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When You Need To Know About The Supreme Court of Canada’s Ruling On The Impact Assessment Act

The Supreme Court of Canada ruled Friday the federal Impact Assessment Act (IAA) is “unconstitutional in part” because it goes beyond federal jurisdiction. 

The Court divided its decision into what amounts to two parts: (1) the process for major project approvals and (2) what projects are considered “designated projects” under the Act.

The Court’s five-to-two decision responded to a reference question led by Alberta about the IAA’s constitutionality. Ultimately, the justices found the processoutlined by the Act to be constitutional. But the Court also said the IAA’s definition of “designated projects” captured by the Act goes beyond Parliament’s jurisdiction under the Constitution.

Critics of the IAA, including the federal opposition Conservatives and counterpart provincial governments such as in Alberta, have long framed the Act as an over-reach of federal power into provincial responsibility for natural resource development. They also have contended that the Act would depress investment in major projects in Canada, such as mining and oil and gas extraction. The federal government has countered that the impact assessment process would, in fact, make approvals easier, at least in the long run.

The Court’s ruling is not technically binding, given that the case brought by the Alberta government sought only a reference opinion from the Court. Federal Environment Minister Steven Guilbeault said Friday the government “accepts” the decision and will work quickly to improve the Act while remaining committed to its principles.

The implications will become clearer in the coming weeks and months but here are some early assessments and expectations: 

  1. Some capital expenditures may be at risk. The U.S. Inflation Reduction Act (IRA) is believed to have drawn investment south, and uncertainty created by the Court decision may increase this. 
  2. The government is seeking to limit any uncertainty. Guilbeault and Natural Resources Minister Jonathan Wilkinson underlined that the Court’s opinion does not nullify the Act. They contended, therefore, that projects now in the pipeline can continue under existing rules even as they work to introduce new legislation to bring the Act in line with the Court’s opinion.
  3. However, there may well be lengthy uncertainty all the same. The ministers acknowledged projects worth billions of dollars now await approval under the IAA regulatory regime. They promised to do their best to provide the kind of certainty sought by the private sector. But the legislative process to pass the IAA took four years, and this was when the Liberal government had a majority. It also remains highly likely that Alberta will again challenge the Act, depending on what form the proposed changes take. This could add yet more uncertainty.
  4. The Liberals may be squeezed by this issue both domestically and internationally. Domestically, the Tories will insist that the Liberal government has hurt resource development by overreaching in the context of an extreme environmental agenda. Internationally, the Court opinion may suggest to Canada’s allies, especially the United States, that Canada can’t move quickly enough in becoming a big supplier of critical minerals fundamental to the global energy transition.

For those looking to navigate Ottawa, McMillan Vantage is here with insights about what you need to know, when you need to know it.

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