In the Sale of Property, Responsibility for Removal and Remediation of Underground Storage Tanks needs to be clear

Written by Stan Berger, Fogler Rubinoff LLP

On January 9, 2020, the British Columbia Supreme Court in Walton v. Warren 2020 BCSC 19 found in favour of the Purchaser when an undiscovered underground storage tank required removal and site remediation following closing. This ruling was given despite the Purchaser having signed off on an inspection report prior to closing. The purchase and sale agreement provided that the Seller had to ensure that any underground storage tank (UST) located on the property be removed and the surrounding soil remediated. The Seller was responsible for all costs. The Seller had to provide written confirmation before the Completion Date from the tank removal contractor and relevant provincial and local authorities that the remediation complied with provincial or local government laws. The Purchaser had to obtain and approve an inspection report 6 weeks before the completion date. The report recommended that a specialist company survey and sweep the property to determine the presence of buried oil tanks. The Purchaser’s realtor arranged for a scan of the property free of charge. This was followed by a scanning company’s report stating there was no evidence of any UST. The contract closed on schedule and almost 3 years later the basement of the property flooded. During a necessary drain replacement a UST was discovered requiring its removal and remediation at a cost of $42,000. The Purchaser sued the sellers.

The Judge found that the existence of the UST was unknown to the Seller at the time of the sale. The Seller argued that their obligation with respect to responsibility for any underground storage tank ended upon the closing. The Purchaser completed the purchase being satisfied with the condition of the property. The judge disagreed finding in the Purchaser’s favour.

“[62] There is no language in the Addendum which could be interpreted as limiting the defendants’ obligations only to those USTs that were discovered prior to the Completion Date or to those USTs of which they were aware. [63] The Addendum does not include any conditional language. For example, it does not say that the defendants are to remove and remediate “any oil tank that is discovered prior to the Completion Date” or “any oil tank that they are aware of prior to the Completion Date”.

Moreover the survival clause in the agreement contained no exceptions.

The lesson here is that courts are disinclined to infer any limit on the responsibility of a party when the language in the contract isn’t clear.

This publication is intended for general information purposes only and should not be relied upon as legal advice.


About the Author

Mr. Berger has practiced regulatory law for 37 years. He represents nuclear operators and suppliers, waste management operators, renewable energy operators, receivers-in-bankruptcy, municipalities and First Nations. He was an Assistant Crown Attorney in Toronto for 8 years, Senior counsel and Deputy Director for Legal Services/Prosecutions at the Ministry of the Environment for 9 years and Assistant General Counsel at Ontario Power Generation Inc for 14 years.
He is the author of a quarterly loose-leaf service published by Thomson Reuters entitled the Prosecution and Defence of Environmental Offences and the editor of an annual review of environmental law.
Mr. Berger was the President of the International Nuclear Law Association (2008-2009) and the founder, and President of the Canadian Nuclear Law Organization.

Are your Waste Transport Drivers Properly Trained under Ontario’s EPA?

Companies that hold an Environmental Compliance Approval (Waste Management System) for the transport of municipal waste, liquid industrial waste, or hazardous waste or are registered under the Environmental Activity Sector Register (EASR) for waste transport are required to have their drivers undergo specific environmental training.

Ontario’s General – Waste Regulation (Ontario Regulation 347) under the Ontario Environmental Protection Act ensures that wastes are effectively managed from the point of their generation to where they are ultimately processed or disposed of.  To provide this necessary control, the regulation includes definitions for different waste types and detailed requirements for a range of waste management activities.

The Ontario Ministry of the Environment, Conservation, and Parks (MOECP) Guideline for Training Requirements for Drivers of Waste Transportation Vehicles (Guideline C-12, PIBS 7914e01) provides information on environmental driver training related to the transport municipal waste, liquid industrial waste or hazardous waste.

The Guidelines outline the major areas that drivers of vehicles used for the transportation of municipal waste, liquid industrial waste or hazardous waste need to be trained on which includes:

  • The operation of the vehicle and waste management equipment,
  • Relevant waste management legislation, regulations and guidelines,
  • Major environmental concerns for the waste to be handled,
  • Occupational health and safety concerns for the waste to be handled, and
  • Emergency management procedures.

