Environmental law and practice in Canada: overview

A Q&A guide to environment law in Canada. This Q&A provides a high level overview of environment law in Canada and looks at key practical issues including emissions to air and water, environmental impact assessments, waste, contaminated land, and environmental issues in transactions. In addition, answers to questions can be compared across a number of jurisdictions to assist in the management of cross-border transactions (see Country Q&A Tool).

This Q&A is part of the Practical Law multi-jurisdictional guide to environment. For a full list of jurisdictional Q&As visit www.practicallaw.com/environment-mjg.

Jonathan Kahn, Janice Walton, Catherine Powell and Monika Sawicka, Blake, Cassels & Graydon LLP
Contents

Environmental regulatory framework

1. What are the key pieces of environmental legislation and the regulatory authorities in your jurisdiction?

Canada is a federal system and laws relating to environmental issues are routinely passed by the federal, provincial, territorial and municipal governments. Under the Constitution Act 1867 (Constitution) the federal government's jurisdiction includes power over fisheries, navigation and oceans, as well as inter-provincial and international matters. In addition, the federal government has jurisdiction over criminal law and has relied on this power to enact environmental laws governing, among other things, toxic substances. The Constitution grants the provinces jurisdiction over property and civil rights, local matters, and natural resources. As a practical matter, much of the legislation governing environmental issues occurs at the provincial level. Canada has three northern territories that are under the jurisdiction of federal government, which has granted them certain powers to pass legislation. Municipalities, which are created by provincial statutes, are also typically granted statutory jurisdiction to enact municipal bye-laws relating to various environmental issues.

The primary federal legislation relating to environmental matters are:

  • Canadian Environmental Protection Act 1999 (CEPA).

  • Nuclear Safety and Control Act (NSCA).

  • Fisheries Act.

  • Species at Risk Act (SARA).

  • Transportation of Dangerous Goods Act 1992.

  • Canadian Environmental Assessment Act 2012.

In addition, each of the provinces and territories has enacted various pieces of environmental legislation.

Most provinces have enacted legislation governing, among other things:

  • Water pollution.

  • Contaminated land.

  • Waste management.

  • Air quality.

  • Product stewardship and extended producer responsibility.

  • Environmental assessments.

Provinces have also enacted legislation mirroring federal legislation for transportation of dangerous goods, for example, and, in some cases, endangered species.

In this article, where the subject matter is governed by federal legislation, that law is cited. However, where the matters fall within an area of provincial jurisdiction, one province (generally Ontario or British Columbia) is used as an example. In some cases, other jurisdictions are cited where they deviate materially from the Ontario or British Columbia statutory regimes.

 

Regulatory enforcement

2. To what extent are environmental requirements enforced by regulators in your jurisdiction?

Canada has comprehensive enforcement mechanisms to ensure environmental regulations are adhered to. At the federal, provincial and local level, government agencies employ personnel who conduct regular inspection of activities impacting the environment. All levels of government also have dedicated environmental enforcement personnel who investigate potential violations of legal requirements that arise under legislation, regulations or permits. These officers have similar powers to police officers. They can:

  • Obtain warrants to search premises.

  • Seize property.

  • Question witnesses.

  • Lay charges.

  • Impose fines.

  • Issue tickets.

In some jurisdictions, officers can issue orders to undertake work to mitigate the environmental impact of an activity, or to stop the activity. Additionally, the federal government and some provinces use administrative mechanisms (for example, administrative penalties) as enforcement tools.

Actual enforcement depends, to some extent, on the policies in place and the resources available in a particular jurisdiction. Typically, the level of scrutiny of an entity is dependent on the perceived level of risk of the activities carried out, as well as the entity's past compliance history.

 

Environmental NGOs

3. To what extent are environmental non-governmental organisations (NGOs) and other pressure groups active in your jurisdiction?

Canada has a very active environmental NGO community that:

  • Lobbies federal and provincial governments for changes to environmental laws.

  • Carries out public relations to communicate their message to the public.

  • Organises rallies and protest marches (which can include civil disobedience).

  • Brings court actions to overturn or vary decisions made by regulatory bodies.

  • Intervenes in significant court cases (particularly in the Supreme Court of Canada).

  • Launches private prosecutions.

  • Actively participates in hearings before administrative tribunals (for example, the National Energy Board).

