U.S.: Lessons Learned from Citizen Suits for Contamination of Property by Industry

by Seth Jaffe, Foley Hoag LLP

Two recent cases illustrate the potential scope of, and the potential limitations on, injunctive relief in RCRA citizen suits. 

First up, Schmucker v. Johnson Controls. Contamination was detected at the Johnson Controls manufacturing facility in Goshen, Indiana.  In response, Johnson Controls performed substantial remediation under the auspices of the Indiana Department of Environmental Management’s Voluntary Remediation Program.  Nonetheless, significant contamination remains at the site, including a groundwater plume running beneath residences.  In 2011, TCE was detected in indoor air at concentrations exceeding IDEM’s screening level.  Johnson Controls installed vapor mitigation systems at all affected residences, and concentrations were below screening levels in all the residences after installation of the mitigation.

Imminent and substantial endangerment, or not?  In a battle of the experts, the Court denied both sides’ motions for summary judgment.  First, the plaintiff’s expert’s opinion that there was a risk of future exposures, notwithstanding the mitigation, was enough to defeat Johnson Controls’ motion.  The Court did note that:

“Murphy’s law” is not sufficient to establish an endangerment where a party relies only on speculation that mitigation measures might fail.

However, the Court found that the plaintiffs’ expert was not simply speculating.

On the flip side, defendant’s expert said that the mitigation measures were sufficient to eliminate the endangerment.  That was enough to defeat plaintiffs’ motion.

Next up, Lajim v. General Electric.  The facts are somewhat similar to those in Johnson Controls.  There was a long history of industrial use, discovery of a groundwater plume – in this case, impacting municipal water supply wells – and the commencement of significant response actions.  Here, the work was supervised by Illinois EPA, pursuant to a 2010 consent decree.  Here too, nearby plaintiffs were not satisfied with the remedial plan, notwithstanding approval by the state agency overseeing the cleanup.  In another battle of the experts, the District Court denied plaintiffs’ request for injunctive relief.  The 7th Circuit Court of Appeals affirmed.  Here are the highlights:

  • District courts have discretion to deny injunctive relief under RCRA, even where the defendant has been found liable.  “It will usually be the case that injunctive relief is warranted,” but it is not mandatory.
  • RCRA is not a general cleanup statute; injunctive relief is only available where there may be an imminent and substantial endangerment.
  • Where plaintiffs failed, after an evidentiary hearing, to demonstrate that cleanup was necessary beyond that which GE was doing pursuant to the consent decree, no injunction need issue.

I think that there are two lessons from these cases, one substantive and one practical:

  1. RCRA’s citizen suit provision provides plaintiffs with a powerful hammer, but there are limits to the relief that courts will impose, particularly if a defendant is implementing a cleanup under state oversight.
  2. Good lawyering and persuasive experts still really matter.

About the Author

Seth Jaffe is recognized by Chambers USA, The Best Lawyers in America and Massachusetts Super Lawyers as a leading practitioner in environmental compliance and related litigation. He is one of the authors of the Law and the Environment Blog, www.lawandenvironment.com, which provides real-world perspectives on current developments in environmental law and regulation. Seth is a past President of the American College of Environmental Lawyers.

Seth works on a wide range of environmental law issues, representing clients in the permitting/licensing of new facilities and offering ongoing guidance on permitting and enforcement related matters under federal and state Clean Air Acts, Clean Water Acts, RCRA, and TSCA. He also advises on wetlands and waterways regulation. Seth’s clients include electric generating facilities, companies in the printing and chemical industries, and education and health care institutions.

Brownfield Redevelopment in New York City and Community Air Monitoring – What you need to know

Written by Paul R. Pickering, Aeroqual Ltd.

Brownfield cleanup in New York City

As New York City’s need for space grows, existing stock of land must be used more effectively. Brownfield cleanup and redevelopment represents one of the best opportunities to engage communities and reclaim land for development in many cities. In 2018, the Mayor’s Office of Environmental Remediation (MOER) announced 1000×21, the most aggressive land cleanup and revitalization goal of any city in the world. This OneNYCinitiative seeks to remediate and redevelop 1,000 lots in NYC by the end of the de Blasio administration in 2021.


A vacant lot in Mott Haven, NY before remediation. Photo: OneNYC

Remediation air quality challenges

Any time a remediation or construction project involves earth-moving, it has the potential to release particulate (dust) and volatile organic compounds (VOCs) contaminants that exist below the surface. VOCs will readily transition to the gaseous, breathable phase, when exposed to air. Particulate emissions must be controlled to prevent impacts to the respiratory system. Negative impacts range from mild lung irritation to chronic lung disease. 

Regulations to protect community

To protect workers and the surrounding community, construction and demolition projects that involve excavation need to follow a stringent Community Air Monitoring Plan(CAMP), as specified by the New York State Department of Health (NYSDOH). If the excavation activities are occurring on a remediation or cleanup site, additional requirements are outlined in a guidance document known as DER-10. NYSDOH and DER-10 specifically apply to sites in New York. However, agencies and authorities in other states may also recognize these guidelines. They have been known to apply or refer to them for projects in their designated territories.

What is DER-10?

In 2010, the New York State Department of Environmental Conservation (NYSDEC) issued Division of Environmental Remediation (DER)-10 Technical Guidance for Site Investigation and Remediation, known as DER-10. This is the source document the NYSDEC refer to for authority to oversee remediation projects. It was designed to help parties and consultants (environmental and engineering) in developing and implementing investigation and remediation projects at contaminated sites.

DER-10 extensively (over 225 pages) describes the A to Z requirements for remedial site investigations, cleanups, post-cleanup monitoring and site closure. It presents detailed technical guidance for each of the investigative and remedial steps undertaken at contaminated sites. DER-10 covers procedures for assessing the environmental conditions at the site, including air monitoring during remediation activities.

What is CAMP?

Appendix 1A of the DER-10 outlines requirements for the implementation of a CAMP. This air monitoring plan is prescribed by NYSDOH. It involves direct-reading air monitoring instruments placed at defined locations around the perimeter of a remediation, construction or demolition site.

A CAMP requires real-time air monitoring for total VOCs (also referred to as total organic vapors) and PM10 (particulate matter 10 micrometers or less in diameter) at downwind and upwind locations relative to each designated work area when certain activities are in progress at contaminated sites. The CAMP is not intended for use in establishing action levels for worker respiratory protection. Rather, it is intended to protect the downwind community) from potential airborne contaminants released as a direct result of investigative and remedial work activities. The downwind community includes off-site receptors such as residences, businesses, and on-site workers not directly involved with the subject work activities. The specified CAMP action levels require increased monitoring, corrective actions to abate emissions, and/or work shutdown. Additionally, the CAMP helps to confirm that work activities did not spread contamination off-site through the air.

VOC and particulate monitoring

Basic requirements of a CAMP call for real-time air monitoring for VOCs and/or particulate levels at the perimeter of the exclusion zone, or work area. Sites known to be contaminated with heavy metals alone may only require particulate monitoring. If radiological contamination is a concern, additional monitoring requirements may be necessary in consultation with NYSDEC and NYSDOH. The table below summarizes CAMP Monitoring Action Levels for total VOC and particulate monitoring.

CAMP air monitoring equipment

Since the introduction of DER-10 in 2010, sensor-based technologies have reduced the cost of air monitoring and increased efficiency of the implementation of CAMP. Real-time air monitoring solutions are available to fit the budget and complexity requirements of every project. Below is a sampling of equipment options:

Entry Level – Basic environmental dust monitoring kit

Assembled kits, like this Basic Environmental Dust Monitoring Kit from Raeco Rents, are portable and suited to short-term or temporary CAMP. The ensemble includes an off-the-shelf dust monitor, handheld PID monitor for total VOCs, and a cloud-based telemetry system mounted in an environmental enclosure.

Ultimate Flexibility – All-in-one air quality monitor

All-in-one air quality monitors, like the AQS1 and the Dust Sentry from Aeroqual, are highly flexible and defensible, as well as good allrounders for short or long-term CAMP. In addition to the primary particulate fraction PM10, these monitors can also measure PM2.5, PM1 and Total PM. They can also be configured for monitoring total VOCs and NO2 emissions from remediation and construction sites. A robust light-scattering Nephelometer with sharp cut cyclone is integrated with a PID-based VOC analyzer module (or GSE-based NO2 gas module), Cloud telemetry platform, air quality software, and optional plug-and-play weather and noise sensors. Trigger alerts are programmable for SMS and email notifications, or can be used to activate an external VOC canister sample collection for speciated analysis according to EPA Method TO-15.

The Rolls Royce – GC-based perimeter air monitoring station

Perimeter air monitoring stations, like the AirLogics Classic 2, contain analytical, climatic, and communications instrumentation. This equipment includes: a gas chromatograph (GC) to measure specific VOCs, a respirable particulate meter to measure dust levels, shelter heaters and air conditioners, and a radio-based data acquisition system. These systems were originally developed for use in the cleanup of former manufactured gas plant (MGP) sites.

Weather monitoring

DER-10 guidelines require daily measurement of wind speed and direction, temperature, barometric pressure, and relative humidity, to establish background weather conditions. Wind direction data is used to position the air monitoring equipment in appropriate upwind and downwind locations.

The evaluation of weather conditions is also necessary for proper fugitive dust control. When extreme wind conditions make dust control ineffective, remedial actions may need to be suspended. There may be situations that require fugitive dust suppression and particulate monitoring requirements with more stringent action levels.

Additional monitoring

Under some circumstances, the contaminant concentration and/or toxicity may require additional monitoring to protect site personnel and the community. Additional integrated sampling and chemical analysis of the dust may be required. This must be evaluated when a Health and Safety Plan (HASP), is developed. Appropriate suppression and monitoring requirements are established for protection of people’s health and the environment.

Reporting

All recorded monitoring data is downloaded and field logged daily, including Action Limit Reports (if any) and daily CAMP monitoring location plans. Records are required to be maintained onsite for NYSDEC and NYSDOH to review. A description of the CAMP-related activities is also included in a monthly progress report submitted to the NYSDEC. The overall report submitted to the NYSDEC should include all CAMP monitoring records. If site works are stopped due to inability to control fugitive emissions to below the action limit, the NYSDEC is to be notified within twenty-four hours of the work stoppage.

For a real-life example of air monitoring at a remediation site please read my blog about the pilot cleanup of the Gowanus Canal, NY.

What CAMP solutions does Aeroqual offer?

Aeroqual’s Dust Sentry and AQS1 are flexible air monitoring platforms used by air quality professionals, and environmental and geotechnical consultants, for community air monitoring plans on remediation sites. We help environmental consultants deliver defensible data on projects by providing cost-effective and reliable instrumentation. For insights on the latest air monitoring trends at construction sites please read our blog about measuring NO2 and multiple PM fractions.


About the Author

Paul R. Pickering is the Business Development Director at Aeroqual Ltd., and is located in Auckland, New Zealand. Aeroqual Ltd. is a company that delivers innovative air quality and environmental monitoring solutions. He is passionate about making it easier to measure the air with advanced sensor-based technology. He believes that more relevant information about our environment can help us make better informed decisions, enjoy better quality of life, and make our planet a better home. 

With more oil to be shipped by rail, train derailments show enduring safety gaps

by Mark Winfield and Bruce Campbell, Faculty of Environmental Studies, York University, Canada

The recent runaway CP Rail train in the Rocky Mountains near Field, B.C., highlighted ongoing gaps in Canada’s railway safety regime, more than five years after the Lac-Mégantic rail disaster that killed 47 residents of the small Québec town.

The British Columbia crash resulted in the deaths of three railway workers and the derailment of 99 grain cars and two locomotives.

In the B.C. accident, the train involved had been parked for two hours on a steep slope without the application of hand brakes in addition to air brakes.

The practice of relying on air brakes to hold trains parked on slopes was permitted by both the company and by Transport Canada rules. Revised operating rules, adopted after the Lac-Mégantic disaster, had not required the application of hand brakes under these circumstances.

The latest accident was one of a rash of high-profile train derailments in Canada since the beginning of 2019. While none compares in magnitude with Lac-Mégantic, they evoke disturbing parallels to that tragedy. Although investigations are ongoing, what we do know raises questions about whether any lessons have in fact been learned from the 2013 disaster.

