Taking Stock of the Grassy Mountain Project: Part 3, June 2025

By: Nigel Bankes

Cases and Decisions Commented On: (1) Northback Holdings Corporation v Alberta Energy Regulator, 2025 ABCA 186 (CanLII), (2) Northback Holdings Corporation v. Canada (Environment and Climate Change), 2025 FCA 31 (CanLII), and (3) AER Decision, Northback Holdings Corporation Applications for Coal Exploration Program (CEP) A10123772, Deep Drilling Permit (DDP) 1948547, and Temporary Diversion Licence (TDL) 00497386 May 15, 2025, 2025 ABAER 006

PDF Version: Taking Stock of the Grassy Mountain Project: Part 3, June 2025

In addition to ABlawg’s coal law and policy series (for the most recent post in that series see here) and our Coal Law and Policy ebook, we have provided occasional posts updating readers on the status of the Grassy Mountain project and litigation related to the project. As the title of the post suggests, this is the third such update following earlier updates in February 2024 and August 2024.

While many of us believe that the Joint Review Panel (JRP) had killed the Grassy Mountain Project in 2021, the proponent, Benga, now known as Northback, continues efforts at judicial resuscitation or resurrection. Readers will recall that Northback, recognizing that the project review was a joint federal and provincial review, has sought to engage both the provincial superior courts and the federal court in its resurrection efforts.

The Alberta Court Proceedings

As recounted in previous posts, Northback’s engagement with the provincial superior courts has two tracks. Track one saw Northback try to appeal the JRP’s decision to the Court of Appeal. That Court denied permission to appeal, and the Supreme Court of Canada declined to hear an appeal of that denial. Track 2 saw Northback try again, this time in the Court of King’s Bench. The first instance judge threw the case out on the application of the Alberta Energy Regulator (the AER, as the provincial part of the JRP) on the basis that the legislature had confined judicial supervision of AER decisions to the Court of Appeal by way of what is known as a privative clause, and thus the Court of King’s Bench has no role to play. In the most recent development, the Court of Appeal, in a majority decision rendered May 27, 2025, confirmed that King’s Bench decision: Northback Holdings Corporation v Alberta Energy Regulator, 2025 ABCA 186 (CanLII). The dissent (Chief Justice Rita Khular) questions whether a privative clause can limit access to ordinary judicial review in the Court of King’s Bench. I won’t use this post to explore this profoundly important constitutional question but interested readers can see Mark Mancini’s initial analysis here. It remains to be seen whether Northback will seek leave to appeal this matter to the Supreme Court of Canada, and, if so, whether that Court will grant leave.

The Federal Court Proceedings

The Federal Court proceedings attacking the federal decision-making in relation to the JRP decision also continue. Recall that the trial judge had granted the separate applications of two First Nations on procedural fairness grounds but had rejected the substantive grounds for review raised by Northback. In the most recent development, the Federal government sought to have Northback’s appeal of its substantive issue set aside on the basis that its application was moot given the federal Minister had been ordered to reconsider their decision on the application of the Nations. The Federal Court of Appeal (Northback Holdings Corporation v. Canada (Environment and Climate Change), 2025 FCA 31 (CanLII)) (Northback Holdings, FCA), ruled that the issue that Northback wished to raise was not moot and that Northback’s issue extended beyond the procedural considerations raised by the Nations:

The Federal Court’s reasons show that it ordered redetermination only on the procedural fairness issue raised by the First Nations, not on the issue of the allegedly defective report. Properly interpreted in its proper context, the judgment of the Federal Court says that the report qualified as a “report” under the Canadian Environmental Assessment Act, 2012 and so the issue of the allegedly defective report will not be part of the redetermination.

