On June 5, 2009, the Toxics Reduction Act, 2009 (TRA) received Royal Assent. The TRA is intended to reduce the use and creation of toxic substances in Ontario industrial facilities and inform Ontarians about toxic substances. Despite the specific purpose that the TRA is apparently intended to address, the proposed legislation includes a number of broad provisions and enforcement measures that will have sweeping implications for industry and manufacturing across the province. It is also important to note that, despite being directed primarily at "owners and operators" of operations that use toxic substances, the TRA could impose liability on individual employees and agents of a corporation for offences committed by a corporation under the Act, even in circumstances where the corporation itself has not been charged or prosecuted.
The TRA makes provisions for very broad regulation-making powers, including the power to enact regulations to ban and/or regulate the manufacture, sale and distribution of toxic substances. These provisions permit what could be one of the most important (and controversial) parts of the TRA to be implemented entirely by regulation. Depending on how it is exercised, the power to enact additional regulations could significantly expand the application of the TRA beyond the stated purpose of the Act – particularly as it relates to what constitutes a toxic substance. It could also lead to significant duplication of the toxics regime that has long existed under the federal Canadian Environmental Protection Act, 1999 (CEPA).
The potential application of the TRA is further broadened by the lack of any defined test setting out how "toxic substances" will be identified and designated under the Act. Unlike the toxic substance provisions of CEPA (which specifically set out the test that is applied to identify toxic substances), the TRA merely states that toxic substances for the purposes of the TRA will be those substances designated by regulation. This effectively makes it possible for virtually any substance to be designated as being "toxic."
Toxic Substance Reduction Plan And Summary Report
Compliance With Obligation To Prepare A Toxic Substance Reduction Plan
If enacted, the TRA will require owners and operators of facilities in certain industrial sectors that use or create substances prescribed by regulation as "toxic substances" to prepare a toxic substance reduction plan (Reduction Plan). This requirement applies to each substance that is designated as being toxic and that is used in specified circumstances. Such circumstances would include, for example, the use or creation of a toxic substance at a facility in amounts that exceed certain minimum use thresholds.
Significantly, compliance with the TRA will be required for even very small operations; facilities employing as few as 10 employees will be required to comply with the TRA if the facility exceeds the toxic substance minimum use thresholds. Also, although the legislature probably did not intend as much, the absence of a definition for "owner of a facility" could, for example, have broad implications for multi-tenanted industrial complexes where not only each operator/tenant, but also the owner of the property (the landlord), may be required to ensure that a Reduction Plan is prepared under the TRA. While this scenario may be covered by the normal "compliance with laws" clause in commercial/industrial leases, landlords will have to consider whether to specifically address the issue in drafting their leases.
Likewise, it is noteworthy that the TRA does not contain a definition of who constitutes an "operator" for the purposes of compliance with the Act. Although it seems unlikely that the legislature intended the term "operator" to include an employee who runs a facility or who is otherwise involved in the operation of a facility, without a definition this remains a possibility. Individual employees could therefore be obligated to prepare Reduction Plans under the TRA and could further be exposed to liability for environmental penalties resulting from breaches of the TRA.
The lack of clarity around the intended scope and the definitions of "owner" and "operator" is undesirable and creates business uncertainty. The Ministry of Environment (MOE) should remedy this as soon as possible in a guideline or regulation.
Specified Contents Of The Reduction Plan
The TRA specifies the following required elements of a Reduction Plan:
- a statement that the owner or operator of the facility intends to reduce the use or creation of the toxic substance at the facility;
- the objectives of the Reduction Plan, including any targets for reducing the use or creation of the toxic substance at the facility;
- a description of each process at the facility that uses or creates the toxic substance;
- a description and analysis of options considered for reducing the use and creation of the toxic substance at the facility; and
- a statement identifying which options will be implemented, including a description of any steps that will be taken, a timetable for taking such steps, and estimates of the amounts by which the use, creation and discharge of the toxic substance will be reduced.
