How federal law enables and constrains biodiversity offsetting in Canada

Abstract

The globe is facing a serious crisis in biodiversity and almost two hundred countries, Canada among them, have responded by committing to halt and reverse biodiversity loss through their adoption of the Kunming–Montreal Global Biodiversity Framework (KMGBF). The mitigation hierarchy – avoid, minimize, remediate onsite, and, finally, offset – is a common framework for prioritizing mitigation measures with a goal of no net loss (or better) of biodiversity. Application of the hierarchy, however, must be done within a legal framework, consideration of which is often lacking. This article focuses on Canada, though its analytic framework may be instructive for other jurisdictions. It reviews six statutory regimes used to assess and regulate development impacts, considering to what extent they enable biodiversity offsetting and the pursuit of no net loss or net gain. It finds that most of the laws do allow for the pursuit of no net loss, but only one seems to provide for a goal of net gain. Statutory reforms will be required to meet Canada's KMGBF commitments. This analysis may serve as a partial guide to how other jurisdictions may approach these questions.

Introduction

The globe is facing a serious crisis in biodiversity. The number of species facing extinction is rising, and populations of particular species are in steep decline. ¹ Canada has pledged to combat this trend, in part through its signature on the Convention on Biological Diversity, and more recently, by joining with almost 200 other countries in its commitment to the Kunming–Montreal Global Biodiversity Framework (KMGBF). ² Signatory countries commit to contribute to the pursuit of a series of global targets, the preparation of national biodiversity strategies and action plans, and regular reporting on progress. To comply with its obligations under the KMGBF, in June 2024 the Government of Canada released its national biodiversity strategy, titled Canada's 2030 Nature Strategy: Halting and Reversing Biodiversity Loss in Canada. ³ That Strategy was emphatic: ‘We have less than a decade to achieve the ambitious task of halting and reversing biodiversity loss. . . . When we halt and reverse biodiversity loss, the bare minimum is no net loss of biodiversity, moving toward achieving net gain overall.’ ⁴

For any jurisdiction, achieving such a goal requires a wide variety of legal and non-legal tools. What is often missing from recommendations founded upon conservation science is consideration of how such aspirations can be pursued within a given legal framework, including both its statutory tools and common law doctrines. This article aims to fill that gap in the context of the federal jurisdiction in Canada.

One of the legal tools that is most well-accepted is the regulated assessment and mitigation of the impacts of development activities. Despite the conventionality of that process, it is in need of improvement if it is to contribute to meeting the new goals to the degree necessary. This article focuses on the provisions in Canadian federal law most commonly invoked in the regulation of development impacts and other human activities. It considers how well-suited those provisions are to enable more ambitious and innovative mitigations, especially the offsetting of impacts to biodiversity, and whether they do so in a consistent manner that facilitates widespread use.

The article first considers the mitigation hierarchy, a well-accepted framework for prioritizing mitigation actions based on risk, and the assumption that leaving ecosystems intact is better than trying to repair or reproduce them. That section also reviews biodiversity offsetting, the least preferred form of mitigation, but one which is seeing increasing attention. Following that review, six Canadian federal statutes are examined for their treatment of impact mitigation, with an eye to determining to what extent they reflect the mitigation hierarchy and enable offsetting. Finally, the article examines two aspects in which Canadian common law doctrines may constrain the pursuit of net gain and the use of offsetting.

Though the article focuses on Canada, it offers a framework and an identification of potential issues that is likely instructive for analysis of similar measures in other jurisdictions, especially those with a common law tradition. It indicates that in order for the law to support the pursuit of new biodiversity goals, reviews will not only have to be taken of specific mitigation statutes, but that long-held doctrines of common law may have to be reconsidered, at least in this context.

The mitigation hierarchy in theory and practice

It has become increasingly common to frame the options for impact mitigation in terms of a hierarchy. This hierarchy prescribes that impacts are first to be avoided to the extent reasonably possible. Second, impacts that cannot be avoided are to be minimized. Third, parties are to reverse through onsite remediation those impacts that cannot be prevented in the previous steps (this third step is sometimes merged into the second). Fourth, and as a last resort, those residual impacts that remain after all reasonable efforts have been made under the prior steps are to be offset. ⁵ It has been argued that adherence to the mitigation hierarchy is foundational to the pursuit of the Nature Positive agenda that underlies the KMGBF goals, ⁶ and that an expanded form of the hierarchy can act as a framework for the ordering of societal actions for the renewal of biodiversity. ⁷

While the rationale for this hierarchy is not often made explicit, study of the different forms of mitigation reveals that as one progresses through the hierarchy from avoidance to offsetting, one courts increasing risk. That risk takes three forms. ⁸ The first is that the human interventions required may fail, in whole or in part, to produce the environmental outcomes that were intended. The second is that even if the interventions succeed as intended they are likely to produce a simpler or distorted version of the pre-disturbance ecosystem, providing only a limited form of equivalency. ⁹ Finally, as ecosystems take time to mature and become functional, there are time gaps between the development impacts and the realized benefits of offsetting, resulting in temporary losses even when interventions ultimately prove to be reasonably successful. ¹⁰ These risks have been a source of particular concern with respect to biodiversity offsetting.

The theory of biodiversity offsetting is that the residual adverse effects of human developments or activities can be compensated for by the intentional production of ecosystem gains. For example, a wetland lost to development may be offset by restoring or creating other wetlands nearby that exhibit comparable ecosystem features and provide comparable benefits. Another example, new linear disturbance through sensitive habitat may be compensated for by reclaiming other linear features in similar habitat. Canada has experience with both these types of offsetting, as well as others.

Typically, the gain required by offsetting is produced through the restoration of previously degraded habitat, enhancement of habitat, the creation of new habitat, or the protection of habitat under imminent threat of harm. ¹¹ In some cases, where a particular species is the focus of mitigation, offsetting may take the form of measures to support that population of that species, such as predator control, captive breeding or disease management. When losses and gains to the same regional ecosystem are equivalent, in kind, quantity and quality, then a goal of no net loss (NNL) can be said to have been achieved. That ideal scenario offers the prospect that ecosystem health, including the diversity and abundance of biodiversity, can endure even in the face of development and activities that are socially and economically beneficial, though environmentally destructive.

