On May 31, 2007, the Supreme Court of Canada decided two constitutional cases that could make it harder for federally regulated companies and undertakings to claim immunity from provincial environmental requirements.
The companion cases of Canadian Western Bank v. Alberta and British Columbia (Attorney-General) v. Lafarge Canada Inc. deal with the constitutional doctrine of interjurisdictional immunity. This is the doctrine that a provincial law, though validly enacted, must be read down so as not to interfere with the core of an exclusive federal power. Thus municipal land-use controls do not apply to an airport because regulating airports is at the core of the federal power over aviation (GTAA v. Mississauga (2000, 50 O.R. (3d) 641) -- but provincial liquor regulations do apply to airlines because serving cocktails is too far removed from that core (Air Canada v. Ontario  2 S.C.R. 581).
In these decisions, the Court signalled that the doctrine has gotten out of control. While not abandoning the doctrine altogether, as some commentators have recommended, the Court has narrowed its scope and indicated that it should only be used sparingly.
In particular, the Court took a step back from its decision in Bell Canada v. Quebec  1 S.C.R. 749, which lowered the threshold for the application of the doctrine. Prior to Bell Canada the test for immunity from provincial legislation was whether the legislation "impaired", "sterilized" or "paralyzed" a federal work or undertaking. In Bell Canada the test was recast as whether the legislation merely "affected" a federal work or undertaking. Now the Court says that "We believe that the law as it stood prior to Bell Canada better reflected our federal scheme.... It is when the adverse impact of the law adopted by one level of government increases in severity from 'affecting' to 'impairing' (without necessarily 'sterilizing' or 'paralyzing') that the 'core' competence of the other level of government (or the vital or essential part of an undertaking it duly constitutes) is placed in jeopardy, and not before": Canadian Western Bank. The Court also held that the doctrine should be applied "with restraint", and only as a last resort, where the normal “pith and substance" analysis and the doctrine of federal paramountcy are insufficient.
Applying this new, restricted approach, the Court held in Canadian Western Bank that federally regulated banks are not immune from Alberta's insurance legislation. Promoting insurance is not an integral part of banking and thus the provincial law did not interfere with the core of the federal power over banking.
In Lafarge, the issue was whether a municipal zoning by-law applied to a concrete plant to be built on federal port lands. The Court held that "the port is not a federal enclave". The site in question, while under the control of the federal Vancouver Port Authority, was not owned by the federal government and was not used for shipping and navigation purposes. Accordingly the regulation of land use at the site could not be considered a vital part of the federal power over public property or navigation and shipping. However, the municipal by-law was held not to apply by virtue of the paramountcy doctrine. Both the Port Authority and the city could properly make land use rules in respect of the site, but in the event of a conflict, as there was here, the Port Authority rules would prevail.
The significance of these cases is that it may in the future be more difficult to argue that provincial (or municipal) environmental laws do not apply to federal works and undertakings. That said, the trend even before these cases has been to recognize the application of such laws -- in other words the courts have been reluctant to insulate federal works and undertakings such as railways (Ontario v. Canadian Pacific  2 S.C.R. 1028) and interprovincial trucking companies (R. v. TNT (1986), O.R. (2d) 410) from provincial environmental laws of general application.
Both decisions are available at: