In this blog, we provide our final follow-up commentary on the Alberta Court of Appeal’s reference decision which concluded that the federal Impact Assessment Act (IAA) is unconstitutional.
The Alberta Court of Appeal (the Court) held that the federal government did not have the jurisdiction “to regulate emissions generally within a province, including from designated projects approved by that province” (paras 230 and 289). A majority of the Court was concerned about federal overreach into areas of provincial jurisdiction by allowing it to effectively regulate greenhouse gas (GHG) emissions from specific projects and, in particular, by regulations under the IAA which exempted in-situ oil sands projects from the IAA, but only if there was a legislated provincial emissions cap on oil sands emissions. It is noteworthy that even Justice Greckol, who would have upheld the IAA as being within federal jurisdiction, was careful not to suggest that the federal government had broad authority to regulate GHG emissions from specific projects.
As discussed in our recent “Cap in Hand” bulletin, the issue of federal regulation of GHG emissions is once again in the news with a federal proposal to mandate a 42% reduction in emissions from the upstream oil and gas sector from 2019 levels by 2030. This would be done by either capping emissions through new regulations under the Canadian Environmental Protections Act (CEPA) or taxing oil and gas sector emissions under the federal Greenhouse Gas Pollutions Pricing Act (GGPPA). The consensus from the upstream oil and gas industry is that it is impossible to achieve this level of emissions reduction by 2030 without cutting existing production. Should the federal government proceed with its proposed plan, it is likely that the conclusion of the Court regarding the limits to the federal power to regulate GHG emissions will be tested.
The Supreme Court of Canada (SCC) has already upheld both CEPA and the GGPPA, in the case of the former under the criminal law power and the latter as a matter of national concern under the peace, order and good government clause of the constitution. The limits of these powers remain uncertain. Although there may be no general federal power to regulate GHG emissions, can the federal government use its long-standing criminal law power under CEPA, or its newly minted carbon pricing power under the GGPPA, to mandate the reduction of GHG emissions by the upstream oil and gas industry?
The Federal Court of Appeal (FCA) has previously upheld regulations under CEPA mandating the blending of renewable fuels into diesel with the intent of reducing GHG emissions from fuel consumption as a valid exercise of its criminal law power. If that FCA decision were accepted by the SCC, the federal government might be able to make it a criminal offence for oil and gas operators to emit GHGs in excess of permitted levels. However, an important aspect of the FCA reasoning was that the regulations under CEPA did not intrude too far into areas of provincial jurisdiction. Critical to that reasoning was the FCA’s finding that the regulations in question were “agnostic” about who achieved the emissions reductions and how, exactly, they were achieved. By contrast, the ability to impose conditions on specific projects related to GHG emissions, the ability to effectively veto a project due to its GHG emissions, and laws that target GHG emissions from the oil and gas industry could be viewed differently by courts. Such laws (like the IAA or the proposed federal oil and gas emissions cap) might not be considered “agnostic” about where emissions reductions come from and who achieves them.
The federal government has appealed the decision of the Court on the constitutionality of the IAA to the SCC, but that appeal won’t necessarily answer the constitutional questions related to the use of CEPA or the GGPPA to cap emissions from the upstream oil and gas sector. The IAA is different legislation that has the potential to be justified using a broad range of federal powers. Courts tend only to answer questions that are necessary to decide cases before them. This leaves the prospect of another decade of uncertainty for the oil and gas sector in Canada, while constitutional issues wind their way through the Courts. Ultimately, all parties, including the federal government, provincial governments and oil and gas industry stakeholders, will have to assess their political, business and legal positions and come up with a solution that everyone can live with.
For more information on this topic, please reach out to a member of Dentons’ Energy Innovation and Transition group.