Environmental Law 2021

Last Updated November 30, 2021

Canada

Law and Practice

Authors



Lawson Lundell LLP differentiates itself as one of the largest and most experienced law firms in Western Canada. It is a leading, full-service, business law firm, with over 170 lawyers located in offices in Vancouver, Calgary, Kelowna and Yellowknife. The environmental practice group comprises 20 lawyers, who provide their expertise to clients in a wide range of industries, including banking, construction, energy, forestry, government, mining, real estate, transportation and utilities. The team provides advice and assistance to clients in all aspects of environmental law, including commercial transactions, environmental management systems, environmental project assessment, regulatory and licensing requirements, contaminated sites, reclamation, closure and remediation, and environmental offences.

In Canada, the federal (national) and provincial/territorial (regional) governments have responsibility for the protection of the environment. Federal laws will generally apply to all projects or operations throughout the country, while provincial/territorial laws apply only to those projects or operations located within the specific province or territory.

The key federal laws governing environmental protection include the Canadian Environmental Protection Act, the Fisheries Act, the Impact Assessment Act, the Transportation of Dangerous Goods Act and the Canadian Navigable Waters Act. Provinces bolster these laws with legislation within their jurisdiction, such as British Columbia’s Environmental Management Act or Ontario’s Environmental Protection Act. Territories also have legislation within their jurisdiction, such as Nunavut's Environmental Protection Act. 

Each one of these acts is underscored by regulations, orders and guidelines designed to ensure compliance and further the goals of each respective act.

The key federal regulatory authorities in Canada include Environment and Climate Change Canada, Fisheries and Oceans Canada, the Impact Assessment Agency of Canada, Crown-Indigenous Relations and Northern Affairs Canada, Transport Canada, Parks Canada and Natural Resources Canada.

Other key regulatory authorities exist in each province or territory, many of which will co-ordinate their approach to regulation and enforcement with their federal counterparts.

Most regulatory authorities employ officers or other enforcement personnel, who are often granted the power to conduct inspections and investigations. These inspections and investigations may be routine or in response to suspected regulatory breaches. For example, a federal fishery officer may enter and inspect a facility or vessel if he or she has reasonable grounds to believe that federal fishery regulations are being breached. In this example, they may also open containers, examine fish or take samples of them, conduct tests, or take copies of documents. Regulatory officers investigating an offence may be required to obtain search warrants or may request voluntary disclosure.

The approach to the enforcement of environmental law varies according to the severity of the environmental incident or breach of the regulation. Whenever possible, Canadian authorities enforce environmental law through voluntary agreements and specific orders to comply. Canadian authorities will hold polluters responsible for the clean-up costs of pollution or contamination, and may seek further penalties where necessary.

Environmental permits are issued by the federal and provincial/territorial governments, depending on the nature and location of the activity at issue.

Environmental permits may be necessary for a wide variety of activities. For example, activities that may harm a threatened or endangered species will require a permit under the federal Species at Risk Act, while activities related to forestry will require a permit from the relevant provincial or territorial regulatory authority. While federal and provincial jurisdictions may not strictly overlap in this instance, environmental activities often require both federal and provincial permits and authorisations, thereby increasing compliance concerns for businesses. Some activities will also require municipal or regional permits and authorisations.

Depending on the circumstances, some projects may be able to obtain multiple environmental permits through a single process, but this is not always the case. Project proponents or operators in Canada will need to obtain permits from each of the responsible government authorities, at the federal and provincial/territorial levels, as required. As noted above, either federal or provincial environmental assessment (or both) may be required before permits may be issued.

Investors looking to purchase Canadian projects or operations will want to ensure they acquire the project’s associated permits. Most environmental permits can be transferred, but governmental consent may be required to do so. This can require a lengthy process in some circumstances, which may trigger consultation with indigenous groups. Usually, change of control will not trigger the need for governmental consents, but the specific requirements of the applicable legislation as well as the language of the permit itself must be carefully reviewed to determine whether governmental consents are required.

Environmental permits are usually time-limited, but the duration of the authorisation will depend on the nature of the activity being permitted. Permits can often be renewed, but may require additional regulatory process in order to secure a renewal.

Permits typically contain conditions that accord with the requirements of the legislation under which they are granted.

Environmental permits are generally obtained by applying to the appropriate government authority with responsibility over the permitting scheme; for example, permits around fish or fish habitats will commonly be obtained from Fisheries and Oceans Canada.

In many cases, the applicable legislation explicitly states that environmental permits will only be granted to individuals or businesses that can show they are qualified to hold them. As an example, the federal Nuclear Safety and Control Act forbids transfers of licences unless the licensee can show that they are authorised to carry out the particular activity granted under the licence.

Some permitting regimes, but not all, will allow for an appeal to a quasi-judicial authority (often an administrative tribunal) or a member of the federal government – ie, a minister. In all cases, the decision to grant or refuse a permit can be reviewed by the courts through an application for judicial review. Further appeals from these decisions may find themselves in courts of competent jurisdiction.

The key types of liability faced by project proponents or operators in Canada for environmental damage or breaches of environmental law include monetary fines, remediation orders, the loss of environmental permits and prosecution.

Environmental legislation, such as the Fisheries Act, include a provision that makes it an offence to fail to comply with the legislation. Furthermore, the Fisheries Act and others like it state that any committed or continued offence that occurs over time shall be considered a separate offence for each day the contravention occurred. The result is that offenders may be subjected to multiple convictions and large monetary fines should environmental breaches continue. It is often possible for an employee, agent or a director or officer to be held personally responsible for an offence under environmental legislation.

