The Supreme Court of Canada recently issued the next chapter in a line of cases confirming the division of power between the federal and provincial governments when it comes to environmental regulation.
The issue arose from a reference by the Government of Alberta to the Court of Appeal, asking the court to determine whether the federal Impact Assessment Act and its related Regulations were constitutional. In May of 2022, a majority of the Court of Appeal held that they were not and the Government of Canada appealed.
The Supreme Court issued its decision in Reference re Impact Assessment Act (2023 SCC 23) on October 13, 2023. The Court allowed the appeal in part, with the majority concluding that portions of the legislative scheme do fall within the federal government’s jurisdiction. The bulk of the Act, however, was held to extend beyond Parliament’s legislative competence and is therefore unconstitutional.
The decision addresses a significant issue because, despite the recognized importance of environmental protection, sections 91 and 92 of the Constitution Act, 1867 (which distribute areas of jurisdiction between the provincial and federal governments) do not directly deal with the “environment” itself. Reviewing the prior case law, Chief Justice Wagner summarizes this issue at paragraphs 114-116 of the decision as follows:
This Court has recognized that the environment is a “constitutionally abstruse matter which does not comfortably fit within the existing division of powers without considerable overlap and uncertainty.”
…
Accordingly, neither level of government has exclusive jurisdiction over the whole of the “environment” or over all “environmental assessment.” Rather, this Court has acknowledged that both levels of government can legislate in respect of certain aspects of environmental protection, including certain aspects of the environmental assessment of physical activities. Shared federal and provincial responsibility for environmental impact assessment is “neither unusual nor unworkable.”
[Citations omitted]
Although the Court acknowledged that environmental assessments may have a double aspect that can be properly legislated by either level of government, it is critical that the “pith and substance” of the legislation be confined to that government’s exclusive heads of power. As the Court explains, the fact that a law “incidentally touches on a head of power belonging to the other level of government does not affect its validity,” provided that the “thrust or dominant characteristic” of the legislation is focused on subject matter within its jurisdiction. Consequently, while the federal government may pass legislation governing environmental impacts on fisheries (for example), which are specified as a federal head of power by the Constitution, it cannot pass legislation that is driven by the regulation of natural resources, which are within the jurisdiction of the province.
For this reason, the Supreme Court concluded that portions of the Impact Assessment Act exceed the federal government’s authority because the decision-making process it imposes is driven by factors within the exclusive jurisdiction of the provinces.
The Impact Assessment Act creates two distinct schemes. The first serves to assess projects carried out or financed by federal authorities on federal lands or outside of Canada. This component of the Act was held to be clearly within the federal government’s jurisdiction and therefore constitutionally sound.
The second scheme applies to “designated projects” identified by the Minister of the Environment that “may cause adverse effects within federal jurisdiction or adverse direct or incidental effects, or public concerns related to those effects.”
Notably, the Act empowers the Minister to designate any physical activity based on its anticipated effects, regardless of whether the project itself is under federal or provincial jurisdiction. This, on its own, is not problematic. As the Court notes, an impact assessment is a planning tool and necessarily starts from a place of “informational uncertainty.” The Court therefore concluded that it is not possible to limit the Act to apply only to projects that touch upon a federal jurisdiction, because the full effects of a project may not be known until more information is compiled.
Once a project is designated, however, the legislation requires the responsible agency to conduct a screening process to determine whether a full impact assessment is necessary based on criteria imposed by the Act. Some of these factors require the agency to consider adverse effects on areas under federal jurisdiction, while others place equal weight on mandatory considerations such as: comments received from the public; any study or plan prepared by any jurisdiction; and “any other factor that the Agency considers relevant.” The result, in the Court’s view, is that a full impact assessment could be imposed under the Act based on considerations that are wholly unrelated to any area of federal jurisdiction. This is particularly troubling given the broad discretion afforded to the Minister in designating projects; if the designation process “casts a wide net” to allow for greater information gathering and review, greater scrutiny must be applied at the screening stage to ensure that the requirement for an assessment is driven by proper federal concerns.
The Supreme Court found similar deficiencies with the factors imposed by s. 63 of the Impact Assessment Act for the final decision-making process following the completion of an impact assessment. Specifically, the Minister’s decision ultimately turns on whether the identified effects are significant when considering the “public interest.” The majority of the Court determined that this analysis necessarily calls for a decision based on an evaluation of the project as a whole – as opposed to solely of the adverse effects on areas within the federal jurisdiction – and inappropriately extends the scope of the Act beyond Parliament’s authority.
Given that reference decisions such as this one serve to provide judicial interpretation, the Impact Assessment Act was not quashed by the Supreme Court’s ruling and remains on the books. In response to the decision, the Government of Canada issued interim guidance on the impact assessment process on October 26, 2023, pending the anticipated legislative amendments required to align the Act with factors properly within the federal jurisdiction.
About the Author: Philip Osterhout practices Municipal, Land Development & Expropriation law. He regularly represents developers, businesses, homeowners and municipalities navigating land use regulations and a full range of development approvals.
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