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When Is It Too Late to Sue for Environmental Contamination? The Alberta Court of Appeal Rules

Written by Laura M. Gill, Stephanie Clark, and Justin Duguay, Bennett Jones LLP

On February 6, 2019, the Alberta Court of Appeal (ABCA) released its first ever decision on section 218 of the Environmental Protection and Enhancement Act (EPEA), which may extend limitation periods applicable to environmental contamination claims.

By a unanimous decision in Brookfield Residential (Alberta) LP (Carma Developers LP) v Imperial Oil Limited, 2019 ABCA 35 [Brookfield], the ABCA upheld a lower court decision where the judge refused to exercise his discretion under section 218 of the EPEA to extend the limitation period for an environmental contamination claim. Extending the limitation period would have likely been prejudicial to the defendant’s ability to maintain a defence to the claim, as the alleged cause of the environmental damage occurred over 60 years ago. We previously discussed the 2017 Court of Queen’s Bench decision in an earlier post, When is an Environmental Contamination Claim Too Old to Extend the Limitation Period?

Background

Brookfield Residential (Alberta) LP (Brookfield) brought a negligence claim in the Alberta Court of Queen’s Bench (ABQB) against Imperial Oil Limited (Imperial) for 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. Multiple owners 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. After several additional transfers of ownership, the site was issued a reclamation certificate in 1968. Contamination requiring remediation was not discovered until 2010, when Brookfield was preparing the site for residential development.

Brookfield brought an application under section 218 of the EPEA to extend the limitation period, and Imperial cross-applied with a summary dismissal application, asserting that the limitation period had expired. Since it was clear that the ten-year ultimate limitation period under the Limitations Act had expired, Brookfield’s negligence claim was entirely dependent on an extension of the limitation period under section 218. The ABQB refused to extend the limitation period and summarily dismissed the action against Imperial. Brookfield appealed.

The appeal was dismissed. In its reasons, the ABCA provided guidance on three important aspects of section 218 applications: (i) procedure and timing; (ii) the impact of the passage of time on prejudice to the defendant; and (iii) policy considerations relevant to the fourth factor in section 218(3).

1. Applications Under Section 218 of the EPEA Should Be Decided Prior to Trial

The ABCA in Brookfield ruled that applications under section 218 of the EPEA should be decided prior to trial, overruling the two-part test in Lakeview Village Professional Centre Corporation v Suncor Energy Inc, 2016 ABQB 288 [Lakeview]. In Lakeview, the ABQB set out a two-part approach to section 218 applications where the court may make a preliminary determination on limitations and allow the action to proceed subject to a final determination on the merits of the limitations issue at trial. Lakeview became the leading case on the procedure for section 218 applications.

In overturning the Lakeview test, the ABCA found two problems with the approach of deferring the decision on extending limitation periods until trial. First, the Lakeview approach “is inconsistent with the wording of section 218, which provides that the limitation period can be extended ‘on application'”. Second, the approach defeats the whole purpose of limitation periods because it forces a defendant to go through the expense and inconvenience of a full trial on the merits for a determination on limitations, notwithstanding that a limitation period is intended to eliminate the distractions, expense, and risks of litigation after the prescribed time has passed.

2. The Passage of Time Increases the Likelihood of Prejudice to the Defendant

The ABCA affirmed the approach of balancing the four factors in section 218(3), which in this case revolved primarily around the third factor (prejudice to the defendant). The ABCA found that it was reasonable for the ABQB to infer prejudice from the passage of time, noting that this is the presumption behind statutes of limitation. The allegations in Brookfield’s claim occurred over 60 years ago, and as such, witnesses and documentary evidence were difficult to identify and were no longer available. The passage of time also made it difficult to establish the proper standard of care. The ABCA agreed that attempting to determine 1949 industry standards and the standard of care at that time would prejudice Imperial.

3. The Competing Policy Objectives of the Limitations Act and the EPEA

The ABCA also provided guidance on the fourth factor listed in section 218(3), which grants judicial discretion to consider “any other criteria the court considers to be relevant”. The ABCA found that policy considerations behind limitations statutes were relevant criteria that should be weighed. In particular, the ABCA noted the policy objectives of statutes of limitations that actions must be commenced within set periods so that defendants are protected from ancient obligations, disputes are resolved while evidence is still available, and claims are adjudicated based on the standards of conduct and liability in place at the time. However, on the other hand, the ABCA highlighted that the EPEA has a “polluter pays” objective where a polluter should not escape responsibility by the mere passage of time.

Implications

The ABCA’s decision in Brookfield changes the procedure for extending limitation periods in environmental contamination claims. Rather than waiting until trial, parties must bring section 218 applications early on. As a result, plaintiffs in contaminated sites claims should also carefully assess the impacts on defendants of the passage of time in making section 218 applications. Brookfield reinforces that a court will likely presume greater prejudice from a longer passage of time, especially if witnesses and evidence may be difficult to identify and the standard of care may be difficult to assess. Going forward, Brookfield suggests that the Court will take a practical approach to assessing prejudice against a defendant when deciding whether to extend limitation periods in contaminated site claims where the ultimate limitation period has passed.


This article has been republished with the permission of the authors. It was first published on the Bennett Jones website.

