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Canadian Oil/Gas Industry Wins One in Precedent-Setting Case

Industry has blazed a trail to carrying out resource projects through Canada's tangled aboriginal rights maze -- and associated environmental resistance -- by winning a landmark law case.

The path is so clear that the World Wildlife Fund called the verdict by the Federal Court of Appeal "a startling precedent that puts the needs of oil and gas companies ahead of the rights of indigenous Canadians."

The legitimacy of a regime that enables industry to deal directly with natives was upheld in a unanimous ruling by a three-judge panel on Hamlet of Clyde River versus TGS Nopec Geophysical Co. and the Attorney General of Canada.

The case centers on "the honor of the Crown," a shorthand legal phrase for the Canadian constitutionally enshrined duty of the federal and provincial governments to respect aboriginal treaty and traditional rights.

Clyde River, an Inuit village on the west coast of Baffin Bay between Canada's Nunavut eastern arctic territory and Greenland, unsuccessfully tried to bar TGS from doing a marine survey liable to lead eventually to offshore gas and oil drilling and development.

The community failed to enforce a hard line interpretation of the Crown honor doctrine that emerged during the 2004-2010 regulatory ordeal of the now-dormant Mackenzie Gas Project in the Northwest Territories.

The hard line spread across the country and most strongly into areas of British Columbia, Ontario and Quebec, which are affected by liquefied natural gas export proposals and gas and oil pipeline projects.

The line is built on historical readings of promises made beginning in Canada's 18th-century British colonial period. Aboriginal rights advocates insist that Crown honor means the highest government officials -- the national prime minister, the provincial premiers and their cabinets -- must obtain native cooperation and permission to grant approvals to projects.

The Clyde River ruling rejects the hard line by stitching together precedents set by the Supreme Court of Canada in an array of rulings on the aboriginal role in resource projects since a 1982 reform bill enacted the country's modern constitution.

"It is now settled law that Parliament may choose to delegate procedural aspects of the duty to consult to a tribunal," Justice Eleanor Dawson wrote in the national appeal court's unanimous decision.

In Clyde River, the tribunal is the National Energy Board and its contested approval methods are an aboriginal relations template followed by other authorities such as the Canadian Environmental Assessment Agency, its provincial counterparts, the Alberta Energy Regulator, and the BC Oil and Gas Commission.

The formula is an instruction manual for project sponsors to provide notice and detailed information, hold meetings, support technical and historical studies, amend potentially harmful plans, seek agreements, and comply with approval conditions generated by the process.

"The consultation process does not dictate a particular substantive outcome. Thus, the consultation process does not give Aboriginal groups a veto over what can be done," the Clyde River ruling said. "Nor does consultation equate to a duty to agree; what is required is a commitment to a meaningful process of consultation.

"Put another way, perfect satisfaction is not required. The question to be answered is whether the regulatory scheme, when viewed as a whole, accommodates the Aboriginal right in question."

"Good faith is required on both sides in the consultative process," said the judges, then added a quotation about how the formula should work from a national supreme court precedent.

"The common thread on the Crown's part must be the intention of substantially addressing [aboriginal] concerns as they are raised through meaningful process of consultation."

Not all the duty to be reasonable belongs solely to the agencies responsible for approving and supervising industry projects. "Aboriginal claimants must not frustrate the Crown's reasonable good faith attempts, nor should they take unreasonable positions to thwart government from making decisions or acting in cases where, despite meaningful consultation, agreement is not reached."

The Inuit, urged on by international environmental groups, vow to appeal the ruling to the Supreme Court of Canada, with Clyde River lawyer Nader Hasan reciting the nub of the native grievance against the role of companies in the regulatory process: "They are private industry. They have their own interests. They have no fiduciary duty to Inuit and aboriginal peoples. They have their duties to their shareholders. So the proponents can't discharge the duty to consult."

But the Clyde River decision is in complete agreement, only differing in its clarity, with summer rulings in parallel BC cases that rejected protests against provincial approval of a new hydroelectric dam on the Peace River known as the Site C Clean Energy Project.

Until Canada's top court, one step up the legal ladder from the federal appeal panel, says otherwise the regulatory agencies and industry have a course to project approvals and execution, said a note to clients from prominent national law firm McMillan LP.

"None of this is to say that the Crown or [project] proponents should take the duty to consult lightly, and concerns expressed by First Nations about the adequacy of consultation should be considered as genuinely as concerns about the effects of a project. But provided that is done, the lesson of these cases is that major projects will not necessarily be 'tied up in court' simply because there is a lack of consensus," said the law firm, which has a large roster of industry clients.

"Given the diverse views associated with major project development generally, this is a very important point for governments, industry and First Nations to all keep in mind. Governing in the public interest may not always be easy, but despite frequent assertions to the contrary, the courts have given enough guidance to make clear that it can be done."

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