On May 10, 2022, the Alberta Court of Appeal (Court) released its opinion on the Government of Alberta's constitutional challenge to the federal Impact Assessment Act (IAA). Four of the five Justices of the Court accepted Alberta's position and agreed that the IAA was beyond the constitutional authority of federal Parliament. Fundamentally, the majority of the Court was concerned that the IAA encroached too far into areas of exclusive provincial authority and would upset the careful balance of legislative power provided for in Canada's Constitution Act, 1867.

The IAA and the Reference

Our prior articles discussed the structure of the IAA (here) and the process the federal government used to develop and implement that Act (here and here). Briefly, the IAA was tabled in Canada's House of Commons in 2018 and ultimately took effect in August 2019 when its predecessor legislation, the Canadian Environmental Assessment Act, 2012, was repealed. The IAA prohibits project proponents and federal authorities from doing anything in connection with a "designated project" without first completing the impact assessment process. Regulations accompanying the IAA list the “designated projects” which must complete the federal impact assessment process (Project List Regulations). Importantly, the Project List Regulations include a number of activities that take place wholly within a single province and which do not necessarily have any impact on federal responsibilities (e.g., fisheries or migratory birds).

The review processes under the IAA are comprehensive and require consideration of at least 20 different factors ranging from environmental, health, social, and economic impacts as well as impacts on "sustainability," Canada's international climate change commitments, and the “intersection of sex, gender and other identity factors." At the end of that review process, the federal Minister of Environment and Climate Change Canada, or federal cabinet, must decide whether to approve the Project.

In September 2019, Alberta initiated a constitutional challenge of the IAA, focusing specifically on how the IAA affected intra-provincial projects, such as natural resource developments. When applied to many of the intra-provincial projects identified in the Project List Regulation, Alberta claimed that the IAA was a "Trojan horse" that permitted the federal government to conduct far-ranging inquiries into, and ultimately regulate, matters within core provincial jurisdiction. The provinces of Ontario and Saskatchewan intervened in support of Alberta's position, as did the Woodland Cree First Nation, the Indian Resource Counsel, and several industry and business associations.

The federal government responded, asserting the IAA does not regulate intra-provincial projects, but rather provides an impact assessment mechanism whereby "adverse federal effects," including greenhouse gas (GHG) emissions, arising from such projects can be regulated accordingly. Various environmental groups and First Nations groups intervened in favour of the federal government.

Majority Opinion

In a 4-to-1 split ruling, the majority of the Court agreed with Alberta, finding that the IAA and Project List Regulations are unconstitutional. In doing so, the majority was careful to clarify that the reference case was not about the legitimate concerns all governments and citizens have about climate change, or how best to address them. Rather, the majority was primarily concerned with preserving the "great genius of our constitutional structure," including the "carefully calibrated division of powers between federal and provincial governments."

As context for its reasons, the majority provided a detailed overview of the history of the constitutional amendments which gave the provinces ownership of, and exclusive power to legislate regarding, natural resources. The majority also discussed principles of federalism and subsidiarity (i.e., the principle that law-making is often best achieved at a level closest to the affected citizens) which it said weighs heavily in the constitutional analysis. The majority reliance on these principles is clear throughout its reasons.

The majority reviewed the framework for deciding a division of powers question which involves first characterizing the "pith and substance" (i.e., the "dominant purpose" or "true subject matter") of the impugned legislation and, second, classifying the legislation by assigning the "matter" to one of the heads of legislative power.

When characterizing the IAA, the majority stressed that the purpose of the IAA was to establish an impact assessment and regulatory regime to review and regulate all effects of federal designated projects and intra-provincial designated projects that would otherwise fall within provincial jurisdiction. It then focused considerable attention on describing the legal effects of the IAA. Among other things, the majority noted:

• "Effects-based trigger" not tied to federal decision-making power: Relying on prior Supreme Court of Canada (SCC) guidance, the majority said the federal environmental assessment of an intra-provincial activity that would otherwise be subject to exclusive provincial jurisdiction must be tied to some constitutional decision-making authority (e.g., under the Fisheries Act).
• Considering "all effects" goes too far: The "starting point" is that provincial legislatures have primary jurisdiction over intra-provincial projects. Despite this, the IAA empowers the federal government to consider any and all effects when making a public interest determination. Parliament does not have constitutional jurisdiction to regulate intra-provincial designated projects from inception to completion.
• Federal "public interest" veto over intra-provincial projects: The IAA gives the federal executive an effective veto over every intra-provincial designated project based on federal policies and priorities. This is the "apex of regulation" and, importantly, several of the mandatory factors that must be considered at the decision-making phase (e.g., the "need for the designated project") are not linked to any federal head of power.

