Canada: Downstream GHG Emissions and Sierra Club Canada Foundation v Canada (Environment and Climate Change)

The Federal Court’s recent decision in Sierra Club Canada Foundation v. Canada (Environment and Climate Change) highlights the continuing focus in Canada on climate change litigation. The case involved a challenge to a decision by the federal Minister of Environment and Climate Change to approve the Bay du Nord oil development project offshore Newfoundland and Labrador.

The Minister determined that the Bay du Nord project was not likely to cause significant adverse environmental effects. Two environmental non-profit organizations and one not-for-profit organization representing eight Mi’gmaq communities in New Brunswick challenged the Minister’s decision in a judicial review application against the federal government and the Bay du Nord project’s majority owner, Equinor Canada Ltd. In particular, the applicants claimed the Minister improperly failed to consider the impacts of downstream greenhouse gas (GHG) emissions from the Bay du Nord project. Downstream GHG emissions are created from the crude oil recovered from the project and subsequently used by others.

The Federal Court dismissed the challenge, adding to the developing body of case law in Canada about climate change that demonstrates clear limits on the ability of courts to address climate change where governmental action has been challenged as inadequate. See our January 23 Update, Climate Change Suits Against the Government: The Limits of Court Action and our April 27 Update, Limits of Climate Change Suits Against the Government: Mathur v. Ontario Decision.

Background

The Bay du Nord project seeks to produce oil from the Flemish Pass Basin of the northwest Atlantic Ocean, which is located approximately 500 kilometers east of St. John’s, Newfoundland and Labrador. Equinor (an indirect subsidiary of a company that is 67 percent owned by the State of Norway) holds a majority stake in the Bay du Nord project, while BP Canada Energy Group ULC holds a minority stake. Equinor estimates the Bay du Nord project contains 300 million barrels of recoverable crude oil and has an operational life span of 30 years.

In accordance with the Canadian Environmental Assessment Act, 2012, the potential “environmental effects” of the Bay du Nord project, including its direct GHG emissions, were assessed in a report. However, the report did not assess the “downstream” GHG emissions of the project. The Minister considered the report and the implementation of mitigation measures, and determined that Equinor’s Bay du Nord project was not likely to cause significant adverse environmental effects.

Challenge to the Minister’s Decision

Three applicants – Sierra Club Canada Foundation, Équiterre, and Mi’gmawe’l Tplu’taqnn Incorporated (MTI) – challenged the Minister’s decision to approve Equinor’s Bay du Nord project. They claimed the decision was unreasonable for failing to consider (i) the project’s downstream GHG emissions, and (ii) marine shipping that would arise from the project. They also claimed the Minister failed to discharge the duty to consult and accommodate MTI’s member communities regarding the project.

The applicants argued that the downstream GHG emissions – the emission created from the crude oil recovered by the project – were (i) directly linked to the Bay du Nord project authorization, and therefore must be assessed under the relevant legislation, and (ii) required to be considered because the burning of crude oil is a necessary result of oil production from the project.

Federal Court Decision

The Federal Court rejected the applicants’ submissions that the decision was unreasonable for its failure to consider and include the effects of downstream GHG emissions. The Federal Court noted that Canadian regulators have repeatedly found that downstream GHG emissions need not be considered in environmental assessments and those decisions have been upheld on appeal or review. The Federal Court also cited authority holding that nothing in the relevant legislation required a consideration of general issues such as climate change in coming to a decision mandated by the legislation.

The Federal Court agreed with Equinor’s submission that “given that particular downstream locations and uses of Project oil are unknown, it would be impossible to determine whether the GHG emissions generated from those uses are within the legislative authority of Parliament.” The Federal Court noted that the oil from the project could be used all over the world for numerous purposes, which may elicit different GHG emissions. It would not be possible to determine how much downstream use, if any, would be within Canada. Accordingly, considering the environmental effects of downstream GHG emissions would be speculative, and it was reasonable for the assessment of the project to exclude them.

The Federal Court rejected all of the applicants’ other challenges. It held the applicants had not established that the decision regarding marine shipping was unreasonable. Since the Bay du Nord project was located “500 kilometers from the coast of Canada, well beyond the legislative authority of Parliament, […] there is uncertainty about the destination of the oil from the Project site”, which made it “impossible to assess marine shipping”.

Regarding the duty to consult, the Federal Court noted that there were no treaty rights in the project area, which was “far from the traditional territory” of the MTI in New Brunswick, and had a low predicted impact on the culturally significant wildlife nearby. It held that MTI was given opportunities to raise concerns and provide comments, the Minister was not required to agree with MTI’s concerns, and it was reasonable for the Minister to assess the concerns and dismiss them.

Final Considerations

As mentioned above, this decision is another example of the developing body of case law in Canada concerning the limited scope for courts to address challenges to governmental action regarding climate change.

For more information concerning climate change or how it may impact businesses, please contact any member of our Dispute Resolution Group.

The authors would like to thank Genevieve Citron, Summer Law Student, for her assistance in writing this Update.