By Hannah Rachel Solmon and Jared Knott

In Reference re Impact Assessment Act, 2023 SCC 23, five out of seven Canadian Supreme Court justices found that the new environmental Impact Assessment Act (“IAA”) is too broad in its purported authority over environmental impacts, and ruled that it is partially unconstitutional. This decision has negative implications for the future of comprehensive environmental assessment legislation in Canada.

Overview of the Act

In 2019 the Canadian Parliament enacted the IAA (also known as Bill C-69), which establishes a new information-gathering and regulatory scheme for assessing environmental impacts of proposed development projects on federal land. The IAA follows its predecessor the Canadian Environmental Assessment Act, 2012 (“CEAA 2012”).

Under the IAA, the general impact assessment process for “designated projects” (which include any physical activity on federal land) is divided into three main phases: the planning phase, the impact assessment phase and the decision‑making phase. The IAA also includes a separate component dealing exclusively with projects carried out or financed by federal authorities on federal lands or outside Canada, which was not challenged as unconstitutional.

Designated Projects Scheme

Under the planning phase, the proponent of a project must provide the Impact Assessment Agency (the “Agency”) with an initial project description. The Agency then consults with a number of parties and decides whether the project requires an impact assessment.

The impact assessment phase involves preparation of an assessment report, which sets out the potential adverse effects that are likely to be caused by the carrying out of the designated project. The report must also consider various factors, including changes to the environment or health, social or economic conditions, and the positive and negative consequences of these changes.

Finally, during the decision‑making phase, the Agency must balance the pros and cons of the proposed project to determine whether it is in the public interest. If the Agency concludes that the project is in the public interest, the Minister of the Environment must impose appropriate conditions to mitigate negative effects identified in the impact assessment phase.

History of the Reference

In 2021, the Province of Alberta asked the Alberta Court of Appeal (“ABCA”) for a reference on whether the IAA was wholly or partially unconstitutional. A reference is a judicial process by which a government can refer important questions of law to the court to decide.

In 2022, a majority of the ABCA concluded that the IAA and its Regulations were ultra vires (outside the authority) of Parliament and therefore unconstitutional in their entirety. The Supreme Court of Canada (“SCC”) then heard the appeal of the reference, releasing their decision on October 13th, 2023.

The SCC Decision

The SCC was tasked with determining whether the purpose and effect of the IAA’s impact assessment scheme were within Federal authority under the division of powers set out in s. 91 the Constitution Act 1867. If the Court determined the subject matter of the IAA fell under a “head of power” assigned to the Federal government, the legislation would be valid.

Characterizing the purpose and effects of “Environmental” legislation can be particularly difficult, since the “Environment” per se is not a head of power addressed under the Constitution. Instead, environmental management falls under many different areas of constitutional responsibility. Accordingly, neither the federal nor provincial government has exclusive jurisdiction over the whole of the “environment.” Rather, both levels of government must cooperate if they want to accomplish a truly comprehensive environmental assessment scheme.

Ultimately, the Chief Justice Wagner for the SCC majority decided that the general federal impact assessment scheme was unconstitutional. This was because 1) the three-step regulatory scheme for “designated projects” was not directed at regulating environmental effects solely within federal jurisdiction; and 2) the defined term “effects within federal jurisdiction” was overbroad and captured effects outside federal legislative jurisdiction.

In sum, the scheme’s decision‑making mechanism did not regulate only federal impacts. Instead, it granted the Agency a broad power to regulate all projects, regardless of whether Parliament had jurisdiction to regulate a given project in its entirety. For example, under the “impact assessment” phase of the IAA’s three part scheme, the Agency must take into account several factors, only two of which are tied to federal jurisdiction. As such, an impact assessment could be required for reasons other than the project’s possible impacts on areas of federal jurisdiction.

Similarly, the “decision-making phase” includes factors that are not confined to federal legislative competence. As such, the final balancing of positive and negative impacts focuses on whether the project, as a whole, is in the public interest, rather than whether the federal effects are in the public interest.

The SCC Dissent

Justices Karakatsanis and Jamal dissented. They were of the opinion that the IAA was a valid exercise of federal parliamentary jurisdiction. In their decision, they emphasized that “the environment,” by its very nature, is complex. Because it overlaps areas of both federal and provincial jurisdiction, it is essential that both levels of government cooperate to legislate effectively. As such, both levels of government must approach environmental assessment legislation with respect and presumed good faith. Additionally, courts should not presume, by default, that a legislative regime will not be administered in a constitutionally compliant manner or find legislation unconstitutional simply because it could conceivably be misused. Instead, courts should interpret such legislation to comply with constitutional limits, favouring the simultaneous operation of statutes enacted by both levels of government whenever possible.

Implications of the Reference

Finding the right constitutional balance in environmental assessment legislation has proven difficult since the first Canadian Environmental Assessment Act of 1995. Unfortunately, the IAA Reference only signals continued challenges with enacting comprehensive environmental protection legislation under our parliamentary democracy.

Under the previous CEAA 2012, federal environmental assessment was only necessitated when there was no provincial authority overseeing key areas of federal legislative control. Further, the CEAA 2012 was more narrowly focused on selected areas of federal legislative control. This meant that the prior environmental assessment regime was more “patched together” rather than comprehensive. While this meant the CEAA 2012 was clearly within federal constitutional authority, it also didn’t have much “teeth” or power to actually curtail projects with potential adverse impacts, since decision-makers could only take into account specifically federal negative impacts. This narrow focus was significantly broadened in the IAA to include full range of impacts and benefits of proposed projects. However, now that the legislation has the “teeth” to actually do its job in protecting the environment, it now oversteps its constitutional authority.