Energy Law in Canada
Constitutional Framework
Energy law in Canada is fundamentally shaped by the constitutional division of powers between the federal Parliament and the provincial legislatures. The Constitution Act, 1867 assigns jurisdiction over natural resources to the provinces under s. 92A, granting provincial governments the authority to make laws in relation to exploration, development, conservation, and management of non-renewable natural resources and forestry resources. This provision, added by the Constitution Act, 1982, confirmed and expanded provincial ownership of natural resources within their borders.
Parliament, however, exercises jurisdiction over interprovincial and international undertakings under s. 92(10) of the Constitution Act, 1867, which includes pipelines, power lines, and other energy infrastructure that crosses provincial or national boundaries. The federal government also holds exclusive jurisdiction over nuclear energy, including the regulation of atomic energy and nuclear facilities, by virtue of its peace, order, and good government (POGG) power and specific federal legislation. Offshore energy resources present a more complex jurisdictional picture, with joint federal-provincial management regimes established through accords such as the Canada-Newfoundland and Labrador Atlantic Accord Implementation Act and the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act.
Federal Energy Regulation: The Canada Energy Regulator
The Canada Energy Regulator (CER) is the primary federal energy regulator, established by the Canadian Energy Regulator Act, SC 2019, c 28, s 10, which repealed and replaced the National Energy Board Act. The CER operates as an independent quasi-judicial agency and reports to Parliament through the Minister of Natural Resources. Its mandate encompasses the regulation of interprovincial and international pipelines, power lines, and energy trade, as well as offshore renewable energy projects.
The CER’s functions include adjudication (hearing applications for certificates of public convenience and necessity for pipeline construction, tolls and tariffs, and leave to open), compliance and enforcement (inspections, audits, and orders for pipeline safety and environmental protection), and data collection and analysis regarding energy markets and infrastructure. The CER also conducts lifecycle regulation of pipelines, from construction through operation to decommissioning and abandonment. The Canadian Energy Regulator Act introduced a forward-looking mandate that expressly includes consideration of environmental, social, and Indigenous interests, reflecting a significant shift from the National Energy Board’s historical approach. The CER now considers the public interest through a lens that includes Canada’s climate change commitments and Indigenous rights and title.
The Impact Assessment Act
The Impact Assessment Act (IAA), SC 2019, c 28, s 1, replaced the Canadian Environmental Assessment Act, 2012 and fundamentally restructured the federal assessment of major energy projects. The IAA creates the Impact Assessment Agency of Canada (the Agency) and establishes a single, integrated assessment process that considers environmental, health, social, and economic impacts. For energy projects, the IAA applies to designated projects listed in the Physical Activities Regulations or designated by ministerial order. The Act requires an impact assessment for projects that could give rise to adverse effects within federal jurisdiction, including effects on fish and fish habitat, aquatic species, migratory birds, and federal lands, as well as effects that cross provincial or international boundaries.
The IAA also imposes a duty on decision-makers to consider the extent to which the project contributes to Canada’s ability to meet its climate change commitments, including its greenhouse gas emission reduction targets under the Canadian Net-Zero Emissions Accountability Act. The Supreme Court of Canada’s decision in Reference re Impact Assessment Act, 2023 SCC 23 held that certain aspects of the IAA were unconstitutional, finding that the Act’s ambit exceeded federal jurisdiction. Parliament subsequently amended the IAA through the Budget Implementation Act, 2024 to address the constitutional deficiencies identified by the Court, narrowing the scope of projects subject to federal assessment and clarifying the “effects within federal jurisdiction” that trigger assessment requirements.
Provincial Energy Regulators
Each province maintains its own energy regulatory framework, with regulators exercising jurisdiction over energy resources within the province. The Alberta Energy Regulator (AER) is a comprehensive regulator responsible for overseeing oil, gas, oil sands, coal, and geothermal resource development in Alberta under the Responsible Energy Development Act. The AER has broad authority over all stages of energy development, from exploration to reclamation, and administers a suite of statutes including the Oil and Gas Conservation Act and the Pipeline Act.
The BC Energy Regulator (BCER) was established by the Energy Resource Activities Act, SBC 2018, c 39, succeeding the BC Oil and Gas Commission. The BCER regulates oil and gas activities, geothermal resources, and hydrogen projects in British Columbia, with particular emphasis on environmental protection and Indigenous consultation.
In Ontario, the Ontario Energy Board (OEB) regulates the province’s electricity and natural gas sectors under the Ontario Energy Board Act, 1998. The OEB’s mandate includes setting rates for electricity transmission and distribution, licensing electricity generators and retailers, and approving natural gas pipeline expansion projects. Unlike the AER and BCER, the OEB does not regulate oil and gas exploration or production, as Ontario has limited hydrocarbon resources.