About the Authors

Laura Gill is called to the bar in Alberta and British Columbia and has a commercial litigation practice specializing in energy and natural resources, First Nations issues, and environmental matters. Laura advises clients on disputes in a wide range of corporate matters, including complex breach of contract claims and joint ventures.

Laura’s experience in the energy industry includes litigating disputes involving leases, right-of-way agreements, ownership stakes, royalties, gas supply contracts, farmout agreements, and CAPL operating agreements. Laura also acts on appeals and judicial review proceedings following decisions of regulatory bodies, in particular with respect to regulatory approvals for energy-related projects in Alberta and British Columbia.

Stephanie Clark has a general commercial litigation practice. Stephanie has assisted with matters before all levels of the Alberta court system. During law school, Stephanie held a student clerkship with the Honourable Mr. Justice Nicholas Kasirer at the Court of Appeal of Quebec, competed in the 2015 Jessup International Law Moot, and was awarded with the Borden Ladner Gervais Professional Excellence Award. Stephanie articled with the firm’s Calgary office prior to becoming an associate. 

Justin Duguay is an articling student at Bennett Jones.

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.

Provincial Environmental Obligations Prevail Over Federal Bankruptcy Laws – Supreme Court of Canada

by Paul Manning, Manning Environmental Law

Recently, the Supreme Court of Canada released its decision in the case of Orphan Well Association, et al. v. Grant Thornton Limited, et al.Orphan Well Association, et al. v. Grant Thornton Limited, et al. 

The decision writes another chapter in the long running saga of whether a company’s environmental regulatory obligations survive bankruptcy and, in particular, whether the company’s trustee in bankruptcy can disclaim an asset so as to avoid environmental liability. (See our blog post The Non-Polluter Pays: Creditor Roulette and Director Liability)

The Supreme Court has now decided in Orphan Well that, after going bankrupt, an oil and gas company must  fulfill provincial environmental obligations before paying its creditors.

Background

Redwater was an Alberta oil and gas company, which owned over a hundred wells, pipelines, and facilities when it went bankrupt in 2015.

Alberta has provincial laws requiring oil and gas companies to obtain a licence to operate. As part of the licence, companies have to “abandon” wells, pipelines, and facilities when they are done. This means permanently taking these structures down. They also have to “reclaim” the land by cleaning it up. Companies cannot transfer licences without permission from the Alberta Energy Regulator (AER), which they won’t receive if they haven’t met their responsibilities.

Most of Redwater’s wells were dry when it went bankrupt. Dismantling the sites and restoring the land would have cost millions of dollars more than they were worth. To avoid paying those costs, the the trustee in Orphan Well decided to disclaim (i.e. not to take responsibility for) the redundant wells and sites under the BIA. The trustee wanted to sell the productive sites to pay Redwater’s creditors.

The AER said that this wasn’t allowed under the BIA or provincial law and ordered the trustee to dismantle the disowned sites. The trustee argued that even if the AER was correct, the provincial abandonment orders were only provable claims under the BIA. In this case, this meant the money would first go to pay Redwater’s creditors.

The Supreme  Court’s Decision

There were two main legal issues before the Supreme Court. The first was whether the BIA allowed the trustee disclaim the sites it didn’t want take responsibility for. The second was whether the provincial orders to remove structures from the land were provable claims under the BIA. If they were, that would mean the payment order set up in the BIA applied. Only money left, if any, after those payments were made, could be used to pay for taking the sites down.

The trial judge had ruled that the trustee was allowed to disclaim the disowned sites and the abandonment costs were only provable claims in the bankruptcy. The majority of judges at the Alberta Court of Appeal hearing had agreed.

The majority of judges at the Supreme Court disagreed. It ruled that the trustee could not disclaim  the disowned sites. It said the BIA was meant to protect trustees from having to pay for a bankrupt estate’s environmental claims with their own money. It did not mean Redwater’s estate could avoid its environmental obligations.

The majority also said the abandonment costs were not “provable claims”. These costs weren’t debts requiring payments; they were duties to the public and nearby landowners. This put the abandonment costs outside the BIA’s payment order scheme and as such, the majority ruled, there was no conflict between the federal and provincial laws.

(The minority of judges at the Supreme Court disagreed, arguing that there was a genuine conflict between the federal and provincial laws and the BIA being the federal law should prevail over the provincial regulations. Where a valid provincial law conflicts with a valid federal law, the federal law will normally prevail under the constitutional law “doctrine of paramountcy.”)

As the trustee had already sold or given up all of Redwater’s assets, the money from the sales was held “in trust” by the court during the lawsuit. This money must now be used to abandon and reclaim the land before anything is paid to any of Redwater’s creditors.

Click here for the full decision of the Supreme Court of Canada in Orphan Well.

_________________________________________________________________

Manning Environmental Law is a Canadian law firm based in Toronto, Ontario. Our practice is focused on environmental law, energy law and aboriginal law. 

Paul Manning is a certified specialist in environmental law. He has been named as one of the World’s Leading Environmental Lawyers and one of the World’s Leading Climate Change Lawyers by Who’s Who Legal. This article is only as a general guide and is not legal advice.

