Supreme Court of Canada to hear Alberta’s “orphaned” oil wells case

By – Michael Nowina and Glenn Gibson, Baker McKenzie

On November 9, 2017, the Supreme Court of Canada granted the Alberta Energy Regulator and the Orphan Well Association’s request for leave to appeal from the decision in Grant Thornton Ltd. v. Alberta Energy Regulator, 2017 ABCA 124.  By granting leave, Canada’s highest court will weigh in on the Alberta Court of Appeal’s determination that secured creditors in a bankruptcy should be paid before environmental claims arising from abandoned oil and gas wells.

Map of all Orphan Wells in Alberta

As described in our previous blog post, on April 24, 2017, a majority of the Alberta Court of Appeal determined that certain sections of the Oil and Gas Conservation Act and Pipeline Act were inoperative to the extent that they conflicted with the Bankruptcy and Insolvency Act (BIA). Under the appellate decision, a bankruptcy trustee or receiver is not required to satisfy the environmental remediation obligations in priority to other creditors.  On the other hand, the dissenting judgment noted concerns that the effect of the majority decision would be to create an incentive for corporations to avoid the end-of-life obligations of wells by using insolvency laws and shift the environmental remediation costs onto the public and other oil and gas producers.

 Leave to the Supreme Court

Leave to the Supreme Court will only be granted where the court is of the opinion that the question raised by the case is of public importance or one that ought to be decided by the Supreme Court. In their leave application, the Orphan Well Association and the Alberta Energy Regulator identified the following issues to be clarified by the Supreme Court:

(a) Given the exclusive jurisdiction of provinces to regulate their natural resources, whether regulatory obligations created by provincial legislation conflict with or frustrate the scheme of priorities set out in the BIA?

(b) Whether select provisions of the BIA enable a receiver or trustee to pick and choose which provincial laws it will comply with?

(c) Are end-of-life obligations associated with oil and gas development also duties owed to the public?

The Minister of Justice and Solicitor General of Alberta intervened in the leave application. In supporting the leave application, the Province of Alberta’s position on leave was that the majority decision of the Court of Appeal interfered “with critical provincial regulatory functions in a manner that is inconsistent with the constitutional division of legislative powers and the balance of confederation.”

The Supreme Court granted a motion to expedite the appeal, and it will likely hear the appeal in the first half of 2018. The Supreme Court’s decision is an opportunity for the court to clarify the interaction of federal insolvency laws with the province’s jurisdiction to regulate natural resources as well as whether the public and other oil and gas producers ought to bear the burden of environmental remediation. The decision will have significant implications for the oil and gas industry, lenders, and regulators across the country. We will continue to provide updates on the status of the hearing as it becomes available.

This article was originally published on the Baker McKenzie website.

_________________

About the Authors

Michael Nowina is a member of the Firm’s Dispute Resolution and Global Financial Restructuring & Recovery practice groups. Mr. Nowina has a diverse civil litigation practice, with a focus on fraud recovery, insurance defence and insolvency law. Mr. Nowina has appeared before all levels of courts in Ontario and regularly appears on matters on the Commercial List in Toronto.

Glenn Gibson is a member of Baker McKenzie’s Litigation & Government Enforcement Practice Group in Toronto. She joined the Firm in 2015 as a summer student and completed her articles of clerkship in 2017.  Glenn acts for various clients on contractual disputes, jurisdictional disputes, commercial class actions, matters involving fraud and commercial arbitration. She is a contributor to www.canadianfraudlaw.com, www.globalarbitrationnews.com, and the Baker McKenzie International Arbitration and Litigation Newsletter.

Long Lake Gold Mine remediation project hits stumbling block

As reported by the CBC, the Long Lake Gold Mine Remediation Project near Sudbury, Ontario will not be getting started until 2019.

The Province on Ontario first announced its commitment to remediate the abandoned gold mine back in 2013.  The lake, located near a popular recreation area, had high levels of arsenic.

Long Lake Gold mine operated intermittently from 1908 to 1937 and produced approximately 200,000 tonnes of tailings.  The tailings were discharged directly to the environment without containment.  The tailings have since eroded into Luke Creek and Long Lake.  The tailings are acid generating and leach acidic water that is high in metal contamination, specifically arsenic.  The Ontario Ministry of Northern Development and Mines (MNMD) sampling in the south end of Long Lake identified arsenic contamination above the Ontario Drinking Water Standard.

