Two wins, a loss, and a question mark: What the Impact Assessment Act reference case means for the environment

This is a detailed analysis of the case – stay tuned for a shorter summary coming soon

On October 13, 2023, the Supreme Court of Canada released its opinion on the constitutionality of the Canadian Impact Assessment Act, with a 5-2 majority, led by Chief Justice Wagner, finding that the federal government has overstepped its jurisdiction in parts of the Act. Justices Karakatsanis and Jamal dissented, finding that the Act and regulations are constitutional. 

West Coast intervened in the case along with Nature Canada, so we had a front-row seat to the arguments. In this blog, we explain what a reference case is, what the decision says, and what the consequences are for Canadians, the climate and the environment. 

At the outset, it is important to note that while the fact that the majority has declared the Impact Assessment Act to be unconstitutional, I consider this opinion to be a overall a victory for the environment and for Canadians.

While the majority found some aspects of this law to be problematic, it confirmed that Parliament has jurisdiction to enact an environmental impact assessment regime in order to protect components of the environment within its jurisdiction, like fisheries and navigation, and with some relatively minor amendments the Act should be easily brought into conformity with the Constitution. I describe why I think this case is more of a win than a loss below, but will first explain what I mean when I say it is a reference case. 

What a reference case is

A reference case occurs when a government asks a court to give its opinion on the constitutionality of a law. It differs from other cases in that there is no particular legal right at stake, such as when a person or company is charged with an offence. 

In reference cases courts issue opinions, not decisions. While opinions are not legally binding, it is customary for governments to respect what the court says, and Environment Minister Guilbeault has said that the federal government accepts the Supreme Court’s opinion. It is likely that the government will amend the Act to bring it into conformity with what the majority of the Court says is constitutional. 

In this case, the Government of Alberta first asked the Alberta Court of Appeal to give its opinion on whether the Impact Assessment Act and the Physical Activities Regulations are unconstitutional in whole or in part. For more on the main issues and our arguments, you can read our earlier blog here. A majority of the Court of Appeal found that the Act is unconstitutional, and Canada appealed that decision to the Supreme Court, which has the last word on these issues. 

What the Supreme Court of Canada said about the Impact Assessment Act

The majority noted that there are effectively two assessment schemes in the Act:

1. A comprehensive impact assessment regime that applies to major projects that are designated in regulations (the “designated projects” scheme); and 
2. A basic environmental assessment process for projects on federal lands and projects outside Canada. 

It found no problem with the latter scheme and was only concerned with the “designated projects” scheme. (I should note that the majority entirely missed a third scheme in the Act, the part governing regional and strategic assessments. I presume based on the Court’s silence on those provisions that none of the judges take issue with them.) 

The main problem the majority found with the designated project scheme is that it believes it is not sufficiently tied to areas of federal jurisdiction. The provinces and the federal government derive their powers to enact legislation from the Constitution, which divides matters between them in what are known as “heads of power.” The environment is not listed among these heads of power; instead, courts (including both the majority and minority in this case) have described the environment as a diffuse matter that relates to several heads of power belonging to both the provincial legislatures and federal Parliament. 

Provincial powers include things like local works and undertakings, local matters, provincial lands, natural resources, and electricity generation. Federal powers include things like fisheries, navigation, Indigenous peoples and lands reserved for Indigenous peoples, migratory birds, the criminal law power (which can be used to prohibit harm to the environment), interprovincial projects like pipelines, and matters pertaining to peace, order and good governance. 

Essentially, the majority of the Supreme Court found that the Impact Assessment Act does not sufficiently focus on federal matters, such as effects on areas of federal jurisdiction like fisheries and navigation. There are four places where that focus needs to be tightened: 

1. The initial screening phase. The majority of the Court upheld the project list approach to designating which projects are subject to the Act. Under the project list approach, projects are listed in the Physical Activities Regulations according to type and size – any project listed in the regulations that are at or above the defined thresholds are considered “designated projects.”
   
   What the majority did take issue with is the Agency’s initial screening decision. It occurs early, within three months of a designated project entering the process, and determines whether an impact assessment of a designated project is required. Currently, that decision must be based on a number of factors, including the possibility that the project might cause adverse federal effects.
   
   The majority held that the potential for federal effects must be a more prominent consideration, not just one among many other equal ones. In my view, this issue could be easily fixed with an amendment that says there must be the potential for federal effects in order to decide whether an impact assessment is required and list the remaining factors (such as public comments and Indigenous engagement) as additional considerations.
    
2. The main prohibitions. Section 7 of the Act prohibits proponents of designated projects from doing anything connected to carrying out a project if it might cause changes to various matters within federal jurisdiction. This prohibition lasts until either the Impact Assessment Agency of Canada determines that an impact assessment is not required, or the Minister or Governor in Council says that the federal effects are in the public interest. If the Minister or Governor in Council decides that the federal effects are not in the public interest, the prohibition stands. 
   
