Municipal Environmental Risk Management AMCTO Annual Conference and Professional Development Institute Jody Johnson & Scott Stoll Aird & Berlis LLP
June 2015
Agenda 1. Municipal exposure to environmental risk 2. Sources of municipal legal liability 3. What Kawartha Lakes means for municipalities 4. Remedies for municipalities under the Environmental Protection Act 5. Limitations on municipal liability under the Municipal Act, 2001 6. Insolvency and environmental risk 7. Brownfields and environmental risk 2
Agenda (cont’d) 8.
Case Study: The former Grace Hospital, Windsor
9.
Municipal power to regulate the environment
10. Risk management frameworks 11. Environmental risk management in action
3
4
Sources of Legal Liability/Risk •
Civil claims • Negligence • Nuisance
•
Statute • Regulatory Liability/ Quasi-criminal offences
5
Sources of Legal Liability/Risk •
The environmental regulatory regime can create a number of risks for municipalities with regard to contaminated properties
• • • • • •
Procedural Financial Political Operational Environmental Health
6
Regulatory Liability •
Environmental liability in Ontario is governed by many Federal and Provincial Statutes
Federal Environmental Legislation: • Canada Shipping Act, • controlling the discharge of pollutants from shipping vessels
•
Fisheries Act • protection of fisheries habitats in both oceans and inland waterways
•
Transportation of Dangerous Goods Act;
•
Canadian Environmental Assessment Act; and
•
Canadian Environmental Protection Act, 1999 (“CEPA”). 7
Regulatory Liability (cont’d) Provincial Environmental Legislation: •
Environmental Protection Act (“EPA”)
•
Green Energy Act
•
Ontario Water Resources Act (“OWRA”)
•
Safe Drinking Water Act
•
Clean Water Act Toxics Reduction Act
•
Environmental Assessment Act
8
What Kawartha Lakes Means for Municipalities Facts •
Several hundred litres of furnace oil leaked from the basement of a property into the City’s municipal storm sewer system and culverts and was being discharged into Sturgeon Lake
•
The Ministry of the Environment (“MOE”) was notified and issued an order requiring the property owner to clean-up and remediate the site
•
Property owner could not afford the cost of clean up
•
MOE issued order to City to prevent further discharge and remediate 9
What Kawartha Lakes Means for Municipalities (cont’d) ERT, Divisional Court and Court of Appeal Decisions •
City appealed the order to the Environmental Review Tribunal (“ERT”) and the ERT found: • Potential unfairness to innocent owners is justifiable in order to protect the environment • Environmental protection objective takes precedence over City's concerns about "polluter pays" principle” • MOE did not need to be satisfied that reimbursement to City would be guaranteed before issuing order
•
Divisional Court upheld ERT’s decision • MOE need not consider “fairness” in making clean-up order
•
Court of Appeal upheld ERT’s decision 10
What Kawartha Lakes Means for Municipalities (cont’d) City’s Actions After the Fact • City issued orders against property owners, Technical Standards and Safety Authority (“TSSA”) and Thomson Fuels Ltd pursuant to s. 100.1 of the EPA requiring the parties to pay over $471 k for clean-up • City later revoked the orders against Thomson Fuels and TSSA pursuant to a settlement agreement • City and property owners brought civil proceedings relating to spill • The hearing is scheduled to take place in February 2015
11
What Kawartha Lakes Means for Municipalities (cont’d) How can a municipality reduce exposure? •
Monitoring property activity, but it can be challenging to monitor private homes
•
Consider potential polluters
•
Search the Environmental Bill of Rights (“EBR”) website for Certificates of Approval • Has MOE required company to provide financial assurance?