Plan Certification Required
The Reduction Plan will also be required to contain a certification by the "highest ranking employee at the facility who has management responsibilities relating to the facility" stating that the employee has read and is familiar with the Reduction Plan and that the Reduction Plan is accurate and complies with the TRA and any associated regulations. A similar certification will also be required from a "qualified person" stating that the person is familiar with the processes at the facility, that the person agrees with the reduction estimates set out in the Reduction Plan, and that the Reduction Plan complies with the TRA and its regulations.
This two-pronged approach to certification is unique. The first certification is familiar (a similar requirement can be found in Ontario's spill prevention plans legislation) and is intended to expose the highest ranking individual at the facility to liability under the TRA. However, the second level of certification by a "qualified person" is a new concept in legislation of this kind. It reflects (to a certain degree) the approach taken in the legislative regime with respect to brownfields in Ontario. In any event, it may require the involvement and use of outside expert consultants. Even if an internal employee is qualified to make the qualified certification, reliance on an outside consultant will be advisable in most circumstances to help protect the "highest ranking employee" from exposure to liability.
Toxic Substance Tracking And Reporting
The owner and operator of a facility will also be required to track and quantify the use of each toxic substance to show, for each process at the facility that uses or creates the toxic substance, how the substance enters the process; whether it is created, destroyed or transformed during the process; how it leaves the process; and what happens to it after it leaves the process. As part of this requirement, the owner and operator will provide reports to the MOE summarizing the results of the tracking and quantification of the toxic substances, and the steps taken toward achieving the objectives of the Reduction Plan (including an assessment of the effectiveness of those steps).
Reductions Need Not Be Achieved And Plan Need Not Be Implemented
One of the prescribed requirements for Reduction Plans is that they must contain a statement that the owner or operator of the facility (as the case may be) intends to reduce the use or creation of the toxic substance at the facility. While the TRA does not explicitly provide that such a statement need not be made, it does provide that if the Reduction Plan does not include such a statement, then reasons must be given. This suggests that the statement does not necessarily have to be made.
Curiously, the TRA provides that the development of the Reduction Plans is mandatory, but it does not specify that they must be implemented or even complied with, or that reductions in the use or creation of toxic substances must be achieved. The discussion paper accompanying the original tabling of the TRA stated that this non-binding approach was based on research of toxic reduction strategies in other jurisdictions. This research indicated that voluntary approaches were generally more successful at achieving reductions than mandatory approaches, since industry is willing to set more aggressive goals in a voluntary system than a mandatory system. If that is the case, it may be asked why, aside from the positive public optics of adopting toxic substances legislation, it is necessary to mandate the development of a Reduction Plan through legislation, particularly where the cost of developing such a plan could be substantial and the Reduction Plan will be required for even small operations.
The owner and operator of the facility will be required to create a summary of the Reduction Plan for public dissemination in accordance with regulations that have yet to be developed. The summary will be required to include (among other things) a copy of the objectives of the Reduction Plan and a projection of how effective the Reduction Plan will be in meeting those objectives. In addition, regulations may be enacted requiring certain information contained in the tracking and quantification summary reports to also be made available to the public.
Substance Of Concern Report
In addition to the development of Reduction Plans, the TRA will also require owners and operators of facilities that use or create substances prescribed by regulation as "substances of concern" to prepare reports to the MOE. The MOE has stated that substances of concern will be designated in regulations to include substances that are of concern to human health or the environment but for which there is limited information on use or release in Ontario. Moreover, these would be substances that are not currently tracked through the National Pollutant Release Inventory (NPRI) under CEPA. The TRA sets out the minimum components that will be required in a report on substances of concern and provides for regulation-making authority to detail additional components.
The TRA contains a number of very broad provisions and powers relating to compliance and enforcement that are similar to those found in Ontario's Environmental Protection Act (EPA), one of Ontario's most comprehensive environmental protection statutes. While the TRA's extensive enforcement powers are arguably justifiable for statutes like the EPA, given its broad application, it may be asked why such powers are necessary to achieve the relatively limited goals of the TRA.
