and its duty to consult by failing to consult with the Petitioners prior to June 2014 when it felt that their concerns had not been adequately addressed by the JRP’s recommended conditions for approval of the Project. The Court considered the time period between December 2013 (when the JRP Report and conditions were issued) and June 2014 (when the federal government approved the Project). Up until that time, the Province would have had the opportunity to terminate the Equivalency Agreement to accommodate the Petitioners’ concerns by exercising its decision-making authority and attaching additional mitigating conditions to a Certificate.^[9]

By way of remedy, the Court ordered the Province to consult with the Gitga’at about the potential impacts of the Project on areas of provincial jurisdiction and how such impacts may affect the Gitga’at’s Aboriginal rights and should be addressed.

We note that the Court dismissed the Petitioners’ argument that the Province also had a duty to consult before entering into the Equivalency Agreement. Due to the general nature of the Equivalency Agreement, there was a lack of a sufficient causal connection between the Equivalency Agreement and the potential for adverse effects, so it would also be unrealistic to engage in consultation on the subject. The Court held that the Province is entitled to enter such kinds of agreements without the requirement for consultation.^[10]

3. Court rejects Northern Gateway’s constitutional arguments as premature

At the outset of the decision, the Court addressed Northern Gateway’s position that since the Project is an interprovincial pipeline, it is a federal undertaking within the exclusive jurisdiction of the federal government. Northern Gateway submitted that the application of the EAA to the Project is therefore unconstitutional, and that any conditions or requirements that the EAO might attach to the Project would be ultra vires and of no force and effect.

The Court acknowledged the interprovincial nature of the pipeline, but found that BC’s interests will be substantially affected by its construction. The Court further stated that although the pipeline is interprovincial, it will disproportionately impact the interests of British Columbians. Therefore, disallowing any provincial environmental regulation would limit the Province’s ability to protect social, cultural and economic interests in BC, thus bucking the trend towards co-operative federalism.

The Court held that the Province has a constitutional right to regulate territorial environmental impacts through the EAA. The Court stated that “since it is established law that regulation of the environment is shared jurisdiction among all levels of government, it flows logically that the EAA, whose purpose is to regulate environmental concerns in British Columbia while advancing economic investment in the Province, is valid legislation, even where it applies to an interprovincial undertaking.”^[11]

On the issues of inter-jurisdictional immunity and paramountcy, the Court acknowledged that “the Province cannot go so far as to refuse to issue a Certificate and attempt to block the Project from proceeding.”^[12] The Court agreed that these were valid concerns, but it would be premature to make a constitutional finding regarding a potential conflict with or impairment of federal powers prior to the Province making a s. 17 decision and imposing and additional conditions on a Certificate. In theory, a decision by the Province to refuse to issue a Certificate or to impose unreasonable conditions could effectively prohibit the development of the Project and would be unconstitutional.

Discussion

Potential impacts on other reviewable projects under the Equivalency Agreement

The Province maintains a list of all reviewable projects that are currently subject to the Equivalency Agreement. If the decision is ultimately upheld on appeal, this would cause the EAO and NEB to revise the terms of the Equivalency Agreement to meet the standard required for the Province to maintain its decision-making authority and issue a Certificate in respect of other reviewable projects. The Province could also consider whether to make any statutory amendments to the EAA to allow for greater ministerial discretion in respect of the issuance of a Certificate, on a case by case basis.

In all other respects, the EA equivalency processes established under the Equivalency Agreement are deemed valid and would not require amendment, except to the extent that the Province may need to carry out some aspects of consultation, depending on the circumstances.

Potential impacts on other equivalency and substitution processes in Canada and other interprovincial projects

There are a number of equivalency and substitution agreements in place between federal and provincial regulatory agencies dealing with environmental assessment reviews, among other environmental matters. While this decision could have potential impacts for other projects across Canada that are subject to regulatory review processes similar to the one established for the Project, the extent of such impacts will depend on the nature of federal/provincial cooperation, as well as the scope of ministerial discretion contained in the relevant provincial environmental legislation, in particular the ability of provincial decision-makers to determine the need for their own certification or approval of a project. As a result, project proponents will need to carefully consider the terms of the federal/provincial agreement in question and the specific legislative provisions which provides the basis for cooperation. Further, both proponents and regulators will need to be mindful of the scope and type of impacts of the project on provincial interests within the context of the province’s ability to enforce and uphold provincial standards.