   The majority found section 7 to be problematic because it doesn’t just prohibit harms to areas of federal jurisdiction, it prohibits any changes to areas of federal jurisdiction. While I would argue (indeed, did argue before the Court in this reference) that the Constitution does not distinguish between harms, benefits or other changes to matters within federal jurisdiction, with one caveat I am not particularly troubled by this finding, mainly because I can’t imagine many circumstances in which a mine, dam, pipeline or other major project will cause non-harmful changes to fish, navigation, species at risk or migratory birds. As with the screening provision, the issues with the prohibition should be relatively easily solved by a new prohibition focused on adverse effects on areas of federal jurisdiction. 
   
   The caveat is that it is unclear how this decision will affect Indigenous peoples. Section 7 also prohibits impacts resulting from any change to the environment on Indigenous peoples, as well as any changes to Indigenous peoples’ health, social or economic conditions. The majority found the scope of this prohibition to go beyond Parliament’s authority over Indigenous peoples and lands reserved for Indigenous peoples because it captures trivial and non-adverse impacts, whereas it says Parliament’s authority is focused on the protection and welfare of Indigenous peoples. 
   
   Discounting trivial impacts ignores the reality of cumulative effects, which are effects that may individually be minor but collectively significant. The Yahey case, which found that the Province of British Columbia had infringed Blueberry River First Nations treaty rights “by allowing industrial development in Blueberry’s territory at an extensive scale without assessing the cumulative impacts of this development and ensuring that Blueberry would be able to continue meaningfully exercising its treaty rights in its territory.” In other words, the BC Supreme Court in Yahey makes it clear that governments must pay attention to so-called trivial effects.
    
3. The definition of federal effects. The Impact Assessment Act defines “effects within federal jurisdiction” as including changes to fish and fish habitat, aquatic species, migratory birds, federal lands, interprovincial environmental effects, impacts resulting from any change to the environment on Indigenous peoples, and changes to Indigenous peoples’ health, social or economic conditions. As with the section 7 prohibitions, the majority found this definition to be overly broad. In its reasons, it highlighted three specific issues:
    
   • Greenhouse gas (GHG) emissions: The majority found the assertion of jurisdiction over all interprovincial environmental effects to be “astonishing” in its breadth because it “captures an unlimited range” of effects felt in a different province than where the activity causing them is located (at paras. 183-184). For example, it could capture any amount of GHGs, thereby allowing Parliament to prohibit any amount of GHGs.
      
   • Indigenous peoples: As noted above, the majority found that Parliament’s authority over Indigenous peoples does not extend to trivial and non-adverse impacts.
      
   • Migratory birds: Somewhat bizarrely, especially given that the subject did not come up in the hearing, the majority questions Parliament’s power over migratory birds. In a nutshell, the Constitution gives Parliament authority over matters that are covered by a treaty entered into by the British Empire on behalf of Canada (though that authority arguably does not extend to matters covered by a treaty entered into by Canada after the patriation of our Constitution in 1982). The United Kingdom and the United States entered into the Migratory Birds Convention in 1916, which Canada and the US amended in 1995. The majority questioned whether Parliament’s power over matters subject to treaties made by the United Kingdom also covers amendments to those treaties made by Canada.
     
     While those amendments would narrow the definition of “federal effects” under the Act, broader considerations respecting GHGs, impacts on Indigenous peoples and effects on migratory birds can still be considered in assessments, and may still be relevant considerations for decisions (see my main take-aways #5 and 6, below).
      
4. Decision making. This is, to me, the most problematic part of the majority’s opinion. The final decision under the Act is whether the project’s federal effects are in the public interest in light of the assessment report and five listed factors, including whether the project fosters sustainability and the extent to which the project helps or hinders Canada’s ability to meet its environmental obligations and climate commitments.
   
   The majority appears to suggest that the federal government can only consider non-federal benefits, but not non-federal adverse effects, when deciding whether to allow federal effects to occur. For the federal government to only be able to look at broader socio-economic and environmental effects in order to justify adverse effects on federal jurisdiction without being able to say no to them would effectively force officials to make decisions half-blind. I go into more detail about why this finding is so problematic – and potential work-arounds – in #6 of my main takeaways below. 

Main takeaways 

So, what does all of this actually mean for the federal impact assessment going forward? I have identified six main take-aways from the majority’s opinion:

1. The federal government has the authority to enact environmental assessment regimes. We already knew that – it’s a well-recognized principle by the courts – but it’s a helpful reiteration from the highest court in Canada, especially in this era of provincial leaders lighting their hair on fire every time the federal government pursues an environmental protection measure. 
    
