Supreme Court ruling to reshape Canadian environmental assessment rules

In a landmark decision that has reignited the age-old debate about the division of powers between federal and provincial authorities, Canada’s Supreme Court has declared certain provisions of the Impact Assessment Act (IAA) unconstitutional. The Oct. 13 ruling, delivered with a 5-2 majority, specifically found the IAA’s provisions related to the assessment of “designated projects” to be outside the jurisdiction of the federal Parliament and, therefore, unconstitutional. 

While the implications of the decision in the short-term are still unclear, Sean Sutherland, a partner at law firm Osler and who represented the Business Council of Alberta as an intervenor in the case, said it would reinstate confidence regarding the federal environmental impact assessment process which the IAA had eroded. 

“This is a significant decision for major project proponents concerned about the overbreadth of the IAA, delays and increased costs to major projects captured by the IAA, and decision-making regarding major projects within a province by federal politicians based on federal policies and priorities,” Sutherland told The Northern Miner in an interview in October. 

“The decision itself, in the medium and long term, provides more certainty because we have guidance from the courts on what those proper jurisdictional limits are. In the short term, it’s a bit of another wait-and-see.”  

Sutherland said the decision challenges Canada’s approach to environmental assessments and is expected to lead to significant revisions to the IAA. The legislation was passed in August 2019, superseding the Canadian Environmental Assessment Act of 2012. 

The majority ruling applies to designated projects — typically large-scale or significant developments within Canada that may substantially impact the environment and surrounding communities. 

Designated projects undergo a more thorough assessment process to ensure responsible development. However, critics have long cautioned that the IAA introduced more ambiguity around project approvals, and the final say under that act was a decision by the federal cabinet – a group of politicians whose policies and priorities can change. 

In its response, the Mining Association of Canada (MAC) noted the uncertainty caused by the ruling will hurt the mining industry and Canada’s energy transition. 

“We call on Canada and Parliament to respond to the Court opinion expeditiously to shorten the period of investment uncertainty,” the association said in an Oct. 13 statement. “Prolonged uncertainty is a roadblock to building the mines and infrastructure we urgently need to achieve our climate change, supply chain security and critical minerals goals.” 

MAC said it will carefully analyze the court’s opinion before providing constructive advice. 

The federal government said on the same day that it accepted the ruling.  Environment and Climate Change Minister Steven Guilbeault and Justice Minister and Attorney General of Canada Arif Virani said in a joint statement the government planned to quickly improve the legislation through Parliament. 

“Our immediate priority will be to provide guidance to our many stakeholders and Indigenous partners to ensure as much predictability as possible for projects affected by this opinion,” the minister said. 

“We understand the importance of timeliness in determining a path forward. The government wants to ensure clarity and certainty for investment in the projects this country needs.” 

According to the government, the Act allows each province and territory to make separate decisions based on their areas of jurisdiction, supporting the federal government’s ‘one project, one assessment’ objective. 

Currently, 23 projects are undergoing the federal impact assessment process under the IAA, with eight final decisions already made, allowing those projects to proceed. 

While the court was split on designated projects, it unanimously affirmed the IAA’s validity concerning projects carried out or financed by federal authorities on federal lands or outside Canada. 

Majority opinion 

Chief Justice Richard Wagner laid out the reasons for the majority opinion, saying the ‘designated projects’ scheme exceeded the bounds of federal jurisdiction for two main reasons. 

“First, the scheme is not directed at regulating ‘effects within federal jurisdiction,’ shifting the decision away from the acceptability of adverse federal effects,” he wrote. 

“Second, the IAA’s definition of ‘effects within federal jurisdiction’ is itself over-broad, going far beyond the limits of federal jurisdiction in the Constitution.” 

In the majority’s view, the IAA failed to tailor its regulations to the aspects of projects falling within exclusive federal jurisdiction, treating all “designated projects” similarly, regardless of Parliament’s jurisdiction over them.  

