Supreme Court Finds Federal Impact Assessment Act Largely Unconstitutional

In a landmark decision that reshapes the landscape of environmental regulation and resource development in Canada, the nation's top court has found key provisions of the federal Impact Assessment Act (IAA) to be unconstitutional. The Supreme Court of Canada's landmark advisory opinion, released following a reference case initiated by Alberta, concluded that the legislative scheme is a clear example of federal overreach into powers explicitly granted to the provinces under the Constitution.

The 5-2 majority opinion, written by Chief Justice Richard Wagner, centered on the division of powers outlined in the Constitution Act, 1867. The court found that the IAA's designation process, which determines which projects are subject to federal review, is overly broad. The legislation's framework allowed the federal government to assess a project's overall "public interest," considering a wide range of factors beyond clear federal jurisdiction, such as environmental effects on fisheries, migratory birds, or Indigenous peoples. Chief Justice Wagner wrote that this approach effectively gave the federal government a veto over projects that fall squarely within provincial jurisdiction, such as the development of natural resources.

The IAA, enacted in 2019 and often referred to by its legislative name, Bill C-69, was designed to replace the previous environmental assessment process under the Harper government. The Trudeau government argued it was necessary to restore public trust and ensure that the environmental, health, social, and economic impacts of major projects like mines, pipelines, and dams were thoroughly evaluated. However, it was met with fierce opposition from several provinces, most notably Alberta, which dubbed it the "No More Pipelines Act." These provinces argued the law created significant uncertainty for investors, delayed critical economic projects, and usurped their constitutional authority to manage their own resources.

A Victory for Provincial Rights

The ruling was immediately hailed as a major victory by Alberta Premier Danielle Smith, whose government led the constitutional challenge. She stated the decision affirms that the federal government cannot impose its will on provincial resource projects and that it represents a win for economic development and regulatory clarity. Other provinces, including Saskatchewan and Ontario, which had supported Alberta's position, also welcomed the court's opinion. The decision is seen as a powerful reaffirmation of the principle of cooperative federalism, where both levels of government must operate within their respective constitutional spheres.

The core of the legal argument rested on whether the primary purpose of the IAA was to regulate federal matters or to regulate projects themselves. The Supreme Court concluded that the law's focus was on the latter, making its primary thrust an intrusion into provincial powers. While the federal government has clear authority over areas like fisheries, navigation, and Indigenous lands, the court found the IAA used these as a foothold to conduct a wide-ranging assessment of projects in their entirety, which it is not constitutionally permitted to do.

Federal Response and the Path Forward

In response to the ruling, federal Environment Minister Steven Guilbeault and Justice Minister Arif Virani stated the government accepts the court's opinion and will move quickly to amend the legislation. They emphasized that the goal remains to have a strong, predictable, and effective environmental assessment process. The government's challenge will be to redraft the law so that it is constitutionally sound while still achieving its environmental objectives. The new legislation will need to be more narrowly focused on the specific, direct impacts on areas of federal jurisdiction, rather than a project's overall desirability.

This creates a period of uncertainty for projects currently under review. The Impact Assessment Agency of Canada will need to assess how the court's decision affects its ongoing work. For industry, the long-term outlook may be more positive. Business groups and energy sector associations have long argued that the IAA created a complex and unpredictable regulatory environment that discouraged investment. They hope a revised, more focused law will provide a clearer and more efficient path for project approvals. As industries evolve, driven by technological shifts highlighted in discussions about Canada's role in the global AI landscape, regulatory clarity becomes paramount for attracting capital and fostering innovation.

Implications for Environmental and Indigenous Groups

While provinces and industry celebrate, environmental organizations and some Indigenous groups have expressed deep concern. They fear the ruling will weaken environmental protections and sideline federal oversight on major resource projects with significant climate and ecological impacts. These groups saw the IAA as a crucial tool for ensuring a holistic review that considered climate change commitments and the rights of Indigenous peoples. The requirement for federal consultation with Indigenous communities remains a constitutional duty, but critics of the ruling worry that a more constrained federal role could diminish the weight given to their concerns in the approval process. The path forward will require careful navigation to ensure that while constitutional boundaries are respected, Canada's commitments to environmental stewardship and reconciliation are not compromised.