Reference re Impact Assessment Act: Supreme Court majority rules that the presumption of constitutionality cannot save the Act from being unconstitutional in part

Introduction

On appeal from a decision of the Court of Appeal of Alberta in the context of a reference, the Supreme Court of Canada (the “Court”) recently concluded that the federal impact assessment scheme consisting of the Impact Assessment Act¹ (the “IAA”) and the Physical Activities Regulations² is unconstitutional in part.³

A majority of the Court, per Chief Justice Wagner, reaffirmed the Court’s vital role in upholding the division of powers framework laid out in the Constitution, while recognizing environmental protection as a fundamental value of Canadian society.⁴ It emphasized that cooperative federalism means that both levels of government can show leadership in protecting the environment while respecting the division of powers.⁵

The federal “designated projects” impact assessment scheme

The majority reasons largely relate to the portion of the federal scheme concerning designated projects, as the constitutionality of the provisions on activities on federal lands or outside Canada is not effectively in dispute.⁶ Designated projects are set out in a “Project List” adopted by the Governor in Council.⁷ These are projects which are viewed as having “the greatest potential for adverse effects on areas of federal jurisdiction related to the environment.”⁸ The Minister of Environment and Climate Change may also designate projects that are not on the “Project List” if, in his or her opinion, they may cause adverse effects within federal jurisdiction, or adverse direct or incidental effects, or if public concern about those effects warrant the designation.⁹

The impact assessment process for designated projects consists of three main phases:¹⁰ (1) the planning phase, which focuses on initial information gathering;¹¹ (2) the assessment phase, which culminates in the preparation of an assessment report identifying the adverse effects within federal jurisdiction and the adverse direct or incidental effects that the project is likely to cause;¹² and (3) the decision-making phase, by which the decision maker must determine whether these adverse effects are in the public interest.¹³ While all designated projects must go through the planning phase, they are not automatically subject to an impact assessment. Indeed, it is up to the Impact Assessment Agency (the “Agency”) to make a screening decision as to whether an impact assessment is required.¹⁴

At the core of the disagreement between the majority and dissenting reasons: the presumption of constitutionality

According to the majority, the pith and substance of the designated projects component of the scheme is to assess and regulate such projects with a view to mitigating or preventing their potential adverse environmental, health, social and economic impacts.¹⁵ It thus exceeds the bounds of federal legislative jurisdiction,¹⁶ because, inter alia, federal effects “do not drive the scheme’s decision-making functions.”¹⁷

For example, section 16 of the IAA grants an unconstitutional discretionary power to the Agency, since the screening decision “is not driven by possible federal effects”.¹⁸ Similarly, at the public interest decision stage, the scheme does not focus on federal impacts as it should.¹⁹ Instead, in its current form, it requires the decision maker to consider a host of factors without specifying how those factors are to  be weighted in, such that decision-making is no longer focused on regulating federal impacts, but on the project as a whole.²⁰

According to the partly dissenting judges Karakatsanis and Jamal, the pith and substance of the designated projects scheme is rather:

“to establish an environmental assessment process to (1) assess the effects of physical activities or major projects on federal lands, Indigenous peoples, fisheries, migratory birds, and lands, air, or waters outside Canada or in provinces other than where a project is located, and (2) to determine whether to impose restrictions on the project to safeguard against significant adverse federal effects, unless allowing those effects is in the public interest. […]”²¹

Contrary to the majority, they are of the opinion that section 16 of the IAA is intra vires, insofar as “the presumption of constitutionality requires a court to interpret the discretion granted under the legislation as being exercised in good faith and within constitutional bounds.”²² In other words, Justices Karakatsanis and Jamal consider it premature to rule on the Agency’s discretionary power before it has been exercised.²³ In the same vein, they conclude that the decision-making process is constitutional, provided that it is anchored in adverse federal effects.²⁴ If such were not the case in a given situation, then the decision could be subject to judicial review for being contrary to the object and purpose of the IAA.²⁵

In sum, for the partially dissenting judges, cooperative federalism demands that the courts presume good faith on the part of legislatures and that legislation be interpreted to comply with the division of powers, so as to favour the operation of statutes enacted by both levels of government whenever possible.²⁶

Conversely, the majority judges hold that the courts may not “employ the presumption of constitutionality to rewrite legislative text as they see fit in order to bring it into compliance with the Constitution.”²⁷  With regard to section 16 of the IAA, for example, they indicate that they are unable to resort to the presumption of constitutionality, as it only applies when two competing interpretations are reasonably open to the court, which the text, context and purpose of section 16 preclude in this case.²⁸ Finally, according to the majority, courts may not circumvent their duty to review the constitutionality of a law by suggesting that judicial review is available if an administrative decision maker applies that law unconstitutionally.²⁹

Conclusion

Opinions given in references are not formally binding on governments.³⁰ In a statement issued by the Impact Assessment Agency, the Minister of Environment and Climate Change and the Minister of Justice and Attorney General of Canada  notably declared:

The Government of Canada developed the Impact Assessment Act to create a better set of rules that respect the environment, Indigenous rights and ensure projects get assessed in a timely way. We remain committed to these principles. We are heartened that the Supreme Court of Canada affirmed our role on these core principles. We will now take this back and work quickly to improve the legislation through Parliament.

The statement also notes that 23 projects are currently undergoing federal impact assessment. However, it does not specify what will happen to these projects in light of the reference.

The authors are grateful to law student Inès Bagaoui-Fradette for her invaluable contribution to this article.

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¹ S.C. 2019, c. 28.
² SOR/2019-285.
³ Reference re Impact Assessment Act, 2023 SCC 23.
⁴ Id., para. 1.
⁵ Id., para. 216.
⁶ Id., para. 208.
⁷ Id., para. 35.
⁸ Ibid.
⁹ Id., para. 36.
¹⁰ Id., para. 37.
¹¹ Id., para. 38.
¹² Id., para. 43.
¹³ Id., para. 46.
¹⁴ Id., para. 148.
¹⁵ Id., para. 204.
¹⁶ Id., para. 134.
¹⁷ Id., para. 135.
¹⁸ Id., para. 150.
¹⁹ Id., para. 178.
²⁰ Ibid. See also paras. 166–174.
²¹ Id., para. 257. See also para. 298.
²² Id., para. 314.
²³ Id., para. 315.
²⁴ Id., para. 336.
²⁵ Id., para. 335.
²⁶ Id., para. 234.
²⁷ Id., para. 73.
²⁸ Id., para. 154. See also para. 73.
²⁹ Id., para. 74.
³⁰ Reference re Code of Civil Procedure (Qc), s. 35, 2021 SCC 27, paras. 151–152.