Alberta Court Places Creditors over the Environment

As reported by the CBC and the Calgary Herald, the Alberta Court of Appeal (in a 2-1 decision) has upheld the Redwater Energy decision that gave secured creditors priority over environmental clean-up in the case of an energy bankruptcy.

The case centered on a small energy company called Redwater Energy, which went into receivership in 2015, owing $5 million to ATB Financial, a financial institution owned by the province of Alberta.  At the time of its bankruptcy, Redwater had few producing oil and gas wells, as well as many more assets that were not producing and would need to be reclaimed.

Alberta energy regulations say that producing wells would have to be sold to pay the environmental clean-up costs of the non-producing wells or other assets.

Insolvency wins the day

The receiver for the insolvent company — accounting firm Grant Thornton — along with ATB Financial, instead wanted to sell the producing wells to pay off the debt to ATB and leave the non-producing wells to be cleaned up by the Orphan Well Association, which is funded by industry.

The case went to a lower court that was tasked with deciding which has priority: federal insolvency law, or provincial energy regulations.  Two courts have now decided insolvency law wins the day and Grant Thornton is in the process of selling the producing assets.

This case has implications that reach far beyond one small energy company.  British Columbia and Saskatchewan both participated in the appeal in support of the Alberta Energy Regulator because the case could act as a precedent in other provinces.

 Costs and benefits

There are some benefits, said Kathleen Shannon, a lawyer with Field Law.

“Lenders will still feel secure in their creditor positions, so they’re likely to continue lending to the oil and gas industry.  If the decision had been reversed, there would have been more hesitancy from financial institutions.”

Shannon pointed out that the AER will have some work to do to ensure it has enough security against the environmental obligations of energy companies. It also has the option to further appeal.

“I think the fact that there’s dissent means that potentially there will be another appeal to the Supreme Court of Canada,” she said.

Opportunity in the U.S. for Oil Spill Response Training

The U.S. Naval Facilities Engineering and Expeditionary Warfare Center in Port Hueneme, California, is soliciting proposals for a contract to provide Oil Spill Response Training via instruction of three classes–Facility Response Plan Training, Spill Management Team Training, and New Skimmer Training – at various locations worldwide.  The solicitation is available at https://www.neco.navy.mil/ under solicitation number N3943017R1912.  The resulting contract will be a single-award, firm-fixed-price IDIQ contract with a base ordering period of 60 months.  This requirement is set aside for service-disabled veteran-owned small businesses under NAICS code 541620. Quotes must be received by 4:00 PM PT on May 12, 2017.

 

Outlook of the Global Emergency Spills Response Market

Fior Markets recently issued a market study report entitled “The Emergency Spill Response Market Research Report.”  The report is a professional and in-depth study on industry Size, Share, Trends, Growth, Application, Consumption Volume and Value, Forecast, Supply, Production, Price, Professional Survey 2017 to 2022

The report offers a holistic overview of the Emergency Spill Response market with the help of application segments and geographical regions that govern the market currently.  Further, the report delves deep into the value chain of the Emergency Spill Response market so as to emerge with information specific areas that hold high revenue-generating potential. With the Emergency Spill Response market having undergone certain inherent shifts in the past decades, the report discusses how these changes will impact the future.

Moreover, the report also provides a realistic picture of the state of both traditional and emerging markets. The advantages and disadvantages of investing in these markets are discussed at length in the Emergency Spill Response market report. Companies in the Emergency Spill Response market have realized that innovation is of utmost importance for sustained growth. In keeping with this pressing need for innovation, the report tracks latest developments and analysts have dedicated substantial efforts toward spotting new business opportunities.

The report further focuses on the leading industry players that will steer the course of the Emergency Spill Response market through the forecast period. Each of these players is analyzed in detail so as to obtain details pertaining to their product/services, recent announcements and partnerships, investment strategies and so on. A detailed segmentation evaluation of the Emergency Spill Response market has been provided in the report. Detailed information about the key segments of the market and their growth prospects are available in the report.  The detailed analysis of their sub-segments is also available in the report.  The revenue forecasts and volume shares along with market estimates are available in the report.

New Sensors Monitor Temperature of Dangerous Goods in Real Time

Nexiot AG (a company specializing in complex systems, and ultra low-power imbedded technology) recently announced that it is customizing its zero-maintenance smart sensor system for Bertschi Group’s tank containers, to monitor the temperature of dangerous goods and help ensure safe delivery of consignments.

Bertschi is a global logistics service provider for the chemical industry, specializing in both liquids and dry bulk products, and transports hazardous cargo, some of which need to travel within a specific temperature band.

