Link to Decision Summarized

Reference – Division of Powers

In this decision, the Alberta Court of Appeal (“ABCA”) determined that the Impact Assessment Act (“IAA” or “Act”) and the Physical Activities Regulations (the “Regulations”) are unconstitutional. The ABCA found that the IAA undermines the division of powers and the rights provided to the provinces to control the ownership and development of natural resources in their boundaries. Accordingly, the ABCA determined that the IAA is ultra vires Parliament.

Introduction

The Lieutenant Governor in Council asked for the ABCA’s opinion on two questions:

1. Is Part 1 of An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act, to amend the Navigation Protection Act and to make consequential amendments to other Acts, S.C. 2019, c. 28 unconstitutional, in whole or in part, as being beyond the legislative authority of the Parliament of Canada under the Constitution of Canada?

2. Is the Physical Activities Regulations, SOR/2019-285, unconstitutional in whole or in part by virtue of purporting to apply to certain activities listed in Schedule 2 thereof that relate to matters entirely within the legislative authority of the Provinces under the Constitution of Canada?

To answer these questions, the ABCA focused on the projects that would fall under the regulation of the IAA and the Regulations. The ABCA further considered the extent to which the provinces and Canada have individual and shared concerns about the environment and climate change.

The ABCA found that the IAA deprives Alberta and Saskatchewan, which together have the vast majority of oil and gas reserves in this country, of their constitutional right to exploit these natural resources. The ABCA noted that this deprivation, while the federal government continues to permit the import of hundreds of millions of barrels of oil into Canada from other countries, reintroduces the very discrimination both provinces understood to have ended, if not in 1930, then certainly by 1982.

Parliament has the authority to legislate to protect the environment. However, it must do so in accordance with the Constitution. The ABCA concluded that the subject matter of the IAA is properly characterized as “the establishment of a federal impact assessment and regulatory regime that subjects all activities designated by the federal executive to an assessment of all their effects and federal oversight and approval”. When applied to intra-provincial designated projects, this subject matter does not fall under any heads of power assigned to Parliament but rather intrudes impermissibly into heads of power assigned to provincial Legislatures by the Constitution Act, 1867.

The ABCA, therefore, concluded that the IAA is ultra vires Parliament.

The Environment and the Division of Powers

The ABCA noted that the environment has not been assigned to the jurisdiction of either Parliament or provincial Legislatures under the Constitution Act, 1867, nor has the environment been allocated to the federal government under the national concern doctrine. Both levels of government may affect the environment but only within the legislative powers specifically assigned to each. The ABCA further noted that neither level of government has exclusive jurisdiction over environmental impact assessments. Like the environment more generally, impact assessments are not explicitly enumerated as a head of power under ss 91 or 92 of the Constitution Act, 1867.

The Purpose and Scope of the Resource Amendment Under S. 92A of the Constitution Act, 1867

Under s. 92A(1) of the Constitution Act, 1867 each province may exclusively make laws in relation to (a) exploration for non-renewable natural resources in the province; (b) development, conservation, and management of non-renewable natural resources and forestry resources in the province; and (c) development, conservation, and management of sites and facilities in the province for the generation and production of electrical energy.

The ABCA noted that provincial jurisdiction over natural resources is “one of the mainstays of provincial power”. Consequently, deciding the terms and conditions under which a project to exploit these natural resources will be constructed and operated goes directly to a province’s power to decide how best to manage, and the conditions under which it will permit the development of, its natural resources.

Overview of Environmental Impact Assessment Legislation Federally

The IAA and the Regulations apply to and compel a comprehensive assessment and review of any activity anywhere in Canada designated in the Regulations (sometimes referred to as the “project list”) or by Ministerial order.

The IAA is designed to assess proposed designated projects in their entirety. This is illustrated not only by the scope of purported federal effects but also by at least 20 different factors that must be considered. These range from changes to environmental, health, social, or economic conditions, to “the extent to which the designated project contributes to sustainability”, to “the extent to which the effects of the designated project hinder or contribute to the Government of Canada’s ability to meet its environmental obligations and its commitments in respect of climate change”, to “the intersection of sex and gender with other identity factors” to “any other matter relevant to the impact assessment” that the Impact Assessment Agency of Canada (“Agency”) requires to be taken into account.