•
Monitor new approvals and changes on EBR website
•
Opportunity to become recipient of reports to MOE 12
Remedies for Municipalities Ontario’s Environmental Protection Act Action by municipality or designated persons, spills Section 100 •
Provides that where a pollutant is spilled, the municipality may do everything practicable to prevent, eliminate and ameliorate any adverse effects and to restore the natural environment
•
Provides right of entry and immunity from prosecution
•
Municipality must coordinate efforts, make use of the expertise of and not impede a person carrying out a duty, order or direction
13
Remedies for Municipalities (cont’d) Section 100 (cont’d) •
A municipality has the right to compensation from the owner of the pollutant and the person having control of the pollutant for all reasonable cost and expense incurred in acting
•
The right to compensation under subsection may be enforced by action in a court of competent jurisdiction
14
Remedies for Municipalities (cont’d) Municipality’s order for costs and expenses Section 100.1 •
A municipality may recover the costs for cleaning up a spill that it did not cause by issuing an order for payment to the owner of the pollutant or the person having control of the pollutant
•
Municipality shall have a lien on that property for the amount specified
15
Civil Liability Berendsen v. Ontario • Waste asphalt was buried on farmland in 1960s, with the agreement of the farmer. Plaintiff, a successor in title, experienced problems with cows which would not drink well water from the farm. Plaintiff attributed this to water contamination caused by asphalt waste
•
In 2008 the trial judge found the Province liable, in the amount of $1.7 million, plus costs
•
Court of Appeal set aside the decision and found no evidence to prove that, in 1960, when asphalt was deposited, harm to cattle was a reasonably foreseeable risk
•
Insufficient evidence to show waste was causing harm to cows 16
Limitations on Municipal Liability •
Part XV of the Municipal Act deals with Municipal Liability
•
Section 449: No proceeding on nuisance in connection with the escape of water or sewage from sewage works or water works shall be commenced against a municipality, local board, member of council or local board; officer, employee or agent of a municipality or local board
•
Section 450: No proceeding based on negligence in connection with the exercise or non-exercise of a discretionary power or the performance or non-performance of a discretionary function, if the action or inaction results from a policy decision of a municipality or local board made in a good faith exercise of the discretion, shall be commenced against the actors listed above
17
Insolvency and Environmental Risk Nortel Networks (Re), 2012 ONSC 1213. •
Nortel identified environmental impacts at several sites
•
Filed for Companies’ Creditors Arrangement Act (“CCAA”) protection from its creditors in January 2009
•
By this time Nortel maintained only a partial interest in one of the the impacted sites
•
MOE issued remediation orders requiring expenditures of ~ $18M
•
Nortel challenged and court agreed that order should be stayed due to CCAA proceedings 18
Insolvency and Environmental Risk (cont’d) Northstar Aerospace Inc. (Re), 2012 ONSC 4423. •
Northstar ceased operations at Cambridge Site (“Site”) in 2004 but continued to monitor contamination and started remediation
•
MOE issued two remediation orders
•
In 2012, court approved agreement for the sale of substantially all of Northstar's assets, excluding the contaminated Site
•
Sale of assets closed, trustee in bankruptcy abandoned Site
•
Court held MOE was entitled to file a claim for remediation costs but it could not use the remediation order to obtain a payment priority it would not otherwise have access to under CCAA 19
Insolvency and Environmental Risk (cont’d) Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67. •
The Supreme Court released landmark decision in AbitibiBowater while MOE's appeals in Re Northstar and Re Nortel were pending
•
Articulated three-pronged test to determine whether a regulatory order constitutes a monetary claim that may be compromised under the CCAA:
1. There must be a debt, liability or obligation to a creditor; 2. Such debt, liability or obligation must have arisen prior to the time limit for inclusion in the CCAA claims process; and 3. It must be possible to attach a monetary value to the debt, liability or obligation
20
Insolvency and Environmental Risk (cont’d) •
Environmental remediation obligations may be reduced to compromisable monetary claims:
(a) Where the province has performed the remediation work and advances a claim for reimbursement; or (b) Where the obligation may be considered a contingent or future claim because it is "sufficiently certain" that the province will perform the remediation work and seek reimbursement
21
Insolvency and Environmental Risk (cont’d) Ontario Court of Appeal Decisions: Northstar Aerospace Inc. (Re), 2013 ONCA 600 •
