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Environmental Due Diligence And Managing Environmental Risk – Part 1: Overview Of Saskatchewan Environmental Regulatory Landscape

Written by Christopher J. Masich, McKercher LLP

Today environmental due diligence and managing environmental risk are fundamental aspects of most (if not all) commercial transactions. Whether acting for developer, buyer, seller, purchaser, lessor, lessee, or financier, and whether in the context of M&A, real estate, project development or otherwise, some form of environmental due diligence or environmental risk management is necessary. Due diligence leading to the discovery of environmental liability (or even the potential of environmental liability) often causes an instinctive negative reaction. Fortunately, proper environmental risk management may be the difference between closing a transaction with economic success or not. To ensure economic success, it is incumbent upon legal counsel to assist clients in completing environmental due diligence and managing environmental risk.

This Resource Update is the first of a series of updates that will summarize the range of possible environmental issues, the patchwork provincial and federal regulations in Saskatchewan, the differences among Saskatchewan’s key industries, and the nuances of each type of commercial transaction. A prerequisite to any discussion of environmental due diligence and environmental risk management is a strong understanding of environmental regulations and potential liabilities that exist at common law in Saskatchewan. These are discussed in this Resource Update.

The Saskatchewan Environmental Regulatory Landscape

Environmental regulation in Saskatchewan is a patch-work of provincial and federal legislation administered by several government departments. While the management and protection of the environment in Saskatchewan is principally (but not exclusively) provided for under The Environmental Management and Protection Act, 2010, many environmental matters and industries with environmental impacts may also be regulated under the following Saskatchewan legislation and regulations promulgated under these Acts:

  • The Agricultural Operations Act
  • The Cities Act
  • The Conservation Easements Act
  • The Crown Minerals Act
  • The Dangerous Goods Transportation Act
  • The Ecological Reserves Act
  • The Environmental Assessment Act
  • The Environmental Management and Protection Act, 2010
  • The Fire Safety Act
  • The Fisheries Act (Saskatchewan), 1994
  • The Forest Resources Management Act
  • The Heritage Property Act
  • The Management and Reduction of Greenhouse Gases Act
  • The Mineral Resources Act, 1985
  • The Mineral Industry Environmental Protection Regulations, 1996
  • The Municipalities Act
  • The Natural Resources Act
  • The Oil and Gas Conservation Act
  • The Pest Control Act
  • The Pipelines Act, 1998
  • The Provincial Lands Act, 2016
  • The Sale and Lease of Certain Lands Act
  • The Public Health Act, 1994
  • The Reclaimed Industrial Sites Act
  • The Saskatchewan Employment Act
  • The Water Security Agency Act
  • The Weed Control Act
  • The Wildlife Act, 1998
  • The Wildlife Habitat Protection Act

This list is illustrative only and not exhaustive of all Saskatchewan environmental legislation, and not inclusive of applicable Federal legislation. Once due diligence has been “scoped” based on the particular industry and transaction, legal counsel and environmental consultants will fully review applicable Saskatchewan and Federal legislation.

In addition to Government legislation and regulation, environmental liability may be based on traditional common law tort claims of private and public nuisance, riparian rights, strict liability, trespass, negligence and negligent misrepresentation, deceit and fraudulent misrepresentation, breach of the duty to disclose, breach of the duty to warn, breach of fiduciary duty and waste. The following is a brief summary of each of these common law tort claims.

