Supreme Court Strikes Down Federal Environmental Law in Major Ruling on Jurisdiction

In a decision with profound implications for Canada's natural resource sector and the balance of power between Ottawa and the provinces, the Supreme Court of Canada has ruled that the federal Impact Assessment Act (IAA) is largely unconstitutional. The 5-2 majority opinion, delivered by Chief Justice Richard Wagner, concluded that the legislative scheme, enacted by the Trudeau government in 2019, improperly intrudes into areas of exclusive provincial jurisdiction.

The ruling is the culmination of a years-long battle initiated by Alberta, which argued the law gave the federal government a de facto veto over resource projects within provincial borders. The Act, often referred to by its critics as the "No More Pipelines Act," was designed to overhaul how major projects like mines, pipelines, and dams are approved. It required assessments of a wide range of effects, including environmental, health, social, and economic impacts, as well as impacts on Indigenous peoples and climate change commitments.

The Constitutional Challenge

The core of the legal dispute centred on the division of powers outlined in Canada's Constitution Act, 1867. While the federal government has authority over areas such as fisheries, navigation, and Indigenous lands, the provinces have exclusive jurisdiction over natural resources, property, and civil rights. The Alberta government launched a reference case to its provincial Court of Appeal, which found in 2022 that the Act was an unconstitutional overreach. The federal government subsequently appealed that decision to the nation's top court.

The Supreme Court's majority agreed with the fundamental thrust of Alberta's argument. Chief Justice Wagner wrote that the IAA's framework designated a broad range of projects for federal review and then subjected them to an assessment of overall "public interest" that blurred the lines between federal and provincial responsibilities. "The defined 'effects within federal jurisdiction' and 'public interest' factors constitute a classic example of legislative creep," the decision stated. The court found that the law effectively treated all designated projects as federal matters, which is constitutionally impermissible.

The ruling clarifies that the federal government can still conduct environmental assessments, but they must be strictly focused on specific adverse effects within federal jurisdiction. It cannot use this power to make broad decisions about whether a project is in the public interest, a role the court affirmed belongs to the province where the project is located.

Reactions Across the Country

The decision was met with celebration by several provincial governments. Alberta Premier Danielle Smith hailed it as an "overwhelming victory for Alberta and for Canada," stating that it reaffirms the role of provinces in managing their own resources. Saskatchewan Premier Scott Moe echoed these sentiments, calling the ruling a defence of provincial autonomy against federal intrusion.

Conversely, the federal government expressed disappointment but pledged to abide by the court's direction. Environment Minister Steven Guilbeault stated that the government would move quickly to introduce new legislation that respects the constitutional division of powers while maintaining a rigorous and efficient assessment process. "Our government is committed to adapting our legislation to the letter and spirit of this decision," he said in a statement.

Environmental organizations and some Indigenous leaders voiced concern that the ruling weakens environmental protections at a critical time. They argue the IAA was a necessary tool to ensure a holistic review of projects with national and international consequences, particularly concerning climate change. They fear a return to a patchwork of provincial standards that may not adequately protect the environment or ensure meaningful consultation.

Implications for Business and Investment

For the business community, the ruling provides some long-sought clarity but also introduces a period of uncertainty. Industry groups like the Canadian Association of Petroleum Producers (CAPP) and the Mining Association of Canada welcomed the decision, having long argued that the IAA created regulatory gridlock and deterred investment. They hope the new federal framework will be more streamlined and predictable.

However, until new legislation is passed, projects currently in the assessment pipeline face an uncertain future. The ruling underscores the complex regulatory environment in Canada, where navigating federal-provincial jurisdiction is a key challenge for major capital investments. This domestic legal complexity exists alongside global economic pressures; for instance, the G7, with Canada's support, issues stern warning to China over Russia aid and trade practices, highlighting the international context in which Canadian businesses must compete. A clear and efficient domestic regulatory system is seen as crucial for attracting global capital.

The path forward requires careful legislative drafting by Ottawa to create a system that is both constitutionally sound and effective. The Supreme Court of Canada rules federal Impact Assessment Act largely unconstitutional, but its decision provides a roadmap for how the federal government can validly exercise its environmental assessment powers. The challenge will be to create a process that respects provincial jurisdiction while addressing environmental concerns of national importance, ultimately aiming to restore investor confidence in Canada's resource sector.