Now must apply hand brakes

Within days of the B.C. runaway, both CP Rail and Transport Canada mandated the application of hand brakes in addition to air brakes for trains parked on slopes. This after-the-fact measure parallels the action Transport Canada took days after Lac-Mégantic, prohibiting single-person crews, after having granted permission to Montréal Maine and Atlantic Railway to operate its massive oil trains through Eastern Québec with a lone operator.

Furthermore, like the Lac-Mégantic tragedy, existing mechanical problems with the locomotives involved reportedly played a role in the CP Rail derailment, raising questions about the adequacy of oversight with regard to equipment maintenance practices.

Like Lac-Mégantic, worker fatigue may have also played a role in the crash. Despite efforts within Transport Canada to force railways to better manage crew fatigue, railway companies have long resisted. Instead they have taken page out of the tobacco industry playbook by denying inconvenient scientific evidence as “emotional and deceptive rhetoric.”

The situation has prompted the Transportation Safety Board to put fatigue management on its watchlist of risky practices, stating that Transport Canada has been aware of the problem for many years but is continuing to drag its feet.

Oil-by-rail traffic explodes

The implications of the B.C. accident take on additional significance in light of the dramatic growth seen in oil-by-rail traffic in Canada over the past year. Export volumes reached a record 354,000 barrels per day in December 2018, with the vast majority of the oil going to refineries on the U.S. Gulf Coast and Midwest.

This development has not gone unnoticed by people living in communities across North America, who are concerned about the growing danger of another disastrous derailment.

The increase in traffic — now bolstered by the Alberta government’s plan to put another 120,000 barrels per day of crude oil on the rails by next year — is occurring at a time when the Transportation Safety Board reported a significant increase in “uncontrolled train movements” during 2014-17 compared to the average of the five years preceding the disaster.


Read more: Technology to prevent rail disasters is in our hands


This is despite the board’s Lac-Mégantic investigation report recommendation that Transport Canada implement additional measures to prevent runaway trains.

Two weeks after the B.C. crash, a CN train carrying crude oil derailed near St. Lazare, Man.; 37 tank cars left the tracks, punctured and partially spilled their contents. The cars were a retrofitted version of the TC-117 model tank car, developed after Lac-Mégantic, intended to prevent spills of dangerous goods. The train was travelling at 49 mph, just under the maximum allowable speed.

Budgets chopped

In the lead-up to the Lac-Mégantic disaster, the Harper government squeezed bothTransport Canada’s rail safety and transportation of dangerous goods oversight budgets. These budgets did not increase significantly after the disaster.

Justin Trudeau’s government pledged additional resources for rail safety oversight. However, Transport Canada’s plans for the coming years show safety budgets falling back to Harper-era levels. It remains to be seen whether these plans will be reversed in the upcoming federal budget.

Safety Management Systems-based approach remains the centrepiece of Canada’s railway safety system. That system been fraught with problems since it was introduced 17 years ago.

It continues to allow rail companies to, in effect, self-regulate, compromising safety when it conflicts with bottom-line priorities. Government officials claim there has been a major increase in the number of Transport Canada rail safety inspectors conducting unannounced, on-site inspections. But the inspectors’ union questions these claims.

If an under-resourced regulator, with a long history of deference to the industry, is unable to fulfil its first-and-foremost obligation to ensure the health and safety of its citizens, the lessons of Lac-Mégantic have still not been learned. The B.C. accident highlights that the window for history to repeat itself remains wide open.


This article is republished with permission. It was first published on The Conversation website.

About the Authors Authors

Mark Winfield is a Professor of Environmental Studies, York University, Canada

Bruce Campbell is an Adjunct professor, York University, Faculty of Environmental Studies, York University, Canada

Are New United States Regulations Coming for Accidental Releases into Air?

By Louis A. Ferreira, Willa B. Perlmutter, and Guy J. Thompson, Stoel Rives LLP

On February 4, 2019, a federal court ruled that the U.S. Chemical and Safety Hazard Board must issue regulations within one year that set forth reporting requirements for accidental releases of hazardous substances into the ambient air. This requirement has been part of the Board’s statutory mandate since its inception in 1990 pursuant to Section 112(r)(6)(C)(iii) of the Clean Air Act (“CAA”). Nevertheless, the Board has never issued any such regulations.

Four non-profit groups and one individual filed a one-count complaint against the Board, seeking declaratory relief and an injunction to compel the Board to promulgate reporting requirements as required by the CAA. Plaintiffs claimed that the Board had violated the Administrative Procedure Act by not issuing any regulations. Plaintiffs further asserted the lack of reporting requirements have impaired their respective abilities to collect information that would help prevent future releases and the harm caused from such releases.

The United States District Court for the District of Columbia agreed with the plaintiffs and ruled that the Board must issue regulations within one year. In reaching its decision, the Court rejected the Board’s defenses that the delay in promulgating regulations was reasonable given the Board’s limited resources, small staff size, and other required functions. “[I]f that is the case,” the Court said, “the solution to its resource constraints is not to ignore a congressional directive[,] [i]t is to return to Congress and ask for relief from the statutory requirement.” The case is Air Alliance Houston, et al. v. U.S. Chem. & Safety Hazard Investigation Bd., D.D.C., No. 17-cv-02608, February 4, 2019.

The Court’s decision appears to follow a similar one issued in August 2018 in which some of the same plaintiffs brought a complaint against the U.S. Environmental Protection Agency. In that case, the plaintiffs petitioned the D.C. Court of Appeals for review of the EPA’s decision to delay for 20 months the effective date of a rule designed to promote accident safety and enhance the emergency response requirements for chemical releases. The Court rejected all of EPA’s defenses justifying the delay in a strongly-worded opinion that held the agency strictly to the letter of the CAA. That case is Air Alliance Houston, et al. v. EPA, 906 F.3d 1049 (D.C. Cir. 2018).

The same directness is evident in this recent decision.

Ultimately, the practical effect of the ruling is not clear. There are already laws in place that require companies to report accidental releases to state and federal authorities. It is possible the Board will promulgate regulations that align with its current practice of deferring reporting requirements to other agencies. If the Board took that approach, there likely would not be a noticeable difference in reporting requirements from the current practice.

On the other hand, the two recent decisions discussed above suggest that a trend may be forming in which the courts are pushing back when the government steps off its clear statutory path.


This article has been republished with the permission of the authors. The original post of this article can be found on the Stoel Rivers LLP website.

About the Authors

Lou Ferreira is a senior partner with more than 27 years of complex trial experience.  His practice focuses on commercial litigation, insurance coverage and environmental, safety & health issues.  A seasoned litigator, Lou has significant experience in high-stakes litigation including successfully defending a class action filed against a utility by residents of a town in Washington asserting that the utility was liable for flooding as a result of the operations of its upstream dams.  Lou  successfully defended a port in Washington from a $20 million lawsuit brought by developers alleging breach of contract to develop a large mixed-use waterfront project on the Columbia River. 

Willa Perlmutter has more than 30 years of experience as a litigator, focusing for the last 20 on defending mine operators across all sectors of the industry in administrative enforcement proceedings brought by the Mine Safety and Health Administration (MSHA) for alleged violations of the Mine Act.  In addition, she regularly counsels clients on a broad range of issues that affect their mining operations, from personnel policies and actions to compliance with a broad range of federal statutes. Willa regularly defends companies and individuals facing investigations and formal legal proceedings for alleged safety and health violations under both the Federal Mine Safety and Health Act of 1977 and the Occupational Safety and Health Act of 1970, whether those arise out of a catastrophic event, such as an accident, or in the course of a regular inspection by MSHA or Occupational Safety and Health Administration (OSHA). She has successfully defended a number of mining companies in whistleblower cases brought under the Mine Act.

Guy Thompson is a litigator and advisor on a wide-range of insurance matters. His practice focuses on insurance coverage litigation, including natural resources/environmental insurance coverage, and a wide variety of risk management issues. Guy helps policyholders obtain the recovery they deserve from their insurers and has helped recover millions of dollars from insurance companies for his clients. Guy is skilled at getting insurance carriers to cooperate in paying claims and often secures settlements with insurers without the need for litigation. Recently, he helped recover over $1.65 million from multiple insurance carriers for a Portland company that was required to perform environmental cleanup by the Oregon Department of Environmental Quality.

How the SCC Decision in Redwater Case could Change the Role of Environmental Orders in Ontario Insolvency Proceedings

by Erin D Farrell, Jessica Bioly and Haddon Murray, Gowlings

1. Introduction

The potential conflict between federal insolvency law and provincial environmental law that came to a head in Orphan Well Association v Grant Thornton Ltd (“Redwater“) was settled by the Supreme Court of Canada (the “SCC“) on January 31, 2019 in a split 5-2 decision.[1] Specifically, Redwater addresses whether environmental orders are binding on an insolvent estate, or if a trustee can disclaim unprofitable lands subject to the environmental orders, treating the regulator as an unsecured creditor.

In a contested decision, the SCC considered a test it had previously established to determine whether a regulatory order was enforceable against the debtor’s estate as opposed to merely constituting a provable claim in the bankruptcy (the “Abitibi  Test“, described below). If a regulatory order was found to meet theAbitibi Test and therefore found to be a claim provable in bankruptcy, then it would be stayed and treated as any other unsecured debt. The SCC in Redwater determined that the Abitibi Test had been interpreted too broadly by the lower courts, therefore narrowing the circumstances where such an order would be reduced to a claim provable in bankruptcy. The majority of the SCC in Redwater significantly expanded the circumstances in which costly end-of-life environmental or other regulatory orders will effectively trump secured and other creditors in an insolvency. The SCC further held that the regulator should not be characterized as acting as a “creditor” in this case where the regulator sought to enforce an insolvent company’s end of life obligations and consequently does not have a claim provable in bankruptcy.

In arriving at its decision, the SCC held that there was no conflict between the applicable provisions of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (“BIA“) [2] and Alberta’s environmental regulatory statutes that would trigger the doctrine of federal paramountcy. The SCC overturned the decisions of both the Alberta Court of Queen’s Bench[3] and the majority of the Alberta Court of Appeal,[4] both of which held that there was a conflict between the applicable federal and provincial acts that found that provincial environmental law, to the extent that it created a practical super‑priority in favour of the regulator, to be inoperative.

The Attorney General of Ontario intervened in the case and supported the Alberta regulator’s position that its environmental orders should continue to operate in bankruptcy. Although Ontario’s submissions focused on its provincial oil and gas industry, all corporations that could be subject to regulatory orders, including owners and operators of contaminated lands, may be affected.

The decision will have serious consequences for creditors, many of whom are innocent suppliers and investors, but will be left paying for environmental remediation.

2. Background

Redwater Energy Corporation (“REC“) was an oil and gas company operating in Alberta. The Alberta oil and gas industry is regulated by the Alberta Energy Regulator (“AER“). The AER regulates the oil and gas industry by issuing licenses for each oil and gas well or pipeline, and then by imposing on each licensee conditions that control all aspects of the operation, disposition and eventual shutting-in of the licensed property.[5] It issues licenses, approvals, permits, orders, decisions and directions pursuant to authority derived from statutes such as the Oil and Gas Conservation Act (“OGCA“) and the Pipeline Act (“PA“).[6]

In Alberta non-producing wells do not need to be “abandoned”[7] (plugged) and reclaimed[8] (remediated) within any set timeframe.[9] The many non-producing wells often sit for years or even decades.[10] They are also commonly transferred to subsequent licensees, who may or may not be sufficiently capitalized to perform their end‑of‑life obligations. Like many oil and gas companies ceasing operations, REC held licenses for both non-producing oil and gas wells.

In the Redwater case, REC became insolvent and was put into receivership by its senior secured creditor, ATB Financial. Upon learning of REC’s receivership, the AER took view that:

  1. it was not a creditor;
  2. environmental obligations were not “claims provable in bankruptcy”, and that accordingly the environmental obligations of REC were unaffected by the insolvency proceedings;
  3. the receiver was legally obliged to discharge REC’s environmental obligations “prior to distributing any funds . . . to creditors, secured or otherwise”; and
  4. it would not approve any transfers of REC’s (valuable) oil and gas assets unless it was satisfied that both the transferor and transferee would be in a position to fulfill all environmental obligations and the proceeds of sale were paid to the AER as security for the end‑of‑life obligations.

