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| By John Stevens |
Forty years ago, I took a couple hundred of my hard-earned dollars and bought my first car. I bought it from a dealer who was subsequently prosecuted for sales tax fraud and declared bankruptcy before he went to jail. The car was an Austin. It was a grey-blue color — identical to the smoke that regularly came out of the exhaust.
Every weekend I fondly tinkered with that car to keep it running another week. Then I went off to my local ESSO station to buy two dollars of leaded gasoline and a quart of motor oil. I kept that car running for two years and then sold it to a fellow who ran it for another couple of years before he passed away.
I was always intent on obeying the law with that car — albeit the laws in those days were not as voluminous as they are today. I went on to become an engineer and subsequently understood that the blue smoke that came out of the exhaust contained various hydrocarbons, carbon monoxide, oxides of nitrogen, lead oxides and other delightful things that we today call pollutants and contaminants.
Now just imagine an enforcement officer from the Ministry of Environment presenting me with an order that required me to go back and clean up all the impacts of the emissions that came out of the Austin. And imagine that since I am the only owner of that car who is still around, I have to deal with all the pollution that came out of that car in its lifetime. And imagine that if I don’t comply, we’re talking about five years in jail and fines in excess of $1 million.
Outrageous you say. It could never happen. What I have described is an example of both retrospective liability and joint-and-several liability. And what I have described is exactly what is happening with contaminated properties. And the legislation that facilitates this is in place in all ten
Imperial Oil Case 1: Levis, Quebec
Two recent cases have impacted Imperial Oil. Both of these matters have drawn
considerable media attention, however the full story is not often told.
The first situation concerns a property in Levis, Quebec, on the shore of the
Saint Lawrence. Imperial first developed this site as a fuel terminal in the
1920s. The property had large above-ground storage tanks to receive shiploads
of heating oil and ceased operations in the early 1970s. In 1979, Imperial sold
the property on an “as-is” basis to a party who had full knowledge
of the historical uses of the site. At this point in time, Quebec did not have
any numeric standards defining contaminated sites or remediation.
The property remained vacant and unoccupied until 1987, when a residential developer acquired it. A cleanup of the site began under the supervision of the Quebec Ministry of the Environment, which then advised both the residential developer and the Town of Levis that the site was suitable for residential redevelopment. The town granted building permits and some 20 townhouses were built on the site between the spring of 1988 and the early 1990s. Imperial was not involved in the sale to the residential developer, the application for residential-use approval, the cleanup program or the subdivision and sale of the residential lots.
In 1990, the Quebec National Assembly amended the Environment Quality Act to provide for retrospective environmental liability or what was qualified as the “polluter pays” provisions of that Act.
In 1994, the proposed construction of some further homes led homeowners to discover contamination on their lots. They started civil lawsuits against the developer who sold them the lots, the town that issued the residential permits and the Ministry, who oversaw the remediation and certified the lots as being suitable for residential development. This then led to a series of third party suits. The Ministry then ordered Imperial to conduct an environmental assessment of the property, propose a remediation program and produce a cost estimate for the execution of the work.
Imperial sought judicial review of the order from the Superior Court of Quebec, which found that the minister was in a conflict of interest, trying to avoid liability in the pending civil case. The minister appealed to the Quebec Court of Appeal, which overturned the Superior Court ruling even though it agreed that the Ministry was in a conflict of interest. Imperial then appealed to the Supreme Court of Canada, which dismissed the company’s appeal in October 2003.
Hence, it appears that the Supreme Court is ruling that under the Quebec law, the concept of polluter pays will be in the forefront, notwithstanding liability. This is despite the fact that there was never any evidence that any actions by Imperial were in conflict with the laws of the day and that Imperial had no role in undertaking the deficient cleanup or in the decision to build homes on the property. The Supreme Court suggests that the polluter can thereafter seek recovery of any costs incurred from other potential responsible parties before the Civil Courts.
Imperial Oil Case 2: Calgary,
Alberta
A residential development in Calgary called Lynnview Ridge was formerly owned
by Imperial and operated as an oil refinery from the 1920s until the mid-1970s.
Imperial then dismantled the facility and entered into an agreement with Alberta’s
then-largest residential developer to redevelop the property into a residential
subdivision. Under the terms of the agreement, the developer was responsible
for liasing with government to obtain all the necessary approvals for residential
developments, including all engineering studies.
At this stage in history, it was recognized that some restoration of the site would be required, but numeric standards for remediation did not exist. A reputable engineering firm was hired to develop a scope of remediation. The studies identified the presence of contaminants on the site and provided recommendations to properly and effectively mitigate these risks. The city planning department approved the redevelopment plan subject to the recommendations in this plan being implemented. Unfortunately for Imperial, neither the developer nor the engineering firms are around today.
In 1993, Alberta changed its environmental protection act to include retrospective liability for some matters. In 2001, the province also reduced its numeric standard for lead in soil. The subdivision was not compliant with the 2001 lead standard and Imperial was issued Environmental Protection Orders covering further remediation of the site. To date, Imperial has purchased 225 of the 246 housing units in the subdivision to facilitate managing the issue. The legal process continues with 21 civil claims as well as the Orders.
What These Issues Say
These two cases are but a fraction of this family of issues facing Imperial.
These cases say that current regulations and court interpretation indicate:
So if you go back to the headline, “When does the liability end?” I’m afraid that my answer to you is that in the current regulatory regime we have in Canada, the answer is never.
And it’s for that reason that some Canadian companies are choosing to put fences around their surplus properties and turn them into brownfields rather than remediate or sell. I am sure this is not the outcome that governments had anticipated as they enacted their various contaminated-site statutes.
John Stevens is manager of real estate at Imperial Oil Limited.