Subject to available defences, a current or purchasing operator or landowner will be subject to liability if they acquire contaminated land. The Canadian liability regime is designed to ensure that liability always falls on either past or present owners or operators of land in order for federal and provincial governments to avoid incurring remediation costs.

Most environmental legislation in Canada operates on the “polluter pays” principle, which requires the party that caused the harm to the environment to bear the ultimate cost of any clean-up or remediation.

However, Canadian contaminated sites legislation can impose liability for historic environmental incidents or damage on a current operator or landowner of contaminated land; for example, if the new landowner is aware of contamination and takes no steps to mitigate its spread, then the new landowner may be liable (subject to the various defences set out in the legislation).

There are several types of liability for environmental incidents or damage in Canada. Project proponents, operators, or suppliers and transporters of products may face liability for pollution or harm to the environment, for failing to comply with specific environmental regulations or permits, for the ownership, operation, or control of contaminated sites, or for the supply of products to contaminated sites. They may also face claims of nuisance or negligence from private parties affected by contamination.

A defence of due diligence is normally available to parties accused of breaching environmental legislation, as well as various common law and equitable defences. However, there are some offences where due diligence is not available.

A recent case that demonstrates many of the key principles and issues in a contaminated sites context is JI Properties Inc v PPG Architectural Coatings Canada Ltd, 2015 BCCA 472. This appellate decision provides commentary on the legislative/regulatory regime, the status of pre-legislation comfort letters and due diligence by the defendants, the operation of limitation periods on environmental damage, and the scope of reasonably incurred remediation costs.

As previously noted, Canada has adopted the polluter pays principle for environmental liability, and this includes corporations. Corporate entities that damage the environment or breach environmental legislation will be liable for the harm caused. This can include damage caused by oil spills and sewage pollution, or breaches of regulations around wildlife, fisheries, the transportation of dangerous goods, the disposal of hazardous materials and contaminated sites.

It is uncommon in Canada for the shareholders or parent company of a polluting corporate entity to be held liable for the environmental damage. However, Canadian contaminated sites legislation contains broad liability provisions that may apply to shareholders or a parent company that owns, controls, or manages a contaminated piece of property. Also, in very rare circumstances, a party or government may seek permission from the court to “pierce the corporate veil” and sue the parent company for actions taken by the subsidiary.

Several pieces of federal environmental legislation impose responsibilities on directors and officers for their company’s environmental performance. Penalties for environmental damage or breaches of environmental law can include:

  • being fined or imprisoned for the corporation's pollution, even if the corporation has never been prosecuted or convicted;
  • being fined for the corporation's failure to obtain the necessary permits or approvals, follow required environmental processes, or report spills;
  • being prosecuted for failure to take all reasonable care to prevent the corporation from causing or permitting pollution;
  • being heavily fined or imprisoned for the corporation’s contempt of court where there are repetitions of events that led to a previous environmental conviction; or
  • being personally liable for the costs of remediating historical and current property contamination associated with any real estate that the corporation owns, controls or occupies, or formerly owned or controlled.

Most directors and officers in Canada rely on director and officer insurance to insure them against any errors and omissions made in the course of their duties. Given the serious consequences of potential environmental breaches, it is not uncommon for directors and officers to have coverage for environmental breaches as part of their insurance policies. However, such policies are often additional and expensive, as they are not traditionally included as part of standard policies.

Directors and officers may seek further indemnification from the company itself for any liability that arises from their role in the company; however, this may be of less utility if the company becomes insolvent due to environmental penalties.

It is unlikely that financial institutions or lenders will be liable for the environmental damage caused by one of their clients. However, Canadian contaminated sites legislation contains broad liability provisions that may apply to a lender who owns, controls or manages a piece of property. For example, if a lender realises on security taken on real property assets that are contaminated, the lender may have sufficient "control" over the situation to incur liability for clean-up.

To protect themselves from liability risk, lenders should investigate the potential environmental liabilities inherent in an undertaking before investing, and should ensure that money is allocated towards meeting environmental contingencies. Furthermore, lenders can make it a term of any lending agreement that the owner or operator of a site meets and/or exceeds any environmental regulations or policies in furtherance of the agreement. Finally, a lender could ask for an indemnity or for the provision of an insurance policy naming them an additional insured in order to further mitigate any potential fallout from an environmental offence.

Civil claims for compensation or other remedies can be brought through common law causes of action, such as nuisance, negligence, trespass, or loss of property value, or through statutory causes of action set out in environmental legislation.

Canadian courts of inherent jurisdiction almost always have jurisdiction to award exemplary or punitive damages. However, generally speaking, they are unlikely to award such damages unless the conduct in question is high-handed, malicious, arbitrary or highly reprehensible. The bar for awarding punitive damages is high, but punitive damages have been awarded in certain jurisdictions such as Alberta for breaches of environmental responsibilities.

Class actions are available for environmental-related civil claims. However, class actions in Canada must first be “certified” by a court in order to proceed. This process ensures that the claim raises common issues and that a class proceeding is the preferred way to resolve those issues. However, few environment-related cases have made it past this initial threshold.

Two appellate decisions, released in 2014, confirmed that class action regimes are not often appropriate to remedy environmental harms: Canada (Attorney General) v MacQueen, 2013 NSCA 143 and Windsor v Canadian Pacific Railway Ltd, 2014 ABCA 108. Although environmental causes of action may seem to involve common issues among class members, proof of those claims is often an individual issue.

