On October 13, 2023, the Supreme Court of Canada released its highly-anticipated judgment on constitutional challenges to the federal Impact Assessment Act (IAA) raised by the Province of Alberta. In a 5-2 split decision, a majority of the Court concluded that, while the federal government is permitted to create a federal impact assessment regime, the current "designated projects" scheme created by the IAA is beyond the legislative authority of the federal government and therefore unconstitutional. A small portion of the IAA concerning projects carried or financed by federal authorities was not challenged by Alberta and was upheld by the Court as being within Parliament's legislative authority. The decision follows a May 2022 ruling by the Alberta Court of Appeal which also held that the IAA was beyond Parliament's legislative authority.

The Decision

The structure of the IAA is outlined in some of our previous articles (here and here). Briefly, the IAA prohibits proponents and federal authorities from doing anything in connection with a "designated project" without first completing the impact assessment process or being screened out of that process. As the Court describes, there are four key components to the scheme of the IAA:

1. Project Designation – projects are "designated" and brought within the scope of the IAA either through regulations or by ministerial order.
2. Project Screening – each designated project is screened by the Impact Assessment Agency of Canada (Agency) to determine whether the project must undergo an impact assessment.
3. Information Gathering and Assessment – designated projects not screened out by the Agency are subject to a comprehensive impact assessment.
4. Final Decision-making – the federal Minister of Environment and Climate Change or federal Cabinet makes a determination on whether to approve the project in question.

The majority opinion concluded that the scheme under the IAA suffered from two related defects which principally affect the screening and final decisions made under that Act (items 2 and 4, above). At the same time, the majority concluded that the designation mechanism and assessment process (items 1 and 3) were constitutionally unproblematic.

Alberta raised concerns that the designation mechanism (item 1) was overbroad because it did not distinguish between federal and local projects, resulting in several physical activities with "no obvious ties to federal jurisdiction" being designated. The majority opinion explained that it was permissible for the designation mechanism to cast a "wide net" to cover projects (even local ones) with a potential to affect areas of federal jurisdiction.

Similarly, the majority concluded that the information gathering and assessment phase (item 3) was not overbroad, despite Alberta's objections that the factors considered at that stage go significantly beyond matters with a clear connection to federal jurisdiction. The majority opinion distinguished between assessment and decision-making, explaining that although the federal government is constrained to legislating over environmental activities within its areas of jurisdiction, it is not similarly limited in its information gathering. The federal government can gather information on and assess effects of a project that are not federal in nature.

The majority noted that, when making a screening decision about whether a project must complete the full impact assessment process (item 2), the Agency is required to take into account an open-ended list of factors. As a result, a designated project could be required to undergo an impact assessment based on considerations other than the project's possible impacts on areas of federal jurisdiction. While it is permissible for the IAA's designation mechanism to cast a "wide net", the screening decision must focus the scheme by ensuring the decision to require an impact assessment is driven by potential for the project to have significant effects – not effects that are insignificant or trivial – on matters within federal jurisdiction. The screening mechanism, as written, creates risk that projects with little or no potential for significant adverse federal effects will be required to undergo an impact assessment. This, according to the majority, causes the "main thrust" of the scheme to stray from federal legislative competency.

The majority opinion raised similar concerns with the final public interest decision to be made at the end of the impact assessment process (item 4). The central problem with the IAA decision-making process is that it does not focus on the project's federal effects. The IAA currently permits the decision-maker to blend the assessment of adverse federal effects with other adverse effects which are not federal. The majority was concerned that adverse non-federal effects could amplify the perceived severity of the adverse federal effects and effectively become the underlying basis for the public interest determination. While it is permissible to make a public interest determination by considering whether federal adverse effects are "outweighed on the other side of the leger" by public interest benefits, federal or otherwise, it is not permissible to include non-federal concerns on the "adverse" side of the leger when making that decision. According to the majority, including non-federal adverse effects in the public interest decision shifts the decision from being about the acceptability of federal adverse effects to being about the wisdom of the project as a whole.

The majority's second overarching concern was that the definition of "effects within federal jurisdiction" in the IAA is overbroad. That definition is critical for several aspects of the IAA scheme. For example, the Minister's ability to designate an activity depends in part on the Minister forming the opinion that carrying out the activity may cause adverse effects within federal jurisdiction. The Agency's screening decision and the final public interest decision-making processes also depend critically on the scope of that definition. Notably, the majority criticized the definition of "effects within federal jurisdiction" as being broad enough to allow the federal government to anchor jurisdiction over major projects based on their greenhouse gas emissions. That overbroad definition "dilutes the focus of the scheme's decision-making functions."

In light of these flaws, the majority concluded that the "designated projects" scheme created by the IAA could not be classified under federal heads of power. Instead, it intrudes on exclusive provincial legislative jurisdiction over property and civil rights in the province, matters of a local nature and non-renewable natural resources.

Significance

While the decision does not "strike down" the IAA, it does introduce some uncertainty as proponents wait for the federal government to address the deficiencies identified in the majority reasons. The federal government has indicated that it intends to amend the IAA to align with the majority reasons. At a minimum, it is reasonable to expect that the screening and final decision-making processes established by the IAA will be refined to ensure they remain focused on federal effects. Similarly, any such amendments will need to substantially narrow the definition of "effects within federal jurisdiction."

The majority confirmed that the federal government can enact an impact assessment scheme provided that the scheme is "consistently focused" on federal matters. It concluded by noting that Parliament and the provincial legislatures can "exercise their respective powers harmoniously, in the spirt of cooperative federalism." The majority referred to the Court's past comments about both levels of government "seeking cooperative solutions" to balance national and regional objectives. It will be interesting to observe whether the federal government embraces that commentary by attempting to cooperate with provincial governments on the scope of potential amendments to the IAA.

The precise impacts of any amendments proposed by the federal government may depend on the nature of the project. The majority reasons explain that screening decisions and final public interest decisions regarding projects that are primarily provincial (e.g. power plants, mines, in situ facilities) must focus on "federal effects" of a project, without allowing those effects to be amplified by considering non-federal adverse effects. However, the majority also suggests that the decision may not need to be so focused when considering federal projects (e.g. interprovincial pipelines or railways).

The majority reasons may also have implications for other federal initiatives including the proposed oil and gas sector emissions cap and the proposed Clean Electricity Regulations. The majority confirmed that each level of government may legislate in respect of environmental matters but stressed that, it must ground that legislation in one of its existing heads of power and be careful not to encroach too far on the other jurisdiction's sphere of power. A federal scheme that comprehensively regulates greenhouse gas emissions in industries that are primarily subject to provincial regulation may be subject to challenge if not adequately grounded in a federal head of power.

You can read more about the decision here.

We wish to thank Jesse Dias, Student-at-law, for his contributions to this article.

For more information on this topic, please contact the author Dan Collins, Bernie Roth and Laura Estep.