A Federal Court of Appeal decision has overturned Canada’s approval of the Trans Mountain Pipeline Expansion. The decision means Trudeau’s government has to further consult with First Nations, and the Governor in Council must refer the National Energy Board’s recommendations back to the board for reconsideration.

In the court’s decision, Judge Eleanor Dawson wrote that Canada acted in good faith, but in the last phase of its consultations, Phase III, its efforts “fell well short of the mark set by the Supreme Court of Canada.

“Canada failed in Phase III to engage, dialogue meaningfully and grapple with the real concerns of the Indigenous applicants so as to explore possible accommodation of those concerns. The duty to consult was not adequately discharged,” Dawson wrote.

She also wrote that the National Energy Board made a “critical error”: it “unjustifiably” excluded marine tanker traffic from its review.

“As a result, the Governor in Council could not rely on the Board’s report and recommendations when assessing the project’s environmental effects and the overall public interest.”

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Lee Spahan, chief of the Coldwater Indian Band, one of the six First Nations to challenge the project in court, called the decision "a major victory." The First Nation had argued the government had failed to assess the expansion's impact on an aquifer that provides drinking water to 90 percent of the community.

"Until now our rights and our water have been disregarded by Kinder Morgan and the Government of Canada,” Spahan said. “Thankfully, the court has stepped in where Canada has failed to protect and respect our rights and our water. Our members will be hugely relieved.”

This is a huge turning point for the hotly contested project that would expand an existing pipeline and triple the amount of oil transported from Alberta to the west coast. Earlier this year, Canada announced it would buy Trans Mountain from Kinder Morgan, but the company's shareholders still had to vote to finalize the sale. Only 30 minutes after the court decision was released, shareholders voted 99 percent in favour of closing the deal.

Following the decision, Trans Mountain said it was suspending construction on the project. "The court decision was not a condition of the transaction between KML and the federal government," said Ian Anderson, president of Kinder Morgan Canada.

The project’s construction costs are estimated at $6.3 billion, with $1.1 billion already spent; and a recent report from Kinder Morgan warned these costs could increase by another $1.9 billion. Kinder Morgan has said the Canadian government buying the pipeline represents the best opportunity for the project to be completed. So far the Canadian government has not succeeded in finding any buyers.

What did First Nations argue in court?

Canada has a constitutional duty to consult and accommodate each First Nation along the route, but six First Nations argued the pipeline expansion threatened their drinking water, fishing rights and sacred sites, and that Canada had not learned from the inadequate consultations that led to the cancellation of the Northern Gateway pipeline. Instead, they said the government approached consultations with its mind made up about the approval of the Trans Mountain Expansion.

The First Nations also argued the National Energy Board’s report on the project was flawed and had breached the principles of procedural fairness, and that the NEB and cabinet failed to comply with the Canadian Environmental Assessment Act 2012.

Heard in October 2017, the case turned on three main factors: 1) Did the federal cabinet meet its duties to First Nations on consultations when making its decision? 2) Did cabinet follow its own laws? 3) Did the National Energy Board in its review follow its own laws and rules of procedural fairness?

The six First Nations — Tsleil-Waututh, Aitchelitz (of the Sto:lo Nation), Upper Nicola Band, Squamish Nation, Coldwater Indian Band and Chief Ron Ignace of Stk’emlupsemc Te Secwepemc Nation — argued government consultations were inadequate, and cabinet was merely checking a box in the process of approving a pipeline. They also argued there were legitimate legal errors that weren’t corrected by cabinet.

The federal government, on the other hand, argued its consultations were stellar, and it had tacked on additional consultations to ensure it was meeting its duty.

In this case, if the court sided with any one of the First Nations on the consultation question, it would undermine the project’s legal basis. So it’s worth considering what each First Nation argued in court.

Tsleil-Waututh argued Canada’s consultations were as shallow as its consultations with Gitxaala, which overturned the Northern Gateway pipeline project in 2016. Tsleil-Waututh said while consultations were still happening, the Canadian government was in the process of making a website to announce the pipeline’s approval, and hadn’t made a website to announce the opposite — calling into question whether it had already made its mind up. Tsleil-Waututh also said marine shipping was excluded from the NEB review, though it was supposed to be examined under the Canadian Environmental Assessment Act.

Aitchelitz First Nation, or the Sto:lo Nation, argued the government hadn’t consulted them on how the pipeline would affect their ceremonial fishing rights. Upper Nicola Band contended the pipeline represented a threat to the environment and humans, and it threatens Aboriginal rights and title. The Squamish Nation said Canada hadn’t learned from the Northern Gateway decision; Canada’s consultation team did not engage in a two-way consultation with them; instead the government sent low level note-takers to pass their concerns along to cabinet. Coldwater Indian Band told the court the expansion threatened an aquifer that was its only source of drinking water, and that the government never assessed the project’s potential to contaminate their water. Chief Ron Ignace of Stk’emlupsemc Te Secwepemc Nation said consultation was inadequate, and that the pipeline route would disrupt sacred sites and sensitive ecosystems.

Kinder Morgan warned of risks

The Tsleil-Waututh case represented a major legal threat to the pipeline’s future. Experts had pointed out that the lack of treaties in BC and previous court rulings bolstered the First Nations case against the pipeline. Even Kinder Morgan, the company that proposed the expansion, acknowledged these legal risks in its May 25 2017 prospectus, stating the project still faced “significant risks”:

“In the event an applicant is successful at the Federal Court of Appeal, among other things, the NEB recommendation of Governor in Council’s approval may be quashed, permits may be revoked, the Trans Mountain Expansion Project may be subject to additional significant regulatory reviews, there may be significant changes to the Trans Mountain Expansion Project plans, further obligations or restrictions may be imposed or the Trans Mountain Expansion Project may be stopped altogether,” the company disclosed.

“In the event that an applicant is unsuccessful at the Supreme Court of British Columbia, they may further seek to appeal the decision 29 to the British Columbia Court of Appeal,” Kinder Morgan’s disclosure continued. “Any decision of the British Columbia Court of Appeal may be appealed to the Supreme Court of Canada. A successful appeal at either of these levels could result in the same types of consequences described above.”

At a press conference Thursday afternoon, finance minister Bill Morneau said the government plans to close acquisition of the project tomorrow.

Morneau said the expansion is “critically important for our economy” and the government is “absolutely committed to moving forward on the project.”

The government is reviewing the court decision carefully, but Morneau wouldn’t say if it would appeal. Asked by a reporter how much costs could increase following the court decision, he said the government would need to do further analysis.

As for the government’s weak review process, Morneau blamed the Harper government: “Our government inherited a flawed environmental review process, and we made efforts to improve it.”

Morneau said the project faced “risks between provinces that were difficult for a private sector actor to deal with,” and that Canada’s role was to step in and “de-risk it.”

Are there any more legal threats to the pipeline?

While this case represented the biggest legal threat to the expansion project, it may still have to tangle with other cases.

On August 23, the Supreme Court of Canada rejected an application by the City of Burnaby for the court to hear its case against the Trans Mountain Expansion; the NEB had ruled that the pipeline could ignore local laws.

There are two more legal threats to the expansion project. The State of Washington has mounted a legal challenge with Indigenous groups in that state over the pipeline’s impact on orca whales. And of course, there’s been a significant amount of media attention toward the BC government’s reference case on bitumen, which won’t be heard until spring.

Earlier this month, the City of Burnaby arrested 11 protesters at Camp Cloud, outside a Kinder Morgan facility. The city has dismantled the protest camp, while a nearby watch house built by Tsleil-Waututh Nation remains standing.