WEB EXCLUSIVE: Who should pay for brownfield clean-up?

There are some 30,000 brownfield sites across Canada, according to the 2003 report “Cleaning Up the Past, Building the Future: A National Brownfield Redevelopment Strategy for Canada.”

Most are vacant, underused or abandoned. And many are likely to stay that way unless government comes up with a coherent policy for dealing with contaminated sites, according to environmental lawyers Dianne Saxe, of Saxe Law Office and Janet Bobechko, of Blaney McMurtry LLP; both based in Toronto.

So far, they contend, government’s approach to brownfield legislation has been piecemeal, inconsistent and sometimes even unfair. Read on for their take on some of the biggest problems in the area of brownfields legislation.

Current brownfield policy often leaves the taxpayer with industrial clean-up bills, or transfers the cost to the new site owner. Is there a better way?

Problem 1: A regulatory environment that fails to protect

First of all, says Saxe, “we have all these contaminated sites because, as a province and as a country, we didn’t have a decent regulatory system for hazardous materials.”

The material safety data sheet for disposing of TCA (Trichloroethane) in 1964 recommended pouring it on the ground, she points out. Until 1970, you could close a petroleum storage tank by just leaving it in the ground. The result: a plethora of contaminated sites often created through practices that were legal at the time.

Of course, we’re wiser now, says Saxe. “We’ve been dealing with these sites for 40 years.” And yet, things aren’t much better. “You’d think we’d have a plan in place to say: ‘if you’re doing something that runs the risk of making a future mess, you need to have the money to clean it up’. The first thing I think the province should be doing is requiring enough insurance from everyone who is handling the sorts of materials that are likely to cause serious contamination; the most obvious ones being petroleum products, solvents and metals.”

That, she says, still isn’t the case. She points to a recent court case in Kawartha Lakes in which a home heating oil spill from a private homeowner’s tank flowed into a storm drain and was carried off the property and into a lake. The homeowner’s insurance paid for the initial on-site remediation costs, but that money (which Saxe points out, was “woefully inadequate”) quickly ran out.

At that point, the Ministry of the Environment served an order on the City of Kawartha Lakes to complete the remediation. The city fought the order and lost. “The [city] taxpayers ended up paying for the clean-up of the home heating oil tank leak and yet it’s the province that regulates home heating oil tanks and it’s the province that doesn’t require you to have adequate insurance for them,” said Saxe.

The city of Kawartha Lakes has a law suit outstanding seeking compensation for the clean up. The same problems apply to solvents such as those used by drycleaners and manufacturers. Industries today can still buy solvents and they’re not required to have insurance or post financial assurance.

“The government says, if we require all these people to have insurance, the premium would be too high and a lot of them would go out of business and then they’d leave these contaminated sites behind,” says Saxe. “That seems to me completely illogical. If you can’t afford to do business in a way that deals with all the costs and consequences, why is it the policy to let these people operate?”

In her point of view, if you’re handling something environmentally benign then there’s no problem. “But if you’re handling something that we know is dangerous and likely to leave the next generation a huge cleanup bill, you need to have it covered.”

At the very least, suggests Bobechko, we need to expand the pool of money allocated to deal with contaminated sites federally and provincially. “Down in Florida there’s a program for gas stations and dry cleaners,” she says. “For every fuel and solvent purchase, a certain amount goes into a reserve fund. That at least provides stable long-term funding for clean up.”

Problem 2: Making the innocent pay

Another problem with the handling of brownfield sites, Saxe contends, is government makes no distinction between the people who caused the contamination in question and the people who didn’t.

In the City of Kawartha Lakes case, for example, local taxpayers are on the hook for cleaning up a site that was polluted by a single home-owner with inadequate insurance, largely due to a lack of provincial regulation.

Saxe points to another case from the past, where a family purchased a small dry-cleaning business that had been operating for many years. They bought the business in 1981 when there was no way of knowing that the site was contaminated as there weren’t yet any standards to assess contamination. Unfortunately, the previous owners had been sloppy in their handling of solvents and so the site was badly polluted.

“Even though the contamination occurred 20 to 30 years ago and this family had nothing to do with causing it, the province is taking the position that they are personally liable,” she says. The end result: the site is likely to remain contaminated because the family can’t possibly afford to clean it up and no buyer is likely to take on the liability.

One solution to the problem, says Bobechko, would be to allow innocent purchasers of contaminated properties to be absolved from off-site liability as long as they are willing to clean up the on-site issues. “That would at least help deal with the source properties,” she says.

Problem 3: Targeting well-meaning directors and officers

Saxe is also critical of a recent move to make company directors personally liable for the clean-up of a contaminated site, even if they weren’t with the company at the time the contamination occurred.

One clear example is the case of the 12 former board members of Northstar Aerospace Inc. or bankrupt Northstar Canada who have been ordered to pay the estimated $15-million cost to clean up a contaminated site in Cambridge, Ont.

At least one of the directors, she points out, joined the parent company in 2009 (Saxe’s client, Neil Baker). “There wasn’t any contamination going on by then,” says Saxe. “The only thing happening while he was a director was they were spending millions of dollars cleaning up. Because of that, they are saying he is personally liable to clean up all the contamination.”

The hard-line stance is meant to discourage directors and officers of corporations from forfeiting property with contamination issues to the government, leaving taxpayers holding the bag. But, as Bobechko puts it, “I don’t think it’s fair for company officers and directors to be held responsible for things that happened outside their timeline of being on the board.”

Taking that approach, she says, only ensures it will be an uphill battle to persuade people to sit on corporate boards. And that’s a problem because “when companies are in trouble, that’s when they need the best minds,” says Bobechko. “I wouldn’t become a director and officer. Not on your life. There’s just too much liability and it’s not something I could focus on full time.”

Bobechko believes corporate directors
and officers must be educated about the liability they may be taking on when they agree to sit on a board. In addition, she says, “we need to find a way to encourage that advice without attracting liability.”

One possible solution is to become a special advisor, she says. “You’re paid to give advice and so you’re not subject to liability, except that you can be negligent if you give bad advice.” Insurance products aimed at covering liability for directors and officers would be helpful as well, she says.

Problem 4: Wasting taxpayer resources pursuing those who can’t pay

The final issue that needs to be addressed, says Saxe, is what to do about polluters who simply don’t have the financial resources to pay for clean up. She points to the case of Bruce Cooey, whose father owned and operated a factory in Brighton, Ont., between 1941 and 1989. The site was contaminated, the company went bankrupt and the site was abandoned. Cooey ended up as the registered owner of the land.

Since then, the MOE has relentlessly pursued Cooey to clean up the site, despite the fact that he simply doesn’t have the financial resources to do so. “What’s next?” asks Saxe. “Will they prosecute him for not complying with the order, and add fines to what he owes? Will they put him in jail for not having the money to clean up his father’s mess?” Whatever happens, she says, it’s unlikely to result in a clean up of the site.

Though regulations for management of hazardous waste have vastly improved over the past decades, stakeholders point to ongoing policy gaps for sites that are already contaminated. Until then, its seems brownfield development will follow a slower curve.

Camilla Cornell is a Toronto-based environmental, business and technology writer.

This article originally appeared in Environmental Consultant on May 28, 2013. www.enviro-consultant.ca




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