Indemnities and other contractual arrangements can be used to transfer or apportion liability for environmental pollution or breaches of law, although the appropriate terms for each set of parties will be fact-specific. However, third parties – including regulators – are not likely to be bound by such agreements, and are entitled to prosecute or seek compensation from the party who is liable at law. Polluters relying on such indemnities and contracts must seek indemnification or compensation through those mechanisms on their own.

Most commercial general liability policies in Canada exclude pollution liability. Businesses can purchase an optional pollution liability extension, although such extensions will be subject to strict exclusions.

Instead, Canadian businesses may wish to purchase an environmental liability policy from one of a variety of insurers in Canada. These policies can provide coverage for liability arising from a sudden or gradual pollution event, waste management services, storage tanks and contractors, among other things.

Jurisdiction over contaminated sites is divided between the federal and provincial/territorial governments in Canada. The federal government has some powers to issue remedial and preventative orders regarding water and soil contamination, and has jurisdiction over any federal lands. All other lands are governed by provincial contaminated sites legislation.

Provincial contaminated sites legislation details hazardous waste disposal and storage, site investigations, permitting and authorisations, pollution prevention, site remediation, administration, penalties, etc. All of these fall under provincial jurisdiction relating to the environment and property management.

Contaminated sites are defined as areas of land where the soil, sediment, vapour, or groundwater contains a prescribed substance in quantities or concentrations exceeding risk-based criteria, standards or conditions. Prescribed substances generally include hazardous substances such as sulphur, petroleum hydrocarbons, heavy metals and CFCs.

When a “responsible person” has not remediated an identified contaminated site, a regulatory authority can issue a remediation order to ensure remediation is carried out. This could occur if the contamination is severe, or if the responsible person will not voluntarily carry out the remediation requirements.

Persons who may be liable for the costs of remediating a contaminated site include the current owner or operator of a site, a previous owner or operator of a site, persons who produced the prescribed substance found on the site, and persons who transported the prescribed substance found on the site.

However, specific exclusions apply. For example, a prior owner or operator might not be found liable if they can demonstrate that the site was not contaminated at the time they owned or controlled it, and that they did not contribute to the contamination. Similarly, a current owner who can demonstrate that none of their conduct exacerbated or contributed to the costs of remediation may not be found liable.

More than one person can be liable for remediation of contaminated land, with liability typically apportioned according to the degree of fault or contribution by the parties to the pollution. Gehring et al v Chevron Canada Limited et al, 2006 BCSC 1639 provides commentary on the allocation of remediation costs. The recent appellate case Victory Motors (Abbotsford) Ltd. v Actton Super-Save Gas Stations Ltd., 2021 BCCA 129 confirmed that, at least in British Columbia, remediating parties may claim both litigation legal costs and legal costs incurred throughout the actual remediation of the contaminated site.

A person liable for remediating contaminated land can seek recourse from the original polluter or former landowner. Such actions may be available in contract law, in negligence, or through a statutory cause of action in some provinces.

A polluter or landowner can transfer liability for a contaminated site to a purchaser by way of contract. However, environmental legislation in most provinces permits regulators to order those who formerly owned or controlled contaminated property to carry out remediation measures. Parties seeking to rely on contractual terms to recover their costs or limit liability will need to seek a remedy through those mechanisms.

Although a large part of the Canadian economy is resource-based, the country’s economy varies greatly from coast to coast. The strategies to combat climate change have therefore been as varied as the economies in which they are implemented. As it currently stands, Canadian provinces have a patchwork of different environmental policies in play, with varying adherence to policies concerning carbon credits, renewable energy credits and emission standards.

Canada is a signatory to the major international climate change conventions. As a party to the Paris Agreement, Canada has committed to an economy-wide target to reduce greenhouse gas emissions by 40-45% below 2005 levels by 2030. The Canadian Net-Zero Emissions Accountability Act formalises Canada’s target to achieve net-zero emissions by the year 2050, and establishes a series of interim emissions reduction targets at five-year milestones toward that goal.

Although the federal government signed the Paris Agreement and has set emission targets, Canada is a federal system and the federal and provincial levels of government have the jurisdiction to regulate matters concerning the environment.

In recognition of the collaborative approach needed for progress on climate change, the federal and provincial Ministers of the Environment developed the Pan-Canadian Framework on Clean Growth and Climate Change, which required all provinces and territories to have carbon pricing initiatives in effect by 2018. However, the framework gives the provinces and territories the flexibility to design their own policies to meet emission-reduction targets through the different initiatives or mechanisms that best suit their individual economies. The federal government subsequently issued a further climate plan in 2020 – A Healthy Environment and a Healthy Economy. The plan builds on the efforts that are currently underway through the Pan-Canadian Framework.

Canada maintains a number of legal requirements with respect to energy efficiency. Regulations apply to a range of products, including appliances, light bulbs, heating and cooling systems, and vehicles. Many incentive programmes also exist to support the construction of energy-efficient homes and buildings, and the development of energy-efficient industries and businesses.

In 2017, the federal government announced that the provinces and territories in Canada had to develop their own carbon pricing system that met federal standards or the federal government would impose their own programme on the provinces and territories. Since 2019, every jurisdiction in Canada has had a price on carbon pollution, either their own pricing system tailored to local needs or the federal pricing system. If a province or territory decides not to price pollution, or proposes a system that does not meet minimum standards set by the federal government, the federal system is put in place.