The pursuit of that ideal of offsetting has encountered many practical challenges. Our ability to manipulate the environment to reliably produce specific ecosystem outcomes is uncertain, if constantly evolving. ¹² Further, the notion of ecological equivalence between non-identical habitats is difficult to conceptualize. ¹³ That difficulty is compounded when quantitative equivalence requires metrics that are indicative of complex ecosystem variables, yet practical to measure and apply. ¹⁴ Significant time lags between the impacts of development and the effectiveness of offset measures result in temporary losses, which can sometimes become permanent. ¹⁵ At the other end of the relevant time scale, offset gains must be secured, legally and physically, to provide their benefits for a period comparable to the duration of the development impacts, if not more. ¹⁶

Biodiversity offset policies and projects often account for these risk and deficiencies of offsetting by applying multiplier ratios, whereby the offset is required to be substantially bigger, as determined by the appropriate metric, than the development impact. The ratio may be calculated with various degrees of precision reflective of the challenges faced in any offset situation. ¹⁷ It has been noted, however, that actual offset multipliers often do not reach the levels that identified risks suggest they should. ¹⁸

Aside from these technical problems with offsetting, there are often social and political issues raised by the notion that ecosystem features and benefits may be shifted from one location to another. Local values, based on the ecosystem, may not be considered in the technical considerations of ecological equivalency, a risk particularly high for indigenous communities. ¹⁹ If care is not taken, different communities may not share equitably in the burdens and benefits of the combination of economic development and environmental benefits that the overall development and offset scenario provides. ²⁰

While the default goal of biodiversity offsetting (and in fact the whole of the mitigation hierarchy) has been NNL to the biodiversity values of the ecosystem, ²¹ that goal has been subject to both skepticism and optimism. On the negative side, there may be confusion about the baseline reference against which NNL is assessed. ²² If an individual project is assessed against a baseline of gradual ecosystem decline, that project and others may form part of a development pattern that ‘locks in’ ecosystem decline. ²³ A 2019 review of the reported results from 48 biodiversity offset projects and programmes found that a minority claimed to have achieved NNL, with the success rate varying substantially between ecosystem types (highest success for wetlands, lowest for forests). ²⁴ All of these factors dictate why offsetting deserves its position as the last resort in the mitigation hierarchy, and why it is generally agreed that there are situations when it is impractical and inappropriate. ²⁵ It should be noted, however, that scholars and practitioners continue to wrestle with the challenges of offsetting with a view to attaining greater clarity in concepts and better performance in practice. ²⁶ That work is important precisely because offsetting is the last resort for addressing impacts that cannot be practically dealt with by the other forms of mitigation. Often the realistic alternative to development impacts with imperfect offsets is not no development impacts, but rather impacts with no offsets.

Despite the challenges that have been experienced in attaining NNL, some have identified the potential to use the concepts and tools of offsetting to pursue the more ambitious goal of a net gain for biodiversity. ²⁷ The proposition is that if we can improve our techniques for ecosystem gains, and clarify the concepts necessary to quantify losses and gains, then we can calibrate our efforts to not just stem losses to biodiversity but to reverse them. Canada's 2030 Nature Strategy alludes to the possibility of net gain in the quote in the introduction to this article. The extent to which current legislation supports that goal is considered later in this article. What is clear is that any such support in the Canadian federal context must be cobbled together from several pieces of legislation.

In contrast, the United Kingdom has recently adopted a statutory mandate for England that commits the country to achieving a ten percent increase in biodiversity above 2030 levels by 2042. ²⁸ This is done through legislation ²⁹ that requires the Secretary of State to set targets for biodiversity (among other environmental priorities) and species abundance. The programme is served by a well-considered set of tools including a biodiversity metric founded in conservation science. The Biodiversity Net Gain programme will be instructive for many countries, including Canada, for its ambition and specificity.

Simmonds et al have taken a more nuanced and refined position with respect to conservation goals. ³⁰ They argue that various targets can be set for different ecosystem components, and those targets can be the basis for calibrating compensation requirements for each component. A single compensation system could target (by policy) a significant gain for some components, while others might be maintained at NNL, while still others might conceivably be managed for an agreed-upon rate of loss. Such goals would be reflected in the kind and size of offsetting or other mitigations that would be required for each component.

Legal architecture

The legal architecture required to impose mitigation measures of all kinds, including offsetting, is found in the basic structure of regulated activities. There are three necessary components: (1) a prohibition on an activity, (2) a permitting process that allows a discretionary exemption to the prohibition, and (3) the authority to impose conditions, at the regulator's discretion, on permits granted. This sets up the imposition of mitigation conditions as an exercise of the regulator's discretion. That discretion is often guided by policy statements, though that is not always the case.

Federal Constitutional Authority

As in many areas of environmental governance, Canada has no single coherent body of law respecting the conservation of biodiversity or the mitigation of impacts. Rather, the field is heavily fragmented and many of the components deal with biodiversity only tangentially. ³¹ This article focuses on some of the major fragments that fall within the federal sphere that might enable offsetting for biodiversity.

The Canadian constitutional authority to legislate and regulate with respect to the environment is complex and often contested. Of this situation the Supreme Court of Canada has said:

It must be recognized that the environment is not an independent matter of legislation under the Constitution Act, 1867 and that it is a constitutionally abstruse matter which does not comfortably fit within the existing division of powers without considerable overlap and uncertainty. ³²

There are areas where federal constitutional authority is settled, such as those over fisheries, navigable waterways, and migratory birds. ³³ However, many of the major constitutional heads of jurisdiction affecting biodiversity lie squarely with the provinces, including natural resources, property and civil rights, municipal governance, and the management of provincial public lands. ³⁴ There are also areas where the extent of federal jurisdiction is uncertain or not yet tested, authority over terrestrial species at risk, for example.

As a result, there is no unified approach to environmental management or permitting among federal and provincial governments across Canada. The unclear boundaries of federal and provincial jurisdiction over the environment have resulted in long-standing tensions within the federation. This creates an impetus for innovation in the development of structures and processes for co-operation to act on the legitimate concerns of both levels of government, challenging as that may often be. ³⁵ Even within the federal government decision-making authority is fragmented between different agencies and departments, each relying on its own statutory mandate and path to constitutional legitimacy.

