Brett Carlson Chidinma B. Thompson Rick Williams July 18 2022 Court of Appeal finds IAA unconstitutional Borden Ladner Gervais LLP | Environment & Climate Change - Canada Brett Carlson, Chidinma B. Thompson, Rick Williams Environment & Climate Change IntroductionFactsDecisionCommentIntroductionOn 10 May 2022, the Alberta Court of Appeal issued its highly anticipated decision(1) on the constitutionality of the federal Impact Assessment Act (IAA) and the Physical Activities Regulations (the Regulations). Alberta's highest court considered complex legislative and constitutional issues and ruled that the IAA "would permanently alter the division of powers and forever place provincial governments in an economic chokehold controlled by the federal government".(2)The federal government has announced its intention to appeal the decision to the Supreme Court, which, if upheld, will have significant impacts on the regulation of designated projects and Canada's constitutional division of powers with respect to environmental assessments.FactsIn June 2019, the federal government introduced the IAA, which replaced the Canadian Environmental Assessment Act 2012. In response, the Alberta government launched a constitutional reference before the Alberta Court of Appeal, where it requested the Court's opinion on the constitutionality of the IAA and the Regulations.The IAA is a complex piece of federal environmental legislation that sets out when and on what terms a resource project or activity will be subject to a federal environmental impact assessment.Put simply, the IAA provides for a mechanism through which the minister may designate certain projects or activities under the Regulations, which are then automatically prohibited by virtue of section 7 of the IAA if they "may cause effects within federal jurisdiction". The section 7 prohibition applies unless and until the agency decides under section 16(1) that the project does not require an impact assessment or the proponent complies with the conditions in the decision statement issued for the project following an impact assessment.Crucially, the prohibition and other mechanisms under the IAA are governed largely by the "effects within federal jurisdiction" threshold, which is broadly defined and include potential environmental, socioeconomic and health-related effects.(3) Therefore, a key issue in the decision was the extent to which "effects within federal jurisdiction" actually tethered the IAA to matters within federal jurisdiction.DecisionMajority decisionAs a starting point, the majority emphasised that the "environment" is not a head of power that has been assigned to Parliament or the provinces under the Constitution Act 1867 and, accordingly, an environmental matter may have "some provincial aspects and some federal aspects".(4) However, projects will only be subject to federal environmental oversight if they are connected in some way to a federal head of power.Drawing on these principles, the Court proceeded to "characterize" the IAA's "pith and substance" in light of its purpose and its legal and practical effects. The Court concluded the "main thrust" of the IAA was "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".(5) Characterised this way, the Court found that the IAA "intrudes fatally into provincial jurisdiction and the provinces' proprietary rights as owners of their public lands and natural resources". In particular, and among 12 other reasons provided to support this finding,(6) the Court rejected the "self-defined effects within federal jurisdiction" trigger and held that many of these effects were not linked, or not sufficiently linked, to a federal head of power.(7)The Court then considered the second step of the constitutional analysis, which involved determining whether the IAA could be "classified" under any federal heads of power. However, the Court concluded the IAA did not fall under any federal heads of power, including the federal peace, order and good government power. Instead, the Court found the IAA fell "squarely within several heads of provincial power", including, among others:natural resources (section 92A);the management of public lands (section 92(5));local works and undertakings (section 92(1)); andproperty and civil rights (section 92(13)).(8)Ultimately, the Court concluded that the IAA "constitutes a profound invasion into provincial legislative jurisdiction and provincial proprietary rights"(9) which, if upheld, would result in the "centralization of the governance of Canada to the point this country would no longer be recognized as a real federation".(10)Concurring and dissenting decisionsJustice Strekaf concurred with the majority's analysis and conclusions, with the exception of the majority's conclusion that the IAA and the Regulations amounted to a de facto federal expropriation of the provinces' natural resources, on which she declined to express an opinion.In dissent, Justice Greckol would have upheld the IAA and the Regulations as a "valid exercise of Parliament's authority to legislate on the matter of the environment".(11) Justice Greckol was of the view that although the IAA and the Regulations applied to intra-provincial projects, which prima facie fell under provincial heads of power, they were nevertheless constitutional because they targeted adverse environmental effects in federal jurisdiction.(12)CommentThe decision is significant for the Alberta government and various allied industry and indigenous interveners. Since its inception, the IAA has faced fierce criticism from various provinces and resource market participants, who have argued that the IAA introduced a high degree of regulatory uncertainty and complexity with respect to project approval and oversight. The Court echoed similar concerns and noted several practical business impacts flowing from the IAA, including delays and the stifling of investment.The decision has several important implications for the division of powers with respect to energy issues. First, it represents a major update to constitutional law regarding federal authority over environmental assessments, which had not been thoroughly considered since 1993, when the Supreme Court upheld an earlier but significantly different version of federal environmental assessment legislation. Second, the decision contributes to a growing body of recent case law that is etching out provincial and federal jurisdictional boundaries with respect to modern environmental legislation.(13) These developments have been spurred in recent years as various levels of government have become increasingly motivated to regulate with respect to environmental issues, which has invariably led to disputes, uncertainty and judicial intervention.Notwithstanding the majority's strong rebuke of Canada's position on the IAA, the Supreme Court will have the final say, given that the federal government has already announced its intention to appeal the decision. Until then, and since the decision was a "reference" or "advisory opinion", it is expected that the IAA will remain in force and effect unless and until the decision is upheld by the Supreme Court.For further information on this topic please contact Brett Carlson, Chidinma B Thompson, Matti Lemmens or Rick Williams at Borden Ladner Gervais by telephone (+1 416 367 6749) or email ([email protected], [email protected], [email protected] or [email protected]). The Borden Ladner Gervais website can be accessed at www.blg.com.Aidan Paul, articling student at Borden Ladner Gervais, assisted in the preparation of this article.Endnotes(1) Impact Assessment Act, 2022 ABCA 165.(2) Para 27.(3) For example, "effects within federal jurisdiction" includes any effect related to any change:occurring outside of a province for which an activity is located;to the health social or economic conditions of indigenous peoples of Canada;to fish and fish habitat;to migratory birds; andto federal lands.(4) Para 47, citing Quebec (Attorney General) v Moses, 2010 SCC 17.(5) Para 372.(6) See summary of reasons for overreach at para 373.(7) For example, "effects within federal jurisdiction", which includes extra-provincial effects stemming from a project, would effectively allow Canada to assert federal oversight over provinces on the sole basis that a project otherwise within its jurisdiction emits greenhouse gas (GHG) emissions. Citing the Supreme Court's recent decision in Reference re Greenhouse Gas Pollution Pricing Act, the Court held that Parliament does not have jurisdiction over the general regulation of GHG emissions.(8) Paras 409-420.(9) Para 421.(10) Para 423.(11) Para 740.(12) Para 740.(13) See, for example:Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5;Reference re Environmental Management Act, 2021 SCC 1; andReferences re Greenhouse Gas Pollution Pricing Act, 2019 SCC 11.