The IAA and Regulations seek to regulate a number of activities primarily within exclusive federal jurisdiction. Importantly, however, designated projects also include intra-provincial activities otherwise within provincial jurisdiction such as mining, renewable energy, transportation, and oil and gas.

Section 7 of the IAA prohibits the proponent of a designated project, and that would include all intra-provincial designated projects, from doing “any act or thing in connection with the carrying out of the designated project, in whole or in part, if that act or thing may cause” any of the listed effects. The listed effects track almost word for word the definition of “effects within federal jurisdiction”.

Under the IAA, Parliament has also regulated what it has defined as “direct or incidental effects” and what it characterizes as “adverse direct or incidental effects”. Direct or incidental effects include effects that are directly linked or necessarily incidental to a federal authority’s grant of a federal permit or approval that a desi
gnated project requires under other valid federal legislation to proceed. S. 8 of the IAA prohibits a federal authority from issuing a federal permit for a designated project unless a positive public interest determination has been made by the federal executive or unless no impact assessment is required.

There are three main phases to the impact assessment process:

First, there is the planning phase: A proponent of a designated project provides the Agency with a description of the project that must include information prescribed by regulation. If the Agency decides a designated project requires an impact assessment, it issues a notice of commencement outlining the information and studies needed to conduct the assessment.

Second, there is the impact assessment phase. This begins with the proponent collecting the requested information and completing the required studies that it provides to the Agency. An assessment of the designated project is then carried out, either by the Agency or, in cases where the Minister is of the view it is in the public interest, a review panel. The potential effects of a designated project are assessed, after which a report is prepared.

Third, there is the decision phase: The Minister or Governor in Council is required to make a public interest determination with respect to the designated project which must be based on the report and other mandatory factors. If the public interest determination is positive, the Minister or Governor in Council must also determine what conditions will be imposed. The Minister must then issue a “decision statement” to the proponent informing the proponent of the public interest determination made by either the Minister or Governor in Council and the reasons for it and, if applicable, any conditions that must be complied with by the proponent.

If the public interest determination is not positive the proponent continues to be prohibited from proceeding with the designated project if it may cause any of the purported federal effects. This effectively prohibits the proponent from proceeding since the negative public interest determination constitutes a finding by the federal executive that the designated project may cause such purported federal effects.

The ABCA found that the provisions of the IAA and the Regulations accordingly require that: unless and until the federal executive determines that an intra-provincial designated project is in the public interest, the proponent of that project cannot proceed with it, full stop.

Division of Powers

Reviewing legislation for validity on federalism grounds involves a two-stage analytical approach: (1) characterization; and (2) classification. First, the subject matter (or “pith and substance”) of the challenged legislation must be characterized. Characterization requires looking at both the purpose of the law and its effects. Second, that subject matter must be classified by assigning it to federal and provincial heads of power. But since not all powers are limited to a class of subjects, the Court’s task is more accurately described as determining “whether the subject matter of the challenged legislation falls within the head of power being relied on to support the legislation’s validity”.

A statute and related regulations will be considered together for purposes of constitutional characterization where the regulations give “concrete meaning and content to the statute and [are] indispensable to its classification”. The ABCA found that the Regulations constitute an integral part of the legislative scheme. The IAA provides a statutory framework; the Regulations make that framework operative. It is the Regulations that list the designated projects subject to the federal environmental impact assessment. The ABCA accordingly found that the IAA and Regulations should be considered together to properly characterize and classify the legislative scheme as a whole.

The First Stage: Characterization – What is the “Matter” of the IAA?

The ABCA found that the “pith and substance”, or the “matter” of the IAA is: “the establishment of a federal impact assessment and regulatory regime that subjects all activities designated by the federal executive to an assessment of all their effects and federal oversight and approval”. This subject matter, and any variation on it, including the “establishment of a federal impact assessment and regulatory regime that subjects all intra-provincial activities designated by the federal executive to an assessment of all their effects and federal oversight and approval”, intrudes fatally into provincial jurisdiction and the provinces’ proprietary rights as owners of their public lands and natural resources.

