Climate Change Legislation and Federal Infrastructure Projects: Does The Federal Government Need Provincial Cooperation?


This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.

The regulation of renewable fuels in an attempt to reduce greenhouse gas (“GHG“) emissions is a legitimate expression of the federal government’s constitutional criminal law powers according to a recent decision of the Federal Court of Appeal (“FCA“).  In Syncrude Canada Ltd v Canada (Attorney General), 2016 FCA 160 (“Syncrude“), the court dismissed Syncrude’s attempt to have federal regulations related to renewable fuels struck down on constitutional grounds.  The court held that despite questions about the effectiveness of the regulations in reducing GHGs and the possible economic implications of creating a market for renewable fuels, the regulations are valid criminal law and do not infringe on provincial jurisdiction.

The production, importation, and sale of fuel in Canada is regulated, in part, by s. 139 and 140 of the federal Canadian Environmental Protection Act, 1999 (the “Act“).  Under the authority of the Act, ss. 5(2) of the Renewable Fuel Regulations, SOR/2010-189 (“RFRs“) requires 2% of all diesel fuel produced, imported, or sold in Canada to be renewable fuel.  Every liter of renewable diesel produced constitutes one “compliance unit”; these compliance units can be bought and sold to ensure that Canada’s fuel supply, in the aggregate, complies with the regulations.

Syncrude, subject to the RFRs as a consumer of diesel fuel at its oil sands operations, argued the RFRs infringed on provincial jurisdiction over local markets and non-renewable resources.

Constitutional analysis requires the court to first define the essential purpose of a law and then consider where the law fits within the constitutional division of powers. Valid criminal laws, an area of federal jurisdiction, must feature (a) a prohibition (b) backed by a penalty (c) aimed at achieving a valid criminal purpose.  Syncrude challenged only the third of these elements.

Concerning the purpose of the RFRs, the FCA determined they were unambiguously intended to protect the health of Canadians and preserve the natural environment,[1] thus serving a valid criminal purpose (see R v Hydro-Québec, [1997] 3 SCR 213).  However, Syncrude countered by arguing the RFRs would not effectively reduce GHG emissions (suggesting the GHG “footprint” of renewable fuels is as large or larger than that of traditional fossil fuels) and the government’s true goal, to create a market for renewable fuels, overwhelmed any environmental criminal purpose.

The FCA rejected both of these arguments. First, while the practical effects of a law are relevant in assessing its essential purpose, if Parliament is acting within its jurisdiction, the courts are not to evaluate how effectively a law achieves its intended purpose.[2]  Second, the fact that criminal sanctions encourage alternative behavior (the consumption of renewable fuels and the trading of compliance units) does not negate the validity of the criminal purpose underlying the law.

Finally, the court held that the RFRs do not intrude on provincial jurisdiction over non-renewable resources because they apply to Syncrude as a consumer of fuel, irrespective of Syncrude’s core business of resource extraction.[3]

A recent Supreme Court of Canada (“SCC“) decision, Rogers Communications Inc v Châteauguay (City), 2016 SCC 23 (“Rogers“), reinforced federal exclusivity over certain infrastructure projects. In Rogers, the SCC held that a municipality’s interference with the placement of a telecommunications antenna was an unjustifiable interference with federal jurisdiction over telecommunications infrastructure.  This precedent limits a municipality’s ability to interfere with federal infrastructure projects (such as pipelines).

Early in its mandate, the Trudeau government has emphasized cooperation with the provinces on climate-change initiatives. However, as Syncrude affirms, the federal government has significant constitutional authority under its criminal law powers to enact environmental regulations. This decision, together with the SCC’s ruling in Rogers suggests that the federal government has the constitutional authority to take action on certain climate change initiatives and major infrastructure projects.

[1] Syncrude Canada Ltd v Canada (Attorney General), 2016 FCA 160 at para 42 [Syncrude].

[2] Ibid at para 60.

[3] Ibid at para 80.