S P R I N G 2 0 0 1

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S Q U É B E C ’ S C O N TA M I NAT E D S O I L R E G I M E :I S T H E “ P O L L U T E R PAY S ” P R I N C I P L E S O O N TOB E H I S TO R Y ?Christine Duchaine (Montréal)

In December, 2000 the Government of Québec introduced an Act to amend

the Environment Quality Act with regard to land protection and remediation

(“Bill 156”) which will drastically change obligations concerning

contaminated land and responsibility for remediation. Pursuant to these

proposed provisions, owners and occupiers of contaminated sites, and

ultimately secured lenders, who did not cause the contamination could be

financially impacted and even responsible for remediation. Remediation

will also become mandatory in certain circumstances.

The Québec Environment Quality Act currently imposes no obligation to

restore a contaminated site. The Minister of the Environment can, however,

issue characterization or remediation orders (“Ministerial Orders”)

pursuant to the Act. Such orders may only be issued to those who have

contaminated a site in whole or in part. The government’s existing

“polluter pays” principle means that owners and occupiers who did not

contribute to the contamination of a site assume none of the cleanup costs.

Bill 156 introduces a diametrically opposite approach. The equitable

“polluter pays” principle may soon be gone in Québec.

Bill 156 would permit Ministerial Orders to be issued against (1) any entity

which contributed to or allowed the contamination of the site, or (2) any

entity which has or had ownership, custody or control of the contaminants.

The principle concern is with the second category since no exceptions

currently exist, unlike in other provinces where there are secured creditor,

innocent purchaser and/or migrating pollution exemptions. As such, this

proposition extends liability beyond that imposed anywhere else in

Canada. For example, in other provinces, such as British Columbia, prior

owners and operators may be liable but if they did not cause the pollution

they may qualify for an exemption. If adopted, Bill 156 will inevitably

impact property value as well as restrict the ability to sell, lease and finance

contaminated land.

I N T H I S I S S U E

1

Québec’s Contaminated

Soil Regime

4

Case Digests

5

Legislative Digests

7

Policy Initiatives

S P R I N G 2 0 0 12

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Regulated contamination levels are a key component of Bill 156. A

regulation will set the concentration levels of various contaminants

above which a site will be considered contaminated. The Ministry

has already indicated that these new standards will correspond to the

Criteria A, B and C (natural state, residential and commercial/

industrial use) presently contained in a non-binding Ministry Policy

issued in 1988 and subsequently replaced in June 1998. Until now,

these criteria were proposed only as guidelines and were not

considered remediation objectives. Pursuant to Bill 156, these criteria

will take on an unexpected importance by becoming minimum

standards. Ministerial Orders could be issued whenever the level of

concentration of a contaminant exceeds these criteria or, without

exceeding or being subject to them, “will be likely to adversely affect

the life, health, safety, welfare and comfort of human beings, other

living species or the environment in general, or to be detrimental to

property”.

A Ministerial Order will trigger a series of events that could have

tremendous impact on its recipient and on the prior, current and

subsequent owners and occupiers of the site. If a characterization

study reveals the presence of contaminants in excess of the above-

mentioned criteria, a notice of contamination will be registered

against title to the property and the land will be added to a list of

contaminated sites kept by the Ministry and by the municipality

where the site is located. No construction or subdivision permit may

be issued by the municipality in respect of a listed property prior to

submission of a satisfactory remediation plan. In any event, a

remediation plan will have to be filed with, and accepted by, the

Ministry. A summary of the remediation plan will then be registered

against title to the land and this plan will become enforceable against

third parties, including subsequent owners, occupiers and secured

creditors. As part of the conditions of the plan, restrictions

concerning the use of a site could be imposed.

E N V I R O N M E N T A L3

Bill 156 will also apply to other situations including: the voluntary remediation of a contaminated site;

whenever contaminants remain in the land; the commencement and cessation of certain commercial and

industrial activities; and, the change in use of certain sites.

In order to undertake certain commercial or industrial activities to be listed in a regulation, the entity

proposing to engage in such an activity will have to undertake to monitor and control the quality of the

underground and surface water and will have to provide the Ministry with a characterization study

determining the initial state of the land, a remediation plan to be implemented upon final cessation of

operations and financial guarantees to ensure implementation of the remediation plan. A draft list of

designated activities is already available. The list contains most of the sectors likely to alter the quality of

the environment.

