Canada: How Not To Conduct An Environmental Assessment

In a decision that should become required reading for all environmental consultants, the Ontario Superior Court of Justice ordered one of Ontario’s leading environmental consultant companies to pay a client $127,000.00 to compensate it for an incorrect report.

The claim concerned clean-up costs incurred with respect to a gasoline station property acquired by the Ontario Ministry of Transportation in 1996, after commissioning an environmental investigation of the property by CH2M Gore & Storrie Ltd. ("CH2M"). The environmental investigation was a modified Phase I Environmental Site Assessment ("ESA") that included soil and groundwater sampling. The consultant charged the Ministry approximately $12,700.00 for the investigation.

At the end of the investigation, CH2M prepared a report and concluded that there was no evidence of significant hydrocarbon contamination at the site and that no specific remediation was required. Unfortunately for the consultant, after accepting title to the property and paying full market value, the Ministry discovered a significant amount of petroleum contamination during the decommissioning of the existing fuel storage equipment.

The environmental report was found to suffer a number of deficiencies and, at the end of the Court’s review, the presiding justice specifically stated that the report was "replete with errors". A key error was the failure of the consultant to obtain fire insurance plans which would have identified the location of underground fuel storage tanks that had existed prior to the current fuel storage equipment. This, the court found, caused the consultants to locate their soil and groundwater borings in the wrong locations.

The consultants attempted to defend their investigation on the basis that it was conducted on a very tight budget, as a result of a competitive bidding process conducted by the Ministry. They also suggested that it was appropriate to rely only on a drawing showing the existing fuel storage equipment, which was obtained from Sunoco, although at trial the particular drawing could not be produced.

At the end of the day, the Court appeared to have little problem imposing liability on the environmental consultant and requiring it to compensate its client for the costs of removing the unidentified contamination. The Ministry suffered a small discount for having failed to engage the consultant in the remedial work, on the basis that the consultant may have performed the work more cheaply. However, the Court was clearly sympathetic to the Ministry’s position that it had lost confidence in the consultant and was under time constraints to clean up the property and have it available for use as part of a highway construction project.

Clearly, environmental consultants who aggressively bid on government and other environmental work need to remember that the final product must still meet the same industry standards that apply to full-paying work. Another lesson from the case is that notwithstanding the fact that a property has current evidence of potential or current contamination, it is still essential to perform a full assessment of the site’s environmental history in order to uncover all potentially contaminated areas. Phase I Environmental Site Assessment Work is not simply a step in deciding whether to conduct Phase II intrusive work, but it is a source of valuable information that must be used in ensuring that the Phase II work is appropriately scoped and focused.

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