By Andrew Roman, March 31, 2023
On April 1 Canada’s carbon tax will increase, raising the price of gasoline by 14 cents a litre. This will also increase other energy prices, the prices of your food, and the cost of living generally. But the carbon tax is only the obvious federal policy to reduce energy consumption. The other policy is meant to reduce energy supply – by keeping Canadian oil and gas in the ground.
The latter policy is being accomplished subtly, through the Impact Assessment Act (IAA). The IAA’s stated purpose is to require proposed projects like mines, pipelines and electricity transmission lines to go through a federal assessment of the estimated environmental, financial and social impacts, to determine whether they are licensed to proceed. However, the IAA makes new energy projects – like pipelines to transport oil and gas to consumers – prohibitively costly, if they are approved at all.
Alberta had hoped that it could use constitutional litigation to end this legislated federal control of its natural resource development. Alberta will probably lose this case, now before the Supreme Court of Canada (SCC). Yet this loss was predictable from the SCC’s decision in the 2021 carbon tax litigation, brought by several provinces. In that case, as in this one, the provinces conceded Ottawa’s position on the facts that the federal government used to justify its legislation, thereby ensuring their loss.
The real dispute behind the constitutional litigation
Federal and provincial environmental assessments have been used cooperatively for large scale projects for half a century. Some assessments have had representatives from each level of government on the assessment panel. So why the court battle now?
The reason is that the IAA has greatly expanded the scope of the federal assessment process, making it practically impossible to construct any project Ottawa is opposed to, including new pipelines. That’s why Alberta politicians have called it the “No More Pipelines Act.”
The last pipeline assessed, the Trans Mountain Extension (TMX), demonstrated just how broken our assessment process was. It took a decade – two or three times the length of similar US assessments. After the approval, pipeline opponents subjected that decision to two rounds of litigation. The frustrated investors walked away while the litigation was ongoing. The message to investors is that Canada is no longer open for business as it once was.
However, that pipeline assessment was under the old (Canadian Environmental Assessment Act, 2012) impact assessment law. Under that law it was mandatory to assess 12 issues. The new IAA almost doubled that to 22 issues, including new ones, like the downstream impact on climate change for the entire planet, which is virtually impossible to estimate. This massive increase in the cost, length and uncertainty of the process ensures that no new energy project of any size is likely to be built anywhere in Canada. That’s the real purpose of the IAA, and the reason why Alberta, the province most affected, wanted to nullify it.
Why Ottawa will probably win
Canada’s impact assessment process is broken, but constitutional litigation is unlikely to fix it. That’s because of the important SCC precedent set in the 2021 carbon tax case.
As the Chief Justice wrote, on behalf of the majority of the court:
these gases are a specific and precisely identifiable type of pollutant. The harmful effects of GHGs are known … Moreover, GHG [greenhouse gases] emissions are predominantly extraprovincial and international in their character and implications. …. GHG emissions represent a pollution problem that is not merely interprovincial, but global, in scope.
The Court’s holding on the international aspects of GHG emissions leaves no room for provincial natural resources jurisdiction. That effectively amended the Canadian constitution without changing any words in the written law. As all large-scale industrial activity emits CO2 and has social and economic impacts, the CO2 hook in the IAA makes all natural resources subject to federal micro-management and veto.
The provinces’ fatal concession
The provinces are the authors of their own misfortune. In the carbon tax case the federal government argued that Canada’s CO2 emissions needed to be reduced massively and immediately to fight the global climate crisis. The provinces did not contest this argument. Once the provinces had effectively conceded urgent global action to fight the climate crisis, it was all over for them – for natural resources and possibly other areas of provincial jurisdiction.
Reference cases do not test the facts
These two constitutional cases came to the SCC through an unusual Canadian legal procedure: the reference case. Usually, constitutional litigation starts with a trial, with competing testimony and cross examination of witnesses, and then, perhaps, appeals up the judicial ladder to the SCC. However, to avoid a long trial, a province can refer a case straight to its provincial Court of Appeal for a non-binding opinion, or Ottawa can refer a case to the SCC for a binding opinion.
But reference cases do not test facts. The central issue is the interpretation of the constitution. The “evidence” presented is usually rudimentary, without cross-examination. The court assumes the stated facts to be uncontroversial, and considers which level of government has the constitutional authority to deal with those facts. If the facts presented are one-sided, the decision will probably also be one-sided.
The SCC’s decision about the constitutional jurisdiction over natural resources will have a huge economic and social impact for all Canadians. It will also greatly stress Canadian national unity in the years to come. The provinces that have most of the high value natural resources will be the obvious losers. But less obvious, thanks to the IAA, all Canadians will also be losers through escalating energy prices. It remains to be seen for how long Ottawa’s victory in this case, and the new IAA, will be sustainable.
Andrew Roman is a retired litigation lawyer with over 40 years of experience in environmental, electricity, competition, and constitutional issues. He has appeared at all levels of court and is the author of over 100 legal articles and a law book.