The smart sensor system supplied by Nexiot AG, is used during transportation of cargo to monitor the temperature dangerous goods, such as products in tanks, as well as the steam pipes which are used to heat the cargo, in real time.

 

 

Nexiot’s smart sensors harvest energy from the environment, which makes them self-sustaining, and enables them to update the control system with messages down to every five minutes.

“Any means by which we can further raise the bar regarding safety gets priority at Bertschi, and having continuous and detailed information about the containers allows us to be certain that everything is well within safe operating conditions,” said Markus Berner, Head of Digital Logistics, Bertschi Group.

“Automated alerts on deviations provide us with one more layer of safety on top of all the existing procedures and mechanisms.
“The very same measurements are also invaluable for guaranteeing that the cargo, which often includes delicate chemical compounds, reaches its destination within the optimal temperature band and in perfect condition.

“We have very tough requirements for the capabilities, ruggedness, cost, and maintainability of devices in the field.  In my opinion, particularly regarding energy autonomy and frequency of updates, the technology of Nexiot speaks for itself.”
Nexiot’s sensor system is also being installed across the entire fleet of rail wagons for wagon hire giant VTG.
The self-sustaining technology overcomes the battery problems which were a major barrier to monitoring dangerous goods in transit and makes critical data available in real time.

Nexiot is testing a new system of self-sufficient sensors, mounted onto the tank containers, communicating temperature data wirelessly to its Machine to Machine (M2M) communication devices, also installed on the tank containers.

Many shipping companies are seeing increased demand from customers for real-time updates and estimates, who use the data to optimize their own logistics chain.

Canada: When Is An Environmental Contamination Claim Too Old To Extend The Limitation Period?

40 to 60 years may be too old when determining whether to extend a limitation period for a negligence-based environmental contamination claim, the court recently ruled in Brookfield Residential (Alberta) LP (Carma Developers LP) v Imperial Oil Limited, 2017 ABQB 218 [Brookfield]. In Brookfield, the likelihood of prejudice to the defendant in granting an extension was significant since the alleged cause of the environmental damage occurred over 60 years ago, witnesses and documents were no longer available, and expert evidence on the standard of care at the time would be impossible to obtain.

The facts of Brookfield involved a claim brought in negligence against Imperial Oil Ltd. (Imperial) by Brookfield Residential (Alberta) LP (Brookfield) based on environmental contamination from an oil well. Imperial drilled and operated the well between 1949 and 1950, and disposed of it in either 1950 or 1954. A different owner operated the well between 1950 and 1957 and then used it for salt water disposal between 1958 and 1961, at which point the well was decommissioned and abandoned. Contamination requiring remediation was not discovered until 2010 when Brookfield was preparing the site for residential development.

Extending a Limitation Period for an Environmental Claim

Imperial sought to summarily dismiss Brookfield’s claim on the basis that the 10-year ultimate limitation period set out in the Limitations Act, RSA 2000, c L-12 had expired. In response, Brookfield sought an extension of the limitation period under section 218 of the Environmental Protection and Enhancement Act, RSA 2000, c E-12 [EPEA], which states:

218(1)  A judge of the Court of Queen’s Bench may, on application, extend a limitation period provided by a law in force in Alberta for the commencement of a civil proceeding where the basis for the proceeding is an alleged adverse effect resulting from the alleged release of a substance into the environment.

(3)  In considering an application under subsection (1), the judge shall consider the following factors, where information is available:

(a)   when the alleged adverse effect occurred;

(b)   whether the alleged adverse effect ought to have been discovered by the claimant had the claimant exercised due diligence in ascertaining the presence of the alleged adverse effect, and whether the claimant exercised such due diligence;

(c)   whether extending the limitation period would prejudice the proposed defendant’s ability to maintain a defence to the claim on the merits;

(d)   any other criteria the court considers to be relevant.

With respect to the first factor (218(3)(a)), the court decided that it did not have enough evidence to determine when the environmental damage occurred. On the second factor (218(3)(b)), the court found that there was evidence that Brookfield exercised the necessary due diligence. The court further determined under 218(3)(d) that no additional relevant factors were present. The extension of the limitation period, therefore, turned on the possibility of prejudice to Imperial.

The Role of Prejudice

The court held that extending the limitation period would cause prejudice to Imperial, and that such prejudice outweighed the other factors under section 218(3).

