Drilling down on deference: The Federal Court of Appeal upholds approval for Bay du Nord offshore drilling project

The Federal Court of Appeal has dismissed challenges to the federal approval of Equinor Canada Ltd.’s Bay du Nord Development Project. The decision in Sierra Club Canada Foundation v. Canada (Environment and Climate Change), 2026 FCA 110, reaffirms key principles of administrative law and the duty to consult Indigenous Peoples, providing important guidance on the scope of challenges to environmental assessments and the adequacy of consultation on major resource projects in Canada.

What you need to know

• Bay du Nord Development Project may proceed. The Federal Court of Appeal dismissed a challenge to the approval of this offshore oil and gas project. The Court concluded that the Ministerial approval was reasonable and that the duty to consult potentially affected Indigenous groups was met.
• Court reaffirms key principles applying to project challenges. The Court applied a deferential standard of review to the Minister’s approval decision, focusing on the extensive mitigations as evidence that the decision was reasonable. The Minister also met the duty to consult, which was at the low end of the spectrum in this case, through a robust consultation process and by imposing responsive accommodations.
• Importance of offshore location. One reason that the approvals were upheld was the location of the project—500 kilometres off the coast of Canada. Parliament has no territorial jurisdiction over these waters, and the location of the project made it “impossible” to assess marine shipping.
• Delay in raising concerns can influence assessment of reasonableness. The Court explained that delays in raising issues during an environmental assessment might affect the Court’s assessment of reasonableness. Late or fleeting assertions of concerns may undermine subsequent legal challenges, even if they relate to the Crown’s duty to consult with Indigenous groups.

The Bay du Nord Development Project

The Bay du Nord Development Project, of which Equinor Canada Ltd. holds a 65% interest, is an offshore oil and gas initiative located in the Atlantic Ocean approximately 500 kilometres east of St. John's, Newfoundland. The project requires substantial infrastructure, including subsea installations, a floating storage and offloading structure, drilling installations, and supporting vessels, helicopters, and tankers. Once operational, the project is expected to supply 300 million barrels of crude oil over a 30-year period.

The project is located 640 to 2000 kilometres from the traditional and treaty territories of the Mi’gmag of New Brunswick, represented through Mi’gmawe’l Tplu’taqnn Inc. (MTI).

The decision at issue

The Impact Assessment Agency of Canada (Agency) conducted an environmental assessment of the Project under the Canadian Environmental Assessment Act, 2012 (CEAA, 2012), the predecessor to the Impact Assessment Act. In addition, the Agency served as the Crown consultation coordinator in discharging the Crown’s constitutional duty to consult with MTI. After thoroughly studying the Project, the Agency prepared an environmental assessment report that reviewed and assessed its environmental impacts. It also set out the results of its consultation process, and “in practical terms, approved the Project subject to conditions”¹.

Under CEAA 2012, the Minister of Environment and Climate Change (Minister) then considered the Agency’s report and decided that the project is not likely to cause significant adverse environmental effects. Guided by the Agency’s recommendations, the Minister also imposed extensive mitigation conditions on the project. Finally, the Minister determined that the consultation process was consistent with the honour of the Crown and appropriately accommodated the concerns and interests of Indigenous groups.

The judicial review

The Sierra Club Canada Foundation (an environmental group) and MTI brought a judicial review challenging the Minister's decision on two main grounds. First, they argued that the Minister's decision was unreasonable because the report was fundamentally deficient: it failed to consider marine shipping from the Project and did not assess the environmental effects of downstream greenhouse gas emissions from the extracted oil. Since the Minister’s decision was based on that report, it was unreasonable. Second, MTI argued that the Crown failed to adequately consult and accommodate its interests. The Federal Court rejected both grounds and dismissed the judicial review.

The Federal Court of Appeal upheld the Minister’s decision

The Federal Court of Appeal dismissed the appeal. In doing so, it affirmed key principles of administrative law.

The decision at issue is the Minister’s decision—not the Agency’s report. While the appellants were critical of the Agency’s report, those arguments were of limited force. The report could only render the Minister’s decision unreasonable if the report was so deficient that it was unreasonable to consider it a “report” under CEAA 2012. That was not the case here.

The FCA upheld the Minister’s decision on environmental effects. The Court concluded that the Minister’s decision concerning environmental effects was reasonable. On the issue of downstream greenhouse gas emissions, the Court held that CEAA 2012 does not require the Minister to consider “larger, general issues such as climate change”. Notably, the Court distinguished the Impact Assessment Act, which includes a preamble addressing climate change, from CEEA 2012. The Court also held that the Minister’s consideration of marine transshipment was reasonable: (1) the issue was considered to some extent; and (2) the project was located in international waters, beyond the legislative authority of Parliament, and the Agency did assess the environmental effects of marine shipping to the extent that it could.

The FCA upheld the Minister’s decision on Indigenous consultation. The Court also upheld the Minister’s decision that consultation was adequate, confirming that while “[t]he Indigenous right to be consulted and to have its interests meaningfully accommodated in certain circumstances is enormously important… Indigenous groups do not have a right to veto a project”². The Court considered the following factors:

• First, the Court agreed with the Minister’s conclusion that the Crown had a duty to consult MTI, but that the duty was at the low end of the spectrum for several reasons: MTI had no treaty rights in the Project area; the Project was located 640 to 2,000 kilometres from the Mi’gmag of New Brunswick’s traditional territory and communities; and the predicted impact to Atlantic salmon, and thus to MTI's fishing rights, was minimal. The Court held that the Minister was right to ignore "mere speculative impacts" from the analysis.
• Second, despite the duty falling at the low end, the Agency conducted a process that resembled deeper consultation. The Agency provided MTI with four comment periods to raise concerns and funding to make submissions. It held information and engagement sessions with MTI and Equinor to discuss the Project and its impacts. The Agency considered a 2018 Indigenous Knowledge Study and a technical review provided by MTI, putting this information to Equinor and requiring responses. Most importantly, the Agency recommended extensive accommodation measures, which the Minister incorporated as binding Project conditions, including continued incorporation of Indigenous knowledge in follow-up and monitoring plans, ongoing research on Atlantic salmon, continued engagement with Indigenous groups, annual public reporting, and monitoring and spill response programs requiring Indigenous engagement.

Delay in raising issues during the regulatory process can influence assessment of reasonableness. The Court also made important observations about the appellants’ delays in raising their concerns. The environmental issues raised in the judicial review—marine transshipment and downstream greenhouse gas emissions—were raised late in the environmental assessment process. While these delays did not prevent the appellants from pursuing these issues on judicial review, the Court cautioned that “failure to raise issues in a timely way should not be allowed. Otherwise, projects would be endlessly delayed by concerns asserted later in the process than they should be”.

Implications

The Federal Court of Appeal’s decision is an affirmation of the key principles applicable to judicial reviews of environmental approvals:

• Courts should generally focus on the approval decision, not the underlying report.
• Courts should review project approval decisions on a deferential reasonableness standard, and likely defer to factually suffused determinations of impacts and appropriate mitigation.
• When the duty to consult is triggered, and the question of whether the Crown discharged its duty is raised on judicial review, the Court first determines the depth of consultation that was owed in the specific context. The Court then analyzes on a deferential standard whether the consultation that was undertaken was sufficient to meet those requirements. Here, the Crown was found to have exceeded what was required, because it conducted a process that resembled deeper consultation, even though the duty to consult owed fell at the low end of the spectrum.
• Late or fleeting assertions of concerns during an environmental assessment process may undermine subsequent legal challenges, even if they relate to the Crown’s obligation to consult with Indigenous groups.