Supreme Court of Canada rules federal environmental assessment legislation to be largely unconstitutional

Canada has a constitutional division of powers between the federal government and provincial governments. Because of the age of Canada’s constitution (which dates back to 1867), “the environment” was never assigned as a federal or provincial head of power. As a result, both levels of government have the ability to regulate environmental matters.

For proponents of infrastructure projects, this has meant that a project may require both a provincial and a federal environmental assessment. But in an important recent decision, Reference re Impact Assessment Act, the Supreme Court of Canada ruled that the current iteration of the federal environmental assessment regime is largely unconstitutional because it infringes on provincial powers. This may make it easier to see infrastructure projects to completion.

The Impact Assessment Act in Context

The current federal environmental assessment legislation, called the Impact Assessment Act (IAA) is the third iteration of such legislation. The first iteration passed in 1992 had certain “triggers” for federal environmental assessments based on the presence of federal funding or the need for federal permits. In an attempt to facilitate projects and reduce red tape, the second iteration (passed in 2012) had a narrower application and provided more ministerial discretion. The IAA is the third iteration (introduced in 2019), and is broader than either of its two predecessors.

The biggest criticism of the IAA by proponents and provincial governments alike has been that the IAA is automatically triggered based on a list of designated projects, regardless of their actual impact. For example, any new fossil fuel-based generating facility with a capacity of 200 MW or more or any new pipeline requiring more than 75 km of new right-of-way is automatically treated as a designated project requiring an impact assessment.

The far-reaching scope of the IAA has been controversial, particularly in Western Canada where there is a significant fossil fuel-based economy. As a result, it was the Province of Alberta that brought a constitutional challenge to the legislation by way of a reference, meaning a proceeding in which the court is asked to determine whether a piece of legislation is valid.

The Supreme Court's Findings

Previous Supreme Court decisions have affirmed that both levels of government can regulate environmental issues under the “double aspect” doctrine, which means there may be areas relevant to both federal and provincial jurisdiction. However, the power to enact laws respecting each of these aspects must legitimately be found under the relevant constitutional heads of power set out in sections 91 (federal) and 92 (provincial) of the Constitution Act, 1867.

To determine whether a statute reflects a legitimate act of provincial or federal power, the court examines the “pith and substance” of legislation, meaning the actual purpose of the law and its intended and unintended effects. While the federal government attempted to defend the IAA based on its regulation of effects within federal jurisdiction, the court did not accept this and found that the actual pith and substance was “to assess and regulate designated projects with a view to mitigating or preventing their potential adverse environmental, health, social and economic impacts.”

Based on this analysis, the court found that the legislation was overly broad. Because of the legislation’s broad designation mechanism, projects with little or no potential for adverse federal effects are required to undergo impact assessment. This demonstrates that, in reality, it is not the federal effects that are driving the legislative regime. The court cited the definition of “effects within federal jurisdiction”, which includes “a change to the environment that would occur … in a province other than the one where the physical activity or the designated project is being carried out.” Using the example of greenhouse gases, the court determined that this could mean any project that generates greenhouse gases in the jurisdiction where it is built. This led the court to conclude that the interprovincial effects clause in the legislation captures an unlimited range of interprovincial environmental changes, making the legislation overly broad.

The court did uphold the application of the IAA requirements to federal lands and to projects outside Canada, meaning that portion of the legislation remains valid.

The court’s decision that the IAA regime is unconstitutional was not unanimous. In a two-person dissent, the minority of the court found that the legislation was constitutional and a legitimate attempt to establish a transparent information-gathering and decision-making process to determine whether physical activities or designated projects have adverse federal effects.

What Does the Ruling Mean for Project Proponents?

Canada has had federal environmental assessment legislation for over 30 years, so the concept of federal environmental assessments will not go away. In fact, the court specifically acknowledged that “there is no doubt that Parliament can enact impact assessment legislation to minimize the risks that some major projects pose to the environment”, although “this scheme plainly overstepped the mark.”

With the initial 1992 iteration of the Canadian Environmental Assessment Act in force for 20 years, it is possible that the federal government concludes that both the 2^nd and 3^rd iteration of Canada’s environmental assessment legislation swung the pendulum too far into different directions. If that is the case, then the likely outcome of the Supreme Court’s ruling is new legislation that is more closely aligned with the original federal environmental assessment scheme. This would mean reverting back to triggers such as federal funding, federal permits (migratory birds, fish habitat, etc.), or more strictly construed interprovincial effects. While such an approach would not align with the current federal government’s environmental protection ambitions, it should reduce the regulatory risk for project proponents.