Article by Gayle Hunter and Jennifer Williams,, ©2006 Blake, Cassels & Graydon LLP
This article was originally published in Blakes Bulletin on Real Estate, March 2006
A recent British Columbia Court of Appeal decision assists developers of contaminated sites.
In Imperial Oil Limited v. City of Vancouver, the Court of Appeal of British Columbia recently rejected an attempt by the City of Vancouver to require off-site environmental remediation as a condition of development permit approval. This decision clarifies and brings a level of certainty to municipal involvement in environmental regulation, being one of many challenges facing developers of brownfields.
"Brownfields" are abandoned or under-utilized commercial or industrial sites where potential re-development is complicated by environmental contamination. Notwithstanding the benefits of brownfields redevelopment, including rehabilitation of often scarcely available urban land and increased tax revenues to government from redevelopment, developers often hesitate to redevelop contaminated sites due to the challenges of managing liability, obtaining financing and special planning and environmental issues.
In B.C., municipal and provincial governments use environmental legislation and municipal by-laws to regulate redevelopment. In Imperial Oil, the Court took a big step in diminishing the concern that a municipality could stand in the way of brownfields development using its permit approval powers.
Imperial Oil owned and operated a gas station site in Vancouver. In 2000, Imperial Oil, aware of hydrocarbon contamination of the site and the adjacent City property, decommissioned the service station, removing the gas pump islands and underground storage tanks. The company then applied to the City of Vancouver for a development permit to redevelop the site with a new service station having a different design and amenities.
The City initially expressed concerns about the environmental contamination caused by the original gas station onto the adjacent City property. In 2002, the City conditionally approved the development permit application, subject to the requirement that Imperial Oil enter into an off-site soils agreement (OSA) regarding the remediation of the contamination of the adjacent City street before it would approve issuance of the final development permit.
In December 2003, in a separate process under the provincial Waste Management Act (now the Environmental Management Act), Imperial Oil obtained approval in principle for its plan to remediate the site and adjacent streets during redevelopment, and commenced such remediation. Notwithstanding this approval, the City still required the OSA before it would issue the development permit.
Imperial Oil applied to the Court for an order compelling the City to issue the development permit on the basis that the OSA required higher remediation standards than those imposed under the provincial regime, and would impose greater and indeterminate liabilities on Imperial Oil to the City and third parties than otherwise required by provincial law. In what would become the key issue in the case, Imperial Oil argued that the City did not have jurisdiction to require the OSA condition.
Each of the trial and appeal Courts agreed with Imperial Oil. The trial Court held that the City’s requirement of the OSA as a pre-condition to a development permit was beyond the scope of the City’s authority, as neither Sections 565A nor 189 of the Vancouver Charter conferred the power to impose such a condition. Although the City had the authority to act in the best interests of "good rule and government", the City’s imposition of the OSA reflected the City’s concern as a landowner for its own prospective financial liabilities for the soil contamination rather than exercising its powers in its capacity as regulator.
The OSA condition was found not to be acceptable. The Court held that there was simply no logical basis for the City to connect the issuance of a development permit to the execution of an OSA. The trial Court allowed the application and ordered the Director of Planning to issue the development permit. The Court of Appeal dismissed the City’s appeal of the trial decision.
Imperial Oil represents a small victory for prospective developers of contaminated sites by clarifying and limiting certain powers of a municipality with respect to approval of development permits. However, it should be noted that local governments and regulatory approving bodies retain other means of regulating property development beyond the power to issue or place conditions on a development permit, including broader powers under their empowering legislation over subdivision, re-zoning, development variances and the issuance of building permits. Therefore, if a municipality does not approve of a particular brownfields redevelopment, it may find other ways to introduce restrictions with respect to the development approval process.
Nonetheless, the decision of the Court is a step in the right direction to providing greater certainty to developers willing to undertake the challenges of brownfields development.
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