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A pumpjack draws oil from a wellhead near Calgary on Sept. 17, 2022.Jeff McIntosh/The Canadian Press

The Supreme Court of Canada ruled Friday that Ottawa has overstepped its constitutional authority in how it regulates major resource projects in Canada, throwing the sector into deep uncertainty as companies wait for clarity from the federal government in its legislative response.

Since 2019, Ottawa, under the Impact Assessment Act, has had broad authority to approve or deny large-scale mining, oil and gas and pipeline projects in Canada on environmental grounds.

Alberta, which wants to see oil and gas projects approved at a faster clip, won a legal case in a provincial court in 2022, challenging the constitutionality of the act. That ruling was subsequently appealed by Ottawa to the Supreme Court.

On Friday, the court largely backed the ruling from the provincial Court of Appeal. In a 5-2 non-binding opinion, the top court ruled that Ottawa’s current powers to police the resource sector go above and beyond what is allowed under the Constitution.

Since the ruling was in a reference case, one in which a province asked for an opinion, it is considered advisory. However, such rulings from the Supreme Court are taken seriously by government and will shape impending legislative changes.

Chief Justice Richard Wagner on behalf of the majority wrote that the impact-assessment process is unconstitutional specifically around the existing system of federal environmental reviews for “designated projects.” That system gave Ottawa the power to conduct broad-based environmental reviews on large-scale resource projects such as critical-minerals mines.

“Parliament has plainly overstepped its constitutional competence in enacting this designated projects scheme,” he wrote.

The Supreme Court affirmed that Ottawa’s jurisdiction to police resource projects is instead narrower in scope, and restricted to areas such as assessing the impact that projects have on fisheries, the bird population, species at risk, and other areas where it has clear constitutional authority.

The decision is a win for Alberta, and other provinces such as Ontario, which had intervened in the case in support of the Western province. In the short term, however, it creates a regulatory vacuum.

Pierre Gratton, president of The Mining Association of Canada, said the ruling introduces “tremendous uncertainty” for mining projects that are already going through the impact-assessment process, and for companies thinking of submitting projects for federal review.

There are currently 42 active impact assessments under way at the federal level, including 17 in the mining industry, six in oil and gas, and six road projects, including three into Ontario’s Ring of Fire critical-minerals region.

“We need the federal government and Parliament to act expeditiously to bring certainty to the federal system and certainly for our sector, especially given the intense interest in seeing critical-minerals projects come forward,” Mr. Gratton said.

Federal Natural Resources Minister Jonathan Wilkinson and Environment Minister Steven Guilbeault said in a news conference Friday that the government accepted in full the opinion from the Supreme Court, and will make legislative changes accordingly.

“We need to ensure that there is clarity,” Mr. Wilkinson said. “It is in everybody’s interest that we act expeditiously. I don’t think at this stage, given that the ruling just came out, that we can give a specific time frame on that, but we certainly are going to move as quickly as we can.”

Qasim Saddique, principal consultant at Suslop, has been working with Marten Falls, an Indigenous community in Northern Ontario which is leading two federal impact assessments into proposed roads into the Ring of Fire. Marten Falls, alongside Webequie, another Indigenous community, were the first proponents to be subject to the Impact Assessment Act, and have spent four years on the assessments.

“It definitely has left us with a sense that the processes are upended,” Mr. Saddique said. “Does this mean that the federal impact assessment does not need to continue, when we’re pretty much in the final few stages of the process for the Marten Falls community access road? We don’t know.”

But the ruling may put energy projects such as Suncor’s planned Base Mine expansion back into play, said Marla Orenstein, the director of energy, economy and environment at the Canada West Foundation, a think tank.

The federal government had declared the project incompatible with Canada’s emissions targets, “but the Supreme Court has now very clearly said, ‘Federal government, you can’t use GHG emissions. It’s not in your basket,’ ” Ms. Orenstein said in an interview.

Still, she doesn’t expect an immediate deluge of projects rushing to seek approval off the back of Friday’s decision.

That’s because it’s still up in the air whether Ottawa can deal with the ruling by making surgical tweaks to the act, or if it will have to overhaul or eliminate the entire legislation.

Robin Junger, partner, Indigenous law and environment with McMillan LLP, said that over time, the ruling will reduce the role of the federal government in regulating mining projects, but not eliminate it.

What changes is that Ottawa will likely no longer be able to grant approval, or turn down a major mining project, in one fell swoop, Mr. Junger said.

While the federal government could in theory attempt to prevent a resource project by drawing on its constitutional powers in areas such as fisheries, Mr. Junger believes that legally enforcing that will be difficult.

“They can’t use that as a Trojan Horse to stop projects, the court would not allow that,” Mr. Junger said.

Red tape in the mining industry has been one of the chief concerns raised by companies looking to advance projects. In Ontario’s Ring of Fire region, apart from the federal impact assessments into the roads, there are three additional provincial environmental studies under way on building roads into the remote region.

While the federal government looks to rejig its legislation in the wake of the court ruling, Alberta Premier Danielle Smith said the province will do what it can to attract new resource investments by loudly declaring that Alberta is open for business.

“We’ll ask for people who have been delayed in making project submissions to start now. Because we’re going to approve them – we have the constitutional authority to do that,” Ms. Smith told reporters on Friday.

Ontario also welcomed the ruling. The federal impact-assessment process “needlessly duplicated” Ontario’s own process, Premier Doug Ford said in a statement.

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