  • Private Nuisance. Private nuisance provides that a defendant may not cause substantial or unreasonable interference with the plaintiff’s use and enjoyment of its land.
  • Public Nuisance. Public nuisance is broader than private nuisance in that it confers a right of action for damages arising from the defendant’s use of its land even though no rights to the plaintiff’s land have been affected, but is restricted in that a plaintiff can only claim if it has suffered special or particular damage over and above that suffered by the public at large.
  • Riparian Rights. Riparian rights protect a plaintiff’s right to the flow of waters over its property without serious alteration in quantity or quality.
  • Strict Liability (Rylands v. Fletcher). Strict liability is a tort that varies slightly from negligence, nuisance and trespass. It generally requires the use of the land to be ‘non-natural’, followed by an escape, leading to mischief and compensable damages.
  • Trespass. Trespass is any invasion of property however slight and, in the context of environmental trespass, it must be proven that the defendant intentionally caused the contaminant to enter the plaintiff’s land.
  • Negligence and negligent misrepresentation. A successful claim of negligence requires the plaintiff to prove that the defendant breached a duty of care owed to the plaintiff, which caused the plaintiff to suffer damages.
  • Deceit or fraudulent misrepresentation. Fraudulent misrepresentation occurs when a defendant knowingly makes a false representation with the intent to deceive the plaintiff, and the representation induces the plaintiff to act, resulting in damages.
  • Breach of the duty to disclose. Similar to fraudulent misrepresentation, a party may be under a duty to disclose information that would be a benefit to the other party. This duty generally arises under the scope of a fiduciary duty, but may also exist under certain contractual relationships, such as real property transactions and lease transactions.
  • Breach of duty to warn. In certain contexts, there is a specific duty to warn that exists separate and apart from the duty to disclose and fiduciary duty. The duty to warn arises when facts or circumstances exists which may cause another person physical damage or harm. In the context of the environment, this duty may arise in manufacturer product liability cases or with the mishandling of hazardous substances.
  • Breach of fiduciary duty. The fiduciary duty is a special duty of utmost good faith and includes a duty of confidentiality and a duty to make full disclosure.
  • Waste. In lessor and lessee relations, a lessee may not commit waste against the lessor’s reversionary interest. Waste in this sense causes lasting injury to the reversion interest and may be due to a positive act or due to neglect or omission.

Environmental claims are often grounded in contract law. It is not possible to summarize the countless ways a contractual breach may occur but, in the context of the environment, such claims tend to relate to: onsite (historic) contamination, migration of contaminants, misrepresentations, indemnity claims, actions or omissions under lease tenancies and insurance coverage denial.

In Part 2 of our series on Environmental Due Diligence and Managing Environmental Risk, we will discuss early stage planning and scoping due diligence to set parameters and establish the framework for the due diligence process – arguably the single most important task of a transaction.

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 Author

Christopher J. Masich is a Partner at McKercher LLP practicing in the Firm’s Saskatoon office where he maintains a commercial transactions and project development practice focusing on Saskatchewan key economic sectors – energy, natural resources and agricultural. Additionally, Christopher provides special counsel on environmental risk management and environmental regulation across all industry sectors.

ERIS Introduces Environmental Data Package for Mexico

In an effort to further expand coverage of North America, ERIS recently announced the launch of The Mexico Package for property due diligence, including: Database Reports, Fire Insurance Maps (FIMs), Aerials and a current Topographic Map.

MEXICO DATABASE REPORT
• Offers the familiar and easy-to-use format of the Canadian version, including an Executive Summary, a Detail Report, a map of the project property and surrounding sites within the search radius (for 1 mile), an Aerial, current Topo Map, and Unplottables.
Hyperlinked Page Numbers (in the Table of Contents and Executive Summary), Map Keys and Data Sources, to quickly access detailed information and/or the Definitions section.
• Searches 11 essential data sources, including gas stations; PCBs; collection, storage, use and disposal of hazardous industrial wastes and emissions to air, water and soil.
• Future enhancements will include Historical Topographic Maps.

MEXICO FIRE INSURANCE MAPS (FIMs)
FIM images are included in The Mexico Package, and where not available, a no records found letter will be provided for your due diligence.

MEXICO AERIALS
ERIS maintains a significant collection of Aerials, from 1991 to present day, covering all of Mexico.

PRICING
The Mexico Package: $300 USD

HOW TO ORDER
Order through your Regional Account Manager.

 

United States: Protect Your Company from Waste Liability

Written by: Viggo C. Fish, McLane Middleton

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

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

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

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

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

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

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

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

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

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

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About the Author

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