The Federal Government’s constitutional power to curb Canada’s oil production

Part 13 in a series of 18 discussion papers

At a press conference on April 4, 2022, Canada’s Minister of Environment Steven Guilbeault confirmed that Canada’s new climate plan is “based on” increasing oil production:

… the plan we presented last week, the Emissions Reduction Plan, was based on the Canadian Energy Regulator projections that oil and gas production would increase in Canada between now and 2030 …

Canada’s political leaders don’t want to talk about any near-term need for reducing oil production.  Many political leaders in Canada claim that the Federal Government has no constitutional power to limit oil production by the provinces. Minister Guilbeault told the media in an interview published on September 2, 2022:

I know there are people out there who say we should be capping production. That’s a point of view I respect. But constitutionally we can’t do that.

— Steven Guilbeault, quoted in The Tyee, September 2, 2022 (emphasis added)

Mr. Guilbeault is misleading Canadians. Constitutionally, the Federal Government has very significant powers that are determining the path of Canada’s oil production. This same Liberal Government in November 2016 approved the two pipeline expansion projects (TMX and the Line 3 Expansion) that will add an additional 910,000 bpd of pipeline shipping capacity to facilitate our growing oil exports – which is almost equivalent to the entire amount of the projected 1.1 million bpd increase in Canada’s oil production that will occur between 2019 and 2030. Under our constitution, the Federal Government has the exclusive legal power to approve inter-provincial pipelines.

The Federal Government had full constitutional authority to refuse to approve TMX and Line 3 – and it had ample warning between 2014 and 2016 that these projects, if approved, would enable higher levels of oil production that are incompatible with our climate commitments made in Paris in 2015. The government ignored those warnings.

On April 6, 2022, the Federal Government announced the approval of a major new offshore oil field in Newfoundland which is expected to come into production by 2028. Bay du Nord will contribute an additional 200,000 bpd to 300,000 bpd to Canada’s oil production level. The new project will continue producing through to about 2058.  More offshore oil projects are awaiting approval on the Atlantic coast. The Federal Government has the exclusive constitutional power to approve (or refuse to approve) offshore oil development and had full power to refuse to authorize Bay du Nord.

Most of the currently planned expansion of Canada’s oil production into the early 2030’s is the direct result of a series of deliberate policy choices and decisions made by the Liberal Government since it assumed power in October 2015.

The constitutional power to impose a carbon price on oil production  

In addition to its exclusive constitutional powers over inter-provincial pipelines and offshore oil development, when it comes to the threat of climate change the Federal Government has other exceptional powers.  On March 25, 2021, the Supreme Court of Canada (SCC) released its decision in the Greenhouse Gas Pollution Pricing Act (GGPPA) case, ruling that the Liberal Government’s new legislation imposing a carbon price across all provinces is properly within the constitutional powers ofthe Federal government.

Where the substance or purpose of the Federal law is to curb greenhouse gas emissions, Canada’s highest Court has confirmed that the Federal Government has a formidable constitutional power to impose a “carbon price” on oil and gas producers (and on many other emitting industries) in all provinces. Under the new law, the Federal government has the sole right to set, and to increase, the stringency of the carbon price – even if individual provinces object. A suitably high carbon price on oil production in Canada, and successive sharp increases over the next few years, would curb Canada’s oil production. What is missing is not constitutional power, but political will and candour.

It is true that the long-established principles of Canadian constitutional law protect provincial autonomy from undue Federal intrusion. The exclusive constitutional powers that provinces have with respect to control of the development of their own natural resources – including their oil and gas resources – have long been jealously protected.

But two exceptional provisions in Canada’s constitutional structure give the national government additional lawmaking powers that allow it, under certain circumstances, to override what would otherwise be areas of purely provincial jurisdiction (such as control over developing oil and gas resources). One provision is called the “national concern doctrine”, which the government successfully relied in the recent Carbon Pricing Case to establish that the new Greenhouse Gas Pollution Pricing Act is properly within the Federal Government’s powers. There also exists a second exceptional power known as the “emergency power”, which the Federal government chose not to rely on in this case.

The “national concern” doctrine recognizes that, where there is a broadly shared problem or threat in Canada which is beyond the powers of the individual provinces to solve, the national government has constitutional authority to act based on the residuary power consigned to the Federal Government in section 91 of the Constitution.

To successfully rely on the “national concern” doctrine, two issues had to be addressed:

The first issue to be decided by the SCC concerned whether the provinces, individually or acting voluntarily together, could protect their populations from the threat of climate change. The “national concern” doctrine cannot be invoked by the Federal Government if the provinces, using their own lawmaking powers, could protect their populations from the dangers and risks of harm posed by climate change.

The Federal Government can only rely on the “national concern” doctrine if it can show what is referred to as “provincial inability”. The Federal Government could not assert a constitutional power to impose a minimum carbon price on the provinces unless it could successfully prove (as it did in this case) that efforts to control and limit rising carbon emissions cannot be effective if left entirely to the provinces themselves, either acting separately or acting in combination by means of voluntary co-operation among the provinces.

Based on the scientific evidence presented to the Court, the SCC judges (by a majority of 7-2) agreed that emissions released in any one province add to, and exacerbate, the warming of the atmosphere and will contribute to the impacts of climate change that are being experienced in all the other provinces and around the world. Therefore, the SCC accepted that a refusal by one province to curb its emissions would have “grave consequences for extra-provincial interests” (i.e., grave impacts on natural systems and people) in other provinces.