2. The federal government can use a project list approach that subjects natural resource projects like mines, dams and pipelines to impact assessment. We knew that, too, and even though premiers like Danielle Smith still don’t seem to have gotten the memo, the court was clear that just because an activity (like mining) may be provincially regulated, provincial jurisdiction does not create an “enclave of exclusivity” over a project. Federal authorities can assess projects and say no to impacts on areas of federal jurisdiction, so long as the decision is truly about the federal effects and not an attempt to regulate the activity.  
   
   As mentioned, the majority upheld the project list approach to designating which projects are subject to the Act. Under this approach, any project listed in the Physical Activities Regulations that are at or above the defined thresholds are considered “designated projects.” 
    
3. The jurisdictional threshold for triggering assessments is low. This was one of our main arguments, and a big win in the case. The majority rejected arguments that the federal government can only trigger assessments of projects that must obtain a federal permit, such as a Fisheries Act authorization. Rather, it held that the federal government can trigger impact assessments where there is only the potential for impacts on areas of federal jurisdiction. In other words, federal effects need not be known at the time an assessment is triggered, so long as it is clear that there may be federal effects. 
   
   While the project list approach has received much criticism (including by us), the main problem with it is that it fails to capture thousands of projects and activities that impact areas of federal jurisdiction every year. That’s more an issue with what is on – and what is not on – the regulations, not an inherent flaw in the approach itself. A major advantage of the project list over the triggering approach used in the original Canadian Environmental Assessment Act is that it triggers assessments earlier on, which helps facilitate cooperation with other jurisdictions and also allows for more effective assessments. 
   
   In my view, the majority’s opinion allows the government to not just maintain the project list approach, but to in fact considerably expand the types of projects and activities that require federal assessment. 
    
4. The scope of what can be considered is broad. The majority held that federal officials can consider all the factors currently listed in the Impact Assessment Act, including climate and sustainability, in impact assessments. This finding was another big win, and something we argued in our written and oral submissions.
    
5. “Federal effects” do not include all GHGs, all changes respecting Indigenous peoples’ wellbeing, and all effects on migratory birds. Also as noted above, the majority took issue with the definition of federal effects in the Act, which includes all GHGs and other transboundary effects, changes respecting Indigenous peoples’ health and wellbeing, and all aspects of migratory birds. This finding not only limits what federal decision-makers can protect, it may also limit what officials can consider when making final decisions about whether to allow federal impacts to occur. There needs to be more thinking about how to amend the Impact Assessment Act to respect this finding while also ensuring a strong federal role in these areas, and, due to the lack of clarity left by the majority’s opinion, we may see future court cases about what is and is not a federal effect.
   
   This finding about the definition of federal effects has rung alarm bells for some, including our friends over at ABlawg. However, while it would have been helpful for the Court to have found in favour of federal authority to make decisions about some threshold amount of GHGs, I may be somewhat less concerned about this decision because 1) it leaves the door open for doing so in the future; and 2) it reflects the important principle that we need both provincial and federal governments to uphold Indigenous rights and authority, and for both to step up on climate change. Either way, for the purposes of the impact assessment regime, this issue could be addressed through amendments to the definition of federal effects in the Act.
    
6. The federal decision cannot consider non-federal adverse effects. As we noted above, this is probably the most problematic part of the decision. Essentially, the majority seems to suggest that it would be within federal authority to consider non-federal benefits of a project in order to justify impacts on areas of federal jurisdiction, but cannot consider any non-federal impacts when deciding whether the federal effects are overall in the public interest. 
   
   For the majority, the Act’s public interest decision is “constitutionally vulnerable” for two reasons: first, some of the factors to consider are about the whole project, not just federal effects. Second, some factors, such as sustainability, go well beyond federal effects. It is here that the majority’s opinion becomes problematic – and in my view, illogical. 
   
   There are two problems with this opinion. To begin with, it is constitutionally arbitrary. Nowhere in the Constitution does it differentiate between impacts and benefits – a matter is a matter whether it is positive or negative. If it is constitutionally permissible for Parliament to consider economic benefits, such as jobs, when deciding whether the federal effects, such as impacts on fish, are warranted, it must be equally permissible to consider economic risks and downsides, such as whether the project will take away jobs in other sectors, result in a less diversified and therefore less resilient economy, or replace permanent, well-paying jobs with temporary low-wage ones. 
   
   Additionally, it could lead to blinkered – and therefore impoverished – decision-making. Federal officials ought to be able to make informed decisions about effects on federal jurisdiction, including whether approving harms to federal matters might have unwanted spinoff effects. In its opinion the majority used a hypothetical example of a mine project, and I’ll stick with that here. For the majority, if a federal decision maker concluded that fisheries effects are not in the public interest because the overall effects of the mine would hinder sustainability, the decision would no longer be driven by the fisheries effects. 
   