The ABCA noted that Canada’s Constitution does not permit this hollowing out of provincial powers. The ABCA summarized the findings underpinning its conclusion that the IAA and Regulations amount to federal overreach as follows:

1. The IAA compels an intra-provincial designated project to undergo a wide-ranging impact assessment and subjects the project to regulation from inception to completion merely because the federal executive has designated it as a designated project.

2. The IAA gives the federal executive the unilateral right to make that designation even where the federal government has no decision-making authority vis à vis that project under other valid and applicable federal legislation.

3. The IAA’s self-defined “effects within federal jurisdiction” includes effects not within Parliament’s jurisdiction when applied to intra-provincial designated projects, namely, the incidental effects of provincial laws (authorizing such projects) on a federal head of power, effects not linked, or not sufficiently linked, to a federal head of power and effects that do not even qualify as significant.

4. The IAA prohibits a proponent of an intra-provincial designated project from any conduct that is otherwise lawful for proponents of non-designated projects unless the federal executive determines that the intra-provincial designated project is in the public interest.

5. The IAA mandates the federal executive to consider all effects of an intra-provincial designated project in determining whether the project is in the public interest even where those effects are not all linked, or sufficiently linked, to a federal head of power.

6. The IAA mandates the federal executive to consider all effects of an intra-provincial designated project in determining whether the project is in the public interest even where those effects include incidental effects of provincial laws on a federal head of power.

7. The IAA permits the federal executive to determine that an intra-provincial designated project is not in the public interest even where the adverse federal effects caused by that project are not material.

8. The IAA mandates the federal executive to take in
   to account mandatory factors in determining whether an intra-provincial designated project is in the public interest, not all of which are linked to a federal head of power.

9. The public interest determination necessarily includes assessing whether the intra-provincial designated project overall is in the public interest – having regard to federal priorities and policies.

10. A negative public interest determination by the federal executive constitutes an effective veto of the intra-provincial designated project: the proponent is prohibited from proceeding even if the project satisfies, can satisfy, or does not otherwise require, any federal permit under other valid and applicable federal legislation.

11. The IAA authorizes the federal executive to impose on an intra-provincial designated project whatever conditions it chooses in relation to self-defined adverse “effects within federal jurisdiction” as part of the decision statement authorizing the project to proceed even though the adverse federal effects are not all within federal jurisdiction.

12. The IAA permits the federal executive to second guess and veto the results of a province’s duty to consult under s 35 of the Constitution Act, 1982 with respect to an intra-provincial designated project where that duty arises.

13. The IAA authorizes the federal executive to stop an intra-provincial designated project even where agreements have been made by an Indigenous entity with either or both the provincial government and project proponent and with provincial approval.

Classification of the Subject Matter of the IAA

The ABCA found that the subject matter of the IAA, when applied to intra-provincial designated projects, falls within several heads of provincial power. Despite the blending of federal points of interest with the parts of the IAA, the IAA constitutes an invasion into provincial legislative jurisdiction and provincial proprietary rights. Parliament’s claimed power to regulate all environmental and other effects of intra-provincial designated projects improperly intrudes into industrial activity, resource development, local works and undertakings, and other matters within provincial jurisdiction.

Greckol J.A. (Dissenting)

In the dissenting opinion, the Honourable Greckol J.A. found that, in enacting the IAA and Regulation, Parliament established a federal environmental assessment regime designed to regulate effects within federal jurisdiction. The Honourable Greckol J.A. found that the IAA confines its reach to the protection of the environment and the health, social and economic conditions within Parliament’s legislative authority from the adverse environmental effects of select activities that in its view, have the greatest potential for adverse effects on areas of federal jurisdiction. The legislative regime prescribed in the IAA and Regulations is therefore a valid exercise of Parliament’s authority and compliant with the Constitution Act, 1867, as amended.