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To:  The Hon. Amarjeet Sohi, Minister of Natural Resources

From: Grant Bishop

Date: February 27, 2019

Re: Federal cabinet must get TMX right this time

On Friday, the National Energy Board released its reconsideration report on the Trans Mountain Expansion (TMX) pipeline project, finding that the project was likely to cause significant adverse environmental effects but that these effects could be justified and the project would be in the public interest.  TMX now requires a final decision by the federal cabinet, which is awaiting the conclusion of consultations with affected Indigenous peoples. 

With the legal missteps by cabinet in its earlier approval of TMX, it is critical that this consultation addresses the deficiencies identified by the Federal Court.  The pipeline’s 590,000 barrels per day are critical for crude oil production from Western Canada to reach Pacific markets (as outlined in this Graphic Intelligence).

Ottawa bought the pipeline last year for $4.4 billion, and analysis by the Parliamentary Budget Office indicates it paid at the top end of the valuation range and that a lag in construction would reduce the project’s value by $693 million for each year of delay.

The NEB was required to reconsider its recommendation following the quashing of the cabinet’s project approval by the Federal Court of Appeal’s Tsleil-Waututh decision last August.  In that decision (elaborated in an earlier Intelligence Memo), the Court found that the NEB had unjustifiably excluded the impact of tanker traffic on the southern resident killer whale population. As well, the court found the federal government had failed to adequately consult affected Indigenous peoples.

In quashing the initial approval of TMX, the Court found that the cabinet had relied on a flawed report by the NEB, which scoped the “designated project” to exclude project-related marine traffic.  (Notably, while the NEB originally excluded increased tanker traffic from its definition of the TransMountain project, the NEB’s May 2016 report did feature a chapter that examined the impacts of tanker traffic on killer whales and found significant adverse effects on that population from the increased traffic.)  Nonetheless, the Court found that the NEB’s original report unjustifiably excluded the project-related marine traffic from the definition of the project, which led the cabinet to conclude that TMX is unlikely to cause significant adverse environmental effects.

Last week’s NEB reconsideration report addressed this issue. Importantly, the NEB found that project-related marine traffic will represent a maximum of 13.9 percent of all vessels in the relevant area (including ferries, tugs, whale watching and other cargo ships), and that overall traffic is expected to grow regardless of TMX-related shipping. Indeed, the NEB noted that ferries are estimated to contribute 52 to 67 percent of underwater noise and recommended the acceleration of mitigation for ferries’ disturbance to orcas. Even though the contribution by TMX to the cumulative effects on the orcas is comparitvely small, the NEB's finding on marine shipping recognizes the "tipping point" and recommends the federal cabinet develop a regional management plan. 

With the recommendation from the NEB, the approval for TMX is again in cabinet’s hands.  Critically, cabinet must ensure the adequacy of consultation for affected Indigenous peoples. The Federal Court of Appeal found consultation prior to the original cabinet approval (which took place from February to November 2016) to be deficient in several respects.  In particular, the Court found that the earlier consultation lacked “meaningful, two-way dialogue” and that the consultation team merely acted as “note-takers.” 

This was a startling error by the federal government given the Federal Court of Appeal’s nearly identical finding in its June 2016 decision in Gitxaala (quashing the Northern Gateway approval) that “[m]issing was someone from Canada’s side empowered to do more than take notes.”  As well, the then-Minister of Indigenous and Northern Affairs had received an expert report in May 2016 that emphasized the guidance on consultation for federal officials “perpetuates the perception that consultation is simply a process to record rather than meaningfully address concerns.”

In the wake of the Tsleil-Waututh decision, the federal government appointed former Supreme Court of Canada justice Frank Iacobucci as a representative to design and oversee the consultation process with the 117 affected Indigenous groups.  While Ottawa has not published an update on the consultation, media reports indicate that the consultation team had met with 85 of these groups as of late February.  Under Iacobucci’s direction, one can only hope that the federal government can finally reach a robust decision on TMX.

Grant Bishop is Associate Director, Research at the C.D. Howe Institute

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The views expressed here are those of the author. The C.D. Howe Institute does not take corporate positions on policy matters.