In Re Northstar, Court of Appeal determined it was “sufficiently certain” that the MOE would remediate the contaminated property • MOE had no realistic alternative • No subsequent purchaser for MOE to order to remediate • Commencement of remediation work by MOE further established that remediation orders were claims provable in bankruptcy
22
Insolvency and Environmental Risk(cont’d) Nortel Networks Corporation (Re), 2013 ONCA 599 •
Court found MOE had realistic alternatives to performing the remediation work itself • Remediation orders could be directed at other current (and former) owners of the properties • Not sufficiently certain that MOE would perform remediation ordered at impacted sites (with the exception of the London Site, in which Nortel maintained an interest) • MOE could seek to claim security over the London Site under the CCAA
23
Environmental Issues and Insolvency: Municipal Implications •
No official role for municipalities despite the potential impact but there are steps municipalities can take to protect their interests
•
Stakeholder management is crucial
•
Understanding, monitoring and communicating the environmental risks – awareness of what is going on in your community is critical
24
Brownfields: A Common Cause of Environmental Risk •
Brownfield properties are lands that are potentially contaminated due to historical, industrial or commercial land use practices, and are underutilized, derelict or vacant
•
Leaving these properties idle presents liability risks and financial losses, not to mention the potential impacts to the environment and human health
•
Municipalities are a key partner in the success of any brownfield redevelopment project
•
Province sets the standards that must be met for site remediation as well as the assessment and processes required to demonstrate that a property is safe for redevelopment
25
Brownfields: A Common Cause of Environmental Risk (cont’d) • Record of Site Condition (RSC) • Environmental Site Assessment (ESA) • Property-specific approach
• Certificate of Property Use (CPU)
26
Case Study: The Former Grace Hospital, Windsor
27
Case Study: The Former Grace Hospital, Windsor (cont’d) •
Former hospital purchased by a development company in 2006
•
City of Windsor and MOE issued an order for asbestos inspection
•
Due to delay in complying with order, MOE staff contacted MOL who collected samples, which tested positive for asbestos
•
Development deal fell through in 2011 and site abandoned
•
Property became the subject of multiple property standards violations and was a blight on the neighbourhood
•
Owner accrued nearly $1M in tax arrears which were paid one hour before the property was to fall into City hands 28
Case Study: The Former Grace Hospital, Windsor (cont’d) •
City purchased site for $2.1 million in 2012
•
City awarded $4.1 million demolition and cleanup contract
•
Province agreed to pay the full cost to demolish the former Grace Hospital and clean up the property (estimated at close to $7 million)
•
In 2014, the company was ordered to pay a $100k fine for failing to properly clean up the asbestos on the site
29
Case Study: The Former Grace Hospital, Windsor (cont’d) •
Importance of maintaining dialogue with the Province and the community
•
Importance of ongoing monitoring
•
Use of property standards by-laws to minimize some environmental risks
•
Preventative action in order to mitigate environmental risk
30
Municipal Power to Regulate the Environment Municipal Act, 2001 •
Can regulate, prohibit and provide for system of licensing and permitting for: • Economic, social and environmental well-being of the municipality • Health, safety and well-being of persons • Protection of persons and property, including consumer protection • Structures, including fences and signs (Part II, Municipal Act, 2001) • Prohibition of nuisances (s. 128)
31
Municipal Power to Regulate the Environment (cont’d) • • • • •
Regulate noise and vibration (s. 129) Regulate or prohibit odour and dust (s. 129) Natural person powers (s. 9) Can regulate, prohibit and discriminate (s. 8) Powers to be interpreted broadly (s. 8)
BUT: • Section 14(1) – municipal by-law not effective if it conflicts with an order, license or approval issued under Provincial or Federal Act as well as any Provincial or Federal Act or Regulation • Conflict if the by-law frustrates the purpose • City of Toronto Act, 2006 and other municipal enabling legislation have similar provisions
32
Burlington Airpark Inc. v. Burlington (City), 2014 ONCA 468 •
Municipality issued order to owner of airport to stop adding fill to berms absent compliance with municipality’s Topsail Preservation and Site Alteration By-law
•
Owner brought application for declaration that by-law was ultra vires municipality because it infringed upon Aeronautics, a legislative power reserved to Parliament
•
Court of Appeal held language of by-law indicated that it was directed toward management of environment, a matter of property and civil rights, a provincial legislative power
•