For more information on driver training requirements, contact John Nicholson, the editor of Hazmat Management Magazine.

U.S. OSHA Reveals Preliminary List of Top Ten Violations for 2019

Written by , GLE Associates, Inc.

Annually, around 5,000 workers die and millions are injured on the job in the United States. Many of these deaths and injuries are preventable, caused by United States Occupational Safety and Health Agency (U.S. OSHA) violations.

In September, U.S. OSHA revealed preliminary data about the top ten violations they’ve cited in 2019. The list is largely unchanged from 2018, with two violations trading ranks in the list (respiratory protection took the place of control of hazardous energy-lockout/tagout).

The data reveal the largest areas of concern for worker safety and opportunities for employers to improve.

Top Ten Violations

Rank Standard Number of Citations
1 Fall Protection – General Requirements (1926.501) 6,010
2 Hazard Communication (1910.1200) 3,671
3 Scaffolding (1926.451) 2,813
4 Control of Hazardous Energy – Lockout/Tagout (1910.147) 2,606
5 Respiratory Protection (1910.134) 2,450
6 Ladders (1926.1053) 2,345
7 Powered Industrial Trucks (1910.178) 2,093
8 Fall Protection – Training Requirements (1926.503) 1,773
9 Machine Guarding (1910.212) 1,743
10 Personal Protective Equipment – Lifesaving Equipment and Eye and Face Protection (1926.102) 1,411

Ontario to promulgate Excess Soil Regulations

After much speculation and delay, the Province of Ontario finally announced that the On-site and Excess Soil Regulation will take effect on July 1, 2020.  In a speech at the Excess Soil Symposium in Ajax, Ontario, the Environmental Minister, Jeff Yurek announced that the government is moving ahead with making changes to and finalizing the regulations under the Environmental Protection Act.

“As Ontario’s population continues to grow, we need to ensure our valuable resources and prime land don’t go to waste,” said Minister Yurek. “These changes will remove barriers for communities, developers and property owners to clean up and redevelop vacant, contaminated lands and put them back into productive use. This will benefit the local economy and create jobs, and keep good, reusable soil out of our landfills.”

Under the new regulations, Ontario is clarifying rules on the management and transport of excess soil to help optimize the resources we have and reduce costs in development, which will benefit communities. Clear rules and new tools to work with municipalities and other law enforcement agencies will also strengthen enforcement of illegal dumping of excess soil. These regulatory changes will provide greater assurance that soil of the right quality is being reused locally, reduce greenhouse gas impacts from truck transportation, and prevent reusable soil from ending up in landfills.

Ontario’s government is moving forward with its commitment to make it safer and easier to use local excess soil and put vacant, prime lands back into good use

“The Ontario Home Builders’ Association is supportive of clarifying rules regarding the reuse and management of excess soils generated from construction sites,” said Joe Voccaro, CEO, Ontario Home Builders’ Association. “This will create business certainty, while ensuring the tracking and quality of soil being deposited and increasing opportunities for reuse on other sites. Furthermore, exempting historic road salting that was preventing developers from obtaining an RSC is a very positive amendment supporting new housing supply.”

Ontario is also reducing barriers to clean up brownfields, which are properties where past industrial or commercial activities may have left contamination, so underused land in prime locations can be cleaned up and put back to productive use, benefitting the neighbourhood and businesses. This will also provide developers with more certainty and opportunity to redevelop brownfield properties, while still maintaining human health and environmental protection.

Quick Facts

  • An estimated 25 million cubic metres of excess construction soil is generated each year.
  • The management of excess soil, including trucking and disposal fees, can account for a significant part of the costs in large development projects, accounting for an estimated 14 per cent of overall construction costs.
  • Soils travel long distances to either a landfill or reuse site. On average, a load of excess soil travels 65 km or more.
  • Greater local reuse of excess soils can save between five to 10 per cent of overall project costs.

 

Environmental Site Assessments: In Search of Better Conclusions

Written by Bill Leedham, P. Geo., CESA, Down 2 Earth Environmental Services Inc.

Environmental consultants sometimes struggle with reporting their Phase One Environmental Site Assessment (ESA) findings and conclusions, especially for properties with limited available data, or where the identified environmental issues are deemed to be of low to moderate concern.