At the time of the receivership, REC had both producing and non-producing wells. The receiver concluded that the cost of the end-of-life obligations for the non-producing wells would likely exceed the sale proceeds of the producing wells. As such, the receiver renounced or disclaimed the non-producing wells pursuant to s. 14.06(4) of the BIA, taking possession and control of only the productive wells. Nonetheless, the AER issued orders requiring REC to abandon and reclaim, “for environmental and public safety reasons”, the non-producing assets that the receiver had renounced.[11] Subsequently, REC was assigned to bankruptcy and the receiver was appointed as the bankruptcy trustee. The trustee took the position that, as a result of the disclaimer, it had no obligation to comply with the AER’s orders in relation to the renounced wells and attempted to maximize recovery for creditors through sale of the profitable wells.

The AER, along with the Orphan Well Association, a non-profit organization operating under authority delegated by the AER,[12] sought a declaration that the trustee’s disclaimer was void, and an order compelling compliance by the trustee with the abandonment and remediation orders issued by the AER. The AER’s position was, in essence, that the environmental orders were regulatory in nature and continued to bind the trustee during the bankruptcy notwithstanding the consequences this may have for the bankrupt’s creditors. The trustee brought a cross-application for approval of the sale of assets, and a ruling on the constitutionality of the AER’s position.

The main constitutional issue was whether the AER’s abandonment orders and certain provisions of Alberta’s applicable environmental legislation conflicted with the federal BIA – which would result in certain provisions of the provincial environmental legislation being held in abeyance and the BIA overriding.

In order to answer this question, the SCC considered the following issues:

  1. whether disclaiming property under s. 14.06(4)(b)(ii) of the BIA has the effect of removing the obligation to comply with the order from the bankrupt estate, or simply eliminating the trustee’s personal liability in respect of the order; and
  2. whether environmental orders are provable claims in an insolvency proceeding. If they are, then the environmental order is treated like any other claim in the proceeding – the order is stayed and it generally ranks as an unsecured claim (except for certain statutory security interests). The alternative is that the environmental order is considered as a regulatory obligation that continues to be enforceable during the insolvency proceeding and consequently, effectively has priority over all other claims and, in the case of a restructuring, continues after the restructuring.[13]

The trustee in Redwater argued that (a) while the estate would continue to be liable for the end‑of‑life obligations associated with disclaimed property, the trustee would not be obliged to perform them, and (b) the environmental orders were properly characterized as provable claims and the regulator was attempting to defeat the priority scheme set out in the BIA. For both of these reasons the trustee argued that the provincial statutes that gave rise to the environmental orders conflicted with the federal BIA, and accordingly the federal law was paramount.

3. The Abitibi Test

The characterization of environmental obligations as provable claims has previously been considered by the Supreme Court of Canada. In Newfoundland and Labrador v. AbitibiBowater Inc., (“AbitibiBowater“)the SCC considered whether certain orders issued under Newfoundland’s Environmental Protection Actwere “claims” for the purpose of the CCAA.[14] The SCC established a three-part test for whether a regulatory obligation is a provable claim in an insolvency proceeding:[15]

  1. there must be a debt, liability or obligation to a creditor,
  2. it must be incurred before the debtor’s bankruptcy, and
  3. it must be possible to attach a monetary value to the debt, liability or obligation.

Meeting the test would mean that a regulatory order would be stayed and treated the same as other unsecured debts.

The Abitibi Test has been applied by the Ontario Court of Appeal in Nortel Networks Corp. (Re),[16](Nortel) and Northstar Aerospace, Inc. (Re) (“Northstar“)[17]. Both cases concerned clean-up orders for legacy contaminated sites owned by insolvent corporations.

In Nortel, the Ministry of the Environment (“Ministry“)[18] issued remediation orders after the corporation’s CCAA filing. These orders dealt with a number of properties and would have required certain of the debtor companies (referred to collectively as “Nortel“) to expend approximately $18 million to remediate the properties. Nortel brought a motion before the CCAA judge seeking a declaration that the Ministry orders were monetary in nature and thus, were stayed by the CCAA proceedings, meaning it could cease complying with the orders. It also sought a declaration that the Ministry’s claims had to be dealt with as part of the CCAA. The Ontario Court of Appeal found that the key issue was the third branch of the Abitibi Test; specifically, the Court of Appeal held that in order for a monetary value to be attached to the debt, it had to be sufficiently certain that the Ministry would perform the remediation work itself and then have a claim for indemnification against Nortel. With the exception of one property, the Court of Appeal found it was not sufficiently certain the Ministry would perform the remediation itself and thus, the claim was not stayed and the regulatory orders had to be complied with, depleting assets from the estate that would otherwise be paid to Nortel’s creditors.

By contrast, in Northstar, the Ontario Court of Appeal found it was sufficiently certain that the Ministry would perform the remediation work itself, given that the Ministry had already taken steps towards conducting the remediation itself, there was no funding available to the debtor or the trustee to do remediation work, and there were no other parties who could be required to perform the work. Consequently, the Ministry’s order was found to be a provable claim that was stayed by the insolvency proceeding – to be determined and paid in the same manner as all other creditors of the estate. Subsequently, the Ministry chose to pursue Northstar’s directors and officers personally.

4. Judicial History

Court of Queen’s Bench of Alberta

In his May 19, 2016 decision (the “Chambers Decision“), Chief Justice Wittmann of the Alberta Court Queen’s Bench found that there was a conflict between the provincial and federal laws. Specifically, he found that requiring a trustee to comply with abandonment orders issued pursuant to provincial legislation in relation to renounced licensed assets triggered the doctrine of federal paramountcy as there was an operational conflict between s. 14.06(4) of BIA and the provincial law. The obligation to comply with the AER orders required payment of, or the posting of security for, the abandonment costs to the AER in priority to all others, including secured creditors. This frustrated the primary purposes of the BIA, as its distribution scheme would be upset.

Chief Justice Wittman stated that it was conceded by the OWA and AER that the first and second branches of the Abitibi Test were met.[19] However, the AER argued that the fact that there were monetary consequences to its orders was not determinative of the third branch of the test.[20] Chief Justice Wittman disagreed and found that there was no funding for the receiver to carry out the work, the receiver was not in possession of the renounced properties and therefore could not carry out the work, and that there were no other parties who could be required to carry out the work. Further, he found either the AER or OWA would probably carry out the work, and therefore that, although not expressed in monetary terms, the AER orders were “intrinsically financial,”[21] and sufficiently certain.[22] If the regulator’s actions indicate that, in substance, it is asserting a provable claim within the meaning of federal legislation, then that claim can be subjected to the insolvency process.[23]

Alberta Court of Appeal

The majority of the Court of Appeal (consisting of the Honourable Mr. Justice Frans Slatter and the Honourable Madam Justice Frederica Schutz) affirmed the Chambers Decision. In considering the constitutional issues, the Alberta Court of Appeal stated that under the principle of cooperative federalism, the court will first attempt to interpret and apply the two provisions in harmony with each other, and only if that fails will paramountcy be invoked.[24] However, the majority found that the regulatory orders of the AER were in operational conflict with section 14.06 of the BIA and that the underlying sections of the OGCA and PA frustrated the federal purpose of the BIA in managing the winding up of insolvent corporations.

The majority held that a trustee is entitled to abandon or renounce oil and gas assets encumbered with environmental obligations and that the AER’s demand for security for remediation diverted value from the bankrupt estate. This was reason enough to classify the claims of the AER as financial in nature, thereby making it a “creditor” whose claims are subject to the priorities prescribed by the BIA.

As it did for the Chambers hearing, AER conceded that the first two branches of the Abitibi Test were met: an obligation existed to the AER as a creditor, and the obligation had arisen prior to the conclusion of the insolvency.[25] Therefore the only real issue was the third branch.

In finding that the regulator’s orders constituted a claim provable in bankruptcy, the majority applied the Abitibi Test and found that the effect of the abandonment orders was to elevate the priority of environmental claims and upset “the priorities of the BIA.”

The majority found that AER’s claims met the test for a provable claim in s. 14.06 of the BIA and did not have higher or special “super priority” over the claims of secured creditors. Under the proper interpretation of the BIA, the AER could not insist that substantial parts of the bankrupt estate be set aside in satisfaction of the environmental claims in super priority over the claims of secured creditors.

In her dissent, The Honourable Madam Justice Sheilah Martin, prior to her elevation to the Supreme Court of Canada, disagreed with the majority, found no conflict between the legislation, and noted that the environment was an area that called for “co-operative federalism.”[26] Justice Martin noted that that the “cradle to grave” approach to regulation now stopped at “insolvency,” moving the “polluter pays” policy to a “third party pays” system. Justice Martin found that license obligations are public duties, not debts owed to the regulator. Abandonment and reclamation are necessary for public health and safety, reducing the environmental impact of drilling activities, and ensuring private landowners are not left with unused and potentially unsafe well sites on their land.

Ultimately, Justice Martin held that there was no conflict between the legislative schemes and that both schemes could continue to co-exist. In examining the third branch of the Abitibi Test, Justice Martin distinguished the nature of the remedial work being performed in Redwater from AbitibiBowaterNorteland Northstar:[27]

…. During the course of its operations, various contaminants spilled on the lands owned by Abitibi and the government issued orders and tried to have those lands transferred to the government through legislation. As the Supreme Court noted, when such conditions arise, “regulatory bodies sometimes have to perform remediation work”. The decisions of the Ontario Court of Appeal in Nortel and Northstar Aerospace Inc., Re, 2013 ONCA 600, 234 A.C.W.S. (3d) 642 (Ont. C.A.), both decided after Abitibi, also dealt with the same type of industrial contamination on land owned by the debtors, and the same kind of clean-up order. Contrast that with the licensing and regulatory regime here. The abandonment obligations are not an unknown or unexpected event; all parties involved know these obligations will arise at the end of the life of the well.

Given the foregoing, Justice Martin found that the third branch of the Abitibi Test had not been made out as there was insufficient certainty that remediation work would be done or that a claim for reimbursement would be made.

In significant contrast to the majority justices and Chief Justice Wittman in the Chambers Decisions, Justice Martin also held that the first branch of the Abitibi Test had also not been met because the regulatory body was not a creditor of the insolvent company.[28] Quoting Laycraft CJA in Northern Badger,[29] Justice Martin held that the cost of abandoning licensed wells “was one of the expenses, inherent in the nature of the properties themselves, taken over for management by the Receiver,” and that the cost was not owed to the regulator, or to the province.

5. The Supreme Court of Canada Decision

The SCC decision was released January 31, 2019. The SCC, split 5:2 in favour of granting the regulator’s appeal. The intervenors supporting the AER and OWA in its arguments included Greenpeace, Ecojustice and the Attorney General of Ontario, among others. The majority decision, penned by Chief Justice Wagner, found:

  • the regulator’s use of its statutory powers did not create a conflict with the BIA so as to trigger the doctrine of federal paramountcy;
  • section 14.06(4) of the BIA permits a trustee to avoid any personal liability in respect of environmental obligations for a property it has disclaimed, however those obligations remain a liability of the insolvent estate; and
  • not all environmental obligations enforced by a regulator will be claims provable in bankruptcy. Further, the regulator’s orders in this case were not claims provable in bankruptcy, and the priority scheme in the BIA was not upended. Thus, no conflict was caused by the trustee’s status as a licensee under Alberta legislation. Alberta’s regulatory regime can coexist with and apply alongside the BIA.

The majority of the SCC also reframed its own Abitibi Test to determine whether a regulator’s action amounts to a claim provable in bankruptcy with respect to the first and third branches of the test.

