SCC Rules Federal Impact Assessment Act’s “Designated Projects” Component Is Unconstitutional

On October 13, 2023, the Supreme Court of Canada (SCC) issued its decision in Reference re Impact Assessment Act. The majority of the SCC determined that the federal Impact Assessment Act (IAA) and associated Physical Activities Regulations (Regulations) are unconstitutional in part. The decision provides an important clarification to the federal environmental regulatory landscape and further emphasizes the difficulty of allocating jurisdiction over environmental issues to one level of government or the other under Canada’s Constitution.

Background

The IAA was introduced in February 2018 and provides for the assessment of environmental, social, economic, cultural, and heritage impacts of certain physical activities carried out in and outside Canada. The range of physical activities includes “designated projects” as listed in the Regulations. Under the IAA, the types of construction, development, business, commerce and other intra-provincial activities that are listed in the schedules to the Regulations as designated projects can be unilaterally expanded by the federal Minister of the Environment or the Governor in Council.

Alberta challenged the IAA’s constitutionality by way of a reference to the Court of Appeal of Alberta (ABCA). A majority of the ABCA determined that the IAA and Regulations were unconstitutional. The federal government appealed to the SCC. For more information, see our earlier Blakes Bulletin: Alberta’s Top Court Rules Federal Impact Assessment Act is Unconstitutional.

The SCC decision

The SCC unanimously considered the IAA as having two parts: i) those dealing with “designated projects,” and ii) those dealing with projects carried out or financed by federal authorities on federal lands or outside Canada (federal projects). Both the majority and the dissent agreed that the IAA provisions dealing with federal projects were constitutional. The disagreement involved the provisions dealing with designated projects, which were the primary issue on the appeal.

Designated Projects

The designated projects listed in the Regulations included certain types of mines, and oil and gas facilities, including some in-situ oil sands developments and hydroelectric generation facilities. These types of projects, when located within provincial boundaries (i.e., an intra-provincial project), have traditionally been solely within provincial jurisdiction to regulate.

Both the majority and dissenting justices of the SCC confirmed that environmental protection is a fundamental Canadian value and that the federal government has the power to enact legislation related to environmental assessments. As the dissenting justices noted, “the environment is ‘a diffuse subject that cuts across many different areas of constitutional responsibility, some federal, some provincial.’” However, the majority emphasized that environmental legislation must comply with the constitutional division of powers.

The majority determined that the designated projects component of the IAA is unconstitutional for two overarching reasons: i) the decision-making under the IAA is not, in fact, driven by effects within federal jurisdiction, and ii) the definition of “effects within federal jurisdiction” in the IAA is overly broad and not restricted to proper federal jurisdiction.

The majority found that many of the factors required to be considered in determining whether a designated project should be assessed (or should ultimately be found to be in the public interest) under the IAA scheme were not related to adverse effects solely within federal jurisdiction. The IAA also allows decisionmakers to blend their consideration of federal and non-federal factors, further reducing the focus on effects falling under federal jurisdiction. The result is to potentially allow federal regulation of the impacts of any major project in Canada, including regulation of non-federal matters.

The federal government attempted to justify its authority over such designated projects on the basis that they have some “effects within federal jurisdiction.” However, the majority of the SCC found that Parliament’s definition of such effects was overly broad and not limited to areas of federal jurisdiction. Notably, this included any inter-provincial effects on the environment, itself defined expansively to cover every component of the earth.

The majority found that the resulting encroachments into provincial jurisdiction rendered the entirety of the designated projects provisions of the IAA and the Regulations ultra vires Parliament, and therefore, unconstitutional.

Greenhouse Gas Emissions

Both the majority and the dissent agreed that greenhouse gas emissions from intra-provincial projects do not automatically result in a project having effects within federal jurisdiction. On this point, the court relied on its prior decision in References re Greenhouse Gas Pollution Pricing Act, which held that federal jurisdiction does not extend to the comprehensive regulation of greenhouse gas emissions.

Key Takeaways

While, as a reference, the SCC’s decision is considered advisory (i.e., non-binding), the federal government has stated that it accepts the SCC’s opinion and will “work quickly to improve the legislation through Parliament.”

Although the IAA and Regulations technically remain in force, significant revisions will be required to comply with the SCC’s decision. This may mean wholesale revisions to the types of projects that fall within a revised “designated project” scheme, if that scheme remains. Presumably, the provisions dealing with federal projects will remain, since their constitutionality was upheld by the unanimous court.

It is yet to be seen how proponents of designated projects that have already begun the impact assessment process pursuant to the IAA will react. We expect that at least some will seek to end the current federal assessment process in favour of provincial review processes applicable to their projects.

Finally, the decision, with its clear direction on jurisdiction over greenhouse gas emissions, may affect the federal government’s approach to emissions policies currently in development, which some have argued, intrude on provincial jurisdiction, such as a potential oil sands emissions cap or the draft Clean Electricity Regulations. We will continue to monitor and report on developments in this area.

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