The Federal Court of Appeal has quashed federal approval of the pipeline expansion over a failure to consult with First Nations, and also pointed to a failure by the National Energy Board (NEB) to consider the increased tanker traffic the project would generate.
The court combined into one case almost two dozen lawsuits calling for the energy board's review to be overturned. The court also concluded that the federal government failed in its duty to engage in meaningful consultations with First Nations before giving the project the green light.
"This decision reinforces our belief as a nation and as part of the coastal communities in which we live that the Trans Mountain Expansion Project must not proceed and we tell the Prime Minister to start listening and put an end to this type of relationship", Squamish councillor and spokesperson Khelsilem said in a statement.
Regulatory lawyer Bill Gallagher, author of Resource Rulers and the upcoming book Resource Reckoning, said the ruling was a "benchmark" in the rise of what he called "Native empowerment" over natural resources in Canada, after the demise of the abandoned Northern Gateway pipeline through B.C. amidst protests and lawsuits.
"We believe this project is in the national interest, we believe that it's critically important for our economy, critically important to allow us ... to get to global markets", said Morneau.
On the heels of the ruling, Kinder Morgan Canada Ltd. announced construction-related activities were being suspended. He said the pipeline is critically important as Canada looks to diversify its oil exports.
The expansion, which has sparked anti-pipeline protests, pro-pipeline rallies and an Alberta-B.C. standoff in recent months, will almost triple the line's capacity to 890,000 barrels per day.
When asked if the pipeline project is dead, he said it will no longer be "top of mind for British Columbians".
Kinder Morgan shareholders are to vote later today on whether to approve the sale to Canada.
According to the ruling, the shortcut, or "critical error" made by the NEB, was to define the scope of the project as only the pipeline and the marine terminal for the purposes of its environmental assessment. Morneau defended the purchase, describing it as a "sound investment", given that any private sector company would have found it hard to bear the risks involved with the project.
The court ruling will halt construction of the 1,150km project, spearheaded by Texas-based Kinder Morgan, until the energy regulator and government can show they have complied with the court's demands - a process that could take years.
The decision was a major victory for Canadian First Nations, environmental groups and US tribes that opposed the pipeline expansion. "The federal government now owns a multi-billion dollar pipeline it can't get built".
The B.C. government acted as an intervener in the case and also filed a separate reference case to the B.C. Court of Appeal to determine if it has the right to restrict bitumen shipments from Alberta.
While the project could allow Alberta to get its bitumen to markets in Asia and reduce its reliance on the United States market, there has been opposition over the potential for oil spills and the impact that a dramatic rise in tanker traffic could have on the region's southern resident killer whales, a population already on the knife edge of extinction.
Canada's National Energy Board board recommended approval of the project, even as it acknowledged it would set back recovery of southern resident killer whales, a protected species in Canada. It would also increase the number of tankers in Burrard Inlet sevenfold.
That allowed it to claim there were no "significant adverse environmental effects", a conclusion that was central to its report.
"The court has sent a clear signal that the rule of law will not accommodate environmental decision-making that fails to address these environmental risks", he said.
For example, the Coldwater Indian Band in south-central B.C. raised concerns about the pipeline route passing through an aquifer that is the sole supply of drinking water for its main reserve. The city of Burnaby unsuccessfully pushed the Supreme Court to stop the project.