Politics·Analysis

What the Supreme Court rulings mean for pipeline proponents (it could be good news)

At first glance, the Supreme Court's recent rulings on energy infrastructure might seem like a blow to pro-development forces in Canada. But investors love predictability, and now the approval process for projects is much more clear.

Trans Mountain stock price leaps after top court clarifies pipeline regulatory process

The Supreme Court ruled that the National Energy Board had consulted adequately with the Chippewas of the Thames First Nation regarding the Line 9 pipeline. (Mark Blinch/Reuters)

At first glance, the Supreme Court's recent rulings on energy infrastructure might seem like a blow to the pro-development forces in Canada aiming to tap the country's natural resources.

After all, the top court quashed seismic testing in the North, seen by some as the next frontier for oil and gas extraction. However, a closer reading of both the Clyde River and Chippewas of the Thames decisions might give pipeline proponents in particular some solace.

It's no secret building a crude oil pipeline — especially one headed for tidewater — has been an arduous task in recent years. But there is nothing investors love more than predictability, and now, with a court-approved constitutional checklist of sorts available to Indigenous Peoples, the National Energy Board and proponents, the approval process for projects is that much more clear.

The federal government has a duty to consult with Indigenous Peoples when there is a claim that an Aboriginal or treaty right will be breached by energy development. However, the top court justices ruled unanimously that the NEB can — and often should — lead those consultation talks.

This had been murky territory, as many activists, environmental and Indigenous alike, have long argued the Crown's duty to consult with affected communities should not be farmed out to an energy regulator that has a track record of approving many of the projects that come across its desk.

Even an expert panel appointed by Natural Resources Minister Jim Carr suggested the NEB wasn't the best body to do this sort of outreach, creating uncertainty in the world of energy infrastructure — but the top court clearly disagreed.

"Let's just say these rulings are another piece in an opaque puzzle that is helping to bring some clarification to businesses," Dirk Lever, the head of research at Alberta-based investment firm AltaCorp Capital, said in an interview with CBC News. "The Supreme Court has provided companies with a path forward that, if they follow these particular steps, they have comfort that they should be OK by it."

A ship receives its load of oil from the Kinder Morgan Trans Mountain pipeline's Westridge loading dock in Burnaby, B.C. (Jonathan Hayward/Canadian Press)

"I read the rulings in a positive light, and if you look at Kinder Morgan's stock price, it jumped a dollar, so the marketplace thought so too," he said, referring to the proponent of the controversial Trans Mountain expansion project that would bring nearly one million barrels a day of Alberta oil to Burnaby, B.C.

'NEB process is not broken'

The Supreme Court said the NEB is well within its authority to oversee the constitutionally mandated consultation work it has long demanded from the federal government. The court also acknowledged the NEB can, and has, done consultations well, notably in the Chippewas case where the court said First Nations concerns about the process were largely unfounded, because they had more than enough time to have their say.

(The Chippewas maintain their concerns about oil spills from the pipeline were not adequately addressed; the Assembly of First Nations also said it was disappointed with the ruling because it did not adhere to the United Nations Declaration on the Rights of Indigenous Peoples, which demands "free, prior and informed consent" from First Nations.)

Chippewa of the Thames First Nation Chief Myeengun Henry prays in the company of a seven-year-old boy. The First Nation has vowed to continue its opposition to the Line 9 pipeline. (Kate Dubinski/CBC)

Helpfully, the court sought to end ambiguity and laid out exactly what it expects the NEB to do adequately:

  • Consult with First Nations, Métis and Inuit communities in the future.
  • Hold oral hearings and provide written responses. 
  • Fund Indigenous efforts to intervene. 
  • Use its considerable quasi-judicial powers to compel companies to hand over pertinent information.
  • Help Indigenous Peoples solicit real answers from often secretive proponents.

The NEB followed many of the steps outlined above before it approved Trans Mountain. The Liberal government also held further consultations — outside the NEB process — before cabinet gave the project the green light last November.

"These were landmark decisions … and it's a huge shot in the arm for the NEB from a predictability, from an investor confidence perspective," Tom Isaac, one of the country's foremost experts on Aboriginal law, said in an interview with CBC News. "The highest court in the land went out of its way to say the NEB process is not broken."

'The sky isn't falling here'

If consultation efforts are botched — as the court said had happened in the Clyde River case — a project could be subject to a potentially fatal judicial review. Until now, consultation has been done inconsistently, which is why the court allowed Enbridge to proceed with its Line 9 reversal while shutting down Norwegian seismic testing efforts in North, even though both projects were vetted by the NEB.

Now, there is a set of standards all parties can follow.

"This is immensely valuable to reconciliation for everybody, for government and Indigenous Peoples. I don't think that's arguable," Isaac said.

The court said the failure of the NEB to adequately consult wasn't the result of the NEB structure, Isaac said.

In Clyde River, Nunavut, people rely on hunters for food year round. The Inuit argue seismic testing could put their livelihoods at risk. (Elyse Skura/CBC)

Rather, the failure stemmed from a proponent who failed to properly address Inuit concerns or answer basic questions about what seismic testing could do to marine mammals the residents rely on for subsistence, he said.

'We have something that works'

The federal Liberal government came to power promising fundamental reforms to the NEB, acknowledging criticism the national regulator might have served as a rubber stamp for projects in the past — and a source of scandal with some wayward board members.

The independent panel Carr appointed has recommended the NEB essentially be blown up and replaced with two separate regulatory agencies, while shifting some of the work from Calgary, home to many oilpatch headquarters, to Ottawa.

Natural Resources Minister Jim Carr appointed an expert panel to make recommendations for modernizing the National Energy Board. (Jeff McIntosh/Canadian Press)

The panel also suggested that the review process for a pipeline project be extended from the current 15 months to allow for further Indigenous consultation.

Isaac said the government might want to reconsider its efforts to overhaul the NEB in light of the top court's rulings.

"Much of what the expert panel report said in its critique of the NEB consultation process flies in the face of the conclusions of the highest court in two express decisions," he said.

"We have to be careful. We're playing with the chemistry set and we have something that works in law," he said.

About the Author

John Paul Tasker

Parliamentary Bureau

John Paul (J.P.) Tasker is a reporter in the CBC's Parliamentary bureau in Ottawa. He can be reached at john.tasker@cbc.ca.

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