Blog: The Supreme Court Ruling on the Impact Assessment Act – Climate Change Implications

By Joseph Castrilli and Richard Lindgren*

In a 5:2 split decision released on October 13, 2023, the Supreme Court of Canada (SCC) opined that most of the federal Impact Assessment Act (IAA) is unconstitutional. This blog provides an overview of the IAA appeal, summarizes the majority and dissenting opinions, reviews possible next steps by Parliament, and discusses the ruling’s implications for federal efforts to address greenhouse gas emissions (GHGE) through a new or amended IAA.

Overview of the IAA Appeal

As noted in a previous CELA blog, the IAA was enacted by Parliament in 2019. Among other things, the IAA established a multi-stage information-gathering and decision-making process for major projects across Canada that may have adverse effects upon areas of federal jurisdiction.

Shortly thereafter, the Alberta government asked the province’s Court of Appeal to advise whether the IAA and the projects list regulations were unconstitutional, in whole or in part. In 2022, the Court released a lengthy decision in which the majority of justices found that the IAA and regulations were unconstitutional because they impermissibly interfered with matters of exclusive provincial jurisdiction under sections 92 and 92A of the Constitution Act, 1867.

This ruling was then appealed by the Attorney General of Canada to the SCC. Several provincial Attorneys General intervened in the appeal, as did numerous industry associations, business groups, First Nations, and non-governmental organizations, including CELA clients. A two-day appeal hearing was held by the SCC in March 2023.

Summary of the Majority and Dissenting Opinions

Writing for the majority, Chief Justice Wagner held that ss. 81-91 of the IAA – which create an assessment process for projects funded or undertaken by federal authorities on federal lands or outside Canada – are constitutionally valid [paras 5, 47-49, 103, 130, 207-211].

The majority opinion also affirmed that Parliament can enact impact assessment legislation that is directed at federal aspects of proposed projects [para 131]. During such assessments, the federal government may gather information about a broad range of potential effects beyond those that fall within federal jurisdiction [paras 158-161]. Nevertheless, Parliament must still “act within the enduring division of powers framework laid out in the Constitution [para 7].

After considering relevant jurisprudence and constitutional principles, the majority opinion concluded that the IAA and regulations which entrench the “designated projects” regime are beyond federal jurisdiction: “Parliament has plainly overstepped its constitutional competence in enacting this designated projects scheme” [para 6].

In making this finding, the majority opinion determined that the predominant purpose of the IAA scheme “is to assess and regulate designated projects with a view to mitigating or preventing their potential adverse environmental, health, social and economic impacts” [para 76]. Given this broad characterization, the majority opinion found that “designated projects” scheme “exceeds the bounds of federal jurisdiction” cited by Canada in support of the IAA regime (e.g., fisheries, Indigenous peoples, imperial treaties, and the national concern branch of the Peace, Order and Good Government (POGG) residual power) [paras 133-136, 204-206].

While various concerns were expressed about different aspects of the “designated projects” approach in the IAA, the majority opinion identified two overarching reasons why the current approach is unconstitutional. First, “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” [paras 6, 166-169, 178]. Second, the IAA’s overbroad definition of “effects within federal jurisdiction “does not align with federal legislative jurisdiction” [paras 6, 179-180].

Accordingly, the majority opinion stated that “in the result, the scheme invites the federal government to make decisions in respect of projects that it has no jurisdiction to regulate, at least from the perspective of the heads of power upon which it relies” [para 138].

In dissent, Justices Karakatsanis and Jamal agreed with the majority opinion that the assessment regime in ss.81-91 is within the legislative competence of Parliament [para 220] but determined that the IAA and regulations are constitutionally valid “in their entirety” [para 217].

According to the dissenting opinion, the predominant purpose of the IAA is to establish an environmental assessment process to: (1) assess the effects of physical activities or major projects on federal lands, Indigenous peoples, fisheries, migratory birds, and lands, air, or waters outside Canada or in provinces other than where a project is located; and (2) determine whether to impose restrictions on the project to safeguard against significant adverse federal effects, unless allowing those effects is in the public interest [paras 223, 257, 298].

Based on this characterization, the dissenting justices concluded that the public interest decision-making process under the IAA is constitutional because each of the adverse federal effects set out in the IAA anchor the federal review and decision-making under the legislative scheme and fit within multiple heads of Parliament’s legislative jurisdiction under the Constitution Act, 1867 [paras 224, 304, 336, 354].

Possible Next Steps by Parliament

The SCC’s ruling is an advisory opinion, not a judgment that strikes down most of the IAA. At present, the IAA remains intact, but the opinion provides general direction to Parliament on the need to amend the IAA to bring it into conformity with the constitutional division of powers.

Hours after the release of the SCC opinion, the federal Environment Minister and Attorney General held a press conference in which they indicated that “surgical” changes to the IAA would be drafted and introduced shortly. This federal commitment accords with the views of some environmental lawyers who state that only a relatively small number of focused amendments to the IAA will be required to address the jurisdictional concerns identified in the majority opinion.

In contrast, other legal commentators suggest that the majority opinion should result in a complete re-casting of the federal impact assessment regime in a manner that more closely resembles the former Canadian Environmental Assessment Act, 1992 (CEAA 1992). Unlike the IAA, this previous legislation did not utilize a “designated projects” list. Instead, CEAA 1992 used several different triggers for applying the legislation (e.g., disposition of federal lands, provision of federal funding, federal proponency, or issuance of a federal permit, licence, or approval that was prescribed in the Law List regulations).