Canada: Environmental Issues In Expropriation

Article by Chidinma Thompson, Borden Ladner Gervais LLP

A. Indirect Expropriation through Environmental Regulation

Claims for indirect expropriation may arise through environmental regulatory regimes. Where legislative schemes operate to interfere with existing property rights, such interference may constitute de facto, or indirect, expropriation. One example of a legislative regime that has been the subject of indirect expropriation claims is the federal Species at Risk Act1 (the “SARA”). Under the SARA, the Governor in Council is empowered to make emergency orders to provide for the protection of certain wildlife species.2 The emergency protection order may extend not only to Crown land, but also private property.3 The SARA provides for a limited compensation scheme. The Minister may provide for reasonable compensation for losses suffered “as a result of any extraordinary impact of the application of” the emergency protection order.4 The Governor in Council may make regulations with respect to the procedures to be followed and the methods to be used to determine the compensation.5

The sage grouse order exemplifies how a SARA emergency protection order may give rise to an expropriation claim. The sage grouse order was the first emergency protection order to be issued under section 80 of the SARA. It was issued to protect the greater sage grouse population in Alberta and Saskatchewan, and came into force on February 18, 2014. The sage grouse is an endangered species under the SARA and Alberta’s Wildlife Act.6 Under the Wildlife Act it is an offence to “willfully molest, disturb, ore destroy a house, nest or den” of sage grouse. The sage grouse order restricted activities on 1,672 km2 of provincial and federal Crown lands in southeastern Alberta and southwestern Saskatchewan.

A Sage Grouse (Photo Credit: Miles Tindal / Calgary Herald)

In The City of Medicine Hat et al v Canada (AG) et al,7 LGX Oil and Gas and the City of Medicine Hat, which had interests in the Manyberries oil production site that was affected by the sage grouse order, brought a judicial review and constitutional challenge of the sage grouse order at the Federal Court of Canada. The applicants successfully resisted a summary dismissal motion brought by the Crown and subsequently commenced an action at the Alberta Court of Queen’s Bench for $123.6 million in compensation (including accelerated reclamation costs) for de facto expropriation of existing oil and gas mineral rights, leases and rights-of-way. This case is ongoing. At this point, the Governor in Council has not made regulations with respect to compensation. The Crown pleads that the emergency protection order is regulatory and, in the alternative, that compensation under the SARA is discretionary. In the further alternative, the Governor in Council had chosen not to make regulations, and the emergency order did not have an “extraordinary impact” on the plaintiffs.

Another case was Groupe Maison Candiac Inc v Canada (AG).8 This case concerns the second emergency protection order made under the SARA, which protects the western chorus frog. The western chorus frog is listed on the SARA’s list of endangered species as a threatened species in the provinces of Ontario and Quebec. The emergency protection order prohibits excavation, deforestation and construction within a two km2 area in the municipalities of La Prairie, Candiac and St-Philippe, Quebec to protect the frog and its habitat. This order was the first time a SARA emergency protection order restricted development on private land.

As a result of the western frog order, Groupe Maison Candiac Inc. (“Groupe Maison”) was forced to reduce its residential development by 171 units after construction was already underway and Groupe Maison had obtained the requisite municipal and provincial approvals. Groupe Maison brought a judicial review of the emergency protection order by way of a constitutional challenge and an expropriation claim. The Federal Court dismissed the application, finding that: (1) section 4(c)(ii) of the SARA is within the federal government’s jurisdiction over criminal law; and protected by the doctrine of ancillary powers, including jurisdiction over peace, order and good governance; (2) the western chorus frog order did not amount to expropriation that required compensation; and (3) the Parliament had already provided a mechanism for compensation under the SARA that applies in “extraordinary circumstances.”

In 2017, the Minister of Environment and Climate Change received three petitions to recommend to the Governor in Council for an emergency order to protect the southern mountain woodland caribou population. The Minister conducted an Imminent Threat Assessment and, on May 4, 2018, determined that the southern mountain caribou faced imminent threats requiring intervention for recovery. An emergency protection order may be forthcoming for Alberta and British Columbia. The SARA public registry and the Canada Gazette will provide updates on this matter.

B. Polluter Pays in Expropriation of Contaminated Lands

Alberta’s Environmental Protection and Enhancement Act9 (the “EPEA”) is another environmental protection legislation that affects expropriation claims. As one of its purposes, the EPEA adopts the “polluter pays” principle to address contamination. The EPEA includes three regulatory mechanisms with respect to contamination: (1) Part 5 Division 1 concerns the release of substances generally; (2) Part 5 Division 2 concerns contaminated sites designation; and (3) Part 6 deals with conservation and reclamation. Further, the EPEA expressly acknowledges an affected person’s recourse to court through private civil claims.10 Some of the key concepts related to the three regulatory mechanisms are considered below.

Part 5 Division 1 of the EPEA deals with the release of substances into the environment. Under section 112, the person responsible for the substance has the duty to take remedial measures with respect to any release of same.11 Environmental protection orders may also be issued to the person responsible for the substance where the release is causing, has caused or may cause an adverse effect.12

The statutory definition of “person responsible” includes: (1) owner and previous owner of substance; (2) every person who has or has had charge, management or control of the substance; (3) successor, assignee, executor, administrator, receiver, receiver‑manager or trustee of (1) to (2); and (4) principal or agent of (1) to (3).13 The “person responsible’ excludes, unless they release new or additional substances: (1) a municipality in respect of land shown on its tax arrears list, or land acquired by it by dedication or gift of an environmental reserve, municipal reserve, school reserve, road, utility lot or right of way; (2) a person who investigates or tests the land for the purpose of determining the environmental condition of that parcel; and (3) the Minister responsible for the Unclaimed Personal Property and Vested Property Act, with respect to a parcel of land to which that Act applies. Thus, it appears that the notion of “person responsible” is based on one’s relationship to the substance/release only, and not based on the cause of the release.

