Photo credit: Doane Gregory
The reference question was first heard by the Alberta Court of Appeal, which held that the entirety of the scheme was ultra vires of Parliament (i.e., outside the federal government’s legislative authority under section 91 of the Constitution Act, 1867)(the “Constitution”). On appeal, the majority (five justices) of the Supreme Court of Canada held that the scheme was ultra vires, in part, because it provides for federal regulatory powers over projects that fall primarily under provincial jurisdiction. The dissent (two justices) held that the scheme is entirely within Parliament’s authority.
The IAA and the Regulations
The federal impact review scheme is divided into three phases: planning (i.e., screening), impact assessment (i.e., evaluation), and final public interest decision-making.
The Regulations establish a project list of activities. If a proposed project involves activity captured by the project list, it is subject to the IAA planning phase for determination of whether it requires a federal impact assessment.1 During this initial phase, the Impact Assessment Agency of Canada (the “Agency”) screens the proposal and consults with the public stakeholders, including Indigenous Peoples, to identify potential issues and impacts.
If the Agency determines that the project requires an impact review, it proceeds to the assessment stage. Here, the project proponent must disclose further information to the Agency, its delegate, or a joint review panel (consisting of provincial and federal representatives). The assessment must account for Indigenous knowledge and whether the project contributes to sustainability and assists Canada in meeting its greenhouse gas emission reduction targets. The assessment phase has an information gathering and assessment function. Additional information is gathered to inform the assessment of potential impacts, including whether the impacts can be mitigated.2
After the impact assessment is completed, a report is issued to the federal minister who decides whether the project should proceed, and if so, on what terms and conditions.3
Photo credit: Doane Gregory
The majority judgement: the IAA is an overreach of federal jurisdiction
The majority’s concern pertained to the screening and decision-making phases for projects on provincial lands for two key reasons: first, the federal government’s powers are not closely enough aligned with federal heads of power under section 91 of the Constitution.4 Second, the IAA definition of “effects within federal jurisdiction” extend far outside the ambit of matters of national concern.5
The majority arrived at this conclusion through a two-step analysis. First, the majority determined the “pith and substance” of the law based on the purpose and effect of the law. This step is meant to characterize the law’s true function and meaning. Second, the court classified the pith and substance according to federal and provincial powers enumerated in sections 91 and 92 of the Constitution.
(a) The pith and substance: to assess and regulate designated projects
The majority described the “pith and substance” of the IAA as to “assess and regulate designated projects with a view to mitigating or preventing their potential adverse environmental, health, social and economic impacts.”6 The majority found the IAA uses a “wide lens” to account for all impacts of a project,7 not only impacts that fall under federal jurisdiction. The majority determined that the effect of the IAA is to place broad temporary holds on designated projects; require the proponent to provide information about the project; and require projects to undergo an impact assessment subject to a public interest decision and ongoing regulator oversight.8
The majority determined that classification depends on whether a project falls primarily within provincial jurisdiction (e.g., a natural resource project within the boundaries of one province) or federal jurisdiction (e.g., an interprovincial road or pipeline).9 The majority was not concerned with the federal government’s powers in relation to projects on federal lands, as described by sections 81-91 of the IAA.10 The majority held that when a project falls primarily within federal jurisdiction, the federal minister can make a decision that considers a variety of federal and provincial “environmental and socio-economic concerns, including a general concern for sustainability.”11 However, when a project falls mainly within provincial jurisdiction, the federal minister’s decision must focus on the effects of the project on a resource or matter that falls within federal jurisdiction (e.g., impacts on fish habitat).12 That means the federal government can only apply a broad decision-making lens when it has primary jurisdiction—the legislation must otherwise be tailored to focus on effects within federal jurisdiction.13
The majority’s reasoning on trivial “effects within federal jurisdiction” and Indigenous Peoples
The federal government is “vested with primary constitutional responsibility of securing the welfare” of Indigenous Peoples.14 The IAA allows the federal government to regulate projects that have “effects within federal jurisdiction” including impacts on Indigenous Peoples of Canada. This includes impacts on their lands, cultural heritage, and areas of historical and archaeological significance as well as impacts on the health, social, or economic conditions of Indigenous peoples.15
Despite the federal government’s constitutional responsibility, the majority found the IAA to be overly broad in relation to impacts on Indigenous Peoples. Specifically, the court viewed IAA references to “any change” in areas of federal jurisdiction with respect to Indigenous Peoples as overly broad because it could allow the federal government to render wide-ranging decisions that capture trivial or non-adverse impacts that should not be the basis for prohibiting a project on provincial lands.16 In other words, the majority’s concern is that the IAA allows the federal government to reject a project based on minimal or non-adverse impacts on Indigenous Peoples, thereby exceeding federal jurisdiction and interfering with provincial jurisdiction.17