The influence of NGOs can be significant, depending on the state of the economy and the political leanings of the government in power at the time, among other things.

Generally, project proponents will be required to consult with affected parties, including environmental NGOs, as part of an application process. In addition, Canadian courts have determined that both the federal and provincial governments must consult affected aboriginal peoples as part of their decision-making processes.

 

Environmental permits

4. Is there an integrated permitting regime or are there separate environmental regimes for different types of emissions? Can companies apply for a single environmental permit for all activities on a site or do they have to apply for separate permits?

Permission to carry out activities impacting the environment typically involves permits from both federal and provincial governments, and potentially from regional or municipal bodies as well. Additionally, an environmental permit is often required under more than one provincial or federal statute. Some provinces allow for single permits addressing multiple emissions or facilities, while others issue separate permits for each emission and/or facility.

Integrated/separate permitting regime

Some provinces establish a form of integrated permitting in conjunction with the environmental impact assessment (EIA) that occurs before project approval. For example, in British Columbia an entity can elect to have concurrent review and approval of individual permits together with its EIA certificate. For projects not included in the EIA regime, there can be integrated permitting application processes. However, these do not always capture all permits and do not capture federal or local government requirements. (For example, FrontCounter BC is an administrative agency that co-ordinates the applications for project approvals from various departments. However, the final decision-making remains with the individual regulators.) In other provinces, for example, Ontario, there is generally no integration and entities deal with a lot of agencies on a variety of permit applications.

Single/separate permits

Generally, the federal government does not co-ordinate its permitting regimes. However, there are some exceptions for specific industries that are dealt with through administrative boards (the Canadian Nuclear Safety Commission, for example). For industries to which the Canadian Environmental Assessment Act 2012 (CEAA) applies, permitting occurs after the assessment decision is issued. In some cases, an EIA decision sets conditions and these apply to permits issued subsequently. However, subsequent permitting is not bound by the assessment decision and the permits are issued separately through administrative processes. There is no integration of federal permitting processes for proposals to which the CEAA does not apply.

 
5. What is the framework for the integrated permitting regime?
 

Water pollution

6. What is the regulatory regime for water pollution (whether part of an integrated regime or separate)?

Permits and regulator

The federal and provincial governments share jurisdiction over the protection of water. Generally, the federal government can enact legislation to prevent and control pollution to coastal waters (including arctic waters). The provinces can enact legislation to prevent and control pollution to the bodies of water that fall within their boundaries.

The federal government also has jurisdiction over fisheries across the country. However, enforcement of the Fisheries Act can be delegated to provincial authorities.

Prohibited activities

Activities are prohibited under both federal and provincial legislation.

Federal. Generally, the CEPA states that the Environment Minister can issue environmental objectives, and release guidelines and codes of practice to prevent and reduce marine pollution from land-based sources. More specifically, the CEPA prohibits the disposal at sea of wastes and other substances without a permit issued for that purpose.

The Arctic Waters Pollution Prevention Act prohibits the deposit of waste of any type in arctic waters, unless that deposit occurs in conditions related to water quality management and as permitted under the Canada Water Act. The Canada Water Act prohibits the discharge of waste into federal waters, unless an agreement regarding water quality management has been entered into.

The primary purpose of the Fisheries Act is to protect Canada's fisheries as a natural resource by safeguarding both fish and fish habitats. The Fisheries Act is also used to punish those responsible for water-polluting activities. It is an offence for anyone to deposit or permit the deposit of any type of deleterious substance in water frequented by fish or to cause serious harm to fish, without the appropriate approval.

Other federal statutes relevant to the prevention of water pollution are:

  • Navigable Waters Protection Act (NWPA).

  • Oceans Act.

  • Migratory Birds Convention Act 1994 (MBCA).

  • Canada National Marine Conservation Areas Act.

Provincial. Most provinces have adopted comprehensive legislation to protect surface and ground waters. For example, in Ontario, the water pollution prevention regime is principally embodied in the following statutes:

  • Ontario Water Resources Act (OWRA).

  • Nutrient Management Act 2002.

  • Clean Water Act 2006.

  • Safe Drinking Water Act 2002 (SDWA) (together, the latter two statutes are referred to as the Drinking Water Statutes).

The protection of waterways is also enforced through the Lakes and Rivers Improvement Act. This is in addition to the general prohibition against pollution contained in the Environmental Protection Act (EPA).