They also argued that the IAA’s broad scope of “effects within federal jurisdiction” allowed the federal government to deny projects based solely on their greenhouse gas emissions, extending beyond its scope of its “peace, order, and good government” power as well as others outlined in the Constitution. 

In a dissenting opinion, Justice Andromache Karakatsanis argued that the IAA establishes an environmental assessment process that evaluates the effects of major projects on issues within federal jurisdiction. 

“Instances of government action that exceed statutory authority, federal jurisdiction, or both could be challenged on judicial review in future cases,” he wrote. 

While the majority’s ruling will fundamentally reshape federal assessment and decision-making over major projects, it emphasizes that federal decision-making must consider only factors within federal legislative jurisdiction rather than broad policy-based considerations. 

The judgment also casts doubt on the government’s plans for a cap on oil and gas emissions and a clean electricity standard, suggesting that these initiatives may exceed federal jurisdiction and erode the division of powers under the Constitution, Karakatsanis wrote. 

Legal analysis 

While the reference decision does not technically strike down the legislation, it clearly indicates from Canada’s highest court that the IAA and its regulations need significant revision to align with Canada’s constitutional framework, law firm Bennett Jones said in an Oct. 16 legal note. 

It also said the majority decision sent a strong message that environmental protection must respect the constitutional division of powers. 

“The opinion that the IAA and regulations are unconstitutional also confirms that primary jurisdiction over non-renewable natural resources rests with the provinces,” the firm wrote. 

An analysis by Osler, which represented the Business Council of Alberta in the case, noted the decision means that federal decision-making regarding assessments and approving projects located entirely within a province should be based solely on factors within federal legislative jurisdiction.   

“Consequently, any amended version of the IAA must prioritize federal jurisdiction and effects within that jurisdiction, rather than broad policy considerations unrelated to federal authority,” Osler national co-chair Maureen Killoran wrote in an Oct. 13 Osler Update. 

In addition, the court highlighted that the IAA’s lack of a materiality threshold for designation leads to federal decision-making on projects that may not be sufficiently tied to federal jurisdiction. 

“This could have implications beyond the current case, affecting other federal decision-making powers. The Court expressed concern that the current legislation allows for the regulation of projects on broad grounds, potentially granting decision-makers excessive authority over projects regardless of federal jurisdiction,” Killoran wrote. 

Lastly, the court’s judgment raises questions about the federal government’s plans related to the energy transition, which have faced challenges for encroaching on provincial jurisdiction.  

“These statements suggest that other federal initiatives that specifically target greenhouse gas emission reductions, such as a cap on oil and gas emissions and a clean electricity standard, may similarly exceed the federal government’s jurisdiction and erode the division of powers under the Constitution,” Killoran wrote. 

Roadblock to mining 

Any changes to the IAA will impact the mining industry, with many projects across the country currently undergoing federal assessment and more entering the process. 

MAC also highlighted the complex regulatory framework that mining projects face, including comprehensive provincial regulations and various federal requirements. The association argued there is sufficient regulatory oversight governing mine developments. 

“The federal government does not have jurisdiction over mining on provincial Crown land and does not have a dedicated regulator for mines. However, most new mining projects and major expansions have been subject to the federal IAA and predecessor legislation,” it said. 

For instance, the abundance of water in most parts of Canada means that a mining project may also require authorization under the Fisheries Act habitat provisions, an approval or Governor in Council Order under the Canadian Navigable Waters Act, and, in some cases, an amendment to Schedule 2 of the Metal and Diamond Mining Effluent Regulations. All mines must also comply with relevant general federal legislation such as the Explosives Act, the Species at Risk Act, the Migratory Birds Convention Act and the Canadian Environmental Protection Act. 

There’s an added layer with uranium projects. Uranium mines are subject to the exact provincial and federal requirements as other mines and are further regulated by the Canadian Nuclear Safety Commission, adding yet another source of federal and provincial regulatory overlap. 

“MAC encourages the federal government and Parliament to take this extensive regulatory oversight into account as it considers its response to the Court’s opinion,” it said.