Reasonable Costs of Remediation Recoverable under the Environmental Management Act A Closer Look at Old and New Law

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1 Reasonable Costs of Remediation Recoverable under the Environmental Management Act A Closer Look at Old and New Law Una Radoja, Harper Grey LLP BCEIA BEST Conference May 19-21, 2015

2 Statutory Cost Recovery Action Section 47(1), EMA Elements: Contaminated site Reasonably incurred costs of remediation ( on or off the contaminated site ) Responsible person target(s) (RPs) Once cause of action established allocation of reasonably incurred costs of remediation among RPs

3 Costs of Remediation What are they? Section 47(3), EMA means all costs of remediation and includes, without limitation: costs of preparing a site profile costs of carrying out a site investigation and preparing a report legal and consultant costs associated with seeking contributions from other responsible persons fees imposed by a director, a municipality, an approving officer or the commission under Part 4 of the EMA

4 What is included? Stage 1 and 2 Preliminary Site Investigation Detailed Site Investigation Remedial work Backfilling / landscaping Risk assessment work Reporting / Contaminated Site Forms Obtaining instruments AIPs, release of development permit applications, CoCs Obtaining determinations from the director Monitoring Well-decommissioning Recontamination measures

5 Unrecoverable Costs and Grey Areas Administrative and management costs of the plaintiff Carrying costs Interest, rental costs (alternative premises), etc. Increased development costs Economic losses lost rents, business interruption, diminution in property value (likely all not recoverable under the EMA) Dolinsky v. Wingfield, 2015 BCSC 238 Loss of rental income (basement suite) not costs of remediation I question whether economic loss is a recoverable item under the statutory scheme. It is not expressly included in the statute. (at para. 135).

6 Incurred Requirement Dolinsky v. Wingfield, 2015 (BCSC) Award of indemnification for future costs of remediation made Evidence from environmental consultant key re: remaining contamination, plan and costs associated with its remediation $90,000 ordered be paid into and held in trust by plaintiff s counsel on undertaking to not release the funds to the plaintiff except upon provision of proof that the costs were incurred and subject to establishing reasonableness of the expense

7 Legal Costs Legal and consultant costs associated with seeking contributions from other responsible persons section 47(3), EMA Expressly defined as costs of remediation recoverable in a cost recovery action No limitation on recovery in the EMA Not treated any differently from other costs of remediation

8 Legal Costs Canadian National Railway v. A.B.C. Recycling Ltd., 2005 BCSC 647, [2006] B.C.J. No. 512 (CA) 2005 (BCSC) Legal costs recoverable (close to full indemnity special costs ) Consistent with polluter pay principle Expressly stated in section 47(3)(c), EMA 2006 (BCCA) Overturns BCSC s ruling re: legals only one RP (the defendant); plaintiff not an RP; therefore, not seeking contribution from other responsible persons Very narrow interpretation of s. 47(3), EMA

9 Legal Costs Gehring v. Chevron Canada Ltd., 2007 BCSC 468 More than one RP narrow ruling of the CA in A.B.C. Recycling does not apply To bring consistency to the case law only party and party costs awarded No full indemnity for legal costs incurred in pursuing other responsible persons

10 Legal Costs Grey area - Legal costs incurred not in pursuit of responsible persons, but in providing advice re: regulatory framework in the context of remediation / pursuit of instrument No case law Good argument to be made recoverable in full

11 Reasonableness Requirement Almost always in issue in a cost recovery action Strict liability claim Plaintiff has the onus of proof of proving reasonableness

12 Reasonableness Requirement Two parts to analysis: Reasonableness of the methodology / approach (consultant key) Whether costs objectively reasonable? (i.e., excavation fees, laboratory costs, etc.)

