Canada: Constitutional Clarity For Port Operations

Overview and Key Takeaways

In Attorney General of Quebec v. IMTT-Quebec Inc.1, the Quebec Court of Appeal concluded that IMTT-Quebec Inc.'s ("IMTT") activities at the Port of Quebec are not subject to the environmental assessment and authorization regime contained in Quebec's Environment Quality Act2 (the "EQA"). In doing so, the Court provided useful clarity respecting the proper role that precedent plays in considering the application of interjurisdictional immunity to otherwise valid provincial legislation.

IMTT operates a bulk liquids transshipment service in the Port of Quebec. In 2008, Quebec attempted to use its powers under the EQA to subject IMTT's operations to its provincial  environmental assessment and approval process. IMTT objected on the basis that Quebec had no constitutional power to do so because IMTT was operating on federal public property providing services closely integrated with the activities of the Port of Quebec and hence navigation and shipping in Canada.

The Court of Appeal agreed. It found that, when applied to IMTT's operations at the Port of Quebec, the discretionary authorization regime in the EQA interfered with the core of the federal government's jurisdiction to control the use of federal public property for federal purposes. The impugned provisions of the EQA, therefore, were rendered inapplicable to IMTT's activities by reason of interjurisdictional immunity. The Court also found that federal paramountcy would apply on the basis that the discretionary authorization provisions of the EQA frustrate the comprehensive federal regime over shipping and navigation in Canada, which includes environmental assessment protocols for projects in Canadian ports.

This case is a significant development for the following reasons.

First, the Court of Appeal addresses head on the suggestion that courts should be reluctant to apply the doctrine of interjurisdictional immunity in the absence of existing direct precedent and held that:

  1. it is not necessary to find a precedent that deals directly with the type of legislation or regulation that is being challenged; rather, the question is whether the jurisprudence identifies a protected "core" of the federal power at issue that is analogous to the issue before the court; and
  2. in any event, while courts may be hesitant to identify new "core" areas of jurisdiction, they are not prohibited from doing so.

Second, the Court of Appeal makes it clear that a province cannot interfere with the exclusive jurisdiction of Parliament by imposing an environmental assessment regime in relation to projects over which the province has no constitutional authority to participate in the decision-making process.

Background

IMTT is a federally incorporated company that operates a transshipment business at the Port of Quebec. IMTT's operations are carried out on federal property leased from the Quebec Port Authority. When petroleum, heating oil, jet fuel, and other liquids are delivered to the Port of Quebec by ship, those liquids are transferred into large tanks that customers rent from IMTT and then into other ships, rail cars or trucks that deliver the goods to their next destination. While IMTT's customers are responsible for the transshipment of the products, IMTT monitors the operations and also provides ancillary services like blending and dilution.

In 2006, IMTT built seven new tanks in order to increase its transhipment capacity at the Port of Quebec. For each of these tanks, IMTT complied with the assessment and authorization process set out in the Canadian Environmental Assessment Act and the Canada Port Authority Environmental Assessment Regulations. IMTT did not apply for an authorization under Quebec's EQA and took the position that such an authorization was not required because IMTT is under federal jurisdiction and operating on federal lands.

In 2008, after the new tanks were already built and operating, the Attorney General of Quebec ("AGQ") sought an injunction to compel IMTT to submit to the province's environmental impact assessment and review process under the EQA and to stop using the tanks until provincial authorization was granted under the EQA. IMTT and the AGQ attempted to reach a negotiated settlement via a memorandum of understanding, pursuant to which IMTT agreed to submit to the environmental assessment process without acknowledging the applicability of the EQA. However, when the Minister of the Environment decided to hold a public hearing regarding the project, IMTT terminated the memorandum of understanding.

The Application

After terminating the memorandum of understanding, IMTT and the QPA (the "Applicants") filed an application seeking a declaration that the EQA does not apply to IMTT's activities within the Port of Quebec. The Applicants argued that IMTT is a federal undertaking and that its activities are closely integrated with areas of exclusive federal jurisdiction, including the management of federal public property, navigation and shipping, and interprovincial/international transportation.

The Applicants relied on both the doctrine of interjurisdictional immunity and the doctrine of federal paramountcy. Regarding the former, the Applicants argued that the EQA is inapplicable to IMTT's activities because it impairs the core of the federal government's power over federal public property, navigation and shipping, and interprovincial and international transportation. Regarding the latter, the Applicants argued that the EQA is in conflict with and frustrates federal port and environmental legislation.

The AGC intervened to support the Applicant's claims.

The Trial Judgment

The trial judge found that IMTT's activities are closely integrated with navigation and shipping in Canada and that IMTT was operating a federal undertaking in the business of interprovincial trade. However, he concluded that the doctrine of interjurisdictional immunity could not apply because of the lack of clear precedent. Turning to paramountcy, the trial judge found that the impugned provisions of the EQA both conflict with and frustrate the federal legislative scheme over Canadian ports.

The Court of Appeal's Decision

The Competing Legislative Schemes

The Court of Appeal noted that there is a comprehensive federal regime that governs port activities. This regime includes the Canada Marine Act, the Port Authorities Operations Regulations, the Canadian Environmental Assessment Act (1992 and 2012), the Canada Port Authority Assessment Regulations, the Storage Tank Systems for Petroleum Products and Allied Petroleum Products Regulations, and the letters patent of the port authorities.