The following section focuses on a handful of statutes and policies that have biodiversity conservation as part of their core concern and area of authority. In each I identify the necessary elements of prohibition, permitted exceptions to the prohibition, and conditions on permits issued. I also set out policy guidance that has been published to guide the exercise of discretion over mitigation measures relevant to biodiversity. The particular focus is on those provisions that enable the application of the mitigation hierarchy and biodiversity offsetting.

Federal statutes and their policies

(A) Fisheries Act

The most well-known and frequently used provision for biodiversity offsetting in Canada is found in the Fisheries Act. ³⁶ That Act includes two major prohibitions aimed at protecting fish populations. The first is Section 34.4 which prohibits activities, other than fishing, that cause the death of fish. ³⁷ The second is a prohibition on activities that result in the ‘harmful, alteration, disruption or destruction’ (often called HADD) of fish habitat, contained in Section 35. ³⁸

In each of these cases, the prohibited activities may proceed if they are within a prescribed class of works, undertakings or activities, or are authorized by the Minister of Fisheries and Oceans, or prescribed person, and in accordance with conditions imposed by the authorization. ³⁹ This authority to impose conditions provides the legal architecture to require mitigation measures, including the offsetting of the harm done as a condition of either authorization.

The current (2019) version of the Fisheries Act constrains the exercise of this regulatory discretion by the Minister or prescribed person or entity by reference to a requirement that approximates the mitigation hierarchy. Section 34.1 (1) requires that, before exercising any power to authorize the death of fish or the HADD of fish habitat the Minister must consider

34.1(1)(c) whether there are measures and standards

to avoid the death of fish or to mitigate the extent of their death or offset their death, or

to avoid, mitigate or offset the harmful alteration, disruption or destruction of fish habitat;

and

(f) whether any measures and standards to offset the harmful alteration, disruption or destruction of fish habitat give priority to the restoration of degraded fish habitat[.]

While these provisions strongly echo the mitigation hierarchy (noting the substitution of ‘mitigation’ as the terminology for the steps of minimization and onsite restoration, which can be regarded as essentially synonymous in this context) it must be noted that the different types of mitigation are not listed as a hierarchy or in any clear order of preference. Rather, they seem to present a menu of equally acceptable mitigation options.

The application of the mitigation hierarchy is made much clearer, in particular in the Fish and Fish Habitat Protection Policy Statement ⁴⁰ of 2019, which states:

The concepts of ‘avoid, mitigate and offset’ build a hierarchy that is internationally recognized as a best practice in reducing risks to biodiversity. This hierarchy of measures emphasizes that efforts should be made to first prevent (avoid) the occurrence of harmful impacts. When avoidance is not possible, then efforts should be made to minimize (mitigate) the extent of the death of fish and harmful impacts on fish habitat caused by the proposed work, undertaking, or activity in question. Any residual harmful impacts should then be addressed by offsetting; offsetting measures typically counterbalance this loss through positive contributions to the aquatic ecosystem.

Fisheries dynamics and fish habitat functions are complex. It is much more difficult, expensive and uncertain to repair or restore damaged ecosystems than it is to avoid harmful impacts. For this reason, the Department emphasizes avoidance and mitigation as the initial steps in the hierarchy, followed by offsetting as a means of last resort. ⁴¹

This approach is elaborated upon in the Policy for Applying Measures to Offset Adverse Effects on Fish and Fish Habitat Under the Fisheries Act, ⁴² which was published later in 2019.

All of the above is based on the 2019 version of the Fisheries Act and the policies based upon it. However, the mitigation hierarchy and the offsetting of harm to fish and fish habitat has been a common feature of the federal fisheries regime since 1986, when the applicable policy committed to a goal of ‘maintain[ing] the current productive capacity of fish habitats’ and a guiding principle of ‘no net loss of productive capacity of habitats’. ⁴³ The 2019 policies do not explicitly commit to NNL, but do prescribe that ‘[a]ny residual harmful impacts (i.e., after avoidance and minimization measures) should then be addressed by offsetting; offsetting measures typically counterbalance this loss through positive contributions to the aquatic ecosystem’. ⁴⁴ This can be read to approximate NNL if the harm is to be counterbalanced in its entirety.

(B) Species at Risk Act

The Species at Risk Act ⁴⁵ (SARA) provides for the listing and recovery and action planning of species whose populations face particular pressures. Under SARA species may be listed as (in declining order of severity) extinct, extirpated, endangered, threatened, or of special concern. The main focus of prohibitions and recovery planning is those species classified as endangered or threatened, or those extirpated where there is a prospect of recolonization.

The Act contains three broad prohibitions on the adverse treatment of listed species:

Section 32 prohibits the killing, harassment, capture, or taking of members of species listed as extirpated, endangered, or threatened, and the possession, collection, buying, selling or trade of any members or their parts.

Section 33 prohibits the damage or destruction of the residence of members of those species, including extirpated species for which a recovery strategy has recommended reintroduction to Canada.

Section 58 prohibits the destruction of critical habitat of those species, subject to considerable nuance with respect to the limits of federal jurisdiction.

The responsible Minister, however, may, by agreement or issuance of a permit, allow an activity having such effects on species, their residences or critical habitat. ⁴⁶ This may only be done where the proposed activity is for scientific research related to the conservation of the species, is for the benefit of the species, or where the effect to the species is incidental to the activity. ⁴⁷

Once the affecting activity has been found to fall into one of the three qualifying categories, SARA invokes a form of the mitigation hierarchy. Among other requirements the Minister may only enter into an agreement, or issue a permit, to allow the activity if of the opinion that:

all reasonable alternatives to the activity that would reduce the impact on the species have been considered and the best solution has been adopted;

all feasible measures will be taken to minimize the impact of the activity on the species or its critical habitat or the residences of its individuals; and

the activity will not jeopardize the survival or recovery of the species. ⁴⁸

Clauses (a) and (b) call for all reasonable avoidance and feasible minimization measures, while clause (c) raises the prospect of offsetting and its limitations. Subsection 73(6) also allows conditions to be placed on an authorized activity, thereby opening the door to the regulatory imposition of offset conditions.

There are two points of ambiguity with respect to how the provisions described above might enable offsetting for those species negatively impacted by development. The first is the breadth of the ‘incidental purpose’ category. The second is how any offset measure might be taken into account in determining whether an activity will jeopardize a listed species.

