On May 10, 2022, the Alberta Court of Appeal released its decision on the constitutionality of the Impact Assessment Act and Physical Activities Regulations (collectively, the "IAA"). The IAA was enacted with the purpose of regulating the impacts, including the environmental effects, of certain physical activities across Canada. The majority of judges in the 4—1 split decision found the Act to be unconstitutional, finding that Parliament had overstepped its jurisdiction and intruded on areas of exclusive provincial jurisdiction.

Background

The IAA was enacted through Bill C-69 which received royal assent in June 2019. It sets out a comprehensive impact assessment process geared towards assessing the "effects" of certain physical activities carried out in Canada, including any environmental, economic, social, cultural or heritage effects caused by the activity. Those physical activities include those deemed to be "designated projects." Many of the activities deemed to be designated projects involve intra-provincial activities which fall under exclusive provincial jurisdiction. For example, construction of in situ oil sands extraction facilities, intra-provincial highways, or hydroelectric generating facilities are all intra-provincial activities that have been swept up into the IAA assessment regime. Under the IAA, once the federal government determines that a designated project causes effects on areas of federal jurisdiction that are contrary to the “public interest”, then the project proponent is prohibited from proceeding with that project.

The Government of Alberta ("Alberta") challenged the validity of this legislation as it pertains to intra-provincial activities deemed to be designated projects, arguing that the IAA intrudes impermissibly into provincial jurisdiction by regulating intra-provincial activities that do not fall within Parliament’s jurisdiction. The Governments of Ontario and Saskatchewan, as well as several Indigenous and private interest groups intervened in support of Alberta's position. The Government of Canada ("Canada"), on the other hand, defended the validity of the IAA, arguing that it only regulates matters that fall squarely within federal jurisdiction because it focuses merely on the “adverse effects within federal jurisdiction”. Several Indigenous and private interest groups intervened in support of Canada's position.

Majority Decision

The majority at the Court of Appeal held the IAA to be unconstitutional as it undermines Canada's constitutional division of powers. They noted that under the Constitution Act, 1867 (“Constitution”), the environment is not listed as a head of power assigned to either the federal or provincial governments and in order to introduce legislation regulating the environment, the legislation must be “linked to the appropriate head of power” falling within the specific government's jurisdiction. In trumpeting the value and importance of federalism and the division of powers between federal and provincial governments, the majority relied on the principle of subsidiarity – which is that “law-making and implementation are often best achieved at a level of government that is not only effective, but also closest to the citizens affected and thus most responsive to their needs, to local distinctiveness, and to population diversity” – to hold that provincial jurisdiction should be favoured.

Reviewing legislation for validity on federalism grounds consists of the well-established two-stage analytical approach. The first stage involves characterizing the "pith and substance", or subject matter, of the legislation. The second stage involves classifying the legislation under the federal and provincial heads of power as set out in the Constitution.

Characterization of the IAA

After reviewing intrinsic evidence such as the title, preamble and statutory purposes of the IAA, and extrinsic evidence such as the legislative debates surrounding the introduction of Bill C-69, the majority found that the "pith and substance" 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."

Classification of the IAA

Canada argued that Parliament had jurisdiction over the subject matter by virtue of the following heads of federal power: section 91(12) – Sea Coast and Inland Fisheries; section 132 – Imperial Treaties; section 91(24) – Indians and Lands Reserved for the Indians; and section 91 - National Concern Doctrine Under Peace, Order and Good Government (“POGG”). The various interveners supporting Canada further argued that section 91(2) – Trade and Commerce and section 91(27) – Criminal Law applied. The majority of the Court found that the subject matter of the legislation does not properly fall under any of these federal heads of power.

Regarding Sea Coast and Inland Fisheries and Imperial Treaties, the Court noted that, unlike what was proposed by Canada, these sections do not give the federal government a general power to regulate water or air pollution. Using these heads of power to anchor prohibitions relating to intra-provincial designated projects that may have effects on fish, fish habitat, aquatic species or migratory birds constitutes jurisdictional overreach. Similarly, Canada's claim that it has jurisdiction over intra-provincial designated projects that have any effects on the environment, health, social or economic conditions of Indigenous peoples was deemed to be jurisdictional overreach.

Lastly, the Court held that the three-part test needed to establish the national concern doctrine was not satisfied. Specifically, the matter does not have a "scale of impact that is reconcilable" with the division of powers. Pursuant to the References re Greenhouse Gas Pollution Pricing Act[1], while Parliament may regulate GHG emissions for any industry over which it has exclusive jurisdiction, it may not rely on the national concern doctrine to regulate GHG emissions generally within a province including from intra-provincial designated projects approved by that province.

Instead, the Court found that the application of the IAA to intra-provincial designated projects falls squarely within several heads of provincial jurisdiction, stating that "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."

The Dissenting Opinion

Justice Greckol provided dissenting reasons, finding that the IAA establishes an environmental assessment regime that is limited in scope to matters that fall within Parliament's legislative authority. This view was based on the premise that the decision-making authority in the IAA is limited to consideration of “effects within federal jurisdiction”. That is, Justice Greckol considered that the effects of intra-provincial designated projects were limited under the IAA to those effects within federal jurisdiction, such as “on fish and fish habitat, aquatic species, migratory birds, on federal lands or federally funded projects, between provinces, outside Canada, and with respect to Indigenous peoples.” Noting both the complexities and urgency of the climate crisis, Justice Greckol championed the call for co-operative environmental protection regimes that function within their constitutional jurisdiction. And in her view, the IAA answers that call through cooperation with other jurisdictions that bear responsibility for the environment as well as its limited application to “effects within federal jurisdiction”.

The impact of the Court’s decision on the future of Canadian federalism, climate policy and intra-provincial “designated projects” remains to be seen as we fully expect that the decision will be appealed to the Supreme Court of Canada.