Unconstitutional in Part: Reference re Impact Assessment Act

Last month, in Reference re Impact Assessment Act, 2023 SCC 23 [“IAA Reference”], the Supreme Court of Canada (the “Court” or “SCC”) held that the bulk of the federal Impact Assessment Act, S.C. 2019, c. 28, s. 1 (the “Act” or the “IAA”) is unconstitutional because it exceeded the powers allocated to Parliament under s. 91 of the Constitution Act, 1867

Writing for the seven-to-two majority, Wagner C.J. held that even though environmental regulation involves complex and multifaceted shared responsibility between federal and provincial governments, the text of a law must conform to the enacting level of government’s constitutional jurisdiction. While the doctrines of cooperative federalism and double aspect permit overlap when a subject matter is legislated on from each respective level of government, these principles do not permit a court to go so far as to presume a law will be applied in constitutional conformity when the text itself is ultra vires

This case comment will focus on summarising and contextualising the purpose and function of the IAA, the Court’s analysis, and how it got to its conclusion.

 

Legislative Design

In 2019, Parliament enacted the IAA, establishing an updated regulatory scheme for assessing the environmental impacts of proposed projects, overhauling the Canadian Environmental Assessment Act, 2012 (S.C. 2012, c. 19, s. 52). The types of projects that fall under the IAA include, among others, renewable energy projects, pipelines, mines, oil and gas facilities, and power-generating plants.

The premise of the IAA is that proposed physical activities should be scrutinised in advance for potential environmental consequences. Accordingly, the legislation provides a framework for information gathering, approving, and regulating activities or projects with an environmental, health, social, or economic effect that falls within federal jurisdiction.

The SCC agreed with the Court of Appeal of Alberta’s characterization of the IAA as “essentially two acts in one:” the “designated projects” scheme and the more specific secondary scheme, outlined in ss. 81–91, covering activities on federal lands or outside Canada that are not designated projects (Reference re Impact Assessment Act, 2022 ABCA 165, para 190 [IAA Reference ABCA]; IAA Reference, para 32).

 

Designated Projects Scheme

Projects become designated if they meet any of the requirements set out in the IAA Regulations or if the Minister of Environment (the “Minister”) declares them to be designated if it is believed their physical activity could cause “adverse effects within federal jurisdiction or adverse direct or incidental effects” (IAA, ss. 9(1), 9(7)(a)). Two “principal effects” follow from a project’s designation: (1) it becomes subject to the IAA’s ambit, and, (2) certain broad, temporary holds are placed on the project’s proponent. Those holds prohibit the proponent from proceeding until the federal impact assessment is completed (IAA Reference, para 93–94). 

Following designation, projects are subject to an impact assessment process that has three main phases: (1) the Planning Phase, (2) Impact Assessment Phase, and (3) Decision-Making Phase

At the Planning Phase, the project proponent must provide an initial project description to the Impact Assessment Agency of Canada (“Agency”) for it to determine if an impact assessment is required. The Agency then consults with a number of parties (Indigenous groups, other jurisdictions, the public) and provides a summary of issues for the proponent to respond to in a detailed project description (IAA, ss. 11–13, 14(1), 15(1)). In determining whether the project requires an impact assessment, the Agency is afforded discretion in considering factors set out in s. 16(2) of the IAA. The Planning Phase culminates in the Agency’s decision; if the project requires an impact assessment, it moves to phase two.

In the Impact Assessment Phase, the project is assessed for “adverse effects within federal jurisdiction” or “adverse direct or incidental effects” (IAA, ss. 22(1), 28(3)). While “effects within federal jurisdiction” is a key defined term, “adverse” is not defined, and appears to be taken for its common meaning: “unfavourable” or “harmful.”

The Agency prepares a report detailing the noted factors, which ultimately supports the Minister’s public interest findings at the final phase (IAA, s. 60). 

Lastly, the project moves to the Decision-Making Phase, where the Minister or Governor in Council determines whether the project’s adverse effects, and adverse direct or incidental effects, are outweighed by the public interest in moving the project forward. If it is in the public interest, the Minister “must establish any condition that he or she considers appropriate in relation to the adverse effects within federal jurisdiction” in order for the project to proceed (IAA, s. 64(1)).

The IAA relies on the defined term, “effects within federal jurisdiction” to drive decision-making during project assessment. “Effects” is defined as “a change to” the “components of the environment” within federal legislative authority; “a change to the environment” on federal lands, interprovincially, or outside Canada; or on Indigenous heritage or cultural sites, lands used for Indigenous resources or traditional purposes, or any site with Indigenous historical, archaeological, or paleontological, or architectural significance; and any change to a health, social, or economic matter that is within federal legislative authority (IAA, s. 2). 

This is a central point of issue through the Court’s reasoning. This defined term provides the basis for some projects to be designated (IAA, s. 9(1)) and, at the ultimate decision phase, guides the decision-maker in determining if a project is in the public interest (IAA, ss. 60(1) and (2)). 

Non-Designated Projects Scheme

The ss. 81–91, or “non-designated project,” regime of the IAA focuses on a narrower set of projects, either on federal lands or outside of Canada. For these projects, the three-phase impact assessment process is not required; however, the federal authority carrying out or financing the project is obligated to decide if it is likely to cause significant adverse environmental effects. If it is likely, the authority itself must determine if the effects are justified (IAA, s. 90).  

 

Judicial History

In 2021, the Province of Alberta referred two questions to the Alberta Court of Appeal (“ABCA”):

(i)              Is the IAA unconstitutional, in whole or in part, for being ultra vires?

(ii)            Are the IAA Regulations unconstitutional, in whole or in part, by virtue of purporting to apply to certain activities that relate to matters entirely within provincial legislative authority?

A four-to-one majority of the ABCA held that the IAA and Regulations are ultra vires the federal authority and therefore unconstitutional in their entirety (IAA Reference ABCA, para 5). Canada argued the provisions were not severable and must stand or fall as a whole. The majority agreed and held it would not be practical to sever the offending provisions from the permissible (IAA Reference ABCA, para 426). 

In conducting its analysis, the ABCA majority found that the pith and substance of the IAA and IAA Regulations is to establish a federal impact assessment and regulatory regime which subjects all activities designated by the federal executive to an assessment and to federal oversight and approval (IAA Reference ABCA, para 372; IAA Reference, para 53). This fatally intruded into provincial jurisdiction and provinces’ proprietary rights as owners of their public lands and natural resources (IAA Reference ABCA, para 372; IAA Reference, para 53). At the classification stage, the majority found these did not fall under any federal head of power, but fit squarely within multiple heads of exclusive provincial power (Constitution Act, 1867, ss. 92A and 92(13)) (IAA Reference, para 54). 

The majority also considered the doctrine of interjurisdictional immunity (“IJI”). It held in the alternative that if the scheme were valid, IJI would apply to protect the “core” of relevant provincial heads of power (IAA Reference ABCA, para 430; IAA Reference, para 56). 

The ABCA dissent would have held that the pith and substance lead to a finding of constitutionality as a federal environmental assessment regime that facilitates the planning and information gathering for specific projects to inform federal decision-making (IAA Reference ABCA, para 593; IAA Reference, para 57). The dissent concluded that the scheme falls within some federal heads of power, and rejected the majority’s characterization of the public interest determination as a federal veto power (IAA Reference ABCA, para 717; IAA Reference, para 58). Instead, the IAA is “designed to facilitate interjurisdictional cooperation rather than creating a competitive veto” (IAA Reference ABCA, para 723, 730; IAA Reference, para 58).

 

SCC Decision – Majority

The Court held that the IAA and its Regulations were broadly ultra vires. While the ss. 81–91 portion was found intra vires Parliament, the remainder of the scheme, “designated projects,” overreached constitutional boundaries. 

The majority took issue with the scheme for having an overly broad designation mechanism, permitting projects without adverse federal effects to be subjected to federal oversight. At key decision-making junctures, the Act involves the assessment of a given project, or physical activity, as a whole and not only federal adverse effects. Ultimately, it permits prohibitions to be placed on the project proponent, with ongoing federal oversight for effects that should only be regulated by provinces.

The constitutional framework 

Court Justice Wagner acknowledged that environmental regulation is abstruse and its matters are aggregate, fitting into both levels of government. But shared federal and provincial power is “neither unusual nor unworkable;” rather, it is a central feature of environmental decision making in Canada (IAA Reference, paras 114–116).

A scheme that overlaps with same subject matter governed under the other level of government’s heads of power could theoretically be saved under the double aspect doctrine if it were directed at activities of concurrent jurisdiction. A double aspect explains how different levels of government legislation can validly co-regulate the same fact scenario from different perspectives (IAA Reference, paras 118–119). 

With that said, Wagner C.J. warned that the doctrine must be applied with caution: not all fact situations have a double aspect, and the fact that the environmental assessment of physical activities may have a double aspect does not mean the regulated field falls within concurrent jurisdiction (IAA Reference, paras 120–121). When an activity is primarily regulated by one level of government, the substance of any legislation enacted by the other level of government must be carefully tailored to the specific aspects of the project that fall within its jurisdiction (IAA Reference, para 128).

While both levels of government can and do legislate in respect of certain aspects of environmental protections, particularly within a cooperative federalism, they must still do so according to the defined constitutional order. Courts may not “erode the constitutional balance” of powers under the guise of cooperative federalism (IAA Reference, para 122). 