Conceivably the incidental purpose requirement could refer to any activity whatsoever that does not specifically target a listed species for adverse effects. This interpretation was advanced in 2016 when the Government of Canada released a proposed SARA Permitting Policy. ⁴⁹ The proposed policy stated that the provision could apply to hunting or fishing that did not target the affected listed species, and the ‘[i]ndustrial development projects will usually satisfy this paragraph of SARA, as they are not directed at wildlife species.’ ⁵⁰ This broad interpretation of the incidental purpose provision set out in the proposed policy has been the object of concern expressed by at least one scholar. ⁵¹ After public input was solicited that proposed policy was not adopted. The Permit Guidelines that were subsequently released do not address the issue, simply suggesting that if a proponent is unsure whether its activity is prohibited, it should contact the regional office of the relevant regulatory. ⁵²

The issue of whether Subsection 73(3) allows offsetting turns on the wording of the section itself. I suggest two routes by which offsetting may be allowed, though the two are not mutually exclusive. Clauses (a) and (b) clearly reflect the mitigation hierarchy, the steps of avoidance and minimization in particular. The first route poses that the word ‘minimization’ in the statute does not necessarily carry the same technical meaning that it does in the steps of the hierarchy. It can reasonably be read to cover all mitigation measures, including offsetting, that have the effect of ameliorating the impact on affected species, and that have the effect of removing any jeopardy to the species as required by Clause (c).

The second route to apply offsetting can be found in Clause (c), and in the wording of the permitting scheme itself. Section 73(1) allows the minister to permit and activity affecting a species, its, residence or critical habitat, so long as (s. 73(3)(c)) it does not jeopardize the survival or recovery of the species. This appears to draw a distinction between affecting and jeopardizing, with the value-neutral affect permittable in the absence of clearly negative jeopardy. ⁵³ In this reading of the provision, the activity under consideration must either be inherently neutral in its effect on the species, or be rendered neutral by the inclusion of a suite of mitigation measures, including offsetting. In other words, the activity to be considered is not merely a development or other intrusive activity, but rather the full suite of mitigation measures that accompany it, viewed as an integrated whole.

The latter interpretation is commended by the presumption in statutory interpretation against a reading that would render any part of the statute meaningless or redundant. ⁵⁴ If s. 73(3)(c) is interpreted to mean that the principal activity alone cannot jeopardize the species, then paragraphs (a) and (b) would be rendered redundant. It would be of no consequence if the Minister opined that the proponent had sought all reasonable alternatives or taken all feasible minimization measures so long as the final result was no jeopardy. A preferred interpretation of s. 73(3) as a whole is that it prescribes a ladder of mitigation measures, in which the unstated but implied step is the offsetting of impacts that would otherwise still jeopardize the species after avoidance and minimization measures had been accounted for (i.e., the residual impact).

The proposed policy of 2016 adopted the approach that s. 73(3)(c) encompassed consideration of offset measures and the policy included an annex on the use of biodiversity offsets. ⁵⁵ Again, however, that proposed policy was not adopted and the current permitting guidelines merely counsel a proponent to call the regional office of the responsible department for guidance on the use of offsets.

(C) Migratory Birds Convention Act

The Migratory Birds Convention Act ⁵⁶ (MBCA) gives domestic legal effect to the treaty between Canada (the British Crown on behalf of the Dominion of Canada in 1916, the year of its original signing) and the United States, which seeks to protect populations of bird species that migrate across the border of the two countries. The Convention, as it has been periodically updated, lists the species to which it applies, not all migratory species.

The MBCA itself contains prohibitions on the possession of a migratory bird or nest, or the commercial exchange or gifting of such birds or nests. ⁵⁷ It also prohibits the deposit of a substance harmful to migratory birds into waters frequented by migratory birds. ⁵⁸ For prohibitions on the direct destruction or disturbance of subject birds and nests, however, reference must be had to the Migratory Birds Regulations. ⁵⁹ Section 5 of those regulations prohibits the ‘capture, kill, take, or harass[ment]’ of a migratory bird, the destruction, taking or disturbance of an egg, or the damage, destruction, removal, or disturbance of a nest. ⁶⁰ These prohibitions are subject to some exceptions, such as the destruction of a nest when no bird or viable egg is present. ⁶¹

The prohibitions in section 5 of the regulations, however, only apply if the actor does not have a permit that authorizes the impugned activity. The list of permits that the Minister may issue are listed in section 12, and include those for hunting, scaring, egg and nest destruction, and various other impactful activities. With the exception of hunting, however, those permits are only allowed in specified circumstances, such as authorizing a person who has an interest in land to kill or scare birds to prevent a danger to human health or safety, to prevent damage to agricultural, environmental, or other interests. ⁶² These are sometimes known as ‘danger and damage’ permits.

The authority to impose conditions on those permits is found in section 13, which, importantly, includes conditions respecting ‘the care, release, scaring, capture, killing or disposal of migratory birds’. ⁶³ The inclusion of care on this list enables the imposition of positive conservation duties on permits for activities harmful for birds. If such required care were designed to produce conservation benefits that matched the impact of the harmful activity, that could be seen as a permissible form of offsetting. This provision, however, only applies to those specific situations for which ministerial permits may be issued. The application of offsetting under the MBCA is therefore quite circumscribed.

(D) Impact Assessment Act

The foremost federal vehicle for the investigation of impacts and mitigation options is the Impact Assessment Act ⁶⁴ (IAA). Adopted in 2019, the IAA is Canada's third version of impact assessment legislation since 1992.

The IAA includes provisions requiring impact assessment in four different respects. The bulk of the Act deals with ‘designated projects’, generally large and complex projects that are typically expected to have appreciable environmental and social impacts, including, presumably, those within federal jurisdiction. In addition to such designated projects, the Act mandates the assessment of impacts for projects on federal lands and those outside Canada, ⁶⁵ and enables the conducting of regional and strategic assessments at the discretion of the responsible Minister. ⁶⁶

Projects may be designated by listing in the Designated Projects Regulation, ⁶⁷ or by the direct designation of the responsible Minister. ⁶⁸ Once designated by either means the IAA prohibits the project proponent from doing ‘any act or thing in connection with the carrying out of the designated project in whole or in part if the act or thing may cause any adverse effects within federal jurisdiction.’ ⁶⁹

