Executive summary: key legal and evidentiary issues

• The Environmental Appeals Board unreasonably disregarded uncontradicted evidence that wetlands subject to the Approval fell within designated critical habitat for the bank swallow, a threatened species under the Species at Risk Act.

• Misinterpretation and misapplication of the precautionary principle undermined the Board's reasoning, including an unfounded assumption that development is "necessary and desirable."

• An internally incoherent decision on onus and burden of proof rendered the Board's analytical framework unreasonable, as the Board inconsistently shifted the burden between parties without justification rooted in the statutory scheme.

• Requiring "conclusive evidence" from the Applicants imposed an incorrect and unjustifiably high standard of proof not supported by the EPEA or Canadian law.

• Undocumented private conversations between the Board's general counsel and the Badlands representative gave rise to a reasonable apprehension of bias in this particular case.

• Procedural fairness was breached when the Board preferred Badlands' site-specific evidence while knowing the Applicants had been denied access to the site to gather comparable data.

The parties and the proposed development

Badlands Recreation Development Corp. owns approximately 508 acres adjacent to the Rosebud River near Rosebud, Alberta, and intends to develop an automotive racetrack along with a full-service recreational resort and residential community. The Applicants — Rick Skibsted, Linda Skibsted, Richard Clark, Wendy Clark, Half-Diamond HC Limited, Jonathan Groves, Derek McMillan, and Spruce Coulee Farms Ltd. — are individuals and corporations that either work or own land adjacent to or in the vicinity of the land owned by Badlands. In 2017 and 2018, Badlands filed applications under section 36 of the Water Act, RSA 2000, c W-3, for approval to conduct certain activities in the Rosebud River Valley for the purpose of constructing a racetrack. The Designated Director under the Water Act granted the Approval on January 8, 2020 (Approval No. 00406489-00-00), authorizing Badlands to place fill in two wetlands (Wetlands 2 and 3), modify three wetlands (Wetlands 1, 4, and 5), and construct, operate and carry out maintenance of a stormwater management system.

The appeal to the Environmental Appeals Board

The Applicants appealed the Approval to the Board on January 20, 2020, under s 115(1)(a) of the Water Act and s 91(1)(p) of the Environmental Protection and Enhancement Act, RSA 2000, c E-12, seeking to have the Approval reversed in its entirety or, in the alternative, varied. The appeal proceedings before the Environmental Appeals Board were extensive — the longest in the Board's history — spanning preliminary written motions from February 2020 through October 2022, a site visit on September 2, 2022, and a virtual public hearing over seven and a half days: November 2–4 and 7, 2022, and January 30–February 2, 2023. Each party tendered evidence from witnesses and conducted cross-examination. Closing written arguments were submitted between February 28 and March 30, 2023, and the appeal hearing closed on September 8, 2023. The Certified Record of Proceedings exceeded 34,000 pages. On March 28, 2024, the Board issued a 773-paragraph report concluding that the Appellants had not provided sufficient evidence to demonstrate the Approval should be reversed, and recommended that the Minister vary the Approval and permit the proposed activities to proceed under different terms and conditions. On April 8, 2024, the Minister issued a one-line decision varying the Approval as recommended by the Board.

The bank swallow and critical habitat

A central issue was the Board's failure to engage with evidence regarding the bank swallow, a species listed as "threatened" under the federal Species at Risk Act, SC 2002, c 29. In November 2017, about three years before the Approval was granted, the bank swallow was officially listed as a threatened species under SARA. By April 7, 2022 — about six months before the Board's appeal hearing — a final Recovery Strategy for the bank swallow was published on the SARA public registry. The Recovery Strategy identified critical habitat along the Rosebud River, including 55 km of shoreline on non-federal land, and defined critical habitat as a 500-m radial distance around shorelines of waterbodies where nesting colonies occur. The Applicants filed expert evidence (the 2022 Wallis Report) demonstrating that approximately three-quarters of Badlands' property, including Wetlands 1, 2, 4 and 5 (referred to in the Reasons as the "Valley Wetlands"), fell within the area deemed critical habitat in the Recovery Strategy. The 2022 Wallis Report concluded that the Approval would destroy habitat designated critical habitat in the Recovery Strategy. This evidence was uncontradicted; Badlands did not file any evidence to contradict the conclusion in the 2022 Wallis Report. The Applicants also submitted evidence of visual observations, including video evidence, of existing bank swallow colonies directly adjacent to the proposed racetrack and bank swallows foraging over the Valley Wetlands. Nevertheless, the Board concluded there was "insufficient evidence of potential harm to the bank swallows arising from those changes" and treated SARA as having only "limited application," using it merely as a "reference to identify species that should be considered." The Court found this reasoning unintelligible and held that the Board unreasonably disregarded relevant evidence on a key issue the Board itself had identified for determination.

The precautionary principle

The Board also misstated the precautionary principle, asserting without authority that "[u]nderlying the precautionary principle seems to be an assumption that development is necessary and desirable" and that the principle requires "balancing the interests of development with protection of the environment." The Court agreed with the Applicants that the Board offered no justification for these propositions and that the jurisprudence on the precautionary principle neither assumes that development is necessary and desirable nor requires such balancing. The Board further contradicted the very principle it cited — that lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation — by requiring "conclusive evidence" from the Applicants that the Valley Wetlands are the "only feeding ground for the bank swallows" and "conclusive evidence" that golden eagles "feed only on ducks in the Badlands Wetlands." The Court found this reasoning could not be reconciled with the precautionary principle the Board itself had recited.

