Alberta Court of Appeal Finds Impact Assessment Act Is Unconstitutional… Again

In its October 9, 2026 opinion in Reference re Impact Assessment Act, as amended (2026 Reference Decision), a majority of the Court of Appeal of Alberta (ABCA) concluded that the 2024 amendments to the Impact Assessment Act (IAA) did not cure the constitutional defects previously identified by the Supreme Court of Canada (SCC). The majority found that the new definition of “adverse effects within federal jurisdiction” continues to reach beyond matters of federal authority and risks capturing projects that are primarily provincial in nature.

The 2026 Reference Decision is the latest chapter in a constitutional saga spanning seven years and two provincial references. It arrives at a time of significant federal reform involving major projects, including with respect to the IAA.

Here are the key elements of the decision and what they mean for project proponents.

Background: The 2023 SCC Reference and the 2024 Amendments

In 2023, a majority of the SCC found that the IAA and Physical Activities Regulations (Regulations) were largely unconstitutional (Reference re Impact Assessment Act) (SCC Reference Decision). The “designated projects” scheme was determined to be ultra vires (beyond the powers of) Parliament because the concept of “effects within federal jurisdiction” did not drive the scheme’s decision-making functions, and the definition itself went beyond the federal government’s jurisdiction.

In the majority’s view, the designated projects scheme gave federal decision-makers “practically untrammelled” power to regulate projects, regardless of jurisdiction over the underlying activity.

The federal government responded to the SCC Reference Decision by amending the IAA through the Budget Implementation Act, 2024, No. 1.

Among other things, the new definition of “adverse effects within federal jurisdiction” in the IAA was limited to:

• “Non-negligible adverse changes” to components of the environment stated to be within federal jurisdiction, including fish and fish habitat, aquatic species and migratory birds
• “Non-negligible adverse changes” to the environment on federal lands, the marine environment or boundary, or international or interprovincial waters
• “Non-negligible adverse changes” to Indigenous Peoples’ physical and cultural heritage, traditional use of lands and resources, or historically significant sites

The broad reference to interprovincial environmental effects was removed from the definition.

The amendments also confined ministerial designation and Impact Assessment Agency of Canada screening decisions to projects that may cause non-negligible adverse changes to areas of federal authority, reformulated the public interest test around whether significant adverse federal effects are “justified in the public interest,” and expanded the ability to substitute provincial assessments in support of a “one project, one assessment” approach.

Further information about the SCC Reference Decision and resulting legislative amendments can be found in our October 2023 Blakes Bulletin: SCC Rules Federal Impact Assessment Act’s “Designated Projects” Component Is Unconstitutional and our May 2024 Blakes Bulletin: Balancing Jurisdictions: Proposed Changes to Canada’s Impact Assessment Act.

The Government of Alberta took the position that the 2024 amendments did not meaningfully change the designated projects scheme and that the IAA continued to infringe on areas of exclusive provincial jurisdiction. It referred the amended IAA and the Regulations to the ABCA to opine on the constitutionality of the amended legislation.

2026 Reference Decision

The ABCA majority recognized that Parliament had taken steps to address some of the SCC’s concerns. In its view, however, the pith and substance of the designated projects scheme had “not changed appreciably,” and the amendments did not address the fundamental problem, being that “the IAA continues to provide the federal executive branch with ultimate decision-making power in respect of broad effects of a primarily provincial project.” The designated projects scheme and the Regulations were therefore found unconstitutional again, except insofar as they apply to federal undertakings.

Section 7 of the amended IAA bars the proponent of a designated project from doing any act or thing in connection with the project that may cause “adverse effects within federal jurisdiction.” The majority found that the definition of this term continues to overreach. In the majority’s view, key issues regarding the definition include:

• A low threshold. The “non-negligible” qualification for adverse effects is undefined in the IAA. The ABCA majority considered Canada’s characterization of the term as meaning “non-trivial” or “more than minimal,” and observed that it is difficult to imagine a major project that does not have the potential to cause a non-trivial adverse effect on at least one area of federal jurisdiction (e.g., fish and fish habitat, migratory birds, Indigenous Peoples’ traditional land use). As a result, the majority concluded that the “non-negligible” threshold only marginally narrowed the application of the section 7 prohibition, and that section 7 continues to “cast a very wide net.”
• Indigenous Peoples. The majority determined that the “non-negligible” qualification did not prevent those aspects of the adverse effects definition relating to Indigenous Peoples from allowing for a “radical intrusion on provincial jurisdiction.” As drafted, the definition allows federal government to “potentially insert itself into any provincial decision that may result in virtually any impact on Indigenous traditional land use, culture, Aboriginal and treaty rights, or the health, social or economic conditions of Indigenous Peoples”. Section 91(24) of the Constitution Act, 1867 does not give Canada a veto or supervisory jurisdiction over valid exercises of provincial jurisdiction on the basis that such matters may affect Indigenous Peoples, where those matters are not themselves within federal jurisdiction.

