Contaminated Site, Eh? (Or Lust, Canadian Style)

John D. Stefaniuk
Thompson Dorfman Sweatman
Winnipeg, Manitoba

Introduction
"[F]rom Bonavista to Vancouver Island; from the Arctic Circle to the Great Lake waters…" So goes the chorus to the Canadian adaptation of Woody Guthrie’s classic This Land is Your Land as taught to school children across my country. The tune is the same, but the words are a little different. For an American, looking at Canadian environmental law as it relates to contaminated sites can be a lot like that – the same concepts generally apply, but there can also be variations. The following is a brief overview of some of the areas often raised in my discussions with U.S. counsel.

The Constitutional Division of Powers
Quiz show devotees will be glad to learn that Canada’s federal constitutional system consists of a central Federal Government (Parliament), ten provincial governments and three territorial governments. The last province to join confederation (as we like to refer to our union) was Newfoundland, in 1949 – the newest territory, Nunavut, was only created a year ago. Aboriginal peoples (often referred to in Canada as First Nations) have, in some locales, established recognized systems of self-government, adding to the constitutional mix.

The division of legislative powers between the levels of government is set out in The Constitution Act of 1867. The provinces (and, by separate federal legislation, the territories) are granted exclusive legislative jurisdiction over "property and civil rights." This is considered to include jurisdiction over most issues relating to the regulation of business activity (including emissions), land use, zoning, municipal government, and waste. All of the provinces were granted jurisdiction over natural resources by 1930.

The Federal Government has exclusive jurisdiction over matters relating to fisheries, coastal waters, Indian lands, federal lands and international matters. It also has a broad criminal law power and a "national concerns" power to legislate for "peace, order and good government." The Federal Government is also given jurisdiction over any areas not specifically assigned to either level of government.

It was not until 1992 that the Supreme Court of Canada gave some clear direction as to the respective roles of the federal and provincial governments in the environmental arena, in the Friends of the Oldman River decision. The Court held that the regulation of environmental matters was an area too diffuse to be assigned by the Constitution exclusively to one level of government. More recently, in the 1997 Hydro Quebec decision, the Court confirmed that the Federal Government’s criminal law powers extend to the ability to legislate in relation to toxic substances, such as PCBs, under the Canadian Environmental Protection Act ("CEPA"). Hence there is an overlap between the federal and provincial jurisdictions.

The end result is that the provinces and territories have the primary jurisdiction over the regulation of most contaminants and contaminated sites. That is not to say that the Federal Government is necessarily out of the picture. For example, if the site in question involves the deposit of a "deleterious substance" in "waters frequented by fish," the federal Fisheries Act may come into play. Likewise, if the site involves a listed toxic substance, regulations under CEPA may limit what can be done with the contaminated soils or water.

Smoothing the Patchwork Quilt – the CCME
Environmental legislation and regulation only began to take off in Canada in the late 1970s. Each of the Canadian jurisdictions proceeded at their own speed and in their own direction. To address differences in legislation that quickly developed between the provinces, the Canadian Council of Ministers of the Environment ("CCME") was created. It operates under a framework of federal-provincial accords and agreements to promote inter-jurisdictional cooperation and coordination (see the CCME web site at http://www.ccme.ca for more information about CCME projects and standards).

The CCME is comprised of the environment ministers from the federal, provincial and territorial governments. CCME committees made up of senior department staff provide advice and recommendations to the ministers for their consideration. One of the most important activities carried on by the CCME is the development of Canada-wide Standards ("CWSs"), including those in relation to site contamination and remediation. For example, the CWS for Petroleum Hydrocarbons ("PCHs") is intended to tackle the most wide-spread soil contaminants in Canada and to establish ambient soil quality guidelines/standards including: a framework for phased assessment and management; ambient soil quality standards for remediation; and analytical methodologies for measurements of PHCs in soil. The CCME has also developed Canadian Environmental Quality Guidelines (available on CD-ROM) which set national benchmarks for air, water, soil, sediment and tissue residues for identified contaminants.

Standards and guidelines developed by the CCME are up to the provinces to apply. Some of the provinces have formal, regulated standards for site remediation and the categorization of contaminated sites. Other provinces use CCME standards in the development of guidelines for remediation and retain discretion in their environment ministries to deal with individual properties on a site by site basis.