Fettering of discretion

The Applicants argued the Board fettered its discretion by refusing to consider the economic viability of the Badlands project and the ultimate undertaking for which the Approval was sought — a racetrack. Before the Board, the Applicants had submitted two expert reports authored by BDO Canada LLP opining that the racetrack was not economically viable and would not generate market returns. The Court rejected this ground, finding that the Water Act and the EPEA limit the Board's authority to consider only the effects flowing from what the Approval authorizes. The Approval does not authorize construction and operation of a racetrack; it authorizes Badlands to fill in two wetlands, modify three wetlands, and construct, operate and carry out maintenance of a stormwater management system. The Court agreed with the Board's conclusion that the economic viability of the racetrack and the effects of the racetrack's construction and operation were not "applicable to the approval" within the meaning of section 38(2)(c)(ii) of the Water Act.

Onus and standard of proof

The Board's decision to place the onus on the Applicants "to provide sufficient evidence and argument to demonstrate to the Board that the Director's approval should be reversed or varied" was found unreasonable. The Court noted the Board's reasoning was internally incoherent: it sometimes treated the hearing as a true de novo proceeding — for example, finding at paragraph 207 that any bias by the Director would be "cured by the de novo hearing process" and at paragraph 567 placing the onus on Badlands to demonstrate that its application met the Alberta Wetland Policy requirements — yet simultaneously reviewed the Director's decision on the correctness standard with the onus on the Applicants to justify a reversal or variance. The Board did not explain why the onus shifted to Badlands on one particular issue but not on others, including flow changes, wetland classification, bank swallow feeding grounds, impact to golden eagles, and presence of northern leopard frogs. The Board's reliance on its prior decisions in Fenske (2006 ABEAB 12) and Visscher (2011 ABEAB 23) was found unjustified, as those decisions cited no supporting authority for the proposition. The Court further found that Imperial Oil Limited v Alberta (Minister of Environment), 2003 ABQB 388, was distinguishable and not determinative, as it was decided on the narrow question of whether imposing the onus on the recipient of an Environmental Protection Order was a breach of natural justice — a different factual context from an appeal by "directly affected" persons. Additionally, the Board's requirement of "conclusive evidence" was held to be an unreasonable standard of proof not supported by the EPEA or Canadian law, and the Board's suggestion that "the standard of proof required to support a recommendation to reverse may be lower than that for a recommendation to reverse" was similarly unreasonable, as the standard of proof does not change depending on the remedy sought.

Bias findings

While the Court declined to find institutional bias — holding that decision-outcome statistics, the briefing note regarding Board member re-appointments, and other factors were individually and collectively insufficient to establish systemic structural bias — it did find a reasonable apprehension of bias in this particular case. The most significant factor was the disclosure, on January 7, 2025, that the Board's general counsel had "numerous telephone conversations" with Mr. Zelazo, the Badlands representative, during the course of the appeal without notifying the Applicants. No record of these conversations was made. The Court rejected the argument that these communications were merely procedural, noting that the distinction between procedural and substantive is "often illusory" and that there was insufficient evidence to conclude the conversations were limited to procedure, as the general counsel only referenced his "general practice at the time." The absence of records left open the possibility — and the appearance — that the lawyer who was advising the Board on substantive matters was providing legal advice to Mr. Zelazo. The Court noted that the briefing note or general counsel's media statements alone did not give rise to a reasonable apprehension of bias, but observed that the conduct of the general counsel in making media comments may have been "ill-advised." Looking at the entire context, the role and function of the Board, the requirements of natural justice and institutional constraints, the Court concluded that a reasonable, well-informed person would conclude that the Board did not decide this appeal fairly.

Procedural fairness

The Court found a breach of procedural fairness arising from the Board's preference of evidence submitted by Badlands over evidence submitted by the Applicants on the basis that Badlands had access to site-specific data and the Applicants did not. Several times between 2020 and 2022, the Applicants had requested access to the site so that their expert could respond to the Wetland Assessment and Impact Report written by Ms. Ferguson, a professional biologist retained by Badlands. Mr. Zelazo declined these requests, and the Board stated it could not order that Badlands give the Applicants access to the site. The Board also conducted a site visit in September 2022 that the Applicants were not permitted to attend. Despite knowing that the Applicants had been denied site access, the Board concluded that the Applicants had "provided no site-specific data" to support their assertions. The Court held it was procedurally unfair for the Board to place an onus on "directly affected" parties to produce site-specific evidence for a site on which they had been denied access. Other procedural complaints — regarding the Director's standing as a party, hearing time allocation, long sitting hours, and undisclosed supplementary reports to the Minister — were either dismissed or found to be technical breaches not independently warranting a remedy.

The ruling and outcome

The Honourable Justice M.R. Gaston of the Court of King's Bench of Alberta granted the application for judicial review, quashed the Decision, and remitted the matter back to the Board for a rehearing. The Applicants — Rick Skibsted, Linda Skibsted, Richard Clark, Wendy Clark, Half-Diamond HC Limited, Jonathan Groves, Derek McMillan, and Spruce Coulee Farms Ltd. — were the successful parties and were awarded costs, with submissions on quantum to be made within 30 days if the parties could not agree, such argument not to exceed 5 pages. No specific monetary amount was ordered or awarded beyond the entitlement to costs, as the nature of the relief was the quashing and remittal of the administrative decision rather than a damages award. The Notice of Constitutional Question filed by the Applicants regarding whether section 58 of SARA is paramount over section 36 of the Water Act was not decided, as the Court found it unnecessary to resolve the judicial review application.