Stewart Maier and Courtney Burton
Introduction:
On October 13, 2023, the Supreme Court of Canada rendered a judgment on the Impact Assessment Act (IAA), a significant piece of legislation addressing environmental assessments for major infrastructure and resource projects in Canada. The IAA has been a divisive piece of legislation since it came into force four years ago, and now the Supreme Court has ruled portions of it to be beyond the constitutional authority of Parliament. According to the Federal Government, the IAA was designed to require a more stringent and multifaceted review process for major natural resource and infrastructure projects than was previously required under the now repealed Canadian Environmental Assessment Act, 2012. However, just because the Supreme Court has ruled that that certain provisions of the IAA are unconstitutional, questions remain regarding the future of major projects in Alberta and Canada. This article discusses certain critical elements of the ruling and its implications for the energy industry and its stakeholders.
Background:
In 2019, Prime Minister Justin Trudeau's government passed the IAA with the articulated purpose of ensuring comprehensive environmental evaluations for significant projects, but which also included assessment of various health, social gender and economic considerations. The IAA was instituted as a mechanism aimed at fortifying the environmental assessment processes applied to significant projects such as pipelines, mines and hydro dams. Since its introduction, the IAA has faced criticism from different sectors across several provinces, with critics within the energy industry contending it over-complicated and frustrated the major project approval process.
Under the IAA, major projects must go through three main phases before they can begin. These phases are:
Planning Phase: First, the project proponent must give basic information about the project to the Impact Assessment Agency (Agency). The Agency then consults with a number of parties and decides whether the project requires an impact assessment.
Assessment Phase: If a detailed review is needed, the project proponent is required to provide information or studies to the Agency. This phase culminates in the preparation of an assessment report, which sets out the effects that are likely to be caused by the carrying out of the designated project and indicates those that are adverse “effects within federal jurisdiction” and those that are adverse “direct or incidental effects”.
Decision-making Phase: After the report, the Agency decides whether the project can go ahead, and what rules it must follow if it does.
In 2022, the Alberta Court of Appeal released a decision regarding a challenge to the constitutionality of the IAA which had been brought by the Government of Alberta. The provinces of Ontario and Saskatchewan intervened in support of Alberta's position, as did the Indian Resource Council, the Woodland Cree First Nation and several other industry and business associations. The Alberta Court of Appeal found the IAA to be unconstitutional in its entirety.That decision was appealed to the Supreme Court of Canada by the Attorney General of Canada, which resulted in this October 13, 2023 decision.
Ruling:
By a 5-2 majority, the Supreme Court of Canada declared certain portions of the IAA to be unconstitutional, stating that the federal legislation overstepped its jurisdictional authority, especially in respect of major infrastructure projects strictly within provincial borders. The portions of the IAA found to be unconstitutional concern the regulation of the effects of "designated projects” which are defined in the IAA to capture projects carried out in Canada or on federal lands that are designated by broad regulations under the IAA or by order of the Minister. The IAA now faces a return to Parliament for revision.
The majority opinion, penned by Chief Justice Wagner, expressed concern that the IAA's designated projects scheme went beyond assessing project impacts within appropriate federal jurisdiction, notwithstanding the legislation’s use of the limiting term of “effects within the federal jurisdiction”. Instead, the legislation inherently authorized a far broader evaluation, resulting in aspects of such evaluation to encroach on areas within exclusive provincial jurisdiction.
The Court determined that the definition of "effects within federal jurisdiction" in the IAA was too expansive, stretching beyond the Constitution's limits. For instance, treating all "designated projects" the same, regardless of their location or the nature of their operations, was deemed problematic. This approach was deemed to disregard the Constitution's division of powers, where certain projects, especially those entirely within a province, should fall under provincial, not federal, jurisdiction.
Justices Karakatsanis and Jamal, the two dissenting justices on the Supreme Court, upheld the IAA's validity, stating that its primary purpose is to assess the effects of major projects on areas within federal jurisdiction, such as fisheries, Indigenous lands, and interprovincial regions. They argued that possible unconstitutional applications of the IAA in specific instances don't render the entire Act unconstitutional.
Potential Implications of the Judgment:
Federal vs. Provincial Jurisdiction: The Supreme Court's ruling emphasizes the importance of respecting the jurisdictional boundaries set by the Constitution. It serves as a reminder that while environmental protection is important, the approach must align with the constitutionally defined roles of federal and provincial governments.
Effects for Project Proponents: For those involved in natural resource and infrastructure projects, the decision may bring certainty/efficiencies. The IAA's regulations around "designated projects" often led to extended review processes, raising project costs and uncertainties. The Supreme Court's decision may pave the way for a more streamlined process.
Limits on Federal Power: The Majority of the Supreme Court criticized the IAA for its broad purview, especially its treatment of “designated projects”. Projects located entirely within a province, for instance, should be primarily under provincial regulation.
Future of Environmental Legislation: The Supreme Court judgment may have consequences on the formulation of future environmental legislation in Canada. Any new or amended versions of such laws may need to focus on matters of federal jurisdiction more precisely. The Court’s analysis also touched upon the federal government’s capacity to regulate GHG emissions, underscoring the nuanced boundaries of federal authority in this domain, which may have implications for future policy and regulatory initiatives.
Revisiting the IAA: Parliament will now need to re-evaluate and amend the IAA’s scope to align with the parameters set out by the Supreme Court's decision. As the IAA returns to Parliament, stakeholders from the energy and environmental sectors will keenly observe the modifications, with the hope that the revised legislation will offer greater clarity and certainty for future projects. Minister of Environment and Climate Change, Steven Guilbeault, has communicated the government's willingness to modify the contentious IAA following the Supreme Court's recent ruling. However, Mr. Guilbeault has also conveyed that while adjustments will be made in accordance with the Court’s findings, the essence of the IAA process is expected to remain unchanged.
Final Thoughts:
The Supreme Court's ruling on the IAA underscores the delicate balance between federal and provincial powers in the realm of energy and environmental legislation. The decision serves as a flashpoint in Canada's journey to balance environmental concerns with infrastructural and energy needs. For energy stakeholders, understanding the legislative journey is vital in navigating the ever-evolving Canadian energy sector. As the regulatory framework continues to evolve, active engagement and adaptation will be essential for stakeholders navigating Canada’s energy sector.
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