Neither purpose nor effect on owner of by-law intruded into operation of airport as matter of Aeronautics, and accordingly bylaw was intra vires municipality 33
2241960 Ontario Inc. v. Scugog (Township) •
Applicant decided to build aerodrome
•
Township passed new site alteration by-law and ordered applicant to cease all site alteration activity
•
Applicant argued site was federal aerodrome to which municipal by-laws did not apply
•
On judicial review, court found applicant was not presently engaged in aeronautics, but was operating commercial landfill site
•
Township's by-law was not affecting, let alone impairing, activity that fell within federal competence over aeronautics - Activity with respect to landfill was subject to valid provincial and township regulation 34
Risk Management Frameworks Defining Risk •
The International Standards Organization has developed a standard vocabulary for risk management (ISO/IEC Guide 73:2002)
•
Risk may be defined as “the combination of the probability of an event and its consequences”
35
Risk Management Frameworks (cont’d) •
A risk management system is “a set of elements of an organization’s management system concerned with managing risk”
•
The risk management system’s function is to establish an organization structure to: • Establish the risk criteria • Maintain the organization’s risk management framework to identify, estimate, assess, control and communicate risks • Make decisions • Implement risk controls to modify risk • Develop relationships with stakeholder • Be responsible for how the organization manages risks
36
Risk Management Frameworks (cont’d) •
Three basic high- level elements in a risk management framework:
1) Operations to reduce risk 2) Decision-making or corporate management 3) Risk assessment and treatment options
37
Risk Management Frameworks (cont’d) •
Basic high- level elements in a risk management framework
38
Examples of Environmental Risk Management in Action Municipal Class Environmental Risk Assessments •
The Municipal Class EA is an approved process that municipalities must follow under the Ontario Environmental Assessment Act
•
Applies to municipal infrastructure projects including roads, water and wastewater projects
•
Class EA projects are classified in terms of schedules (A, A+, B or C) depending on the degree of impact to the environment
•
Process includes an extensive evaluation of impacts on the natural and social environment, including the impacts to plants and animals, soils, traffic patterns, and to residents and businesses in the community 39
Examples of Environmental Risk Management in Action (cont’d) Canada-wide Strategy for the Management of Municipal Wastewater Effluent
• Established in February 2009 by the Canadian Council of Ministers of the Environment (CCME) • Employs an environmental risk management framework which: • Identifies a list of substances of national concern and develops performance standards for them • Integrates the characteristics of the site specific receiving environment into the development of these standards • Includes a risk-based decision-making process where performance standards can be adjusted depending on risk. • The onus is on the discharger to demonstrate the absence of adverse effects 40
Examples of Environmental Risk Management in Action (cont’d) • Canada-wide Strategy for the Management of Municipal Wastewater Effluent Environmental Risk Management Framework
41
Examples of Environmental Risk Management in Action (cont’d) •
A risk management framework is promoted by the Wastewater Infrastructure Needs Assessment Project which aims to help municipalities prioritize investment in wastewater and stormwater infrastructure
42
Takeaways for Clerks and Treasurers •
Monitor EBR for approvals and changes
•
Add potential polluters to your watch list
•
Cross reference property tax arrears with list
•
Pay attention to financial assurances held by MOE • Become familiar with MOE’s Financial Assurance Guidelines
•
Participate in community liaison committees
•
Request to be a recipient of reports to MOE
•
Identify options for redeveloping contaminated sites 43
Takeaways for Clerks and Treasurers, continued…. •
More than a public works issue
•
Discussion and information sharing across departments
•
Maintain a relationship with MOE
44
Conclusion •
Municipalities do not have complete control over the management environmental risks
•
Partnership with other levels of government is important
•
Environmental Risk Management is an emerging field
•
Frameworks exist for managing risks associated with municipal assets (e.g. buildings, wastewater infrastructure)
•
Identifying, understanding and communicating environmental risks is at the heart of managing legal liability
45
Thank You Jody E. Johnson Partner T 416.865.3438 F 416.863.1515 E
[email protected] Scott Stoll Partner T 416.865.4703 F 416.863.1515 E
[email protected] The content of this presentation is provided to you for informational purposes only and should not be construed as legal advice on any subject matter. Please consult a legal professional on the particular issues that concern you.
