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EPEA v. Limitations Act: Test Set By Alberta Court For Extending Limitation For Environmental Claims

The Alberta Court of Queen’s Bench has set the “test” to be followed in s. 218 applications pursuant to the Environmental Protection and Enhancement Act, R.S.A. 2000, c. E-12 (“EPEA”) in its May 19, 2016 decision in Lakeview Village Professional Centre Corporation v Suncor Energy Inc, et al 2016 ABQB 288.

Background

The plaintiff had purchased lands in the Lakeview subdivision of Calgary in 1998. The plaintiff was aware that a gas station was formerly on the site. This raised concerns of potential contamination of the lands; however, an initial environmental assessment found no significant contamination.

A number of years later, in 2013, the plaintiff received an offer to purchase the lands, prompting another environmental assessment. This assessment found contamination at a level that required remediation of the lands, including the removal of piping, concrete and soil. The plaintiff has spent approximately $400,000 on remediation to date, with further costs expected.

The Action

As a result of these remediation costs, the plaintiff wishes to recoup some or all of these costs from former owners of the lands, including the successor of the gas station operator and the vendor of the lands who commissioned the first environmental assessment (Suncor and Commonwealth Business Management Ltd. (“Commonwealth”)).

The Problem

Normally, the Plaintiff’s action would be out of time under the Limitations Act, R.S.A. 2000, c. L-12, as the contamination / sale of land occurred well past the 10-year ultimate limitation period. However, there is a provision in EPEA that permits a judge to extend the limitation period in some cases.

The Law

Section 218 of EPEA provides that a judge may extend a limitation period where the basis for the action arises out of a “release of a substance into the environment”. The purpose of this extension is that sometimes, contamination may not be identified for several years.

Where an application is made, s. 218 does identify a list of things for a judge to consider: (a) when the alleged adverse effect occurred; (b) whether the alleged adverse effect ought to have been discovered by the claimant had the claimant exercised due diligence in ascertaining the presence of the alleged adverse effect, and whether the claimant exercised such due diligence; (c) whether extending the limitation period would prejudice the proposed defendant’s ability to maintain a defence to the claim on the merits; (d) any other criteria the court considers to be relevant.

However, there was little in the way of case law on this issue, and there was no “test” to guide the court in considering these types of applications. In particular, does a court decide conclusively in these applications whether the limitation period should, or should not be extended? Or, can the court make a preliminary determination giving plaintiffs the green light to go ahead to trial, where the limitation argument may surface again?

The New Test

Ultimately, Justice Martin created a two-step approach for use in s. 218 applications:

  1. Is there sufficient evidence on the s. 218 factors to grant an extension of the limitation period?
  2. If there is not enough evidence to make that determination, or if there is sufficient evidence but an issue for trial could be determined prematurely, has the claimant shown a good arguable case for an extension? If so, the claimant is entitled to an extension of the limitation period subject to a final determination of the issue at trial.

The court reasoned that this approach respects the purpose of s. 218 while acknowledging the legitimate interest of a claimant to know whether to spend further resources on their claim. It also allows the court to extend the limitation period for obviously meritorious s. 218 cases or to weed out cases that are attempting to “abuse the system”.

The Decision

Lakeview was successful in its application and may now proceed with a claim against Suncor and Commonwealth.

The court found that the “adverse effect” may have been as early as 1969, through to as late as 2013, and that this time frame is “not so long ago that it would be unfair to allow the action to proceed against either party”.

Further, the court determined (on a preliminary basis only) that Lakeview had exercised due diligence when purchasing the property from Commonwealth. Lakeview had made it a condition of its purchase that Commonwealth provide information on the environmental status of the property. Commonwealth had commissioned its own environmental assessment which concluded that there was no evidence of significant contamination and no further investigation would be warranted.

The court found no prejudice to Suncor or Commonwealth as neither had presented any evidence that an extension to the limitation period would prejudice their ability to maintain a defence on the merits.

Finally, Commonwealth had attempted to argue that s. 218 only applied to parties that had caused or contributed to the contamination of the lands and as it was only an owner of lands (between Suncor and Lakeview), s. 218 did not apply.