Asbestos management in Canada is governed by occupational health and safety legislation and environmental legislation. It is governed federally by legislation such as the Hazardous Products Act and the Canada Consumer Product Safety Act, and provincially by legislation such as the Workers Compensation Act. The federal Prohibition of Asbestos and Products Containing Asbestos Regulations prohibit the import, sale and use of asbestos, as well as the manufacture, import, sale and use of products containing asbestos (with some exceptions).

The responsibility for removing or managing asbestos present in a building generally falls on the building owner. However, in some provinces the occupier of a building, such as a tenant or project developer, may also bear some responsibility.

Landowners or occupiers must conduct a pre-work assessment before commencing certain building work. Any asbestos found must be removed, enclosed, encapsulated, or carefully managed prior to renovations or alterations. The legislation mandates that specific procedures are implemented during asbestos removal, relating to ventilation, waste containers and decontamination.

Asbestos was used frequently in Canadian insulation, fireproofing and construction until the 1980s. Canada was also an active producer of asbestos until 2011. As a result, Canadian exposure to asbestos has been relatively widespread, and asbestos-related diseases continue to be one of the top causes of workplace death in Canada.

Despite this, asbestos litigation against employers is relatively uncommon. Canada has a socialised medical insurance system and most provinces operate a mandatory workers' compensation scheme, which means that the majority of workers injured by asbestos exposure will receive medical treatment and compensation without resorting to litigation.

Where asbestos litigation has been undertaken, it has been initiated by workers' compensation boards, the bodies responsible for administering the workers' compensation schemes, and brought against manufacturers of asbestos products to recover the costs of paying out compensation to workers and their families.

To establish a claim for damages for asbestos exposure, a litigant must demonstrate actual physical harm or injury. However, the long latency period of asbestosis and mesothelioma means that the injury or harm may not be realised and litigation not commenced for decades.

This has created challenges for Canadian courts. Litigants have often been exposed to asbestos from a variety of sources over a long period of time, making causation and the proper apportionment of liability a difficult issue. More recent jurisprudence suggests courts will take a more relaxed approach to causation in such cases; see Clements v Clements, 2012 SCC 32.

One of the leading cases with respect to asbestos liability in Canada is Privest Properties Ltd v The Foundation Co of Canada Ltd (1995), 11 BCLR (3d) 1 (SC), aff’d (1997), 31 BCLR (3d) 114 (CA). Privest was the first suit to be tried in Canada involving asbestos in buildings. The court rejected the plaintiffs’ position that the building in question had been contaminated by the presence of asbestos-containing spray fireproofing. The court concluded that the substance at issue was not an inherently dangerous product, because the fireproofing contained chrysotile, rather than crocidolite or amosite forms of asbestos. This decision set a meaningful precedent in Canada by constraining liability with respect to the use of asbestos in fireproofing and construction. It also departed significantly from earlier US authorities.

In Canada, the responsibility for managing and reducing waste is shared among federal, provincial, territorial and municipal governments. The federal government regulates the export and import of waste and the interprovincial movement of waste, while the provinces regulate the use and disposal of waste. Both “extended producer responsibility” and “product stewardship” programmes are used to manage products at their end-of-life.

Whether or not a producer or consigner of waste retains liability for waste after it has been disposed of by a third party depends on the province in question. In some provinces, the legislation includes an automatic ownership transfer provision that is triggered once waste is accepted by an authorised waste management facility, which limits further liability of producers or consigners.

In provinces where such a provision does not exist, any past or present owner or person that possessed, controlled or managed the waste remains exposed to liability for waste after it has been disposed of by a third party. However, generally speaking, some direct involvement in the release is necessary in order for the liability to crystallise. Under both schemes, producers or consigners remain liable for any damage caused while the waste was in their possession or in transport.

Producers in Canada are not generally required to take back, recycle or dispose of goods once they become waste. However, legislation across Canada is widely used to impose some or all of the costs of recovery, recycling, and disposal of goods on the producers of waste. These laws are intended to incentivise producers to design products that can be disposed of responsibly.

There are requirements to self-report environmental incidents or damage to regulators in Canada. These requirements often apply to spills or releases of environmentally harmful substances such as oil, sewage, and ozone-depleting substances. Larger spills or releases may also be required to be reported to the public at large.

In addition to legal requirements to report spills or other environmental breaches, a failure to notify may be used against an offender as evidence of conduct worthy of sanction via punitive damages or an increased fine for a conviction.

Canadian government agencies often publish environmental information on their websites. The public may also request government documents and information through access to information requests, which apply to nearly all public authorities and bodies and nearly all government documents.

The disclosure of environmental information in annual reports is still largely voluntary in Canada. However, under Canadian securities rules, reporting issuers (which are largely public companies) must disclose all material information, including material information about environmental and social issues. Report issuers may also have disclosure obligations under the policies of a particular stock exchange.

Environmental due diligence is typically conducted on M&A, finance and property transactions in Canada. The level of due diligence conducted may vary according to the level of risk a particular property may present (such as a gas station or dry cleaner).

In a share sale, all the assets and liabilities of the target company remain with the company, meaning that the buyer will absorb any outstanding environmental liabilities for historic environmental damage or breaches of environmental law.

In an asset sale, the buyer typically does not inherit the pre-acquisition environmental liabilities associated with the purchased assets. However, by law, the buyer may inherit liability for the pre-existing environmental condition of the assets, especially in the case of a contaminated site. A buyer may also be liable where it takes over an ongoing situation of regulatory non-compliance.