The Court acknowledged that the Project, while interprovincial, is not a national project and has disproportionate effects on British Columbia. However, this decision also raises the issue of whether other interprovincial projects that cross multiple provincial jurisdictions would require separate decision-making processes by each province, resulting in a potentially burdensome regulatory process and unduly fettering federal jurisdiction. If this decision is upheld on appeal, joint review processes for other interprovincial projects might require consideration, on a case by case basis, of any equivalency processes between each province and the federal government, as well as each province’s environmental legislation, to determine the scope of ministerial discretion to maintain or delegate provincial decision-making authority. However, the decision suggests that if a province refuses to issue a provincial environmental assessment certificate or imposes conditions that would impair a project or render it inoperable, this could constitute an unconstitutional interference with federal jurisdiction.

Lack of provincial representation on the JRP

Joint environmental review processes often involve decision-making representatives from both the provincial and federal Crown. In the case of the Project, however, the Province was not represented on the JRP, but only participated in a more passive role as an intervenor. The JRP was comprised of two representatives from the NEB, and a non-government geologist.

While the Court did not expressly find fault with this approach, the lack of provincial representation on the JRP may have been another indicator of a lack of involvement or responsibility by the Province in the decision-making process. This also raises a question of whether, had the Province been represented on the JRP, the Court would have still ruled that the Province was required to issue its own Certificate, or whether the JRP’s report and recommendations would have been sufficient to discharge the Province’s authority. However, we note that since the JRP is not the final decision-making authority and only makes a recommendation to the Governor in Council, this suggests that a separate provincial decision would still have been deemed necessary by the Court.

Scope of consultation remedy

In our view, there appears to be a disconnect between the Court’s analysis in the decision and the broad remedy that it ultimately provides for the Province’s breach of the duty to consult.

In the decision, the Court concludes that the Province should have consulted with the Petitioners once it became aware in December 2013 that their concerns were not adequately addressed in the JRP recommendations, in order to decide whether to terminate the Equivalency Agreement prior to June 2014 and issue a Certificate with its own conditions. However, the scope of the Court’s remedy seems broader; it directs the Province to consult ““with the Gitga’at about the potential impacts of the Project on areas of provincial jurisdiction and about how those impacts may affect the Gitga’at’s Aboriginal rights, and how those impacts are to be addressed in a manner consistent with the honour of the Crown and reconciliation.”

In our view, the Court did not conclude that the Province must conduct an entirely new and separate consultation process on all areas of provincial jurisdiction with respect to the Project, although the remedy could be interpreted as such. In our view, the scope of the consultation remedy (if any) should have been limited to discussing those aspects of the Gitga’at’s concerns that would put the Province in a position to determine what further mitigating conditions should attach to the Certificate. It will be interesting to see whether the scope of the Court’s remedy in this regard might be appealed or will require clarification.

In our further view, however, if the Province’s jurisdiction over environmental matters gave rise to a duty to consult independent of the federal Crown, there were a number of other ways that the Province might have satisfied itself that it had fulfilled its legal duty, without having to carry out procedural aspects of consultation on its own accord. It could have taken steps to ensure that the JRP engaged in further consultation with the Gitga’at prior to June 2014 and issued further recommendations, or that the federal Crown implemented additional conditions on approval. Failing that, the Province may ultimately have needed to terminate the Equivalency Agreement and impose its own conditions to a Certificate. However, in our view it does not necessarily follow that the Province had to engage in consultation in order to satisfy itself that the duty to consult had been discharged. Further, the Province appears to have been already well aware of the outstanding concerns of the Petitioners.

---

^[1] 2016 BCSC 34.

^[2] The 2010 Equivalency Agreement superseded a 2008 equivalency agreement.

^[3] Para. 168.

^[4] Paras. 170, 171.

^[5] Paras 180, 182.

^[6] However, the Court rejected the Petitioners’ argument that the entirety of the Equivalency Agreement was invalid, finding that the Minister properly delegated s. 27 powers to the Executive Director of the EAO to enter into the Equivalency Agreement.

^[7] Para 181.

^[8] Para. 185.

^[9] Paras. 205, 206.

^[10] Para. 204.

^[11] Para. 56.

^[12] Para. 55.