Canada: The Non-Polluter Pays: Municipal Liability For Cleaning Up Migrating Contamination

The Remediation Order

In December 2008, a residential property leaked fuel oil in the City of Kawartha Lakes (the "City"). The fuel oil sank into the ground, quickly migrated across the property onto adjoining municipal land, and from there seeped into Sturgeon Lake. Unfortunately, the $1 million dollars of insurance coverage held by the residential property owners was not enough to pay for the entire clean up. When it became clear that more funds were needed, the Ontario Ministry of the Environment ordered the City to step in to remediate the contaminated public property (the "Order"). The City appealed the Order to the Environmental Review Tribunal (the "Tribunal") on the basis that it was not a cause of the pollution. The appeal was ultimately denied. The Tribunal found that evidence of fault was not relevant when considering whether or not an Order should apply, so the City launched a judicial review of the Tribunal's decision. In the meantime, the City paid more than $400,000 to clean up the public property. In June 2012, the Divisional Court dismissed the City's judicial review application.

The Divisional Court decided that the fault of the City was not a consideration when deciding whether or not the City should be a party to the Provincial Officer's Order because the City could not establish how relieving it of the Order would be consistent with the purpose of the Environmental Protection Act's (the "EPA") . The City did not show how relieving it from the Order would be fair to the environment or those impacted by the pollution.

Even though the City never owned the oil or caused it to spill, the well-known "polluter pays principle" was not offended because the EPA and the Ministry of the Environment's Compliance Policy specifically contemplated holding innocent owners responsible for cleanup if it furthers the fundamental purpose of the legislation: protecting the natural environment. While the Divisional Court does not rule out fairness arguments in future clean-up order appeals, the importance of environmental response must be taken into account. Protecting the natural environment after the oil spill was not furthered if the City was let out, because it had the ability to pay for cleaning up the public lands.

The City's Cost Recovery Actions

The City is currently pursuing two other avenues to recuperate the clean-up costs. First, it issued its own orders pursuant to Section 100.1(1) of the EPA against the residential property owners, the Technical Standards and Safety Authority and the fuel companies. The City issued these orders on June 15, 2010, which were appealed by all parties to the Tribunal (the "s. 100.1(1) Appeals"). Secondly, it commenced a civil action a month and a half later in the Ontario Superior Court of Justice in Lindsay, Ontario concerning the same clean-up costs (the "Civil Action"). The Tribunal adjourned hearing the s. 100.1 (1) Appeals in March 2011 pending the decision in Civil Action.

The City brought a motion returnable February 16, 2012 to alter the Tribunal's adjournment decision in the s. 100.1(1) Appeals pending the outcome of the Civil Action. However, the Tribunal denied the City's request to move the matter forward promptly, finding that s. 100.1(1) of the EPA is part of a larger statutory scheme aimed at the prompt remediation of spill. The Tribunal refused to accept the City's argument that the Tribunal should move forward with the s. 100.1(1) Appeals promptly so that the City could recover its costs as soon as possible. The Tribunal also noted the City's previous conduct in appealing the original clean up Order and how it delayed doing the required work. Since the City did not make any efforts for prompt environmental recovery, it could not succeed in its argument that its present efforts at the Tribunal for cost recovery trumped all other interests at play. However, the main factor was the relationship between the issues in the Civil Action and the s. 100.1(1) Appeals. Adjourning the s. 100.1(1) Appeals while the Civil Action continued avoided unnecessary duplication and waste of Tribunal and party resources. On November 7, 2012, the Tribunal ordered 12 month adjournment on the s. 100.1(1) Appeals.

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