Selected Elements of Provincial and Territorial Legislation

Site Assessment
Approaches to site assessment can vary from province to province. Some provinces have their own regulatory standards for site remediation. Others take a more flexible "guidelines" approach. More jurisdictions are moving away from formulaic criteria for site remediation and are at least allowing potentially responsible persons ("PRPs") the option of presenting remediation plans based on risk-based analysis, even where guideline values are exceeded. This is some attempt to rationalize the economic realities of site remediation and land usage with environmental protection. For instance, what is the point in removing lead-contaminated soil if adequate containment measures are put in place and the land has been paved and is being used for a parking lot? However, not every jurisdiction has embraced this approach.

Allocation of Liability under Remedial Orders
Once contaminated sites have been identified, and in the absence of voluntary cleanup, government-mandated action generally takes the form of a remedial order. The list of PRPs who may be named in a remedial order can vary between jurisdictions, as can the lists of exemptions that may be applied to "innocent" parties having a connection to a particular site. PRPs can include past and current owners and occupants and those having control of the contaminants, among others.

Some of the provinces, such as Manitoba, Ontario and British Columbia, have liability allocation mechanisms built into their legislation, whereby identified PRPs may seek an allocation of liability for cleanup costs among all identified PRPs. The process usually allows named PRPs to identify other PRPs that can be brought to the table. In some provinces the allocation process could involve voluntary agreements among PRPs and the use of government-appointed mediators to resolve liability allocation issues.

Even where the liability allocation processes exist, most jurisdictions retain an underlying system of joint and several liability among identified PRPs. Even in Manitoba, where the concept of an "orphan share" is possible under legislation, there is an uncertainty as to how or whether a significant un-allocated portion of site cleanup costs would be considered to be the responsibility of government.

Emergency Powers, Penalties and Cost Recovery
Federal and provincial legislation provides for varying levels of fines and penalties. Typical maximum fines for individuals tend to be in the range of Can.$250,000 and possible imprisonment in the order of a maximum of six months to a year. On the corporate end, maximum fines tend to be around the Can.$1,000,000 mark. Typically, each day of a continuing offense is considered to be a separate offense. Officers and directors who act or participate in an offense are usually liable to prosecution. Most legislation also provides for the disgorgement of profits realized through the commission of the offense and the ability to order site remediation and a wide variety of other remedies. Although maximum penalties are high, the history in most jurisdictions is that the fines that are actually imposed are very low except in egregious circumstances.

Legislation also typically grants powers to the environmental authority to undertake cleanup in emergency situations or where PRPs have defaulted under their obligations as set in remedial orders. The provinces have cost recovery remedies that can include liens against the site and/or property of the PRP, with the priority of the lien right depending on that jurisdiction’s legislation.

Duty to Report Contamination
The duty to report contaminant spills in excess of prescribed quantities (especially for PHCs) is reportable under applicable provincial legislation. Most provinces do not, however, require reporting of the existence of contamination at a site, even where contamination is above regulatory standards or guidelines.

Although a property owner or occupant may not be required to report the existence of contamination, you should be aware that the code of conduct of professional engineers in Canada (the principal environmental consultants in Canada) requires the reporting of contamination posing a serious and imminent threat to health or safety. Having said that, there will rarely be a situation in which the engineering firm could not be convinced that its reporting obligation could not be fulfilled by having the property owner do the reporting on its own terms.

Common Law Torts – Alive and Well
Legislative regimes governing contaminated sites deal with the relationship between the regulators and identified PRPs and only apply to those sites that involve government regulatory action. Except in those jurisdictions where liability allocation schemes are built into the legislation, most claims as between PRPs, innocent parties and insurers who may find themselves somehow tied to a contaminated site issue continue to be resolved in the Courts (or under ADR) under the torts of nuisance, negligence and trespass (or, in the case of Quebec, under their civil law equivalents).

The Moral: Help on the Ground – Using Local Talent
In my experience the most efficient and cost effective way to deal with the different environment law regimes across Canada is to first decide whether and where the contaminated site issues might arise and then to engage local consultants and/or counsel to take the lead role or to provide advice as local agents. Apart from saving time and costs involving climbing the learning curve, local contacts will have a better feel for the unwritten rules that apply when dealing with local regulators and for the best approaches to be taken.