The OWRA prohibits the discharge of polluting materials into a body of water or its bank, where the discharge can impair the quality of water. It also prohibits taking water in excess of 50,000 litres per day, unless in accordance with a permit issued by the Ministry of the Environment. It also provides that no person can use, operate, establish, alter, extend or replace new or existing sewage works, except under and in accordance with an environmental compliance approval.

The combined effect of the Drinking Water Statutes is to:

  • Establish water source protection areas.

  • Prohibit the operation of drinking water systems without a permit.

  • Impose duties and obligations on the owners and operators of municipal and non-municipal drinking water systems for the quality of the water they provide.

The Nutrient Management Act mainly regulates the use of nutrients and potential impacts on water and watercourses.

Clean-up/compensation

The Ministry of the Environment can:

  • Require persons responsible for pollution (or the innocent owner of contaminated property) to undertake remedial activities (sections 17 and 18, EPA).

  • Effect the remediation work itself and seek compensation from the person who should have remediated the contamination (sections 146, 147 and 150, EPA).

In addition, the Ministry of the Environment can issue preventative orders if necessary to prevent pollution or in the public interest (sections 7 and 8, EPA).

Most water-protection statutes contain similar provisions.

Penalties

Breach of water-protection statutes (and their regulations) can result in orders by the government to stop, prevent or remedy water pollution, and/or monetary fines. Imprisonment can also be imposed on individuals. Imprisonment is an option in a range of convictions but is more typically sought for failure to comply with orders, or in cases of intentional or wanton disregard for the law. Liability can accrue to an individual or to a corporation, as well as to a corporation's directors and officers.

Fines vary with each statute and can reach several millions of dollars per offence. Certain statutes impose a statutory minimum fine. Fines usually increase for second and subsequent convictions, as well as for particularly serious offences.

 

Air pollution

7. What is the regulatory regime for air pollution (whether part of an integrated regime or separate)?

Permits and regulator

Air pollution is largely controlled at the provincial level of government. However, a number of industry-specific air pollution regulations exist under the CEPA (including but not limited to asbestos emissions from asbestos mines and mills, and lead emissions from secondary lead smelters). The federal government is currently working with the provinces on an initiative to develop a comprehensive air management system. Implementation is expected to begin in 2013.

Most provincial governments have enacted legislation governing air pollution. For example, in Ontario, air emissions are regulated under the EPA through a combination of the environmental approval process (where facilities that emit contaminants into the atmosphere must apply for an Environmental Compliance Approval), and specific air contaminant limits determined at "points of impingement", that is, the location at which the highest concentration of a contaminant emitted by a facility is expected to occur.

Prohibited activities

Discharge into the atmosphere of contaminants in excess of the standards set out in the CEPA and the EPA regulations is prohibited, unless the appropriate approvals are obtained. Facilities must comply with the conditions set out in their approvals.

Clean-up/compensation

The Ministry of the Environment can:

  • Require persons responsible for air pollution to undertake remedial activities (section 17, EPA).

  • Effect the remediation work itself and seek compensation for the person who should have remediated the contamination (sections 146, 147 and 150, EPA).

In addition, the Ministry of the Environment can issue preventative orders, where it is necessary to prevent pollution, or in the public interest to do so (section 18, EPA).

Similar powers are contained in the CEPA.

Penalties

Breach of the CEPA or of the EPA (or of their regulations) can result in the governmental agency in charge enforcing an order to stop, prevent or remedy air pollution, and/or monetary fines. In certain instances, imprisonment is also a possibility (see Question 6). Individuals and corporations can be held liable, as well as the directors and officers of a corporation.

Fines can reach several millions of dollars per offence. Fines usually increase for second and subsequent convictions, as well as for particularly serious offences.

 

Climate change, renewable energy and energy efficiency

8. Are there any national targets or legal requirements for reducing greenhouse gas emissions, increasing the use of renewable energy (such as wind power) and/or increasing energy efficiency (for example in buildings and appliances)? Is there a national strategy on climate change, renewable energy and/or energy efficiency?

Canada does not have legislated targets for reduction of greenhouse gas (GHG) emissions, use of renewable energy or increasing energy efficiency. However, the federal government regulates specific emissions through sector-based regulations under the CEPA, for example, for coal-fired power plants. See also Question 7.