13 Factors to Consider s. 35(2), CSR Must be considered when determining reasonably incurred costs of remediation : price paid for the property by plaintiff relative due diligence of the RPs amount / toxicity of contaminating substances attributable to RPs relative degree of involvement, by each RP, in generation, transportation, treatment, storage, and disposal of the contaminant remedial measures implemented and paid for by each of the RPs other factors relevant to a fair and just allocation

14 Canadian National Railway v. A.B.C. Recycling Ltd., 2005 BCSC 647 CN long-term owner of 80 acres of commercial land ABC Recycling owned property adjacent to a portion (northeast corner) of CN s lands ABC owned and operated a scrap metal and auto wrecking business on its property caused contamination of CN s lands

15 Canadian National Railway v. A.B.C. Recycling Ltd., 2005 BCSC 647 CN had to remediate before it could proceed with its redevelopment and sale plans No penalty for allegedly overly careful approach (to ensure CoCs would be issued on first review) Legitimate business objectives will be considered CN entitled to obtain CoCs for parcels of land in stages - increased costs recoverable But, court deducted savings CN could have obtained if accounts paid promptly (2.5% prompt payment discount)

16 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 BCSC decision August 2014 Remediation of James Island (between the Saanich Peninsula and Sidney Island) by the plaintiff, JI Properties Cost recovery claim brought by JI Properties against PPG, former owner, pursuant to the EMA

17 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 PPG and its predecessors owned the island from (except for a brief period of time in the 1970s) Operated explosive manufacturing and storage operations until 1985 caused contamination (first industrial activity on the island) Plaintiff bought it in 1994 knew of previous operations Numeric remediation by the plaintiff and numeric CoC - Total bill appx. $5.3M Reasonableness of the costs KEY ISSUE

18 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Defendant s position Plaintiffs costs not reasonably incurred because: Plaintiff voluntarily and unnecessarily remediated to the most stringent numerical standards Plaintiff did not consider alternate and less costly measures (i.e., risk assessment) Plaintiff did not employ more cost-effective methodologies

19 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Voluntary remediation - Court: Voluntary remediation in pursuit of a profit / to make property more valuable not unreasonable Strong reliance on polluter pays principle animating the entire regime Subsequent landowners motives largely irrelevant

20 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Standards: Plaintiff applied most stringent standards Residential and urban park for soil Aquatic life, irrigation and drinking water for groundwater Sensitive standards for sediment Defendant argued commercial/industrial standards should have applied

21 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Standards: Court disagreed Plaintiff entitled to rely on their expert re: Selection of standard Reasonable potential future use includes residential development Plaintiff was entitled to pursue it No remaining CL/IL uses on the once pristine island

22 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Methodology: Defendant challenged (among other things) Plaintiff s numeric remediation argued that riskassessment could have been used (more cost effective) Court s view Reasonableness does not mandate the most cost-effective or cheapest option

23 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Methodology: Reasonableness requires consideration of all circumstances + reliance on advice / recommendations of qualified experts Battle of the experts re: Use of risk assessment Court accepted the Plaintiff s expert s view that numeric remediation reasonable / preferred approach

24 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Methodology detonation Remediation by detonation approach employed in one area challenged (used on discovery of high concentration of TNT and unexploded dynamite) But, was not necessary Lack of reliance on experts not reasonable Even though the approach worked

25 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Quantum: Court accepted Defendant s evidence that excavation w/out detonation would have saved appx. $800,000 In addition, there were arithmetic errors / inclusion of costs not related to remediation grey areas / no forensic analysis

26 J.I. Properties Inc. v. PPG Architectural Coatings Canada Inc., 2014 BCSC 1619 Quantum: Court applied a discount to account for this also Ultimately, court decided reasonable costs of remediation were in the amount of $4.75M (not $5.3M)

27 Takeaways Role of the Consultant Evidence of the on the ground consultant KEY Need clear cogent evidence (including analysis / reasoning) as to: nature of investigation conducted remedial approach chosen (and decisions made throughout the remedial process) selection of standards permanent solutions preferred (s. 56, EMA) other options considered cost considerations / client s objectives Reliance on MoE protocols and guidances / industry standard Exercise of professional judgment Reliance on other experts (including lawyers) Importance of papering of the file (and file retention) Opinion evidence litigation expert

28 Questions? Una Radoja Harper Grey LLP