   That’s a bold claim to make outside of a specific fact situation. Yes, it could be the case that in some future hypothetical situation the federal Environment Minister refuses to allow minor impacts on fish not because of those effects but because the Minister is actually trying to regulate something outside of federal jurisdiction, but that’s a big presumption to make, and it’s more likely that the Minister may want to make a valid decision about impacts on fish that are compounded by other effects that would occur as a result of allowing the impacts on fish. 
   
   For example, turning a lake into a tailings pond takes work, which requires workers. And if the tailings pond is required for the mine to operate, the mine itself will also require workers to build and operate it. All those workers need to be housed somewhere. For a mine that is relatively close to a town, the proponent might prefer that the workers live in that town rather than build onsite housing for them. Influxes of hundreds or thousands of workers and their families can strain local services like health and create housing shortages. Those are all issues that would fall under provincial power over local matters, but they are also highly relevant to a federal decision about whether to allow the harm to fisheries. To say that a federal decision maker cannot consider the spinoff effects of its decisions is irrational and comes with a serious risk of forcing the federal government to ignore the wellbeing of Canadians when making decisions that affect them. That, in my view, is an untenable situation.
   
   In light of those issues, there is another way to read the majority’s opinion. The Chief Justice suggests that the decision-making power under the Canadian Environmental Assessment Act, 2012 (CEAA, 2012) was appropriate. Under that Act, decision-makers had to determine wither significant adverse federal effects were “justified in the circumstances.” While the majority appears to believe that under CEAA, 2012 decision makers couldn’t use the “circumstances” to render a negative decision, that isn’t supported by a plain reading of the Act. Section 52(4)(b) of CEAA, 2012 clearly states that the Governor in Council may determine “that the significant adverse environmental effects that the designated project is likely to cause are not justified in the circumstances” [emphasis added].
   
   Thus, a simple fix could be to amend the final decision in the Impact Assessment Act to state that the final decision is whether the project’s federal effects are justified, rather than are in the public interest. We note that we, along with others, criticized the “justified in the circumstances” decision under CEAA, 2012, in part because there was no requirement to provide detailed reasons for decisions, and in part because “in the circumstances” was so vague as to allow dubious and unexplained “benefits” to trump environmental protection. In my view, it should be possible to craft a decision function that better addresses the majority’s concern that decisions be truly focused on federal effects and not regulating projects while ensuring that decisions protect the environment and Canadians. 

Conclusions and next steps 

To reiterate, while the majority found the Impact Assessment Act to be unconstitutional, overall I see this case as a win for Canada. In its reasons, the majority made two important findings that expand on federal powers to trigger and conduct impact assessments. First, federal officials can require projects – including natural resource projects like mines, dams and pipelines – to go through an impact assessment even if at the initial triggering stage it isn’t clear whether the project will have effects on areas of federal jurisdiction. This finding underscores the importance of taking a precautionary approach and should help foster better assessment outcomes and better collaboration with other governments. 

Second, the majority clarified that during impact assessments, officials can consider all relevant information, including climate effects, sustainability, impacts on Indigenous peoples and their rights, and the intersection of sex and gender with other identity factors. This finding is important because it ensures that assessments can identify and consider all the potential consequences of potentially harmful projects and activities, and because Canadians can be assured that they can raise issues of concern and importance to them. 

The majority’s opinion does contain some concerning language that appears aimed at limiting the scope of factors that decision makers can consider. However, the majority’s fundamental concern is that federal assessments and decisions are rightfully focused on matters within federal jurisdiction, which is reasonable. It should be possible to craft a new decision-making provision that addresses the majority’s concerns while also ensuring that decisions can be fully informed and help foster sustainability. 

So what happens next? 

Natural Resources Minister Jonathan Wilkinson has said that the government will make minor amendments to bring the Impact Assessment Act into conformity with the majority’s opinion. Those amendments will likely be recommended by a new ministerial working group established to investigate how to make impact assessments and regulatory permitting processes more efficient. 

In the meantime, the Impact Assessment Act will continue to remain on the books, and projects that entered into assessments under the Act will have to remain in those processes. 

While there is some risk that the amendments will go beyond simple fixes to constitutional issues and may be aimed at finding “efficiencies” for clean-growth projects, we will be closely monitoring next steps and will do our utmost to ensure that if anything, amendments to the federal assessment regime overall strengthen the Act, such as by preventing authorities from approving federal impacts that would undermine ecological integrity or that do not have the consent of Indigenous peoples. We will also be engaging in the five-year review of the Physical Activities Regulations to advocate for the inclusion of far more projects and activities with the potential for effects within federal jurisdiction. Overall, this opinion is more of an opportunity than a setback.

Top photo: lezumbalaberenjena via Flickr Creative Commons