"New Law is Coming to BC --What’s Old is New Again", Environmental Law Bulletin Harper Grey LLP
October 2003New Law is Coming to BC -- What’s Old is New Again
Richard Bereti and Richard Attisha
Overview
Since our previous Bulletin, BC has stepped to the brink of having a “new” statutory regime take effect. The Fall sitting of the legislature is just around the corner and is expected to see Bill 57 become law. It is still unlikely that the Contaminated Sites Regulation (CSR) will be replaced this year, although we may see a draft version of its proposed successor. In this article, we will revisit some of the principal liability issues contained in the Waste Management Act (WMA) that are expected to remain in place under the new Environmental Management Act (EMA), and will serve as a primer respecting these fundamental principles.
Over the next few months, the federal, provincial and territorial governments across Canada will be closely watching how British Columbia implements revisions to its environmental clean-up legislation. Industry and shareholders alike will be paying close attention to this developing field in the coming months (and years) simply because this law can be so tough that ignorance can literally kill a business unlucky enough to be snared by it. The downside can be high because the cost of clean-up can reach into the millions.
Much of our environmental clean-up law casts a wide net. Industry is often at risk. Businesses big and small are tenants, landowners and hands-on operators of industrial land. That puts industry at the front lines of lawsuits and government investigations where land is discovered to be contaminated.
This Fall, the British Columbia government is expected to pass the new EMA. In it are provisions that may yet be changed—it depends on how successful those lobbying against them are—but these provisions continue to be worrisome. The new law, like the old, has a broad sweep and has serious implications for anybody with an interest in land that government regulators deem to be contaminated. In the law’s eyes, virtually anybody who has carried on an activity at a contaminated site may be found to be an “operator” on that site, and if you had any interest in the contaminated site itself, even if that link is tenuous, you may be found to be an “owner.” It gets worse: all owners and operators, present and historic, can potentially be named “responsible” by B.C.’s Director of Waste Management (“Director”) and ordered to clean up a contaminated site—even if they did not dump the oil or spill the chemical - and liability is joint, several, retroactive and absolute.
Producers and transporters of nasty substances, whether they travelling to or from a contaminated site, may also be found responsible, but they must be shown to have actually caused the contamination as well—there is no such “causation” requirement to protect owners or operators.
Numerous owners, operators, producers and transporters may be found responsible for contamination at any given site, and each is jointly and severally liable for the clean-up of such contamination. That means, and it doesn’t get more simple or tougher than this, that each responsible person is technically liable for the entire clean-up, regardless of what portion of the contamination each person actually caused. Business people in BC are hoping this provision won’t be as stringent in the final legislation or in subsequent regulations, but they should be doing more than hoping if they want modification.
Environmental law in BC is designed to be “polluter-pay” legislation. Theoretically, then, the actions of government officials should ultimately focus responsibility for contamination on the actual polluters, and ultimately the costs of clean-up should be borne by each polluter in proportion to their degree of contribution. Up front, however, the government’s key objective is to get the problem cleaned up and to worry about apportionment later. That’s exactly counter to the best interests of those on the hook for clean-up, but allows clean-up to begin virtually immediately - another clear aim of regulators in the province.
In BC, directors, officers and even employees of a polluting company face another problem. They are arguably automatically responsible for their company’s environmental wrong-doing, even if they personally had nothing to do with the contamination. This automatic responsibility comes into play where the Director is establishing a list of responsible parties at a given contaminated site to do the initial clean-up. If the matter proceeds to trial, these individuals have added protection under the WMA.
Subsidiaries of large companies face responsibility for contamination, even when true control seems to be held by the parent. Similarly, the degree of control a parent company exerts over a subsidiary can lead to the parent company being found responsible for the subsidiary’s actions. There may be more than one owner and operator at any given site, as stated above, because “control” over an operation that causes contamination is not always in the hands of just one party.
Private agreements between two or more parties may determine or allocate responsibility at a contaminated site. Any business in any industry can prepare asset and share purchase agreements, property sale agreements and other contracts in such a way as to minimize their responsibility for historic or even future contamination. But it’s fundamental under this new regime that anybody contemplating becoming involved in a property do their due diligence to ensure they know what has likely occurred on that property: was there once a chemical plant on it? Did a company have fuel storage tanks on it? These are the kinds of questions that need to be asked up-front.
The B.C. Supreme Court recently ruled that every lease contains an implied term requiring the tenant to return the property to its owner in a clean state. This important decision found that, despite the property owner’s full knowledge of the contaminating activities carried on by the tenant, it was the tenant who should bear 100% of the costs of clean-up. A clear lease agreement can potentially confirm or counter this assumption and go a long way toward placing responsibility where the parties want it to be.
Exemptions from responsibility exist for certain individuals in BC. Other provinces have similar protections. For example, in BC you are not responsible for contamination that has migrated from a neighbouring property through no fault of your own. Purchasers of land may also be exempt from responsibility if they make every effort to ensure a property is clean before purchasing it. Certain landowners have an exemption from responsibility where they buy clean land and have nothing to do with the land’s subsequent contamination by a third party. Every business should be familiar with all available exemptions in order to take steps necessary to protect themselves down the road if the land is found to be contaminated.
Responsible persons may be able to obtain insurance coverage for the costs of clean-up despite the absolute pollution-exclusion clause found in most commercial general liability policies. Such coverage may even include a requirement that the insurance company pay legal costs associated with the defence of claims against the insured person, whether or not they are ultimately liable. Advice should be sought respecting each individual policy.
In short, industry is vulnerable to environmental liability because they often have hands-on contact with land. This can mean that, even if not the polluter, a company can be dragged through negotiations with government regulators, an appeal to the Environmental Appeal Board, and a trial, to determine who is responsible for what. The defence of such cases can cost as much as or more than the clean-up. Therefore, any contractual protection that can be obtained from the real polluter, the landlord or tenant, or the buyer or seller can greatly assist when a contamination problem is later discovered. Environmental indemnities can be a cost-effective way of defining and allocating existing and future liability for contamination. However, entering into an indemnity agreement with the wrong parties, an insufficient number of parties or with parties possessing insufficient assets, may negate any benefit the indemnity was intended to provide. Further, indemnities allow you to collect on them after you have incurred the costs of remediation; they do not normally allow you to avoid defending a claim altogether or obtain money from the indemnitor before you have spent that amount yourself on clean-up. “Buyer beware” has become everyone beware in BC, and elsewhere.
This article was prepared by Richard Bereti and Richard Attisha, environmental lawyers with Harper Grey in Vancouver. They can be reached directly at 604.895.2816 and 604.895.2811, respectively.
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