The majority also clarified that it was mindful of the presumption of constitutionality as a “cardinal principle” of division of powers jurisprudence (IAA Reference, para 69). That is, a law is presumed to be intra vires as a principle of statutory interpretation, especially if it can be read down to be confined with the appropriate head of power. Nevertheless, the principle cannot be relied on to ignore a statute that is clearly ultra vires, or to suggest that the law could be constitutional if it were applied in an intra vires manner. Further, the ultra vires law cannot be saved by relying on judicial review to police out of bounds applications (IAA Reference, para 74).

The IAA is unconstitutional in part

The unconstitutionality of the “designated projects” scheme was found to result from its focus on project effects broadly rather than those within federal jurisdiction. The scheme treats all “designated projects” the same way, regardless of whether their effects fall within provincial or federal heads of power (IAA Reference, paras 134–136).

In essence, the scheme itself would have to provide a federally-focused framework to be constitutional. Relying on a decision-maker to discretionarily stay within those boundaries is insufficient. 

Pith and substance

Court Justice Wagner, writing for the majority, held that the pith and substance of the designated projects scheme is “to assess and regulate designated projects with a view to mitigating or preventing their potential adverse environmental, health, social and economic impacts” (IAA Reference, paras 6 and 76). Thus, the legislation has both information-gathering and regulatory components (IAA Reference, para 6). 

The majority found that the IAA’s designated projects scheme was unconstitutionally overbroad for two reasons: (1) the three-phase impact assessment process is not driven by effects within federal jurisdiction, permitting a broad consideration of factors (IAA Reference, paras 135 and 137); and, (2) the defined term “effects within federal jurisdiction” doesn’t actually comport with federal legislative authority (IAA Reference, paras 136 and 138). 

Put simply, the problem is that the scheme does not consistently focus on federal matters but rather, it intrudes unconstitutionally into provincial spheres of jurisdiction (IAA Reference, para 206). 

        1. Three-phase impact assessment process not driven by effects within federal jurisdiction

As outlined above, the scheme creates three decision-making phases following designation, together referred to by Wagner C.J. as the four decision-making junctures.The majority found two of these junctures to be ultra vires federal jurisdiction. 

First, the Screening Phase gives broad discretion to a decision-maker to require any project to undergo an impact assessment based on an open-ended list of equally weighted factors, which are not all tied to areas of federal jurisdiction (IAA Reference, paras 148–154).

Canada argued that s. 16(1) gives the Agency discretion to not require an impact assessment where there would be insufficient connection to federal effects (IAA Reference, para 153). However, Wagner C.J. noted that under s. 16(2) of the IAA, the discretion granted is not limited to projects that may cause federal effects (IAA Reference, para 162). In other words, the Act grants discretion to require an impact assessment where the only consequences fall under provincial jurisdiction. Accordingly, a presumption of constitutionality could not be relied on because the provision’s text, context, and purpose preclude a reasonable interpretation consistent with constitutional validity (IAA Reference, para 154). To be constitutional, the decision to require an assessment must be rooted in the possibility of federal adverse effects (IAA Reference, para 153). 

Second, the Decision-Making Phase determines if the project, in spite of its adverse federal effects, is within the public interest (IAA Reference, para 165). However, the mandatory public interest factors are framed in relation to the project as a whole rather than adverse “effects within federal jurisdiction” (IAA Reference, para 166). Further, the majority found that the discretionary provision, permitting a decision-maker to consider other factors, does not contain a jurisdictional limit (IAA Reference, para 178).

Together, these phases enable a decision-maker to regulate projects regardless of whether or not the physical activity is within the federal jurisdiction, making them unconstitutional according to the majority (IAA Reference, paras 177–178).

        2. Defined term “effects within federal jurisdiction” does not comport with federal legislative authority 

The second issue is that the definition of “effects within federal jurisdiction” is fundamental to most of the Act’s decision-making junctures, yet reaches beyond federal legislative jurisdiction. The definitional overbreadth permits project designation based on effects that are exclusive to provinces’ jurisdiction and then to either impose conditions, or declare the project not within the public interest, based on those effects (IAA Reference, para 182). The fact that the effects are defined in the legislation as being within federal jurisdiction is irrelevant to the question of whether or not they actually are within Parliament’s ambit. 

Non-designated projects

A majority of the SCC found the ss. 81–91 regime intra vires and that it could be severed from the balance of the IAA. Court Justice Wagner characterised the pith and substance of this narrower scheme as being “to direct the manner in which federal authorities that carry out or finance a project on federal lands or outside Canada assess the significant adverse environmental effects that the project may have” (IAA Reference, paras 6, 76, and 109). These provisions were not challenged at the SCC, and Canada dropped its argument that the IAA must stand or fall as a whole. Therefore, the Court determined that ss. 81–91 could be severed from the rest of the Act (IAA Reference, paras 208–211).

