Wrecking ball contained: Supreme Court of Canada did stop, will stop expanding federal jurisdiction

This morning, the Supreme Court of Canada (SCC) released its highly anticipated decision in Reference re Impact Assessment Act (IAA Reference)¹ assessing whether the federal IAA² is constitutional. In what may be a surprise to many, a majority of the court concluded that large portions of the IAA are unconstitutional, a decisive statement that federal jurisdiction to regulate the environment, as well as cooperative federalism, both have firm limits and do not permit overbroad encroachment on matters left exclusively to the provinces.³ Below, we provide a brief overview of the procedural history of the case, today’s decision, and several key takeaways.

Procedural background

Today's decision is an appeal from a reference case put to the Alberta Court of Appeal (ABCA). Reference cases are questions to the court from government, brought through a specialized statutory mechanism. 

In this case, the Lieutenant Governor in Council of Alberta asked the ABCA to answer two questions: (1) whether the IAA is beyond the legislative authority of the federal government, and (2) whether an associated regulation is properly within the legislative authority of the provinces. 

As we previously outlined,⁴ a majority of the ABCA held that the IAA unconstitutionally overreached into provincial power – going so far as to describe Parliament as having “taken a wrecking ball to the constitutional right of the citizens of Alberta and Saskatchewan and other provinces.”⁵ The IAA was found to unconstitutionally infringe provincial powers over the development and management of natural resources, proprietary rights as owners of public lands, local works and undertakings, management of public lands, property and civil rights, and local or private matters.⁶ 

Decisions made in reference cases are advisory and not binding, so the IAA remained in force despite the ABCA’s conclusions. The federal government appealed the decision to the Supreme Court of Canada. 

The decision

Chief Justice Wagner, writing for the majority, found that significant portions of the IAA are unconstitutional – largely on the basis of overbreadth in the way the legislation treats federal effects in designating projects. While acknowledging that legislation is presumed to be constitutional, and that matters like the environment may have elements that touch on both federal and provincial powers (the “double aspect doctrine”), the majority held firmly that these concepts have limits and cannot be used to circumvent meaningful legislative review. 

The IAA purported to regulate “Designated Projects” – either being physical activities that are automatically subject to the IAA, or activities designated by the Minister of Environment and Climate Change Canada for review if the activity may cause adverse effects within federal jurisdiction or where there were public concerns related to those effects. Once designated, the project would be required to undergo a federal review, and ultimately the minister would determine if the project could proceed, and if so on what conditions.

Here, although the IAA attempted to tether the legislation to federal powers through consideration of “effects within federal jurisdiction,” two concerns ultimately proved fatal to the bulk of the legislation. First, those effects did not drive the IAA’s decision-making functions – rather, decision-makers are empowered to consider an open-ended list of factors, of which only two are tied to federal jurisdiction, and a project may be caught by the IAA even where there is a tenuous link to those two factors. Second, even the defined “effects within federal jurisdiction” noted did not in fact align with the federal government’s constitutional powers. Accordingly, the “pith and substance” of the IAA is beyond federal jurisdiction.

The court did, however, narrowly allow one aspect of Canada’s appeal, holding that a portion of the scheme governing federal projects on federal lands or outside of Canada is constitutionally compliant given the federal government’s constitutional power over these lands. 

Justices Karakatsanis and Jamal dissented in part, and would have held the entirety of the legislative scheme to be constitutional. Their answer to the risk of federal overreach was a combination of presumed constitutionality and decision-specific judicial review – elements the majority judgment raised and rejected. The dissent also heavily discounted “extrinsic evidence” that the majority accepted – but did not rely upon – as reinforcing the legislation’s overbroad application. 

Key takeaways

The outcome today will likely come as a surprise to many given the SCC’s 2021 decision upholding the federal carbon pricing backstop in References re Greenhouse Gas Pollution Pricing Act (in which the dissenting judgment struck similar chords to the ABCA decision below in this case),⁷ particularly since it reflects a break from a long string of environmental cases expanding both provincial and federal jurisdiction under the auspices of cooperative federalism.

Yet the decision is consistent with what is likely the most closely analogous case, the BC Court of Appeal’s decision in Reference re Environmental Management Act.⁸ There, like here, the court ruled on the basis that the legislation’s “pith and substance” – BC’s effort to restrict the import of heavy oil into the province on environmental grounds – was an unconstitutional attempt to “usurp” federal jurisdiction over interprovincial pipelines, just as here the IAA was found to intrude into provincial powers within their borders.

The case law now neatly identifies what will often be the critical point for an environmental law’s constitutionality: characterizing its purpose. Courts will closely scrutinize whether a law is validly directed toward matters within the enacting level of government’s power, or if, despite pretext to the contrary, it is properly characterized as directed toward matters in the exclusive power of the other level of government. But once a law's purpose is established as within the enacting government's power, cooperative federalism means there is a broad scope for both federal and provincial governments to regulate in an overlapping manner and proving an unconstitutional conflict will often be challenging.

The IAA ultimately remains in force (as noted, reference cases are advisory, not binding), but those portions of the scheme declared unconstitutional are highly unlikely to be enforced given today’s ruling. Federal government statements promise speedy “surgical” amendments to respond to the judgment. The portion of the legislation found to be constitutional (governing federal projects on federal lands or outside of Canada) continues to apply.

Today’s decision may have broader impacts beyond an amended IAA. In particular, the court discussed that the “IAA expressly permits projects to be designated, assessments to be required and public interest decisions to be made on the basis that a project emits greenhouse gases that cross provincial and national borders,”⁹ which the court found was overreaching. This may impact certain legislative initiatives currently being considered by the federal government, including those related to regulating emissions within provincial boundaries.