Harmony at last? Amendments to Canada's Impact Assessment Act seek to harmonize federal and provincial assessments

Co-Authored by 2024 Articling Students Stacy Porter and Maggie Sainty

The Impact Assessment Act ("IAA") has been amended with implications for the assessment and approval of major energy, infrastructure and mining projects going forward. The federal government unveiled amendments to the IAA in the Budget Implementation Act, 2024, No. 1 ("Bill C-69"), which received royal assent on June 20, 2024.^[1]

The amendments are intended to ensure the IAA is more efficient and constitutionally sound. In a landmark opinion issued on October 13, 2023, the Supreme Court of Canada found core components of the IAA to be unconstitutional, including the "screening decision" (whether a federal impact assessment is required), and the "public interest decision" (where a decision is made to allow a project to proceed or not). See our prior article for details.

That being said, the Supreme Court found there was still a role for federal assessment. Therefore, the federal government has not repealed or completely overhauled the IAA. The amendments are more targeted and aim to address the Supreme Court's concerns, including by clarifying that an impact assessment is only required when a project may have adverse effects within federal jurisdiction. The amendments also more explicitly promote substitution of the federal impact assessment process with other equivalent provincial assessment processes.

We explore some of the key amendments in the subsections below.

1. The Amendments shift the IAA's focus to non-negligible adverse federal effects and no longer include GHG emissions

The precursor to the IAA, the Canadian Environmental Assessment Act, 2012, focused on "significant adverse environmental effects." In 2019, the IAA replaced that approach for a more holistic assessment of all positive and negative effects within federal jurisdiction, including environmental, social, economic, cultural and heritage effects.

The amendments move to something closer to the former regime by replacing "effects within federal jurisdiction" with "adverse effects within federal jurisdiction," which is defined as "non-negligible adverse changes" that are within the legislative authority of the federal government. While the term "non-negligible" has yet to be interpreted, these amendments suggest the IAA will focus on material, adverse environmental effects that fall within the federal government's authority.

Notably, the broad category of "a change to the environment that would occur in a province other than the one where the physical activity or the designated project is being carried out" is removed from the definition of "adverse effects within federal jurisdiction" as the Supreme Court found this clause was too broad."^[2] This provision has been referred to as the "interprovincial or cross-border effects clause" because it captures effects that would cross over provincial borders.

The exclusion of this interprovincial or cross-border effects clause effectively removes Greenhouse Gas ("GHG") emissions as "adverse effects within federal jurisdiction." Meanwhile, pollution to boundary waters or international waters, as well as marine pollution are within the definition of "adverse effects within federal jurisdiction."^[3] This is because the Supreme Court has previously found that the federal government does have constitutional authority to legislate in these areas.^[4]

2. The federal government will likely give more consideration to the assessment processes of other jurisdictions

Given these amendments were precipitated by the Supreme Court's ruling that the IAA overstepped the division of powers between the federal and provincial governments, there is a theme to ensure the federal government considers the assessment processes of other jurisdictions. The subsections below illustrate three examples.

1. The Minster may consider equivalent processes when deciding whether to designate a project that is not on the project list

Section 9 of the IAA allows the federal Minster of Environment to designate a physical activity not prescribed by the regulations (i.e. not on the project list) and to require it to go through federal impact assessment. The federal government amended this provision to add additional factors for the Minister's consideration, including public concerns, whether a means other than an impact assessment exists that would permit a jurisdiction to address the adverse effects, and any other factor the Minister considers relevant.^[5]

Thus, if an equivalent provincial process is in place to adequately address federal impacts, this may avoid the need for the Minister to designate a project through a section 9 order.

2. The Impact Assessment Agency, in its screening decision, may consider whether an equivalent process exists in another jurisdiction

Section 16 of the IAA outlines the factors the Impact Assessment Agency considers when determining whether an impact assessment is required (i.e. the "screening decision"). The federal government amended this provision to include a new factor (f.1) that considers whether a means other than an impact assessment exists that would permit a jurisdiction to address the federal effects.^[6]

Furthermore, the new section 16(2.1) states the Impact Assessment Agency "may decide that an impact assessment is required only if it is satisfied that the carrying out of the designated project may cause adverse effects within federal jurisdiction or direct or incidental adverse effects" (emphasis added). This provision is meant to make the screening decision more focused on federal effects to address the Supreme Court's concerns. However, critics worry that the permissive language (i.e. " may cause adverse effects within federal jurisdiction") may still lead to federal overreach.

3. The Minister has broader powers to substitute a federal impact assessment with that of another jurisdiction

The amendments also broaden the Minister's powers under section 31 to allow for (a) the substitution of another jurisdiction's process for assessing the effects of a designated project, and (b) the substitution of another jurisdiction's process for assessing the effects of a designated project together and the activities undertaken under an agreement or arrangement with that jurisdiction referred to in s.114(1)(f) of the IAA.^[7]

Thus, with all three of these changes, we see the federal government opening the door for substitution of a provincial, territorial or other assessment processes if they adequately address federal effects.

We note that even before these changes, the IAA gave the federal government the discretion to defer to the assessments of other jurisdictions. For example, the federal government denied a request to designate the Ontario Line Project (a 15-km subway project in Toronto) on the basis that Ontario's assessment under Ontario Regulation 341/20 would be sufficient to address potential effects to fish and fish habitat, migratory birds and species at risk, and aboriginal and treaty rights.^[8]

The Supreme Court's decision has spurred further cooperation. For example, the federal government recently dropped its requirement for a federal assessment for Ontario Highway 413 and has instead adopted a bilateral federal-provincial working group.^[9]

Therefore, these amendments appear to clarify what is already occurring on the ground and promote greater deference to provincial processes in the future.

3. The final project approval decision must consider whether effects are likely to be "to some extent, significant"

Finally, the Supreme Court was concerned the "public interest decision" (i.e. the final decision to deny or approve a project) was unconstitutional because of its failure to focus on effects within federal jurisdiction.

Bill C-69 amends the final decision-making provisions so there is first an initial determination on whether the adverse effects within federal jurisdiction and the direct or incidental adverse effects are "likely to be, to some extent, significant" and if so, "the extent to which those effects are significant."^[10] Only after this determination is made is there a determination of whether those effects are justified in the public interest.

Conclusion

Through Bill C-69, the federal government aims to address the IAA's constitutional issues while also facilitating efficient project reviews and advancing Canada's clean growth and environmental protection goals. However, the full implications of these changes remain to be seen as these amendments have yet to be interpreted in practice.

We will keep you posted as this area develops. Please contact the authors or a member of the Environmental Law Group for questions.