Impact Assessment Act amendments satisfy no one

When the Supreme Court of Canada released its advisory opinion on the constitutionality of the federal Impact Assessment Act (IAA) in October 2023, it expressed a fond hope that the provinces and Ottawa could learn to work together “harmoniously” to “exercise their respective powers over the environment.”

Eight months later, nobody’s holding their breath, waiting for that to happen.

Just weeks after the federal government pitched amendments to the Act in response to the high court’s ruling, Alberta declared the changes “unconstitutional” and threatened further court action. Long-term regulatory certainty for investors seems anything but certain.

“In a way, it doesn’t really matter whether the federal government is in the right or the wrong,” says Sander Duncanson, a partner in environmental and Indigenous law at Osler in Calgary.

“The continued fighting over the rules is undermining investor confidence and hurting the country.”

Enacted in 2019, the IAA subjected “designated projects” to a statutory prohibition on any activities that could cause “adverse effects” in areas under federal jurisdiction without federal government approval. What infuriated the provinces was how the law gave the federal government sweeping powers to declare something a designated project — even projects that fall under provincial authority and operate entirely within provincial borders.

The regulations associated with the IAA listed activities that were automatically subject to the law, including certain mining projects (for thermal coal, for example), hydroelectric projects, oil sands operations, and oil and gas extraction. The law also permitted the federal environment minister to pull an activity under the IAA’s authority if it might cause adverse effects within federal jurisdiction or if public concerns related to those effects warranted federal regulation.

The law basically gave the federal cabinet the power to decide whether a designated project went forward based on federal policy priorities, including whether it would contribute to or hinder government efforts to boost sustainability or fight climate change.

In its reference ruling on the IAA (technically non-binding but very hard to ignore), the Supreme Court majority concluded that the “designated projects” aspect of the law was unconstitutional and ultra vires because it sought to regulate projects in their entirety rather than just those aspects under federal authority.

The court said the designated projects scheme “grants the decision maker a practically untrammelled power to regulate projects qua projects, regardless of whether Parliament has jurisdiction to regulate a given physical activity in its entirety.”

Fair enough.

The federal government released draft amendments to the IAA in April. While they preserve the designated projects list, they narrow the law’s ambit to “adverse effects within federal jurisdiction” and state that impact assessments may only be required if the regulator is satisfied it may cause adverse effects within federal jurisdiction.

Of course, the amendments managed to satisfy no one. Joshua Ginsberg, a staff lawyer at Ecojustice, points out that the designated projects system predated the IAA and was introduced by the Harper Conservatives in the Canadian Environmental Assessment Act. He says the amendments amount to the federal government surrendering the power to consider trans-border greenhouse gas emissions as a factor.

“The amendments reduce the federal authority to marine pollution and interprovincial water pollution, even though these things are often tied to the same causes as air pollution,” Ginsberg says.

“The federal government has been regulating air pollution for decades, and the Environmental Protection Act is constitutional.

If the federal government is permitted to regulate water pollution, he wonders why it would hold back when the trans-border pollution is in the air?

“That’s the sort of thing that just can’t be done at the provincial level.”

But do the amendments pull the law back across the ultra vires line?

“Is it constitutional now? I’m not too sure about that,” says Duncanson.

“It’s still unclear which projects will be made subject to federal assessments.”

The process itself will still be very lengthy. The criteria the feds intend to apply are also unclear.

“The federal government can still use this as a tool to decide whether projects that otherwise fall under provincial authority can proceed,” he says. “Most major projects could be seen as having ‘non-negligible effects’ on areas of federal jurisdiction. If you want to find a non-negligible effect, you can if you look long enough.”

Duncanson says it will all come down to how the federal government uses the law. Will it be narrowly focussed on effects in federal jurisdiction? Or broadly, as a tool to regulate major projects across the country in line with federal policy?

And might the Supreme Court’s ruling have implications for two other federal initiatives that have drawn the ire of the provinces — clean electricity regulations and an emissions cap for the oil and gas industry? It seems plausible, and some law firms have advised their clients that the high court’s ruling may jeopardize those initiatives.

Or maybe not.

In a recent paper on the Supreme Court reference, three leading lights at the University of Calgary’s faculty of law — Martin Olszynski, Nigel Bankes and David Wright — argue that the clean electricity regulations and the emissions cap are safe because the federal government is relying on a different “head of power” to support them — the criminal law power.

“Contrary to some political rhetoric … this does not mean that these regulations will form part of Canada’s Criminal Code,” they wrote.

"Rather, the Supreme Court has long since recognized that section 91(27) refers to the criminal law in a broad sense.”

The three academics wrote that the federal government has used this route to uphold prohibitions on tobacco advertising (RJR-MacDonald Inc v Canada) and the “toxic substances” regimes under the Canadian Environmental Protection Act. Prime Minister Stephen Harper’s government used those regimes to list greenhouse gases as toxic substances, and they also support federal regulations on renewable fuels.

No one should expect the argument between the federal and provincial governments to end there, of course. Certainly, Olszynski, Bankes and Wright don’t see things settling down any time soon.

“In light of the chasm between Alberta and the federal government with respect to the imperative of reducing GHG emissions, as well as the hyperbole and misinformation that followed the release of this reference decision,” they wrote, “we suspect that more court battles loom ahead.”