By Gary G. Mar
Published in the Financial Post

March 22, 2023

This week, the Supreme Court of Canada is hearing arguments on the constitutionality of the federal Impact Assessment Act — formerly known as Bill C-69. The court challenge hinges on whether the federal government overstepped its authority with respect to making decisions on major project approvals.

Many Canadians are interested because the court’s decision will determine the way in which resource development and major infrastructure projects unfold across Canada over the coming decades. This isn’t an academic point; many of these projects — transmission lines, critical metals and minerals, LNG terminals, natural gas processing, oil sands production and more — underlie the future of not only our own energy sources, but also our economy and our role in international energy systems.

The Court isn’t looking at whether the federal assessment regime is effective, efficient or trustworthy. It also isn’t looking at who has the “better” project approval system — the provinces or the federal government. Those are important questions that deserve attention and need to be addressed for Canada to have a project approvals process that works for our environment, our energy systems and our economy.

What the Supreme Court will consider is how responsibilities are assigned under the constitution — especially when power is shared — and ultimately who should have final approval over resource development projects.

Canada is a federation — and a very decentralized one on purpose. Our provinces have more decision-making responsibility than U.S. or Australian states. The reason goes back to the negotiations that created Canada. The deal pounded out in the British North America Act of 1867, which later became the Canada Constitution Act in 1982, brought together regions with diverse cultures, languages, economies, resource endowments and sources of tax revenue. The federal government was dealt responsibility for those things that were best held in common across the country — currency and banking, postal service, national defence, interprovincial undertakings, navigation and shipping, fisheries and others. Provinces were given responsibility for those areas where diversity mattered for local social and economic priorities — local “undertakings,” education, hospitals, municipal governments, Crown lands and resource management, development, ownership, and taxation.

But responsibility for the environment doesn’t fall clearly into either camp.

It wasn’t an issue in 1867. And when it was addressed in 1982, responsibility was assigned to the federal government if it related to fisheries or navigable waterways (traditional federal responsibilities), or through very specific new federal legislation. Otherwise, it fell to the provinces.

With the Impact Assessment Act, the federal government assumes broad decision-making powers that arise from its environmental protection responsibilities. And that is what has brought us to this Supreme Court reference case. Shared federal interest in environmental impacts has run smack into provincial responsibilities for resource development projects in oil and gas, LNG, electricity, and mining among others. (Pipelines are a whole other matter because they are inter-provincial projects.)

The question at the heart of the case is the limits of the application of environmental jurisdiction by the federal government to determine the fate of projects that fundamentally reside in the provinces’ jurisdiction.

Why does it matter? There are two reasons. The first relates to the project approval process itself. This case will determine whose assessment criteria and process, or processes, are used and ultimately who has final approval with implications for the pace and environmental impact of resource development. Canada has the resources the world wants and needs — can we provide them responsibly, and in the process create wealth for the entire nation?

The second goes to the very nature of our federation. The federal government argues that Canadian federalism has evolved to a new concept of “co-operative federalism” of shared jurisdiction that moves away from siloes of strict jurisdictional boundaries as set out in Sections 91 and 92 of the Constitution Act. The provinces submit that in the Impact Assessment Act, federal powers assumed in the name of co-operative federalism go far beyond what has been regarded as federal responsibilities for the environment in the past, going so far as to infringe upon not only provincial environmental responsibilities but also fundamental provincial jurisdiction to manage and develop natural resources. Another way to frame the issue is whether one order of government can do indirectly (i.e. via environmental responsibility) what it cannot do directly under its own assigned jurisdiction (i.e. manage resource development).

The constitutional implications of the IAA decisions will apply to the validity of federal emissions caps and methane regulations for the oil and gas sector, the validity of the proposed Clean Electricity Standards for electricity generation, as well as for mines (for critical minerals and otherwise) and other major industrial facilities — like petrochemicals.

What happens next?

The decision on a reference case does not invalidate laws. However, the opinion provides timely advice that governments generally do not ignore. A full constitutional challenge could be the next step. Ultimately this decision will not end concerns and uncertainty about what form impact assessments of major projects in Canada will take, but it will open a window to create a new process — informed by the guidance of the Supreme Court.

One thing is certain: Canada needs an effective and efficient project approval system that favours both sustainability and prosperity — regardless of the Court’s decision.

Gary Mar is CEO of the Canada West Foundation.