The court, however, found that the wording of s. 218 is broad. Its opening paragraph refers to civil proceedings “where the basis for the proceeding is an alleged adverse effect”. The basis of Lakeview’s action is determining liability from the fallout of an alleged adverse effect. In addition, EPEA also contemplates the liability of a former owner for remediation in its definition of “persons responsible” for a contaminated site:

SECTION 107
Interpretation and application

107 (1) In this Part,

(c) “person responsible for the contaminated site” means

(i) a person responsible for the substance that is in, on or under the contaminated site,

(ii) any other person who the Director considers caused or contributed to the release of the substance into the environment,

(iii) the owner of the contaminated site,

(iv) any previous owner of the contaminated site who was the owner at any time when the substance was in, on or under the contaminated site,


[Emphasis added]

As such, the court found that this case was one contemplated by s. 218, where the harmful effects of contamination were not evident for a number of years, due diligence was shown, and there was no prejudice to the defendants. Accordingly, the court extended the limitation period for Lakeview’s claim and has allowed this matter to proceed to trial.

James Early

AER Taking Baby Steps

Ecojustice recently reported on the Alberta Energy Regulator (“AER”) and the lack of action it has taken following a lot of hype when it was first introduced.

Well, one step does not a regulator make, but the AER has just shown some teeth in laying environmental charges against Plains Midstream Canada ULC.

The charges stem from a pipeline incident that occurred on June 7, 2012, and resulted in 2,900 barrels (461,000 litres) of sour crude oil being released from the company’s Rangeland pipeline into the Red Deer River near Sundre, Alberta.

Specifically:

“The charges include a federal charge under the Fisheries Act and a provincial charge for failing to report a release of crude oil from a pipeline as required under Alberta law.

“The provincial environmental charge stems from an Alberta Environment and Sustainable Resource Development (ESRD) investigation that found the company failed to report the release as required within Alberta’s Environmental Protection and Enhancement Act (EPEA).”

What will come of these charges? Does this baby step signal more to come from the AER, or will AER action only sporadically occur in the wake of pressure from organizations such as Ecojustice? Time will tell. For now, I for one am glad to see some teeth being shown.

By James Early

The Clean Power Plan, will Canada follow suit?

Today, President Obama and the Environmental Protection Agency (“EPA”) released the Clean Power Plan (the “Plan”), a 645-page rule created to curb global warming.

Amongst other things, the rule seeks to cut carbon emissions by 30% from 2005 levels by 2030. Under the rule, States must submit initial compliance plans by June 2016. Each state will be left to develop its own strategy for complying with the new guidelines. To read the Plan, if you have time, click here.

A summary of the Plan is can be gleaned directly from the Plan itself:

“Nationwide, by 2030, this rule would achieve CO2 emission reductions from the power sector of approximately 30 percent from CO2 emission levels in 2005. This goal is achievable because innovations in the production, distribution and use of electricity are already making the power sector more efficient and sustainable while maintaining an affordable, reliable and diverse energy mix.

“This proposed rule would reinforce and continue this progress. The EPA projects that, in 2030, the significant reductions in the harmful carbon pollution and in other air pollution, to which this rule would lead, would result in net climate and health benefits of US$48 billion to US$82 billion.”

Will the Plan result in legal challenges? Quite probably. One such challenge could be whether the EPA has overstepped its authority. A public comment period could also result in changes to the Plan.

Finally, will Canada follow in the footsteps of our southern neighbours? After all, didn’t Mr. Harper state that he would be acting “in concert” with the US on these matters? In the wake of the Copenhagen Summit on climate change (2009 United Nations Climate Change Conference), Mr. Harper announced that:

“[i]f the Americans don’t act, it will severely limit our ability to act. But if the Americans do act, it is essential that we act in concert with them.”

I’m on the edge of my seat…

By James Early

Kinder Morgan: Who Participates?

While thousands of interested parties participated in the Northern Gateway hearings, the same cannot be said of the Kinder Morgan National Energy Board (“NEB”) pipeline review.

More than 2,100 people applied to participate in the Kinder Morgan hearings, though as few as 400 will be permitted to appear as intervenors at the hearing. New rules enacted by the federal government now limit participation to only those who are directly affected by the project.

In order to participate, the NEB must be satisfied that an applicant:

-is directly affected by the granting or refusing of a project application

-has relevant information or expertise for the NEB to consider; or

-both.