Some provinces have instituted targets for specified industries or entities. For example, in BC, the Greenhouse Gas Reduction Targets Act (GGRTA) sets province-wide targets for GHG emissions. While the GGRTA sets targets, it does not impose requirements on the private sector to achieve the stated goals. However, public sector organisations are required to meet targets by specific dates.

 
9. Is your jurisdiction party to the United Nations Framework Convention on Climate Change (UNFCCC) and/or the Kyoto Protocol? How have the requirements under those international agreements been implemented?

Parties to UNFCCC/Kyoto Protocol

Canada is a party to the UNFCCC and submitted an instrument of ratification to the Kyoto Protocol in 2006. In 2007, the federal government began to develop a framework for setting reduction targets, and released guidelines for credits for early action and a domestic offset system. Between 2009 and 2011, the federal government indicated the framework would be redesigned to reflect a North American approach, and previously predicted targets were revised. With the plans for a cap and trade system shelved in the US, Canada also shelved its proposed system indefinitely. In December 2011, the Canadian government formally withdrew from the Kyoto Protocol.

 
10. What, if any, emissions/carbon trading schemes operate in your jurisdiction?

There is currently no national emissions/carbon trading scheme. Several provinces participate in the Western Climate Initiative's cap and trade system, which remains under development. The province of Québec and the state of California have engaged in a cap and trade system at their local level. Alberta has developed an emission reduction programme under the Climate Change and Emissions Management Act, which includes emissions trading systems, mandatory reporting, creation of a fund for implementing new technologies, and programmes and measures for reducing emissions.

 

Environmental impact assessments

11. Are there any requirements to carry out environmental impact assessments (EIAs) for certain types of projects?

Scope

Both the federal and provincial governments have requirements to carry out EIAs for certain proposed projects.

The CEAA triggers a federal assessment for projects, which are included on the Designated Physical Activities Regulations. These regulations focus on major projects. The federal Minister of the Environment also retains a discretionary power to order assessment of projects not included in the regulations. The scope of the environmental factors assessed is limited to environmental issues within federal jurisdiction (such as fisheries, migratory birds and endangered species). However, it also includes a broader scope that includes international or interprovincial trans-boundary effects. There are also specific requirements for review of the effect on aboriginal peoples. The Minister of the Environment can require an EIA to be conducted through a panel review. This process includes an extensive public consultation component, including public hearings. Decisions by a review panel must be confirmed by the federal cabinet.

The federal Minister of the Environment can approve the substitution of the federal EIA process by a provincial process in prescribed circumstances (sections 32 to 37, CEAA). In these cases, the federal government retains final approval authority over the proposed activity, but bases its decision on the outcome of the provincial EIA. British Columbia and the federal government have an agreement on the circumstances in which substitution will occur, and there have been a number of provincial EIAs substituted for the federal EIA in that province. These substitutions have not occurred in any other provinces. Provincial EIA processes can also be declared "equivalent" to the federal CEAA with federal cabinet approval, in which case no federal EIA approval would be required; however, no equivalency orders have been made by the cabinet to date.

Generally, provincial EIA requirements are broader both in the scope of what projects are subject to an assessment and what environmental impacts are assessed. Determining whether an EIA is required is established either through a schedule or regulation to legislation or, in many cases, the discretionary order-making power of the relevant regulatory authority. Typically, the decision makers can also establish the environmental factors to be assessed.

Permits and regulator

The federal EIA regime under CEAA results in a decision to allow or disallow a project. If a project is approved, the decision statement contains conditions that must be followed when the project is built and goes into operation. However, a decision to allow the project does not mean the project is ready to proceed, as the entity still requires permits and approvals from the specific regulatory agencies at all levels of government.

Federal EIAs are carried out by the Canadian Environmental Assessment Agency (Agency). The Agency's role is largely administrative as typically, the entity undertakes the relevant studies. The Agency is responsible for:

  • Gathering the information from entities.

  • Seeking clarifications.

  • Establishing mechanisms for public and aboriginal consultation.

  • Preparing the final reports.

The technical input comes from consultation with various government departments and agencies.

Provincial EIA regimes vary, however, typically the end result of a successful EIA is a certificate that contains conditions required of the entity in constructing and operating a project. In some jurisdictions, concurrent permitting review results in the issuance of permits shortly after the certificate is obtained.