Long Lake (Photo Credit: Markus Schwabe/CBC)

The MNDM initiated a review of remediation alternatives to clean up the tailings area and has selected a preferred method of relocating all fugitive tailings to a new containment facility that will be constructed on site.  The objective of remediation efforts is to reduce the arsenic concentration in Long Lake below the provincial drinking water limit, such that water quality in the south bay of Long Lake will recover to background conditions.

The latest delay in the remediation project is the result of the MNDM addressing some concerns of nearby residents who are concerned that the clean-up will result in increased truck traffic on the existing road to the lake.

The chair of the Long Lake Stewardship group says residents are aware of the notion “short term pain for long term gain” when it comes to the completion of the remediation project.

“But I think the concern I heard was the number of trucks that would be travelling on the road, day-in and day-out through the restoration phase,” Scott Darling said.

“Primarily what I heard in terms of the concerns were the traffic, the increased traffic that’s going to occur over the two-year period on Long Lake Road and Tilton Lake Road and South End Road — the wavy trail.”

Roads in the area will see 50 to 60 trucks a day hauling out contaminated material and bringing in clean fill.

The remediation project is expected to run between two and three years.

Darling says it could be closer to 2019 before the project gets started.

More information on the proposed clean-up of the Long Lake can be found in the MNMD environmental assessment document.

 

U.S. Senators Introduce Bipartisan Bill to Establish Renewable Chemicals Tax Credit

Two U.S. senators recently introduced a Bill in Congress, called the Renewable Chemicals Act 2017 (S. 1080) which aims to establish a short-term tax credit for the production of renewable chemicals and for investment in renewable chemical production facilities.  If enacted, the legislation would allow chemical manufacturers to claim a production credit equal to $0.15 per pound of bio-based content of each renewable chemical produced.  In lieu of the production credit, companies would be able to claim an investment credit equal to 30 percent of the basis of any eligible property that is part of a renewable chemical production facility.

Proponents of the Bill believe that the tax incentives will spur research, development, and production of renewable chemicals from biomass and also result in the investment in renewable chemical production facilities.  Applicants for the tax credit would be evaluated on job creation, innovation, environmental benefits, commercial viability and contribution to U.S. energy independence.

Rideau Canal’s downtown stretch declared Contaminated Site

As reported in the Ottawa Citizen, a portion of the historic Rideau Canal that runs through downtown Ottawa is now on a list of contaminated federal sites.  The announcement was made recently by Parks Canada.

Parks Canada said the results were not unusual in such waterways, and this stretch of the canal, located in the middle of a major urban area, has a long history of industrial use.

Rideau Canal (Photo Credit: Fred Chartrand/Canadian Press)

That designation is the result of tests done on sediment from the canal bed between the Ottawa Locks and Bronson Avenue.  The tests were conducted after the discovery of heavy metals such as lead and cadmium, as well as polycyclic aromatic hydrocarbons, which have been linked to various cancers.

The latest round of tests was conducted to identify the extent of the contamination, and to be able to put in place measures to protect the environment, Parks Canada said.

Parks Canada calls the discovery of contaminated sediment “not unexpected” given the long history of industrial use and the urban location of that part of the canal. Over the last century the downtown stretch of the canal was home to a paint factory and has seen both trains running along its edge and steam-powered boats hauling industrial goods.

Parks Canada, the federal department in charge of the canal, said it would work with the City of Ottawa and the National Capital Commission to find ways to deal with the affected section of the UNESCO World Heritage Site.

The risk to human health is low, according to the department, as long as people don’t have direct contact with the sediment at the bottom of the canal.

Parks Canada temporarily halted repairs along a section of the canal after workers turned up canal-bed toxins while laying bricks in the Fall of 2016.

Repairs resumed in the winter but were restricted so as not to disturb the sediment.

Parks Canada said future construction work would proceed with mitigation measures in place to protect the environment and public safety.

Class Action suit filed against CN Rail for derailment

As reported in the Sudbury Star, a Timmins law firm has sent a letter out to Gogama area residents and cottagers advising that a class-action lawsuit has been filed against CN Rail in connection with the derailment of an oil tanker train and subsequent oil spill that occurred on March 7, 2015.

The letter, signed by James Wallbridge of Wallbridge, Wallbridge Trial Lawyers of Timmins, was to advise residents to sign retainer agreements or to indicate whether or not they wish the law firm to proceed on their behalf.