As part of the new rules, the NEB is to determine who is directly affected by considering the following two factors:

1. The nature of the person’s interest.

2. Whether the granting or refusing of a project application causes a direct effect on the person’s interest.

The first enquiry addresses whether a person has a specific and detailed interest, rather than a general public interest. Examples of interests that could support participation are: commercial, property or other financial interest (including employment); personal use and occupancy of land and resources; or use of land and resources for traditional Aboriginal purposes.

In relation to this second stage, the NEB will consider the degree of connection between the project and the interest, the likelihood and severity of harm a person is exposed to, and the frequency and duration of a person’s use of the area near the project.

The interpretation of these rules, however, is proving contentious.

In challenging the rules on participation, this week Forest Ethics Advocacy, amongst others, filed an application with the NEB alleging:

“…[the restriction on participation] is a draconian, undemocratic limitation of their constitutionally guaranteed freedom of expression…”

The applicants also allege that the NEB used a very narrow definition of the phrase “directly affected”, and that the NEB refuses to hear submissions on climate change or fossil fuels:

“This board cannot determine whether the proposed pipeline is in the public interest without a full consideration of the environmental effects… …[th]e project is being proposed in order to increase pipeline capacity in support of growing oil production. Without acknowledging that increased production of oil sands is having a devastating effect on the environment, and resulting in climate change, this board cannot even begin to address the issues which it has deemed relevant

The NEB application follows on the heels of a Tsleil-Waututh application, filed just a few days earlier in the Federal Court of Appeal. In this case, the First Nation claims that the NEB review process is unilateral and one-sided.

The First Nation has stated:

“…serious legal errors made by the federal Crown and NEB have led to a flawed and unlawful review process that puts Burrard Inlet and all peoples who live here at risk.

“The Crown and NEB are running roughshod over our Aboriginal Title and Rights. The process to review Kinder Morgan’s proposed pipeline expansion and tanker project was designed without First Nations consultation or public participation. The timelines appear to have been designed to rush through approvals,” says Chief Maureen Thomas, Tsleil-Waututh Nation.

“Legal materials to be filed in the Federal Court of Appeal will demonstrate that, among other things, the NEB lacked legal authority to start its review process because of the federal government’s failure to first consult Tsleil-Waututh on key decisions about the environmental assessment and regulatory review of the project.”

Regardless of the disposition of the NEB and Federal Court applications, what appears to be certain is that litigation in relation to the Kinder Morgan project is not likely to stop. Currently the Northern Gateway project is facing litigation on at least 10 fronts from a range of parties including First Nations and environmental groups.

By James Early

Environmental Protection Order issued by Alberta Government

Earlier this month, Alberta issued an environmental protection order to Locke Stock & Barrel Company Ltd. that outlined necessary steps to reclaim an oil and gas wellsite in the Municipal District of Foothills No. 31.

Under the environmental protection order, Locke Stock & Barrel Co. Ltd. must:

– conserve and reclaim the site in accordance with the 2010 Reclamation Criteria for Wellsites and Associated Facilities;

– remediate any contamination on site, or off-site which originated from the well or any of its activities;

– undertake soil and/or groundwater sampling at appropriate intervals to demonstrate acceptable remediation;

– submit a final report to Environment and Sustainable Resource Development (“ESRD”) summarizing all work that has been undertaken to remediate any contamination;

– apply to ESRD for a reclamation certificate for the well; and

– conduct weed spraying and maintenance on the site at least twice a year until ESRD issues a reclamation certificate to the company.

As the Environmental Law Centre recently noted, though, there were 16,975 wells abandoned between 1963 and 2002, and an additional 35,856 since 2002 in Alberta. Hopefully we will begin to see a lot more remediation orders issued in the coming months, and with greater diligence than in the past.

That begs the question: what is the effect of an environmental protection order in the case where the company or entity required to remediate declares bankruptcy? A recent Lexpert article noted:

“Many a stakeholder has been stunned by the broad powers of the Companies’ Creditors Arrangement Act (“CCAA”) to stay – and then compromise – nearly all clams against an insolvent company. This power has recently been confirmed to extend even over remediation orders issued by provincial ministries of environment (“MOEs”)…

“[The issue of insolvency vs. remediation orders is s]o hot that counsel for MOEs have suggested that CCAA is in danger of becoming a “regulatory car wash,” arbitrarily cleansing debtors of environmental obligations and leaving taxpayers to pick up the tab.”