The first branch of the test requires that there must be a debt, liability or obligation to a “creditor”. The SCC agreed with the regulator and Martin JA and held that the Court of Queen’s Bench and Alberta Court of Appeal (as well as the Ontario Court of Appeal in Nortel) had incorrectly, and overly broadly, interpreted the circumstances in which a regulator will be considered a creditor. The majority rejected the concessions made by the regulator on the creditor issue at the lower courts, noting that “concessions of law are not binding.” In Nortel and Northstar the courts applied the Abitibi Test to find that the first branch of the test was always made out when a regulator exercises its statutory enforcement powers against a debtor. The SCC found that where the regulator acts in a bona fide regulatory capacity in the public interest and for the public good, and is not seeking a pecuniary benefit, it is acting in a regulatory capacity rather than as a creditor. Echoing Justice Martin’s statement, the SCC held that where the public is the beneficiary of the enforcement action (and not the government’s coffers as in AbitibiBowater), the first branch of the test will not be made out. Rather, in Redwater the majority found that the orders were made in the public interest and for the public good. Therefore the regulator was not a creditor of REC as the public was the beneficiary of the environmental obligations. The majority rejected the trustee’s argument that the first “creditor” branch of the Abitibi Test would be satisfied whenever a regulator exercises its enforcement powers against a debtor. The majority instead agreed with the submissions of Ontario that the creditor part of the test would be meaningless if it were not possible for the test to turn on whether a regulator is a creditor of the bankrupt.[30]

The Supreme Court went on to discuss the third branch of the Abitibi Test, or the “sufficiently certain” branch. The majority noted that the regulatory end-of-life obligations did not directly require REC to make a payment to the regulator, but rather obliged REC to “do something”.[31] The majority rejected the characterization of the orders as “intrinsically financial” applied by the majority of the Alberta Court of Appeal, finding that this application would be too broad. This would result in a provable claim being established even where the existence of a monetary claim in bankruptcy was merely speculative.[32] The third branch of the test was the focus of the courts analysis in Nortel and Northstar. The Supreme Court confirmed the approach of the Ontario Court of Appeal in Nortel, finding that ongoing environmental remediation obligations may be reduced to monetary claims only where: (i) the regulator has performed the remediation work and advanced a claim for reimbursement, or (ii) it is sufficiently certain that the province will do the work and seek reimbursement. The Supreme Court stated that Northstar could be distinguished, because in that case the Ministry had already stepped in to conduct the remediation.

In a detailed dissent that is sure to be cited in future cases, Justices Moldaver and Côté found that both an operational conflict and frustration of purpose existed between the provincial legislation and the federal BIA, and thus invoked the doctrine of federal paramountcy. Consistent with the lower court decisions, the dissenting judges found that Alberta’s statutory regime does not recognize the disclaimers by trustees of assets as lawful by virtue of the fact that receivers and trustees are treated by regulators as licensees who cannot disclaim assets. The minority was of the view that, because of the unavoidable conflict the provincial legislation should be held inoperative to the extent that it does not recognize the legal effect of the trustee’s disclaimers. The minority also applied the Abitibi Test and found that, as in the AbitibiBowatercase itself, the regulator was a creditor and “most environmental regulatory bodies can be creditors…and that government entities cannot systematically evade the priority requirements of federal bankruptcy legislation under the guise of enforcing public duties.”[33]

6. Implications for Ontario

Insolvency Proceedings

The Redwater decision has significantly expanded the circumstances in which an environmental order, or any regulatory enforcement action for that matter, will not be provable in an insolvency proceeding. The decision will impact companies with environment liabilities in the following ways:

  • There may be a chilling effect on the availability of financing in industries where environmental liabilities are likely, because secured creditors will take a backseat to environmental liabilities. Lenders may expand environmental due diligence requirements and increasingly demand stricter covenants from businesses regarding the state of environmental liabilities. We may also see a decrease in the number of lenders offering debtor-in-possession loans to fund the insolvency proceedings and ongoing operations of an insolvent company. While these loans were traditionally provided a super-priority charge against the assets of the debtor, it is possible that such a charge would also take a backseat to environmental liabilities.
  • Professionals may begin to demand indemnities for the payment of their fees from creditors before agreeing to insolvency mandates. While trustees are protected from personal liability under subsections 14.06(2) and (4) of the BIA, where environmental liabilities exceed the value of the estate, it is possible, although not clear, that insolvency professionals might not be paid.
  • It may become more challenging to retain key employees during the insolvency period. When a company enters insolvency proceedings it is often important to keep certain key employees working through the insolvency period in order to maximize value and ensure the debtor can be sold as a going concern. In order to retain these employees, it is common in restructuring proceedings (and occasionally in receiverships) to obtain a super-priority charge for a bonus payment plan for key employees (referred to as a KERP) provided they continue to work through the insolvency period. As with the above charges, the ability to retain key employees is brought into question by the possibility that all those funds will be spent complying with environmental orders.

Industries with the Potential for Environmental Liabilities

Anxiety among lenders in Alberta’s oil and gas industry, where the number of non-producing wells is rapidly escalating, could signal rapid market decline. If lenders, given the uncertainty, are unwilling to provide additional credit, many more wells may end up in the orphan system, with fewer industry participants contributing to the fund. Many commentators have noted that as a result of the Redwaterdecision, companies with potential significant environmental liabilities may have difficulty finding new capital or restructuring.

In Ontario, the operator of a well that is no longer producing should plug the well within 12 months after it is taken out of use,[34] and return the well site to its original condition no later than 6 months from the plugging date.[35] There is no such requirement in Alberta, despite proposed legislation. In many industries in Ontario, closure, reclamation and anticipated end-of life remediation obligations are also secured by financial assurance (usually through a letter of credit). For example, mining operations with closure plans or landfills that might require remediation and monitoring upon closure would normally be subject to financial assurance requirements by the regulator. Consequently, even if the business were to become insolvent, the environmental obligations would be secured by financial assurance. In those cases, assuming that the financial assurance numbers accurately capture the risk, lender anxiety should be reduced.  

Contaminated Sites and Brownfield Development

In Ontario, owners and those in management or control (including former owners or those previously in management or control) of an environmentally contaminated or brownfield site, as well as persons who caused or permitted a discharge of a contaminant, may be subject to regulatory orders for both on and off-site work (including investigation, delineation, and in some cases, remediation). The characterization of such environmental orders was litigated in Northstar and Nortel, which involved Ontario properties subject to Ministry orders that were owned or previously owned by insolvent companies.

The outcome of Nortel would likely be the same under the new Redwater decisionThe Supreme Court in Redwater cites the Northstar case in support of the proposition that where the Ministry steps in to conduct remediation, the third branch of the Abitibi Test is made out. However, it is possible that the Supreme Court’s approach to the first branch of the Abitibi Test could mean that in certain circumstances, even where the Ministry has demonstrated that it will conduct the remediation itself, the Ministry is still considered a bona fide regulator and thus, the order would not be a provable claim.

Unless there is legislative change, it is clear that the Redwater decision will have implications on the way that regulatory “clean-up” orders are treated during an insolvency, particularly in cases where the facts fall somewhere between Nortel and Northstar. We expect the Ministry (and other environmental stakeholders) will take the position that, except in unusual circumstances, regulatory orders are not stayed during insolvency and must be complied with before the distribution of the insolvent corporation’s assets to other creditors. Where an insolvent estate does not have significant assets, environmental costs may mean there is nothing left for creditors.

In some cases, the decision may be welcome news to stakeholders such as directors and officers of insolvent companies, other persons who may also be obliged to address the contamination and neighbouring property owners because they will not have to bear the burden of the clean-up. In Northstar,for example, the Ministry pursued the directors and officers personally after the remediation obligations of the company were found to rank alongside the claims of unsecured creditors. For creditors, however, the Redwater decision may reinforce the recent trend in environmental law of displacing polluter pays for “third-party pays”, particularly when that third party has deep pockets.

For corporations that own or operate a number of brownfield properties or have significant historical environmental liability for previous industrial activities, the insolvency calculus may change. Creditors, even secured creditors, are less likely to see full recovery in cases where there is environmental contamination the Ministry wants addressed.

The Redwater decision confirms that the Ministry will not be seen as a creditor where it acts in a regulatory role. However, the Supreme Court’s comments demonstrate that even post-Redwater, if the Ministry steps in to do the work itself, then it becomes a creditor and its order will be relegated to a claim provable in bankruptcy. This leaves the Ministry in a difficult position when requiring clean-up work from a company that may become insolvent. If the risk to human health or the environment is so significant that the Ministry must step in to do the work, the Ministry may prejudice its position in the insolvency. If the Ministry does not take steps to do the work and the corporation becomes insolvent, the estate will have to fund the remediation. This creates a potentially perverse incentive where allowing the risk to remain for the interim ultimately improves the Ministry’s position.

Environmental Receivers

The implications of the Redwater decision will encourage creative solutions to deal with remediation during insolvency proceedings. One such solution is the appointment of an environmental receiver, such as the one used in the Outboard Marine insolvency. In that case, an environmental receiver (an environmental consulting firm) was appointed by the court to manage the fund for remediation and to conduct the Ministry-ordered clean-up during the insolvency process. The receivership order authorized the environmental receiver to implement environmental remediation activities, to retain consultants, to apply for permits, licenses and approvals as may be required, to receive funds from the disbursement receiver, and to disburse funds to pay approved environmental remediation costs. There may be other situations where it would be “just or convenient”[36] to appoint an environmental receiver to address irreparable harm or imminent danger to health, safety, private and public property, wildlife, natural resources and compliance with environmental laws caused by ongoing and historical contamination of source sites.[37]

Appointing an environmental receiver, along with a regular disbursement receiver, to manage remediation in tandem with winding up may also help to balance environmental obligations and creditors. Such a creative solution may only be appropriate when sufficient assets exist and the efficiency or certainty gained will merit the extra administration costs. However, there may be tension between the insolvency process, which has among its goals an expeditious resolution, and environmental remediation, which may require many years of investigation or delineation work before a remedial approach can be pursued.

7. Conclusion

At first glance the Redwater case appears to be good news from both an environmental and cooperative federalism perspective. However, in addition to the lender and insolvency uncertainty in the oil and gas industry noted by many commentators, the Redwater decision may complicate insolvency proceedings in any industry with an inherent environmental impact. While Ontario’s smaller oil and gas extraction industry is regulated differently and may not face the same pressures as the industry in Alberta, the Redwater decision will have legal, economic and environmental implications on owners and users of potentially contaminated property, those helping them wind down operations, and other stakeholders.


[1] Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5 (“Redwater SCC“) Note that, while this article concerns the impact of the Redwater decision on industrial operations in Ontario, our colleagues in Alberta have written about the impact of the decision from their perspective as counsel for the trustee/respondent on the appeal.

[2] Although Redwater was a bankruptcy and accordingly, the court analyzed the case under the BIA, analogous issues arise with respect to restructurings under the Companies’ Creditors Arrangement Act, RCS 1985, c C-36 (“CCAA”). This paper will refer to “insolvency proceedings” generally as proceedings instituted under either act. Note that this relationship is not perfect as there are different purposes for the CCAA as compared to the BIA and accordingly, it is possible that a court would reach a different conclusion with respect to paramountcy under the “frustrating the purpose of the act” branch of the paramountcy test. However, the courts have generally interpreted the statutes harmoniously.

[3] Redwater Energy Corporation (Re) 2016 ABQB 278 (“Chambers Decision“)

[4] Orphan Well Association v Grant Thornton Limited 2017 ABCA 124 (“Redwater ABCA“)

[5] Redwater ABCA at para 11.

[6] Redwater ABCA at paras 11 and 124.

[7] SCC Decision at para 16: Abandonment” refers to “the permanent dismantlement of a well or facility in the manner prescribed by the regulations or rules” made by the Regulator (OGCA, s. 1(1)(a)). Specifically, the abandonment of a well has been defined as “the process of sealing a hole which has been drilled for oil or gas, at the end of its useful life, to render it environmentally safe” (Panamericana de Bienes y Servicios S.A. v. Northern Badger Oil & Gas Ltd., 1991 ABCA 181, 81 Alta. L.R. (2d) 45 (“Northern Badger“), at para. 2). The abandonment of a pipeline refers to its “permanent deactivation . . . in the manner prescribed by the rules” (Pipeline Act, s. 1(1)(a)).

[8] “Reclamation” includes “the removal of equipment or buildings”, “the decontamination of buildings . . . land or water”, and the “stabilization, contouring, maintenance, conditioning or reconstruction of the surface of the land” (EPEA, s. 1(ddd))

[9] See for the following Globe and Mail articles for a discussion of attempts in Western Canada at introducing timelines for cleanup of dormant oil and gas wells: December 13, 2018 “B.C. to be first among western provinces to tackle inactive wells” by Jeff Lewis; and November 30, 2018 “B.C. joins Alberta in pledge to impose cleanup timelines on oil, gas wells” by Jeff Lewis and Renata D’aliesio

[10] As the AG of Ontario noted in its submissions, in Ontario the operator of a non-producing oil or gas well is expected to plug the well (abandon in Alberta) within 12 months after it is taken out of use. [O. Reg. 245/97: Exploration, Drilling and Production under the Oil, Gas and Salt Resources Act, R.S.O. 1990, c. P.12 “O.Reg. 245/97“), s. 19; Oil, Gas and Salt Resources of Ontario, Provincial Operating Standards (“Provincial Standards“), ss. 11.01-11.14.] Operators are also required to return the well site to its original condition no later than 6 months from the plugging date. [Provincial Standards, s. 11.13]. In practice this does not always happen.