At this point, it is important to note that in October 2023 the Supreme Court of Canada ruled that the provisions of the IAA respecting designated projects to be an unconstitutional intrusion into provincial jurisdiction. ⁷⁰ The Court's decision was concerned about the breadth of the ‘designated projects’ regime and the matters that are to be considered in federal decision-making. In June 2024 amendments were passed to the IAA, intended to address the Supreme Court's concerns. ⁷¹ These amendments did not alter the fundamental structure of the act that is relevant for this discussion. The amendments may, however, alter certain matters of interpretation that are raised later herein. Here I refer primarily to the amended (2024) version of the act, unless specifically citing the unamended (2019) provisions. ⁷²

A good deal of the IAA sets out provisions for a thorough and complex process to gather and review data and views with respect to the proposed designated project, including timelines for doing so. At the end of that process a decision is to be made by the responsible minister, ⁷³ or by the Governor in Council, ⁷⁴ as to whether the project, with its predicted impacts (within federal jurisdiction) and mitigations, is in the public interest. This is announced in the form of a decision report which must contain conditions in relation to adverse effects within federal jurisdiction. ⁷⁵ The conditions must include implementation measures with respect to mitigations, and follow-up programmes as the Minister considers appropriate. ⁷⁶ Conditions, once contained in a decision report, are legally enforceable upon the proponent. ⁷⁷ Similar provisions apply to any direct or incidental effects from the exercise of a federal power or the exercise of a duty or function by a federal authority.

There are a couple of important qualifications on the mitigations that may be considered under the IAA. The first qualification on mitigation measures is found in the factors to be considered in the impact assessment process. Among those is ‘mitigation measures that are technically and economically feasible . . . .’ ⁷⁸ This limits the extent of mitigation measures that might be required of a proponent. Further, the broad and vague wording of technical and economic feasibility carries within it a potentially serious narrowing of mitigation options.

The second qualification is that the IAA does not set out mitigation options as a hierarchy. The definition of ‘mitigation measures’ is extremely broad, but largely unstructured:

[M]itigation measures means measures to eliminate, reduce, control or offset adverse effects within federal jurisdiction, direct or incidental effects or adverse environmental effects, as defined in section 81, and includes restitution for any damage caused by those effects through replacement, restoration, compensation or any other means. ⁷⁹

Unlike its counterparts in the earlier Canadian Environmental Assessment Act ⁸⁰ and Canadian Environmental Assessment Act, 2012, ⁸¹ this definition includes explicit reference to offsetting as a mitigation option. The different mitigation measures set out, however, are not ordered in any recognizable scheme or priority, including the mitigation hierarchy discussed above.

This deficiency is somewhat addressed by procedural guidance. The process prescribed by the IAA calls for the Impact Assessment Agency of Canada to provide the proponent with tailored guidelines respecting the required content of the impact statement. ⁸² The Agency has published a Tailored Impact Statement Guidelines (TISG) template setting out the matters that the proponent is typically expected to provide through the IA process. ⁸³ An appendix to the TISG template refers to a ‘hierarchy of mitigation measures’ consisting of three options ‘in descending order of preference: Eliminate, reduce and control, and offset’. ⁸⁴ A following section of the TISG Template sets out expectations respecting compensation and offset plans, including that such plans ‘explain and justify the hierarchy of mitigation measures considered’. ⁸⁵

(E) Canadian Energy Regulator Act

The Canadian Energy Regulator Act ⁸⁶ (CERA), adopted in 2019 in conjunction with the IAA, establishes the Canadian Energy Regulator (CER). ⁸⁷ The CER replaced the previous regulator, the National Energy Board. It is given authority over several forms of energy development under federal jurisdiction, including interprovincial and extra-provincial pipelines, interprovincial and international power lines, offshore renewable energy and power lines, and the development of energy resources on federal public lands. Such projects clearly have the potential to substantially impact the environment, including biodiversity. The stated purpose of the CERA is to ensure that activities within its purview are carried out ‘in a manner that is safe and secure and that protects, people, property and the environment’. ⁸⁸

Decision-making (or the making of recommendations) with respect to pipelines and interprovincial power lines lies with a Commission composed of full-time and part-time commissioners. The Commission operates on a quasi-judicial basis. The CERA makes clear that in operating as a regulator the Commission has all the powers of a superior court of record, ⁸⁹ including the jurisdiction to ‘hear and determine all matters, whether of law or of fact’ and make decisions, orders, and recommendations on that basis (s. 32). ⁹⁰

The CERA is structured such that there are separate permitting provisions for each type of activity. Part 3 (s. 179–246) deals with pipelines, Part 4 (s. 247–295) with international and interprovincial power lines, Part 5 (s. 296–312) with offshore renewable energy projects and power lines. In each case, the activity is prohibited in the absence of authorization, which may be granted subject to conditions. In determining conditions, the regulator is required to consider, among other factors, environmental effects, the safety of the environment, and the extent to which the project contributes to or hinders Canada's ability to meet its international environmental obligations.

The key documentary guide to the CER's approach to the mitigation hierarchy and to offsetting is its Filing Manual, ⁹¹ intended to set out what is expected of proponents in an application for CER approval. The manual, however, gives minimal guidance. With respect to facilities applications it advises that ‘if project effects cannot be avoided, mitigation must reduce or compensate for them.’ ⁹² More specifically, it counsels that ‘[a]pplicants should consider construction methods that minimize environmental and socio-economic effects’ and apply ‘principles of minimizing disturbance to the land’. ⁹³ With respect to habitat offsets, they are offered as an example of the various forms of compensation that should be considered by a proponent, ‘as appropriate’, particularly with respect to the mitigation of cumulative effects. ⁹⁴ In a possible reference to the expected rigour of application of the mitigation hierarchy, it requires that a proponent explain why any mitigation recommendations in an environmental and socio-economic assessment are not to be adopted and provide alternative approaches ‘as appropriate’. ⁹⁵

(F) Nuclear Safety and Control Act

The Nuclear Safety and Control Act ⁹⁶ (NSCA) establishes the Canadian Nuclear Safety Commission (CNSC) ‘to regulate the development, production and use of nuclear energy and the production, possession and use of nuclear substances’ so as to, inter alia, ‘prevent unreasonable risk to the environment and the health and safety of persons’. ⁹⁷ Like the CER, the CNSC is established and operate as a quasi-judicial body for purposes of decision-making.