While a return to the CEAA 1992 regime (or its triggers) may sound appealing, it should be recalled that the regime was strongly criticized at the time by CELA, other non-governmental organizations, academics, practitioners, Indigenous communities, stakeholders, and industry on various grounds (e.g., lack of a planning stage, late triggering of the assessment process, primary focus on biophysical impacts, public participation problems, procedural delays and uncertainty, lack of transparency regarding justification of “significant” adverse environment effects, etc.). Accordingly, a simplistic re-enactment of CEAA 1992 – without any substantial improvements – would neither address the environmental, health, and socio-economic challenges of the 21st century nor advance the reconciliation agenda in Canada.

The Unsettled, if not Unsettling, Treatment of GHGE in the Opinion

As the dust settles on the SCC opinion, and as Parliament takes steps to amend the IAA, one of several key issues remains unsettled, if not unsettling. That issue is the extent to which, if at all, there is a role for a new, or amended, federal impact assessment law to play in controlling GHGE from designated projects.

For example, the majority opinion states in various places that:

  • s. 63 of the IAA permits the decision-maker to blend its assessment of adverse federal effects with other adverse effects that are not federal, such as the project’s anticipated greenhouse gas emissions (under s. 63(e)). The adverse non-federal effects can amplify the perceived severity of the adverse federal effects and, effectively, become the underlying basis for the conclusion that the latter are not in the public interest. The mandatory cumulation of adverse non-federal effects shifts the focus of the decision from the adverse effects within federal jurisdiction to the overall adverse effects of the project [para 169];
  • Even if one sets aside any concerns about the scheme’s definition of “effects within federal jurisdiction,” its core decision-making function is constitutionally problematic. The scheme requires the decision maker to consider a host of factors but does not specify how those factors are to drive the ultimate conclusion. As a result, the project’s overall adverse effects, such as hindering Canada’s climate change commitments, can substantiate a negative public interest decision. The scheme’s decision-making mechanism thereby loses its focus on regulating federal impacts [para 178];
  • In References re GGPPA, this Court upheld a law whose matter was limited to carbon pricing of greenhouse gas emissions, “a narrow and specific regulatory mechanism” (para. 199). By contrast, the IAA “designated projects” scheme’s defined interprovincial effects lack specificity as to the type or scale of the “change to the environment” that is said to be a federal effect. If the matter of national concern recognized by this Court in the References re GGPPA does not extend to enabling the federal government to comprehensively regulate greenhouse gas emissions, then the inclusion of such sweeping regulatory powers in impact assessment legislation is likewise impermissible [para 186];
  • When pressed at the hearing of this appeal, Canada asserted that it is not relying on greenhouse gases as a basis for anchoring jurisdiction over major projects. It is plain, however, that the broadly worded “interprovincial effects” clause permits Canada to do just that [para 187];
  • Furthermore, the record demonstrates that the federal government has adopted this very interpretation of “interprovincial effects”. For example, in a 2019 discussion paper, the federal government explained that onshore oil and gas projects would be included in the Regulations in part because “[p]rojects that process or consume large quantities of oil and gas have impacts in areas of federal jurisdiction due to their greenhouse gas emissions”. In addition, the Minister has issued letters to project proponents pursuant to s. 17(1) of the IAA to advise that certain projects “would cause unacceptable environmental effects within federal jurisdiction”. Alberta directed this Court’s attention to two such letters, in which the sole “unacceptable environmental effects” were greenhouse gas emissions [para 188].

The dissenting opinion notes the following:

  • We agree with Canada’s concession that greenhouse gas (“GHG”) emissions — although relevant to the public interest determination — will generally not be an effect within federal jurisdiction under the IAA’s definition. Under the IAA’s project-specific approach, the federal government would need to show that an individual project’s GHG emissions would cause a non-trivial change to the environment in another province or outside Canada. If Canada attempts to treat a project’s GHG emissions as an effect within federal jurisdiction, then whether an individual project’s GHG emissions, in context of the global scale of the climate crisis, may cause non-trivial changes to the environment is best assessed through case-specific judicial review of whether a particular exercise of discretion is consistent with the national concern test, set out in the References re GGPPA [para 351];
  • As this Court recently warned, the environmental harms caused by climate change pose “an existential challenge” and “a threat of the highest order to the country, and indeed to the world” (References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11 (“References re GGPPA”), at para. 167). Today, “[t]he undisputed existence of a threat to the future of humanity cannot be ignored” (para. 167) [para 226].

In our view, GHGE have, in fact, been recognized under federal law as having adverse federal effects since the mid-2000s. The Canadian Environmental Protection Act (CEPA) designates and regulates greenhouse gases (e.g., carbon dioxide, methane, nitrous oxide, etc.) as toxic substances, including their emission from electricity production from coal and natural gas or the oil and gas sector, some of the very sources identified as designated project categories in the IAA project list regulations. The constitutional authority for federal regulation of toxic substances under CEPA is the criminal law power as set out in the SCC’s 1997 judgment in Hydro-Quebec, which was subsequently followed by the Federal Court of Appeal in Syncrude to uphold federal renewable fuels regulations under CEPA.

It therefore appears to be necessary and appropriate for any future amendments to the IAA to be drafted with this criminal law precedent in mind, and the statute’s definition of “effects within federal jurisdiction” should be revised accordingly. The unsatisfactory alternative may be a narrow federal impact assessment law that is unable to address what the SCC itself has acknowledged to be both an “existential challenge” and “a threat to the future of humanity.”
*The authors served as counsel for three interveners in the Supreme Court of Canada in the IAA appeal.