Part 5 Division 2 of the EPEA provides for the designation of contaminated sites. Under section 129 of the EPEA, the Director may designate a site as a contaminated site and issue an environmental protection order to a person responsible for the contaminated site. The Director must consider several factors before issuing an environmental protection order for a contaminated site, including: (1) due diligence of the owner or previous owner; (2) whether the presence of the substance at the site was caused solely by the act or omission of another person, other than an employee, agent or person with whom the owner or previous owner has or had a contractual relationship; and (3) the price the owner paid for the site and the relationship between that price and the fair market value of the site had the substance not been present.14

The “person responsible for the contaminated site” means: (1) a person responsible for the substance that is in, on or under the contaminated site; (2) any other person who the Director considers caused or contributed to the release of the substance into the environment; (3) the owner of the contaminated site; (4) any previous owner of the contaminated site who was the owner at any time when the substance was in, on or under the contaminated site; (5) a successor, assignee, executor, administrator, receiver, receiver‑manager or trustee of a person referred to in any of subclauses (2) to (4); and (6) a person who acts as the principal or agent of a person referred to in any of subclauses (2) to (5). As was the case with Division 1, the definition of “person responsible for the contaminated site” again excludes municipalities and investigators. In this case, the test is based on the relationship to the substance/release and the property.

In practice, Division 2 is rarely used. Designation will only occur as a last resort when there are no other appropriate tools. There have only been five instances of designation of a contaminated site since 1993 and no environmental protection order appears to have been issued under Division 2. Division 2 offers options otherwise unavailable, including the allocation of responsibility to present and past site owners who may have contractually assumed liability for the pollution, remedial actions plans and agreements with the Director, and the apportionment of costs of remedial work among responsible parties. The Minister may also pay compensation to any person who suffers loss or damage as a direct result of the application of Part 5 Division 2.15

Environmental contamination may affect the valuation of expropriated property. Under the Expropriation Act,16compensation for expropriation is based on the market value of the expropriated land, which is in turn “the amount realized if sold in the open market by a willing seller to a willing buyer”,17 and provable damages. The determination of market value accounts for everything that is present in the site, except for the legislated exclusions found in section 45 of the Expropriation Act.

Contamination introduces issues in valuing expropriated property, given the uncertainty in liability exposure, scope, duration, risk and stigma. Below are some case law on the interaction between the expropriation of contaminated lands and the “polluter pays” principle.

In Toronto (City) v Bernardo,18 the respondent Bernardo was the registered owner of a property and permitted the corporate respondent’s scrap metal business on property rent-free by oral licence to occupy. The City of Toronto served and published notice to expropriate property. The City conducted environmental testing on property which showed contamination, and was advised that clean-up costs for property could be in range of $250,000 to $750,000. The appraised value of the property was $242,500 before taking into consideration site remediation or clean-up costs. Given the estimated cost of remediation which exceeded value of land, the City’s offer of compensation to the respondents was $1. The respondents did not request compensation hearing but refused to surrender possession. The City brought motion for order to take possession. The Ontario Supreme Court granted the City’s motion as the respondents had the opportunity to contest the City’s offer of compensation in proceedings before the Ontario Municipal Board and chose not to take any action to assert claims for compensation.

In Thompson v Alberta (Minister of Environment),19 the claimant had purchased land for the sum of $1 million. At the time of purchase, the land was not part of any property acquired by the Crown for a proposed transportation corridor. The Crown reviewed roadway plan within months of claimant’s purchase and determined that land was a necessary part of the corridor. The Crown expropriated land for $1,025,000. The claimant brought action for increased compensation. The action was allowed in part. The claimant was granted $1,120,000. The Crown’s valuation discounted the value of the property because of the unknown cost of filling or remediating a wetland (which is 50% of the property) for future residential development, which posed an economic challenge for a prospective purchaser. The Court found that the cost of remediation calculated by the Crown was based on premature assumption that land was to be developed in isolation with no possible cost sharing by adjacent developers. The Court, however, recognized that a discount must be applied for market value because of this possibility of remediation.

In Ville de Saint-Jean-sur-Richelieu c Cour du Québec,20 the subject property included a grocery store, snack-bar and a retail marina fuel distribution outlet for vessels navigating on Chambly canal, and a gas station for road vehicles. The issue before the Court was whether the costs of decontamination should be deducted from the compensation awarded for expropriation, based on the duty to remediate. It was argued that evidence demonstrated that there was a spill onto the neighbouring property, therefore the question as to cessation of activities no longer applied, and the mandatory provisions of the EQA regarding decontamination was triggered. The Tribunal Administratif du Québec (the “TAQ”) ruled that the total remediation cost of $450,000 be paid by the owner of the property, 9092-9340 Québec Inc. (“9092”) and should be deducted from its expropriation indemnity award. The value of the expropriated property, after deduction of the decontamination costs, was established as being $31,000.


