You can read a much shorter version of this post, published on October 10, 2018 by the CD Howe Institute, here:
On August 30, 2018, the Federal Court of Appeal (FCA) set aside the federal Cabinet’s approval of the Trans Mountain Pipeline Expansion (TMX) project. One of its two reasons for doing so was its finding that the Crown’s consultation with several First Nations (FNs) about the proposed projects had been inadequate. The court criticized the government officials doing the consulting for seeing their roles as largely note-taking and communicating FNs’ concerns to the Cabinet, rather than engaging in a responsive two-way dialogue to “grapple with” their concerns. To approve TMX again, the Crown will have to comply with the court’s requirement for further consultation. With respect, I think the court was wrong.
A number of FN chiefs have made public statements that the government needs their permission to proceed with the pipeline, which permission they will deny. That is incorrect. The SCC has held that the Crown’s duty of consultation does not give FNs a veto over project approval. Yet this FCA decision (as well as a similar FCA decision in the earlier Northern Gateway Pipeline case) has given FNs an effective veto. The two decisions have now created two bad precedents.
A project proponent has no control over the Crown’s consultation process, yet suffers the consequences if the court finds it inadequate. The FCA’s TMX decision should have been appealed to the Supreme Court of Canada (SCC), but the Prime Minster decided against an appeal. The two FCA pipeline decisions are serious deterrents to any major project needing federal approval, suggesting to investors that Canada is not really open for business.
There is No Clear Rule on Consultation
Consultation with FNs is a Crown duty. But the SCC has held that the nature and extent of that duty varies with the circumstances of each case. This is judicial language for saying that there is no clear rule, so we will just have to make it up as we go along.
Apart from saying that the two-way dialogue must “grapple with” FNs’ expressed concerns, the FCA offered no specific suggestion as to how this could work in our governmental system. Nice-sounding language such as “two-way dialogue” does not explain what is supposed to go the other way, from the consulters to the FNs. The FCA commented that the additional consultation it required would not be onerous and could be conducted quickly. That is easy for the court to say when it does not have to figure out how to do it.
Consultation for What Purpose?
Compliance with this FCA decision will be a problem for any future consultation, for two reasons.
First, the people doing the consulting (front-line public servants) are not the people doing the deciding (the Cabinet). The consulters cannot offer any personal opinions about an expressed concern because such opinions would be taken as binding the Crown. They also cannot make any commitments or offer any predictions about what the Cabinet may decide to do at a Cabinet meeting that has not yet been held.
Given how our government actually works, it is unclear how the Crown could ever avoid the FCA’s criticisms unless the entire Cabinet met in person, several times, with each FN. The Cabinet cannot meet repeatedly with numerous FNs while still trying to run the Canadian government. However, the SCC held in the 2017 Clyde River case (para 22) that a Minister had no such duty. Whatever “grappling” the FCA expected the consulters to provide, it offered no explanation as to how this could work under our system of government.
The second reason is that some FNs are unalterably opposed to the construction of the proposed project. Their purpose in participating in the consultation process was not to have their concerns satisfactorily addressed, but to prevent the project’s approval. Why should they ever agree that the consultation was adequate when their strategy is to make it appear inadequate in their future court action? And their strategy succeeded.
Gaming the Consultation Process to Veto the TMX
The FCA’s reasons for decision show no awareness that some of the FNs were gaming the system, for example, through:
- creating meeting agendas with so many items that the agendas could never be completed;
- proliferating numerous “concerns” of questionable relevance to their Aboriginal rights and interests;
- asking for scientific and other studies to be conducted that might take years to complete; and
- asking for extensions of time to respond to information the consulters had provided.
The FCA was critical that, among other alleged consultation deficiencies, “Canada” had failed to
- complete more than 12 items of a 20 item meeting agenda;
- provide adequate responses to some expressed concerns, regardless of their relevance to Aboriginal issues;
- respond to some requests for information specifically, rather than generically; and
- grant some 11th hour extension of time requests.
