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Supreme Court Finds Federal Impact Assessment Act Largely Unconstitutional in Major Ruling on Environmental Oversight
The Supreme Court of Canada has delivered a landmark opinion, finding the federal Impact Assessment Act largely unconstitutional in a major victory for Alberta and other provinces. The Court ruled that the 2019 law, often criticized as the "No More Pipelines" bill, improperly intruded on provincial jurisdiction over resource development. By focusing on a project's overall effects rather than those specifically within federal authority, the legislation created an unconstitutional overreach. The decision compels Ottawa to redraft its environmental review process, significantly altering the landscape for major energy and infrastructure projects across Canada.
Source: Supreme Court of Canada - Reference re Impact Assessment Act
Introduction: A Jurisdictional Rebuke
In a decision with profound implications for Canada's resource sector and the balance of power between Ottawa and the provinces, the Supreme Court of Canada has declared the federal government's primary environmental review law, the Impact Assessment Act (IAA), to be largely unconstitutional. The 5-2 advisory opinion, released in response to a reference case from the Alberta Court of Appeal, concluded that the legislative scheme, enacted in 2019, overstepped federal authority and infringed upon areas of exclusive provincial jurisdiction.
The ruling effectively sends the federal government back to the drawing board, forcing a rewrite of the law that governs how major projects—from pipelines and mines to hydro dams—are approved. While affirming the federal government's legitimate role in environmental protection, the court has significantly narrowed the scope of its assessment powers, providing a measure of victory to provinces that argued the law created unacceptable uncertainty and deterred investment.
Background: The Controversial Bill C-69
The Impact Assessment Act, formerly known as Bill C-69, was a cornerstone of the Trudeau government's environmental and economic agenda. It replaced the previous assessment process under the Harper government, which critics had argued was too weak. The IAA was designed to provide a more holistic review of major projects, requiring assessors to consider a wide range of factors beyond direct environmental harm, including impacts on health, social and economic conditions, Indigenous peoples, and climate change commitments.
From its inception, the legislation was contentious. The government of Alberta, along with Saskatchewan and Ontario, led the opposition, dubbing it the "No More Pipelines" bill. They argued that the law's vague criteria and broad scope gave the federal cabinet excessive discretion to veto projects for political reasons, even if they were primarily within a province's territory and jurisdiction. The business community, particularly the oil and gas sector, echoed these concerns, warning that the unpredictable and lengthy review process would stifle investment in Canada's natural resource industries.
The legal challenge was initiated by Alberta, which asked its provincial Court of Appeal to rule on the law's constitutionality. In 2022, the Alberta court found the act unconstitutional, prompting the federal government to appeal the matter to the Supreme Court of Canada for a final say.
The Supreme Court's Reasoning
Writing for the majority, Chief Justice Richard Wagner affirmed that environmental protection is a shared responsibility between federal and provincial governments. He acknowledged that Parliament has the authority to enact environmental assessment schemes, citing its jurisdiction over areas like fisheries, navigable waters, and Indigenous lands. However, the Chief Justice found that the IAA's designated projects scheme was constitutionally flawed because its primary focus was not on regulating federal impacts, but rather on assessing and regulating the overall wisdom of a project.
The core of the problem, according to the Court, was that the law empowered federal decision-makers to rule on projects based on a broad and undefined "public interest" determination. This process took into account a host of effects that fall squarely within provincial powers, such as a project's impact on a province's economy or its ability to manage its own natural resources. The Court stated that while the federal government can assess a project's effects on federal matters, it cannot use that power as a backdoor to regulate the project as a whole. The IAA, the majority concluded, did just that, effectively giving Ottawa a veto over projects it had no constitutional authority to regulate directly.
Government Response and Legislative Reset
The federal government immediately accepted the Supreme Court's opinion. Environment Minister Steven Guilbeault and Justice Minister Arif Virani stated that the government would move quickly to amend the legislation to comply with the court's guidance. The goal, they asserted, is to create a more targeted and efficient process that respects jurisdictional boundaries while maintaining strong environmental protections. In line with this commitment, Ottawa has since tabled new legislation designed to narrow the focus of federal assessments to clearly defined areas of federal jurisdiction, as directed by the court.
This jurisdictional dispute mirrors other federal-provincial conflicts, most notably the ongoing debate over Canada's carbon tax, where provinces have challenged the extent of federal power in the name of climate policy. The IAA ruling reinforces the principle that while the environment is a shared concern, the constitutional division of powers remains a fundamental constraint on federal action.
Implications for Business and Future Projects
For the resource sector, the ruling is a significant development. Industry groups have welcomed the decision, expressing hope that a revised law will provide the clarity and predictability needed to attract investment for major capital projects. The previous regime was seen as a major source of regulatory risk, with proponents uncertain if their projects could survive a lengthy and politically charged federal review. A more constrained federal process, focused on specific and predictable impacts, is expected to streamline approvals.
However, the decision does not eliminate federal oversight. Projects will still be subject to federal assessment if they have the potential to impact areas like fish habitats, migratory birds, or Indigenous rights. Environmental and Indigenous groups have expressed concern that a weaker federal law could lead to a patchwork of provincial standards and undermine national efforts to combat climate change and protect ecosystems. The challenge for the federal government will be to craft a new system that is both constitutionally sound and robust enough to meet its environmental and reconciliation commitments.
The immediate future involves a period of transition. Projects currently under review are in a state of uncertainty until the new legislation is passed and its regulations are finalized. The long-term impact will depend entirely on the details of the forthcoming law and how it is implemented by the Impact Assessment Agency of Canada.
Insights
- Why it matters: The ruling redraws the constitutional lines for environmental oversight in Canada. It curtails the federal government's ability to regulate major resource projects based on broad 'public interest' grounds, reinforcing provincial authority over natural resource development within their borders.
- Impact on Canada: This decision will likely streamline the approval process for major projects like mines and pipelines, potentially boosting investment in the resource sector. However, it also creates a challenge for creating a cohesive national environmental and climate strategy, as federal powers are now more constrained.
- What to watch: All eyes are on the new legislation promised by Ottawa. The key details will be how narrowly the government defines federal jurisdiction and how the new process balances economic interests with environmental protection and Indigenous consultation. Provincial reactions to the new bill will also be critical.