Publications & Media

Federal Court of Appeal grants leave in TMX appeal application: roadblock or roadmap?

Energy Bulletin
10.09.19
by Robert Martz and Brendan Downey

The story is familiar. On August 30, 2018, the Federal Court of Appeal (the FCA) quashed the Governor-in-Council's (the GIC) approval of the Trans Mountain Pipeline Expansion project (the Project).

Following this set-back, the GIC directed the National Energy Board (NEB or the Board) to reconsider the Project, correcting the technical deficiencies identified in the Tsleil-Waututh decision. At the same time, the federal government initiated an enhanced consultation process intended to address the FCA's criticisms. On February 22, 2019, the Board again recommended that the GIC approve the Project and on June 18, 2019, the GIC accepted the recommendation.

Not unexpectedly, many of the environmental and indigenous groups that challenged the first GIC decision sought leave of the FCA to challenge it again. On September 4, 2019, Justice Stratas released his decision on these leave applications (the Decision). Justice Stratas' decision was surprising on two counts. First, in an unusual and perhaps unprecedented move, he released written reasons explaining his decision to grant leave to 6 of 12 motions for leave to start applications for judicial review. Typically, the FCA does not provide reasons on leave decisions.

Second, he dismissed all of the motions concerning the alleged unreasonableness of the GIC's decision to approve the Project, including those related to the adequacy of the Board's administrative review. His decision to dismiss six of the leave applications was also somewhat unexpected as the parties appear to have assumed that an application for leave only had to satisfy a very low bar and would be granted almost as a matter of course.

Justice Stratas' decision to allow more legal and regulatory uncertainty is frustrating to those who support the Project. However, the decision itself is well-considered, clarifying the law in many respects and providing a roadmap to the federal government in its efforts to resist the allegations. As long as the Project survives the judicial review of the consultation process, which we expect, the Decision may be a significant strategic win for those supporting large resource and infrastructure projects as it should impose important limits on the future ability of groups to challenge the adequacy of the review and approval process.

The regulatory process is now complete

One important result of the Decision is that it dismissed all of the challenges to the regulatory process. This means that the regulatory review is complete and the GIC reasonably relied on it to inform its decision that the Project is in the public interest. Absent an appeal to the Supreme Court, the question of whether the NEB process was sufficient is complete.

The threshold for leave is not a mere checkpoint on the road to judicial review

Trans Mountain and the Attorney General of Canada "took no position on eleven of the twelve leave motions because they considered the threshold for leave to be quite low." As it turns out, they were wrong.

Justice Stratas emphasized that a grant of leave was not a mere stepping stone on the way to judicial review and that an applicant must advance strong substantive arguments, well-documented by evidence, to obtain leave pursuant to the National Energy Board Act. While the decision-making apparatus under the new Canadian Energy Regulator Act and Impact Assessment Act is different than that formerly in place under the NEB Act and the Canadian Environmental Assessment Act, 2012, the provisions governing appeals and applications for judicial review are similar. Thus, to the extent that Justice Stratas' reasons consider the threshold for leave and the appropriate degree of judicial oversight at the outset of an application for judicial review, his guidance in this respect should continue to be relevant as the industry moves forward under the new statutory regime and, in particular, regarding the government's duty to consult.

As a regulatory review process unfolds, recourse to the FCA is forbidden until the GIC has made a final decision. But even then, as Justice Stratas found, the right to seek judicial review "is neither automatic nor as of right"; it must be warranted. The reason for this is simple: one of the principles underlying the NEB Act and now, ostensibly, the CERA is the notion of regulatory certainty. An infrastructure project cannot and should not be held up by "multiple, unnecessary, long forays through the judicial system." Accordingly, for any applicant to obtain leave, it must present a "fairly arguable case." Though this standard is not new to Canadian law, Justice Stratas observed that, having regard to the particular statutory context and the seeming confusion among the parties, further guidance on this point was warranted.

Under the NEB Act and, presumably, the new regulatory regime, three principles inform the contents of the "fairly arguable" standard as it concerns any decision issued by the GIC: (a) the Court must acknowledge the gatekeeping function of the leave requirement, ensuring that an applicant cannot obtain leave without sufficient evidence or in the face of fatal legal bars; (b) the Court must show a high degree of deference to the decision-making of the GIC; and (c) it makes little sense to send a decision back for redetermination if it is clear that the same decision will be made once the technical correction is fixed.

Applying both of these principles and the doctrine of res judicata, Justice Stratas dismissed the motions of all but the First Nation applicants. Entire papers could be written on the content of each of the principles identified in Justice Stratas' reasons—particularly in the context of duty to consult. However, we simply note that for the purposes of the judicial review to come, each principle has significant implications, directing and establishing parameters around the Court's review:

  • Is the documentary evidence that the Attorney General declined to file here sufficient to refute the complaints of the applicants? A proper record and explanation of the government's efforts may be determinative.
  • What degree of deference does a court owe to the GIC in deciding whether a decision should be subject to judicial review? Under the NEB Act and the CERA, the Court must afford the GIC the "widest margin of appreciation" in reviewing its decisions. Does this also apply to a question concerning the duty to consult?
  • And finally, when a democratically elected government makes decisions and commits to courses of action in furtherance of the public interest, does deference to such political decision-making outweigh the importance of ensuring that all of the pieces to the executive decision-making puzzle are in their proper place? Judicial review is an imprecise science. A balance between form and substance, correctness and reasonableness, and certainty and expediency must exist somewhere; it is arguable that previous courts have overshot the mark.