The decision reached by the Supreme Court of Canada in Abitibibowater in 2012 set a worrying precedent. In that case, the Supreme Court held that there are three requirements orders must meet in order to be considered claims that may be subject to the insolvency process.

First, there must be a debt, a liability or an obligation to a creditor. The first criterion was met because the MOE had identified itself as a creditor by resorting to environmental protection enforcement mechanisms.

Second, the debt, liability or obligation must be incurred as of a specific time. This requirement was also met since the environmental damage had occurred before the time of the CCAA proceedings.

Third, it must be possible to attach a monetary value to the debt, liability or obligation. The Supreme Court determined that it was possible.

In Nortel Networks v MOE, litigation that has been working its way through the Ontario courts, the Ontario Court of Appeal lifted stays of remediation orders that had been put in place pursuant to the CCAA. Nortel applied for leave to appeal this decision to the Supreme Court, but last week Nortel’s application for leave was dismissed.

In assessing the Supreme Court’s reasoning in Abitibibowater the Ontario Court of Appeal summarized its interpretation of the ruling as follows:

“In determining whether a regulatory order is a provable claim, a CCAA court must apply the general rules that apply to future or contingent claims. As I read it, the Supreme Court’s decision is clear: ongoing environmental remediation obligations may be reduced to monetary claims that can be compromised in CCAA proceedings only where the province has performed the remediation work and advances a claim for reimbursement, or where the obligation may be considered a contingent or future claim because it is “sufficiently certain” that the province will do the work and then seek reimbursement.” [my emphasis]

In other words, if a province wishes to avoid the ‘car washing’ of its remediation order against a bankrupt polluter, it should not take steps to remediate the contaminated site itself, nor show any intent to remediate.

In terms of the Locke Stock & Barrel Co Ltd. environmental protection order, it is good to see Alberta utilizing some of the tools available to it to fix environmental problems. In some circumstances, however, it could be all for naught if the party subject to a remediation order declares bankruptcy and the obligation to remediate is “car washed” away by the CCAA. Remediation would likely then be left to the province in question, and, consequently, taxpayers like you.

By James Early

Carbon Capture, Alberta’s Licence to Drill

Last week, the Government of Alberta announced that, as part of “Budget 2014”, Alberta will continue to invest in two carbon capture and storage projects that, it says, will reduce greenhouse gas emissions from oil sands upgrading.

The report added that these two projects will commence in 2015 and will store 2.76 million tonnes of carbon dioxide per year, the equivalent, Alberta says, of taking 550,000 cars off the road each year.

What happens to the carbon dioxide once it is pumped underground? Is it safe? Will it leak? What energy has to be expended to actually pipe the carbon dioxide to its final resting place? Perhaps these questions need to be asked, and answered. Likely the carbon dioxide will be used to extract even more oil from the ground – adding more gas-using vehicles to our roads?

One thing is for sure, carbon capture and storage is being used by industry and the Alberta and Canadian governments as a licence to continue along the unsustainable path of developing the Alberta tar sands.

By James Early

Contaminated Lands Claims: Summary Dismissal

The Alberta Court of Appeal (the “Court”), today, ruled on the issues of summary dismissal, strict liability and nuisance. The decision relates to litigation commenced as a result of land contamination: Windsor v Canadian Pacific Railway Ltd., 2014 ABCA 108.  

Background

Canadian Pacific Railway Ltd. (“CPR”) has operated a locomotive repair facility known as the “Ogden shops” in Calgary, Alberta since the early 1900’s. At the time of construction, the Ogden shops were located outside of the city limits of Calgary. They are also located in a heavily industrialized zone.

Between the 1950’s and 1980’s a degreasing solvent consisting mostly of Trichloroethylene (“TCE”) was used by CPR at the Ogden shops. In 1999, CPR discovered that TCE had leaked into the groundwater under portions of the Ogden community, which is now a residential area located within the Calgary city limits.