There is nothing moot about this issue. It is live and affects Northback’s legal and practical interests: Northback wants the approvals necessary to build its Project. (at paras 19 – 20)

Accordingly, all three appeals will be permitted to proceed – but, as the Court says, without prejudice to the merits of the matter: “Nothing in these reasons should be taken as a comment on the merits of any issues in the appeal. The panel hearing the appeal has an entirely free hand to deal with them.” (Northback Holdings, FCA at para 23)

The AER’s Decision on a New Exploration Program on Grassy Mountain

The final development concerns the AER’s decision (May 15, 2025, hereafter AER, Drilling approval) to approve Northback’s applications to conduct a new exploratory drilling program on the Grassy Mountain property. Northback contended that it needed to conduct this program to improve its understanding of the extent of the Grassy Mountain coal deposit, obtain raw coal samples, and structurally model the coal seam complexities. (AER Drilling Approval at para 7)

I have previously taken the position that the AER should never have accepted Northback’s application on the basis that the Grassy Mountain property was covered by an existing moratorium on any consideration by the AER of new drilling approvals. A project that the JRP had rejected could not be an “advanced project” within the meaning of the moratorium order: The AER Does Not Have the Jurisdiction to Consider New Coal Applications for the Grassy Mountain Coal Deposit. Nevertheless, as noted in previous posts, the AER did accept the applications for filing and set the matter down for a hearing in December of 2024 and the first few months of this year. The issue of whether Northback’s applications related to an “advanced project” became moot in January when Minister Jean lifted the existing moratorium as covered in this earlier post: “Coal Law and Policy Part Nine: Coal Moratoriums, They Come and Go”.

The AER’s decision endorsed Northback’s applications for a coal exploration program (CEP), a deep drilling permit and a temporary water diversion licence (TDL) on the basis that the “applications meet all the regulatory requirements” (AER Drilling Approval at para 2).This was not the sort of application that typically would go to public hearing, rather it would be dealt with by the AER as a desk application. My assumption is that the AER put it down for a public hearing because of the massive public concern with the Grassy project (perhaps better described as public outrage at the fact that the AER had simply accepted the applications in the ordinary course without a fully reasoned assessment as to whether they were admissible.)

Necessary Approvals

It is useful to clarify the regulatory requirements that Northback needed to meet in order to secure the AER’s approval for its proposed activities, some of which are proposed for public lands and some of which are proposed for lands for which Northback has title.

First, a coal exploration program (CEP) carried out on public lands requires an approval under section 20(1) of the Public Lands Act, RSA 2000, c P-40 and in accordance with the Code of Practice for Exploration Operations adopted under the Environmental Protection and Enhancement Act, RSA 2000, c E-12 (EPEA).

Second, a deep drilling permit (DDP) is required under section 10(1)(a) of the Coal Conservation Act, RSA 2000, c C-17 (CCA) and section 2 of the Coal Conservation Rules, for drilling activities to depths deeper than 150 metres, whether on public land or private land. In making any decision under the CCA, section 15 of the Responsible Energy Development Act, SA 2012, c 17.3 (REDA) states the AER must consider factors prescribed by Responsible Energy Development Act General Regulation, Alta Reg 90/2013, specifically “(a) the social and economic effects of the energy resource activity, (b) the effects of the energy resource activity on the environment, and (c) the impacts on a landowner as a result of the use of the land on which the energy resource activity is or will be located.” The purposes clause of the CCA (s 4) also offers guidance to the AER in making decisions under that statute and it seems that these purposes (especially (b), (c) and (g)) largely drove the Panel’s decision-making:

4 The purposes of this Act are

(a) to provide for the appraisal of Alberta’s coal resources;

(b) to provide for appraisals of coal requirements in Alberta and in markets outside Alberta;

(d) to effect conservation, and prevent waste, of the coal resources of Alberta;

(e) to assist the Government to control pollution and ensure environment conservation in the development of the coal resources of Alberta;

(f) to ensure the observance of safe and efficient practices in

(i) the exploration for, and the mining, storing, processing and transporting of, coal, and

(ii) in situ coal gasification and in situ coal liquefaction;

(g) to provide for the recording, and for the timely and useful dissemination, of data and information relating to exploration for coal and to the occurrence, reserves, quality, production, transportation, processing and use of coal in Alberta.

In addition, section 8.1(2) of the CCA requires a positive overall public interest determination before the AER can grant any permit, licence or approval under the CCA.

