Environmental Update: What you Never Knew you Needed to Know – Key Takeaways from IECS Conference Presentation

 In Feature Articles

By Jacquelyn Stevens, Partner and Certified Environmental Law Specialist by the Law Society of Ontario, with the assistance of Lauren Wortsman, Associate. © Willms & Shier Environmental Lawyers LLP.

November 19, 2020

It’s easy for lawyers to get caught up in the legal intricacies of environmental law. In order to avoid this,—and to not lose the audience’s attention—at the recent IECS (Innovation in an Era of Challenging Sites) conference on October 1, 2020, I focused in on Environmental Updates: What You Never Knew You Needed to Know. I covered off some basics about: environmental risk and liability, Ontario’s new Excess Soil Management Regime, aggregate resource changes, and potential implications of the Supreme Court of Canada’s (“SCC”) decision in Orphan Well Association v Grant Thornton Ltd [1] (“Redwater”).

The most important takeaway (and it is so important I will put it up front!): Ensure you engage the appropriate environmental technical, planning and legal team for your project or operation so you understand what you never knew you needed to know!

The following are other key takeaways from each topic.

Environmental Risks and Liabilities

A key starting point in any discussion about environmental risks and liabilities is a review of the two primary types of legal liabilities: regulatory liability and civil liability, and the potential for personal liability under each.

1. Regulatory Liability – Governmental Authority can:

  • Grant Environmental Compliance Approvals, Environmental Activity and Sector Registry, Permits and Licences that relate to activities and operations
  • Issue Orders to make you do something or stop you from doing something, and
  • Lay charges and prosecute for offences under environmental statutes, which are generally punitive in nature and carry fines, although in rare cases, for the most egregious offences, jail time.

2. Civil liability – Lawsuits between disputing parties:

  • Environmental lawsuits are most often about contamination on-site caused by an operator at the property or contamination migrating off-site and impacting a neighboring property.
  • Limitation deadlines pursuant to the Limitations Act, 2002,[2] on the timing for commencing lawsuits – 2 years from the date of discovery, but there also exists a 15 year ultimate limitation period.
  • Most often the objective of a lawsuit is to seek damages for clean up or diminution in value, but a lawsuit may also seek other relief including injunctions to stop an ongoing environmental event.

3. Personal Liability – Of particular importance is that individuals, not just corporations, can face both regulatory liability and civil liability:

  • Individuals may be ordered or prosecuted by the governmental authority, and statutory liability exists for directors, officers and those with management and control[3]
  • Individuals in their personal capacity, as directors or officers, or those with management and control, may be named in lawsuits, in additional to corporations. The Courts are willing to, and have, pierced the corporate veil.[4]

Ontario’s Excess Soil Management Regime

1. O. Reg. 406/19 is the new On-Site and Excess Soil Management Regulation that contains new rules and obligations relating to:

  • The reuse and management of excess soil
  • When excess soil can be sent to landfills and dumps
  • How excess soil may be lawfully transported, and
  • Environmental Site Registry of Ontario filing requirements for certain projects.

2. Definitions matter, and there are some new ones in O. Reg. 406/19, including “Project Leader” and “Project Area”.

3. Reg. 406/19 comes into force in stages:

  • January 1, 2021 – the provisions about reuse of excess soil come into force
  • January 1, 2022 – all testing, tracking, and registration requirements associated with the excess soil regime come into force
  • January 1, 2025 – restrictions on depositing excess soils in landfills comes into force, and
  • January 1, 2026 – provisions for work already started or already contracted for (grandfathering) ends.

4. Amendments of other legislation and regulations:

  • Reg. 153/04 Records of Site Condition – Part XV.1 of the EPA
  • 347 General – Waste Management, and
  • O. Reg. 351/12 – Registrations Under Part 11.2 of the Act – Waste Management Systems.