Lock 9, the southern terminus of the Chambly Canal, is located in the town of St.-Jean-Sur-Richelieu.

The Court of Quebec allowed the appeal, holding that the finding of the TAQ was unreasonable and profoundly unfair. Were it not for the expropriation, 9092 could have ceased its activity at its own time, negotiated with a willing purchaser and, based upon the projects of the purchaser, negotiated the decontamination works remaining according to the circumstances. The City deprived 9092 of its right to complete the decontamination work at the time that it deemed the most suitable to its interests and subject to conditions that would have been more favourable. By forcing 9092 to assume the costs of decontamination estimated by the City engineer, the TAQ deprived the owner of the quasi-totality of the value of the expropriated property. The City brought a judicial review application which was subsequently dismissed. The Court found that the systemic analysis undertaken by the Court of Quebec highlights the significant defects and the fragility of the TAQ ruling to assign full liability to 9092 for the estimated costs of decontamination of the property.

Case law suggests that the law is not blind to the causation of the contamination when evaluating the market value of an expropriated property that has been contaminated. Liability for the remediation of contaminated land in Alberta clearly rests with “person responsible for the substance” and, in the rare case of designated contaminated sites, “person responsible for the contaminated site.” Liability for contamination does not run with the land in Alberta.

This leads to the question of what is the intent of the law in respect of a faultless landowner for the environmental depreciation of land in the expropriation context. The principles of statutory interpretation apply to deem the legislature as knowing all the law and the necessary statutory language to give effect to its intention. The EPEA and the Expropriation Act are meant to be interpreted harmoniously as a scheme in cases of expropriation involving contamination. The Expropriation Act is a remedial statute. Accordingly, it must be given a broad and liberal interpretation consistent with its purpose.

Currently, the right of a faultless landowner to recover from a “person responsible” remediation costs in civil claims (whether under the common law or the EPEA) is a chose in action. This chose in action does not appear to be considered in the calculation of market value in expropriation. In the new era of third-party litigation funding, a chose in action for remediation costs is a valuable element that may offset some or all of the discounts associated with contaminated land, even in an open market.

Footnotes

1 Species at Risk Act, SC 2002, c 29 [SARA].

2 SARA, s 80(1).

3 SARA, s 80(4)(c)(ii).

4 SARA, s 64(1).

5 SARA, s 64(2).

6 Wildlife Act, RSA 2000, c W-10.

7 The City of Medicine Hat et al v Canada (AG) et al, Federal Court of Canada File No. T-12-14. See also Federal Court of Canada, Proceeding Queries, Recorded Entries for T-12-14, online: click here.

8 Groupe Maison Candiac Inc v Canada (AG), 2018 FC 643.

9 Environmental Protection and Enhancement Act, RSA 2000, c E-12 [EPEA].

10 EPEA, ss 217, 219, 227-228.

11 EPEA, s 112.

12 EPEA, ss 113-114.

13 EPEA, s 1(tt).

14 EPEA, s 129(2).

15 EPEA, s 131.

16 Expropriation Act, RSA 2000, c E-13.

17 Expropriation Act, ss 41-42.

18 Toronto (City) v Bernardo, 2004 CanLII 5760 (ONSC).

19 Thompson v Alberta (Minister of Environment), 2006 ABQB 510.

20 Ville de Saint-Jean-sur-Richelieu c Cour du Québec, 2017 QCCS 4832.


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.

This article was first published on the BLG website. It is re-published with the permission of the author.

About the Author

Chidinma Thompson is a partner in Commercial Litigation Group at Borden Ladner Gervais LLP‘s Calgary office. She practices commercial litigation and arbitration, project approvals, environmental defence and compliance advisory. Her practice covers a broad range of sectors including oil and gas, electricity, renewable energy, municipal and land development. She has experience in regulatory hearings before the Alberta Energy Regulator and its predecessors, Alberta Utilities Commission, and the Calgary Subdivision and Development Appeal Board. She has appeared before the Alberta Provincial Court, Court of Queen’s Bench and the Court of Appeal.

Environmental Convictions & Contaminated Property: Ontario Summary for 2018

The Ontario Ministry of Environment, Conservation, and Parks (MOECP) publishes publishes an annual report on environmental penalties issued in the previous calendar year for certain land or water violations for companies subject to the Municipal Industrial Strategy for Abatement (MISA) Regulations.  Companies subject to the MISA Regulations belong to one of the nine industrial sectors found in the Effluent Monitoring and Effluent Limits (EMEL) regulations.  The summary report for 2017 was published in the Spring of 2018.

Under the MISA Regulations, environmental penalties can range from $1,000 per day for less serious violations such as failure to submit a quarterly report under the MISA Regulations  to $100,000 per day for the most serious violations, including a spill with a significant impact.

For serious offences under the Ontario Environmental Protection Act and Ontario Water Resources Act, the maximum and minimum corporate fines for each day on which the offence occurs is as follows:

  1. not less than $25,000 and not more than $6,000,000 on a first conviction;
  2. not less than $50,000 and not more than $10,000,000 on a second conviction; and
  3. not less than $100,000 and not more than $10,000,000 on each subsequent conviction.

In the past, Ontario Environment Ministry would publish a more comprehensive environmental enforcement report that covered all penalties, fines and convictions.