The EQA, as the court noted, has two main components: (i) a prohibitive scheme that controls the release of contaminants into the environment through the prohibitions set out in s. 20; and (ii) a discretionary provincial authorization scheme (set out in sections 22, 31.1, and 31.1.1) that requires industrial projects to obtain Ministerial or Governmental approval, usually after the completion of an environmental impact assessment. Under the latter scheme, the Minister or Government may refuse authorizations or make approvals conditional on certain standards and restrictions. This blog post only addresses the Court of Appeal's decision in respect of the provincial discretionary scheme. 

Jurisdiction over IMTT's Activities

The Court of Appeal agreed with the trial judge, who found that IMTT's activities form an integral part of navigation and shipping in Canada and therefore fall within the federal head of power under s. 91(10) of the Constitution Act, 1867. The Court found support for this conclusion in the Supreme Court of Canada's decision in British Columbia v. Lafarge Canada3, where the Binnie and LeBel JJ. said that "dockside unloading and storage operations are 'integral to shipping...".4 The Court also referenced the Canada Marine Act, which states that port activities include the "handling of goods and storage of goods."

The Court, however, disagreed with the trial judge's conclusion that IMTT is a federal undertaking involved in interprovincial or international undertaking because it owns no ships, trucks, or trains and does not transport goods across borders. As illustrated later, this finding did not negatively impact on IMTT's position in relation to the application of interjurisdictional immunity. 

Interjurisdictional Immunity

The Court said that the doctrine of interjurisdictional immunity, while applied sparingly in recent years, continues to play an important role in ensuring that  the "basic, minimum and unassailable content" of the powers listed in ss. 91 and 92 of the Constitution Act 1867 are preserved. The doctrine will apply where an otherwise valid provincial law impairs the core of a federal power. While it may also work to protect core provincial competences, it is most often raised as a means of challenging provincial intrusion into federal jurisdiction.

The Court acknowledged that, as a general rule, interjurisdictional immunity will only apply to situations already covered by precedent; however, the court found that the trial judge took an unduly narrow approach in her search for precedent:

We are of the opinion that the trial judge unduly limited the application of this doctrine by looking for a jurisprudential precedent from a higher court which deals not only with the federal head of power in question, but also applies this constitutional doctrine within the context of a conflict with environmental statutes or regulations.5

When searching for a precedent, the court said, the type of statute or regulation against which the doctrine of interjurisdictional immunity is raised is not a material factor; rather, the question is whether the jurisprudence identifies a protected "core" of the federal power at issue. Further, the existence or non-existence of precedent is not determinative: as the Supreme Court of Canada acknowledged in PHS and other cases, courts may identify new "cores" of legislative powers, even if they are hesitant to do so.6

Returning to the case at bar, the Court found that control over the planning and use of federal public property for a federal purpose forms part of the core of the federal jurisdiction over federal public property (the "Core Federal Property Jurisdiction").7 In reaching this conclusion, the Court relied on Lafarge, where the Supreme Court held that "provincial law cannot affect the exercise of a 'vital part' of federal property rights."8

The Court held that the discretionary authorization scheme in the EQA impairs the Core Federal Property Jurisdiction. Specifically, this discretionary scheme effectively grants Quebec decision-making power over projects on federal public property that relate to a federal head of power (in this case, navigation and shipping). Significantly, the Court held that the province can only require an environmental assessment in relation to a project over which the province has constitutional authority to participate in the decision-making process:

Environmental impact assessment is not a mechanism that allows one level of government to interfere with the exclusive jurisdiction of the other level of government on the pretext of environmental protection. In order to require the environmental assessment of a project, the authority in question must have a constitutional power allowing it to participate in the decision-making process regarding the project. This is an essential prerequisite. The principle of environmental precaution cannot, in and of itself, serve as the basis for the environmental assessment of a project if the level of government carrying out the assessment has no decision-making jurisdiction with respect to the project.

In this case, Quebec has no constitutional powers to participate in the decision-making process regarding IMTT's use of federal property for its activities related to navigation and shipping. Sections 22, 31.1, and 31.1.1 of the EQA, therefore, are inapplicable to IMTT's activities and facilities.

Federal Paramountcy

Federal paramountcy will apply where (i) there is an operational conflict between an otherwise valid and applicable provincial law and a federal law (i.e., where compliance with both laws is impossible); or (ii) the provincial law frustrates the purpose of the federal law.

While the Court's findings on interjurisdictional immunity were sufficient to dispose of the appeal, the Court also concluded that the doctrine of paramountcy applied to render the discretionary authorization sections of the EQA (i.e., ss. 22, 31.1, and 31.1.1) inoperative with respect to IMTT's activities and facilities. Specifically, the Court found that those sections clearly frustrate the comprehensive federal regime that regulates all aspects of Canadian ports, including environmental assessments of projects carried out on port lands.

Footnotes

1 2019 QCCA 1598 "Quebec v. IMTT".

2 CQLR, c. Q-2.

3 2007 SCC 23 "Lafarge".

4 Lafarge at para. 35.

5 Quebec v. IMTT at para. 171.

6 Canada (Attorney General) v. PHS Community Services Society, 2011 SCC 44 at paras. 65 and 67.

7 Quebec v. IMTT at paras. 179 and 200.

8 Lafarge at 55.

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