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WASTE MANAGEMENT WASTEWATER
CONTAMINATED LAND ENGAGEMENTS OF NOTE |
Penalties Tax Deductible - SCC
The Supreme Court of Canada recently allowed a poultry farm to deduct an over-production levy as a business expense. Environmental and OHS fines and penalties will be deductible business expenses unless the feds amend the Income Tax Act. If authorities ratchet up enforcement as threatened, this may influence corporate strategic decisions on whether to go to trial or plead guilty and move on.
Court Awards Neighbour “Pristine" Clean-up, Damages For "Stigma"
The recent Ontario Superior Court decision in Tridan v. Shell awarded surprisingly high damages to a neighbour whose property was contaminated by a petroleum leak from a Shell station. Even though a flourishing business continues to use the property, and much of the contamination would naturally degrade, the court awarded the plaintiff approximately $950,000 in clean up costs and property value compensation.
The scale of damages is surprising for several reasons. First, until now, the courts have been reluctant to award damages for diminution of property value unless the plaintiff had sold, or at least tried to sell the property. Here, no effort to sell was made. Second, this may be the first Ontario judgment that rejects MOE guidelines and "reasonable" clean-up standards and states that a plaintiff is entitled to have commercial property cleaned up to "pristine" standards. Third, the judge awarded a $350,000 bonus for the "stigma" of former contamination – a stigma that the judge found would affect the property value even after it was cleaned up.
Ironically, the result is likely a large windfall for plaintiff Tridan, since there is no pressing reason for it to clean up the property at this time. Tridan can bank the damages award and carry on the business as the contamination naturally degrade. Or it could clean up the property using less stringent standards under the MOE contaminated site guideline at a much lower cost and pocket the rest of the money.
Shell has filed an appeal of this decision. The Court of Appeal may well reduce the damages. In Tony's Broadloom, the Court of Appeal indicated that a plaintiff seeking damages for contamination should either try to sell the property or clean it up, thus quantifying its damages before coming to court. (See “Industrial Contamination Not Defect of Title” at www.willmsshier.com). Tridan also contrasts with the recent decision in Pyke v. TriGrow (below). The award for "stigma" appears to be high for a downtown commercial property. Some U.S. state courts have awarded damages for 'stigma', others have been reluctant. US EPA publications and study reports indicate that while stigma may be a factor for commercial properties, even residential property values recover in a reasonable time. In a sophisticated urban real estate market, the effect of contamination that has been removed on commercial values is limited, even for cleaned up Superfund sites.
Tridan, owner of property occupied by an Ottawa car dealership sued Shell Canada for damages based on a gasoline leak from a faulty underground pipe at a Shell gas station in 1991. Shell had cleaned its own property at the time of the leak.
Shell argued that the underground petroleum contamination did not affect the current use of the property, and would only have an effect if a change in property use was contemplated. The contamination was at a depth of 3-5 metres and posed no risk to the health or safety of the occupants, or even the plant life on the property.
Shell argued that any clean-up damages should be limited to the cost of an actual clean-up under MOE clean-up guidelines.
However, the judge decided that the property owner was entitled to be put into the position it would have been in if not for the contamination. That meant clean-up to a "pristine" condition, rather than merely to levels of contamination that MOE guidelines indicate would not cause adverse effects. The judge ordered the money is to be paid whether or not Tridan cleans up. Until and unless Tridan intends to change the property use, it has no reason to clean up the property. The existing car dealership can prosper without doing anything to the site. Eventually the contamination will decay on site. Even if Tridan decides to remediate the site, it has no obligation or incentive to do any more than use the MOE contaminated site standards. Such a clean-up would cost significantly less than the amount awarded by the court.
In addition to the $350,000 for the notional decrease in value due to “stigma”, the judge also awarded damages for increased mortgage financing costs Tridan incurred during negotiations with Shell. The judge allowed an additional $20,000 for business interruption during the remediation - but this sum will not be paid until the remediation takes place.
Shell was also ordered to complete additional cleanup on its own property, to prevent further migration of contaminants, or pay an additional $85,000 so that the plaintiff could install a barrier wall.
Vile-Smelling Mushroom Farm - Must Pay Neighbours
In Pyke v. Trigrow, a recent Ontario Superior Court decision, neighbours of a mushroom farm were awarded damages for nuisance from the unpleasant odours emitted by the farming operations. Mushroom farming generates particularly unpleasant odours from anaerobic composting of the growing medium.
The neighbours could not obtain an injunction to force the mushroom operation to control its odours, since its operations were covered by the Farming and Food Production Protection Act, 1998.
The judge refused to award the neighbours compensation for impact on property value, relying on Ontario case law that disallows damage awards for property value unless the property has been sold or sale has been unsuccessful.
The neighbours were awarded damages for nuisance based on the frequency and extent of interference with their reasonable enjoyment of their properties because of the smell. Individuals were awarded between $7,500 and $40,000.
Contaminated Land Lawsuit Grinds On US Parent, Directors' Liability Limited
An interesting motion in a large contaminated land lawsuit gives an inside view of the complex legal issues facing Outboard Marine Corp. of Canada, its U.S. parent and directors.
The plaintiff, United Canadian Malting Ltd. is suing for $5 million, an order for immediate clean-up and punitive damages. Causes of action include strict liability, nuisance, trespass, negligence, failure to warn and a statutory civil action under s. 99 of the Environmental Protection Act for spill compensation. The plaintiffs claim that the contamination of groundwater means that they have to truck in water to carry on their business. The damages issues in this case differ from Tridan v. Shell (above), since property value compensation is not the issue. The plaintiff will only have to prove that its economic loss resulted from pollution caused by the defendants.
The defendants brought a motion asking the court to strike out the statement of claim. The plaintiff UMC alleges that the US parent stripped the assets of the Canadian company, leaving it as a shell, after the contamination was discovered. The plaintiff is seeking to pierce the corporate veil and hold the US parent liable. The plaintiff also claims that the individual defendants knew about the contamination, knew the risk it posed to the plaintiff's property and did nothing to deal with the problem or warn the plaintiff.
The judge allowed this as a reasonable cause of action against the individual defendants.
The defendants were unable to dislodge plaintiff's claims against the US parent and the US individuals, except under the EPA spill compensation claim. This statutory claim for compensation to the victim of a spill can only be made against the owners and controllers of the spilled pollutant. Since the US parent only took control after the contamination was discovered, the judge found that it did not have charge, management or control of the contaminants prior to their discharge. The judge struck the EPA s.99(2) pleadings as against the US parent and the individual defendants.
Unless it is settled, this case may clarify Ontario's contaminated land jurisprudence. Watch for future reports.
MOE To Make More Orders - Voluntary Deals Discouraged
The MOE and the provincial government have made a lot of public statements about their intention to enforce environmental laws. There has been talk of SWAT teams and consolidated regulatory prosecution departments. Will we see more prosecutions? Bottom line – money talks – and the government has not yet invested in additional MOE staff and resources.
We have seen more orders issued by the MOE lately. Several ministry staff told us that the Ministry's new internal policy has shifted from voluntary to mandatory abatement. Ministry staff are supposed to issue orders, instead of agreeing to voluntary abatement strategies. Provincial officers are said to require written approval from a Director to forego imposing an order for non-compliance. Overworked abatement officers are pushing their 'field order' powers to the limit to try to comply with the new policy shift using limited resources. The Ministry has not managed to train staff to use the new provincial officer order powers that were rushed through the legislature more than a year ago. The policy shift to mandatory abatement was supposed to have been made public through amendments to the MOE's compliance guideline – but the amendments had not been posted on the Environmental Registry by press time.
Environment Canada – Consultation on Updated Compliance - Enforcement Policy
Environment Canada has published a draft Compliance and Enforcement Policy to complement the new Canadian Environmental Protection Act, 1999.
The Policy guides enforcement officers in inspections, investigations and articulates Environment Canada's policy under CEPA 1999 for responding to violations with tools ranging from warnings, through orders, tickets, prosecutions and other court actions. See the federal Environmental Registry: www.ec.gc.ca/CEPARegistry
Federal, Ontario and Toronto governments are ramping up filing and reporting requirements. The feds have expanded the NPRI, Ontario will require industries to monitor and report on air emissions for 357 substances next year, and Toronto's new Sewer Use By-law will require 4-5,000 local industrial facilities to file pollution prevention plan summaries.
Environment Canada (EC) has expanded the list of substances to be reported under the National Pollutant Release Inventory (NPRI) to 268 for the year 2000. More facilities will be required to report, and the requirements are more complex.
Willms & Shier has published a complete list of the year 2000 NPRI substances, information on filing requirements and links to Environment Canada NPRI resources. Click on NPRI at www.willmsshier.com.
The NPRI is authorized under the Canadian Environmental Protection Act, 1999. It applies to facilities that manufacture, process or otherwise use one of the 268 listed substances in a quantity that exceeds the specific reporting threshold. Each facility must register and file an electronic report on the quantities of the substance released, recycled or disposed.
As well as increasing the number of substances, EC has lowered the reporting threshold for some substances. Employee thresholds no longer apply to some activities.
All dioxin, furan and hexachlo-robenzene releases on-site and transfers must be reported for specified industrial activities including base metal smelting, magnesium production, steel manufacture and casting using electric arc furnaces, pulp and paper manufacturing, portland cement manufacturing, organic solvent and monomer production, fossil fuel power generation, iron manufacturing (sintering), secondary aluminum and lead smelting and wood preservation (pentachlorophenol).
Mercury and its compounds must be reported where manufactured or otherwise used in quantities exceeding
5 kg.
The reporting deadline for the 2000 NPRI is June 1, 2001.
IPSCO Loses NPRI Court Challenge
Regina steel company IPSCO Inc. lost its well-publicized court challenge in April 2000.
Many large industries oppose the NPRI since its statistics are incorporated into the reports of the North American Commission for Environmental Cooperation (CEC). The headline-grabbing CEC reports have singled out several Ontario industries as major polluters. The industries argue that NPRI and CEC reports are misleading: for example, wastes disposed into on-site, licensed waste-disposal areas are listed by CEC as releases into the environment.
Industry Air Monitoring / Reporting NPRI Not Good Enough - Newman
MOE Minister Dan Newman says that, the NPRI is so flawed.that Ontario will impose more extensive mandatory monitoring and reporting regulations on industries and municipalities starting in January 2001. Ontario's proposal will cover air emissions for 357 substances including smog precursors and greenhouse gasses not included in the NPRI. MOE intends to publish the information electronically with a quicker turnaround than NPRI's two-year lag. Not only will filing be mandatory, but MOE intends to levy a filing fee. Reports will have to be audited after 2005/2006 and records will have to be maintained for seven years.
The requirements will be phased-in to cover large industrial emitters by January 2001 and smaller industries by January 2002. Larger emitters will have to implement Continuous Emission Monitoring (CEM).
The list of 357 substances sets out the proposed reporting thresholds – approximately 118 use the same threshold as the NPRI. Other thresholds vary from fractional amounts (0.0001 kg/year for dioxins and furans) to thousands of tonnes for substances ammonia, carbon dioxide and methane.
Critics see this proposed monitoring program as another political gesture – trumpeting government efforts in making industry do more self-reporting as meaningful environmental protection. Ironically, the government seems to be adding red tape instead of stripping it away.
We do not believe that the MOE can meet its time-frame for implementing these requirements given its limited staff and resources, and the lack of commitment and direction of the government. The government appears to continue ignoring the decimation of MOE staffing and its erratic enforcement record. Perhaps the philosophy will be to hand over all reports to the proposed environmental "SWAT Team" – if the MOE can find enough technicians to process all the reports.
Willms & Shier will post links to the draft regulation, list of substances, thresholds and guidelines when they are publicly available, at www.willlmsshier.com.
Environment Canada – Draft P3 Planning Handbook
Under CEPA 1999, the federal Minister of the Environment has authority to require pollution prevention plans for any Schedule I CEPA-toxic substance. Plan requirements will be triggered by a notice in the Canada Gazette. Environment Canada posted a draft Pollution Prevention Planning Handbook for consultation on the federal Environmental Registry at www.ec.gc.ca/CEPARegistry
Haz Waste Regulatory Update: Changes Still Under Review
In the wake of last year's investigation of Philip Environmental waste disposal practices at the Taro landfill the MOE proposed a slate of regulatory changes for haz waste management. Proposed regulatory amendments were published for consultation in February 2000. Currently (summer 2000) the MOE is assessing the consultation feedback. Changes could be implemented before the end of 2000, depending on the government's priorities.
Changes will affect waste processing, recycling, hauling and disposal. Some of the changes will harmonize with U.S. EPA rules and proposed federal regulations. A significant number of industrial substances may be recharacterized as hazardous waste, requiring special treatment and disposal at additional cost.
If any of your wastes will be affected, you should discuss your options with us. You may want to use the delay in implementation to persuade the MOE to incorporate specific exemptions of your wastes into the new amendments. In our experience, once a waste is listed in Reg. 347, the process of delisting is extremely slow, uncertain and frustrating.
For legal advice on the effects of this proposed legislation on your business call John Willms (416) 862-4821 or Doug Petrie (416) 862-4835.
For details: www.willmsshier.com-"MOE Hazardous Waste Regulatory Bulletin, March 2000."
Toronto Enacts Stringent Sewer By-law New Discharge Limits To Be Phased In
Toronto City Council passed the controversial new sewer use by-law on July 6, 2000. City lawyers were busy drafting the final wording at press time.
The by-law will incorporate stringent discharge limits. There will be a two to four year phase-in period to allow industries to meet the discharge limits for sanitary, combined and storm sewer discharges.
Pollution prevention plan summaries will have to be submitted by some 4000 to 5000 industrial and commercial facilities. Every industrial facility discharging any of the listed contaminants into a Toronto sewer will have to submit a plan summary to the City, and update the summary every two years. Updates must detail and evaluate the facility's progress in accomplishing the plan's objectives. Plans will not be submitted, but must be available to city inspectors. The deadlines for plan summary submissions are being phased in according to industry sector, with the first group required by June 30, 2001 and all remaining industries due by June 30, 2002.
Toronto intends to stop incinerating sewage sludge. Discharge limits are designed to ensure that the sludge will be suitable for constructive uses such as land application.
Toronto's by-law is expected to influence surrounding municipalities that send wastewater to Toronto plants for treatment.
MOE Contaminated Site Guideline Workshops
In May and June the MOE conducted a series of workshops on Ministry policy and practice in dealing with the Guideline For Use At Contaminated Sites In Ontario. The workshops were well attended by municipal staff and environmental consultants.
A number of technical and policy questions remain unresolved. For example, the issue of "inert fill" remains in limbo. MOE published a draft excess soils guideline a few years ago but it was never finalized. Setting the cleanliness standard too high for inert fill means higher waste disposal costs on site clean-ups – a disincentive to brownfield site redevelopment. Unreasonable regulations are also an invitation to abusers. There is really no excuse for the MOE's failure to resolve this issue after so many years of study.
Municipalities are still struggling with ways to apply the Guideline. MOE and MMAH have not come up with an integrated plan, so approval requirements are all over the map.
For legal advice on contaminated site clean-up and redevelopment call Donna Shier at (416) 863-0711 or
Jim Renick at (519) 776-9020).
Willms & Shier Welcomes New Lawyer, and Research Intern
Willms & Shier is please to introduce a new member of our legal team. Yelena Faynblyum is an Osgoode Hall graduate, called to the Bar this year. She gained experience in environmental, municipal and energy law and litigation while articling at Ontario Hydro. In addition to her law degree, Yelena studied in the Masters of Environmental Studies program at York University.
We are also pleased to welcome our summer research intern, Danielle Fremes. Danielle is a student in the Masters of Environmental Studies program and conducts research on administrative, policy and technical issues.
Donna Shier will moderate a panel on Certificates of Approval - New Processes and Pilots at the Canadian Institute Conference on New Developments in Environmental Law on October 26, 27, 2000.
Marc McAree will speak on contaminated land issues at the Perth County Real Estate Association on Sept. 20, 2000 and at the Toronto Real Estate Board on Sept. 27, 2000.
Marc will speak at the U. of T. Engineering Continuing Education Facilities Management Conference on Oct. 2, 2000.
Last fall Willms & Shier conducted a client satisfaction survey of a representative group of our clients. The results were quite helpful. We achieved an approximately 40% reply rate to our written questionnaire. Almost all of the respondents were satisfied and gave us high marks across the board. A couple of respondents pointed out specific issues that required attention. The survey provided us with a formal way to obtain this helpful feedback and nip problems in the bud. We are planning to do another survey in the future. Meanwhile, we encourage all of our clients to make sure to be frank with us when service issues arise.
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| Revised:May 25, 2001. ©Willms & Shier Environmental Lawyers LLP, 2004. |
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