In a 2011 blog, Diane Saxe, Ontario’s former Environmental Commissioner and former partner at Siskinds Law Firm, wrote that  a typical year, the Ontario Environment launches about 150 to 175 prosecutions. About 75% of them are resolved by guilty pleas; about 5% are acquitted at trial; about 10% are convicted of something at trial; about 10% are withdrawn.

As the end of the calendar year approaches, the staff at Hazmat Management Magazine thought it would be useful to review some of the more significant environmental convictions related to contaminated property.  That summary can be found below.

Environmental Consultant and an Individual fined $50,000 for False RSC Incidents

In the Spring, an Ontario-based consulting firm that provides environmental, geotechnical, and hydrogeological consulting services was convicted when an employee falsified  Environment Ministry Letters of Acknowledgement to Records of Site Conditions (RSCs) for two properties.

An RSC is a statement on the environmental condition of a property and is typically a requirement by a municipality if a contaminated property is remediated and a redevelopment is proposed that involves a more sensitive land use (i.e., from industrial to residential).  The environmental consultant that performed the environmental site investigation at the site (a Phase I ESA and possibly a Phase II ESA) submits an RSC to the Environment Ministry.  The Environment Ministry issues an acknowledgement of the RSC.

The offences occurred in the Spring of 2014 and winter of 2015.  When the Consulting firm realized one of its employees had issued falsified documents related to the RSCs it immediately informed the affected owners of the related properties.  In the Fall of 2015, an owner/developer of another construction project in the Greater Toronto Area notified the ministry of concerns relating to their RSC submissions of which the consulting firm in question was involved.  At that time, the Environment Ministry commenced an audit and investigations.

The consulting firm was found guilty of one violation under the Environmental Protection Act (EPA), was fined $35,000 plus a Victim Fine Surcharge (VFS) of $8,750, and was given 30 days to pay. On the same date, former employee was found guilty of two violations under the EPA, was fined $15,000 plus a VFS of $3,750, and was given 18 months to pay.

Muskoka Cottage Owner fined $30,000 for Discharging Fuel Oil into Water Well

In the winter, a Muskoka homeowner was convicted for discharging fuel and other petroleum hydrocarbon into a water well which can impair the quality of the water. He was fined $30,000 plus a victim surcharge with 6 months to pay .

The conviction stems from an incident that occurred in the spring of 2016.  On May 16, 2016, the homeowner of a cottage on Lake of Bays poured heating fuel oil down a neighbor’s well, damaging the quality of the water in the well. The incident was referred to the Environment Ministry’s investigations and Enforcement branch, resulted in charges and one conviction through a guilty plea.

Residential Property Owner fined $3,000 for Falsely Claiming Property was Remediated

In the winter, a homeowner in Guelph was convicted of failing to apply with two provincial officers orders issued under the environmental protection act (EPA) . The homeowner was fined $3,000 plus a victim fine surcharge of $750 and was given 15 days to pay the fine .

The violation occurred in 2013 when the homeowner bought a residential property in Guelph , which earlier had been contaminated with oil fuel from a historic spill at the property . In the December of 2014, the homeowner put the residence up for sale.  The Environment Ministry subsequently received a complaint that the house was up for sale but had not been adequately remediated.

During the course of its investigations, the Environment Ministry found the previous owner had claimed the property had been remediated but discovered that no remediation had been conducted.  An Order was issued by the Environment Ministry for all documentation related to any remediation at the property to be submitted.  Despite providing an extension on a submission date, the not information was provided to the Environment Ministry.

The incident was referred to the ministry’s Investigations and Enforcement Branch, resulting in charges and the conviction against the property owner.

Fine of $30,000 for Discharging Contaminants and Illegal Operation of Waste Disposal Site

In the winter, a business located in the County of Essex and its owner was convicted of three offences under the Environmental Protection Act( EPA) and was also fined $30,000 for discharging dust that cause and was likely to cause an adverse effect, and being deposited at a property that is not allowed nor an approved waste disposal site.

A business owner in Essex County accepted 189 truckloads of  construction waste in 2014 despite the fact that property was not approved as a waste disposal site.

In 2015, the business owner was operating a farm tractor to turn soil at the site. The operation resulted in the release of plumes of dust which adversely affected nearby residents and their properties . The incident was referred to the Environment Ministry’s Investigations Branch.

 

Developer takes Alberta to appeal board over former Edmonton wood treatment plant

As reported by Global News, Cherokee Canada is fighting five enforcement orders imposed by Alberta Environment and Parks (AEP) connected to the former Domtar Wood Treatment Facility located in Edmonton.  AEP has been conducting an investigation on properties associated with the former Wood Treatment Plant. As a result of the investigation, a number of Enforcement Orders were issued to the current owners, Cherokee Canada.

Nearby residents, concerned by off-site migration of wood treatment chemicals, have been kept up-to-date of the results of the AEP investigation and subsequent enforcement actions. Contaminants from a historical wood treatment processing plant continue to exist on property formerly occupied by the Domtar Wood Treatment Plant.  This contamination, which originated prior to 1987, consists of benzene, dioxins and furans, free hydrocarbons, naphthalene, polycylic aromatic hydrocarbons (PAH) mixtures, and pyrene.

AEP stated in a news release that it issued the Enforcement Orders to ensure the responsible parties implement appropriate remedial measures and mitigate the potential risks that have been identified.  The latest Enforcement Orders require that the source of the contamination be controlled and remedial measures be implemented in specific areas of the property.

