Written By E. Bruce Mellett, Brad Gilmour, Sean R. Assié, Adam J. Williams and Niall Fink

The Supreme Court of Canada (SCC) has issued an opinion that the Impact Assessment Act (IAA) and its Physical Activities Regulations are largely unconstitutional.

In a five to two decision written by the Chief Justice, the majority (Wagner CJ, Cote, Rowe, Martin, Kasirer JJ. concurring) determined that the legislation, enacted in 2019 through Bill C-69, exceeds Parliament's law-making jurisdiction, with the exception of the part dealing with federal funding and activities on federal lands (subsection 81-91 of the IAA). In a dissenting opinion, a minority of the Court (Karakatsanis and Jamal JJ.) concluded that the IAA and the regulations are constitutional in their entirety.

According to the SCC majority:

Although the process set forth in subsection 81-91 of the IAA is constitutional and can be separated out, the balance of the scheme—that is, the "designated projects" portion—is ultra vires Parliament and thus unconstitutional. The designated projects scheme is ultra vires for two overarching reasons: it is not in pith and substance directed at regulating "effects within federal jurisdiction" as defined in the IAA because these effects do not drive the scheme's decision-making functions, and the defined term "effects within federal jurisdiction" does not align with federal legislative jurisdiction.  The overbreadth of these effects exacerbates the constitutional frailties of the scheme's decision-making functions. Environmental protection remains one of today's most pressing challenges, and Parliament has the power to enact a scheme of environmental assessment to meet this challenge, but Parliament also has the duty to act within the enduring division of powers framework laid out in the Constitution.

Bennett Jones, along with Alberta Justice, represented the Respondent, the Attorney General of Alberta, in the SCC proceedings. Bruce Mellett, Brad Gilmour and Sean Assie appeared before the SCC in March of 2023. The comments in this blog are solely those of Bennett Jones.

The Majority Opinion

The constitutional reference was initiated by the Lieutenant Governor of Alberta on September 9, 2019. In a four to one opinion released on May 10, 2022, the Alberta Court of Appeal concluded that the IAA and its regulations are wholly unconstitutional.

In this appeal from the Court of Appeal's opinion, the majority of the SCC concluded that the IAA and regulations effectively establish two distinct schemes: one dealing with "designated projects" and another dealing with projects carried out or financed by federal authorities on federal lands or outside Canada. The majority concluded that portions of the scheme dealing with federal projects (sections 81-91) were clearly constitutional, but that the balance of the scheme was unconstitutional and that "Parliament has plainly overstepped its constitutional competence".

The majority found that the pith and substance of the designated projects component is to assess and regulate designated projects with a view to mitigating or preventing their potential adverse environmental, health, social and economic impacts. The designated projects scheme treats all "designated projects" in the same way, regardless of whether Parliament is vested with broad jurisdiction over the activity itself or narrower jurisdiction over the activity's impacts on federal heads of power. Many of the activities to which the designated project scheme relates are primarily regulated through the provincial legislature's powers over local works and undertakings or natural resources.

The majority also noted that "effects within federal jurisdiction" as defined in the IAA do not drive the scheme's decision-making functions. The decision-maker is required to consider a host of factors but the scheme does not specify how those factors are to drive the ultimate decision about the project. The scheme's decision-making mechanism thus loses its focus on regulating federal impacts and instead grants the decision maker what the majority described as a practically "untrammeled" power to regulate projects as projects, regardless of whether Parliament has jurisdiction to regulate the given physical activity in its entirety. The overbreadth of the IAA's definition of "effects within federal jurisdiction", which is central to the scheme's decision-making functions, shifts decision-making away from a constitutionally permissible focus on federal aspects of regulation, and may result in impermissibly broad prohibitions.

Dissenting Opinion

In a dissenting opinion, Justices Karakatsanis and Jamal opined that the IAA and its regulations are constitutional in their entirety. The minority described the IAA as building on earlier federal environmental assessment regimes to establish a modern regulatory regime, allowing federal authorities to assess the impacts of designated major projects and to determine whether they are in the public interest, despite their adverse effects in areas of federal jurisdiction.

The minority opinion emphasized a flexible approach to federalism, which presumes good faith on the part of legislatures and favours the operation of statutes enacted by both levels of government whenever possible. The minority noted that Parliament's decision to choose broad language for what constitutes an effect within federal jurisdiction and to detail what factors must be considered in determining whether a project's effects are in the public interest was neither novel nor concerning.

What Does This Mean? 

The majority decision sends a strong message that while environmental protection remains a core Canadian value, it must be pursued in a way that respects the constitutional division of powers.

The opinion that the IAA and regulations are unconstitutional also confirms that primary jurisdiction over management of non-renewable natural resources rests with the provinces. It would be unconstitutional to apply the IAA and regulations to activities that are primarily under provincial jurisdiction, including conventional oil and gas, oil sands (mining and in-situ), hard rock mining, coal and other resource developments.

The reference decision does not technically strike down the legislation, but is a clear indication from Canada's highest Court that the IAA and regulations are fundamentally flawed.

In response to the SCC opinion, Parliament is expected to revise federal impact assessment legislation to comply with the division of legislative powers under Canada's constitutional framework.

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