[11] Redwater ABCA at para 6.

[12] The Orphan Well Association is funded by a levy imposed by the AER, security deposits that licensees have been required to post, and some limited government funding. ABCA decision at para 22.

[13] In a bankruptcy (or liquidating CCAA), the amount available to regulatory obligations that are in substance provable claims is subject to their priority ranking. Generally, these obligations will be unsecured except to the extent they are secured by a specific charge under section 14.06(7) of the BIA. Previously any regulatory or environmental obligations that were not provable in bankruptcy may continue to exist in theory, but typically the burden of those obligations essentially fell on the government. Accordingly, there is an increased incentive for the regulator to extract whatever value it can from the bankrupt estate during its administration

[14] Newfoundland and Labrador v. AbitibiBowater Inc., [2012] 3 SCR 443, 2012 SCC 67 (“AbitibiBowater“)

[15] Chambers Decision at para 139 citing Newfoundland and Labrador v. AbitibiBowater Inc. 2012 SCC 67.

[16] Nortel Networks Corp. (Re), 2013 ONCA 599 (CanLII), leave to appeal to SCC refused, 35642 (17 April 2014) (“Nortel“)

[17] Northstar Aerospace, Inc. (Re), 2013 ONCA 600 (CanLII) (“Northstar“)

[18] Now knowns as the Ministry of Environment, Conservation and Parks.

[19] Chambers Decision at para 164.

[20] Chambers Decision at para 164.

[21] Chambers Decision at para 173.

[22] Chambers Decision at para 173.

[23] Chambers Decision at para 177.

[24]Redwater ABCA at para 24.

[25] Redwater ABCA para 73.

[26] Redwater ABCA Martin dissent at para 107

[27] Redwater ABCA dissent at paras 178-179

[28] Redwater ABCA dissent at para 185

[29] Panamericana de Bienes y Servicios S.A. v. Northern Badger Oil & Gas Ltd., 1991 ABCA 181, 81 Alta. L.R. (2d) 45, 117 A.R. 44 (Alta. C.A.), leave to appeal denied [1992] 1 S.C.R. (S.C.C.)

[30] Redwater SCC at para 124

[31] Redwater SCC at para 139

[32] Redwater SCC at para 146

[33] Redwater SCC at para 236, citing Deschamps J. in AbitibiBowater at para 27.

[34] O.Reg. 245/97, s. 19; Provincial Standards, ss. 11.01-11.14

[35] Provincial Standards, s. 11.13

[36] See Courts of Justice Act, s. 101 provides that “a receiver or receiver and manager may be appointed by an interlocutory order, where it appears to a judge of the court to be just or convenient to do so.”

[37] Sherry A Kettle “The Creative Receivership” 2016 Annual Review of Insolvency Law 18


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.


This article is republished with the permission of the authors. It was first published on the Gowling WLG website.

About the Authors

Erin Farrell is a partner in Gowling WLG’s Toronto office, practising in the firm’s advocacy department. Her practice focuses on a variety of commercial litigation matters, including class actions, product and professional liability, environmental law and municipal liability. Erin represents professionals in both civil and administrative matters, and has defended a number of Canadian and foreign clients in the pharmaceutical, medical device and manufacturing sectors in litigation. She also has extensive experience in the banking sector, advising clients on a range of litigation matters, including a variety of motions and injunctions.

Jessica Boily is an associate in Gowling WLG’s Toronto office, practising in Environmental Law. Jessica works with clients to navigate and resolve complex disputes, including advocating for clients in appeals of environmental orders and civil litigation involving contaminated sites. She guides clients through regulatory inspections and investigations, including defending clients charged with federal, provincial and municipal environmental and regulatory offences. Jessica regularly appears before the Environmental Review Tribunal and all levels of courts in Ontario on motions, applications, trials, hearings, appeals and judicial reviews. She also advocates for her clients in mediations and arbitrations. 

Haddon Murray is an associate lawyer in Gowling WLG’s Toronto office, practising in the areas of restructuring and insolvency and corporate commercial litigation. Haddon represents corporations and their directors on claims ranging from standard litigation to complex restructurings. He has experience appearing before the Ontario Superior Court of Justice – Commercial List, as well as the Ontario Court of Appeal.

How can a multi-gas detection simulator enhance emergency response?

Written by Steven Pike , Argon Electronics

The growth in global industry and manufacturing, together with the ever-present risk of terrorist threat, means emergency personnel are increasingly being required to respond to incidents where there is risk of exposure to explosive atmospheres, low or enriched oxygen, or the presence of lethal toxic vapours.

For response crews arriving on scene there are two essential questions to consider. Is the air safe enough to breathe? And are there any specific toxic gases present?

Gas detection is fundamental to emergency response – and multi-gas detectors are the ideal tools for serving the majority of first responders’ gas detection needs.

Ensuring that crews have access to the right air-monitoring equipment, and that they’re trained in how to use it, is essential for enabling them to make confident decisions in complex scenarios.

In this blog post we provide an overview of the most common types of air-monitoring equipment. And we explore how gas detection simulators can aid in the effectiveness of first response training. 

Portable multi-gas detectors come in a variety of styles and configurations, some with the ability to detect up to six gases at a time. So let’s first consider the four most common types:

Catalytic combustion sensors – in which a heated wire is used to detect a wide variety of flammable gases from natural gas leaks to gasoline spills. In catalytic combustion, power is applied to a special wire coil, in much the same way as a traditional light bulb. Any combustible gas that is exposed to the sensor will react on the wire surface and produce a display reading.

Electrochemical toxic gas sensors – which are used to detect the presence of toxic hazards. An electrochemical sensor is similar in design to a small battery except that the chemical component that is required to produce the electric current is not present in the sensor cell. As the target gas diffuses into the membrane of the sensor, this reacts with chemicals on the sensing electrode to produce an electrical current.

Infrared detectors – commonly used to detect gases that are less reactive and therefore cannot be detected using typical electrochemical cells (such as CO2 or hydrocarbons). Instead of relying on a chemical reaction, infrared sensors determine the amount of gas present by measuring how much light the specific gas absorbs.

Photoionization detectors (PID) – which are used to detect volatile industrial compounds (VOCs) such as methane which can be present during industrial spills. PIDs rely on the specific chemical properties of the VOCs, but instead of absorbing light they use a light source in the UV spectrum to ionize electrons off gas molecules.

Realistic multi-gas detection training

The last decade has seen an increasing demand for advanced training tools to create the highest levels of realism, to reinforce instruction and to enhance student learning.

The use of intelligent simulation technology for chemical warfare agent training is well established. And now that same pool of knowledge and expertise has been applied to training in multi-gas detection.

One such example is Argon Electronics’ Multi-Gas SIM – an App-based simulator that provides instructors with the ability to set up complex multi-gas training scenarios using an android phone.

The simulator is highly configurable which means instructors can set the number of gas sensors they they want their students to view and they can select the type of sensor (be it infrared, electrochemical, PID etc).

They can also program the alarm settings in accordance with the operational detectors in use – so as students move around the training environment, their display readings will adjust to simulate events such as a breached alarm.

The option of an instructor remote means that trainers can remotely monitor student readings and activity, to further stimulate discussion and reinforce knowledge.

For those wanting to implement large-scale releases, the multi-gas simulator can also be used with Argon’s PlumeSM system to provide an enhanced level of realism and a more focused training experience.

Realism, repeatability, safety and efficiency are all key to effective HazMat training.

Simulator detectors tools such as Argon’s Multi-Gas SIM promise to play an invaluable role in aiding trainees’ understanding of gas detection to ensure the right decisions are made, however challenging the scenario.

About the Author

Steven Pike is the Founder and Managing Director of Argon Electronics, a leader in the development and manufacture of Chemical, Biological, Radiological and Nuclear (CBRN) and hazardous material (HazMat) detector simulators. He is interested in liaising with CBRN professionals and detector manufacturers to develop training simulators as well as CBRN trainers and exercise planners to enhance their capability and improve the quality of CBRN and Hazmat training.

U.S. Mining Sites – Legacy of Contamination Needs to be Addressed

https://www.thechronicleherald.ca/news/world/us-mining-sites-dump-50m-gallons-of-fouled-wastewater-daily-285939/

Rimini, Montana – Every day many millions of gallons of water loaded with arsenic, lead and other toxic metals flow from some of the most contaminated mining sites in the U.S. and into surrounding streams and ponds without being treated, The Associated Press has found.

That torrent is poisoning aquatic life and tainting water supplies in Montana, California, Colorado, Oklahoma and at least five other states.

The pollution is a legacy of how the mining industry was allowed to operate in the U.S. for more than a century. Companies that built mines for silver, lead, gold and other “hardrock” minerals could move on once they were no longer profitable, leaving behind tainted water that still leaks out of the mines or is cleaned up at taxpayer expense.

Using data from public records requests and independent researchers, the AP examined 43 mining sites under federal oversight, some containing dozens or even hundreds of individual mines.

The records show that at average flows, more than 50 million gallons of contaminated wastewater streams daily from the sites. In many cases, it runs untreated into nearby groundwater, rivers and ponds — a roughly 20-million-gallon daily dose of pollution that could fill more than 2,000 tanker trucks.

The remainder of the waste is captured or treated in a costly effort that will need to carry on indefinitely, for perhaps thousands of years, often with little hope for reimbursement.

The volumes vastly exceed the release from Colorado’s Gold King Mine disaster in 2015, when a U.S. Environmental Protection Agency cleanup crew inadvertently triggered the release of 3 million gallons (11.4 million liters) of mustard-colored mine sludge, fouling rivers in three states.

At many mines, the pollution has continued decades after their enlistment in the federal Superfund cleanup program for the nation’s most hazardous sites, which faces sharp cuts under President Donald Trump.

Federal officials have raised fears that at least six of the sites examined by AP could have blowouts like the one at Gold King.


Mine waste mixes with runoff at the Gold King Mine. (Provided by the U.S. Environmental Protection Agency)

Some sites feature massive piles or impoundments of mine waste known as tailings. A tailings dam collapse in Brazil last month killed at least 169 people and left 140 missing. A similar 2014 accident in British Columbia swept millions of cubic yards of contaminated mud into a nearby lake, resulting in one of Canada’s worst environmental disasters.

But even short of a calamitous accident, many mines pose the chronic problem of relentless pollution.

AP also found mining sites where untreated water harms the environment or threatens drinking water supplies in North and South Carolina, Vermont, Missouri and Oregon.

Tainted wells

In mountains outside the Montana capital of Helena, about 30 households can’t drink their tap water because groundwater was polluted by about 150 abandoned gold, lead and copper mines that operated from the 1870s until 1953.

The community of Rimini was added to the Superfund list in 1999. Contaminated soil in residents’ yards was replaced, and the EPA has provided bottled water for a decade. But polluted water still pours from the mines and into Upper Tenmile Creek.

“The fact that bottled water is provided is great,” said 30-year Rimini resident Catherine Maynard, a natural resources analyst for the U.S. Department of Agriculture. “Where it falls short is it’s not piped into our home. Water that’s piped into our home is still contaminated water. Washing dishes and bathing — that metal-laden water is still running through our pipes.”

Estimates of the number of such abandoned mine sites range from 161,000 in 12 western states to as many as 500,000 nationwide. At least 33,000 have degraded the environment, according to the Government Accountability Office, and thousands more are discovered every year.

Officials have yet to complete work including basic risk analyses on about 80 percent of abandoned mining sites on federal lands. Most are controlled by the Bureau of Land Management, which under Trump is seeking to consolidate mine cleanups with another program and cut their combined 2019 spending from $35 million to $13 million.

An abandoned mining site in Clear Creek County. (Jesse Paul, The Colorado Sun)

Perpetual pollution

Problems at some sites are intractable. Among them:

  • In eastern Oklahoma’s Tar Creek mining district, waterways are devoid of life and elevated lead levels persist in the blood of children despite a two-decade effort to clean up lead and zinc mines. More than $300 million has been committed since 1983, but only a small fraction of the impacted land has been reclaimed and contaminated water continues to flow.
  • At northern California’s Iron Mountain Mine, cleanup teams battle to contain highly acidic water that percolates through a former copper and zinc mine and drains into a Sacramento River tributary. The mine discharged six tons of toxic sludge daily before an EPA cleanup. Authorities now spend $5 million a year to remove poisonous sludge that had caused massive fish kills, and they expect to keep at it forever.
  • In Colorado’s San Juan Mountains, site of the Gold King blowout, some 400 abandoned or inactive mine sites contribute an estimated 15 million gallons (57 million liters) of acid mine drainage per day.