The majority analysis also considered the IAA could pass constitutional muster under the "national concern" doctrine. That doctrine was recently relied upon by the SCC in the Carbon Tax Reference decision to find that the federal government could establish minimum national standards for GHG pricing stringency. The majority stressed that the SCC did not extend Parliament's power to regulate GHG emissions generally. For the majority, allowing the federal government to regulate GHG emissions from intra-provincial projects under the IAA using the "national concern" doctrine would effectively "unwind federalism." The majority explained that if a given intra-provincial project that would otherwise be subject to exclusive provincial jurisdiction failed to satisfy the federal government on its GHG emissions, the IAA would effectively allow the federal government to veto the otherwise provincially-regulated project.

Considering the purpose as well as the legal and practical effects of the IAA, the majority determined that the primary "matter" of the IAA consisted of "the establishment of a federal impact assessment and regulatory regime that subjects all activities designated by the federal executive to an assessment of all their effects and federal oversight and approval." On the issue of classification, the majority confirmed that the provinces are empowered to regulate all aspects of intra-provincial designated projects, including GHG emissions, under their own several heads of power. The majority held that, as it relates to intra-provincial projects, this "intrudes fatally into provincial jurisdiction and the provinces’ proprietary rights as owners of their public lands and natural resources." The majority therefore held the IAA is ultra vires Parliament.

Minority Opinion

Justice Greckol authored an equally thorough dissenting opinion rejecting the notion that the IAA is a constitutional "Trojan horse" and finding, instead, that the IAA and Project List Regulation are a valid exercise of Parliament's authority to legislate on the matter of the environment. While stressing the importance of co-operative federalism and the presumption of constitutionality, Justice Greckol's minority opinion warned that the "planet is on fire" and that that constitutional interpretation should allow for cooperation to address such concerns.

Justice Greckol found that to the extent the IAA affected intra-provincial projects, the reach of that Act and the regulations was confined to effects in federal jurisdiction (e.g., fish and fish habitat, migratory birds, Indigenous peoples, and interprovincial effects). She concluded that different aspects of the IAA could be classified as falling within Parliament's authority over fisheries, Imperial Treaties, Indians, and Lands reserved for the Indians," and the residual Peace Order and Good Government (POGG) power. With respect to GHG emissions specifically, Justice Greckol acknowledged that the federal government could not regulate GHG emissions from intra-provincial projects per se. However, she held that the federal government could review and consider effects of GHG emissions on matters within federal jurisdiction.

Significance

Opinions on reference questions are exactly that: opinions. The Court did not issue any order or declaration, meaning that the opinion does not have any binding effect within Alberta or elsewhere in Canada. Shortly after the opinion was released, Prime Minister Justin Trudeau told the House of Commons that the federal government planned to appeal the decision to the SCC.

Following the Carbon Tax Reference, a decision from the SCC on the constitutionality of the IAA and the Project List Regulations could offer additional clarity for project proponents and governments on the role of the federal government in regulating environmental impacts from intra-provincial projects. Without being exhaustive, both the majority and the minority opinions from the Court seem to invite the SCC to weigh in on issues such as:

• Triggers for federal review: The majority opinion stresses that federal environmental assessments must be tied to federal constitutional decision-making authority. Whereas, the minority opinion says that no such decision-making trigger is required and that other "safeguards" within the IAA ensure that the federal government "stays within its constitutional lane."
• Scope of review and decision-making power: The majority found that the IAA allows the federal government to review any and all effects of intra-provincial designated projects and to make a broad "public interest" determination based on those factors, many of which are not directly tied to a federal head of power. The minority opinion explained that decision-makers needed complete information about a project's effects within federal jurisdiction in order to make an informed decision about whether such effects were in the "public interest."
• Regulating GHG emissions from intra-provincial projects: The majority found that the federal government was using the IAA to regulate GHG emissions from designated projects, amounting to jurisdictional overreach. The minority opinion held that GHG emissions were properly subject to IAA review and decision-making provided that GHG emissions from the designated project "may have effects within federal jurisdiction."

An appeal to the SCC could provide additional clarity on each of these issues and several others.

Any further commentary from the SCC on the scope of the federal government's ability to review and regulate GHG emissions from a particular project will be especially important. Even under Justice Greckol's more liberal interpretation that would permit the federal government to regulate GHG emissions where those emissions would impact a matter within federal competence, it remains unclear how the federal government could justify imposing conditions on individual projects requiring them to develop emissions management plans or to reach net zero emissions by a given date.

Dentons will continue to monitor developments on this topic. For the latest information and developments, see our Canada Regulatory Review blog and sign up for future alerts here.

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Special thanks to Serena Sajan, student-at-Law, who assisted in preparing this insight.