Amendments to the Impact Assessment Act published for introduction into the House of Commons

Yesterday, the Government of Canada published a series of highly anticipated amendments to the Impact Assessment Act, the federal law that outlines the process for assessing the impacts of projects that fall within federal jurisdiction and projects carried out on federal lands or outside Canada. The amendments are intended to bring the legislation into constitutional compliance after the Supreme Court of Canada held the Impact Assessment Act to be unconstitutional in an advisory opinion released last year. The amendments were made public by the Department of Finance along with a news release as part of a government motion to introduce the Budget Implementation Act, 2024, No. 1, commonly referred to as the “first budget implementation bill”. The full text of the bill with the proposed amendments can be found here and will soon be tabled in the House of Commons.

In addition to addressing the constitutional concerns raised by the Reference re Impact Assessment Act, the proposed amendments include some additional changes that do more than address the Supreme Court of Canada’s opinion, primarily directed at improving federal-provincial coordination and fostering Indigenous reconciliation. These amendments are linked to the section of Budget 2024 released on April 16, 2024, entitled “Getting Major Projects Done”, where the federal government outlined new measures intended to improve federal regulatory and permitting processes.

Taken together, the amendments represent incremental adjustments to the federal impact assessment regime, rather than a complete overhaul. The most significant changes can be found in the approach to “effects within federal jurisdiction”, “substitution”, “designation” and “public interest”, each of which are addressed in more detail below. As soon as the updated Impact Assessment Act (the Act) is in force, the Impact Assessment Agency of Canada (the Agency) is likely to focus on its goal of improved provincial cooperation, along with the efficient and effective review of projects currently under assessment.

What you need to know

• The definition of federal effects and public interest test have been reformulated. In response to the Supreme Court of Canada’s opinion, the proposed amendments have clarified and narrowed the relevant federal effects, although it’s unclear how the Agency will implement these changes in practice. Additionally, the controversial public interest test has been adjusted, focusing on adverse impacts on Indigenous rights, the ability to meet climate change targets, and a contribution to overall sustainability.
• Improved coordination between federal and provincial governments, and door opened to “means other than impact assessment”. A core theme of the amendments is a clear effort to avoid duplication with provincial and other relevant assessment processes that may be sufficient to achieve the objectives of the Act. With these amendments, the government is making it easier to allow substitution and cooperation with other decision-makers while narrowing the scope of the public interest test. Additionally, the amendments introduce the new concept of “means other than impact assessment” in the project designation process.
• The amendments highlight Indigenous rights and reconciliation. These proposed changes are intended to align the Impact Assessment Act with the United Nations Declaration on the Rights of Indigenous Peoples Act, whereas the previous version of the Impact Assessment Act referred only to the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) itself in its preamble. Additionally, the mandate section of the Act would be modified to refer to section 35 rights and the need to account for Indigenous knowledge.

Reformulation of federal effects and public interest test

The first notable change occurs in the Impact Assessment Act’s preamble, which has been replaced with a similar, shorter preamble containing subtle but important differences in emphasis. Notably, while the first clause of the preamble previously referred to the broad concept of “fostering sustainability”, it now refers to having an impact assessment process that “prevents and mitigates significant adverse effects within federal jurisdiction”.

The meaning of “effects within federal jurisdiction” is made more precise throughout the Act by redefining the term as “adverse effects within federal jurisdiction” and including within it a narrow list of “non-negligible adverse” changes to specifically listed components of the environment (such as fish and fish habitat and migratory birds) as well as to federal lands, marine environments and environments with significance for Indigenous Peoples. This definition maintains the use of a Schedule 3, where components of the environment or a health, social or economic matter may be added or removed by regulation.

The use of the terms “significant” and “adverse” are undoubtedly in response to the Supreme Court of Canada’s advisory opinion, which found the overbreadth of the definition of effects within federal jurisdiction “astonishing”, observing that Parliament could have used those adjectives to narrow the definition¹. If the Agency treats the changes as a substantial narrowing of the “effects within federal jurisdiction” in practice—rather than a clarification of the original intent—the result could be fewer assessments for projects with more distant ties to federal jurisdiction.

Notably, the proposed amendments also contain a reformulation of the “public interest” test under the Act, the current iteration of which has spurred controversy. The factors considered under the test have been adjusted, emphasizing adverse impacts on Indigenous rights, the ability to meet climate change targets, and a contribution to overall sustainability.

Strategies to improve federal-provincial coordination and alternatives to impact assessment

The Supreme Court of Canada referred to the government’s commitment of achieving “one project, one assessment” and the concerns raised by provinces and industry on the unnecessary duplication and lack of federal-provincial coordination created by the federal impact assessment regime². To address this, the “mandate” section of the Act found at section 6(2) would be modified to state that the Government of Canada, the Minister, the Agency and federal authorities, in the administration of the Act, “must exercise their powers in a manner that… promotes cooperation among jurisdictions”.

Additionally, the proposed amendments replace sections 34 and 35 of the Act to create more opportunities for the responsible Minister to substitute a provincial assessment in place of a federal assessment by softening the requirements around what factors need to be considered before substitution is possible. This change should, in theory, make it simpler for the federal government to enter into cooperation agreements with provincial governments on a regional or project basis, as the federal government has already done with the Province of British Columbia.

One of the proposed amendments would allow the Agency to decide that an impact assessment of a designated project under the Act is not required if there is a "means other than an impact assessment" that would permit a “jurisdiction” to address the adverse effects within federal jurisdiction. Jurisdiction here is defined to include other federal authorities, provincial authorities and certain Indigenous governing bodies. The Agency would, therefore, have the discretion to defer to alternative evaluative or impact management models administered by others. This could include existing federal or provincial regulatory or permitting processes that already incorporate impact evaluation and/or mitigation, or new, more streamlined processes that are less focused on advance evaluation and prioritize adaptive management instead. This amendment also has the potential to offer considerably more flexibility for deferring to Indigenous-led community review processes that fall outside the typical impact/environmental assessment paradigm.

Promoting Indigenous rights and reconciliation

Although this did not arise from the Supreme Court of Canada’s decision, the proposed amendments seek to further align the Impact Assessment Act with the United Nations Declaration on the Rights of Indigenous Peoples Act, which received Royal Assent in June 2021. This is done by moving up the commitment to implement UNDRIP in the shortened preamble (to give it greater emphasis), as well as the changes to the mandate section of the Act to refer to section 35 rights and the need to account for Indigenous knowledge.

In its advisory opinion, the Supreme Court of Canada did emphasize that the formulation of effects with respect to Indigenous peoples were “cast broadly” and not sufficiently tied to federal jurisdiction³. As for non-Indigenous federal effects, the federal government has addressed this in the proposed new definition of “effects within federal definition” by replacing the words “an impact” with “non-negligible adverse impacts”.

Timelines to Royal Assent

Once the Budget Implementation Act, 2024, No. 1 has been introduced, the federal government will work swiftly to prioritize its passage by both the House of Commons and Senate over the coming months. At the same time, the government will be working to implement the measures set out in Budget 2024 to improve federal regulatory and permitting processes, which includes adhering to the newly set targets of 1) five years or less to complete federal impact assessment and permitting processes for federally designated projects, 2) two years or less for permitting non-federally designated projects, and 3) three years for nuclear projects through closer collaboration between the Impact Assessment Agency of Canada and the Canadian Nuclear Safety Commission.