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Canadian Supreme Court Decisions Improve Prospects for Mackenzie, Other Projects

Canadian Supreme Court Decisions Improve Prospects for Mackenzie, Other Projects

Industry emerged as a winner from two landmark decisions by the Supreme Court of Canada on a legal gray area, aboriginal relations, which has clouded the future of the Mackenzie Gas Project.

The rulings limit the duties and liabilities of resource developers when projects affect native communities, and made it plain that the balance of power is not about to swing entirely over to aboriginal critics of economic projects.

Although the gas project was not a formal participant in the case, the ruling came at a critical time for the C$7 billion (US$5.6 billion) plan for up to 1.9 Bcf/d of Mackenzie Delta production and a 760-mile Mackenzie Valley pipeline.

As the court handed down its decision, the Deh Cho aboriginal district that straddles the southern 40% of the pipeline route declared intentions to proceed with protest lawsuits filed earlier this fall in the Supreme Court of the Northwest Territories and the Federal Court of Canada. Deh Cho Grand Chief Herb Norwegian, in breaking off settlement negotiations after the federal government refused to grant all the demands by his community, repeated previous vows to make industry and gas markets pay. "There will be no pipeline across the Deh Cho territory without Deh Cho consent," Norwegian again declared.

The Mackenzie Gas Project is effectively a hostage in the dispute, which centers on demands by the Deh Cho for status as a government in their territory, even though land claims negotiations with federal authorities remain unresolved. The demands include power for the Deh Cho to appoint two of seven members on a collaborative federal, territorial and aboriginal environmental review panel. The protest lawsuits do not name as defendants the project or its sponsors, Imperial Oil, Shell Canada, and ConocoPhillips Canada. But the other three native communities along the pipeline route -- the Inuvialuit and Gwich'in on the Delta and the Sahtu in the central Mackenzie Valley -- have pledged to defend the project in the courts in order to save their economic benefits including one-third ownership of the gas transmission system.

The new decisions by the Supreme Court of Canada were on similar three-sided disputes between industry, government and aboriginal interests in northern British Columbia. Both cases involved industrial access to land owned by the Canadian Crown or government authorities but claimed by native communities. The Haida Nation fought a transfer of a forestry lease. The Taku River Tlingit demanded greater power in an environmental review of a mining project.

In the B.C. cases, launched independently but decided by the high court unanimously on the same day in virtually the same language, Canadian aboriginal relations law was clarified in ways praised by an array of resource industry interests.

In principle, the court said Canadian authorities have a "duty to consult and accommodate" when industrial developments affect aboriginal populations. In practice, "this process does not give aboriginal groups a veto over what can be done with land," the rulings said. "Rather, what is required is a process of balancing interests, of give and take."

The duty belongs to Canadian federal and provincial governments and not resource developers, the court said. "The Crown alone remains legally responsible for the consequences of its actions and interactions with third parties that affect aboriginal interests."

Without referring directly to the gas industry, the court made it plain the regulatory procedure being followed in the Mackenzie project's case remains entirely acceptable. The gas developers are extensively consulting and courting aboriginal communities, but staying strictly neutral in land rights and jurisdictional disputes between the Deh Cho, federal and territorial authorities, and other native groups. "The Crown may delegate procedural aspects of consultation to industry proponents seeking a particular development; this is not infrequently done in environmental assessments,"the Supreme Court said. "However, the ultimate legal responsibility for consultation and accommodation rests with the Crown."

That ultimate responsibility includes any damages that an aboriginal community may eventually prove to be caused to its territory as a result of a project that obtains government approval, the rulings said. Canada's top court sharply rejected a doctrine, which it noted has been emerging in lower tribunals, that companies should be held liable for damages in aboriginal rights cases because they are the parties most likely to be able to pay.

The Supreme Court of Canada said "the remedy tail cannot wag the liability dog. We cannot sue a rich person simply because the person has deep pockets or can provide a desired result."

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