What the majority’s findings mean for federal jurisdiction over the environment
First, the majority emphasized that the federal government may regulate the environment if it can point to a specific policy measure that is meant to ensure a baseline response to an issue of national concern. The majority determined that the IAA does not meet the national concern test because the IAA is overly broad and not limited to a specific issue of national importance.18
Second, the majority reaffirmed that Parliament has an important role to play in environmental regulation.19 The federal government can continue to rely on a project list to capture and subject projects to a federal impact assessment process. The list can continue to include projects wholly or partly within provincial jurisdiction, so long as screening and final decisions focus on federal jurisdiction.20 The federal government can also evaluate a broad scope of environmental impacts as an information gathering exercise during an impact assessment.21 It does not matter whether the federal government assesses impacts that fall within provincial jurisdiction, or vice-versa, when conducting an impact review.22
Lastly, the ruling affirmed the validity of IAA provisions over non-designated projects on reserves and federal lands as well as projects that require an exercise of federal power or involve federal funding. In these cases, the federal government can exercise a broader scope of powers than over projects that are primarily provincial jurisdiction.23
The dissent: cooperative federalism must guide interpretation of the IAA
Justices Karakatsanis and Jamal dissented in part, holding that the IAA is entirely constitutional. The dissenting judges framed the pith and substance of the IAA differently from the majority, arguing it was intended to assess (1) the impacts of projects that touch on federal jurisdiction (e.g., federal lands, Indigenous peoples, fisheries, migratory birds, areas outside of Canada and provinces outside of where the project is located), and (2) to determine whether to impose restrictions on the project to guard against significant adverse federal effects, unless the government decides those effects are in the public interest.24
The dissent criticized the majority for focusing on hypothetical scenarios in which the federal government could theoretically make unconstitutional decisions, as such alleged unconstitutional decisions would be subject to judicial review.25 For example, the dissent criticized the majority for concerning itself with the effects of a negative decision, and not providing equal weight to a scenario in which a government approves a project for economic reasons while overlooking sustainability considerations.26
The dissent focused on the intent of the IAA to determine its effect. The dissent found the IAA targets federal effects within Parliament’s jurisdiction. The dissent concluded that Parliament did not intend to capture trivial effects because the IAA sets a high threshold by targeting significant adverse environmental effects, as indicated by the long title of the act (“An act respecting a federal process for impact assessments the prevention of significant adverse environmental effects”) and various sections spanning the screening, evaluation, and decision-making stages. Similarly, the dissent viewed the IAA as focused on capturing significant effects that trigger federal jurisdiction.27 The dissent also emphasized that courts should encourage cooperative federalism, particularly in areas of shared jurisdiction such as the environment.28
While this decision has received significant attention, the impacts are unclear for two important reasons. First, a reference decision is a legal opinion, not a binding court order. While the federal government has committed to quickly amending the IAA to address the majority’s concerns, the provisions that the majority believes are unconstitutional remain in effect. Ultimately, how and when the federal government amends the legislation will determine the effect of this decision.
Second, the majority’s ruling turned on hypothetical scenarios whereby it envisioned how the federal government could intrude on provincial jurisdiction. As discussed by the dissent, this theoretical overreach is not borne out by evidence about how the IAA works in practice. For decades, federal and provincial governments have established “joint review panels” that are responsible for carrying out a single, harmonized assessment that takes into account matters falling under provincial and federal jurisdiction. The IAA did not fundamentally change that collaborative approach, and the amended legislation may not, either.
The federal government will likely amend the IAA to more closely align its decision-making powers with federal jurisdiction. Whether and how that will result in substantive changes to federal operations, policymaking, and decision-making under the IAA is far from certain.
1 Reference re Impact Assessment Act, 2023 SCC 23, paras. 34-37.
2 Ibid., paras. 42-45.
3 Ibid., para. 46.
4 Ibid., paras. 150, 177-178.
5 Ibid., paras. 184-189.
6 Ibid., paras. 6, 76, 109, 204.
7 Ibid., para. 80.
8 Ibid., paras. 93-102.
9 Ibid., para. 127.
10 Ibid., paras. 193, 207-211.
11 Ibid., para. 173; see also para. 211.
12 Ibid., paras. 162-178.
13 Ibid., paras. 169; see also para.s 165, 175.
14 Ibid., para. 196; Delgamuukw v British Columbia,  3 SCR 1010 at para 176.
15 IAA, s 2.
16 Reference re Impact Assessment Act, paras. 181-203.
17 Ibid., paras. 196-200.
18 Ibid., paras. 182-189.
19 Ibid., paras. 1, 216.
20 Ibid., paras. 141-146.
21 Ibid., paras. 155-161.
22 Ibid., paras. 157, 160-161.
23 Ibid., paras. 207-211.
24 Ibid., para. 257.
25 Ibid., para. 315.
26 Ibid., para. 331.
27 Ibid., paras. 250-251, 270-280.
28 Ibid., paras. 269, 302, 314, 326.