First, the relevant events occurred some 60 years before Brookfield commenced its action. As a result of the passage of such an extended period of time, witnesses and documents were lost:

Imperial says it cannot even point to specific missing witnesses or missing documents, and this goes to the heart of the prejudice that it will suffer if this matter proceeds. More than 60 years later, Imperial does not know who could have once spoken to these events or who could have identified the specific relevant records.

Second, as Brookfield’s claim was based in negligence, evidence of the applicable standard of care at the time was necessary. The evolution of the standard of care over time, however, would complicate matters:

Undoubtedly, close analysis might indicate that the prevailing practices were negligent, but that would appear to be the result of hindsight and a fundamentally different approach to environmental protection. … It would, in my view, be unfair to consider the appropriateness of 67-year-old practices without reliable evidence of what the practices were then.

The court held that “calling the expert evidence required to establish the standard of care 60 years later would be, in the words of our Court of Appeal, ‘impossible’”, applying authority that would indicate that 40 years may be too old as well.

In light of the passage of time, the loss of witnesses and documents, the difference in the standard of care, and the impossibility of finding experts to establish the standard of care, the court ruled that Imperial would suffer significant prejudice if the limitation period was extended. Upon balancing this prejudice with the first two factors in section 218(3), the court held that the limitation period should not be extended and granted summary judgment to Imperial.

Brookfield represents the first case concerning section 218 of the EPEA in which the court found that the claim would cause significant prejudice to the defendant. In effect, it judicially creates an ultimate limitation period for negligence-based environmental contamination claims of 40 to 60 years. Whether the same result would follow for a contamination claim not based on negligence remains to be considered–while some of the factors the court points to (loss of witnesses and documents) will be similar in such cases, the applicable standard of care and expert evidence concerning the standard of care will not be. In light of Brookfield, potential claimants should carefully assess whether a claim that arose decades ago is likely to give rise to a presumption of prejudice before advancing an application to extend the limitation period.

 The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

______________________

About the Authors

Scott H.D. Bowers is a Corporate, Commercial, Securities and Energy Lawyer at Bennett Jones in Calgary, Alberta.  Head of Legal Research for the firm in Alberta, Scott Bower represents clients in corporate, commercial, securities and energy litigation matters. He appears before all levels of court in Canada and before disciplinary bodies and provincial securities commissions, representing corporations, governmental agencies, banks and individuals.

 

Russell J. Kruger is a Research Lawyer at Bennett Jones Calgary, Alberta.  Russell has a research-oriented practice spanning a variety of areas, including energy, construction, franchise, arbitration and other corporate and commercial matters. Russell engages in review of technical and complex questions of law, and assists with preparation of written legal argument. Russell’s research-focused practice is informed by his previous courtroom experience as a litigation associate. Russell is also an Associate American Bar Association member.

 

Stephanie Clark is a articling student at Bennet Jones.  She is a graduate of McGill law school  and  also has a B.A. from the University of Calgary.

 

 

 

 

This article was first published on the Bennett Jones website.

U.S. EPA Marketplace 2017: Procurement Opportunities for Small Business

The U.S. EPA, Office of Acquisition Management, RTP Procurement Operations Division will be hosting Marketplace 2017 in Durham, North Caroline on May 31st, 2017.  The venue for the event is the Sheraton Imperial Hotel and Convention Center.

The Marketplace event is a bi-annual regional “reverse” trade show that provides small business owners a broad-based business opportunity to meet contracting officers from over 50 large prime contractors and federal, state, and local government agencies.  Contracting officers and representatives from industry will present training sessions and answer questions on a variety of contracting topics.  The Marketplace 2017 website hosts the complete event agenda and electronic registration at http://www.sbtdc.org/events/marketplace/.

 

Nova Scotia Supreme Court Orders Clean-up of Contaminated Site

The Nova Scotia (N.S.) Supreme Court recently confirmed that polluters must clean up a contaminated site in rural community of less than 1000 people that is approximately 10 kilometres (6 miles) south of Halifax.

In the decision, the court ruled that a numbered company (3076525 Nova Scotia Ltd., referred as “307 NSL” by the court) must abide by a clean-up ordered issued in 2016 by the N.S. Department of the Environment.  The numbered company owns recycling operation and the property is contaminated.  The contamination from the property has spread into the groundwater and impacted the drinking water wells of residential neighbours.

Contaminants found in monitoring wells on the property and in neighbouring drinking water wells include uranium, lead and arsenic.  The contaminant levels exceed what is considered safe in the Canadian Drinking Water Quality Guidelines.

