An Act to Prevent New Pipelines in Canada

It is all but impossible for a private-sector oil pipeline proposal to be approved within a reasonable time and with finality in Canada today. Only governments can take on the cost and risk of attempting to build a pipeline to transport oil to an ocean port and, as this fall’s Federal Court of Appeal (FCA) ruling against Ottawa’s Trans Mountain Corporation (TMX) expansion project showed, that is almost impossible too – even if the government really wanted to get it built.

Ottawa is proposing its new Impact Assessment Act (IAA), part of Bill C-69 now before the Senate, as a cure for Canadian oil pipeline paralysis. Unfortunately, the IAA takes a large leap in the wrong direction. It greatly increases complexity and delay in project assessment and provides several new litigation opportunities for pipeline opponents.

The authors of C-69 appear unaware that in pipeline assessments the final decision is not made by the Cabinet but by the courts. As recent experience has shown, the lengthy and costly National Energy Board (NEB) hearings, followed by a Cabinet licensing decision, is usually just the slow road to the courthouse. And if C-69 becomes law, it will create many new roads to the courthouse.

Some commentators accused the FCA of legal improvisation in its TMX decision. Retired Encana CEO Gwyn Morgan accused the judges of basing their decision on “dubious conclusions that veer from objective legal analysis into nuanced opinions seemingly designed to justify their preconceived biases.” Although I have disagreed with the FCA’s judgement (here and here), I think Morgan’s criticisms are overstated. Closer to the mark is Tom Flanagan’s comment in C2C Journal that “the problem is not primarily rogue judges but successive federal governments allowing unchanneled growth of the jurisprudence.”  

That jurisprudence has arisen out of ill-conceived and badly drafted Canadian assessment law which, unfortunately, is about to become worse if the new IAA comes into force as written.

Ill-conceived laws written in vague language permit multiple plausible interpretations, none of which is clearly untenable on the law as written. Looked at from different perspectives, one interpretation may appear better than another. But a court that accepts one of several possible interpretations cannot fairly be criticized as having preconceived biases. In both the TMX and the earlier Northern Gateway decisions, the FCA provided a careful analysis of the facts and the applicable law and made a good faith attempt to discern applicable legal principles out of the legal fog of the law. If we want less “dubious” (in Morgan’s words) judicial conclusions about pipeline assessments, we will have to enact less dubious laws.

Among the problems with existing assessment law is that the CEAA and the NEB Act impose inconsistent obligations on the NEB. The CEAA’s requirement to assess oil tanker traffic, for example, is inconsistent with the conditions of licence that can be imposed on a pipeline under the NEB Act. As tanker traffic is outside of the proponent’s control, the NEB Act does not consider tanker traffic as part of a pipeline project. Thus, conditions of licence cannot cover tanker traffic. While assessment of tanker traffic may be mandatory for some CEAA purposes, it is irrelevant for pipeline licensing purposes.

Another significant inconsistency (in both the current and the new law) is that the persons who conduct the public hearings cannot decide anything. Those who decide everything (the Cabinet) do so in secret, with no public participation.  

The FCA ruled against TMX partly because of a flaw it found in the NEB’s environmental assessment, but the reason that got most of the headlines was the ruling that the constitutional “duty to consult” with Aboriginal stakeholders was inadequately executed.

Under current case law, even one First Nation unalterably opposed to a pipeline can work hard to make the consultation process fail, thereby creating grounds for a successful court challenge. The consultation process can be gamed by demanding detailed, time-consuming studies of generic “concerns” (such as the economic need for the project or the implications for greenhouse gas emissions) that are unrelated to any specific Aboriginal rights. The failure to address such generic concerns adequately (in the court’s opinion) proved fatal in TMX.

Moreover, as with assessments, the persons consulting cannot decide anything or make any commitments on behalf of the persons who decide everything. And obviously, the Cabinet cannot meet and consult repeatedly with hundreds of First Nations potentially affected by a pipeline.