Off-site testing at lands adjacent to Cherokee Canada development (Photo Credit: CTV Edmonton)

Results of off-site testing for contamination in early 2018 found that contamination had not migrated off-site and that there are no health concerns in the surface soil of people’s properties. The off-site testing program was conducted by an independent third-party consulting firm under the direction of AEP.

Cherokee Canada, the developer has started turning the site of the old Wood Treatment Plant in northeast Edmonton into a new residential community but the current and ongoing legal proceedings have halted the project.  “It’s been very difficult because it’s effectively frozen our activities for three years now,” said John Dill, Cherokee Canada’s managing partner.  “It’s very expensive to go through this process, ” he added.

Houses have already been built in the neighbourhood but recently, the AEP questioned the safety of the soil.  AEP said third party testing at the site found chemicals dangerous to human health. The enforcement orders require Cherokee to remediate any contamination.

“The core aspect of these orders is to basically remove potentially large amounts of soil from these sites,” said Gilbert Van Nes, general counsel for the Environmental Appeals Board. “Domtar and Cherokee disagree that this is necessary.”

Both Cherokee Canada and Domtar have completed remediation efforts but AEP, through the enforcement orders, are claiming that they didn’t go far enough.

“Our approach was to take the contaminated soil, isolate it in a separate soil berm — again, a common practice in other jurisdictions — and ensure the soil was protected from exposure to other receptors, humans, animal,” Dill said.  “The disagreement is over how we can remediate this site so it’s safe for residential standards so that we can complete our residential development and restore the site that was previously contaminated to productive use.”

Three environmental experts are heading up the independent appeal board.  The board will pass its findings on to the environment minister and Shannon Phillips will make the final decision on whether construction can resume. However, a decision is not expected until December.

A map shows the former site of the Domtar creosote plant. (Photo Credit: CBC)

 

Rare Jail Sentence for Environmental Offence in Canada

On August 21, 2018, Collingwood Prime Realty Holdings Corp. and its director, Mr. Issa El-Hinn, were sentenced in the Ontario Court of Justice for offences under the Canadian Environmental Protection Act, 1999 related to contraventions of the PCB Regulations.

The charges stem from old electrical transformers and capacitors in use on the former Goodyear property at 101 Mountain Rd., which is now owned by Collingwood Prime Realty.

The property at 101 Mountain Rd., used to be a Goodyear plant. Erika Engel/CollingwoodToday

The court sentenced Mr. El-Hinn to a 45-day jail term, which will be served on weekends, for failing to comply with an environmental protection compliance order. The Court also sentenced the corporation and Mr. El-Hinn to pay a combined penalty of $420,000 to be directed to the federal Environmental Damages Fund.

On April 30, 2015, Environment and Climate Change Canada enforcement officers launched an investigation following the company’s failure to comply with an environmental protection compliance order. The investigation revealed that two electrical transformers and eight electrical capacitors contained higher-than-allowable PCB levels and that the equipment had not been sent for destruction to an authorized facility. The defendants pleaded guilty on September 26, 2017, to ten counts of contravening the PCB Regulations made pursuant to the Canadian Environmental Protection Act, 1999, and one count of failing to comply with an environmental protection compliance order.

As a result of this conviction, the company’s name will be added to the Environmental Offenders Registry.

PCBs are toxic industrial chemical substances that are harmful to aquatic ecosystems and species that feed primarily on aquatic organisms.

Earlier this year, Collingwood Fire Department successfully prosecuted Collingwood Prime Realty Holdings Corp., and its owner El Hinn for multiple fire code violations at the property at 101 Mountain Rd.

Mine fined $100,000 for not Monitoring Effluent

On August 20, 2018, Lupin Mines Incorporated was ordered in the Nunavut Court of Justice to pay $100,000 after pleading guilty to a violation under the Fisheries Act related to the Metal and Diamond Mining Effluent Regulations. Of the total penalty, $80,000 will be directed to the Environmental Damages Fund.

An investigation launched by Environment and Climate Change Canada enforcement officers revealed that Lupin Mines Incorporated did not carry out an environmental effects monitoring study within the prescribed period, contrary to the requirements of the Metal and Diamond Mining Effluent Regulations. Lupin Mines Incorporated has since completed the required study.

Owners and operators of mining companies are required by law to conduct environmental effects monitoring studies that examine the potential effects of their effluent (discharge) on fish populations and aquatic invertebrates.

As a result of this conviction, the company’s name will be added to the Environmental Offenders Registry.

Environment and Climate Change Canada is responsible for the administration and enforcement of the pollution prevention provisions of the Fisheries Act, which prohibit the deposit of deleterious substances into water frequented by fish. The Metal and Diamond Mining Effluent Regulations authorize the deposit of effluent, provided that conditions prescribed in the Regulations are observed.