Environmental consultants are often in search of ‘Better Conclusions’. When I refer to “better conclusions”, I am talking about rational and defensible conclusions that are presented clearly and designed to meet the report objectives (as defined by regulation and client needs) and not simply stating that “no concerns were identified and no further action is needed” (which most clients would prefer).

As environmental consultants, we understand each site and report is unique and the conclusions are dependent on the available data, as interpreted by a qualified professional. The suggestions offered are by no means comprehensive or all inclusive, but are meant to generate some thoughtful discussion when writing and reviewing Phase One ESA reports.

Follow the Regulation(s)

Depending on the locale and client requirements, you could be following one of several ESA guidelines. Make sure you have conducted your ESA in accordance with the applicable and/or client-requested format, and that the content and wording of your conclusions follows the suggested or mandatory requirements. For example, CSA Z-768-01 requires ESA Conclusions to state either no evidence, or evidence of actual and/or potential contamination has been revealed.

Ontario Regulation 153/04, as amended for filing a Record of Site Condition requires, among other things, that the assessor’s conclusions specifically state whether the RSC can be filed on the basis of the Phase One alone; and whether a Phase Two ESA is required to file the RSC. Failure to include the mandatory statements with the specified wording can result in denial of the RSC application.

If the report is to be compliant with ASTM E1527-13, the conclusions must summarize all recognized environmental conditions; provide one of the ASTM-prescribed concluding statements; and include statements certifying that an Environmental Professional (EP) has conducted All Appropriate Inquires (AAI). The assessor should always be familiar with the most current ESA standards, and ensure that that the format they utilize is applicable to the Site and meets all regulatory and stakeholder objectives.

Know Your Client…. And Other Stakeholders

Phase One ESAs are conducted for a variety of reasons including transactional due diligence, mortgage financing, regulatory requirements or private/internal planning needs. The types and objectives of clients can also vary from Site owners to property buyers, sellers, or managers. Often other third parties such as banks, municipalities, government agencies or environmental regulators can have a significant impact on the content and acceptability of the report conclusions.

As an assessor you need to know in advance all the involved stakeholders, especially those that will require and expect reliance on your report in their decision making process. Different clients can tolerate varying degrees of environmental risk.

For example, a client that has owned and operated an industrial facility since first developed use, and has no plans to sell, redevelop or obtain bank financing may be comfortable with the simple identification of potential environmental concerns and decide not to undertake any further confirmatory investigations.

However, a bank financing a purchase of the same industrial property may have a lower risk tolerance, and will likely require a better understanding of the environmental issues, including Phase One ESA conclusions that clearly state whether or not a Phase Two ESA is recommended by the assessor.

To produce a valid report that assists the stakeholders in their decision making, the assessor must also know all stakeholder objectives, and understand their respective risk tolerance and required level of comfort.


About the Author

Bill Leedham is the Head Instructor and Course Developer for the Associated Environmental Site Assessors of Canada (www.aesac.ca); and the founder and President of Down 2 Earth Environmental Services Inc. You can contact Bill at [email protected].

U.S. Ecology Inc. and NRC Group agree to Merge

US Ecology, Inc. (Nasdaq-GS: ECOL) recently announced that it has entered into a definitive merger agreement with NRC Group Holdings Corp. (NYSE American: NRCG), a company that provides comprehensive environmental, compliance and waste management services to the marine and rail transportation, general industrial and energy industries, in an all-stock transaction with an enterprise value of $966 million.

The transaction is expected to close in the fourth quarter of 2019. The transaction will create a company specializing in industrial and hazardous waste management services.

U.S. Ecology Inc. owns the Stablex hazardous treatment facility and landfill in Blainville, Quebec.

Stablex diposal cells

“The addition of NRCG’s substantial service network strengthens and expands US Ecology’s suite of environmental services,” said Jeffrey R. Feeler, President, Chief Executive Officer and Chairman of US Ecology. “This transaction will establish US Ecology as a leader in standby and emergency response services and adds a new waste vertical in oil and gas exploration and production landfill disposal to further drive waste volumes throughout the Gulf region.”