AP also found mining sites where untreated water harms the environment or threatens drinking water supplies in North and South Carolina, Vermont, Missouri and Oregon.

This landscape of polluted sites occurred under mining industry rules largely unchanged since the 1872 Mining Act.

State and federal laws in recent decades have held companies more accountable than in the past, but critics say huge loopholes all but ensure that some of today’s mines will foul waterways or require perpetual cleanups.

To avoid a catastrophe like Gold King, EPA officials now require advance approval for work on many mining sites. But they acknowledge they’re only dealing with a small portion of the problem.

“We have been trying to play a very careful game of prioritization,” said Dana Stalcup, deputy director of the Superfund program. “We know the Superfund program is not the answer to the hundreds of thousands of mines out there, but the mines we are working on we want to do them the best we can.”

The 43 sites examined by AP are mining locations for which officials and researchers have reliable estimates of polluted water releases. Officials said flow rates at the sites vary.

Average flows were unavailable for nine sites that only had high and low estimates of how much polluted water flowed out. For those sites, the AP used the lower estimates for its analysis.

Questions over who should pay

To date, the EPA has spent an estimated $4 billion on mining cleanups. Under Trump, the agency has identified a small number of Superfund sites for heightened attention after cleanup efforts stalled or dragged on for years. They include five mining sites examined by AP.

Former EPA assistant administrator Mathy Stanislaus said more money is needed to address mining pollution on a systematic basis, rather than jumping from one emergency response to another.

“The piecemeal approach is just not working,” said Stanislaus, who oversaw the Superfund program for almost eight years ending in 2017.

Democrats have sought unsuccessfully to create a special cleanup fund for old hardrock mine sites, with fees paid by the mining industry. Such a fund has been in place for coal mines since 1977, with more than $11 billion in fees collected and hundreds of sites reclaimed.

The mining industry has resisted doing the same for hardrock mines, and Republicans in Congress have blocked the Democratic proposals.

Montana Mining Association director Tammy Johnson acknowledged abandoned mines have left a legacy of pollution, but added that companies still in operation should not be forced to pay for those problems.

“Back in the day there really wasn’t a lot known about acid mine drainage,” she said. “I just don’t think that today’s companies bear the responsibility.”

In 2017, the EPA proposed requiring companies still operating mines to post cleanup bonds or offer other financial assurances so taxpayers don’t end up footing cleanup bills. The Trump administration halted the rule , but environmental groups are scheduled to appear in federal court next month in a lawsuit that seeks to revive it.

“When something gets on a Superfund site, that doesn’t mean it instantly and magically gets cleaned up,” said Earthjustice attorney Amanda Goodin. “Having money immediately available from a responsible party would be a game changer.”

The Uses of 3D Modeling Technology in the Environmental Remediation Industry

By: Matt Lyter (Senior Staff Geologist at St-John-Mitterhauser & Associates, A Terracon Company) and Jim Depa (Senior Project Manager/3D Visualization Manager at St-John-Mitterhauser & Associates, A Terracon Company)

Three-dimensional (3D) modeling technology is used by geologists and engineers in the economic and infrastructure industries to help organize and visualize large amounts of data collected from fieldwork investigations.  In the oil and gas industry, petroleum geologists use 3D models to visualize complex geologic features in the subsurface in order to find structural traps for oil and natural gas reserves.  In the construction industry, engineers use 3D maps and models to help predict the mechanics of the soil and the strength of bedrock for construction projects.  In the mining industry, economic geologists use high resolution 3D models to estimate the value of naturally occurring ore deposits, like gold, copper, and platinum, in a practice known as resource modeling.

All of the models are built in almost the same exact way: 1) By collecting and analyzing soil samples and/or rock cores; 2) Using a computer program to statistically analyze the resulting data to create hundreds or even thousands of new (or inferred) data points; and 3) Visualizing the actual and inferred data to create a detailed picture of the ground or subsurface in three dimensions.  These models can be used in the economic and infrastructure industries to help predict the best locations to install an oil or gas well, predict the size of an oil or natural gas reserve, assist in the design of a road, tunnel, or landfill, calculate the amount of overburden material needing to be excavated, or help to predict the economic viability of a subsurface exploration project.

However, because of the significant amount of computing power needed to create the models, usage of the technology by regulatory driven industries has been limited.  But continuing technological advancements have recently made 3D modeling technology more accessible and affordable for these regulatory driven industries, including the environmental investigation and remediation industry.  Complex 3D models that previously may have taken several days to create using expensive high-end computers, can now be made in several hours (or even minutes) using the technology present in most commercially available desktops.  Because of these advancements, subsurface contamination caused by chemical spills can be visualized and modeled in 3D by environmental geologists at a reasonable price and even in near real-time.

3D Models of Soil Contamination

Some of the applications of 3D modeling technology in the environmental investigation and remediation industry are only just beginning to be utilized, but they have already helped to: 1) Identify data gaps from subsurface investigations, 2) Describe and depict the relationship between the geologic setting of a site and underground migration of a contaminant, and 3) Provide a more accurate estimate of the amount of contamination in the subsurface.  The models have also helped contractors design more efficient remediation systems, assisted governmental regulators in decision making, and aided the legal industry by explaining complex geologic concepts to the non-scientific community.  This is especially true when short animations are created using the models, which can show the data at multiple angles and perspectives – revealing complexities in the subsurface that static two-dimensional images never could.

The consultants at St. John-Mittelhauser and Associates, a Terracon Company (SMA), have used 3D modeling technology on dozens of sites across the United States, most recently, at a large-scale environmental remediation project in the Midwestern United States.  Contamination from spills of trichloroethylene (TCE), a once widely used metal degreaser, were identified at a former auto parts manufacturer during a routine Phase 2 investigation.  Dozens of soil samples were collected and analyzed in order to define the extent of contamination, and once completed, traditional 2D maps and a series of cross-sections were created.  One of the cross sections is shown in the image below:

Cross-section of soil contamination

Traditional Cross-section Showing Geologic Units and Soil Sample Results

The maps and cross sections were presented to remediation contractors with the purpose of designing a remediation system precisely based on treating only the extent of the contaminated soil.  The lowest bid received was for $4.2 million dollars (USD), however, it was evident to SMA that all of the proposed designs failed to take into account the complexity of the subsurface contamination.  Specifically, large portions of the Site, which were not contaminated, were being proposed to be treated.  Therefore, using a 3D dimensional modeling program, SMA visualized the soil sample locations, modeled the extent of the contaminated soil in 3D, and created an animation showing the model at multiple perspectives and angles, at a cost of $12,000 (USD).  A screenshot of the model is provided below:

3D dimensional modeling program results

3D Side View of TCE Contamination in Soil (15 PPM in Green, 250 PPM in Orange)

The project was resubmitted to the remediation contractors with the 3D models and animation included, resulting in a guaranteed fixed-price bid of $3.1 million dollars – a cost savings of over $1.1 million dollars for the client. Additionally, an animation showing both the remedial design plan and confirmatory sampling plan was created and presented to the United States Environmental Protection Agency (the regulatory agency reviewing the project) and was approved without any modifications.  To date, the remediation system has removed over 4,200 pounds of TCE from the subsurface and completion of the project is expected in 2019.  A short animation of the 3D model can be viewed on YouTube.


3D Models Showing PCE Contamination in Soil

The 3D modeling software has also been used to help determine the most cost-effective solution for other remediation projects, and has been able to identify (and clearly present) the sources of chemical spills.  The following link is an animation showing three case studies involving spills of perchloroethene (a common industrial solvent) at a chemical storage facility, ink manufacturer, and former dry cleaner: https://www.youtube.com/watch?v=0IlN_TIXkGk

The most cost-effective remediation option was different for each site and was based on the magnitude of the contamination, maximum depth of contaminated soil, geologic setting, and the 3D modeled extent of contamination.  Specifically, the contamination at the chemical storage facility was treated using electrical resistance heating technology, chemical oxidants were used to treat the soils at the ink manufacturer, and soil vapor extraction technology was used at the dry cleaner.

However, several barriers remain which prevent the wide-spread use of 3D modeling technology.  The various modeling programs can cost upwards of $20,000, as well as yearly fees for software maintenance.  There are also costs to organize large datasets, build the necessary files, and create the models and animations.  It also must be noted that the 3D models are only statistical predictions of site conditions based on the available data, and the accuracy of the models is wholly dependent on the quantity, and more importantly, the quality of the data.  Even so, 3D modeling technology has proven to play an important role in the environmental remediation industry by helping project managers to understand their sites more thoroughly.  It has also provided a way to disseminate large amounts information to contractors, regulators, and the general public. But, perhaps, most-importantly, it has saved money for clients.


About the Authors

Matt Lyter (Senior Staff Geologist at St-John-Mitterhauser & Associate, A Terracon Company) provides clients with a wide range of environmental consulting services (Environmental litigation support; acquisition and transaction support; site specific risk assessment, etc.), conventional and state-of-the-art environmental Investigation services, and traditional to advanced environmental remediation services.

Jim Depa (Senior Project Manager/3D Visualization Manager at St-John-Mitterhauser & Associate, A Terracon Company) has over 12 years of experience as a field geologist, project manager, and 3D modeler.  He is well-versed with a variety of computer programs including: C-Tech’s Earth Volumetric Studio (EVS), Esri’s ArcGIS, AQTESOLV, MAROS, Power Director 16, and Earthsoft’s EQuIS

U.S.: New Hazardous Waste Pharmaceuticals Rule: Significant Changes Coming for Health Care Facilities, Particularly Long-Term Care Facilities

by Brooke F. Dickerson and Jennifer L. Hilliard,
Arnall Golden Gregory (AGG)

Health care facilities that provide a host of health care-related services or distribute, sell, or dispense pharmaceuticals will need to learn a whole new set of regulations thanks to a finalized new rule promulgated by the United States Environmental Protection Agency (EPA). The new rule revises management standards for hazardous waste pharmaceuticals (HWPs) for health care facilities, including nursing, skilled nursing, and inpatient hospice facilities, more than three years following the close of comments for the EPA’s initial proposed rule. The revised regulations will take effect six months following publication in the Federal Register.

The Resource Conservation Recovery Act (RCRA) governs the generation, management, storage, treatment, and disposal of hazardous wastes. Before the new rule was promulgated, certain health care facilities, such as hospitals and reverse distributors were subject to the same hazardous waste requirements under the RCRA as most industries. The management of HWPs at long-term care facilities, however, was excluded from the RCRA and treated the same as HWPs at residential households. EPA makes clear in this new rule that because nursing, skilled nursing, and inpatient hospice facilities are more akin to hospitals, their management of any hazardous waste, including HWPs, will also be subject to RCRA requirements.

The final rule revises some of the regulations and management standards for HWPs under the RCRA and sets them apart in a separate section of the RCRA regulations, to be codified at 40 C.F.R. Part 266, Subpart P (“Subpart P”), that are applicable specifically to health care facilities and reverse distributors. According to the EPA, this is necessary because hazardous waste generation and management practices at health care facilities differ significantly from those encountered in industry generally. As a result, regulating HWPs under the standard provisions of RCRA Subtitle C has been unnecessarily difficult. The EPA maintains that the new management standards are more streamlined and tailored specifically for healthcare HWPs and thus will promote proper management of HWPs by healthcare workers and pharmacy employees.

The final rule does not increase the universe of pharmaceuticals that are considered hazardous waste. However, it does accomplish four significant and practical changes in the management of pharmaceuticals: (1) HWPs that are to be sent off-site for reverse distribution will be regulated as hazardous wastes under the RCRA while still at the health care facility, (2) HWPs are banned from being disposed of down a drain or in a toilet, thereby reducing the amount of pharmaceutical ingredients that contaminate drinking water and endanger the environment, (3) it is easier to make a HWP container legally “empty,” and (4) nicotine replacement therapies are no longer considered potential hazardous wastes. Some of the components of the final rule will relieve the existing burdens on generators of HWPs, while other components may make the management of HWPs more onerous, at least initially.

