In a somewhat unexpected decision last week, the Supreme Court of Canada deemed that the federal impact assessment scheme under the Trudeau government’s Impact Assessment Act was largely unconstitutional.

It’s a major decision that could have far-reaching consequences for Canadian energy policy and federal-provincial relations more generally.

At question was whether the federal government had the ability to regulate projects carried out or financed by federal authorities on federal lands or outside Canada. The federal government argued that although the regulation of natural resource projects is generally a provincial responsibility, the emissions and environmental effects of such projects means that federal jurisdiction is impacted. The Supreme Court disagreed.

Perhaps one of the most noteworthy sections from the Supreme Court decision came from Chief Justice Wagner: “the defined term ‘effects within federal jurisdiction’ does not align with federal legislative jurisdiction…but rather, goes far beyond its limits.” This overreach from the federal government shows either a lack of awareness from the government lawyers who drafted the legislation, or a political willingness to supersede those limits.

The reaction from the Trudeau government has been telling. Environment Minister Steven Guilbeault has underplayed the decision, saying they will “work quickly to improve the legislation through Parliament.” The idea that the legislation is just in need of a quick fix shows how Ottawa views the problem, and almost guarantees further court challenges on whatever new scheme that it ultimately designs.

Fundamentally, the Supreme Court ruling was not calling for a simple quick fix: it was a wholesale rejection of the law based on the Court’s critique of the federal government’s wrong-headed understanding of its jurisdictional scope. To reject this critique embedded in the decision is to ignore the ruling of the Court.

If the federal government decides to simply ram another constitution-violating regulatory process through Parliament, it won’t merely be an affront to the Court’s decision. The result will be terrible for national unity and Canada overall. In light of the political infighting and regulatory uncertainty, companies will simply look elsewhere to do major investments.

Provinces will blame Ottawa for losing those investments because of a quixotic political crusade, and relations between the provinces and the federal government will continue to degrade. If a revived permitting regime is again taken to court, tensions will again be ratcheted up. This can only end poorly for all involved.

This does not mean that Ottawa needs to retreat on the question of environmental protection, something the Trudeau government’s voting coalition would likely not tolerate. The Court stated that “Parliament can enact impact assessment legislation to regulate (provincially regulated projects) from a federal perspective, so long as the regulation of federal aspects represents the dominant characteristic of the law.”

There will continue to be major projects that will have federal aspects, such as mines on federal lands, impacts on fisheries, and offshore mineral rights. The government can take heart that the regulations it imposes on those projects can be as environmentally stringent as desired, and be well within its sanctioned constitutional limits. There may even be an opportunity to use these narrow areas as an opportunity to model a permitting regime for provinces to emulate.

More generally, the federal government should instead use this opportunity productively to seize the moment and begin to mend its relationships with the provinces that have become so poisonous.

It’s important to note that it’s not just about Alberta. Nine provinces were intervenors in this case against the federal law. Politically, this can be a moment to restore a more productive cooperative federalism as outlined in the Constitution Act. Provinces of course recognize the need for environmental protection, but they also understand the distinct need to speed up permitting to attract investment and build new projects.

Without reform, we invite greater reliance on riskier supply chains in raw materials that we can otherwise provide ourselves, like lithium, cobalt, nickel, and uranium. With reform, by contrast, we can leverage the country’s rich natural resource advantages and turn them into renewed sources of economic activity and greater influence in the world.

The Supreme Court decision wrote that “shared responsibility is neither unusual nor unworkable in a federal state such as Canada.” Environmental issues are not the only ones that require cooperation between our levels of governments, and this decision is a great reminder for governments of the dangers of not working together.

Political differences can and must be worked through to make Canada function, and doing so makes us all stronger.

On Valentine’s Day 2018, then-Minister of Environment and Climate Change Catherine McKenna stood in the House of Commons to explain how Bill C-69 would “restore public trust in how the federal government makes decisions about major projects, such as mines, pipelines, and hydro dams.”

“These better rules are designed to protect our environment while improving investor confidence, strengthening our economy, and creating good middle-class jobs,” she said.

The Impact Assessment Act would not only undo the environmental protections “gutted” by the Harper government, but it would consider “health, social, gender, and economic impacts over the long term as well as the impacts on indigenous peoples,” McKenna added.

Alberta Premier Jason Kenney fumed, branding C-69 the “No More Pipelines Bill.” It passed in 2019.

The hubris was stunning. Ottawa had arrogated to itself a veto over any large project, regardless of whether it crossed provincial boundaries. It would consider exercising that veto if it decided a project was “not in the public interest” based on factors ranging from “the intersection of sex and gender with other identity factors” to “Indigenous knowledge provided with respect to the designated project” to “the extent to which the designated project contributes to sustainability.”

Ottawa claimed to locate the authority for this veto in a handful of sections of the Constitution Act, 1867 including its powers to regulate “Indians, and Lands reserved for Indians,” “Sea Coast and Inland Fisheries,” and the Peace Order and Good Government of Canada (POGG).

In a 5-2 decision released Friday, the Supreme Court of Canada rejected Ottawa’s monumental power grab, thanks in part to arguments made by the charity that I work for, the Canadian Constitution Foundation.

The decision is great news for anyone who wants to see more large projects like mines and highways get built. But it’s even more consequential than that. Had the decision gone the other way, it would have posed an existential threat to the unity of Canada, which is held together by the wisdom of a constitutional division of powers that leaves many big decisions to provinces.

Chief Justice Wagner’s decision correctly found that the Act was not in pith and substance aimed at regulating effects within federal jurisdiction but, rather, was aimed at regulating entire projects even where they are mostly in relation to provincial jurisdiction.

It should have been obvious from reading the Act that the federal government cannot use its power to regulate fisheries to veto an Alberta oilsands mine, or use its power to regulate migratory birds to block Ontario housing and highway construction, as environment minister Steven Guilbeault has threatened. That’s because section 92 of the Constitution Act, 1867 gave provinces the exclusive power to regulate “Local Works and Undertakings” and section 92A, added by amendment in 1982, gives provinces the power to regulate non-renewable resources and energy.

But that didn’t mean a victory was certain. This is, after all, roughly the same Supreme Court that found just two years ago that Ottawa can impose a carbon tax on provinces using its POGG power because climate change is supposedly an “existential threat.”

Now the federal government has no choice but to accept that it can’t block most projects, and provinces can once again assert their jurisdiction over those matters that the founders of this country—who were, let’s not forget, leaders of provinces—refused to give up at confederation.

Provinces only gave up jurisdiction over those things that a federal government was in a better position to do. That includes defence, matters that can facilitate free trade like currency and the postal service, and things like railways that no single province could achieve on its own.

The risk Canada had faced had the ruling gone the other way was a dangerous scenario in which Ottawa had been given the greenlight to illegally usurp jurisdiction over decisions that our founders had wisely left to the provinces.

Had they ruled the other way, the citizens of Quebec or Ontario, who, let’s face it, currently control the federal government, would have been able to overrule the citizens of Alberta or Saskatchewan whenever Albertans and Saskatchewanians chose to develop their resources.

Likewise, had they ruled the other way, the citizens of western provinces, who are likely to form the largest bloc of MPs in a future Conservative government, would have been able to call the shots on projects that the constitution had wisely left up to Quebec and Ontario.

Exercising this federal veto would have almost certainly reignited dormant separatist movements in Quebec and Alberta, and the separatists would have had a more convincing argument than ever: if the federal government doesn’t need to respect the constitution, why should we?

The Supreme Court’s decision has helped us to avoid that existential threat.