The framework that the Decision sets out has the potential to curtail the proliferation of legal challenges to future projects and, as a result, help promote regulatory certainty and decision-making finality.

Where the federal government declines to act, provinces should step into the breach

As noted, the respondents took no position on all but one of the issues before the Court. On its own motion, the Court sought to fill the gap and invited submissions from the Attorneys General of British Columbia and Alberta. Alberta elected to intervene and presented argument that Justice Stratas expressly described as "helpful". This begs the question: how would the Court have decided these leave applications had Alberta not intervened? In the complete absence of evidence and argument, the Court may have had no option but to grant leave to all applicants. Indeed, there would have been little on the record to rebut the allegations of the applicants and it would have been improper for a court to speculate as to the existence of potential arguments, defences and evidence that could show a complaint is not "fairly arguable."

Two important observations follow:

  • Attorneys general and other delegated decision-makers should not assume that leave will be granted and ought to resist applications for leave to seek judicial review.
  • Where the federal government declines to defend its decisions in court, provinces whose interests are uniquely impacted by such decisions should protect their own interests and seek to intervene.

Alberta's decision to step into the breech in this case should be commended and followed in subsequent proceedings where a province's interests are at risk.

Reading between the lines: the standard of review and the duty to consult

The duty to consult is a matter of increasing prominence in Canadian jurisprudence and is the only remaining legal issue that Trans Mountain needs to navigate. Interestingly, it received a great deal of attention from Justice Stratas in his reasons. In our view, intentionally or not, Justice Stratas' reasons go beyond simply justifying his decision to either grant or deny leave; they reiterate the limits the Supreme Court of Canada has placed on the duty to consult and pre-emptively ask: (a) what should the duty to consult look like in the context of large infrastructure projects that engage consideration of the national interest; and (b) what is the standard of review that applies to (i) the adequacy of the consultation process, and (ii) the validity of the GIC's determination that the consultation process was adequate?

The existence and depth of the duty to consult is a question of law; it is reviewable on a standard of correctness, meaning that the Court can substitute its own views for those of the GIC in this case. But a reviewing court must keep in mind that this duty does not grant indigenous groups a veto and the consultation process does not require perfection, nor does it require the government to obtain consent or non-opposition from those it has consulted. A reviewing court must apply a strict standard in deciding whether the government correctly identified its constitutional obligation to consult, but it must not set the standard so high as to turn the substance of the consultation requirement into something it is not.

In its Phase III consultations concerning the Project, the federal government was guided by the FCA's direction in Tsleil-Waututh. It is unlikely that the panel that ultimately reviews the GIC's decision to approve the Project would find that it failed to realize the depth of consultation legally required. But that is not the only question the Court will ask. It will go further and inquire into the GIC's belief that the new process adequately addressed the shortcomings the FCA identified in the previous round of consultation. Though the applicants argued the GIC's decision in this respect should also be reviewed for correctness, the Supreme Court has previously held that such a question ought to be considered for reasonableness: was the GIC's belief that the consultation process met the applicable legal standard reasonable? Though the question will be more properly addressed in the actual review, Justice Stratas appears to suggest that, in the context of a major federal undertaking that invokes questions of economics, culture, provincial interests, the environment and the broader public interest, executive decision-making ought to be granted substantial leeway to balance and account for all of these competing concerns.

Helpfully, Justice Stratas gave the Attorney General of Canada a roadmap illustrating how it could have and may yet still demonstrate that the government's consultation process was sufficient to inform a reasonable decision. If the Attorney General of Canada can provide evidence that: (a) demonstrates good faith efforts in the government's process design; (b) substantiates the GIC's description of the consultation process contained in the Order-in-Council accompanying its approval; and (c) demonstrates the GIC had good reason to believe the process was adequate, it will likely succeed in arguing that the approval was reasonable. Given the robust consultation process and the accompanying documentation, it appears likely that the Attorney General of Canada will be able to show that the process was adequate.

The question of remedy

Finally, in the Decision, Justice Stratas reminds us that a finding that a project approval was flawed does not necessarily mean that a project should be shut down. Even if the reviewing panel were to find the evidence does not reasonably support the GIC's decision-making in regard to the duty to consult, Justice Stratas signals that, having regard to the nature of the Project, quashing the approval a second time may not be the appropriate remedy. Justice Stratas' reminder to take a common-sense approach to crafting a remedy is also welcome to those who support such projects.

Conclusion

There is no question that the Decision disappointed many who hoped that the long legal saga over the Project would finally be at an end. However, this tactical defeat may ultimately prove to be a strategic victory for proponents of such projects, as Justice Stratas' well-reasoned decision sets crucial limits on the scope of challenges to such project approvals and should limit the legal uncertainty that subsequent projects may face.