In the case of a new enterprise, the obligation will be limited to restoring the site to its initial state.

Operations existing at the coming into force of Bill 156, however, will have to completely rehabilitate the

site after closure. The Ministry considers limiting the exposure for new businesses an incentive to use

contaminated sites, instead of virgin lands, for the establishment of potentially polluting activities.

Nonetheless, the potential liability relating to such sites may discourage their use by subsequent owners

or occupiers. The change in use of such land will be subject to its remediation to the extent necessary to

render the land compatible with its projected use. Where contaminants remain in the site, the change in

use must also be submitted for public consultation.

Bill 156 will also require written notice to neighbouring landowners whenever contamination above the

regulated limits is found at property boundaries or when an owner learns of a serious risk of migration.

The notice must also be sent to the Ministry.

Finally, various fines are proposed, including for the failure to request the registration of a notice of

contamination on title or to notify neighbouring property owners of the existence of contamination. In

addition, should someone fail to perform a characterization study or fail to carry out a remediation plan,

the Minister may take any measures necessary to remedy the default and then recover its costs from the

offender. The amount due is secured by a legal charge on all the assets of the offender, both movable and

immovable.

Obviously, Bill 156 is of grave concern to all industrial and commercial sectors. A parliamentary

commission was recently held to receive submissions from interested parties. Although Bill 156 will most

probably be modified prior to its adoption, everyone who owns or owned, occupies or occupied, or

benefits from securities on contaminated land in Québec should immediately assess the implications of

Bill 156 and prepare adequately for the coming into force of this unprecedented legislation.

S P R I N G 2 0 0 14

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B . C . W A S T E M A N A G E M E N T A C T

G I V E N F U R T H E R C O N S I D E R AT I O N

In the Fall 2000 edition of the Law News we

reported on O’ Connor v. Fleck (July 26, 2000)

and Swamy v. Tham Demolition (August 24,

2000), the first two decisions of the B.C.

Supreme Court to deal with the application and

interpretation of the private cost recovery cause

of action created by the contaminated sites

provisions of the Waste Management Act. On

November 24, 2000 the Court released an

additional decision considering the

contaminated site remediation provisions of the

Act: Beazer East, Inc. v. B.C. (Environmental

Appeal Board).

The Beazer decision suggests, contrary to the

finding in Swamy, that a plaintiff need not seek

findings by and relief from administrators under

the Act’s contaminated sites process and then

exhaust all statutory appeals and judicial review

proceedings prior to instigating a cost recovery

action. In addition, the decision confirms that

although a parent corporation will not be found

liable for a site contaminated by a subsidiary on

the basis of its share ownership, it may be found

liable on the basis that it exercised a sufficient

degree of control over the subsidiary’s

operations at the site.

In 1997 the Ministry of Environment issued a

Remediation Order in respect of a site located

adjacent to the Fraser River in Burnaby, B.C. The

Order named as responsible parties CN Rail (as

prior owner of the site), Beazer East, Inc. (as a

prior owner and operator of the site) and Atlantic

Industries Ltd. (as a prior operator of the site). The

site was contaminated as a result of a wood

treatment operation carried on at the location from

1931 to 1982. Throughout this period, the site was

owned by CN Rail and was leased to the operator of

the wood treatment business (“Op. Co.”). From

1969 to 1988 Beazer was the parent company to

Op. Co. until the subsidiary that owned Op. Co.

was sold. In 1993 Op. Co. merged with and carried

on as Atlantic.

The Court overruled the Environmental Appeal

Board’s decision (reported in the July 2000 edition

of the Law News) that Beazer was a “previous

owner” of the site, reasoning that notwithstanding

the fact that a parent corporation may have de facto

control over the use of a subsidiary’s assets (i.e.

through effecting a change in directors), it does not

have the legal right to control the use of such

assets. (It should be noted that the Court only

considered the one aspect of the definition of

“owner” that the Board had considered in reaching

its decision.) The Court did, however, uphold the

Board’s conclusion that Beazer was a “previous

operator” of the site on the basis that a person who

makes decisions with respect to an operation is “in

control” of the operation and a person who has the

authority to make decisions with respect to an

operation is “responsible” for the operation.

The Court also held that a Remediation Order need

not name the person or persons who contributed

most substantially to a site becoming contaminated

if it would jeopardize the remediation of that site.