The numbered company had claimed that the clean-up order should not have been issued at it for a number of reasons.  The first reason being that is could not have known of the contamination with the exercise of due diligence.  Secondly, it did not receive any economic benefit when it purchased the assets of the previous owner, RDM Recycling [referred to by the court as “301 NSL”], and took over the recycling business in 2005 and the company name.  In particular, there was not any offset between the price paid and the fair market value of property.  In other words, they did not receive a discount for the purchase of contaminated property that would need to be remediated.

In the Court’s decision, it deemed the property “very polluted” and stated that for the past two decades the Province had received complaints from neighbours of the property about the deteriorating quality of drinking water in their residential wells.  During that time, from 1997 to 2005, 301 NSL, operating as RDM Recycling, ran a recycling business on the property for construction and demolition material.

In early 2000, Nova Scotia Environment (NSE) discovered stockpiles of waste material at the RDM C&D recycling site.  NSE allowed RDM to construct a one-time disposal cell on their site.  It took 4 years to complete, while the stockpiles remained, and finally in 2004 RDM finished the cell and they buried over 120,000 tonnes of stockpiled waste.

In 2005, the 307 NSL [the company appealing the existing clean-up order] took over the assets, operating name, and business operations of 301 NSL.  It did not purchase the property.  Instead, it leased the property from 301 NSL.

Government Orders for the clean-up of the property date back in 2010.  At that time, the clean-up cost was estimated at $10.6 million.  The two companies (301 NSL and 307 NSL) along with three individuals were named in the 2010 Order.  The 2016 Order before the Supreme Court replaces early Orders.  The companies have never fully complied with any of the Orders.

In its ruling, the N.S. Supreme Court dismissed the claims made by the 307 NSL and ruled that the clean-up ordered issued by the government was legitimate and must be followed.  As such, the 307 NSL must perform remediation of the property and conduct monitoring.

U.S. Army confirms PFOS/PFOA Contamination at New Jersey Base

U.S. Department of Defence officials at the Joint Base McGuire-Dix-Lakehurst have confirmed that chemicals used in firefighting foam has been found in several groundwater sources on and off the base.

The chemicals in question are perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA).  They are synthetic compounds classified that are components of Aqueous Film Forming Foam (AFFF), a type of fire-fighting foam.  AFFF is the most efficient extinguishing method for petroleum-based fires and is widely used across the firefighting industry, to include all commercial airports, to protect people and property.

PFOA and PFOS are fluorinated organic chemicals that are part of a larger group of chemicals referred to as perfluoroalkyl substances (PFASs). PFOA and PFOS have been the most extensively produced and studied of these chemicals.  They have been used to make carpets, clothing, fabrics for furniture, paper packaging for food and other materials (e.g., cookware) that are resistant to water, grease or stains. They are also used for firefighting at airfields and in a number of industrial processes.

On the base, the groundwater monitoring program consisted of testing approximately 165 groundwater monitoring wells and 28 drinking water sources.  Results of analysis from groundwater samples show that 124 wells and two drinking water sources had contamination levels of PFOS and PFOA far in excess of the U.S. EPA health advisory for the compounds.  In some samples, the PFOS/PFOA concentrations were thousands of time higher than the standard.  The highest concentration of PFOS/PFOA was 264,300 parts per trillion.

To provide Americans, including the most sensitive populations, with a margin of protection from a lifetime of exposure to PFOA and PFOS from drinking water, the U.S. EPA established the health advisory levels at 70 parts per trillion.  When both PFOA and PFOS are found in drinking water, the combined concentrations of PFOA and PFOS should be compared with the 70 parts per trillion health advisory level.

Results of analysis from groundwater samples taken from private wells off the base also showed high PFOS and PFOA concentrations.  Of 131 off-base private drinking water wells tested, three were contaminated, and one had combined PFOS/PFOA levels of 1,392 parts per trillion.

Since the 1970s, the Air Force used this foam at crash sites, in fire training areas and some maintenance hangers at active, Reserve, Air National Guard and former installations.  The Air Force is systematically testing for potential PFOS/PFOA releases in soil, surface water and groundwater U.S. Air Force-wide where AFFF may have been used.

The U.S. Air Force identified approximately 200 installations (active, Reserve, Air National Guard and closed) where firefighting foam may have been released and is conducting site inspections to confirm if releases occurred.  As of November 2016, the U.S. Air Force completed preliminary assessments for 96 percent of the 200 installations.  The U.S. Air Force is prioritizing sampling based on factors, such as; potential pathways to drinking water, depth to groundwater and potential for contam

inate to migrate off base.