The court gave the impression that it considered almost every FN’s demand for almost anything as critically important, while completing an extensive project assessment within a statutory deadline was unimportant.
Some of the most time-consuming responses to FN requests for information, such as on greenhouse gases, had no clear connection to any asserted Aboriginal right. Another prime example was challenging the economic need for the project.
Below are some excerpts from the FCA decision (with respective paragraph numbers). I have deleted some words if unnecessary to convey what the court was saying):
 …… Upper Nicola [a FN band from BC] expressed its concern with the Board’s economic analysis. …
 No dialogue ensued about the legitimacy of Upper Nicola’s concern about the Board’s economic analysis, although Canada acknowledged “a strong view ‘out there’ that runs contrary to the [Board’s] determination.”
 Matters were left that if Upper Nicola could provide more information about what it said was an incorrect characterization of the economic rationale and Indigenous interests, this information would be put before the Ministers.
 Put another way, Canada was relying on the Board’s findings. If Upper Nicola could produce information contradicting the Board that would be put before the Governor in Council; it would not be the subject of dialogue between Upper Nicola and Canada’s representatives. Canada did not grapple with Upper Nicola’s concerns, did not discuss with Upper Nicola whether the Board should be asked to reconsider its conclusion about the economics of the Project and did not explain why Upper Nicola’s concern was found to lack sufficient merit to require Canada to address it meaningfully.
The consulters acknowledged the forecasts of a few economists supporting pipeline opponents’ positions that the pipeline would be uneconomic. These economists asserted that the pipeline’s Asian customers could buy better product for less money elsewhere, hence there was no economic case for the pipeline. But these are not facts. These are merely unverifiable predictions about the future. Other economists presented different predictions, which were more persuasive to the National Energy Board (NEB).
The Cabinet decided that the pipeline had a valid economic case. Unlike the FCA, I see nothing wrong with the consulters either refusing to ask the NEB to reopen the long, costly economic predictions debate, or saying to Upper Nicola that they would convey any new information from Upper Nicola to the decision-makers.
The FCA decision does not say that Upper Nicola offered any new information for consideration. The extensive evidence of all parties was available for anyone to read in the NEB record. The duty of consultation has to have a limit. It should not be extended to the repetition of already thoroughly debated issues.
Theoretically, the consulters could have asked the NEB to reconsider its recommendation to Cabinet. However, there is no benefit in doing it all over again just for the sake of doing it all over again. The FNs requesting this reconsideration would have known the request would be refused. This request was made to create another ground for judicial review.
If the NEB had been asked, and had agreed to reconsider the economics of the pipeline, it would have had to comply with procedural fairness requirements. This meant re-opening the hearing, and giving all parties a full and fair opportunity to present further evidence and argument. That would add at least another 6-12 months for hearings, then a further delay for the NEB to make, write and translate its report. This would require new consultations with FNs about that report, then back to the Cabinet. Yet everyone knew, and the FCA acknowledged, that there was a statutory Cabinet decision deadline of December 19, 2016. A reopening of the NEB’s hearing for reconsideration of the economic case for the pipeline could never have been completed within that deadline. Yet the FCA, in its paragraph 626, gave this alleged failure of consultation as a reason for quashing the Cabinet’s decision.
In the first week of November, 2016 the Crown gave six FNs copies of its second Draft Consultation Report. It sought their comments within two weeks (its first draft had previously been circulated for comment). The statutory deadline for the Cabinet decision was December 19, 2016, just six weeks away. The FCA held that allowing only 2 of those weeks for comments was inadequate. Why? The time needed to comment on a revised report is just a matter of opinion. There is no law that says how long is long enough. It was the Cabinet, not the court, that had to make the difficult approve/deny decision, in the national interest, and within a short deadline. The court had no way of knowing how long it would take for the Cabinet to review and consider all the evidence before it, and then to make, write and translate its decision. The longer the response time given to FNs, the less time would remain for the Cabinet to do its job. The FCA gave no explanation as to why its opinion on how to divide the short time available before December 19 between the FNs and the Cabinet should over-rule that of the Cabinet.