Some provinces have dedicated agencies to carry out EIAs. Other provinces integrate the EIA process with other environmental responsibilities under general environmental statutes. For example, the British Columbia Environmental Assessment Act is administered by the British Columbia Environmental Assessment Agency.

Penalties

Projects included in the CEAA are prohibited from constructing or operating without a decision statement. In addition, there is a prohibition on failing to comply with the conditions set out in a decision statement. The maximum penalty for non-compliance is Can$400,000.

Provincial EIA regimes contain similar prohibitions. Penalties for non-compliance vary between jurisdictions.

 

Waste

12. What is the regulatory regime for waste?

The regulation of waste primarily falls under provincial jurisdiction. However, the federal government regulates waste on federal lands under the CEPA, and legislates in the area of waste export/import.

Permits and regulator

Each province has a general statute that prohibits the introduction of waste into the environment, except as authorised by permits or similar instruments. Waste is referred to in various ways (for example, waste, polluting substances). However, waste generally includes all forms of liquid, solid or gaseous substances. Activities that introduce waste into the environment can be carried out in accordance with a permit, a code of practice or a regulation, depending on the nature of the activity and the province.

Typically, the management of waste regulations is primarily the mandate of provincial ministries of environment. However, various departments that deal with matters related to land use enforce these regulations. Waste management in urban areas is sometimes delegated by the provinces to the municipalities or regional districts.

Prohibited activities

See above, Permits and regulator.

Operator criteria

Some provinces require financial security from operators, especially those engaged in higher risk activities, for example, landfills and sites managing hazardous wastes. Typically, this security forms part of the permit requirements. The form and the amount of the security is subject to the discretion of the regulator approving the activity.

Special rules for certain waste

Each province has specific rules for the management of hazardous substances. For example in British Columbia, the Hazardous Waste Regulation establishes requirements and performance standards for facilities dealing with hazardous wastes, as well as rules for transportation and storage. In addition, many provinces have regulations for specific substances such as polychlorinated biphenyls (PCBs) and asbestos.

Penalties

All federal and provincial environmental management statutes provide for penalties for non-compliance. These take various forms, from fines in small amounts for minor breaches, to large fines issued by the courts. Courts can also order parties to remediate environmental harm or pay the government's costs of that remediation. Penalties are often deposited in special funds for use in environmental projects.

Maximum penalties vary between jurisdictions. Non-compliance with the CEPA can result in fines of up to Can$12 million for large companies that are repeat offenders. Some jurisdictions, such as Ontario, also have minimum fines.

 

Asbestos

13. What is the regulatory regime for asbestos?

Prohibited activities

Asbestos is regulated at the federal and provincial levels of government. The federal government exercises "cradle to grave" jurisdiction over asbestos under the chemical substance regime contained in the CEPA, which classifies asbestos as a toxic substance. This means they control the substance from initial mining, to manufacturing and end of life disposal. Use of asbestos in building materials in Canada is prohibited. However, it is still mined and is regulated under the Asbestos Mines and Mills Release Regulations.

The provincial governments regulate the management of asbestos that exists in buildings primarily through worker's compensation laws, typically within occupational health and safety rules, often referred to as "OSHA". These contain strict requirements for inventory, labelling and, in many cases, removal and disposal of asbestos-containing materials. These include requirements for safety equipment, training and long-term asbestos management programmes. When asbestos is removed from buildings, it is also subject to the strict requirements of provincial and federal hazardous waste transportation and disposal regimes.

Main obligations

Property owners and employers (and those who have property containing asbestos) have strict duties to ensure that asbestos is managed in accordance with both OSHA rules and environmental laws.

Permits and regulator

Permits can be required for removal of asbestos under provincial OSHA rules. The enforcement of OSHA requirements is largely carried out by administrative agencies such as worker's compensation boards. An example is WorkSafe BC, which administers, inspects and investigates asbestos management, and provides workers' compensation when exposure to asbestos occurs. Typically, asbestos is disposed of in hazardous waste facilities that are subject to strict permit requirements under provincial environmental laws. Provincial environmental agencies oversee hazardous waste facilities.

Penalties

Maximum penalties vary between jurisdictions. Both CEPA and provincial statutes contain significant penalties. Administrative tribunals under OSHA statutes are also granted broad powers to order penalties, as well as remedial actions.

