Canada: Impact Assessment Act Found To Be Mostly Unconstitutional

In the highly anticipated Reference re Impact Assessment Act, 2023 SCC 23 the majority (5-2) of the Supreme Court of Canada (Justices Karakatsanis and Jamal dissenting) found that the Impact Assessment Act(IAA) and the Physical Activities Regulations ("Regulations") made by the Governor in Council under theIAA was unconstitutional in part.

The majority found that the IAA created a scheme that could subject projects to a federal impact assessment based on factors that were not sufficiently tied to areas of federal jurisdiction. Rather, many of the activities that the scheme applied to were primarily regulated through provincial powers over local works and undertakings or natural resources. By failing to draw a distinction between the impacts of activities that fall under federal jurisdiction and that those primarily regulated by the provinces, Parliament had overstepped its constitutional limits.

This decision reinforces the longstanding principle that environmental regulation is a shared responsibility between federal and provincial levels of government.

It also clarifies that the matter of national concern recognized in References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11 ("References re GGPPA") was narrowly focused on establishing a set of minimum national standards for carbon pricing to meet emission reduction targets. It does not extend to "enabling the federal government to comprehensively regulate greenhouse gas emissions" and the inclusion of such sweeping regulatory powers in impact assessment legislation is likewise impermissible.

Analysis of decision

The IAA and the Regulations establish a complex, two part regulatory scheme. One part, set out in ss. 81-91 of the IAA, governs an impact assessment process for federal projects. The other part, which included the balance of the IAA and the Regulations, set out what projects are considered "designated projects," making these projects subject to federal review.

In the decision under appeal, the majority of the Alberta Court of Appeal found that the IAA and the Regulations were entirely outside Parliament's jurisdiction and, therefore, unconstitutional in their entirety. The Attorney General of Canada appealed this decision to the Supreme Court of Canada.

The Supreme Court of Canada allowed the appeal in part. The majority found that sections 88-91 of the IAA were not challenged as unconstitutional and could be separated out from the balance of the scheme and upheld as constitutional.

On the other hand, the balance of the scheme, which dealt with "designated projects," fell outside the jurisdiction of Parliament and was thus unconstitutional.

Writing for the majority, Chief Justice Wagner wrote that the designated project scheme was unconstitutional for two overarching reasons: the IAA could not be characterized as regulating environmental "effects within federal jurisdiction" because these effects did not drive the scheme's decision-making functions and second, that the defined term "effects within federal jurisdiction" did not align with federal legislative jurisdiction, which "exacerbates the constitutional frailties of the scheme's decision-making functions."

Chief Justice Wagner noted that the designated project scheme lost its focus on regulating federal impacts. Instead, it granted the decision-maker "a practically untrammeled power" to regulate projects regardless of whether Parliament had jurisdiction to regulate a given physical activity in its entirety.

In reviewing the factors that the IAA permitted a decision-maker to use to determine whether an impact assessment was required for a particular project, the majority found that an impact assessment could be required for reasons other than, or not sufficiently tied, to the project's possible impacts on areas of federal jurisdiction.

Public interest factor

Similarly, the mandatory public interest factors that a decision-maker was required to take into consideration under the IAA did not focus on the project's federal effects but on whether the project as a whole was in the public interest, a question not confined to federal legislative competence. In particular, the majority noted that s. 63(a) required a consideration of "sustainability," which was defined to mean "the ability to protect the environment, contribute to the social and economic well-being of the people of Canada and preserve their health in a manner that benefits present and future generations (s. 2). Chief Justice Wager observed that this "encompasses all environmental, social and economic effects, not only those that the federal government has jurisdiction to regulate."

The majority also found that the impugned legislation could not be supported by the national concern branch of the peace, order and good government (POGG) power. It emphasized that in References re GGPPA, the Court upheld a law whose matter was limited to carbon pricing of greenhouse gas emissions, which was a "narrow and specific regulatory mechanism." In this case, by contrast, the "designated projects" scheme's defined interprovincial effects lacked specificity as to the type or scale of the "change to the environment" that was said to be subject to federal jurisdiction.

Conclusions

While there is no doubt that Parliament can enact impact assessment legislation to minimize the risks that some major projects pose to the environment, the scheme at issue plainly "overstepped the mark." However, the Court was quick to note that it is open to Parliament to design environmental legislation provided that it respects the division of powers. Through resect for the division of powers, both levels of government "can exercise leadership in environmental protection and ensure the continued health of our shared environment."

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