Pipeline or pipedream?

Natural Resources Minister Amarjeet Sohi has told reporters that the key to building pipelines is building trust in regulatory processes and engaging affected parties early on so that approvals aren’t overturned. That is wishful thinking. An adversarial process inevitably creates winners and losers. For anyone totally opposed to a pipeline, the only win is to kill it. Such an opponent couldn’t care less whether the process itself is trustworthy so long as it kills the pipeline. The more open the law is to differing interpretations the better the odds that an opponent will win in the courts of law and public opinion.

Similarly, whether one engages such parties early on or later will not change their determined opposition, nor discourage a court challenge of an approved project.

As bad as things are under the CEAA, the IAA greatly increases the scope and complexity of the assessment process.  The IAA includes not only numerous environmental factors; it adds health, social and economic factors.  It also grants unique, unprecedented privileges to First Nations to present evidence in secret.

It is difficult to understand Minister Sohi’s optimism, considering that in the IAA’s preamble the government is committing Canada to:

  • Achieving reconciliation with First Nations…based on recognition of rights, respect, co-operation and partnership;
  • Using transparent processes that are built on early engagement and inclusive participation and under which the best available scientific information and data and the Indigenous knowledge of the Indigen­ous peoples of Canada are taken into account in decision-making; and
  • Assessing how groups of women, men and gender-diverse people may experience policies, programs and projects and…taking actions that contribute to an inclusive and democratic society and allow all Canadians to participate fully in all spheres of their lives.

The government is unlikely to achieve most of these virtuous-sounding commitments, some of which are self-contradictory.

Reconciliation with First Nations goes far beyond pipelines, but it can hardly be achieved via an adversarial process with winners and losers if some of the First Nations opposing the pipeline will be the losers. And how can the government commit to working in “cooperation and partnership” with any of the First Nations that want to kill a pipeline without demonstrating obvious bias against the proponent?

Minister of Natural Resources Amarjeet Sohi speaks to reporters in Calgary in 2018.
Minister of Natural Resources Amarjeet Sohi speaks to reporters in Calgary in 2018.

Transparency in decision-making is unlikely if those who decide do not hear, while those who hear do not decide. And permitting First Nations to provide “Indigenous knowledge” as secret evidence is the very opposite of transparency.

Moreover it is unclear how the values of an inclusive and democratic society will be strengthened by assessing and taking (unspecified) “actions” against the impact of a pipeline on (unspecified) “groups of women, men and gender-diverse people”.

Litigation trigger warnings

Imagine a pipeline company going through the new IAA process. It may never know what some First Nations witnesses have presented in confidence as their “Indigenous knowledge”. Meanwhile, all of the proponent’s evidence is public, and subject to criticism. Furthermore the IAA does not define “Indigenous knowledge”. It could include any speculation about possible future environmental, health, social and economic impacts of a proposed pipeline, since assessment hearings are always about the future. But there can be no “knowledge” of the future, Indigenous or otherwise. There are only predictions. Yet this secret “knowledge” may decide a project’s fate. The IAA provides no guarantee that a pipeline proponent will ever be permitted to know the evidence against it, and then given a fair opportunity to challenge it.

The proponent can obtain disclosure of secret Indigenous evidence only if the hearing panel finds it necessary for “procedural fairness”. This likely creates a whole new avenue for litigation, in which assessment hearings are suspended while the issue of necessity for procedural fairness goes up the judicial ladder. So much for streamlining the process.

Secret evidence is just one of the IAA’s more obvious new litigation triggers. To get through an assessment in anything like a reasonable time, the hearing panel will have to impose limits on the number and length of oral submissions, potentially triggering court challenges. To reduce the risk of successful court challenges, the panel or the Minister will have to grant one or more extensions beyond the statutory time limits.