Typically, a purchaser of Canadian shares or assets will request any of the relevant environmental studies, reports, permits, orders, key correspondence from regulatory authorities and other critical environmental documents from the vendor. A purchaser can also search public registries for information regarding the target company’s environmental compliance, conduct interviews with senior environmental employees of the target company, or obtain an environmental audit or site assessment.

Private companies may provide Phase I and Phase II assessments, with Phase I inspections consisting of database and visual searches while Phase II inspections consist of site inspection, sample collection and analysis, and often the provision of a review and recommendations regarding the site and potential remediation.

There is little legislation that mandates the disclosure of environmental information to a purchaser. In some jurisdictions, for example, provincial legislation will require a vendor of real property who knows or should know that the property has been used for an industrial or commercial purpose to provide a site disclosure statement to a prospective purchaser. More commonly, the requirement to disclose environmental information to a purchaser is built into Canadian contracts. Robust representations and warranties regarding the property or the company’s environmental status will create liability where those statements prove untrue.

There are no "typical" environmental warranties, indemnities, or similar provisions in a share or asset sale; the allocation of risk depends on the parties themselves. However, it is common in Canadian business transactions to include representations, warranties and indemnities that will affect the allocation of environmental liability. Topics that may be covered by these provisions include the state of the property, the absence of contamination and the company’s environmental compliance status. Often, such warranties and indemnities will be limited in time.

In Canada, environmental taxes are imposed on activities or products that have a negative impact on the environment. They are designed to limit environmentally harmful behaviour through a price incentive, and are levied on the tax bases of energy, transportation, pollution and natural resources, among other things. Examples include federal and provincial fuel consumption taxes, and provincial taxes on mineral use, waste management and carbon emissions. Other provisions may allow businesses to recoup costs or receive accelerated depreciation write-offs for pollution control or energy conservation equipment and machinery.

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Trends and Developments


Authors



Miller Thomson LLP is comprised of approximately 500 lawyers, situated in 12 strategically placed offices across Canada. National and multinational businesses must navigate Canada’s environmental laws and regulations, which evolve constantly and vary from province to province. Miller Thomson’s environmental law group is a trusted partner when it comes to managing environmental risk, including undertaking environmental due diligence, ensuring environmental regulatory compliance, preventing and defending against regulatory prosecutions, pursuing or defending environmental civil claims, structuring transactions involving environmental risk, and keeping up with this fast-moving area of the law. Its lawyers include legal planners, negotiators, former regulators and advocates who have the expertise that comes with deep experience and an understanding of the complex issues that face corporate decision-makers, lenders and regulators.

National Developments

Courts adapt to COVID-19

Courts around the country significantly revised their procedures in response to the COVID-19 pandemic. Many court appearances, which traditionally took place in person, are now facilitated by remote technology such as audio and videoconference. In many cases, this has resulted in a more efficient system for managing busy courtroom dockets.

The elimination of travel time for counsel and litigants, the use of virtual “waiting rooms” – and other efficiencies realised by these changes – may well become permanent fixtures that survive the pandemic.

Enhanced focus on environmental, social and governance (ESG)

Momentum on issues surrounding ESG has continued to swell as more companies integrate ESG matters into their practices. While some organisations voluntarily report on ESG issues, others are mandated to do so in compliance with strengthened regulatory requirements.

The Task Force on Climate-Related Financial Disclosures (TFCD), commonly referred to as the global standard for corporate climate reporting, has continued to gain recognition in Canada. In response to the COVID-19 pandemic, the federal government launched an emergency loan programme for large Canadian businesses which required loan recipients to commit to publishing annual climate-related disclosure reports consistent with the TFCD. In the 2021 budget, the federal government also committed to engaging with provinces and territories to make climate disclosures consistent with the TFCD.

Responding to the climate crisis

Canadian climate laws and policies continue to evolve. Under the federal Impact Assessment Act, the Minister of Environment and Climate Change is directed to consider how a designated project would help or hinder Canada’s abilities to meet its domestic and international climate commitments. The Strategic Assessment of Climate Change outlines what climate and emissions information project proponents ought to submit throughout a federal impact assessment, as well as providing guidance on how climate change will be considered throughout the impact assessment process.

The Supreme Court of Canada upheld the constitutionality of the Greenhouse Gas Pollution Pricing Act, finding that Parliament has jurisdiction to enact this law. The court acknowledged that the climate crisis “poses a grave threat to humanity’s future” and addressed the difficulty of the “collective action problem” in which greenhouse gas emissions in one province may be offset by increased emissions in another province. While this ruling allows the federal carbon pricing scheme to continue applying in provinces and territories that lack an appropriate carbon pricing scheme, the power of Parliament to regulate provincial emissions reductions more broadly remains unclear.

In April 2021, the federal government increased Canada’s 2030 emissions reduction target from a 30% to a 40–45% reduction below 2005 levels by 2030. This target, however, remains less ambitious than the targets of the USA and EU.

Canada’s first-ever climate accountability legislation was passed into law in June 2021. The Canadian Net-Zero Emissions Accountability Act enshrines Canada’s 2050 target of reaching net-zero emissions, and sets out a framework to set and report on milestone emissions reduction targets.

In July, the Minister of Natural Resources launched an engagement process to provide feedback on potential elements of legislation regarding a just and equitable transition to a low-carbon future for impacted workers and communities. The federal 2021 budget also allocated CAD2 billion to create new employment opportunities over the next five years, with CAD250 million of that funding focused on helping workers transition. 