The derailment and oil spill occurred in the area of the Makami River bridge, on the CN mainline near the village of Gogama, a town in Northeastern Ontario located between Timmins and Sudbury.  An eastbound CN Rail train hauling 94 tank cars had a derailment after riding over a broken rail. In all, 39 tank cars left the track.  Some of the cars fell into the river next to be bridge, exploded and burst into flame. Several of the cars were breached releasing many hundreds of thousands of litres of synthetic crude oil into the river and the surrounding environment.

Gogama train derailment

Wallbridge’s letter said the claim against CN Rail was filed back in July and that there are indications that the clean-up of the oil spill in the area is not properly done yet.

“We are advised by Fred Stanley of Walters Forensic Engineering that the cleanup continues notwithstanding CN and the Ministry of the Environment’s view the oil spill cleanup is complete,” said the letter.

Wallbridge went on to suggest that more environmental testing would be needed early next year.

“We are of the view that next spring may be an appropriate time to review the work that has been done and undertake independent testing. We have spoken to the Ministry of Environment’s legal counsel about testing and have indicated that we anticipate their cooperation in reviewing the overall cleanup.”

Wallbridge also advised that his firm has indicated that the timetable for the class action should be “held in abeyance” pending a review of the cleanup in May and June of 2018.

He said his firm elected to proceed by class action to preserve the limitation period of two years from the date of the occurrence. The class action serves to suspend the limitation period during the certification process, the letter said.

The Gogama-Makami River derailment was the second CN oil train derailment in that area in the winter of 2015. Both occurred along the section of the CN mainline known as the Ruel Subdivision. Another train hauling tank cars had derailed three weeks previous, on Feb. 14, 2015, in a remote bush and wetlands area, about 35 kilometres north of Gogama.

Canada’s Transportation Safety Board filed a report in August saying that a broken section of rail was the cause of the derailment at the Makami River bridge.

New Canadian Soil Quality Guidelines for Methanol

The Canadian Council of Ministers of the Environment (CCME) recently published an updated the Canadian Soil Quality Guidelines for the Protection of Environmental and Human Health: Methanol.

Canadian environmental quality guidelines are numerical concentrations or narrative statements recommended to provide a healthy, functioning ecosystem capable of sustaining the existing and likely future uses of the site by ecological receptors and humans.  Canadian soil quality guidelines can be used as the basis for consistent assessment and remediation of contaminated sites in Canada. The guidelines in the report were derived according to procedures described in A Protocol for the Derivation of Environmental and Human Health Soil Quality Guidelines (CCME 2006).  According to this protocol, both environmental and human health soil quality guidelines are developed and the lowest value generated from the two approaches for each of the four land uses is recommended by the Canadian Council of Ministers of the Environment (CCME) as the Canadian Soil Quality Guidelines (CCME 2006).

Sufficient data were available to develop soil quality guidelines for methanol protective of human health, in accordance with the soil protocol.  The human health soil quality guidelines for methanol are 4.6 mg/kg for coarse soil and 5.6 mg/kg for fine soil for all four land uses.  Human health soil quality guidelines were calculated for soil ingestion, inhalation of indoor air, and protection of groundwater for drinking water. The limiting pathway in the calculation of human health guidelines was drinking water.

Sufficient data were available to develop soil quality guidelines for methanol protective of environmental health, in accordance with the soil protocol.  The environmental health soil quality guidelines for methanol are: 7.7 mg/kg for coarse soil and 190 mg/kg for fine soil for all four land uses. Environmental health soil quality guidelines were calculated for ecological direct contact and protection of groundwater for aquatic life.  The limiting pathway in the calculation of environmental health guidelines was aquatic life.  Since it was possible to calculate both human health and environmental soil quality guidelines for methanol, the overall methanol soil quality guidelines are the lower of the two, which are 4.6 mg/kg for coarse soil and 5.6 mg/kg for fine soil for all four land uses.

Advance Technology Camera spots hidden Oil Spills

As reported in the New Scientist, a new kind of polarising camera is available that can detect otherwise invisible oil sheens.

Like many oil imagers, the Pyxis camera sees the infrared radiation emitted by all objects.  That is important because there is often a temperature difference between oil and water.  However, if there isn’t one, thermal imagers don’t work.  So the Pyxis also detects differences between the way oil and water scatter light.  Thanks to this differing polarisation, it works not only when the oil and water are the same temperature – but also in pitch darkness.

