Canada: New Regulations Exempting Certain Infrastructure Projects From Federal Environmental Assessments Already Being Challenged

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Environmental Law, May 2009

Introduction

In the January 2009 federal budget, the Conservatives promised billions of dollars in new spending to help stimulate the economy, including a considerable amount for new infrastructure. Around the same time these spending initiatives were announced, Federal Transport Minister John Baird made public his desire to eliminate federal environmental assessments and other 'red tape' to shorten the time lag between the commitment of federal funds and the construction of certain infrastructure projects. In one interview, he suggested that "We have a lot of rules in place to stop bad things from happening ... we don't have anything to help good things happen."

These pronouncements were manifested into legislative change with similarly little time lag. On March 19, 2009, the government published Regulations Amending the Exclusion List Regulations, 2007, (Exclusion Regulations) and the Infrastructure Projects Environmental Assessment Adaptation Regulations (Adaptation Regulations). In a nutshell, these regulations will exempt certain projects that are funded through the federal Building Canada Plan, from an environmental assessment under the Canadian Environmental Assessment Act (CEAA). The government has indicated that the combined effect of these new regulations will be to exempt up to 2,000 infrastructure projects from the requirements of CEAA over the next two years.

On April 15, 2009, less than a month after publication, the Sierra Club of Canada (Sierra Club) initiated a Judicial Review Application against the Attorney General of Canada (the Application). The overall basis for the Application is that the Governor in Council does not have the requisite authority pursuant to its regulatory powers under the CEAA, to amend the CEAA in the manner that it did.

This article will provide a brief overview of the new regulations. It will then discuss the nature of Sierra Club's Judicial Review Application, the strengths and weaknesses of the Application, and the potential legal and practical impacts of any judicial pronouncements.

The Exclusion Regulations

The legislative scheme under the CEAA follows an all-in-unless-out approach. In other words, unless specifically exempted or excluded, a federal environmental assessment (EA) will be required, whenever a federal authority is a project proponent, or has provided financial assistance, federal lands or some form of approval for a project. The existing Exclusion List Regulations, 2007 sets out a number of projects that are exempt from a federal EA. The new Exclusion Regulations expands that list of exempt projects.

Under the Exclusion Regulations, under certain specified instances, a host of new projects such as waste disposal sites, public transit infrastructure, railway systems, highway interchanges or modifications, residential, medical, educational or commercial buildings, bridges, and sewage treatment plants, funded through the federal government's Building Canada Plan, will now be exempted from the requirements of a federal EA. The Exclusion Regulations have a two-year sunset clause, whereby all of its provisions are set to expire on March 31, 2011.

In addition to the Exclusion Regulations, the government issued a Regulatory Impact Analysis Statement which delves into the rationale behind the regulations. It confirms the government's view that the projects described in the Exclusion Regulations have insignificant environmental effects. This government Statement is quite interesting, when considered in light of the sunset clause. If the government was convinced that there were no significant environmental effects of the projects covered by the new regulations, why have the exemptions expire in two years? Alternatively, if a significant environmental effect is anticipated, but justified due to the importance of the federal infrastructure stimulus package, why did the government not just say so?

The Adaptation Regulations

The Adaptation Regulations are a new set of regulations enacted under the CEAA. They "adapt" certain sections of the CEAA to deal with projects that may be undertaken under the Building Canada Plan. In effect, they rewrite certain statutory sections of the CEAA without actually amending the statute, ostensibly in accordance with s.59(i)(iv) of the CEAA. The revisions also provide the federal Minister of the Environment with a discretionary power to substitute a federal EA process with a provincial EA, where the former would otherwise have been required pursuant to a Joint Panel Review process.

As is the situation with the Exclusion Regulations, the Adaptation Regulations are subject to a two-year sunset clause. However, unlike the Exclusion Regulations, in the Regulatory Impact Analysis Statement that accompanied the Adaptation Regulations, the government acknowledged the problem of exempting infrastructure projects from a federal EA. It identified a host of possible scenarios for facilitating payment of federal funds for infrastructure projects and chose the adaptation of the CEAA, through the implementation of the Adaptation Regulations as its best option.