Headquartered in Great River, New York, NRC operates from over 65 offices and facilities throughout the Pacific (including Alaska and Hawaii), Southwest, Southeast, Atlantic, and Northeast regions.

As a nationally-recognized Oil Spill Removal Organization, NRCG generates a recurring, compliance-driven revenue stream, with upside from spill events and international expansion, particularly in Mexico and Canada.

NRCG is one of two leading national Oil Spill Removal Organizations (“OSRO”) that provide mandated standby emergency response for the transportation of oil products.  With more than 50 service centers, NRCG has a national service network providing emergency and spill response, light industrial services, hazardous and industrial waste management and transportation services.  From a growing base of disposal assets in the two key oil basins in the Gulf region, the Permian and the Eagle Ford, NRCG provides landfill disposal of waste from oil and gas drilling, treatment and handling of residual waste streams and rental and transportation services to support its disposal operations.

The combined company will use the US Ecology name, and its shares will continue to be listed on the Nasdaq Global Select Market under the ticker ECOL.  Jeffrey R. Feeler will continue to serve as President, Chief Executive Officer and Chairman of the Board of Directors.

Hamilton Member of Parliament calls for RCMP investigation of illegal soil dumping

A Canadian Member of Parliament, David Sweet, wants the Royal Canadian Mounted Police (RCMP) to investigate alleged illegal soil dumping in Flamborough, near the City of Hamilton.

According to Mr. Sweet, a Conservative MP representing the federal riding of Flamborough-Glanbrook, the matter of illegal dumping requires the immediate attention of the federal government and the RCMP.

David Sweet, MP

In a open letter to federal Minister of Public Safety, Ralph Goodale, and the federal Minister of Organized Crime Reduction, Bill Blair, the Flamborough-Glanbrook MPP claims that there is illegal dumping of soil at a garden supply store in his riding because of “alleged links to organized crime and related illegal activities.”

“This matter requires the immediate attention of the government and the RCMP,” he said in a letter to Bill Blair, federal minister of organized crime reduction, and Ralph Goodale, public safety minister. 

The garden supply store has faced numerous environmental fines over the years. This includes in 2008, when it was fined $50,000 after it pleaded guilty to violations under the Ontario Environmental Protection Act and the Ontario Water Resources Act. The company was violating several conditions, including not monitoring its wells. 

Recent scrutiny, however, has focused on the dumping of excess soil there. Neighbours say trucks arrive day and night and dump dirt there. Hamilton authorities say there’s an ongoing issue across the city with trucks dumping untested soil from GTHA developments on rural properties. 

Proposed Ontario Rules on Excess Soil

Ontario is proposing changes to the excess soil management and brownfields redevelopment regime.

The changes are designed to “make it safer and easier for more excess soil to be reused locally…while continuing to ensure strong environmental protection” and to “clarify rules and remove unnecessary barriers to redevelopment and revitalization of historically contaminated lands…while protecting human health and the environment.

The changes will include the development of a new excess soil regulation supported by amendments to existing regulations including O. Reg. 347 and O. Reg. 153/04 made under the Environmental Protection Act supports key changes to excess soil management.

Proposed changes include:

  • clarifying that excess soil is not a waste if appropriately and directly reused;
  • development of flexible, risk-based reuse excess soil standards and soil characterization rules to provide greater clarity of environmental protection;
  • removal of waste-related approvals for low risk soil management activities;
  • improving safe and appropriate reuse of excess soil by requiring testing, tracking and registration of soil movements for larger and riskier generating and receiving sites;
  • flexibility for soil reuse through a Beneficial Reuse Assessment Tool to develop site specific standards;
  • landfill restrictions on deposit of clean soil (unless needed for cover).

From an environmental perspective, the proposal’s call for some regulatory key points are quite beneficial. Registering and tracking the excess soil movement from excavation source to receiving site or facility will minimize illegal dumping. Transporting and illegal dumping of the excess soils is a source of concern because excavated soil is a source of trapped Greenhouse Gases (GHG). 

The proposal is posted for comment on the Environment Registry until May 31, 2019. To read the full proposal, click here.