 

SCC Decision – Dissent 

The apparent disjuncture between the majority and dissent, apart from the characterization of the IAA’s dominant focus (pith and substance), is the dissent’s affirmation of the legislation’s presumed constitutionality, which included for them, a presumption of constitutional application. 

The IAA is constitutional in full

The dissent, comprised of Karakatsanis and Jamal JJ., would have held that the IAA’s broad language was not inappropriate, and the mere fact that the process has the potential for unconstitutionality does not mean the legislation as a whole is unconstitutional (IAA Reference, paras 221–222). 

This conclusion flows from the dissent’s characterization of the law in pith and substance as a mechanism to assess the effects of physical activities or major projects on federal matters and to determine whether to impose project restrictions to prevent significant adverse federal effects (IAA Reference, para 257), taking the legislation more directly at its word. Accordingly, a court should presume that the regime would be administered in a constitutionally compliant manner (IAA Reference, para 230). 

For the dissent, the designated projects process in the IAA reflects the precautionary principle, which instructs that where a serious threat to environmental damage may exist, a lack of scientific certainty should not prevent postponing measures to prevent degradation. This is consistent with the scheme’s need to gather information at an early stage of an impact assessment to properly inform federal decision-making (IAA Reference, paras 286 and 308)

The screening decision phase is not unconstitutional

The dissent disagreed with the majority’s conclusion on the designated project Screening Decision Phase, which Wagner C.J. held to be unconstitutional for not being predicated on adverse federal effects. Justices Karakatsanis and Jamal emphasised the role of cooperative federalism and decision-maker discretion in explaining that the broad discretion under s. 16 of the IAA, and its factors, are rooted in federal effects; where the Agency is empowered to consider other factors, this power must be exercised reasonably (i.e., intra vires federal jurisdiction) and should be presumed constitutional (IAA Reference, paras 310–314). For the dissent, decisions that were jurisdictionally out of bounds would be found unreasonable on judicial review (IAA Reference, para 315).

The decision-making phase is not unconstitutional

Further, Karakatsanis and Jamal JJ. disagreed with the majority view on the public interest decision-making that the dominant thrust of the scheme itself must be focused on a project’s federal effects, instead holding that the assessment process can legitimately involve an integrated decision-making process that weighs both federal and non-federal harms (IAA Reference, paras 329–331). The dissent characterised the majority view as suggesting that federal authorities are constitutionally required to consider federal effects only (IAA Reference, para 328). This, they held, would defy the Court’s precedents by overlooking the integrated decision-making process affirmed in Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 SCR 3, which suggests that the federal government must be able to look beyond federal effects in making its impact assessments (IAA Reference, para 329). 

“Effects within federal jurisdiction” fits within federal jurisdiction

Finally, the dissent found that the effects defined as “effects within federal jurisdiction,” are merely triggers for the prohibitions that commence after designation, and for the application of the designated projects scheme as a whole. Both legitimately fall within Parliament’s legislative authority (IAA Reference, para 337).

 

Contextualising the decision

The Court has elsewhere held that “[c]limate change is real … and poses a grave risk to humanity’s future” (Reference re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11, para 2). For Canadian governments that agree, this should be an even more pressing reason to both craft constitutionally sound laws and embrace cooperative federalism.  

When the Confederation was formed by the provinces, provinces did not cede ultimate authority to the federal order, but established a division of authorities to collectively flourish. The majority of the SCC in IAA Reference made the helpful point that environmental regulation is neither “unusual nor unworkable” in a federal state like Canada (para 116, citing Quebec (Attorney General) v. Canada (National Energy Board), [1994] 1 SCR 159, p. 193). 

While the initial drafting of the heads of power could not account for all matters relevant today, I think it stands true that environmental regulation cannot ever be relegated to one level of government. The Act itself defines “environment” as “the components of the Earth” including “(a) land, water, all layers of the atmosphere; (b) all organic and inorganic matter and living organisms; and (c) the interacting natural systems that include components of the above.” In short, it includes everything. That cannot be what the provinces, in any iteration of the Constitution since 1867, envisioned for the governance of Canada. Neither should a single environment head of power be valued for its decision-making efficiency, short of an appeal to Hobbsian simplicity.

Overall, the IAA Reference clarifies that the Court will hold to the constitutional order and require Parliament and the provinces to work out how they’ll solve future issues from their respective spheres of governance.

 

This article was edited by Farah Abdel Haleem.

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