Heightened attention to indigenous peoples’ issues

In May 2021, the remains of 215 indigenous children were found at the site of a former residential school in British Columbia (BC), sparking investigations at other school sites. As of August 2021, more than 1,300 unmarked graves had been found at five former residential school sites; many more sites remain unsearched. These discoveries, coupled with coverage of the 45 long-term drinking water advisories in 32 First Nations communities, continue to increase awareness of indigenous issues and are likely to result in greater attention to all impacts on indigenous rights including those arising from environmental laws and policies.

In September 2019, the United Nations Special Rapporteur on human rights and hazardous substances reported that indigenous peoples in Canada are disproportionately affected by toxic waste. MP Lenore Zann introduced a Private Member’s Bill in February 2020 to develop a national strategy to redress "environmental racism" which she defined as “the disproportionate number of environmentally hazardous sites established in areas inhabited primarily by members of Indigenous and other racialized communities”. Parliament recessed before the bill was passed.

After BC passed the Declaration on the Rights of Indigenous Peoples Act in 2019, requiring the province to harmonise its laws with the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), it has been entangled in numerous high-profile resource conflicts. In December 2019, the BC Supreme Court granted Coastal GasLink an injunction against Wet’suwet’en First Nation members who were blocking its access to the pipeline project in protest of the project being built on their traditional territory. While a Memorandum of Understanding (MoU) was signed in May 2020 between Canada, BC and Wet’suwet’en hereditary chiefs which outlined a process for negotiating shared jurisdiction, the MoU did not address the Coastal GasLink pipeline, and Wet’suwet’en protests continue to date.

In June 2021, Canada passed the United Nations Declaration on the Rights of Indigenous Peoples Act, which similarly requires the federal government to harmonise its federal laws with UNDRIP. Progress on the alignment of federal laws with UNDRIP remains to be seen. 

British Columbia (BC)

Provincial hydrogen strategy released

Shortly after Canada released a national hydrogen strategy in December 2020, BC released its comprehensive hydrogen strategy in July 2021, and declared itself the first Canadian province to do so.

The primary goals of the strategy are to: (i) encourage the use and adoption of low-carbon hydrogen to help it meet its 2050 net-zero emissions target; and (i) encourage the innovation and production of low-carbon hydrogen in BC to grow the sector and position the province as a leader in hydrogen research and production.

Given that two-thirds of BC’s energy used for transportation, buildings and industry currently comes from fossil fuels, transitioning to a cleaner, low-carbon energy system will be pivotal for BC to meet its 2050 target. BC is geographically well-positioned in its proximity to key trading partners, with the export markets of China, Japan, South Korea and California predicted to account for nearly half of the total global hydrogen demand by the year 2050.

Court holds legal fees recoverable as remediation costs

In March 2021, the BC Court of Appeal held that legal costs which were reasonably incurred in connection with the remediation of a contaminated site could be fully recoverable under the Environmental Management Act. In Victory Motors (Abbotsford) Ltd v Actton Super-Save Gas Stations Ltd (2021 BCCA 129), the Court noted that nothing indicated that the words “all costs of remediation” in the Act could not include “full indemnification” for reasonably incurred remediation legal costs.

Prairie Provinces

Extension of time to commence an environmental contamination claim

In most cases, in Alberta, a claimant must commence an action in the earlier of (i) two years after the date on which the claimant first knew, or ought to have known, about the alleged injury or damage attributable to the defendant, or (ii) within ten years after the claim arose,

The ten-year limitation period operates as an absolute bar, as it prohibits a claim from being initiated regardless of when (or even whether) the claim was discovered. This “ultimate drop-dead rule” was designed to give parties some finality to legal exposure.

However, bringing an environmental claim within ten years is often not possible due to factors such as: the time it takes for pollution to develop or be detected; the difficulty of ascertaining the cause, nature or extent of the contamination; and the uncertainty of whether or not there is need for remediation.

While strict application of the ten-year ultimate drop-dead rule would satisfy the objective of ensuring timely resolution of liability and disputes, it would run directly contrary to the established “polluter pays” principle that is enshrined in case law from the Supreme Court of Canada, as well as in Alberta’s Environmental Protection and Enhancement Act.

To try to resolve this conflict, Section 218 of the EPEA expressly gives the court discretion to extend the ten-year limitation period in certain cases.

Case law in Alberta

In Brookfield Residential (Alberta) LP (Carma Developers LP) v Imperial Oil Limited, 2019 ABCA 35 (“Brookfield”) and United Inc. v Canadian National Railway Company, 2020 ABQB 413 (“United”) the Alberta courts provided some guidance on the application of that discretion under Section 218.

In Brookfield, Imperial Oil sold the property in question decades before it was acquired by Brookfield from a later owner. During excavation for re-development, Brookfield discovered contamination and initiated the claim against Imperial Oil – more than 60 years after Imperial had sold the property. The Court of Appeal was not willing to extend the limitation period in this case, as there was a complete lack of evidence available to speak to the events that had occurred. The court ultimately found that the prejudice suffered by Imperial Oil as a result of this passage of time was too great to allow the claim to proceed.

In United, the plaintiff, a residential developer, purchased lands formerly owned by CN Rail. Similar to Brookfield, United had purchased the lands from an intervening owner, and discovered significant contamination some three to four years after expiry of the ten-year period.

The court in United paid particular attention to CN’s allegations of prejudice, and closely tested each potential issue raised, including:

  • loss of documents;
  • fading witness memories;
  • any loss of ability to test the contamination;
  • inability to call evidence to establish the proper standard of care;
  • loss of ability to assess causation and whether that was an issue; and
  • the death of a key witness.