The relevant prohibition under the NSCA is found in section 26, which provides that no person shall mine, possess, or deal with nuclear substances, or with equipment or information prescribed by regulation, or specified related activities except in accordance with a license. ⁹⁸ The Commission of the CNSC may ‘issue, renew, suspend in whole or in part, amend, revoke or replace’ a license, ⁹⁹ and may establish different classes of licenses. ¹⁰⁰ Licenses may contain terms or conditions as the Commission considers necessary for the purposes of the NSCA. ¹⁰¹ Significantly, the NSCA specifically provides that no license shall be issued or otherwise affirmed unless the Commission is of the opinion that the proponent is qualified to carry on the activity in question and, in doing so, will ‘make adequate provision for the protection of the environment’.

The CNSC has published guidance on how it approaches its environmental responsibilities. ¹⁰² It's main focus is on ‘interactions’ between facilities and the environment, and in particular releases of nuclear substances into the environment. The guidance document makes no mention of the mitigation hierarchy, instead simply directing that mitigation measures, and the risk assessments on which they are based, be science-based, recognize the complexity of environmental risk assessment and include monitoring for effectiveness.

General policies covering multiple statutes

There are also two relevant federal policies which are intended to be of general application: the Federal Policy on Wetland Conservation (FPWC) ¹⁰³ and the Operational Framework for the Use of Conservation Allowances. ¹⁰⁴ These are not tied to any single regulatory regime but intended to guide federal decision-makers in a variety of different regimes. Thus, they may draw on the authority of several pieces of legislation, including those set out above. This is a double-edged sword in terms of the impact of these policies. On the one hand, they may be invoked in many administrative and regulatory loci within the federal government. On the other hand, no single agency has the responsibility to see that they are applied consistently or as intended.

(A) Federal Policy on Wetland Conservation

The FPWC was adopted by the federal government in 1991 as a follow-up to its signing of the Convention on Wetlands of International Importance Especially as Waterfowl Habitat (commonly known as the Ramsar Convention). ¹⁰⁵ The FPWC commits the federal government as a whole to the objective of ‘promot[ing] the conservation of Canada's wetlands to sustain their ecological and socio-economic functions, now and in the future’. ¹⁰⁶ Under that broad objective it specifies several goals, including ‘no net loss of wetland functions on all federal lands and waters’. ¹⁰⁷ The policy committed to developing ‘exemplary practices’ toward those ends, including guidelines on mitigation and compensatory measures. ¹⁰⁸ The next step in the development of those practices came five years later in the publication of an Implementation Guide for Federal Land Managers. ¹⁰⁹ The implementation guide sets out a form of the mitigation hierarchy (called ‘the sequence of wetland mitigation alternatives’): Avoidance, minimization, and compensation. ¹¹⁰ This particular styling of the hierarchy reflects that used by the Ramsar Convention on Wetlands of International Importance. ¹¹¹

(B) Operational Framework for Use of Conservation Allowances

The Operational Framework was released by Environment Canada in 2012. It uses the term ‘conservation allowance’ as a synonym for offsetting, and was intended to guide Environment Canada's activities under a variety of statutes, including those set out above. ¹¹² It sets out a three-step version of the mitigation hierarchy: Avoidance, minimization, and application of ‘conservation allowances’. ¹¹³ The Operational Framework stopped short of committing to any particular environmental objective or goal, saying only that the use of conservation allowances was to be informed by Environment Canada's conservation objectives, and referring to NNL only with respect to the goal of the FPWC. The Operational Framework also specifies a number of design elements for conservation allowances: Equivalency, additionality, location, timing, duration, accountability. These are all elements which are commonly recognized in academic literature and policies globally.

(C) Draft Offsetting Policy for Biodiversity

In 2022 Environment and Climate Change Canada released for public comment a draft Offsetting Policy for Biodiversity, ¹¹⁴ with the stated intention of replacing the Operational Framework with respect to many roles of ECCC in decision-making and advising assessment processes. ¹¹⁵ It again set out the mitigation hierarchy, though this time in a four-step version including onsite restoration as the third step. ¹¹⁶ The draft policy also set out many of the common design elements of offsetting in a more full fashion than was done in the Operational Framework.

While the draft policy indicated a default goal of NNL to target biodiversity, ¹¹⁷ it was somewhat equivocal in this regard. A goal of net gain was to apply ‘in some situations’ and ‘where possible’ ¹¹⁸ though these conditions were not elaborated upon. On the other hand, if full offsetting was found not to be feasible, partial offsetting – falling short of achieving NNL – was suggested as acceptable in some undefined situations. ¹¹⁹ The Draft Policy did not explore the possibility of statutory reforms.

The draft policy was available for public comment from December 2022 to February 2023. A subsequent version has not been published at the time of writing of this article.

Constraints on administrative discretion

The above shows the legal foundation enabling federal administrative decision-makers to exercise their discretion to require mitigation of the environmental impacts, including the use of offsetting for biodiversity. That discretion is not unbounded, however. We now turn to the matter of how such administrative discretion is constrained and what implications such constraints carry for Canada's ability to meet its stated biodiversity goals. The following section first considers the degree to which the above legislation supports goals of NNL or net gain in biodiversity in regulatory decision-making. Secondly, consideration is given to whether the regulatory discretion of federal authorities with respect to impact mitigations extends to regulating offset activities offsite of the projects before the decision-makers.

Conservation goals

The first focus is on the authority of decision-makers to pursue goals of NNL, or net gain, to biodiversity as they consider permitting the various projects and activities within their jurisdictions.

In considering this question it is important to take into account the significant difference between the two goals. A NNL goal calls for a proponent to accept full responsibility for all of the negative impacts of its own activities. This is in keeping with the ‘polluter pays’ principle, as well as common notions of personal and corporate responsibility. In contrast, by definition a goal of net gain, or net positive impact, calls on the proponent to take responsibility for an extra increment of biodiversity benefit which does not correspond to any loss that it has caused. The proponent is thus being asked to contribute to the broader public interest in conservation from its private resources. This calls out for a clear legal rationale.

