Canada: Validity Of The Renewable Fuels Regulations Under CEPA Upheld

The Federal Court of Appeal has recently rendered a decision in another judicial review involving the Canadian Environmental Protection Act (CEPA).

Syncrude, which produces diesel fuel at its tar sands operations, commenced an application challenging the validity of federal regulations made under CEPA requiring that all diesel fuel produced, imported, or sold in Canada contain a minimum of 2% renewable fuel (the Renewable Fuels Regulations). In Syncrude v Canada (Attorney General), 2016 FCA 160, the Federal Court of Appeal upheld a lower court decision to dismiss that application.

At the heart of the Syncrude challenge was the Renewable Fuels Regulations (RFRs). The RFRs were promulgated under subsection 140(1) of CEPA, which empowers Cabinet to make regulations to carry out the purpose of section 139 of the Act. Section 139 prohibits the production, importation, and sale of fuel in Canada does not meet prescribed specifications. In order to make a regulation under subsection 140(1), subsection 140(2) requires that Cabinet must first be of the opinion that the proposed regulation could make a significant contribution to the prevention of, or reduction in, air pollution resulting from fuel combustion. Breaching section 139 is an offence, subject to a fine of not less than $500,000 up to a maximum of $6,000,000 on conviction for corporations.

Syncrude challenged the validity of the RFRs as a matter both of constitutional law and administrative law.

In terms of the constitutionality of the RFRs, Syncrude alleged that the operative provision of the RFRs did not constitute a valid exercise of Parliament's criminal law power under the Constitution because it lacked a criminal law purpose.

The arguments relating to constitutionality focused on the operative provision of the RFRs—subsection 5(2)— and asserted is not aimed at reducing air pollution or climate change. Rather, it argued, that subsection 5(1) of the Regulations is either an economic measure designed to create a local market, which would fall under subsection 92(13) of the Constitution, or pertains to non-renewable natural resources, which would fall under section 92A of the Constitution.  Both subsections 92(13) and 92A of the Constitution are matters solely within provincial jurisdiction.

The impugned provision provides:

Distillate pool

(2) For the purpose of section 139 of the Act, the quantity of renewable fuel, expressed as a volume in litres, calculated in accordance with subsection 8(2), must be at least 2% of the volume, expressed in litres, of a primary supplier's distillate pool for each distillate compliance period.

According to the Regulatory Impact Analysis Statement (RIAS) that accompanied the publication of the Renewable Fuels Regulations, the Regulations were aimed at reducing greenhouse gas emissions (GHG), which it linked both to climate change and air pollution. Several GHGs are listed under section 64 CEPA as "toxic substances."

The Court found that dealing pollution was an issue through which Parliament could properly exercise its powers over criminal law. Although Syncrude had attempted to establish that the RFRs were ineffective in reducing GHG emissions, the Court found its evidence uncompelling and that the effectiveness of legislation is irrelevant towards characterizing it in a constitutional analysis. It disagreed that the dominant purpose of the RFRs was to create a market for renewable fuels—even though the government hoped in part that it would create a demand for fuels that emit less GHGs, the sanction was a valid use of its criminal law power.

In terms of its administrative law arguments, Syncrude alleged that the provision was invalid because section 140 of CEPA required Cabinet to form an opinion that the Regulations would reduce air pollution—a condition precedent—which it could not reasonably have done.

The Court did not agree that the Regulations were inconsistent with the enabling statute. Cabinet clearly had come to the opinion that the Regulations would reduce air pollution, therefore satisfying the statutory condition precedent. Cabinet had arrived at the opinion that the Regulations could reduce air pollution, which is all that was required; it need not have based its opinion on absolute scientific certainty.

The Syncrude decision joins a collection of judicial reviews seeking to challenge regulations made under, and regulatory decision making related to, environmental statutes. This has included challenging the validity of regulations made under Ontario's Endangered Species Act, which was dismissed at first instance but for which a decision on a recent appeal to the Court of Appeal is expected shortly; the Goodyear decision, which unsuccessfully sought to indirectly challenge a decision to add BENPAT to Schedule 1 of CEPA as a toxic substance; and a challenge to a regulation made under Ontario's Pesticides Act aimed at reducing neonicotinoid pesticide use, which was rejected both at first instance and upon appeal.

While distinct in their respective approaches, each of these proceedings illustrates the difficulty in challenging regulations and regulatory decision making.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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