Applicability to Long-Term Care Facilities

As noted above, the final rule applies to health care facilities. The definition of “health care facility” specifically includes long-term care facilities. A “long-term care facility,” in turn, is defined as:

[A] licensed entity that provides assistance with activities of daily living, including managing and administering pharmaceuticals to one or more individuals at the facility. This definition includes, but is not limited to, hospice facilities, nursing facilities, skilled nursing facilities, and the nursing and skilled nursing care portions of continuing care retirement communities. Not included within the scope of this definition are group homes, independent living communities, assisted living facilities and the independent and assisted living portions of continuing care retirement communities. (emphasis added).

The exclusion of assisted living from the definition of long-term care facility in the rule avoids many of the practical issues with control over medications taken directly by patients and use of multiple pharmacies that flow from the functional differences between nursing homes and assisted living facilities. The distinction constitutes a welcome change from the 2015 proposed rule, which sought to include such facilities in the definition of long-term care facility. The EPA stated unequivocally that HWPs that are in (a) the custody of the long-term care facility on behalf of the resident, or (b) an in-house pharmacy maintained by such facility (if any), must be managed under Subpart P. 

Definitions and Analysis

The analysis necessary to determine whether a given substance is considered a HWP involves three questions: 

Question 1 – Is it a Pharmaceutical? Under the final rule, a pharmaceutical includes, but is not limited to, the following:

  • Dietary supplements, as defined by the Federal Food, Drug and Cosmetic Act;
  • Prescription drug, as defined by 21 C.F.R. § 203.3(y);
  • Over-the-counter drugs;
  • Homeopathic drugs;
  • Compounded drugs;
  • Investigational new drugs;
  • Pharmaceuticals remaining in non-empty containers;
  • Personal protective equipment contaminated with pharmaceuticals; and
  • Clean-up material from spills of pharmaceuticals.

The definition also includes any electronic nicotine delivery system and liquid nicotine packaged for retail sale. Excluded from the definition are sharps and dental amalgam.

Question 2 – Is it a Solid Waste? A solid waste is any discarded material that is not otherwise excluded under the regulations that implement RCRA. What constitutes a RCRA solid waste, however, is not limited to wastes that are physically solid. Many solid wastes are liquid, semi-solid, or gaseous material. A material is considered “discarded” once the facility has decided to discard it, and must be managed appropriately at that point in time. A material that is legitimately going to be used, reused or reclaimed is not discarded and is not a solid waste. Note, however, that under the final rule, EPA has pre-determined that a health care facility’s decision to reverse distribute a pharmaceutical constitutes a decision to discard the pharmaceutical.

Question 3 – Is it a HWP? Solid wastes that are pharmaceuticals are only considered hazardous waste under RCRA if they are either listed as hazardous wastes or exhibit one of the characteristics of hazardous waste. There are four lists–F , K , P and U –based on either manufacturing and industrial processes, or chemical designations. The F and K lists are based on manufacturing and industrial processes, none of which apply to pharmaceuticals for humans. The P and U lists are based on chemical products. The EPA notes that there are approximately 30 “Commercial Chemical Products” on the P and U lists that have uses in multiple pharmaceuticals. A Commercial Chemical Product is only a waste if (i) it has not been used or used as intended, and (ii) consists of the commercially pure grade of the chemical, any technical grades of the chemical that are produced or marketed or the chemical is the sole active ingredient in the formulation. If these criteria are not met, then the pharmaceutical is not a HWP, even if included in the P or U list.

As noted above, even if a pharmaceutical waste is not listed on any of the lists, it may also qualify as a hazardous waste if it exhibits one of the four characteristics of hazardous waste:

  • Ignitability (something flammable) – for example, solutions containing more than 24% alcohol,
  • Corrosivity (something that can rust or decompose) – for example, certain compounding chemicals,
  • Reactivity (something explosive), and
  • Toxicity (something poisonous).

The answer to all three of the foregoing questions must be yes for the material to qualify as a HWP, though the final rule does contain certain exceptions that may apply to exclude a pharmaceutical from being considered a HWP for purposes of RCRA Subpart P. A long-term care facility that determines that it does generate HWPs must then conduct further analysis to determine the nature of its obligations under Subpart P. 

Scope of Obligations under Subpart P – Amount of Waste Generated

Once the determinations have been made that a long-term care facility is covered by the final rule and has HWPs, the analysis shifts from the type of facility and nature of the waste to the amount of the waste, to determine the scope of the facility’s obligations under Subpart P. Specifically, the next inquiry is the amount of HWPs that the facility generates. Under RCRA, a “Generator” is a person whose act or process produces hazardous waste or whose act first causes a hazardous waste to become subject to regulation. Therefore, a facility that makes the determination to “discard” a pharmaceutical becomes a Generator. A facility that generates less than or equal to any of the following per calendar month qualifies as a Very Small Quantity Generator (VSQG) :

  • 100 kg (220 pounds) of hazardous waste; or 
  • 1 kg (2.2 pounds) of acute hazardous waste.

Under the final rule, long-term care facilities with 20 or fewer beds are presumed to be VSQGs, thereby shifting the burden of proof to the EPA Administrator to establish that a facility is not a VSQG. Facilities with more than 20 beds, however, bear the responsibility of demonstrating that they qualify as a VSQG.

If a facility generates total hazardous waste in amounts exceeding the VSQG thresholds, it must treat its HWPs in accordance with the management standards of Subpart P. While VSQGs may opt to handle their HWPs in accordance with the management standards of Subpart P, they are not required to do so except for the sewering ban and empty container provisions of Subpart P. If a VSQG does not opt to comply with the management standards of Subpart P, its HWPs are subject to the general hazardous waste provisions of 40 C.F.R. § 262.14, which may be less than the requirements of Subpart P. Further, a long-term care facility that is a VSQG may dispose of its HWPs (other than contaminated personal protective equipment or clean-up materials) in an on-site collection receptacle of an authorized collector that is registered with the Drug Enforcement Administration (DEA), provided the contents are collected, stored, transported, destroyed and disposed of in compliance with all applicable regulations for controlled substances.

Whether a long-term care facility that qualifies as a VSQG opts to treat its HWPs in accordance with the management standards of Subpart P likely will depend on (1) the willingness of the facility to undertake the monthly calculations, monitoring and recordkeeping required to demonstrate that their hazardous waste is within the limits established for VSQGs, or (2) whether the decision not to comply with Subpart P would render the facility subject to more onerous requirements on other hazardous waste that it generates. If a facility also generates non-pharmaceutical RCRA hazardous waste, such as lab wastes for example, those wastes are not regulated under Subpart P but under the existing RCRA regulations. The standard regulations become more stringent as the amount of applicable waste increases. Facilities could decrease the overall amount of waste and thus lessen the impact of the standard regulations by not including the HWPs that are managed instead under Subpart P. 

Scope of Obligations under Subpart P – Prescription HWPs versus Non-Prescription HWPs and Non-Creditable Prescription HWPs versus Potentially Creditable Prescription HWPs

Once the determination has been made that a long-term care facility is subject to the management standards of Subpart P, the requirements vary based on whether or not the pharmaceutical required a prescription. For prescription drugs, a facility must determine if it is managing a potentially creditable HWP or a non-creditable HWP. A “potentially creditable hazardous waste pharmaceutical” is a prescription HWP that has a “reasonable expectation to receive manufacturer credit through reverse distribution and is (1) in original manufacturer packaging (except pharmaceuticals that were subject to a recall) even if opened; (2) undispensed; and (3) unexpired or less than one year past expiration date.”

A non-creditable HWP is a prescription pharmaceutical that does not meet the above three criteria and therefore is not likely to receive credit back through reverse distribution. Non-prescription HWPs that do not have a reasonable expectation to be legitimately used, reused or reclaimed are also considered non-creditable HWPs. On the other hand, non-prescription over the counter pharmaceuticals that go through reverse logistics because they have a reasonable expectation of being recycled are not “Solid Waste” under RCRA at all, and therefore are not subject to Subpart P either. The management standards for potentially creditable HWPs are not as stringent as those for non-creditable HWPs.

Because of the requirement that the pharmaceutical be undispensed, it is likely that only long-term care facilities that have an in-house long-term care pharmacy will be managing potentially creditable HWPs. Those long-term care facilities that contract for their pharmacy services with a long-term care pharmacy will be managing non-creditable HWPs because pharmaceuticals are considered to be dispensed when the order is filled by the external pharmacy.

Unlike the existing general RCRA standards for the management of hazardous wastes, standards for HWPs under the new Subpart P are the same regardless of the amounts generated or the places where they are accumulated. 

Management Standards for Non-Creditable HWPs

Notification – A long-term care facility that is subject to the requirements of Subpart P must notify the EPA Regional Administrator within 60 days of the effective date of Subpart P (or within 60 days of becoming subject to Subpart P) that it is a healthcare facility operating under Subpart P, even if the facility already has an EPA Identification Number. Notification may be filed electronically. The facility must keep a copy of the notification on file for as long as the facility is subject to Subpart P. If the facility subsequently qualifies as a VSQG and elects to withdraw from Subpart P, it must so notify the EPA Regional Administrator and may not begin operating under the conditional exemption applicable to VSQGs generally under RCRA until notification has been made. Withdrawal notifications must be kept on file for a period of three (3) years.

Training – All facility personnel that manage HWPs must be trained and be “thoroughly familiar” with proper waste handling and emergency procedures relative to their responsibilities. EPA has not stated whether the agency will offer compliance assistance or training materials to facilities. As a result, because the final rule will become effective six months following publication in the Federal Register, facilities should begin exploring their options for training as early as possible.

Hazardous Waste Determination – The facility must determine whether a non-creditable pharmaceutical is a HWP. In lieu of making such a determination, the facility may choose to manage all waste pharmaceuticals as HWPs under Subpart P.

Containers – Because a facility will likely accumulate HWPs for some period of time before shipping them off-site, the final rule prescribes standards for containers that will be used to store HWPs. Generally, any container used to accumulate HWPs must be structurally sound, compatible with its contents, and lack evidence of leakage, spillage, or damage that could cause leakage under reasonably foreseeable conditions. Such container must be kept closed and secured so as to prevent unauthorized access to its contents.

Labeling Containers – All containers used to accumulate HWP must be labeled or clearly marked with the phrase “Hazardous Waste Pharmaceuticals.”

Maximum Accumulation Time – A facility may accumulate non-creditable HWPs on-site for a period not to exceed one year without a permit. The period begins on the date the pharmaceutical first becomes a waste, and the facility is responsible for demonstrating how long HWPs have been accumulating. The final rule allows the facility to make this demonstration by marking/labeling the container, maintaining an inventory system or by placing the HWPs in a specific area and identifying the earliest date that any of the HWPs in that area became a waste. To the extent that any HWPs are able to be commingled safely in a container, the date on which the very first HWP was deposited in the container would start the one year clock running.

Land Disposal Restrictions – A facility must comply with extensive requirements pertaining to land disposal restrictions at 40 C.F.R. Section 268.7(a), but these have been relaxed to the extent that the individual waste codes no longer need to be identified on the land disposal restriction notification.

Shipping – As noted above, a long-term care facility may accumulate non-creditable HWPs on-site only for a limited time before it must ship them off-site to a pre-designated authorized facility for treatment, storage or disposal. The final rule includes specific requirements for such shipments.

  • Pre-Transport
    • Packaging, Labeling and Marking – Generally, all waste must be packaged, labeled and marked in accordance with applicable Department of Transportation (DOT) regulations.
      • Containers of 119 gallons or less must be marked with specific words and information, including “HAZARDOUS WASTE.”
      • With limited exceptions specified in the final rule, lab packs that will be incinerated are not required to be marked with EPA Hazardous Waste Numbers.
    • Placarding – A long-term care facility must placard or offer the initial transporter the appropriate placards as specified under DOT regulations.
  • Manifests – A facility must use a uniform manifest and comply with applicable manifest requirements except that instead of listing the individual waste codes, the facility should write “PHARMS” on the form.
  • Facilities may ship HWPs across state lines, but will only be able to use the provisions in Subpart P if both states have adopted the same regulations (see below).

Managing Rejected Shipments – A long-term care facility will need to ship any rejected shipments of non-creditable HWPs to a new designated and authorized facility within 90 days of their return.

Reporting – There is no requirement to report the amounts of HWPs generated at a facility unless specifically requested by the EPA. Other than the initial notification, the only report required under the new rule is when the facility does not receive back a copy of a fully received manifest from the receiving facility in connection with a shipment.