The TRA provides for (among other things) the power to designate provincial officers authorized to issue orders and enter and inspect property to ensure compliance with the TRA in circumstances where, for example, the designated officer reasonably believes that a toxic substance or substance of concern is used or created at a facility. During such inspections, provincial officers will be authorized to seize evidence, take samples, conduct tests, require the operation of industrial processes, examine, copy or require the production of documents and make reasonable inquiries of any person. The TRA also provides for a judicial order authorizing entry and inspection of property. Further, the MOE can apply to the court for an order specifying the forfeiture of any "thing" lawfully seized in connection with the commission of an offence under the TRA. Somewhat surprisingly, the broad enforcement measures extend to authorizing the use of tracking devices to monitor and investigate possible offences under the TRA where a justice of the peace has reasonable grounds for believing that an offence has been (or will be) committed.
The TRA authorizes the MOE to issue orders requiring an owner or operator of a facility to pay a penalty for any contravention of the TRA or its regulations. The amount of each penalty will be determined by regulations, but will not exceed $60,000 per contravention. Interestingly, the TRA imposes absolute liability on owners and operators in this regard, removing the defences of due diligence (i.e., the party will be required to pay the penalty even if the party took all reasonable steps to prevent the contravention) and of "mistaken belief of facts that, if true, would render the act innocent."
The TRA provides that every person who contravenes any provision of the TRA, or an order made pursuant to the TRA, is guilty of an offence and is liable to a maximum fine for a first offence of not more than $25,000 for each day or part of a day on which the offence occurred or continues to occur. The fine increases to $50,000 per day for subsequent offences. For corporations, the penalty for a first offence is a fine of $50,000 per day and $100,000 per day for subsequent convictions. Notwithstanding these maximum amounts of these fines, the monetary penalties may be increased by an amount equal to the monetary benefit that was acquired as a result of the commission of the offence.
Individual directors, officers, and employees or agents of a corporation can also be convicted for an offence committed by the corporation where there is evidence that they "directed, authorized, assented to, acquiesced in" or otherwise participated in the commission of the offence or, most importantly, failed to "take all reasonable care" to prevent the offence. This is the case even if the corporation has not been prosecuted for the offence. Under the EPA, the duty to take all reasonable care to prevent an offence is imposed on the officers and directors of a corporation but does not extend to individual employees and agents who may have little or no control over the circumstances giving rise to the offence. The TRA may therefore place an unfair burden on individual employees who may face prosecution for an offence committed by the corporation, even if the corporation itself is not being prosecuted.
Other Aspects Of The TRA
The TRA requires the MOE to consult with experts and the public, at least once every five years, about possible changes to the lists of substances that are prescribed as toxic substances and as substances of concern. The MOE will be required to publish lists of substances that are not toxic substances or substances of concern but that are slated for scrutiny by the MOE during the MOE's next consultation.
More importantly, the TRA provides for several regulation-making powers of the Lieutenant Governor in Council that could dramatically expand the application of the TRA to prohibit or regulate the manufacturing, sale or distribution of toxic substances, substances of concern, other substances prescribed by regulation and any thing that contains a toxic substance, substance of concern or other substance prescribed by regulation. One would expect that such a potentially significant power would be the subject of substantive provisions in a separate part of the Act itself. Given that there is no restriction or guidance on how "toxic substances" will be identified and designated under the Act, the implications attached to these regulation-making powers could be significant.
Finally, the legislation implementing the TRA provides for various amendments to other Ontario Acts. Some of these amendments are complementary to the provisions of the TRA while other amendments make housekeeping changes to add relevant statutory references and to adjust French terminology.
Ontario has indicated that it intends to use the TRA to supplement existing federal powers dealing with the regulation of toxic substances and that it will work with the federal government to promote the use of existing federal powers. The new powers in the TRA would be used to protect Ontarians "if and where necessary." However, given that the use of toxic substances is already regulated in Ontario by both the CEPA and (in some cases) municipal toxic substances bylaws, it is not clear why this extra layer of legislation is necessary. It also not clear why the extensive provisions and enforcement measures contemplated in the current version of the TRA are necessary to accomplish the relatively limited purposes of the Act.
Dan Kirby is a partner and Co-Chair in the firm's Environmental Law Group. Jack Coop is a partner in the Litigation Department in the firm's Toronto office. Ian Osellame is an associate in the Litigation Department in the firm's Toronto office.
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