Similarly, the Court held that an enforceable private

E N V I R O N M E N T A L5

agreement made between “responsible persons”,

in which one party assumes responsibility for the

contamination of a particular site, may be

disregarded if omitting the name of the absolved

party from the Remediation Order would

jeopardize the remediation of the site. Finally, it

is of note that the Court rejected the argument

that equity and fairness must be considered in

determining who should be named in a

Remediation Order.

N E W B E A Z E R O R D E R

On December 19, 2000 the Ministry of

Environment issued a revised Remediation Order

to CN Rail, Atlantic Industries Ltd. and Beazer

East Inc. requiring aggressive and costly cleanup

at the Big Bend site in Burnaby. The Order

requires installation of hydraulic controls

(estimated capital cost of $10 million plus

annual operating costs between $240,000 and

$750,000), dredging of contaminated sediments

in the Fraser River (estimated at $19 million to

$24 million), capping of river sediments,

monitoring, reporting and posting of financial

security. The Ministry rejected a less expensive

and less aggressive risk assessment approach

citing a preference for “permanent solutions”

and a concern over the level of pollution to the

River. The Ministry has agreed to consider the

installation of a wharf as an innovative

alternative (and one that would substantially

reduce the need for and cost of dredging) to cap

contamination and block site seepage.

The Ministry’s reasons illustrate the need for

solid expert consultant assistance, particularly at

large, complex sites. All parties have appealed to

the Environmental Appeal Board.

C O M P L I A N C E N O B A R T O

C R I T I C I S M

The B.C. Court of Appeal has held that the Forest

Practices Board is within its jurisdiction in

levelling criticism at a forest company’s practices

even where such practices comply with the Forest

Practices Code: Northwood Inc. v. Forest Practices

Board (February 28, 2001).

In auditing Northwood’s compliance with the

Code the Board had noted that certain of

Northwood’s activities, while compliant, were

“not consistent with sound forest practices”. The

Board went on to recommend Northwood

change its practices and that a regulation under

the Code be amended to require better practices

in the future. Northwood had sought a

declaration that the Board did not have the

power to make such criticisms or

recommendations.

L E G I S L AT I V E D I G E S TS

O N TA R I O G E T S T O U G H W I T H

P E N A L T I E S

Ontario’s Toughest Environmental Penalties Act,

2000 received Royal Assent on November 21,

2000. The Act amends the Environmental

Protection Act, Ontario Resources Act and Pesticides

Act.

In each amended Act, maximum fines for

corporations have been increased from $1

million to $6 million per day on a first

conviction and from $2 million to $10 million

per day on subsequent convictions. Maximum

S P R I N G 2 0 0 16

fines for individuals have been increased from

$100,000 to $4 million per day on a first

conviction and from $200,000 to $6 million a

day on subsequent convictions. The maximum

period of imprisonment for individuals has

been increased from two years less a day to five

years less a day.

The Ontario Ministry of the Environment

announced recently the total amount of fines

imposed for environmental offences in the past

year. As of December 5, 2000 fines for the year

totaled $2,628,790, up over $1 million from the

1991 figure. The number of charges laid by MOE

also increased in 2000. As of December 5, 2000

there were 1,520 charges laid compared with a

total of 1,216 in all of 1999.

MOE has also introduced environmental

“SWAT” teams whose goal is to provide a

mobile compliance and enforcement unit

focused on companies and individuals that defy

environmental laws. The “SWAT” team’s 65

members are expected to carry out more than

1,000 inspections each year.

B . C . U R B A N F I S H H A B I TAT

P R O T E C T E D

On January 19, 2001 the Streamside Protection

Regulation was passed under the Fish Protection

Act. The purpose of the Regulation is to preserve

“streamside protection and enhancement areas”

from residential, commercial and industrial

development. These protected areas or buffer

zones are to extend 5 to 30 metres beyond the

outer edge of stream banks. The width of the

required buffer zone depends upon the existing or

potential vegetation conditions in the area and on

the characteristics of the given steam. Even non-fish

bearing streams and streams that are non-

permanent require buffer zones, as do some

ditches.

The Regulation does not provide for the

compensation of land owners even though some

private lands will become ineligible for

development.

The Regulation will be phased in throughout B.C.

over the next five years and will initially apply only

to local governments in the Lower Mainland, the

Southern Interior and on the east side of Vancouver

Island.