The majority also noted that the IAA formerly allowed an Indigenous community to agree to an activity that was otherwise prohibited without an impact assessment. With the repeal of this exception, an Indigenous community cannot avoid the section 7 prohibition and associated need to undergo the impact assessment process by agreement, even where it is the proponent of the project.

• An open-ended list. The list of subject areas in the definition of “adverse effects within federal jurisdiction” is not closed. The federal cabinet can amend the list to include “any other component of the environment” by regulation. The majority expressed concern with this aspect of the definition, as it authorizes Cabinet to unilaterally expand the IAA’s scope without parliamentary oversight.

In addition to its concerns about the definition of adverse effects within federal jurisdiction, the majority held that the decision-making powers under the IAA continue to allow federal regulation of projects based on non-federal concerns.

The public interest decision is the final step of the IAA process, where the federal decision-maker decides whether a designated project can proceed. The decision-maker must decide whether any “to some extent significant” adverse effects within federal jurisdiction are justified in the public interest. Section 63 of the IAA lists factors that may be considered to determine if effects are justified in the public interest, including impacts on Indigenous groups, Canada’s climate change commitments, and sustainability. These factors still refer to general project “effects.” Section 2 defines that term broadly to mean positive and negative changes of any size, whether in federal or provincial areas.

The majority determined that a project mainly under provincial jurisdiction could be blocked because of a potential adverse effect within federal jurisdiction, even one that is not otherwise prohibited or regulated. As long as there is a federal “hook,” the project as a whole may be subject to federal review, not just its federal effects.

In dissenting reasons, Justice Feehan opined that he would have upheld the amended IAA in its entirety. He concluded that Parliament “responded to every concern raised” by the SCC majority and that the scheme is now anchored in significant adverse impacts to enumerated areas of federal jurisdiction. The fact that the ABCA was not unanimous indicates that the book may not be closed on this constitutional saga.

Concurrent Federal Action and Related Implications

The 2026 Reference Decision was released just weeks after the federal government issued amendments to the Regulations (the Project List). These amendments narrow the types of physical activities that are subject to the IAA. Among other things, the amendments removed fossil fuel-fired power-generating facilities and certain in situ oil sands facilities from the Project List. As both of these project types are generally intraprovincial in nature, this step aligns with the majority ABCA opinion. However, other types of projects that remain on the Project List may also be predominantly intraprovincial in nature (e.g., metal mines and mills), and the inclusion of such projects in the Regulations has the potential to prompt further review by the federal government in light of the 2026 Reference Decision.

The 2026 Reference Decision was also released in the same timeframe as several federal initiatives intended to streamline project approvals, including Bill C-39, which contemplates IAA amendments. For further information, see our September 2026 Blakes Bulletin: Accelerating Federal Major Projects: Bill C-39’s Proposed Changes to Project Approvals. It remains to be seen how the federal government will react to the 2026 Reference Decision given the progress it is seeking to make in supporting the development of major projects.

Key Takeaways

The 2026 IAA Reference is an advisory opinion on a provincial reference. The IAA, therefore, remains in force. This may leave proponents in a period of heightened uncertainty pending a response by the federal government, which could include new legislation, further legislative amendments or further reference to the SCC. Subject to any grandfathering provisions, any new or amended legislation may change the extent to which the IAA applies to various major projects.

Proponents should also bear in mind that the removal of certain project types from the Project List does not eliminate other valid federal touchpoints, such as the Clean Electricity Regulations or the Output-Based Pricing System under the Greenhouse Gas Pollution Pricing Act for fossil fuel-fired power-generating facilities.

For more information about the 2026 Reference Decision and its implications for your projects, please contact the authors or any other member of our Environmental or Energy Regulatory groups.

You can also visit our Major Projects practice page to learn more about our multidisciplinary expertise.