The recent finding by the Supreme Court of Canada deeming federal reviews of major development projects unconstitutional forces the Canadian government to narrow its regulatory focus and could spur legal challenges, legal and policy experts told S&P Global Commodity Insights.

In a much-anticipated opinion, the Supreme Court on Oct. 13 said Canada's Impact Assessment Act (IAA), which governs an expansion of federal oversight of infrastructure and resource projects, gave the federal government "practically untrammeled power to regulate" any proposal it wants even if it does not have clear jurisdiction.

The decision does not kick the federal government out of the permitting game, but constrains how the government judges federal jurisdiction, screens projects and decides their fate, according to five industry and legal experts who spoke with Commodity Insights.

"We think reviews are likely to become more focused with the potential ... of being more efficient," said Pierre Gratton, president and CEO of the Mining Association of Canada.

The court ruling, seen as a win for provincial jurisdiction over resource and infrastructure projects, ensures the government will revise the legislation, experts said. Gratton said to expect legislative amendments by next spring and interim guidance on the IAA process in the wake of the decision over the next few weeks.

"We accept the court's opinion and will take this back to find the most efficient way of amending the act," Steven Guilbeault, Canada's Minister of Environment and Climate Change, which is responsible for the IAA, said in an emailed statement.

Legal peril

Some legal minds see grounds for companies to reconsider and challenge whether the IAA applies to projects already under review or bound for the process.

One potential reason for a project proponent to revisit their assessment is greenhouse gases. Experts noted that, while the court didn't draw clear lines around federal jurisdiction over climate-change causing pollution, the court said the Canadian government did not make the case that it had full jurisdiction to conduct reviews on the basis of the emissions, as the IAA might claim.

"What they have said is that GHGs are not the hook that can bring it all into federal jurisdiction," said Bridget Gilbride, a partner at law firm Fasken Martineau DuMoulin LLP who focuses on environmental and Indigenous law.

It is not clear if the challenges will succeed, as the federal government still has well-defined authority to assess major projects where they touch on federal jurisdiction. That includes impacts to fish habitat, navigable waters, species at risk, bird migration and interprovincial matters.

"If you are a project proponent today with a project that is provincially approved, and you don't need a Fisheries Act permit or any other federal permit other than approval under the Impact Assessment Act, I think you should now be seeing your legal counsel to get an opinion as to whether or not you can simply proceed today with your project," said Martin Ignasiak, a Calgary, Alberta-based regulatory lawyer and partner at Bennett Jones LLP and head of the firm's energy regulatory practice. "Because I think there's a very high likelihood you can."

Gilbride agreed the court opinion opened the door to challenges in specific scenarios where federal jurisdiction did not appear to have been a trigger.

"I think it's a fair question, if I'm a project proponent, to consider whether you were scoped in for reasons that the court has now said are unconstitutional," Gilbride said.

Feds still in it

Most mining projects in the IAA and projects bound for the process will likely still need federal assessments, as many of them trigger reviews over areas of federal jurisdiction, such as impacts to fish habitat, Gratton said.

"This isn't the end of federal assessment," said Kevin Hanna, director of the Centre for Environmental Assessment Research at the University of British Columbia. "This isn't the end of federal responsibility."

Still, the court opinion puts projects under review in limbo as the government moves to revise the legislation to make it constitutional. Experts said it could mean delays in ongoing assessments while raising uncertainty for project proponents over how the rules may change.

Out of 42 active reviews, there are 17 mining projects and six energy projects under some form of IAA scrutiny, according to data on the Impact Assessment Agency of Canada's website.

IAA — Take Two

However the government revises the IAA, the updated law and regulations will have to stay within more traditional federal jurisdiction, legal and policy experts said.

The court's opinion targeted decision-making points in the IAA as overstepping.

Certainly, the federal government can consider a broad range of issues related to a project in assessments, including climate change and socioeconomic impacts, the court said. But at two key points in the process — screening projects for whether they fall under the IAA and deciding their fate — the court said the IAA went too far.

"Nevertheless, at the ultimate decision-making juncture, the focus on federal impacts must be restored," Chief Justice Richard Wagner said in the 5-2 majority decision. "Parliament can validly regulate only the impacts that fall within its jurisdiction or that arise from activities within its jurisdiction."

Some experts predict a less cumbersome process with the focus returning to federal jurisdiction.

"I think [the federal government] will be hard-pressed to justify extensive studies that are unlikely to contribute to any federal decision," Gratton said.

A tighter screening process could also mean fewer projects fall under federal review, some experts said, though they noted many mines trigger clear federal jurisdiction.

How deep?

The legislative fix may not require an extensive rewrite of the IAA, as the federal government may only need to reframe the screening and decision-making process around federal jurisdiction, some experts said. In this, the revised regulatory regime may resemble past assessment laws that hewed closer to federal jurisdiction.

"I'm sure one of the things that the federal government is thinking about doing right now, is looking at what kind of off-the-shelf statutory provisions were in the previous regimes that [they] could use without a whole lot of modification to bring [the IAA] into harmony with the majority's view," said David Wright, an associate professor in the faculty of law at the University of Calgary who focuses on natural resource and environmental law.

The Trudeau government launched the IAA in 2019, putting a greater focus on consultation, climate change and the socioeconomic impact of mines.

Still, Ignasiak said the government will need to cut deeper in fixing the law.

"Canada has to come to grips with what the decision says," Ignasiak said. "It goes way beyond what they've acknowledged so far. This is not a matter of tweaks and minor amendments."

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