Currently, the U.S. Air Force is focused identify bases where there is PFOS/PFOA contaminated drinking water.  If contamination is found in the drinking water supply, immediate action will be taken to provide an alternative drinking water source.  Furthermore, the U.S. Air Force will initiate a long-term solution for safe drinking water which may include carbon filtration systems, plume-migration control, land use control, or other measures.  Finally, the U.S. Air Force is taking measures to prevent further groundwater contamination by replacing PFOS/PFOA-containing AFFF with more environmentally responsible AFFF.

Charges Laid for Oil Spill in British Columbia

As reported by CTV News, charges have been laid against the owners of the MV Marathassa nearly two years after a leak of bunker fuel fouled the beaches of English Bay in Vancouver, but the company is trying to scuttle the case.

Documents filed in British Columbia’s provincial court show the Marathassa and Greece-based Alassia NewShips Management Inc. face a total of 10 charges including discharge of a pollutant, unlawful disposal of a substance and failure to implement an oil pollution emergency plan.

The company is also accused of depositing a deleterious substance in a way that may have allowed it to reach waters frequented by fish, as well as depositing a substance harmful to migratory birds.

In all, six charges have been laid under Canadian shipping legislation, two relate to alleged Fisheries Act violations and single charges linked to alleged violations of federal environmental laws and the Migratory Bird Act.

None of the allegations have been tested in court.

At least 2,700 litres of bunker fuel spilled on April 8, 2015, while the Cypriot-registered vessel was moored in English Bay. The ensuing miscommunication among Canadian authorities and delays in cleanup raised questions about Canada’s preparedness for oil spills at a time when the Trans Mountain pipeline expansion was being hotly debated.

A provincial court date has been set for Wednesday, but Alassia is attempting to stop the proceedings with an application for a judicial review filed in Federal Court. The company will ask the Federal Court on Tuesday to stop the provincial court hearing from taking place until a judicial review has been heard.

In court documents, it says summonses in the case were invalid because they were served to a Canadian insurance adjuster and a ship captain who has only worked for Alassia on two fixed contracts.

Alassia argues that Canadian law requires summonses to be delivered to an executive officer of a corporation or a branch, and that neither the insurance adjuster or the captain fit that description.

“This is a serious issue to be tried in that it is doubtful that either attempt to serve the applicant was valid,” the company’s Vancouver-based lawyer Peter Swanson says in court documents.

Swanson says the company will suffer “irreparable harm” if the provincial court hearing proceeds as there’s no way for the company to challenge the validity of the summons in provincial court without submitting to its jurisdiction.

Alassia is seeking an order declaring the attempt to serve the summons to be invalid, quashing and setting them aside, as well as an order prohibiting further attempts to serve the summons in a similar manner. The company is also seeking costs.

In an affidavit, Valakitsis Antonios, the ship captain who was served the summons, says he worked on a vessel associated with Alassia between April 2014 and March 2015, but he was at home in Colombia in April 2015 at the time of the spill.

He says he is currently the master of the MV Afroessa, which is owned by Afroessa Shipping Corp., and he has no long-term relationship with Alassia.

Eric Renteria, an insurance adjuster at Charles Taylor Adjusting in Vancouver, says in an affidavit that an Environment and Climate Change Canada employee did not explain why he was serving him with a summons.

He says he is not employed or otherwise associated with Alassia and hadn’t heard of the company prior to receiving the summons last month. Charles Taylor Adjusting is not a branch of Alassia, he adds.

B.C. Environment Minister Mary Polak said Thursday she couldn’t comment on the charges but she was “pleased” the federal government was taking spill response seriously.

Alassia declined to discuss the legal proceedings in a statement but thanked all those who assisted in the response.

U.S. PHMSA Issues Final Rule Harmonizing HMRs with International Standards

The U.S. Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) recently issued a final rule to amend the Hazardous Materials Regulations (HMR) to maintain consistency with international regulations and standards (82 Fed. Reg. 15796).

The rule incorporates various amendments, including changes to proper shipping names, hazard classes, packing groups, special provisions, packaging authorizations, air transport quantity limitations, and vessel stowage requirements.  PHMSA states that these revisions are necessary to harmonize the HMR with recent changes made to the International Maritime Dangerous Goods Code, the International Civil Aviation Organization’s (ICAO) Technical Instructions for the Safe Transport of Dangerous Goods by Air, and the United Nations (UN) Recommendations on the Transport of Dangerous Goods – Model Regulations.

Additionally, PHMSA is adopting several amendments to the HMR that result from coordination with Canada under the U.S.-Canada Regulatory Cooperation Council.  The changes took effect on March 30, 2017.