The court found that, while the passage of time had resulted in some prejudice to CN in its ability to defend the claim, there was not enough evidence of real prejudice that arose during the almost 15 years between when the contamination occurred and when the claim was filed to deny the extension of the limitation period.

Timing is everything

These decisions make it clear that undue prejudice to the defendant is by far the most critical factor to be considered in exercising the discretion under Section 218. Of course, greater prejudice is more likely to be inferred with greater passage of time. For example, in Brookfield, the court was particularly concerned that the parties would not even be able to establish what the standard of care was back in 1949 when the contamination was alleged to have occurred.

While these decisions add some much-needed clarity, we will undoubtedly see more applications under Section 218 given the nature of environmental claims and the broad discretion that has been given to the courts under the section.

Ontario

Regulatory developments

Several regulatory initiatives were announced in 2021, including proposed amendments to the Low Carbon Fuels Regulation (Ontario Regulation 79/15). The regulation was intended to streamline the approvals process for certain manufacturers so they are able to switch from fossil fuels to alternative fuel materials that would otherwise be disposed of as waste. The proposed changes expand eligible fuel sources, eliminate some reporting obligations, increase limits on demonstration projects and reduce some of the pre-conditions to permit applications.

Ontario continues to have limited regulatory control over odour emissions beyond broad legislative prohibitions against emissions that may cause an “adverse effect”. In May 2021, an update to the guideline to specifically address odour mixtures was announced. However, the absence of specific regulation in this area continues to create uncertainty and remains a barrier to even benign development proposals such as composting facilities, faced with an inability to point to objective compliance measures in response to local opposition raising odour concerns.

Ontario Land Tribunal absorbs ERT and others

In June 2021, the Ontario Land Tribunal was established to hear matters formerly heard by five separate tribunals, including the Environmental Review Tribunal. While this amalgamation allows for the possible elimination of the need for multiple hearings where an undertaking requires multiple approvals, it does create the potential for loss of tribunal expertise and, in turn, the potential for reduced judicial deference to the tribunal by courts undertaking judicial review of a tribunal decision.

Continued implementation of Excess Soils Regulation

Ontario’s long-awaited Excess Soils Regulation finally saw implementation of its first phase in January 2021. The regulation is intended to create better management and control of excess soil generated during construction excavations. The second phase of the regulation comes into effect in January 2022, with the third and final phase coming into effect in 2025. Although the regulation has no doubt increased some of the immediate costs of handling, storing and disposing of excess soils, in the long term many of the problems cause by the previous unregulated system should be greatly reduced, if not eliminated entirely.

Court rules Ontario government acted unlawfully

In September 2021, the Divisional Court declared the Minister of Municipal Affairs acted unlawfully in failing to comply with the public consultation requirements of Ontario’s Environmental Bill of Rights (EBR) regarding the expansion of ministerial powers related to Ministerial Zoning Orders (MZOs). Both the use of MZOs and the decision attracted a lot of controversy, with developers favouring the expanded powers over the objection of several environmental groups. The decision, while hailed as a victory by the latter, may well have little practical effect in that Section 37 of the EBR specifically protects the validity of any instrument even if it was issued in a manner that did not comply with the Act.

Court rules against tactical decisions made by litigants in contaminated land cases

Continuing a trend seen in in the 2019 decision of Soleimani v Rolland Levesque, 2019 ONSC 619 (Canadian Legal Information Institute, Canlii), Ontario courts once again ruled against what they saw as tactical decisions by a litigant that created the potential for unfairness. In Soleimani, the court ruled that the plaintiff could not rely on Section 5(1)(iv) of the Limitations Act to stop its limitation period from running. Under the unique exemption created by that subsection, the limitation period is suspended if “having regard to the nature of the injury, loss or damage” a proceeding would not be “an appropriate means to seek a remedy”. The court found that Mr Soleimani made a “manifestly tactical decision” to avoid litigation costs in allowing the Ministry of Environment to direct the defendant’s actions for four years before commencing litigation. The court found that the elements required to rely on the Section 5(1)(iv) of the Limitations Act had not been established.

Similarly, in Tre Memovia Developments Ltd. v 1491316 Ontario Inc. (2020 ONSC 1568) the plaintiff developer delayed seeking an order to conduct environmental testing of the neighbour’s property until after it had completed the construction of a new development on its lands. The plaintiff had discovered unexpected contamination when the development started. The court found the plaintiff’s tactical decision to delay the inspection request until after construction was completed resulted in prejudice to the defendant in that the plaintiff’s site had been so disturbed as to render evidence obtained from the inspection to be of limited probative value. Furthermore, the construction had taken away any meaningful opportunity for the defendant to undertake its own testing of the plaintiff’s property. Leave to appeal to the Divisional Court was denied in April 2020.

Both decisions are consistent with a longstanding trend in Ontario civil litigation in which courts look unfavourably on what they consider to be tactical practices by one litigant that lead to a potential for unfairness. Contrast these decisions with Aragon Investments Ltd. v Moloney Electric Inc. (2021 ONSC 4686) issued in June 2021, in which a very late application to conduct an environmental investigation of a non-party’s lands was granted. In Aragon, the matter had already been set down for trial when the plaintiff’s expert, in preparing a responding expert report in accordance with the rules of practice, unexpectedly advised that additional evidence was required which could only be obtained by the additional subsurface investigation. It is clear from the decision that the court accepted that the plaintiffs were caught by surprise by this development and that the timing of the proposed investigation would not result in any unfairness to the defendants.

