The federal government’s amendments (“Amendments”) to the Impact Assessment Act, SC 2019, c 28 (“IAA”) are one step closer to becoming law. During the week of May 6, 2024, the Amendments, forming part of Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024 (“Bill C-69”),^[1]went to second reading in the House of Commons.

The Amendments seek to remedy portions of the IAA that the majority of the Supreme Court of Canada (“SCC”) found were unconstitutional in Reference re Impact Assessment Act, 2023 SCC 23 (“SCC Reference”), released October 13, 2023.

Background

The scheme established by the IAA and the Physical Activities Regulations, SOR/2019-285 (“Regulations”) has two components. The first component concerns projects carried out or financed by federal authorities on federal lands or outside Canada.^[2] The second component of the scheme, comprised of the remainder of the IAA and the Regulations, considers projects that do not fall within the first component.

The Regulations list physical activities – “designated projects” – that, in the government’s view, are major projects with the greatest potential for adverse effects on areas of federal jurisdiction related to the environment.^[3]

In the SCC Reference, the majority^[4] found that the first component of the IAA scheme is constitutional^[5] but that the second component dealing with “designated projects” is beyond Parliament’s constitutional competence.^[6] The unconstitutionality of the second component hinges on its focus on the impacts of “designated projects” instead of any effects arising within federal jurisdiction. That is, due to the second component of the scheme having a broad designation mechanism, projects with little or no potential for adverse federal effects may be required to undergo an impact assessment.^[7]

For more information on the SCC Reference, refer to Stikeman Elliott’s previous blog post.

The Amendments

Bill C-69 went to first reading on May 2, 2024. As summarized in Bill C-69, the Amendments seek to:

(a) align the preamble and purpose provision with the primary objective of that Act, which is to prevent or mitigate significant adverse effects within federal jurisdiction — and significant direct or incidental adverse effects — that may be caused by the carrying out of physical activities;

(b) replace the definition “effects within federal jurisdiction” with “adverse effects within federal jurisdiction” and, in doing so,

(i) restrict the definition to non-negligible adverse changes,

(ii) limit transboundary changes to those involving the pollution of transboundary waters and the marine environment, and

(iii) include, in respect of federal works or undertakings and activities carried out on federal lands, non-negligible adverse changes to the environment or to health, social and economic conditions;

(c) ensure that the impact assessment process applies only to those physical activities that may cause adverse effects within federal jurisdiction or direct or incidental adverse effects;

(d) ensure that, in deciding if an impact assessment of a designated project is required, one factor that the Impact Assessment Agency of Canada must take into account is whether means exists that would permit a jurisdiction to address those effects;

(e) amend the final decision-making provisions to provide for an initial determination as to whether the adverse effects within federal jurisdiction and the direct or incidental adverse effects are likely to be, to some extent, significant, and then, if so, provide for a determination as to whether those effects are justified in the public interest; and

(f) improve cooperation tools to better harmonize the impact assessment process with the processes for assessing effects that are followed by provincial and Indigenous jurisdictions.^[8]

The Amendments also include transitional provisions, enabling retroactive application to designated projects,^[9] and relating to the amendment of decision statements issued prior to the Amendments coming into force to bring them in line with the Amendments.^[10]

The Amendments target four key elements of the IAA, discussed below in turn.

1. Narrowed Application of the IAA

The Amendments would repeal the definitions of “direct or incidental effects” and “effects within federal jurisdiction” and replace them with a new streamlined definition of “adverse effects within federal jurisdiction”, which requires the adverse effects to also be “non-negligible”.^[11]

The new definition would also apply to non-negligible adverse changes to the marine environment caused by pollution occurring outside Canada,^[12] to boundary waters or international waters, or to interprovincial waters.^[13]

Finally, the amended definition specifies that the IAA would apply to any non-negligible adverse effect arising from physical activities or designated projects on federal land or a federal work or undertaking.^[14]

The Amendments appear to address the overbroad definition of “effects within federal jurisdiction” by casting a narrower application as to the kinds of effects that would trigger an assessment. However, the new definition invites uncertainty with the addition of the phrase “non-negligible”.

2. Limits on Agency and Ministerial Screening Decisions

In determining whether to designate a project not listed in the Regulations for federal assessment, the Amendments include a new requirement that the Minister consider “whether a means other than an impact assessment exists that would permit a jurisdiction to address the adverse effects within federal jurisdiction — and the direct or incidental adverse effects — that may be caused by the carrying out of the physical activity.”^[15]

In the screening process to determine whether a project would undergo federal assessment, under the Amendments, the Impact Assessment Agency (“Agency”) would no longer require a proponent to provide a detailed project description, though it may require one if it is of the view that it cannot make a decision without additional information.^[16] The Agency would still require a proponent to provide notice on how it would address any issues arising from the planning phase of the project, including in relation to any adverse impacts on the rights of Indigenous peoples.^[17]

The Amendments would also limit the discretion of the Agency as it relates to whether it can subject a project to federal assessment by requiring that the Agency be “satisfied that the carrying out of the designated project may cause adverse effects within federal jurisdiction or incidental adverse effects.”^[18]

3. Agreements with Other Jurisdictions

The Amendments would provide the ability for the Minister to enter into agreements with other jurisdictions to substitute, in full or in part, the impact assessment process that other jurisdiction.^[19] Another jurisdiction may mean a province or Indigenous governing body, among other things, as defined in the IAA.

4. Decision Making

As it relates to the final decision as to whether a project may proceed, the Amendments would introduce a two-stage assessment for the relevant decision maker (the Minister in the case of a standard review and the Governor in Council in the case of a panel review or Ministerial referral).

In either instance, the decision-maker must make an initial determination as to whether the adverse effects within federal jurisdiction and the direct or incidental adverse effects are likely to be, to some extent, significant. If so, the decision-maker must determine whether those effects are justified in the public interest.^[20]

The Future

Not surprisingly, the federal government in drafting the Amendments appears to have directed its attention to the primary fault with the IAA as identified in the SCC Reference. However, it did so with a very narrow focus and in a manner that has the potential to create uncertainty by introducing consideration of gradients for adverse effects. This approach may prove problematic in the shorter-term as the nuances of these gradients will only be known through application and consideration. That said, the renewed emphasis on provincial assessment of physical activities, through substitution, is likely to be more successful in the longer-term in addressing the SCC Reference and its criticisms of the IAA.

It also appears that the federal government recognizes its more limited jurisdiction over carbon emitting projects in Canada, but there is uncertainty as to what will occur in practice.

The Amendments have no legal effect until they receive royal assent and come into force.

Stikeman Elliott will continue to monitor developments following from the Amendments, including any changes prior to their passage into law.

[1] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28.

[2] IAA, ss 81-91.

[3] SCC Reference at para 35.

[4] The majority consisted of: Wagner C.J., Côté, Rowe, Martin and Kasirer JJ. The majority reasons were authored by Wagner C.J.

[5] SCC Reference at para 5. The constitutional validity of this component of the scheme was not challenged (para 208).

[6] SCC Reference at para 6.

[7] SCC Reference at para 154.

[8] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Summary.

[9] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 305.

[10] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, ss 307-308.

[11] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 271(3).

[12] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 271(3)(c).

[13] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 271(3)(d).

[14] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 271(3).

[15] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 275.

[16] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 276.

[17] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 276.

[18] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 277(3).

[19] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, s 280.

[20] Government Bill (House of Commons) C-69 (44-1) - First Reading - Budget Implementation Act, 2024, No. 1 - Parliament of Canada, Part 4, Division 28, ss 289-291.

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