Quebec’s Action on Illegal Soil Dumping

The Quebec Government recently announcement that it will adopt the regulation that will include the implementation of a system in which the movement of contaminated soil will be tracked in real time. Under the tracking system, the site owner, project manager, regulator, carrier, and receiving site, and other stakeholders will be able to know where contaminated soil is being shipped from, where it’s going, its quantity and what routes will be used to transport it.

Contaminated soil will be tracked in real time, starting from its excavation, through a global positioning system. The system, Traces Québec, is already in place in Montreal as part of a pilot project.

The Quebec government also intends to increase he number of inspections on receiving sites. Furthermore, fines will be increased for those taking part in illegal dumping — from $350 to $3 million depending on the gravity of the offence, the type of soil and if they are repeat offenders, among other criteria.

How does After Action Review benefit HazMat training?

Written by Steven Pike, Argon Electronics

Emergency response teams are constantly looking for ways to improve their operations.

Simulated exercises, training classes and seminars can all provide valuable insight into tactics and technologies that can be applied in real life HazMat incidents.

However unless feedback on incident response and command is recorded (and can be easily shared with personnel), a valuable learning opportunity can risk being lost.

An effective way to enhance learning outcomes is through the use of a post-incident critique or After Action Review (AAR).

An AAR is a structured means of analyzing what took place during a particular training exercise or event to identify strengths, weaknesses and areas for improvement.

As well as providing a method to scrutinize the actions that occurred, an AAR is also an opportunity to consider what could have been done differently – both by those who took part in the exercise and by those who were in charge.

The evolution of AAR

The origins of After Action Review can be found in the US military where formal AARs evolved out of the combat action debriefs that were carried out during World War Two and the Vietnam war.

The use of AAR in a military context has also been documented in the memoirs of Chinese military leader Gong Chu’s during the 1934-1938 three-year war in South China; and by Emperor Napolean’s Marshall’s and Generals in the early 19th century.

Military AARs fall into two types – formal AARs (which require detailed planning, preparation and resources) and informal AARs (which take the form of on-the-spot reviews of individual or group training performance).

Over the years, a wide variety of public health and emergency management agencies have recognized the value of AARs – using them within training programs to aid better understanding of the perspectives and expectations of all involved and to capture crucial learning that can be widely shared.

One potential challenge with any form of realistic HazMat training exercise is that much can be going on in a relatively short time-frame. When the exercise ends, participants can sometimes find that many of the events, and the associated learning opportunities, have become a “blur” in their minds.

A 2018 article in the online magazine FireEngineering.com discussed how taking a “stop-and-start” approach to full-scale HazMat training exercises can help to cement learning. By breaking up the scenario into several smaller sections with regular breaks for review, there is the opportunity to discuss what’s just happened, to explore alternative tactics, to quickly correct any misunderstandings and to enhance exercise efficiency.

In addition there is also the advantage of being able to ensure that departmental procedures and guidelines are being followed, and that they are modified when necessary.

The application of AAR in simulator detector technology

The integration of AAR capability into simulator detector technology has been shown to reveal important lessons that improve professional practice, minimize risk and enhance communication.

When we think about AAR in the context of a simulator detector, it is the technology within the device itself (rather than a human) that maintains a record of all the activity.

The simulator version of the LCD3.2 Chemical Hazard Detector (the LCD3.2e) is just one example of a device that keeps a record of all real-time trainee movement – from the initial set-up of the equipment through to the completion of the exercise.

Once the scenario has concluded, the instructor is able to easily switch the device to display a detailed (and indisputable) performance report.

AAR is a powerful and constructive way to obtain valuable knowledge that can improve processes and enhance training efficiency – be it in the form of constructive group discussion, via fact-finding exercises or by harnessing the intelligent technological capability of simulator detectors.

The process of regularly critiquing can serve as a powerful tool for understanding the impact of one’s actions and effecting change.

And by regularly comparing the “expected outcome” with what “actually happened”, adjustments and improvements can continually be made, to improve safety at both an individual and an organizational level.

About the Author

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

VelocityEHS acquires Industrial Hygiene Software company Spiramid

VelocityEHS, a Chicago-based environment, health, safety (EHS) software company, recently announced it has acquired Spiramid, developer of the a system for managing industrial hygiene (IH). The acquisition adds Spiramid’s occupational safety & health software to the VelocityEHS’s EHS platform. The software, now called VelocityEHS Industrial Hygiene, gives organizations the capabilities to efficiently run an industrial hygiene program.