O N TA R I O ’ S W A S T E M A N A G E M E N T

R E G U L AT I O N R E V I S E D

Effective March 31, 2001 Ontario’s general Waste

Management Regulation 347 was amended to

provide for the addition of a “derived from” rule

and the adoption of a new toxicity characteristic

leaching procedure in place of the existing leachate

extraction test. The latter amendments will require

the use of a Toxicity Characteristic Leaching

Procedure (TCLP) to determine if waste is

hazardous. The new procedure tests for 88

contaminants.

The “derived from” rule states that any listed

hazardous waste will keep its classification until it

can be clearly demonstrated that it is no longer

hazardous. The schedule of hazardous wastes has

also been updated to include 129 new chemicals

and industrial processes.

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E N V I R O N M E N T A L7

P O L I C Y I N I T I AT I V E S

O N TA R I O M I N I S T R Y A N N O U N C E S

B R OW N F I E L D S L E G I S L AT I O N

In September, 2000 the Ontario Ministry of

Municipal Affairs and Housing, in conjunction

with the Ministry of the Environment and the

Ministry of Economic Development and Trade,

appointed an advisory panel to explore means of

facilitating the cleanup and redevelopment of old

industrial and commercial properties, known as

“brownfields” sites.

The advisory panel issued its advice to the

Ministries in November, 2000. The panel’s

advice included a number of significant changes

in provincial legislation, such as:

• limiting lenders’ liability;

• liability limitations for municipalities;

• limiting liability of non-polluter owners and

developers;

• an improved site certification process; and

• enabling municipal incentive programs to

redevelopment, including tax incentives.

On March 2, 2001 the Minister of Municipal

Affairs and Housing announced that legislation

will be introduced this Spring incorporating

many of the panel’s recommendations.

N E B A N D M V E I R B S I G N M O U

In December, 2000 the National Energy Board

and the MacKenzie Valley Environmental Impact

Review Board signed a Memorandum of

Understanding for cooperation between the two

Boards with respect to environmental

assessments of resource development projects in

the North.

The MacKenzie Valley Environmental Review Board

is responsible for conducting environmental

assessments and impact reviews within the

MacKenzie Valley and is given the authority and

responsibility to coordinate its environmental

impact assessment activities with other parties.

The NEB regulates the construction and operation

of various types of resource development projects

in the Territories, such as oil and gas production

and processing and transmission facilities. As such,

under the Canadian Environmental Assessment Act

and the National Energy Board Act, the NEB is

responsible for environmental impact assessments

in areas outside the MacKenzie Valley. The NEB

may also be jointly responsible for environmental

impact reviews of projects under NEB jurisdiction

within the MacKenzie Valley.

The Memorandum of Understanding sets out a

general framework for cooperation between the

two regulators in carrying out their respective

environmental impact assessment responsibilities.

The purpose is to minimize duplication of effort

(for the regulators, project proponents and affected

parties), to provide for timely review of

development proposals and to increase certainty

for projects subject to environmental impact

assessment in the MacKenzie Valley. The MOU

contemplates that the two Boards will enter into

further project specific agreements for the conduct

of environmental assessments and reviews of

projects within NEB jurisdiction in a manner

which is consistent with the purposes and

principles of the MOU.

S P R I N G 2 0 0 1

The Borden Ladner Gervais LLP Environmental Law News is

necessarily of a general nature and cannot be regarded as legal

advice. The firm would be pleased to provide additional

details and to discuss the possible effects of these matters in

specific situations.

Our Environmental group is chaired by:

G. Ross Switzer (Vancouver)

(604) 640-4150

Our environmental group regional contacts are :

Calgary Montréal

Jonathan Liteplo Christine Duchaine

(403) 232-9653 (514) 954-2529

Ottawa Vancouver

Peter Doody William K. McNaughton

(613) 787-3510 (604) 640-4120

Toronto

F.F. (Rick) Coburn

(416) 367-6038

To obtain additional copies of the Borden Ladner Gervais LLP

Environmental Law News or to change your mailing address,

please contact the editor. Or, visit our website at

www.blgcanada.com where you can view the Environmental

Law News or other Borden Ladner Gervais LLP publications.

E D I TO R

Jonty Bogardus

tel: (604) 640-4227

email: jbogardus@blgcanada.com