The FCA Created A New Duty To Consult FNs On Non-FN Issues
FNs’ interests in broad public policy issues such as greenhouse gases and the economics of a project are no different from, and no greater than that of the general Canadian public. These are not about Aboriginal rights based on treaties, land claims or other recognized Aboriginal interests. For example, Canada’s Paris accord commitments on GHG emission reductions were made on behalf of all Canadians, not just FNs. Yet the FCA struck down the Cabinet’s approval decision in part because the court held that Crown consultation of FNs on these non-FN issues had been inadequate.
If any other Canadian person (or a provincial or municipal or government) had applied to the FCA to quash the Cabinet decision on the ground that it was legally invalid because it failed to consider adequately the project’s impact on greenhouse gases or its economic viability the court would have summarily dismissed the application. The reason for dismissal would have been because these are generic policy issues that only the elected representatives can determine, not legal issues for the court.
The FCA has given FNs a new, unique right, unavailable to anyone else in Canada, to challenge the federal Cabinet’s project assessment decisions on broad public policy grounds. The court did this through a major expansion of the Crown’s constitutional duty of consultation, from Aboriginal rights issues to virtually any issue a FN says is of concern to it. Because consultation is a constitutional duty it cannot be amended or restricted by legislation, so the Canadian government is helpless to correct this situation unless and until it succeeds in having this part of the decision reversed by the SCC.
Approval Delayed Is Approval Denied
The FCA’s approval of unrealistic consultation demands could create risks of delay and uncertainty fatal to this and future major projects. TMX had filed for project approval with the NEB in December 2013, to begin construction in 2017, with oil to flow through the pipeline by December 2019. But now, five years later, the FCA decision has left the project in limbo. With the further consultation required, it is unlikely that there can be a Cabinet decision in less than another year. And that decision may be attacked in court again.
A proposed project like this can only tolerate so much uncertainty and delay. As we saw, TMX investors didn’t wait for the court’s August 30, 2018 decision. Facing the uncertain outcome of this court challenge, and having seen the FCA’s decision against the Northern Gateway pipeline, they stopped work on their Cabinet-approved project. TMX investors happily sold the entire project to the federal government. But for the government purchasing the project, the court challenge would have killed it. The FCA gave the FNs an effective veto.
The government recently hired the distinguished former SCC justice, Mr. Frank Iacobucci, to head the renewed TMX consultation. But even he cannot fix a broken law.
Compliance with a court decision is essential in a democracy, but when the court requires the virtually impossible, compliance will be very difficult. Indeed, the First Nations leadership is already saying that the NEB, in its court-required reassessment of marine traffic, is doing it all wrong again; and that the Crown, in its court-required attempt at further consultation, is again failing to consult as required.
As reported in the National Observer, “Representatives of former and current litigants, environmental groups, and affected First Nations held the press conference to raise red flags around a limited assessment of increased tanker traffic and what they see as a hasty rushed process that prevents meaningful consultation with affected First Nations.”
None of this is surprising given that the government will not appeal this unworkable court decision, and that some FNs’ objective is to make the revised consultation fail. I expect a second round of judicial challenges in this case.
What is unclear is whether the government itself hopes this pipeline approval process will fail. That way the controversial pipeline will not have to be constructed. The government can blame the existing law, which it says it is fixing, and write off its investment in the pipeline. The proposed amended law, Bill C-69, will not fix these problems. It will make the assessment process slower, even less certain, and even more weighted against proponents. The government may not understand the assessment process well enough to understand why Bill C-69 will make matters worse. On the other hand, if the government understands what it is doing with Bill C-69, its real intention is to make the TMX Canada’s last pipeline project application.