Lupin Gold Mine, Nunavut

Environmental Consultant’s Disclaimer of Liability to Vendor effective against Third Party Purchaser

by Stanley D. Berger, Fogler Rubinoff

On July 23, 2018 the Court of Appeal for Newfoundland and Labrador in the case of Community Mental Health Initiative Inc. v. Summit Lounge Ltd. 2018 NLCA 42 upheld summary judgment dismissing a purchaser’s claim against two engineering companies (consultants) alleging negligence in the conduct of a Phase 1 Environmental Site Assessment performed for the vendor. The agreement between the consultants and the vendor and the final report both indicated that the assessment was prepared solely for the benefit of the vendor and that the consultants accepted no responsibility for any damages suffered by any third party. Significantly, the plaintiff-purchaser had knowledge of the disclaimer, having been provided with a copy of the final report by its real estate agent prior to the closing of the transaction. The Court of Appeal referred to the Supreme Court of Canada’s decision in Edgeworth Construction ltd. v. N.D. Lea & Associates Ltd. [1993] 3.S.C.R. 206 as well as decisions from appeal courts in Ontario Wolverine Tube (Canada) Inc. (1995) , 26 O.R. (3d) 577 and B.C., Kokanee Mortgage M.I.C. Ltd. 2018 BCCA 151 and summarized the legal principles as follows: (at par. 23) “… an express disclaimer of liability can be an effective bar against a claim by a third party who relied on work in the knowledge of the disclaimer. Permitting third parties to rely on reports which are expressly protected by a disclaimer would undermine the ability of contracting commercial parties to govern their own affairs.”

IMPLICATIONS FOR REAL ESTATE TRANSACTIONS AND ENVIRONMENTAL CONSULTANTS?

The long established principle of privity of contract i.e. that the rights and obligations in a contract apply only to the parties to the contract have been further tested by this decision. For engineering consultants, the decision highlights the importance of exacting express disclaimer clauses restricting responsibility for the reporting information to the party retaining them. For purchasers of real estate, it reinforces the necessity of obtaining indemnities from the vendor for undiscovered contamination or if that is not realistic, retaining an independent environmental consultant to verify any consulting reports given to them by the vendor.

This article was first published on the Fogler Rubinoff LLP website.

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About the Author

Mr. Stanley Berger serves as the Partner at Fogler, Rubinoff LLP. Mr. Berger joined the law firm of Fogler Rubinoff on July 4, 2013. Before joining Fogler Rubinoff, he served for 14 years as Assistant General Counsel to Ontario Power Generation Inc (OPG). In that capacity he provided legal services on licensing, environmental assessment, regulatory compliance, liability, security, decommissioning and waste management to the Nuclear Division of OPG.  Mr. Berger provided strategic legal advice and representation on aboriginal litigation and participated in First Nation settlement negotiations. Prior to joining OPG, he served as the Deputy Director of the Law Division for Prosecutions for the Ontario Ministry of Environment. In that capacity he managed the prosecution staff and helped shape prosecution policy. 

Couple admits illegally storing 4,500 tons of hazardous waste in warehouse

As reported in the St. Louis Post-Dispatch, a husband and wife recently plead guilty to a U.S. federal charge and admitted improperly transporting 4,500 tons of hazardous waste and storing it in a warehouse near St. Louis, Missouri.

The couple, both in their 60’s, pleaded guilty in U.S. District Court in St. Louis to a misdemeanor charge of placing someone in danger of death or serious bodily injury from a hazardous waste.

Green Materials LLC facility in Missouri (Photo Credit: Robert Patrick, Post Dispatch)

Their company, Missouri Green Materials LLC, Missouri Green Materials LLC stored a large quantity of spent sandblasting materials inside a warehouse located in the town of Berger, approximately 70 miles west of St. Louis. They couple admitted that they arranged for the transport and storage of the hazardous waste from Mississippi, and failed to tell both the trucking companies that hauled the waste and the personnel that unloaded it of the danger. Their storage facility was not properly permitted was not registered as a permitted hazardous waste storage or recycling facility. It is important to note that there are many waste removal services around to dispose of this for you. Firms range from Bulldog Rubbish Removal to a wide-variety of other waste removal services. (Bulldog Rubbish Removal is a great example, they maybe located in Melbourne, Australia but… with great customer reviews, these are the companies to make sure you keep an eye out for).

The sandblasting waste materials are considered to be hazardous because they contain amounts of certain metals, including cadmium, that exceed regulatory limits established by the Missouri Department of Natural Resources and the U.S. Environmental Protection Agency (U.S. EPA).

The materials were stored in a warehouse in a flood plain for more than four years. There are no indications of any release of the materials from the warehouse.

When it comes to storing products in a warehouse you need to ensure that all of the resources kept are correct under the laws of the area. It should also be kept to the correct health and safety regulations to ensure none of the workers are hurt. If everything is kept safely then it will also increase productivity. If you would like to increase productivity then you should take a look at Fishbowl Inventory.

The couple have agreed to pay $1.5 million to the U.S. EPA for the costs of dealing with the waste. They could face probation or a sentence of six months behind bars for the crime under federal sentencing guidelines.

The source of the sandblasting waste was for a site in Mississippi. An Ohio company, U.S. Technology Corp had been buried the waste. The company was repeatedly ordered by regulators to remove it.

In 2016, the U.S. EPA and U.S. Technology signed a consent agreement whereby the company agreed to remove the waste from Green Material’s facility in Missouri and test the site for soil contamination. According to prosecutors, this work was never performed.

U.S. Technology and president Raymond Williams, 71, both pleaded not guilty in the case. A hearing has been scheduled to change both pleas later in June.

Some sandblasting waste is classified as hazardous