Supreme Court decisions provide clarity around consultation requirements for NEB

OTTAWA — In separate decisions Wednesday, the Supreme Court of Canada clarified to what degree oil and gas companies have a duty to consult with Aboriginal communities, while also detailing the role of the national energy regulator within the consultation process.

The SCC ruled in favour of the Inuit hamlet of Clyde River, Nunavut, in its years-long bid to stop a Norwegian consortium from conducting seismic testing near its traditional territory in Baffin Bay. In a separate ruling, the court upheld the National Energy Board’s approval of Enbridge Inc.’s expansion and reversal of its Line 9 pipeline, which was appealed by the Chippewas of the Thames First Nation in southern Ontario.

Both decisions provided some clarity around what is an adequate level of consultation in oil and gas project proposals. They also bolstered the NEB’s ability to carry out consultations in so-called “expedited” review processes for smaller project proposals under which the federal cabinet does not have the final say. 

Supreme Court Justices Andromache Karakatsanis and Russell Brown wrote that the NEB is compelled to have clear and reciprocal discussions with local communities, and give locals the opportunities to ask questions and respond to proposals. The justices ruled the NEB failed to meet that standard in Clyde River, but successfully met that expectation during consultations over the Line 9 project. 

The decisions come amid a growing expectation that private companies and the national regulator engage in deeper consultations with local people impacted by oil and gas development. 

It also comes as the federal government conducts consultations in its attempt to restructure the NEB, which could soon be saddled with a far broader mandate, including the need to consider total upstream emissions in its approval process. 

Experts have openly pondered whether the NEB will have the capacity to account for broader environmental questions, suggesting the regulatory body would need require a substantial bulking up.

“Were the [NEB] to have to carry out consultations, it would at the least need more resources, but might also need other adaptations,” said Dwight Newman, a professor at the University of Saskatchewan.

Tom Isaac, a partner in Aboriginal law at Cassels Brock & Blackwell LLP, said the ruling provides some clarity around the extent to which the NEB is required to carry out its own consultations. 

“The outcome of this ruling establishes legal predictability and stability for all parties,” he said in a statement. 

Wednesday’s ruling signals a willingness to override the approval of projects by regulatory bodies if duty to consult is not met. The justices wrote that the Crown “always holds ultimate responsibility for ensuring consultation is adequate” as part of the rationale for its decision.

In the Clyde River case, the court said Wednesday its ruling was not due to environmental risk, but because consultations did not properly address Inuit treaty rights that allow locals to hunt large mammals and fish in the region.

The consortium, made up of Norwegian companies TGS-NOPEC Geophysical Company, Petroleum Geo-Services and Multiklient Invest AS, planned to conduct seismic airblast testing, a process that allows companies to seek out pockets of oil and gas trapped beneath the sea floor.

Residents of Clyde River worried that the loud airgun blasts used in seismic tests could have unknown impacts on populations of narwhal, beluga, bowhead whale and walrus.

“This [seismic work] could change the migration routes of whales,” former Clyde River mayor Jerry Natanine said before the court ruled.

He says some residents are concerned the blasts could either physically harm whales and fish, or potentially scare them off to regions beyond the reach of local fishermen.

“That would be devastating,” he said.

Natanine said the consortium consulted with the local Inuit communities, but that it did not provide adequate responses to local concerns. In one instance, the community asked for video monitoring of how fish would react to airgun blasts, but the consortium did not provide it, he said.

Meanwhile, the court also upheld the approval of Enbridge Inc.’s reversal and expansion of its Line 9B project.

The Calgary-based company years ago proposed to reverse and expand the Sarnia-to-Montreal pipeline, increasing capacity from 240,000 barrels per day to 300,000. It was approved by the NEB in March 2014, and went into service December 2015.

The court ruled that Enbridge’s consultation with local communities was “far more robust” than the Norwegian consortium’s consultations with residents of Baffin Island.

It said in its ruling that Enbridge’s consultation process was “manifestly adequate.” The Calgary-based company hosted several oral hearings before work on the pipeline began. Locals were also given adequate time to submit written concerns to the NEB, the ruling said.

Enbridge applied for the reversal in order to transport heavy oil from Western Canada to refineries in Ontario and Quebec.  

In a written statement Wednesday, the company said it “appreciates and respects” the SCC decision. 

As for Clyde River, the decision appears unlikely to have much impact on oil and gas development in the region. Ottawa imposed a five-year ban on oil and gas exploration in Arctic waters in December 2016, and low oil prices have made fossil fuel development uneconomic in remote Northern locations.

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