Environmental Liability in Ontario Steps Backward

Ontario’s environmental industry is still processing a startling decision on a massive property contamination case made earlier this month.

On October 7, 2011 the Ontario Court of Appeal overturned a July 2010 decision by the Ontario Superior Court in Smith vs Inco Limited[1]. The 2010 decision awarded $36,000,000 in damages to 7000 property owners in Port Colborne, Ontario, due to soil contamination caused by nickel particles emitted from Inco’s refinery, over a 66 year period up to 1985. It was speculated that the original July 2010 decision would open the door in Canada (or at least Ontario) to American-style environmental class-action lawsuits popularized in movies like: Erin Brockovich starring Julia Roberts, and Civil Action with John Travolta.

In the Court’s decision it said that the case failed to prove that Inco’s refinery dust negatively impacted the values of the properties or the owner’s ability to use their properties.  The Court also found that the case did not show that the contamination posed a risk to the health or safety of residents.

The implications of this decision are potentially far-reaching when you consider so many industrial activities operate near residential areas.

There are several layers of irony in this story.

1.   Smelting is a “Potentially Contaminating Activity” highlighted by the Ministry of Environment (MOE) earlier this year in amendments to Ontario’s Brownfield legislation, O. Reg 153/04. Legislation that is designed to protect human health and the health of our environment.

2.   The pollutant in question, nickel refinery dust, is considered a human carcinogen by the US EPA, and EPA cites health studies from Port Colborne to support their conclusions! “Evidence of carcinogenicity includes a consistency of findings across different countries (Clydach, Wales; Copper Cliff, Ontario; Port Colborne, Ontario; Kristiansand, Norway; and Huntington, WV)”[2]

Inco (now owned by Vale Ltd.) is however not gloating over what must be viewed as a huge victory. The company's website has no posted announcements on the case.

[1] www.ontariocourts.on.ca/decisions/2011/2011ONCA0628.htm

[2] www.epa.gov/iris/subst/0272.htm

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Need a Phase I or II ESA? ---- Read this first (Part 2)

In my last post we saw how Ontario’s new “Brownfield” legislation has resulted in:

1. Phase I ESA’s costing more and taking longer.
2. More Phase II’s ESA being recommended.
3. Property owners receiving copies of Phase I & II’s, regardless of who orders them.
4. 65% of pollutants having more stringent guidelines, including the most common offenders (wastes from motor oil, gasoline and dry cleaning solvents).

You can refer back to September 14^th blog for details.

Additional implications of the new regulations are as follows:

5. More sites will not 'pass the test'.

The new Ministry of Environment (MOE) regulations on how Phase I's are prepared will result in more Phase II's ESA being recommended.  Also the new regulations have imposed lower thresholds for the most common pollutants.

Result: More sites will be deemed ‘contaminated’.

6. Developing a property requires a Record of Site Condition (RSC).

While this is not new news perse, in order to get a RSC approved the supporting Environment Site Assessments (Phase I and II) and remediation reports (if applicable) will have to meet the MOE standard. Therefore Phase I and II’s done to the CSA standard will not be accepted.

Result:  Getting approval for a RSC (necessary condition on most commercial deals and required by municipalities to approve redevelopment) will be more difficult.

7. Sites not being redeveloped can use the CSA-standards for Phase I and II ESA’s...

...BUT most financial institutions have adopted the new (stricter) MOE-standards into their underwriting guidelines*.

*Many bankers I have talked to indicate that in some cases (ie. mortgage refinance on a site with ‘lower risk’ activities) the CSA standard will be permitted. Tip: check with the bank first before ordering a report.