The varying levels of TCE underneath the properties were divided into two categories. The first consisted of properties where there were measurable amounts of TCE that exceeded Health Canada thresholds. For areas within this category, CPR installed sub-slab depressurization (“SSD”) systems to exhaust the TCE vapours and reduce levels to below Heath Canada thresholds.  The second consisted of properties with levels of TCE below Health Canada thresholds which have not required any remediation.

Litigation

The plaintiffs, representing a class of residents in the Ogden area (the “Class”), commenced litigation against CPR alleging:

(a) the Class’ lands have been rendered unhealthy and much less fit for use and occupation;

(b) the Class’ lands have reduced value for renting to third parties; and

(c) the Class’ lands have greatly diminished value.

The Class did not advance claims for personal injury damages. It appears that this allegation was excluded to ensure that the Class would be certified.

Summary Dismissal Application by CPR

CPR applied to the Court of Queen’s Bench (“QB”) for summary dismissal of certain parts of the Class’ claim including:

(a) the strict liability claim by the Class under the doctrine in Rylands v Fletcher;

(b) the claim in nuisance by class members with SSD systems in place; and

(c) the claim in nuisance by class members without SSD systems.

The Class had conceded, before the summary dismissal application, that the Class’ claims in trespass should be dismissed. CPR did not attempt to summarily dismiss the claims in negligence.

QB Finding

QB would not dismiss the Class’ claims based upon strict liability or the claim in nuisance against those class members who had SSD systems installed. QB did, however, allow CPR’s application to dismiss the claim in nuisance against those class members who did not have SSD systems. QB concluded that damage to these non-SSD system lands was trivial or nonexistent.

CPR appealed the first two components of the ruling.

Test for Summary Dismissal

The Court reviewed the test for summary judgment in light of the recent decision of the Supreme Court of Canada in Hyryniak v Mauldin. In that decision, the Supreme Court found that summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.

Strict Liability

The rule in Rylands v Fletcher provides that a landowner who allows unusual dangerous substances to escape from his lands would be liable to his neighbours for any resulting damage. The liability under this principle is exceptional in that it is “strict”; liability is not dependent upon a finding of negligence or other fault.

The leading case on strict liability in Canada is Smith v Inco Ltd. The Court followed the guidance set by the Ontario Court of Appeal in Inco. The requirements of this tort are:

(a) the defendant made an “extraordinary”, “special” or “extra-hazardous” use of its land;

(b) the defendant brought onto its land something that was likely to do mischief if it escaped;

(c) the substance in question in fact escaped; and

(d) damage was caused to the plaintiff’s property as a result of the escape.

In allowing CPR’s appeal, and dismissing the Class’ claim on this issue, the Court found that CPR was not using its land in any unreasonable way, and the land was, in fact, zoned for this type of industrial use. Further, the Court found that it was not foreseeable that TCE would do any mischief at the time it was being used and that the TCE did not “escape” from the land (for an escape to occur, there must be some unintended accident or mishap). In this case, TCE “migrated” and was a normal and intended consequence of the activity being conducted on the land.

Since the other parts of the Rylands v Fletcher test were not met, the Court found it unnecessary to explore the issue of damages in order to dismiss the strict liability claims of the Class. The Court did consider the issue of damages in its analysis of the nuisance claims.

Nuisance

Claims in nuisance depend on proof of damage. Nominal or trivial damages are insufficient to support a claim in nuisance.

QB, in dismissing CPR’s application, held that there was some proof of damage at the SSD system lands for the following reasons:

– the presence of vapours in some of the SSD system properties;

– the consequences and impacts of mitigation; and

– the very need for mitigation.

The Court found no error in QB’s reasons as they pertain to the nuisance claim advanced by those members of the class located in the SSD system area. As such, the Court dismissed that portion of CPR’s appeal, directing that this issue proceed to trial.

Summary

CPR now faces ongoing litigation with the Class in relation to claims in negligence, and the claims of the SSD system residence in nuisance.

This decision provides litigants with an up-to-date precedent of how summary dismissal applications will be handled by the Alberta courts post-Hrynyiak. The decision should also provide litigants pursuing and opposing land contamination claims with guidance on how Alberta courts will handle the strict liability and nuisance aspects of those claims. To see the full decision, click here.

By James Early.