Infrared polarimetry has been used in astronomy to help identify distant stellar objects. Polaris Sensor Technologies, based in Alabama, has modified the technology for a new use.

“The optical system and the physics behind it are very complex,” says David Chenault, President of Polaris Sensor Technologies.  “We started building infrared polarimeters several decades ago, but they were bulky and not capable of looking at dynamic scenes.” Only in the past few years did it become possible to significantly shrink the sensor – now roughly the size of a fist – and make it capable of imaging moving scenes. That is important for detecting oil on water.

The new camera can see spills invisible to the naked eye from 2 kilometres away.  Its size means it can be mounted on a small drone or other robot.

Doug Helton of the National Oceanic and Atmospheric Administration Emergency Response Division says these cameras could augment NOAA satellite networks, which detect and track suspected oil spills.  While they can spot even small spills, visual confirmation is crucial to rule out false positives. “Wind shadow may look like an oil slick,” he says.

Confirmation is usually done by people in a helicopter or plane, so that is where a drone-mounted camera could save a lot of time.

The camera can also spot and track oil washed up on beaches. Typically, this is a time-consuming task that must be done by people on the ground.

The sensor passed extensive tests with crude oil and diesel in different wave conditions at the massive Ohmsett test facility pool in New Jersey and at an actual spill off Santa Barbara, California, in 2015.  Russell Chipman at the University of Arizona says this is a significant development. “The costs of polarimeters are decreasing,” he says, and the miniaturisation and commercialisation of infrared polarimetric sensors means this technology can now be deployed widely to detect all kinds of oil slicks.

While Polaris is currently concentrating on oil detection, more applications for the camera are likely to be discovered when it goes into mass production, anticipated early next year.

 

United States: Protect Your Company from Waste Liability

Written by: Viggo C. Fish, McLane Middleton

Question: My company is purchasing real estate, and we are concerned there may be existing environmental contamination on the property. What steps can we take to protect ourselves from liability?

 Answer:  Conducting environmental due diligence correctly is essential to protect purchasers of potentially contaminated commercial properties from possible liability far exceeding the value of the property. Strict hazardous waste regulation exists at the federal, state and, sometimes, even the municipal level.

Under both the U.S. Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund, and corresponding state law, owners of contaminated properties are liable, without regard to fault, for environmental conditions on the property, whether or not the owner was involved in any way in the initial release of the contamination. There are, however, steps prospective purchasers can take to limit this liability.

Hazardous waste laws allow purchasers of potentially contaminated property to conduct the necessary level of investigation, and, if performed correctly, limit their liability.

For example, the Superfund All Appropriate Inquiry (AAI) rule provides for certain limitations on liability of a so-called “innocent purchaser” if such an investigation is completed before the acquisition.

The innocent purchaser provision allows a purchaser who, under certain circumstances, did not know and “had no reason to know” that the property was contaminated to avoid later Superfund liability. Similar rules apply to state hazardous waste liability. Importantly, to avoid that liability, the purchaser must be able to establish it “carried out all appropriate inquiries … into the previous ownership and uses of the facility in accordance with generally accepted good commercial and customary standards and practices.”

Careful compliance with AAI requirements can be used later to support the “innocent landowner” defense to liability of the new owner. The burden of proof is on the purchaser to establish it is entitled to this and other such landowner liability defenses.

The key element of proof is the Environmental Site Assessment (ESA).  Buyers of commercial property typically conduct a Phase I ESA to evaluate the potential for contamination in accordance with ASTM Standard E1527-13.

Following the ASTM Standard demonstrates compliance with the EPA’s AAI rule, that protects prospective purchasers of property from liability under CERCLA.  This area of the law is unusually complicated, and it is therefore usually necessary to have the advice and assistance of qualified environmental consultants and environmental legal counsel to assure that the legal and financial protections against hazardous waste liability will actually be available, if needed in the future.

This article was first published in Know the Law, a bi-weekly column sponsored by McLane Middleton, Professional Association.  Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation. 