Further litigation triggers are scattered throughout the IAA. Consider section 22 (1) (a), with keywords underlined:

              22 (1) The impact assessment of a designated project…must take into account the following factors:

              (a) the changes to  the environment or to health, social or economic conditions and the positive and negative     consequences of these changes that are likely to be caused by the carrying out of the designated project…

“Environment” is defined in section 2 as:

              environment means the components of the Earth, and includes

             (a) land, water and air, including all layers of the atmosphere;

             (b) all organic and inorganic matter and living organisms; and

             (c) the interacting natural systems that include components referred to in paragraphs (a) and (b).

The quoted language has no words that limit the assessment to the local environment that may be directly affected by the project, or even to Canada. It literally includes all layers of the atmosphere everywhere on the entire planet and every plant and animal, every rock, and the interaction of these, anywhere and everywhere. Assessing all that seems a rather ambitious agenda for a hearing with a short time limit.

Furthermore, the IAA’s new mandatory assessment of health, social or economic conditions, all of which are unlimited as to geography or time, add enormous complexity. The scope of these mandatory considerations will need to be determined by the courts, representing further massive undertakings via litigation. 

Finally, the IAA requires a pipeline assessment to consider “the extent to which the effects of the designated project hinder or contribute to the Government of Canada’s ability to meet its environmental obligations and its commitments in respect of climate change.” This imposes an evidentiary duty on proponents that is far beyond their ability to deliver: assessing the future of the international obligations and commitments of the Government of Canada.

Canada’s CO2 emission reduction “commitments” under the Paris Agreement are not legally binding or enforceable. They are merely political promises to use best efforts to reduce CO2 emissions to specified levels by a certain time.

The earlier Kyoto international accord fell apart. What if some future Canadian government follows Donald Trump and pulls Canada out of the now crumbling Paris Agreement? The current Liberal government will not likely remain in power continuously for the 50-plus-year lifespan of a pipeline. We cannot assume that future governments of any political stripe will keep all the promises made in 2015. Or that Canada’s promises will make economic and  political sense indefinitely, even after the United States has left and major CO2 emitters like China and India continue to increase their emissions with new coal plants, far more rapidly than Canada has promised to reduce its emissions.  

Besides, Canada’s CO2 emissions may increase or decrease regardless of whether any particular pipeline gets built. U.S. emissions are far lower since the U.S. pulled out of the Paris deal because of extensive switching from oil and coal to natural gas. Canada’s future emissions will be dictated by many factors – such as the increased use of hybrid and electrical cars, or non-fossil energy generation, or a higher carbon tax – any of which will be many times more impactful than any given pipeline.

Every one of the 20 “must take into account” factors in the IAA (10 more than under the CEAA) is a box to be checked, even if it’s irrelevant to licensing any particular project. Every item requires detailed discussion in the panel’s written reasons, to prove to a court that it was taken into account. Every such discussion adds to cost and delay, while providing another potential weapon for project opponents to use in court.

By adding “health, social or economic conditions” and doubling the number of “must take into account” factors from10 to 20, the government has rendered implausible its claim that the IAA will streamline and improve the duration and finality of the pipeline assessment process. The IAA is far more likely to cause even longer hearings at even higher cost, followed by even more litigation. Five years after TMX filed its application under the CEAA there is still no final decision.  The obvious additional problems of the IAA will be even more discouraging to private investment in Canadian resource development. If Bill C-69 becomes law as currently written, Canada is not likely to see another pipeline proposed, let alone built, unless and until much of the IAA is repealed.

The Senate voted last week to send the legislation to the Standing Committee on Energy, the Environment and Natural Resources for review. The committee intends to hold public hearings, after which the Senate may propose amendments for consideration by the Commons.

 

Andrew Roman recently retired after 40+ years of national law practice. He has appeared in pipeline hearings and at all levels of court including the Supreme Court of Canada. He is the author of more than 100 published articles and a book, and has been an adjunct faculty member at four Canadian law schools. Environmental and energy law has been an important part of his practice since his work with the Federal Environmental Assessment Review Agency in the 1970s.

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