5. The Ministry of the Environment, Conservation and Parks (“MECP”) issued Additional Guidance Documents:

Aggregate Resources

1. Pits and Quarries are regulated under the Aggregate Resources Act[8] by the Ministry of Natural Resources and Forestry (“MNRF”). The MNRF implements rules governing aggregate management, issues licences, permits and changes to existing approvals, inspects aggregate operations, responds to complaints, enforces compliance, and ensures rehabilitation is carried out. Note that the MECP now deals with endangered species permits.

2. Amendments to the Aggregate Resources Act and O Reg 244/97 include:

  • Changes to Minister/Local Planning Appeal Tribunal considerations regarding the issuance or non-issuance of a licence
  • Certain zoning by-laws are rendered inoperative
  • Changes to the process for amending certain licences
  • New requirements for technical reports and information in applications
  • Enhanced notification and consultation requirements, and
  • Updated operating and compliance reporting requirements.

3. Proposed amendment to A Place to Grow: Growth Plan for the Greater Golden Horseshoe

  • The proposed amendment to remove the prohibition on new mineral aggregate resources in key natural heritage features and key hydrologic features, including significant wetlands, habitat of endangered species and threatened species, and significant woodlands, will not come into effect.

The SCC Decision in Redwater

1. The upshot of the SCC’s decision in Redwater –is that pre-existing environmental obligations take precedence over the claims of secured creditors in Bankruptcy. The facts are as follows:

  • Redwater went bankrupt.  Redwater’s assets were mostly non-producing, non-valuable, wells.  Grant Thornton, the receiver, renounced/disclaimed Redwater’s non-producing wells and took possession of the producing valuable wells only under the Bankruptcy and Insolvency Act[9]. The Alberta Energy Regulator then issued Abandonment Orders for the disclaimed wells, requiring Grant Thornton to remediate and decommission the disclaimed wells.
  • The Regulator argued that it was not a secured creditor, but instead a bona fide regulator seeking to enforce the Orders for the public good. Grant Thornton and the secured creditor banks argued that the Regulator was a secured creditor and the Regulator’s Orders were claims provable in bankruptcy.

2. In finding the Regulator was not a secured creditor and the claims were not provable in bankruptcy, the SCC stated “[i]t is the public, not the Regulator or the General Revenue Fund, that is the beneficiary of those environmental obligations; the province does not stand to gain financially from them.”[10]

The result of Redwater is that a debtor’s regulatory environmental obligations are outside the bankruptcy legal regime, incurred as conditions of its environmental licensing approval. Assets from Redwater’s estate were required to be used to satisfy Redwater’s environmental obligations before distribution to secured creditors.

3. Redwater may have implications across the country:

  • Reduced lending to industries where adverse environmental impacts are common
  • Heightened lender scrutiny of the borrower’s potential environmental liability
  • Increased attention to the value of any collateral that includes assets with financial assurance requirements, and
  • Heightened monitoring of environmental matters during the loan tenure.

We will continue to watch how the SCC’s decision in Redwater plays out in disputes at the intersection of environmental law and insolvency law.

And, to end, as I started…the most important takeaway — Ensure you engage the appropriate environmental technical, planning and legal team for your project or operation so you understand what you never knew you needed to know!

Jacquelyn Stevens is a partner at Willms & Shier Environmental Lawyers LLP in Toronto and certified as a Specialist in Environmental Law by the Law Society of Ontario.  Jacquie may be reached at 416-862-4828 or by e-mail at jstevens@willmsshier.com.

The information and comments herein are for the general information of the reader only and do not constitute legal advice or opinion.  The reader should seek specific legal advice for particular applications of the law to specific situations.
[1]2019 SCC 5.
[2]SO 2002, c24.
[3]See eg. R v Collingwood Prime Realty Holdings Corp et al., 2020 ONSC 2953 Alizadeh v Ontario (Ministry of Environment, Conservation and Parks), [2019] OERTD No 32.
[4]See eg Midwest Properties Ltd v John Thordarson and Thorco Contracting Limited, 2015 ONCA 819.
[8]RSO 1990, c A8.
[9]RSC 1985, c B-3.
[10]Redwater, supra note 1 at para 122.

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