There are several common-law doctrines that impugn such a move in the absence of clear statutory intent. The starting point for any consideration of the scope of regulatory discretion in Canada is the Supreme Court of Canada's landmark 1959 decision in Roncarelli v Duplessis, ¹²⁰ holding that no administrative discretion is unlimited, and must be exercised in a manner that is consistent with the purposes of its enabling legislation, not extraneous factors. More recently the Supreme Court has clarified that administrative discretion is to be exercised not only within the purpose and wording of its enabling statutes, but also within its values, including those values set out in the Canadian Charter of Rights and Freedoms. ¹²¹

Within the field of planning law the issue of subdivision and development permits subject to discretionary conditions is limited to the conditions which are, firstly, for a planning purpose and not for any ulterior purpose and, secondly, that they be fairly and reasonably related to the permitted development. ¹²² Expanding on the first criteria in the Newbury decision of the UK House of Lords, Viscount Dilhorne quoted approvingly from an earlier decision of Lord Denning: ‘The planning authority are not at liberty to use their powers for an ulterior object, however desirable that object may seem to them to be in the public interest’. ¹²³

In the United States the distinction has a constitutional dimension. The U.S. Supreme Court has found that offset conditions on development must have a ‘essential nexus’ to the impact caused by the proponent ¹²⁴ and must be ‘roughly proportionate’ to the impact. ¹²⁵ If these conditions are met, the Court found, the regulatory requirement was a legitimate means of internalizing what would otherwise be an externalized environmental cost of development. ¹²⁶ If, however, the compensation requirement has no essential nexus or is more than roughly proportionate, i.e., that it seeks a net gain, then it would amount to an unconstitutional taking of the proponent's property.

In a related doctrine, statutes are not to be interpreted to derogate from property rights unless that is the clear intention of legislation, and then only to the extent that is such intention is clearly manifest. ¹²⁷ Similarly, it is a well-accepted judicial presumption that any residual ambiguity (after application of other tools of interpretation) in taxing statutes is to be resolved in favour of the taxpayer. ¹²⁸

Each of these doctrine's dictate against the discretionary appropriation of private resources for public purposes, no matter how commendable those purposes may be. The imposition of obligations on a development proponent, over and above those necessary to ameliorate the impact of the permitted development in the pursuit of a net gain to biodiversity is just that. This does not suggest that the pursuit of net gain is illegitimate, or legally suspect, only that it must be unambiguously grounded in the language of a statute that provides the discretion to grant permits and apply conditions.

Bearing these foundational rules in mind, is there statutory authority for a regulatory decision-maker to require a proponent to mitigate their project impacts fully as to achieve NNL of biodiversity, or even to achieve a net gain?

Fisheries Act

The Fisheries Act contains sufficiently broad provisions to support a wide range of conservation goals. The statutory purpose of the Act is ‘to provide a framework for (a) the proper management and control of fisheries; and (b) the conservation and protection of fish and fish habitat, . . . .’ ¹²⁹ Under that expansive mandate the responsible minister is to implement measures ‘to maintain major fish stocks at or above the level necessary to promote the sustainability of the stock . . . .’ ¹³⁰ The legislation allows the establishment of fisheries management objectives, which are required to be considered in making decisions where offsetting might be applied. ¹³¹ All of these provisions suggest that the minister has the ability to set conservation goals that call for an increase in any given fishery stock, and that permits and permit conditions ought to be aligned with that goal. A mitigation goal of net gain is, therefore, likely permissible under the Fisheries Act.

Species at Risk Act

It can be argued that a goal of growth in species populations is inherent in the nature of the SARA. Indeed, the purposes of SARA speak to preventing wildlife species from becoming extirpated or extinct, and providing ‘for the recovery of wildlife species that are extirpated, endangered or threatened as a result of human activities.’ ¹³² Provisions for recovery of such species are replete throughout the statute, including the mandatory preparation of recovery strategies and action plans. ¹³³

As discussed above, SARA does not explicitly provide for offsetting and the pursuit of NNL, though it can reasonably be read into section 73. That section, however, does not make clear reference to an offset goal of net gain. Rather, Clauses 73(3)(a) and (b) refer to assuring that impacts to species will be reduced and minimized. Clause 73(3)(c) requires that the activity in question ‘not jeopardize’ the survival or recovery of the species. This suggests that the baseline scenario for species survival or recovery should not be diminished, but with no requirement to positively contribute to or improve that scenario. It is thus doubtful that the SARA supports an offset goal of net gain, notwithstanding that such a goal would be in spirit of the larger intent of the Act.

Migratory Birds Convention Act

The stated statutory purpose of the MBCA is to implement the migratory Birds Convention ‘by protecting and conserving migratory birds – as populations and individual birds – and their nests.’ ¹³⁴ Despite the mention of populations, the act makes little mention of population goals. It is difficult, therefore, to read into the act support for any particular goals. In this context NNL is likely the most ambitious goal that could be reasonable supported by the MBCA.

Impact Assessment Act

The IAA, in both it original and amended form, contains several provisions suggesting the mitigation requirements are limited to the adverse effects of the particular projects under review. This dictates against using the act to require proponents to go beyond addressing their own effects and producing a net gain for the environment.

The statutory definition of ‘mitigation measures’ in the original 2019 version of the act referred to measures to address ‘the adverse effects of a project or designated project’. ¹³⁵ With the recent amendment that wording has been dropped in favour of ‘adverse effects within federal jurisdiction’. ¹³⁶ The definition of that phrase, however, retains the reference to effects ‘with respect to a physical activity or designated project’. ¹³⁷

Further the new amended purpose of the IAA refers to the prevention or mitigation of significant adverse effects ‘that may be caused by the carrying out of designated projects’ or that ‘may be caused by the carrying out of projects’. ¹³⁸ As well, the determination of public interest, the ultimate goal of the impact assessment process, is to consider to degree to which effects ‘that the carrying out of the designated project may cause are adverse.’ ¹³⁹ All of these provisions suggest that the ambition of mitigation measures is limited to the impacts of the project under regulatory consideration, rather than addressing larger or different environmental challenges.

The limitations apply to the deliberations of both the Impact Assessment Agency of Canada and the CER, which derives most of its assessment authority from the IAA.

Nuclear Safety and Control Act

As described above, the NSCA requires only that the Commission make adequate provisions for the protection of the environment. There is no reference to particular environmental goals, much less environmental improvements. This act, therefore, is unlikely to provide support for a goal of net gain in biodiversity.

Based on the above review it appears that the policy goal of halting and reversing biodiversity loss, as expressed in Canada's adoption of the KMGBF and Canada's 2030 Nature Strategy in so far as it requires a net gain in biodiversity, is poorly supported by the statutory provisions reviewed above, with the exception of the Fisheries Act. If the national goal of halting and reversing biodiversity loss is to be achieved statutory reform will be required.