VelocityEHS is launching its new Industrial Hygiene solution at a time when IH is at an important crossroads. The need for workplace programs that anticipate and prevent workplace hazards is growing, while the number of certified industrial hygienists and investments in traditional programs has been on the decline.

“We’re
excited to launch our powerful new Industrial Hygiene product. It’s a perfect
fit for people working on the frontlines and has great synergy with our
market-leading Chemical Management capabilities. Its simple design cuts through
the complexity of IH tasks,” said Glenn Trout, president and CEO of
VelocityEHS. “While there’s no substitute for a well-trained, well-resourced
team of industrial hygienists, the reality today is that a growing number of
EHS generalists are being called upon to do sampling and run IH programs that
fall outside the scope of their training and traditional responsibilities.
Whether you’re a veteran hygienist or new to the role, we believe our new IH
solution will provide significant value.”

The software gives companies with sophisticated programs the ability to see, in one place and in real time, what’s happening across their enterprise. It gives staff hygienists new reporting tools — like dynamic risk matrices — to help them determine where and why to deploy resources, as well as to demonstrate the value of IH when talking with leadership stakeholders. For companies without a Certified Industrial Hygienist, it provides a framework for managing exposure risks and meeting a wide range of IH tasks.

“The goal of any industrial hygiene program is to help as many people in the workplace as you can. I am proud to see our IH software, which we have spent years perfecting, added to the VelocityEHS platform, which serves the industry’s largest EHS software community,” said Dave Risi, co-founder of Spiramid.

Managing
IH can require the collaboration of many stakeholders, including people
sampling in the field, IH consultants, outside laboratories, and program
managers. VelocityEHS’ Industrial Hygiene software is a central management hub,
facilitating the workflow and hand-off of responsibilities from party to party.
For instance, users can more easily plan and control all aspects of IH, from
selection of chemicals and analytical methods, to selection of laboratories and
access of sampling results, with options to share information with the right
stakeholders. The solution lets users send chain of custody forms directly to
labs and receive the analytical data electronically, inside the product,
eliminating the need for manual input and helping to avoid errors by making the
information readily accessible.

Other features include an in-product database of CAS Registry Numbers, OELs and laboratories, plus easy tools for tracking and managing of similar exposure groups (SEGs), qualitative assessments, sampling plans, medical surveillance, surveys, samples and equipment. It is the smartest and most efficient way to track a high-volume of complicated sample data and to manage risk assessments and mitigation programs.

The new IH software, together with VelocityEHS’ Chemical Management and Industrial Ergonomics solutions, provides industrial hygienists with the comprehensive resources they need to promote healthier workplaces.

Diving deep into Redwater – Supreme Court Says Trustee in Bankruptcy can’t cherry pick Environmentally Clean Assets

Written by John Stefaniuk and Scott Birse, Thompson Dorfman Sweatman LLP

The Supreme Court of Canada released its much anticipated decision in Orphan Well Association v. Grant Thornton Limited (a case more commonly known as Redwater) on January 31, 2019. You might recall our article on the Alberta Court of Appeal’s decision in the same case.

In Redwater, the courts had to decide whether bankruptcy law trumped provincial regulatory orders issued in Alberta. Redwater Energy Corporation (Redwater) was an oil and gas developer.  It held a number of development properties under the authority of the Alberta Energy Regulator (AER).  With the slump in oil prices, Alberta Treasury Branches (ATB), Redwater’s primary lender, called its loan. ATB appointed Grant Thornton Ltd. first as receiver and subsequently as trustee in bankruptcy of the estate of Redwater under the federal Bankruptcy and Insolvency Act (BIA).

In the course of examining Redwater’s realizable assets, Grant Thornton became aware of outstanding environmental reclamation obligations that were associated with some of Redwater’s non-producing properties.  Grant Thornton decided to put the valuable, producing wells and other “clean” assets up for sale, and to walk away from the remaining assets by renouncing them under the BIA. That resulted in putting the reclamation in the lap of the Orphan Well Association (OWA), an industry-funded organization set up in Alberta to administer a fund established for the purpose of reclamation of “orphan” properties.

