The Ontario government does not need Ottawa's permission to allow forestry and mining activity under an 1873 treaty that ceded large swaths of Ontario and Manitoba to the federal government, the high court said in a unanimous 7-0 ruling.
"I agree with the Ontario Court of Appeal that Ontario, and only Ontario, has the power to take up lands under Treaty 3," Chief Justice Beverley McLachlin wrote in the decision.
The ruling, a blow to northern Ontario's Grassy Narrows First Nation, follows a historic Supreme Court judgment in British Columbia that changed the way governments must deal with First Nations over land where aboriginal title is claimed.
Grassy Narrows is different from the Tsilhqot'in decision because it involves treaty land, not aboriginal title. But experts say the two decisions, taken together, help clarify what's necessary for natural resource projects to proceed on aboriginal land.
"If you don't have the support of the aboriginal group, then the Crown is going to have a slightly different standard to meet in each case, depending on where the project is," said lawyer Keith Bergner of Vancouver firm Lawson Lundell LLP.
"If it's on aboriginal title land, it's going to be a very high standard. If it's on land where title has been asserted but not yet proven, it's going to be a consultation and accommodation standard.
"If it's on land that has been surrendered pursuant to a historic treaty, there's again a consultation and accommodation requirement, albeit arguably on a lower standard."
Dominique Nouvet, who specializes in aboriginal law at the Victoria firm Woodward & Company, said in both the Grassy Narrows and Tsilhqot'in decisions, the Supreme Court rejected arguments that would have subjected provincial government decision-making to federal supervision.
But she called it shocking that the federal government that signed the numbered treaties with aboriginals is not considered responsible for honouring those promises.
"That's the message this decision sends: if the provinces own the land, it's their job to manage the treaty rights," Nouvet said.
"And the provinces are not currently doing that, especially Alberta."
Indeed, provinces have been trampling aboriginal treaty rights, she said.
"The provinces have been seriously encroaching on treaty harvesting rights of many First Nations, to the point of extinguishment or near-extinguishment. There are many traditional aboriginal cultures, especially in Alberta, that are on the brink of survival."
Grassy Narrows appealed after Ontario's highest court ruled in March 2013 that the province has the right to take up treaty land for forestry and mining.
Only Ottawa has the power to take up the land, argued the First Nation, because treaty promises were made with the federal Crown.
The Supreme Court rejected that argument.
Grassy Narrows Chief Roger Fobister said the fight to protect the First Nation's people and land will continue.
"While we hoped the Supreme Court of Canada would respect our treaty, we are determined to see Treaty 3 respected," he said in a statement.
"We expect the government of Ontario and Canada to learn from the last ten years and come to the table ready to deal with the real needs of our people which requires ensuring a sustainable future both environmentally and economically."
Bill Mauro, Ontario's minister of natural resources and forestry, said the decision provides a welcome and long-overdue degree of clarity.
"We are hopeful that this decision will provide an opportunity for all parties to focus on the best approaches moving forward," Mauro said in a statement.
"Ontario respects aboriginal and treaty rights and remains committed to developing positive relationships with First Nations, including Grassy Narrows and others in the Treaty 3 area."
Grassy Narrows is a tiny community from northwestern Ontario that has spent more than a decade in court fighting the province's decision to issue a licence for clearcut operations in parts of the Keewatin portion of Treaty 3 territory.
The First Nation says scientific studies indicate that clearcut logging in boreal watersheds raises mercury levels in fish above the Health Canada limit for safe human consumption.
It says recent clearcut logging in Grassy Narrows territory has exacerbated the impact of mercury poisoning that began when a paper mill upstream in Dryden, Ont., dumped mercury between 1962 and 1970.
— With files from Maria Babbage in Toronto
Follow @steve_rennie on Twitter
Also on HuffPost