Authority over offsite offset projects

Unlike other forms of impact mitigation, often offsetting is pursued by conservation projects away from the primary development site. This raises a couple of extra questions respecting who has authority over the offset project.

The first question is whether regulatory authority over the primary development extends to oversight of the corresponding offset project. Often this will not be the case, and the offset site will be under the authority of another landowner or land manager. That third party will be entitled to make its own determination on the nature and permissibility of the activity intended to produce the offset credit, including legal arrangements necessary to secure the offset benefits over time.

The required involvement of that third-party decision-maker does not, however, detract from the legitimacy of the principal regulatory authority to prescribe the nature and criteria of the required offset project as a condition of approval of the development impact, and to assess the offset project and outcomes against those criteria.

The second question that arises out of the location of the offset, and the likely need for third-party co-operation and approval, is whether that places the offset project beyond the ‘care and control’ of the proponent. This concern was raised by several federal officials in recent interviews for a forthcoming study looking at officials’ knowledge and application of the mitigation hierarchy. ¹⁴⁰ Those officials offered the view that they could not require mitigation conditions which was not wholly under the care and control of the proponent.

This requirement is apparently based on the criteria of the Impact Assessment Agency of Canada for determining whether physical activities are incidental to the designated project under review, and therefore to be included within the scope of the review. According to IAAC's Guide to Preparing an Initial Project Description and Details Project Description, the project description is to include a description of all activities incidental to the project, with such incidence to be determined by taking into account whether the proposed activity is subordinate or complementary to the designated project, within the care and control of the proponent, whether the proponent has the ability to direct or influence the carrying out of the activity, and whether the activity is required by federal or provincial regulation. ¹⁴¹

Impact mitigations, however, are not properly seen as activities that are open for determination as to their relationship to the designated project in question. They are an inherent part of the project itself, both as a required part of the regulatory process and as a matter of project design, and cannot be isolated.

The concerns raised with the authority of third-party landowners, managers, and the proponent over the offset project are based on a misapprehension of the nature of conditions on a regulatory approval. Conditions are not simply enforceable orders to the proponent to undertake certain actions. Rather, as is well accepted in all areas of law, a condition is a circumstance that must exist in order for a particular legal status to validly take effect. In the case of development approvals, the compliance with mitigation conditions is the prerequisite to the project approval taking effect.

Decisions in impact assessment are replete with example of conditions extrinsic to the project under consideration, and thus beyond the care and control of the proponent. For example, for the Roberts Bank Terminal 2 project (a major expansion of the Port of Vancouver on Canada's west coast) the decision statement conditions provided that mitigation measures were to be varied depending on the presence of sensitive life phases of salmon and crab ¹⁴² or the presence of spawning herring, ¹⁴³ and limit or stop certain operations when Southern Resident Killer Whales (a federally listed population) are present during summer months. ¹⁴⁴

Indeed, there is an implicit acknowledgement of the significance of factors beyond the proponent's control in every condition (and they are common) requiring adaptive management based on unforeseeable changes in environmental conditions or outcomes. In each of these cases uncontrolled elements of the ecosystem act as independent variables requiring the modification or suspension of project activities. The decisions of land managers at prospective offset sites should be regarded in the same manner.

This approach aligns with that taken be the CER, and its predecessor National Energy Board, in a series of decisions over the last dozen years on offsetting for boreal caribou habitat disturbed by pipeline projects. ¹⁴⁵ In each of those projects, the proponent was required to restore caribou habitat offsite of the pipeline right of way. This was mainly done on provincial public lands, including within a provincial park in Alberta. At no time did the regulator or the proponent claim any jurisdiction or control over the approved land use on those provincial lands. That approach was not challenged by the proponents for any of the projects. Rather, the approval of the provincial land managers was treated as an independent variable on which proposed offsets, and ultimately the pipeline project, were dependent in turn.

Conclusion

This review has shown that Canadian federal resource regulators have sufficient authority to require a broad range of mitigation measures, including biodiversity offset requirements, to those development projects under their respective jurisdictions. While each of the statutes reviewed describes the issue in a different way, they can be seen as enabling similar approaches in the circumstances to which they apply.

While the various statutes reviewed can be seen to arrive at that common destination, it must be noted that the multiplicity of policies produced by the federal government under its various statutes and agencies leaves an unnecessary regulatory rabbit's warren for proponents, stakeholders, and regulators to navigate. It would be to the advantage of all these parties, and ultimately to Canada and its biodiversity, for the federal government to move toward a common framework for applying offsetting, and the whole of the mitigation hierarchy, one that could be adapted for each of the natural resources and statutory regimes that have been examined here.

In the longer term, the statutes should be reviewed with a view to aligning them with Canada's aims to address the biodiversity crisis. By providing for the requirement of offsetting, each of these statutes paves the way for the pursuit of a goal of NNL, and at least one, the Fisheries Act, seems to create room for the higher objective of net gain. These provisions are important in Canada's pursuit of its stated conservation goal of halting biodiversity loss. Most of the statutes, however, do not provide sufficient authority for regulators to contribute to the more ambitious goal of reversing biodiversity loss by requiring those extra offset measures that would produce a net gain. In that they fall short of what Canada will require if it is to meet its international commitment to the KMGBF. Statutory reforms will needed if those commitments are to be honoured.

This analysis of the Canadian federal impact mitigation regime indicates the breadth of the challenge facing all jurisdictions that have committed to the KMGBF and the goal of halting and reversing biodiversity loss. Much of our environmental regulation has been developed around the idea of minimizing impacts. Applying that approach on a project-by-project basis has brought pervasive problems of cumulative impacts. The new goals, however, call for environmental governance that is oriented to the achievement of specific environmental objectives. A positive orientation must replace a negative one, and a focus on projects and proponents will have to yield to a focus on the ongoing state of the environment. The legal implications of this may be substantial and may require farsighted reforms. As reviewed here, changes must not only be considered to statutes, but long-held doctrines of common law might have to be scrutinized as well.

England is providing a test case of this new approach with its Biodiversity Net Gain programme. Countries such as Canada will be taking note. There is much work for legal scholarship to explore the breadth and depth of changes needed and the implications those changes carry for society as a whole.