The AER refused to allow the transfer of the productive licences. It issued abandonment orders requiring clean-up or posting of security for clean-up costs in relation to the renounced assets. The parties headed to court to see what would become of the value that could be realized for the retained assets. Both the trial court and the Alberta Court of Appeal would have allowed Grant Thornton to leave the liabilities behind.

In the majority decision written by Wagner C.J., the Court applied a three-part test found in another Supreme Court of Canada case decided in 2012, Newfoundland and Labrador v. AbitibiBowater Inc. The majority of the Court held that the reclamation claims were not  a debt, liability or claim owing to a creditor and that they were too remote to attach a monetary value. That meant that two of the three criteria in the Abitibi test were not met. The Court therefore held that the bankruptcy did not have the effect of undoing the orders and the trustee could not cherry-pick the valuable assets while renouncing the rest.

This was a bit of a surprise to many environmental law practitioners, including most of the ones I attended a conference with just a few weeks prior to the decision.

What then, is the upshot?

Ostensibly, this is good news for provincial regulators. It is more likely that their enforcement orders will be found to continue to be binding upon corporations in bankruptcy. While it does not make receivers or trustees in bankruptcy personally responsible for rehabilitation costs, it does mean that the proceeds of sale of the valuable assets may have to be put toward satisfying those orders before any of it is available to lenders and other creditors. That means less costs potentially borne by the provinces (and their taxpayers). Predictably, lenders do not seem to garner a lot of public sympathy.

On the other hand, (assuming no changes to the BIA) the decision means that lenders and other creditors will have to pay closer attention to the borrower’s unfunded clean-up and closure costs when extending and monitoring credit. If the lender no longer has the ability to deal with valuable assets and leave the “dirty” behind, it means that credit in environmentally sensitive sectors may become tighter, reporting requirements may become more onerous, and some lenders may become skittish.

The dissenting minority decision written by Côté J. said the majority decision was not based on “polluter pays”, but instead resulted in a regime of “lender pays”.  After all, it is always open to the provinces to require permittees and licensees to post better (and more) security to fund rehabilitation costs, and to carry out better monitoring and inspections to ensure that the security is really adequate to fund clean-up. On top of that, who is in a better position to monitor environmental compliance and reclamation costs, the regulator or the bank? Surely, the regulators have better expertise and, assuming proper funding from government, better resources to carry out the work. Indeed, the regulators also wield the bigger stick – fines and penalties – whereas the most that the lender can do is either refuse to lend, lend less, or call in a loan where potential trouble is spotted. By the time that issues are obvious, the lender may choose to let things ride, so long as payments are being made, rather than force a realization that could put its security at risk. It is difficult to see how that serves environmental protection.

In some respects, the decision can be seen as a bit of a “Get out of Jail Free” card for the provinces and their resource and environmental regulators. No doubt that is the way that ATB felt about it.

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


About the Authors

John Stefaniuk engages in a broad practice with emphasis on environmental law, real estate and development law, natural resources and energy, commercial law and municipal law matters. He has particular experience in relation to contaminated sites, mining and mine rehabilitation, wind power development, natural resource development, environmental approvals and licensing, commercial real estate, leasing, financing and development, municipal approvals, taxation and assessment and business acquisitions. He appears regularly before government licensing bodies and administrative tribunals including the Manitoba Clean Environment Commission and Municipal Board, municipal councils, provincial legislative committees and in all levels of court in Manitoba and in the Federal Court in connection with environmental, resource, regulatory municipal, and property issues.

Scott Birse has a broad practice with a particular emphasis on environmental law, municipal law, real estate and development law, regulatory compliance, commercial law and related litigation. He has particular experience assisting clients in the areas of environmental liability in real estate transactions and business acquisitions, municipal planning and approvals, contaminated sites liability, environmental assessments, commercial real estate development and civil litigation. Scott has appeared before municipal tribunals, the Manitoba Court of Queen’s Bench and the Manitoba Court of Appeal. He has also advised clients with respect to municipal and environmental matters in Saskatchewan and British Columbia.