Sierra Club Challenge to Exclusion Regulations

The Sierra Club argues that the Exclusion Regulations are not valid because there was no explanation as to how the Governor in Council reached its opinion that the now exempted projects had insignificant environmental effects, without the whole decision-making process undergoing an EA. The Sierra Club further argues that exempting up to 2,000 projects from environmental assessment is inconsistent with the overall intent of the CEAA and amounts to an illegal amendment to the CEAA.

The Sierra Club's argument that the Exclusion Regulations are invalid due to a lack of adequate explanation by the government is similar to the argument that prevailed in Pembina Institute for Appropriate Development, et al v. Attorney General of Canada and Imperial Oil Resources Ventures Limited (the Kearl Decision). The Kearl Decision was discussed in a May 2008 Blakes Bulletin: Federal Court Decision in Kearl Creates Further Uncertainty and Delays for Oil Sands Projects. The Sierra Club's challenge also appears to be based in part on the government inappropriately exercising its discretion. Convincing a court that the Governor in Council did not properly exercise its discretion will likely prove to be an uphill battle for the Sierra Club.

Sierra Club Challenge to Adaptation Regulations

The Sierra Club's challenge to these regulations is that it is inappropriate and unlawful for the federal government to amend a statute (i.e., the CEAA) through passage of a regulation. In effect, the assertion is that the amendment to the CEAA ought to have been done pursuant to the rules and requirements (and notice) associated with all statutory amendments. By introducing the Adaptation Regulations without any advance warning or ability to discuss its provisions, the Adaptation Regulations amount to an amendment to the CEAA without legal authority. Regarding the sections pertaining to the Joint Review Panel, the Application maintains that the CEAA only confers the power on the federal government to substitute one federal EA process with another federal EA process, but does not enable the government to substitute a provincial EA for a federal EA. Finally, the Sierra Club asserts that the amendments are inconsistent with the overall intent, object and purpose of the CEAA.

The arguments raised by the Sierra Club concerning the Adaptation Regulations are rooted in the context of statutory interpretation and legislative authority. In essence, the Application alleges that the federal government does not have the requisite authority to amend the provisions of the CEAA statute by means of a regulation. The Application will therefore involve the court determining the legal basis upon which the CEAA can be modified by regulation, pursuant to s.59 of that Act, and the parameters surrounding such modification. At first blush, the federal government may very well be faced with a more difficult argument on this issue.

Summary

It is far from certain what the end result of the Judicial Review Application will be. What is certain is that the result may have wide-ranging ramifications.

On the legal front, the court's decision to either uphold or strike these regulations will set some parameters on the Governor in Council's discretion in enacting regulations and how much detailed reasoning must be disclosed when exercising that discretion. Despite the seemingly laudable goals of economic stimulus, governments must still act within the confines of their legislative powers to amend statutory provisions or enact new regulations.

From an environmental perspective, the question arises as to the sufficiency of the provincial EA process, and the larger impact of circumventing the federal EA process. Should the Exclusion and Adaptation Regulations both be upheld, the longer term impact of such a decision needs to be considered. If various infrastructure projects can be exempted from the federal EA process, will the two-year sunset clauses subsequently be deleted? Further, what will hinder or prohibit the government from extending or expanding its exclusion list to other projects?

From a practical perspective, those who make their living in either the environmental field or in infrastructure development may be directly affected by any judicial decision. If the Exclusion and Adaptation Regulations are upheld, certain industries will benefit economically from the increased flow of federal funds. Conversely, should the Exclusion and Adaptation Regulations be stricken, fewer federal funds may flow under the Building Canada Plan, and those who have structured their business activities on an accelerated process may have to amend their current business plans accordingly.

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