Quebec

Energy transition in Quebec

On 7 April 2016, the government of Quebec released the 2030 Energy Policy, which sets out Quebec's goal of becoming a North American leader in energy efficiency and renewable energy by 2030. On 16 November 2020, the government unveiled the 2030 Plan for a Green Economy, which prioritises the development of the green hydrogen and bioenergy sector, as well as its action plan for the implementation of the policy covering the 2021–26 period.

The 2030 Energy Policy and its implementation

The policy defines Quebec's energy transition strategy until 2030. Its objectives include promoting a low-carbon economy, making optimal use of Quebec's energy resources and taking full advantage of the potential of energy efficiency.

To achieve these objectives, the government has adopted five targets to be met by 2030, including increasing the share of renewable energy in total energy production by 25% and increasing bioenergy production by 50%. The policy is implemented through amendments to the existing legislative and regulatory framework.

The first implementation action amended the Act respecting the Régie de l'énergie(Quebec’s energy regulator) to introduce the concept of renewable natural gas (RNG), which in turn led to the adoption of a regulation that requires natural gas distributors to deliver a minimum volume of RNG to their customers each year. This volume will gradually increase by 2025, from 1% to 5% of the total volume of natural gas delivered in a year.

The Minister of Energy and Natural Resources is now responsible for ensuring effective governance of the energy transition, innovation and efficiency. 

The 2030 Plan for a Green Economy

The Plan aims to reduce greenhouse gas emissions by 37.5% by 2030, compared to 1990, through the implementation of measures such as increasing the electrification of transportation and buildings, reducing the free allocation of emissions allowances to the industrial sector and increasing the use of other forms of renewable energy.

In addition, the government announced, in early 2021, the allocation of funding to support the development of the green hydrogen industry.

While several renewable hydrogen production projects aimed at adding hydrogen to natural gas are already under development in Quebec, these projects have evolved until now in the absence of standards and regulations adapted to allow the development of this new form of renewable energy. The Quebec legislative and regulatory framework only deals with hydrogen as a hazardous material.

However, on 30 September 2021, the National Assembly adopted Bill 97, which, among other things, amends the Act respecting the Régie de l'énergie to include hydrogen as a "gas from renewable sources" that can be added to traditional natural gas. This legislative change should allow for the accelerated development of the green hydrogen industry in Quebec.

The rapid changes put in place by the Quebec government suggest that renewable energy projects will be accelerated and are intended to facilitate the achievement of the objectives of energy transition and reduction of GHG emissions by 2030.

Contaminated soil management

While the province is working to promote the development of green energy, it is also taking action to regulate the treatment, transportation, reclamation and landfill of contaminated soil.

In June 2021, Quebec adopted the final version of the highly awaited regulation respecting the traceability of excavated contaminated soil. It will be gradually enforced as of 1 November 2021. The adoption of this new regulation aims, among other things, to put an end to the unethical practice of burying contaminated soil excavated in Quebec outside of the province, particularly in Ontario.

This regulation is part of the many changes to environmental law in Quebec that began in 2015 with the tabling of a green paper on the reform of the Environmental Quality Act.

Other measures have also been taken to tighten the framework for contaminated soils. These include amendments to the Land Protection and Rehabilitation Regulation and to the regulation respecting contaminated soil storage and contaminated soil transfer stations , as well as the adoption of the regulation respecting the regulatory scheme applying to activities on the basis of their environmental impact (REAFIE).

Under the latter regulation and in accordance with the EQA, the vast majority of activities involving contaminated soil require an authorisation from the Quebec Minister of the Environment prior to carrying out such activities. The application for an authorisation must include a monitoring programme for soil entering or leaving the facility, station or site.

Based on the modular approach of the REAFIE, the reception of contaminated soils on or under land may be eligible for a declaration of conformity or an exemption allowing a relaxation of the measures governing this activity – however, such an exemption applies under very limited conditions that present a lower risk to the environment.

Conclusion

Canadian environmental law continues to evolve at a rapid pace. Climate change, issues impacting indigenous peoples and day-to-day pollution regulation remain the active focus of most Canadian lawmakers and courts. All signs point to these trends continuing for the foreseeable future.

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Law and Practice

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Lawson Lundell LLP differentiates itself as one of the largest and most experienced law firms in Western Canada. It is a leading, full-service, business law firm, with over 170 lawyers located in offices in Vancouver, Calgary, Kelowna and Yellowknife. The environmental practice group comprises 20 lawyers, who provide their expertise to clients in a wide range of industries, including banking, construction, energy, forestry, government, mining, real estate, transportation and utilities. The team provides advice and assistance to clients in all aspects of environmental law, including commercial transactions, environmental management systems, environmental project assessment, regulatory and licensing requirements, contaminated sites, reclamation, closure and remediation, and environmental offences.

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Miller Thomson LLP is comprised of approximately 500 lawyers, situated in 12 strategically placed offices across Canada. National and multinational businesses must navigate Canada’s environmental laws and regulations, which evolve constantly and vary from province to province. Miller Thomson’s environmental law group is a trusted partner when it comes to managing environmental risk, including undertaking environmental due diligence, ensuring environmental regulatory compliance, preventing and defending against regulatory prosecutions, pursuing or defending environmental civil claims, structuring transactions involving environmental risk, and keeping up with this fast-moving area of the law. Its lawyers include legal planners, negotiators, former regulators and advocates who have the expertise that comes with deep experience and an understanding of the complex issues that face corporate decision-makers, lenders and regulators.

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