Oil and Gas Law
The regulation of oil and gas exploration and production is primarily a provincial responsibility. Each producing province has established a detailed regulatory framework governing the entire lifecycle of oil and gas operations. Key regulatory elements include: tenure (crown land dispositions through permits, licences, and leases granting the right to explore for and produce oil and gas); drilling and production authorizations (licences and approvals for well drilling, completion, and operation); conservation (well spacing, pooling, unitization, and flaring restrictions aimed at maximizing resource recovery); and environmental protection (requirements for spill prevention and response, groundwater protection, and site reclamation).
The common law of oil and gas ownership in Canada treats oil and gas as ferae naturae (wild animals) until captured. The owner of the mineral rights does not own the oil and gas in place but rather has the exclusive right to search, capture, and appropriate them. The rule of capture provides that a landowner acquires title to oil and gas produced from a well on their land, even if the resources migrated from adjoining lands. This rule is tempered by conservation legislation that prevents wasteful production practices and protects correlative rights.
Electricity Regulation
Electricity regulation in Canada reflects the constitutional division of powers, with provinces exercising primary jurisdiction over electricity generation within their borders. Each province has structured its electricity industry differently: some maintain vertically integrated Crown corporations (Ontario Power Generation, BC Hydro, Hydro-Québec), while others have introduced competitive generation markets (Alberta’s deregulated electricity market, Saskatchewan’s hybrid model).
The federal government regulates interprovincial and international transmission lines under s. 92(10) of the Constitution Act, 1867. The CER issues permits and certificates for international power lines, and the National Energy Board Act (now Canadian Energy Regulator Act) historically governed such authorizations. Provincial utilities commissions or energy boards typically regulate intra-provincial electricity transmission and distribution rates, as well as the terms of access for generators and consumers.
Electricity trade is subject to federal jurisdiction, with the CER regulating exports of electricity under Part VI of the Canadian Energy Regulator Act. Exporters must obtain permits or orders, and the CER must be satisfied that the quantity of electricity to be exported does not exceed the surplus remaining in Canada after due allowance for reasonably foreseeable domestic requirements.
Renewable Energy and Carbon Pricing
Provincial and federal governments have adopted various mechanisms to promote renewable energy development, including feed-in tariffs (Ontario’s Green Energy and Green Economy Act, 2009), renewable portfolio standards, net metering programs, and procurement processes for utility-scale renewable energy projects. Federal support includes tax incentives (accelerated capital cost allowance for clean energy equipment), grants, and contribution programs administered by Natural Resources Canada and CleanBC.
The Greenhouse Gas Pollution Pricing Act, SC 2018, c 12, s 186, establishes the federal carbon pricing system, which applies in provinces and territories that do not have carbon pricing systems meeting federal benchmarks. The Act has two components: a fuel charge applied to fossil fuels (the “carbon tax”) and an output-based pricing system (OBPS) for large industrial emitters. The Supreme Court of Canada upheld the Act’s constitutionality in Reference re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11, holding that greenhouse gas emissions constitute a matter of national concern under the POGG power.
Provinces have implemented their own carbon pricing mechanisms. British Columbia operates a carbon tax under the Carbon Tax Act, while Quebec has a cap-and-trade system linked with California under the Western Climate Initiative. Ontario previously operated a cap-and-trade system, replaced by the federal backstop after the province’s repeal of the program.
The Energy Transition and Net-Zero Regulation
The Canadian Net-Zero Emissions Accountability Act, SC 2021, c 22, establishes a framework for Canada to achieve net-zero greenhouse gas emissions by 2050. The Act requires the Minister of Environment and Climate Change to set national emissions reduction targets for 2030, 2035, 2040, and 2045, and to develop emissions reduction plans, progress reports, and assessment reports. The Act also establishes the Net-Zero Advisory Body to provide independent advice to the Minister on achieving emissions reduction targets.
The energy transition has profound implications for Canadian energy law. The federal government’s 2030 Emissions Reduction Plan envisions a decarbonized electricity grid by 2035, supported by the Clean Electricity Regulations (proposed) and investments in interprovincial transmission infrastructure. The Clean Fuel Regulations, SOR/2022-153, impose increasingly stringent carbon intensity requirements on liquid fossil fuels, while the Zero-Emission Vehicle Mandate requires increasing proportions of new light-duty vehicle sales to be zero-emission.
Indigenous communities are increasingly asserting their rights in the energy transition, seeking equity ownership in renewable energy projects and challenging fossil fuel infrastructure through litigation and consultation processes. The United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) has been adopted into Canadian law through the United Nations Declaration on the Rights of Indigenous Peoples Act, SC 2021, c 14, which requires the government to take measures to ensure Canadian laws are consistent with the Declaration, including in the energy sector.
The transition also raises complex regulatory questions regarding stranded assets, just transition for workers and communities dependent on fossil fuel industries, and the legal framework for emerging technologies including small modular nuclear reactors, hydrogen production and transport, and carbon capture, utilization, and storage (CCUS).