_______________________

About the Author

Vigo C. Fish is an Environmental and Energy Associate in the Administrative Law Department where he assists clients with a wide variety of energy and environmental matters.  Viggo received his J.D., cum laude, and Master of Energy Regulation and Law (MERL) degree, magna cum laude, from Vermont Law School (2015), and his B.A. in English from Providence College (2010). While in law school, Viggo worked as a Research Analyst at Vermont Law School’s Institute for Energy and the Environment and as a Clinician in the Energy Clinic. In addition, Viggo worked as a Markets and Policy Intern in the National Renewable Energy Laboratory’s Strategic Energy Analysis Center.

When Is a Discharge to Groundwater Subject to the U.S. Clean Water Act? Can You Say “Significant Nexus”?

By Seth Jaffe, Foley Hoag LLP

Whether the United States Clean Water Act regulates discharges to groundwater has been a topic of significant debate.  At this point, there seems to be something of a trend in the cases towards concluding it does, but it remains true that all of the courts of appeal that have addressed the issue have concluded that it does not.  As I have noted, the problem with the “yes” answer is that pretty much all groundwater eventually discharges to surface water, making all such discharges subject to the CWA.  How can that be, given that groundwater is not considered to be “waters of the United States?”

Chief Judge Waverly Crenshaw recently addressed the issue in Tennessee Clean Water Network v. TVA.  Judge Crenshaw’s solution was creative – meaning he pretty much made up out of whole cloth.  That doesn’t necessarily mean that it’s wrong, however.

The case involves coal ash management at the TVA’s Gallatin plant.  Some of the – unlined – ponds directly abut the Cumberland River.  The plaintiff citizen groups brought claims under the CWA, alleging that TVA was discharging pollutants to the River – via groundwater – without an NPDES permit.  They requested an injunction requiring that the TVA remove the coal ash from the ponds, at a cost of $2 billion.

Gallatin power plant, operated by the Tennessee Valley Authority in mid-Tennessee on the north bank of the Cumberland River. Location of the main coal-burning facility is indicated by the icon and label.

Judge Crenshaw was clearly frustrated by an absolutist position on either side.  Clearly, he does not think that any link between groundwater and surface water, no matter how attenuated, can be enough for jurisdiction to attach.  On the other hand, he was also trying to reckon with the specific case in front of him.  As he saw it, the Gallatin ash ponds were a complete environmental mess.  They immediately abut the Cumberland River, clearly a water of the United States.  Can the outcome really be different if the ponds discharge directly to the River than if they discharge to groundwater 10 feet from the River, where that groundwater then discharges to the river?

His solution?

the Court concludes that a cause of action based on an unauthorized point source discharge may be brought under the CWA based on discharges through groundwater, if the hydrologic connection between the source of the pollutants and navigable waters is direct, immediate, and can generally be traced.

I confess I like this solution, because it is practical and will generally yield reasonable results.  It avoids either effectively regulating all groundwater under the CWA or having to conclude that the CWA can’t reach situations such as the Gallatin ash ponds.

The problem?

There’s no textual support for this solution in the CWA.  To me, this test sounds a lot like Justice Kennedy’s “significant nexus in Rapanos.  There too, his position received a lot of support at a practical level, while many commentators noticed that the CWA says nothing about a “significant nexus.”

We all know how well that’s worked out.

This article was first published in Law and the Environment, a blog from Foley Hoag LLP.

______

About the Authors

Seth D. Jaffe

A partner at Foley Hoag, Seth Jaffe is recognized by Chambers USA, The Best Lawyers in America and Massachusetts SuperLawyers as a leading… MORE

Kathleen Brill

Kathleen Brill is an Associate practicing in the Administrative Department of Foley Hoag’s Boston office. Before joining Foley Hoag, Kathleen had considerable experience…MORE

 

Degrees in urban revitalization, brownfield redevelopment, and environmental restoration

Revitalization News recently assembled a catalog of 38 undergrad, graduate and certificate courses in urban revitalization, brownfield redevelopment, and environmental restoration worldwide.  The courses are from institutions from all over the world, including the United States and Canada.  The catalog has something for almost anyone ranging from an online course on Landscape Restoration for Sustainable Development , a Master’s degree in technical brownfields revelopment at to the Technical University of Ostrava in the Czech Republic, to a B.Sc. in ecological restoration at Trent University and Fleming College in Ontario.  A complete list of the courses can be found at https://revitalizationnews.com/training-education.

Students participating in 1-YEAR graduate certificate in ecological restoration (Niagara College, Ontario, Canada)