Alberta Court of Appeal Finds the ‘Big Molly’ Project Triggered a Full Environmental Impact Assessment

By Eric Appelt and Sean Parker

In the recent decision of Alexis v Alberta (Environment and Parks), 2020 ABCA 188 (“Alexis”), the Alberta Court of Appeal interpreted important environmental legislation and provided guidance on when a full environmental impact assessment (“EIA”) will be required for a project.

The key issue in Alexis was whether the proposed silica-sand extraction project met the definition of a “quarry” under Alberta’s Environmental Protection and Enhancement Act[1] (“EPEA”), and therefore was a “mandatory activity” under the Environmental Assessment (Mandatory and Exempted Activities) Regulation (the “Regulation”).[2] The Court found that the project was a “quarry” and a “mandatory activity”, and accordingly triggered an EIA under section 44(1)(a) of EPEA.

The Big Molly Project 

The Alberta Court of Appeal’s decision in Alexis concerned a project known as “Big Molly”, located near the hamlet of Glenevis, Alberta. The company behind the Big Molly development, Wayfinder Corp. (“Wayfinder”), is in the business of extracting and processing silica-sand to be used in hydraulic fracturing operations. Once in operation, Big Molly was expected to cover 68.6 hectares and produce silica-sand at an annual rate of 500,000 tonnes for an estimated fifteen years.  

In October 2017, Wayfinder sought guidance from the Director of Alberta Environment and Parks (the “Director”) on whether an EIA would be required for Big Molly. The Director decided that the project did not trigger the requirement for an EIA under the applicable provisions EPEA.

Armin Alexis, a member of the nearby Alexis Nakota Sioux First Nation, subsequently filed an application for judicial review of the Director’s decision that an EIA was not needed. Mr. Alexis was concerned that Big Molly – without an assessment of the project’s environmental, social and economic implications – would have an adverse impact on the traditional activities of his community.  

The reviewing judge in the Court of Queen’s Bench found that the Director had reached a “reasonable conclusion”, and confirmed that Wayfinder would not be required to submit an EIA report. These findings were appealed by Mr. Alexis to the Court of Appeal.

Issue of Statutory Interpretation 

A majority of the Court of Appeal allowed Mr. Alexis’ appeal, and ordered the Director to require an EIA report from Wayfinder. In doing so, the Court clarified several principles underlying the assessment process set out in EPEA.
 

First, the Court referred to the recent Supreme Court of Canada decision in Canada v Vavilov,  2019 SCC 65 (“Vavilov”) for its analysis of the standard upon which decisions of statutory delegates (such as the Director, in this case) must be reviewed. Vavilov confirmed that the presumptive standard of review is now “reasonableness”, which is only rebutted in specific circumstances. A delegate’s decision is unreasonable if based on reasons that are “irrational and illogical… [exhibiting] circular reasoning, false dilemmas, unfounded generalizations or an absurd premise”.[3] In Alexis, all parties agreed that the Director’s decision should be subject to the standard of reasonableness.

Second, the Court examined the assessment-related provisions of EPEA. In order for an EIA to be triggered, the Big Molly project must meet the definition of a “mandatory activity” under the Regulation and the definition of a “quarry” under EPEA. If the undertaking failed to meet one or both of these definitions, Wayfinder would be relieved of the obligation to prepare and submit an EIA.  

Big Molly was expected to produce 500,000 tonnes of silica-sand each year, which greatly exceeded the 45,000 tonne threshold established under the Regulation. It was therefore found to satisfy one requirement, the definition of “mandatory activity”.  

The Court was then tasked with determining whether the project constituted a “quarry” or a “pit”.  The definition of “quarry” involves the removal of any mineral other than a coal or oil sands bearing substance. The definition of “pit” involves the removal of sand, gravel, clay or marl and expressly excludes a quarry (a pit cannot also be a quarry). In undertaking this analysis, the Court revisited the following principles on statutory interpretation: 

• The statute in question, as well as related statutes on the same subject matter, should be read in their entirety. Statutory language cannot be fully appreciated without an understanding of the broader context in which it was written.  
• The reason why the legislature passed the statute should be identified. Determining the aim of the statute – whether to “obviate some mischief, supply an inadequacy, to effect a change of policy, [or] to formulate a plan of government”[4] – will inform its interpretation.  
• Exceptions in statute should be narrowly construed.  Put differently, individuals seeking the benefit of a statutory exception must clearly establish that they come within its terms.  
• The potential permissible meanings of the statutory language, taking into account plain and ordinary language, must also be identified. A permissible meaning is one that a “reasonable reader who uses the language correctly would give to the text at the time of its production… words must not be given meanings they cannot possibly bear”.[5]

Director’s Decision “Irrational and Illogical”

After applying each of the above common law principles, the Court concluded that Big Molly was better characterized as a “quarry” than a “pit”. This determination, in light of the surrounding provisions of EPEA, “trigger[ed] the most rigorous environmental impact assessment process possible”.[6]    

Although the Director did not provide any reasons for her finding that an EIA was not required, the Court characterized the decision as “irrational and illogical”,[7] thereby falling short of the applicable reasonableness standard. The Court held that “[t]he Director could only have come to one rational conclusion” – that an EIA was required – which the Director failed to do. Ultimately, the Court ordered the Director to notify Wayfinder that it was required to submit an EIA report.

Takeaway

EPEA’s assessment process requires the early identification of an activity’s environmental, social and economic effects. In this way, proponents are required to integrate a project’s broader effects into their decision-making early on in the process.  

Significantly, the Alexis decision turned on a question of statutory interpretation that examined the broader environmental regime. This turned out to be a critical issue that arose in the planning phase of the project. Although Wayfinder sought to discharge its due diligence by obtaining advice from the regulator that an EIA was not required, it was vulnerable to the Director not interpreting the legislation correctly. 

The message to proponents is to tread carefully. As seen with other high profile projects in recent years, regulatory decisions on environmental and regulatory assessment processes may be subject to close scrutiny by the courts, and even reversed. While a determination early on that project does not trigger an EIA may be considered good news, it is important that the Director is applying EPEA and its requirements in a reasonable manner; otherwise, the project runs the risk of potential legal challenge.  

If you or your company have questions regarding the above article or any related issue, please do not hesitate to contact Sean Parker in Edmonton, JoAnn P. Jamieson in Calgary or another member of the McLennan Ross Energy, Environmental and Regulatory Practice Group.

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[1] R.S.A. 2000, c. E-12, s. 1(ccc).

[2] Alta. Reg. 111/1993, Sch. 1(b)

[3] Alexis at para 36; Vavilov at para 104.

[4] Alexis at para 44.

[5] Alexis at para 47.

[6] Alexis at para 75.

[7] Alexis at para 21.