Supreme Court Rules Federal Environmental Assessment Law Oversteps Constitutional Bounds

In a decision with profound implications for Canada's natural resource sector and federal-provincial relations, the Supreme Court of Canada has declared the federal government's cornerstone environmental assessment legislation, the Impact Assessment Act (IAA), to be largely unconstitutional. In a 5-2 majority opinion, the court found that the Act's framework for assessing major projects like pipelines and mines improperly intrudes on powers explicitly granted to the provinces under the Constitution.

The ruling is the culmination of a years-long battle between Ottawa and several provinces, most notably Alberta, which argued the legislation gave the federal government a de facto veto over resource projects within provincial borders. The decision forces the Trudeau government back to the drawing board to redraft a key piece of its environmental and climate agenda.

Background of the 'No More Pipelines Act'

The Impact Assessment Act, formerly known as Bill C-69, was passed in 2019. It replaced the previous environmental assessment regime under the Harper government, broadening the scope of project reviews. The IAA required regulators to consider a wide range of potential effects, including environmental, health, social, and economic impacts, as well as impacts on Indigenous peoples and the project's contribution to climate change commitments.

From its inception, the legislation was highly contentious. Then-Alberta Premier Jason Kenney famously dubbed it the "No More Pipelines Act," arguing its vague criteria and broad scope would create insurmountable regulatory hurdles and deter investment in Canada's energy sector. The Alberta government launched a constitutional challenge, referring the matter to its provincial Court of Appeal, which found the Act unconstitutional in 2022. The federal government subsequently appealed that decision to the Supreme Court of Canada.

The Court's Constitutional Reasoning

Writing for the majority, Chief Justice Richard Wagner focused on the division of powers outlined in Canada's Constitution. While acknowledging that environmental protection is a shared responsibility, he affirmed that both levels of government must operate within their respective constitutional spheres. The federal government has jurisdiction over specific areas such as fisheries, navigation, and interprovincial undertakings, while provinces have authority over local works, property, and civil rights, which covers the management of most natural resources.

The Supreme Court found the IAA's two-part structure to be constitutionally flawed. The first part, the "designated projects" scheme, defines which projects are subject to federal review based on their potential to cause effects within federal jurisdiction. The court found this part of the scheme was too broad. The second part, the public interest assessment, was deemed to be a significant overreach. The majority concluded that this assessment was not focused on federal aspects but on the project as a whole, effectively allowing the federal government to regulate projects entirely within provincial jurisdiction.

"The scheme invites the federal government to make decisions about projects that it has no jurisdiction to regulate," Chief Justice Wagner wrote. "This constitutional flaw is fatal."

The dissenting justices, Andromache Karakatsanis and Mahmud Jamal, argued that the IAA represented a valid exercise of federal power. They contended that the legislation's focus on "effects within federal jurisdiction" was a legitimate constitutional trigger for federal oversight and that the scheme was designed to facilitate cooperative federalism in addressing complex, cumulative environmental challenges.

Reactions and Future Implications

The ruling was immediately hailed as a major victory by Alberta Premier Danielle Smith and Saskatchewan Premier Scott Moe, who led the charge against the legislation. "This is a massive win for provincial rights and for the people of Alberta," Smith stated. "It affirms that the federal government is not a national government and that it cannot simply take over all aspects of provincial jurisdiction whenever it feels like it."

In Ottawa, federal Environment Minister Steven Guilbeault and Natural Resources Minister Jonathan Wilkinson expressed disappointment but confirmed the government would respect the court's opinion. They pledged to quickly introduce amendments to the Act to bring it in line with the court's guidance while maintaining a rigorous and efficient assessment process.

Industry groups, including the Canadian Association of Petroleum Producers (CAPP) and the Mining Association of Canada, welcomed the clarity provided by the court. They have long argued for a more predictable and efficient regulatory environment to attract investment. However, the immediate consequence is a period of uncertainty for dozens of projects currently under review.

Environmental organizations expressed concern that the decision could weaken environmental protections. They fear a revised, narrower law will fail to adequately address the cumulative effects of major projects and Canada's climate change commitments.

The challenge of creating clear, modern regulatory frameworks is a central theme in Canadian governance today. As Ottawa reworks its approach to environmental law, it is also pushing forward in other key economic areas. For instance, the government recently announced a landmark $2.4 billion AI strategy to bolster Canada's position in the global technology race. This parallel effort underscores the need for effective governance that can foster growth across diverse sectors. Crafting a successful industrial policy requires balancing competing interests, a goal also reflected in the government's comprehensive national AI strategy, which seeks to promote economic development while establishing strong ethical guardrails. The Supreme Court's decision on the IAA serves as a powerful reminder that all such federal initiatives must be built on a sound constitutional foundation.

The path forward involves a careful legislative redrafting process. The federal government must now design a new assessment regime that targets specifically federal impacts without overreaching into provincial domains. This decision will undoubtedly shape federal-provincial dynamics and the future of resource development in Canada for years to come.