A primer on environmental liability under BC’s Environmental Management Act.

Warning Wonky post ahead:

Every now and then I feel the urge to write a post that clarifies a topic I encounter in my professional life. This is one such post. I hope it will serve to explain, in simple language, how our environmental regime in BC protects the public with respect to contaminated sites. In doing so it will also show how even a well-designed system can sometimes result in unfortunate outcomes. In this case, it may help explain why so many old commercial facilities lie vacant as brownfields in and around our communities.

As I have previously noted, I carefully avoid blogging about my work but this post derives from a discussion I had with a friend over the Christmas holidays. My friend was recently informed that his aunt had passed away and, as her sole living relative, the executor of her estate was looking to pass on parts of her estate to him. In particular, she had owned a piece of land nearby that had historically been home to a gas station which shut down decades ago. The property had subsequently been used as a general store which is now closed. It is now a vacant property on a relatively busy street.

My friend asked me what could go wrong if he took over this property and tried to sell it. In reply, I jotted down some notes that I have now turned into this blog post. Be aware, nothing I am writing is intended to represent a legal opinion and shouldn’t be read as such. I’m not a lawyer, but what I do understand is how BC’s environmental legislation was formulated and how it has been interpreted to date by the BC Ministry of Environment & Climate Change Strategy (BC ENV).

The environmental regime in British Columbia is intended as a “polluter pays” system. The stated intention of our legislators was to ensure the costs of managing and remediating contamination is covered by the generators of that contamination rather than the public purse. As such, the program of managing contamination in British Columbia has been designed to connect as many potential responsible parties (i.e. potential pockets to pay for remediation) to a contaminated site as possible to ensure that the ultimate costs of cleaning up any residual contamination is kept off the public books.

The Environmental Management Act (EMA) provides the legislative framework for addressing contamination in British Columbia. The Contaminated Sites Regulation (CSR) provides the specific regulatory regime for managing contaminated sites under the EMA. The CSR includes a number of “Schedules” which represent items subject to the same regulatory restrictions or controls. Schedule 2 of the CSR presents a list of industrial and commercial activities that would draw an industrial or commercial property into consideration under the CSR. The property under discussion had historically be used for a Schedule 2 activity under the CSR (F5: petroleum product, other than compressed gas, dispensing facilities, including service stations and card locks) and as such it would be drawn into the Contaminated Sites regime of the EMA.

The EMA provides an expansive definition of parties who can ultimately be held responsible for cleaning up a contaminated site. Section 45 of the EMA presents a list of “Persons responsible for remediation of contaminated sites”. Section 45(1) (a) indicates that “a current owner or operator of the site” as a person “responsible for remediation of a contaminated site”. That is a party can become liable for remediation of a contaminated site merely by operating a business on that site (or even accepting the property as a gift), irrespective as to whether that party was involved in the generation of the impacts causing the contamination. This is why careful due diligence is recommended prior to any real estate transaction to ensure that unexpected accrual of liability will not occur through that transaction.

As discussed above, the intention of the regulatory regime in BC is to ensure that the “polluter pays” and as such the EMA includes Section 47 which defines “General principles of liability for remediation” of a contaminated Site. Section 47(1) states:

A person who is responsible for remediation of a contaminated site is absolutely, retroactively and jointly and separately liable to any person or government body for reasonably incurred costs of remediation of the contaminated site, whether incurred on or off the contaminated site.”

Note the language in that section. A party that has become a responsible party for contamination at a site, irrespective of relative blame, can be held fully responsible for the entire cost of any subsequent necessary remedial activities at the site (absolutely liable). The party can be held responsible for impacts that occurred prior to the party being associated with the site (retroactively liable). Finally, the party can either share the costs or be required to cover the entire costs themselves (jointly and separately liable). Certainly Section 47 (1) of the EMA does not prevent an injured party from using legal means to seek out other responsible parties to share in the costs, but the initial payment of those costs can be placed, by the government, on one party trusting that the civil litigation system will sort out relative liability at a later date. In doing this the government places the costs to establish relative blame on the individual parties themselves through the civil court system.

What would this mean for my friend? Well let’s assume the absolute best case scenario, that the historic operation had not caused any contamination. He would still be liable for some serious costs if he wanted to develop the piece of land. When he submitted a development permit to the City they would direct him to complete a Site Profile.The Site Profile system is one of the best features of the contaminated sites regime in BC because it forces municipalities to find out, up front, whether a property is potentially contaminated and gets that information on a permanent, publicly accessible, registry.

Due to the historic nature of the operations at the property, the submission of the Site profile would then draw the landowner into the Contaminated Sites process. As part of this process, the property owner would need to address any environmental requirements before a final development on the property could be issued an occupancy permit.

There are a lot of steps I won’t go into right now but suffice it to say that for an old gas station he would be required to carry out a Preliminary Site Investigation, then a Detailed Site Investigation and ultimately obtain a regulatory instrument (typically a “Certificate of Compliance” for a contaminated site or a “Determination” if the property was not contaminated). Since in this example, his property was clean getting a Determination would require an investigation of soil, groundwater and vapour at his property and then a submission to the BC ENV. Depending on the complexity of the site, we are talking about a minimum of tens of thousands of dollars of work.

If, alternatively, his property had contamination then the work would be much harder. The responsible party (my friend in this scenario) would be required to characterize and delineate the historical impacts at the site and remediation of those impacts would be required to meet either the numerical or risk-based standards specified under the CSR. Ultimately, this would need to be submitted to BC ENV as part of a regulatory submission for a Certificate of Compliance. That investigation/submission process easily puts you over $150,000 for a moderately complex site.

So here is my friend’s dilemma. By taking over ownership of the property he runs the risk of becoming retroactively, absolutely and jointly and separately liable for the costs to investigate, and potentially remediate, any historic impacts. Arguably he could always try and see if any of the historic owners/operators might still be around to help share the expense but absent that he would be on his own to cover the costs. Essentially, he is taking a gamble when he has exactly zero information upon which to base this decision.

Were this a multi-million dollar lot in Vancouver, the answer would be simple, accept the site and take a chance that you may spend a few hundred thousand trying to clean it up and getting it through the system. Then sell the property and re-coup his costs.

Similarly, if it was a small lot in the interior worth only a few thousand dollars the choice would be equally simple. Refuse the offer and let the property revert to the Crown. This would be fine for him but would turn the property into a brownfield. This is the sort of thing that has happened all over our province with old dry cleaners and independent service stations that closed leaving no one to cover the costs.

The system, as designed, is pretty robust, but it has some pretty important holes. The biggest of which may get plugged soon is that some municipalities have opted out of the system. This means that their citizens are not fully protected and in those communities it is possible to build on, and occupy a contaminated piece of land, with all the human health risks that entails. I hope that that the ability to opt out of the system will soon be ended giving all communities equal protection under the law.

Another future challenge is the suggestion that responsible parties be allowed to sell the liability associated with their properties. Unless done extremely carefully this has some very real possibilities to allow bad apples to off-load liabilities onto numbered companies, etc.. that could fold leaving the public holding the bag.

Ultimately, the challenge with any polluter pay system is that it only works if the polluters have the resources to pay. Under the CSR process, the government can essentially hold a property ‘hostage’ until a full investigation has been carried out; necessary remediation conducted; and the results confirmed by BC ENV. The problem with this model is that sometimes the cost of the work exceeds the cost of the property and the result is the government is left holding the bag.

What this means is that the current model works very well with large organizations (big oil companies and companies with a large corporate holdings in BC) since they are not in the position to walk away from the province leaving the government with a brownfield. The process works far worse in cases like the one described where no one is left to over to cover the tab and the land is not worth the cost to get it ready for further use.

The current system is really a balancing act. Every new regulation intended to reduce risk to the community runs the risk of creating a more costly system and thus the creation of more brownfields. In the recent past, most of the changes to the regulations have made closure more expensive, but the government does have some programs to help small land-owners deal with the costs of closing out a contaminated site. Still, as systems go, BC’s is the best in Western Canada (and to my mind the best in Canada). It provides real protections for communities; a clear process for stakeholders; and for the most part keeps the costs of polluting when it belongs, on the polluters themselves. Best of all,  it provides a mechanism by which communities can ensure that contaminated sites aren’t simply re-developed without ensuring they are safe for the next generation.

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1 Response to A primer on environmental liability under BC’s Environmental Management Act.

  1. Thank you. A fascinating article.

    Like

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