Third, Northback required a temporary diversion licence (TDL) under section 62 of the Water Act, RSA 2000, c W-3 to withdraw 1500 cubic metres (m3) of water from end-pit lake 2 (i.e. a pit and lake created by previous legacy mining activities) on Northback’s private land (but all water in the province is owned by the Crown) to support the exploration drilling activities.

As is customary, the hearing Panel focused its interrogation of the project on five key issues:

the need for the Exploration Program
impacts on Indigenous peoples
the social and economic effects including impacts on local communities and municipalities Northback,
impacts on landowners, and
the effects of the program on the environment (at para 40).

The AER Panel declined to expand the hearing issues beyond those associated with exploration noting that it was concerned with a project for “23 drill pads (33 boreholes) on a combination of public and private land for a 105-day duration. It is not about the development of future coal mines, the global supply and demand for metallurgical coal, or the impacts of commercial coal mining.” (AER Drilling Approval at para 41) And, as the Panel emphasised later in its decision “If, in the future, Northback decides to proceed with mine applications at Grassy Mountain, it must follow a rigorous regulatory process that all resource development applications must follow” (AER Drilling Approval at para 52) and “Accepting the need for this Exploration Program does not constitute approval of a coal mine.” (AER Drilling Approval at para 53)

Measured against the purposes of the CCA (quoted above), the Panel had little difficulty concluding that Northback had established the need for the program as part of an iterative data gathering exercise to better understand the target deposits. (AER Drilling Approval at para 51) As for environmental considerations, the Panel was at pains to emphasise the temporary and limited nature of the exploration program, noting as well that “this Exploration Program will require no new roads to be constructed” (AER Drilling Approval at para 112) and “will be entirely on previously disturbed land” (AER Drilling Approval at para 113). The Panel also considered that the water use application filed by Northback was minor in nature and involved an isolated water body, and, on the evidence, presented little if any risk of elevated selenium contamination (AER Drilling Approval at paras 134 – 139).

The Panel took a similarly narrow view of reclamation issues noting that “it is only the reclamation work associated with this Exploration Program that we have jurisdiction to address” and not the full suite of reclamation associated with the legacy mine site (AER Drilling Approval at para 151). The Panel also noted that the “AER does not have the authority to collect financial security for coal exploration projects” (emphasis added) (AER Drilling Approval at para 158).

The Panel’s decision concluded with an overall assessment of the public interest. Once again, and by contrast with the JRP’s analysis of a full mine project, the AER had little difficulty including that the scale and duration of the current program was in the public interest and could provide economic benefits to local communities and Nations.

Conclusion

While I still believe that the AER should have never accepted Northback’s applications during the moratorium period, once it had chosen to do so approval was pretty much inevitable given the limited scope of the activity and the resource development (including data gathering) mandate of the CCA. The only real surprise was it chose to waste everybody’s time and resources with its decision to hold a public hearing.

What happens next remains to be seen. Will Northback keep pushing the remaining threads of its judicial resuscitation or resurrection efforts in the Alberta and Federal Court actions? Will it, armed with new drilling results, come back with a new mine application that addresses all of the deficiencies that the JRP Panel identified? If so, any such application may well be under new coal legislation that the Province promised when it launched its Coal Industry Modernization Initiative (CIMI) in December 2024. Last we heard that legislation is scheduled for the fall 2025 sitting. My bet is that under the new legislation cabinet and not the AER will have final decision-making authority for a mine application.

Finally, I’ll take the opportunity of this Grassy Mountain update post to draw attention to another coal-related development. On June 12, 2025 the Blood Tribe (Kainai Nation) filed an application for judicial review in the Court of King’s Bench seeking to quash Minister Jean’s January 15, 2025 decision to lift the moratorium on coal exploration and development on the Eastern Slopes.

This post may be cited as: Nigel Banks, “Taking Stock of the Grassy Mountain Project: Part 3, June 2025” (27 June 2025), online: ABlawg, http://ablawg.ca/wp-content/uploads/2025/06/ Blog_NB_GrassyMountain.pdf

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