In a written decision, the court indicated that the National Energy Board's review of the expansion project was "so flawed" that the Trudeau Government couldn't rely on it as the basis for its approval of the project back in 2016.
In order for infrastructure company Kinder Morgan to resume construction, the court said the energy regulator and the government must comply with its orders, which could take years. The courts ruled the government rolled over environmental considerations by overlooking the potential consequences of increased tanker traffic on the British Columbia coast once Trans Mountain is completed.
Executive Director of the Georgia Strait Alliance Christianne Wilhelmson says the Trudeau Liberals have been shamed.
The Minister of Finance Bill Morneau said that the government has received the ruling and will review the decision. "They've committed billions of dollars in taxpayers' funds doubling down on a project that the courts have just quashed".
A Canadian court has overturned Ottawa's approval of a hotly-contested pipeline project - throwing plans to almost triple the flow of Alberta's landlocked bitumen to the west coast into limbo - in a ruling hailed by environmentalists and Indigenous groups.
"Today's decision is a major win for Indigenous Nations and for the environment", said Greenpeace USA tar sands campaigner Rachel Rye Butler.
The court's ruling doesn't substantially change legal precedent - which has continued to evolve since court rulings in the early 2000s delivered enhanced recognition of the Crown's constitutional obligation to consult, and in some cases, accommodate Indigenous communities - but adds clarity to the threshold required to genuinely understand the concerns of the Indigenous applicants, said David Wright, who teaches resource and Indigenous law at the University of Calgary.
"Four or five hundred tanker crossings a year will not happen, the risk of a diluted bitumen spill will not increase, it's significant to the orcas, it does not solve all the other problems", says Wilhelmson.
It also ruled Ottawa had failed to meaningfully consult First Nations before approving the project.
The court combined into one case almost two dozen lawsuits calling for the energy board's review to be overturned.
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The court's decision was announced minutes before Kinder Morgan shareholders voted to approve the sale of the pipeline to the Canadian government.
This is the outcome of the unholy alliance between the federal government and corporations taking shortcuts through consultation.
The scheme had been a crucial test for Trudeau and his government, who swept into office in 2015 on promises of striking a balance between economic growth, environmental concerns and repairing the country's fraught relationship with Indigenous peoples.
"Of course we're very happy with the decision", Burnaby Mayor Derek Corrigan said, adding that the ruling is "one that I think reflects numerous issues that we have raised throughout the hearings".
"Today is a really sad day for Canada and our ability to move major projects in the Canadian national interest forward", said Laila Goodridge, UCP MLA for Fort McMurray-Conklin.
January 17, 2018: Kinder Morgan Canada warns the Trans Mountain expansion project could be a year behind schedule. "It is time for Prime Minister Trudeau to do the right thing", the band said in a statement.
August 10, 2017: The B.C. NDP government hires former judge Thomas Berger to provide legal advice as it seeks intervener status in the legal challenges against the project filed by municipalities and First Nations.
"If the Federal Court strikes down the permit authorizing the pipeline because of inadequate consultation, or for another reason, then I don't see how the pipeline project can proceed - unless or until the Supreme Court reversed that decision", he said.
McKay Métis president Ron Quintal said the big lesson from the ruling is that a factor has been identified in "a flawed system that has failed the Indigenous people of this country".
Several Indigenous groups and environmentalists applauded the ruling, which emerged from a legal challenge backed by more than a dozen groups, including the city of Vancouver, several First Nations and environmental organisations.