Record keeping – A health care facility must keep a copy of each manifest, exception report, and hazardous waste determination test result and analysis for three years. All records must be readily available during an inspection.

Response to Spills – Spills of HWPs must be immediately contained and the cleanup materials managed themselves as HWPs.

Accepting Non-Creditable HWPs from an Off-Site Facility that is a VSQG – A facility may accept non-creditable HWPs from a VSQG, such as when a health care facility returns drugs back to a pharmacy, even though the receiving facility does not have a RCRA permit, if the receiving facility (i) is under the same control as the transferring facility or has a business relationship, (ii) is operating under Subpart P, (iii) manages the new wastes under Subpart P, and (iv) keeps records of the shipment for three years.

Management Standards for Potentially Creditable HWPs

As noted above, because the definition of a potentially creditable HWP requires that a pharmaceutical be undispensed, and the use of a third party long-term care pharmacy results in medication being dispensed to a resident by the pharmacy rather than the facility, most long-term care facilities will not be managing potentially creditable HWPs. However, for those facilities that maintain their own in-house long-term care pharmacy, the requirements of the final rule with respect to potentially creditable HWPs are relevant as the facility is likely to have undispensed prescription medications on hand that can qualify as potentially creditable HWPs that can be sent to a reverse distributor.

  • Accepting Potentially Creditable HWPs from an Off-Site Facility that is a VSQG – A facility may accept potentially creditable HWPs from a VSQG, such as when a care facility returns drugs back to a pharmacy, even though the receiving facility does not have a RCRA permit, if the receiving facility (i) is under the same control as the transferring facility or has a business relationship, (ii) is operating under Subpart P, (iii) manages the new wastes under Subpart P, and (iv) keeps records of the shipment for three years.
  • Only Potentially Creditable HWPs – A facility is prohibited from sending hazardous wastes other than potentially creditable HWPs to a reverse distributor.
  • Reporting – There is no requirement to report the amounts of HWPs generated at a facility unless specifically requested by EPA.
  • Recordkeeping – A facility that initiates a shipment of potentially creditable HWPs to a reverse distributor must retain for a period of three years paper or electronic records of (i) the confirmation of delivery, and (ii) shipping papers prepared in accordance with DOT regulations. All records must be readily available during an inspection.
  • Response to Spills – Spills of potentially creditable HWPs must be immediately contained and the cleanup materials managed as non-creditable HWPs.
  • Shipping – Unlike with respect to a non-creditable HWP, a manifest is not required for shipping potentially creditable HWPs to a reverse distributor. Nevertheless, the facility must comply with all applicable DOT regulations in 49 C.F.R. Parts 171 through 180 for any HWP that meets the definition of “hazardous material” in 49 C.F.R. Section 171.8. Also, the receiving reverse distributor must provide confirmation to the facility that it has received the shipment. If the facility has not received such confirmation within 35 calendar days from the date the potentially creditable HWPs were sent, the facility must contact the carrier and the reverse distributor promptly to report that the confirmation was not received and to determine the status of the potentially creditable HWPs.

Conditional Exemption for HWPs that are Controlled Substances:

The final rule includes a conditional exemption from RCRA requirements for HWPs that are listed on a schedule of controlled substances by the DEA. The conditional exemption will apply if the HWPs are collected, stored, transported, and disposed of in compliance with all applicable DEA regulations for controlled substances, and will be destroyed by a method that DEA has publicly deemed in writing to meet their non-retrievable standard of destruction or combusted at one of five types of combustion facilities. 

Generally Applicable Provisions of Subpart P to all HWPs:

The following provisions apply to all health care facilities, regardless of whether the facilities are managing creditable or non-creditable HWPs or are required to comply with the other provisions of Subpart P.

  • Sewering Ban – All health care facilities covered by the rule are prohibited from discharging HWPs to a sewer system that passes through to a publicly-owned treatment works.
  • Empty Containers – Under the new regulations, certain stock, dispensing and unit-dose containers are considered “empty” and therefore not regulated as hazardous waste under RCRA, even if minor pharmaceutical residue remains, if they have been emptied using the practices commonly employed to remove materials from that type of container. This also applies to syringes provided that the contents have been removed by fully depressing the plunger into the patient, another delivery device such as an intravenous bag, or a hazardous waste collection container. Intravenous bags avoid RCRA regulation provided the pharmaceuticals inside have been fully administered to a patient. All other types of containers—whether partially or completely empty—are to be managed as non-creditable HWPs unless they meet the general RCRA empty test for non-acute hazardous wastes.

Over the Counter Nicotine Replacement Therapies:

Nicotine and salts are currently included in the hazardous waste listed code P075 . The new rule exempts FDA approved over the counter nicotine replacement therapies, specifically patches, gums, and lozenges, from waste code P075. The rule does not exempt e-cigarettes, nicotine-containing e-liquids or prescription nicotine replacement therapies because they are not regulated in the same way as the exempted methods. Nevertheless, any nicotine replacement therapy that has been used in the manner initially intended is not a “solid waste” under RCRA and therefore is not a “hazardous waste” either.

Effective Date; Authorized State RCRA Programs:

The final rule will become effective six months following publication in the Federal Register; however, many states operate their own hazardous waste program. Once authorized by EPA, state hazardous waste programs operate in lieu of the RCRA regulations, though authorized states are required to adopt new regulations that are more stringent than existing rules. Most provisions of the pharmaceutical waste final rule are more stringent than the current RCRA generator regulations. Accordingly, authorized state programs will be required to adopt those provisions such that the new rule will not take effect in any of those states until it has been adopted and the state regulations updated. In contrast, the ban against HWP disposal in a drain or a toilet will be effective in every state as soon as it is effective under Federal law because the sewering prohibition component of the new rule, also more stringent than existing requirements, was adopted under separate legal authority. States are not required to adopt the part of the rule exempting over-the-counter nicotine replacement therapies from the hazardous waste requirements because it is less stringent. Also, facilities should be aware that states may include more stringent requirements than those included in the final rule. As a result, facilities will need to monitor adoption and implementation efforts in those states very closely. 

Conclusion:

There can be no doubt that EPA’s final rule will require health care facilities, particularly long-term care facilities other than assisted living facilities, to navigate the new regulatory framework provided in Subpart P, while still potentially being subject to many other RCRA-related provisions and to regulations from other Federal agencies including the DOT. Additionally, facilities in states that have their own authorized hazardous waste program will need to monitor their state agency to determine exactly which rules apply and when. With an effective date only six months following publication of the final rule in the Federal Register, no guarantees of education or compliance assistance from EPA other than three webinars scheduled for February and March, 2019, and steep fines for violations, facilities will be hard-pressed to come up to speed in time. Health care facilities are well advised to begin their efforts now to understand the requirements, draft and implement effective policies and procedures, develop a staff training program, and enter into such contractual relationships as may be necessary to ensure compliance.

This article has been republished with the permission of the authors. It was first published on the AGG website. A pdf version, with footnotes can be found at AGG Legal Insight.


About the Authors

Brooke F. Dickerson focuses her practice on transaction, regulatory, compliance and permitting matters. With regards to environmental work, she has significant experience with Superfund (CERCLA), hazardous waste (RCRA and HWMA), the Georgia Hazardous Site Response Act (HSRA), solid waste, Brownfields, wetlands, and site evaluation, assessment and remediation issues. She also advises clients on stormwater compliance, green leasing issues and green/sustainable building practices. With regards to construction work, Ms. Dickerson advises owners and developers on the drafting and negotiation of architect, construction and construction management agreements. She has represented clients in connection with the construction of office, multi-family, mixed use and tenant improvement projects. She also advises clients on OSHA matters and has represented several companies in obtaining reduced or dismissed penalties in settlement negotiations. 

Jennifer Hilliard is Of Counsel in the Healthcare Practice. Ms. Hilliard focuses her practice on long-term care and aging services issues generally. She has extensive experience with nursing home regulatory matters, compliance and operations. Additionally, she has significant experience with Federal public policy and government affairs in such related areas as Medicare and Medicaid regulation, home health and hospice regulation, DEA controlled substances regulation, OSHA and other labor and employment issues affecting aging services providers, and federal non-profit tax issues. Prior to joining AGG, Ms. Hilliard served for over 18 years in a variety of legal and advocacy-related capacities at LeadingAge, a Washington, DC based trade association for non-profit long-term care and aging services providers.

Using Biosolids to Revegetate Inactive Mine Tailings

Vale Canada (a global mining company with an integrated mine, mill, smelter, and refinery complex in operations Sudbury, Ontario) has been working with Terrapure Environmental (an industrial waste management company) to utilize biosolids on its main tailings area.

For over 100 years, tailings from the milling operation have been deposited in the Copper Cliff Central Tailings impoundment. The facility is still active, but approximately 1,300 hectares are inactive and need reclamation work.


The Big Nickel in Sudbury (Photo Credit: pizzodisevo)

Over the decades, Vale has had some success in revegetation of its tailings area, but there are still large areas of bare or sparsely vegetated tailings, which have led to wind-erosion-management challenges. To control dust, Vale uses agricultural equipment to cover the tailings with straw or hay, as well as a chemical dust suppressant. These practices are costly, and they have to be done continuously to maintain an appropriate cover at all times. In 2012, Vale decided its tailings needed a permanent vegetative cover—not just to suppress dust and reduce erosion, but to improve overall biodiversity. They entered into discussions with Terrapure Organics Solutions (formerly Terratec Environmental) to collaborate on a trial project to apply biosolids on the mine tailings.

In 2012, Vale decided its tailings needed a permanent vegetative cover—not just to suppress dust and reduce erosion, but to improve overall biodiversity. They entered into discussions with Terrapure Organics Solutions (formerly Terratec Environmental) to collaborate on a trial project to apply biosolids on the mine tailings.

The Challenge

The biggest challenge was forging a new path for this type of work. Applying biosolids to mine tailings had never been done before in Ontario. Just to get the right permits and approvals took about two years. Vale Canada and Terrapure worked closely with the Ontario Environment Ministry to ensure standards compliance. Some of this work included helping to determine what those standards should be. Terrapure was able to contribute to these discussions, leveraging decades of expertise in safe biosolids application to agricultural land. Once the Environmental Compliance Approval came in April 2014, the team had to figure out the best application method and proper amount to encourage vegetation, which meant a lot of testing and optimizing.

The Solution

At first, Terrapure mixed biosolids into the surface layer of the tailings. Over time, however, the team learned that applying biosolids to the surface, without mixing, allowed for greater rates of application and coverage at a lower cost.

Terrapure also had to experiment with the right tonnage per hectare. After seeding four trial plots with different amounts of biosolids coverage—20, 40, 60 and 80 dry tonnes/hectare—it was determined that 80 dry tonnes was best for seed germination. At the time, it was the maximum allowable application rate. By the end of 2014, approximately 25 hectares of tailings were amended. Where the biosolids were applied, there were impressive results. Wildlife that had not been seen feeding in the area in years started to return. In 2015, the Ontario Environment Ministry approved an increase in the biosolids application rate to a maximum of 150 dry tonnes/hectare, which was necessary for providing higher organic matter and nutrient levels, and for stabilizing the tailings’ pH levels. This approval also increased the cap on the amount of biosolids that could be delivered to the maximum application rate per hectare. To enhance the program even more, Terrapure and Vale partnered with the City of Greater Sudbury to blend leaf and yard waste with biosolids. By blending these materials, the mixture becomes virtually odourless, its nutrients are more balanced and it allows for a more diverse application.


Glen Watson, Vale’s superintendent of environment, decommissioning and reclamation, surrounded by lush vegetation covering part of the company’s Central Tailings Facility in Sudbury

The Results

As of 2018, Terrapure has successfully covered over 150 hectares of Vale’s tailings with municipal biosolids. Vegetative growth and wildlife are well established on all areas where the team applied organics. Just as importantly, this project has diverted more than 25,000 dry tonnes of valuable biosolids from becoming waste in the landfill. Following the success of the initial trial, the Environment Ministry widened the approval to include all areas of the inactive tailings and a portion of the active tailings. At the current application rate of 150 dry tonnes/hectare, Vale’s central tailings facility could potentially require another 195,000 dry tonnes of biosolids. That’s more than 30 years of biosolids utilization, at an annual rate of 6,000 dry tonnes of material. Needless to say, Vale is very pleased with the results, and the relationship is ongoing. In fact, the Vale team is evaluating other sites in the Sudbury area for this type of remediation, ensuring a long-term, environmentally sustainable rehabilitation program.