On that crucial point, the key evidence is the cumulative character of CO2 emissions, and the relationship (it is a linear relationship) between the accumulating amount of CO2 in the upper atmosphere and the heating of the earth. Once CO2 is released into the atmosphere it does not break down, it does not dissipate. Every emission of CO2 will remain in the atmosphere for centuries, adding to the rising atmospheric carbon concentration level. The evidence presented to the Court showed that, globally, the additional amount of CO2 that can safely be added to the existing atmospheric carbon concentration is now very limited, if we are to keep warming to 1.5°C. That very limited amount, referred to as the “remaining carbon budget” in the IPCC Summary for Policy Makers (which was an important part of the evidentiary record), explains why “every province’s GHG emissions contribute to climate change”. The evidence showed that the remaining carbon budget to 1.5°C is rapidly depleting and at the current level of global emissions it will be fully depleted by 2030. 

That evidence provided the SCC with the essential rationale for dealing with the provincial inability issue. The SCC agreed that “a failure to include one province in the scheme would jeopardize its success in the rest of Canada” (para 183). In paragraph 187, the majority judgment accepts that each province’s emissions contribute to climate change, both in other provinces and in other countries and regions around the world:

It is also an uncontested fact that … every province’s GHG emissions contribute to climate change, the consequences of which will be borne extra-provincially across Canada and around the world. And it is well-established that climate change is causing significant environmental, economic and human harm nationally and internationally, with especially high impacts in the Canadian Arctic, in coastal regions and on Indigenous peoples. This includes increases in average temperatures and in the frequency and severity of heat waves, extreme weather events like floods and forest fires…

— References re Greenhouse Gas Pollution Pricing Act, para 187 (emphasis added)

The provinces, if left to protect themselves, will be unable to do so because individual provinces have no legal means to compel other provinces to curb or reduce their emissions. That vulnerability or inability to protect themselves against an external danger, referred to as “provincial inability” in the terminology of the legal analysis, had been proven.

 A second condition: the “balancing” test

But proving “provincial inability”, alone, is not enough to justify the right of the Federal Government to impose a carbon pricing scheme on the provinces if it would unduly impinge on the provinces traditionally exclusive areas of control over natural resources.  The Federal Government had to meet a second ‘test’. 

The SCC agreed that the imposition by the Federal Government of a carbon price on industrial activities in the various provinces would have some impact (they described it as a “limited impact”) on provincial jurisdiction: it would, the Court agreed, limit to some extent the ability of the provinces to exercise their exclusive jurisdiction, for example, over the development of their natural resources.    

The final test, given the Court’s significant finding that there will indeed be some clear impact (on the provinces’ exclusivepowers), was to determine “whether the matter’s scale of impact on provincial jurisdiction is acceptable having regard to the impact on the interests that will be affected if parliament is unable to address the matter at a national level” (para 196 of the judgment). The final step therefore required a “balancing process” that must ask: in view of the clear evidence presented to the Court showing the advance of climate change and the serious implications of rising greenhouse gas emissions, what will be the impact if the Federal Government is unable to implement a carbon price that applies to all provinces? What will be the outcome if the Federal Government is unable to act?

The majority provided an emphatic answer to that question in paragraphs 205 and 206 of the majority judgment:

In summary, although the matter has a clear impact on provincial jurisdiction, its impact on the provinces’ freedom to legislate and on areas of provincial life that would fall under provincial heads of power is qualified and limited.

I am of the view that the scale of impact of this matter of national concern on provincial jurisdiction … is reconcilable with the fundamental distribution of legislative power under the Constitution. … Although this restriction may interfere with a province’s preferred balance between economic and environmental considerations, it is necessary to consider the interests that would be harmed — owing to irreversible consequences for the environment, for human health and safety and for the economy — if Parliament were unable to constitutionally address the matter at a national level. This irreversible harm … would be borne disproportionately by vulnerable communities and regions, with profound effects on Indigenous peoples, on the Canadian Arctic and on Canada’s coastal regions. In my view, the impact on those interests justifies the limited constitutional impact on provincial jurisdiction.

— References re Greenhouse Gas Pollution Pricing Act, para 206 (emphasis added)

Given the unprecedented character of the threatened irreversible harm from climate breakdown (clearly accepted by the SCC judges based on the record of scientific evidence presented to them) and given the inability of provinces acting alone to effectively protect their populations from that worsening threat, the Court emphatically stated that the alternative of preventing the Federal Government from acting (“if parliament is unable to address the matter at a national level”, see paragraph 196) was unacceptable.

The explicit reference to a province’s “preferred balance between economic and environmental considerations” touches directly on the heart of the matter. While the majority of the SCC judges agreed that the new national carbon pricing law will have what they called a “limited” impact on provincial powers, the Court also acknowledged that in the many areas of economic decision-making, the imposition of the Federal Government’s Carbon Price will indeed alter that balance in the provinces – and may significantly intrude on the powers of a province that, for example, would prefer to pursue more rapid development of its emissions-intensive resource industries. In their development of natural resources, some provinces will be compelled to accept that priority must be given to environmental considerations.

The majority of the Supreme Court of Canada decided that the adverse impacts of the Federal Carbon Pricing legislation on the provinces’ constitutional powers to make their own choices on that balance (thus limiting a province’s ability to exercise exclusive jurisdiction over natural resources) is outweighed by “the irreversible harm across the country” that would occur from climate change if the federal government was unable to implement a minimum carbon tax on all provinces.

The Supreme Court’s decision has confirmed that the Federal Government has the legal authority to put an end to the untrammelled ability of provinces to continue to produce and export rising volumes of oil. The Federal Government has the power to impose a carbon price on every barrel of oil produced based on the amount of carbon emissions released per barrel during the production process. For a more detailed legal analysis of this important ruling on March 25, 2021, by the Supreme Court of Canada on the constitutional power of the Federal Government to impose a carbon price on oil and gas producers on all provinces, and an extended  discussion of the scientific evidence about climate change relied on by the Court, see the link below: