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Willms & Shier Environmental Lawyers LLP

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ENVIRONMENTAL LAW UPDATE: CONTAMINATED LAND AND ENVIRONMENTAL CLAIMS

Marc McAree

Maxxam AnalyticsNovember 24, 2011

Specialist in Environmental Law Certified by the Law Society of Upper Canada

Outline

• Contaminated Land Basics

• Regulatory Amendments

• New 2011 MOE Standards

• Phase I and Phase II Environmental Site Assessments

• Modified Generic Risk Assessment

• Risk Assessment

• Record of Site Condition

• Effect on Completed Clean ups

• Fill – Where RSC Exists

Contaminated Land Update

• Environmental Causes of Action

• Environmental Damages

• Mitigation of Damages

• Limitation Periods

Environmental Claims Update

CONTAMINATED LAND UPDATE

Contaminated Land Basics

• Ontario MOE Brownfields definition

• Brownfields are lands on which industrial or commercial activity took place in the past and that may need to be cleaned up before they can be redeveloped

• Brownfields statutory regime applies to any contaminated site


• Key Terms• Qualified Person (QP)

o Persons defined by regulation who are permitted to perform environmental site assessments, risk assessments and sign a Record of Site Condition

o Required by statute to carry $1M E&O insurance policy – Beware!

• Record of Site Condition (RSC)o Document submitted to the Ministry of the

Environment to certify that a property meet MOE Standards or property specific Risk Assessment standards for the intended use of the property

• Environmental Site Registryo Publically accessible and searchable

database where RSCs are registered


• Key Terms• Phase I Environmental Site Assessment

o Paper review

o Identifies potential contaminants of concern based on historic and current use and occupation of the subject property and at nearby properties

• Phase II Environmental Site Assessmento Intrusive review to investigate the

environmental condition of the property

• Clean upo May involve engineering solutions to

remediate contamination or to carry out a Risk Assessment


• Key Terms• Risk Assessment

o Contamination is left in place, and engineering controls may be implemented to ensure no unacceptable risk to human health or the environment

• Certificate of Property Useo May be registered on title and may

impose restrictions on property use

• Financial Assuranceo Money commitment - often in Letter of

Credit - posted to the MOE to secure future obligations

Regulatory Amendments

• Regulation 511/09 is the formal amending regulation

• Proper citation is still O. Reg. 153/04 as amended

• Most amendments took legal force and effect on July 1, 2011

New Standards (July 1, 2011)

• Soil, Ground Water and Sediment Standards for Use under Part XV.1 of the Environmental Protection Act, April 15, 2011

• New standards for four VOCs and uranium

• A few parameters such as vinyl chloride are less stringent

• The contaminants that we most frequently encounter are now 1 to 3 orders of magnitude more stringent

• Most clean ups are now more extensive, costly and difficult

• Old clean ups may not meet the new Standards – Beware!

Phase I Environmental Site Assessment

• More intensive paper review that takes longer to produce and will be more expensive

• Qualified Person required to

• “Make all reasonable inquiries to obtain reasonably accessible records” about current and past uses

• Review all sites within 250 meters of the subject property

• Review data dating back to the first developed use of the property


• Qualified Person required to interview • Persons with knowledge of the site

OR

• Where there is no owner or occupant of the Phase I property, owners or occupants within the study area AND one provincial or municipal government official

• Must include list of “potentially contaminating activities”


• More extensive review is now required where the site is or was a • Garage

• Gasoline outlet, or

• Dry cleaning facility

• Best before date on a Phase I ESA report is 18 months

• Query: Does the property owner require a Phase I ESA compliant with O. Reg. 153/04? What about the bank? Would a CSA Z768 compliant Phase I ESA suffice?

Phase II Environmental Site Assessments

• Specific sampling requirements

• More samples over a given area

• Must delineate the full extent of contamination laterally and vertically

• Soil vapour investigations must now be done (indoor air quality)

• Must factor in seasonal variations

Modified Generic Risk Assessment

• MGRA is new as of July 1, 2011

• “Streamlined” Risk Assessment that is property specific

• A limited list of parameters can be varied by the QP to reflect site conditions

• Soil type

• Depth to ground water

• Distance to surface water

• Hydraulic conductivity

• Hydraulic gradient

Modified Generic Risk Assessment

• Anticipated to be less expensive and faster than a full Risk Assessment

• Beware!• Cannot be used on “sensitive sites”

• Impractical for use on petroleum contaminated sites

• Not certain how acceptable MGRA will be to lenders

• But, may be useful as a screening level tool to “ballpark” what risk-based derived standards the MOE may accept in a full RA (depends on many factors)

Risk Assessment

• QP develops site specific criteria

• RA generally used when cost to meet the MOE Standards is too high

• Requires consultation with the MOE and must be “accepted” by the MOE

Risk Assessment

• RA allows contamination to exceed concentrations in the MOE Standards, providing there is no unacceptable risk to human health or the environment

• RA may include • Restrictions on property use

• Engineering controls at the property

• May significantly limit redevelopment opportunity and increase cost – Beware!

Confirmatory Sampling Prior to Filing RSC

• Dig and dump• 90 days + 2 consecutive quarters of

groundwater sampling

• Must be included in remediation report

• In-situ remediation• 90 days + 4 consecutive quarters of

groundwater sampling

• Must be included in remediation report

• Significance• Delays the filing of a Record of Site

Condition and this may be particularly important in the redevelopment context – Beware!

Record of Site Condition

• RSC filed on the Environmental Site Registry

• Notice to the world

• Documents that the property meets Ministry Standards for the intended use of the property

• MOE “Good Housekeeping Seal of Approval”

Record of Site Condition

• Available where clean up is to MOE Standards, MGRA or RA

• New filing procedures

• Increases time and cost required to obtain RSC

• MOE may not be meeting its prescribed in law 30 business day timeline to advise if the RSC can or cannot be filed on the ESR

Effect on Completed Clean ups

• What do the new 2011 MOE Standards mean for properties remediated to the old 2004 MOE Standards?

• MOE’s position is that an RSC filed under the 2004 MOE Standards is satisfactory to the MOE for the MOE’s purposes

Effect on Completed Clean ups

• Beware, many relevant parties expect a property to be clean to the 2011 MOE Standards• Municipalities when granting building

permits (although 2004 is fine if property owner complies with transition rules)

• Lenders when considering financing

• Purchasers when buying

• Insurers when insuring

• Neighbours involved in civil claims

• Since 2009, the marketplace has required that the 2011 MOE Standards be met – Beware!

Fill – Where RSC Exists

• New Part XII of O. Reg. 153/04 (Section 55)

• New requirements for bringing soil from another property to a RSC property

• Outlines efforts required to avoid violating the RSC

• Requires that the transported soil meets Table 1

• Soil quality must be determined in accordance with Schedule F

• Sample at source site

• One sample for each 160 m3 for the first 5,000 m3

• One sample for each additional 300 m3 for all volume > 5,000 m3

• Soil can only be used to backfill an excavation or for final grading

• MOE Soil Management – A Guide for Best Management Practices (Draft) dated June 17, 2011

ENVIRONMENTAL CLAIMS UPDATE

Environmental Causes of Action Typically Pleaded

• Negligence

• Nuisance

• Rylands v. Fletcher

• Trespass

• Statutory breach under the Environmental Protection Act, s. 99

• Misrepresentation

Environmental Damages Typically Pleaded

• Obtain environmental consulting advice

• Obtain environmental legal advice (non-litigation)

• Investigate and plan, assess, implement remediation

• Loss of a property sale

• Loss of business income

• Loss of use and enjoyment of the property

• Increased cost of selling, financing

• Diminution in value and/or stigma

• Loss of management time

• Pre- and post-judgment interest

• Litigation costs

Causes of Action for Environmental Claims

• Recent cases have implications for plaintiffs’ claims

• Negligence

• Berendsen v. Ontario (2009 OCA) where the Ontario Court of Appeal held that the MTO was not negligent for depositing roadbed waste on a farm when that was standard practice in the 1960s

• Nuisance

• Smith v. Inco (2011 OCA) (Smith to Seek Leave) where actual, substantial, physical damage to land is required to make out a claim for private nuisance

• Strict Liability – Rylands v. Fletcher

• Smith v. Inco (2011 OCA) (Smith to Seek Leave) where a polluting industrial activity in an industrial area was found to not be a non-natural or special use of land, and strict liability was not made out

Damages for Environmental Remediation Costs

• Tridan Developments Ltd. v. Shell Canada Products Ltd. (2002 OCA) (SCC Denied Leave)

• After plaintiff proves its claim in strict liability, damages may be awarded for the most economical of:

o Cost to clean up to pristine but not for diminution in value

o Cost to clean up to applicable MOE Standards plus diminution in value

o Diminution in value

• Other cases

• Biskey v. Chatham-Kent (2011 Ont. Trial)

• 618369 v. Canadian Turbo (2004 Alta. Trial)

• Eglise Vie et Reveil c. Sunoco (2003 Que. Trial)

• Cousins v. McColl-Frontenac (2007 N.B.C.A.) (SCC Granted Leave But Case Settled)

Damages for Diminution in Value and/or Stigma

• Tridan Developments Ltd. v. Shell Canada Products Ltd. (2002 OCA) (SCC Denied Leave)

• Diminution in value/stigma may be awarded where proof of strict liability for:

o Cost to clean up to pristine but not for diminution in value

o Clean up to applicable MOE Standards plus diminution in value

o Diminution in value

• Smith v. Inco (2011 OCA) (Smith to Seek Leave)

• Diminution in value/stigma not awarded because nuisance not proved and, in any event, no proof of:

o Actual, substantial, physical damage to land

o Impact on the ability to use the property

o No detrimental effect to health (potential risk to health is insufficient)

Mitigation of Damages

• Plaintiff has the obligation to mitigate

• Plaintiff not entitled to recover for loss that could have been avoided by taking reasonable action

• Plaintiff is fully entitled to be extravagant but not at defendant’s expense

• Onus shift to defendant to show that plaintiff failed to mitigate damages

• Important in environmental litigation

• Relates to whether the plaintiff duly considered all remedial options, timing and costs

• Often alternatives may get close to the same or similar finish line

• E.g. may give rise to a defendant arguing that risk assessment (plus other considerations) was more cost-effective than remediation to MOE Standards

Limitation Periods

• Limitations Act, 2002, s. 5(1): Must Issue a Claim Within Two Years From The Date of Discovery

• Limitations Act, 2002, s. 17: There is No Limitation Period on Undiscovered Environmental Claims

• Two Years Passes Very Quickly When Doing Environmental Testing and While Engaging In Negotiations – Beware!

Willms & Shier Environmental Lawyers LLP

www.willmsshier.com

Contact Information

Marc McAree

Phone: (416) 862-4820

[email protected]