 

Contaminated land

14. What is the regulatory regime for contaminated land?

Regulator and legislation

All of the provincial ministries of environment have general powers under environmental protection statutes that can be used to order remediation of contaminated lands. The CEPA provides Environment Canada (the primary federal government regulator over the environment) with similar powers in relation to federal lands. However, the scope of the orders in terms of who can be required to undertake remediation, as well as the level of specificity contained in the legislative instruments vary from province to province. Some provincial statutes contain detailed regimes for the identification, determination and remediation of contaminated sites (British Columbia Environmental Management Act (BC EMA), for example).

Investigation and clean-up

Regulators can require the investigation and clean-up of a contaminated site by issuing a variety of orders including remediation orders against persons responsible for the contamination and, in some provinces, against innocent property owners. For example, in Ontario, orders can be issued in certain circumstances against polluters, owners or persons in control of a contaminant, and owners, past owners or persons who are or were in control of property (including directors and officers of a corporation, regardless of their involvement in the contamination). Standards for investigation and remediation can vary between provinces. However, in recent years a joint committee of the provincial and federal ministers of the environment have been working on developing standards that can be applied across the country.

Penalties

All jurisdictions provide penalties for failing to comply with remediation orders issued by the government. For example, in British Columbia, failure to comply with a remediation order can result in a fine of up to Can$200,000. The court can also require the accused to perform the remediation.

 
15. Who is liable for the clean-up of contaminated land? Can this be excluded?

Liable party

Civil liability for remediation of contaminated sites generally falls under the principles of common law. Evidence of tortious or contractual wrongdoing can therefore be required. However, courts are increasingly inclined to apply "polluter pays" concepts in cases of contaminated land, where possible. Some jurisdictions, for example British Columbia, have "superfund" style legislation, which casts a wide net of responsibility for remediation costs of a contaminated site.

Generally, statutory liability for the remediation of contaminated sites is a matter of provincial jurisdiction. For example, the BC EMA and Contaminated Sites Regulation is modelled on the US Comprehensive Environmental Response, Compensation, and Liability Act 1980 (CERCLA). Persons responsible for remediation include:

  • Current or previous owners or occupiers of a site.

  • Producers or transporters of the substances that caused the contamination.

  • Secured creditors.

Entities may not be liable for the costs of remediation if certain exemptions apply. An entity can reduce its liability if it is a minor contributor to the contamination on the site. Ontario proceeds more often through the order-issuing powers of the Ministry of the Environment (see Question 14).

Owner/occupier liability

See above, Liable party.

Previous owner/occupier liability

See above, Liable party.

Limitation of liability

See above, Liable party.

 
16. Can a lender incur liability for contaminated land and is it common for a lender to incur liability? What steps do lenders commonly take to minimise liability?

Lender liability

Typically, lender liability arises as a matter of provincial law. In Ontario, it is uncommon for a lender to incur liability with respect to contaminated land, unless the lender has control or charge over a pollutant, or permits the discharge of that pollutant to take place. However, a lender can incur liability for contaminated land if it either:

  • Takes over the borrower's operations.

  • Takes possession of the contaminated land and facilities thereon, for example as a result of enforcing a lender's security over the property.

Minimising liability

In Ontario, the EPA contains some provisions for records of site condition (RSC) and brownfield (that is, an area of land or premises that was used previously and is now vacant, derelict or contaminated) regulations, which encourage the revitalisation of contaminated land by establishing acceptable soil and groundwater standards. A voluntary remediation certification system, which includes filing a RSC, allows lenders, bankruptcy trustees and other fiduciaries to deal with contaminated land without assuming liability for historical environmental conditions. To obtain a RSC, various environmental studies must be completed and, in some cases, filed with the Ministry of the Environment for approval.

 
17. Can an individual bring legal action against a polluter, owner or occupier?

In the common law provinces (that is, all Canadian provinces, except for Québec), breach of an environmental statute in and of itself does not give rise to a civil cause of action by an individual.

However, it is possible for an individual to bring a legal action against a polluter, owner or occupier as a result of contamination. Applicable causes of action include:

  • Negligence and trespass: allowing contaminants to migrate on to the claimant's property.

  • Nuisance: interfering with the claimant's reasonable enjoyment of property (due to noise or air pollution, for example).

  • Failure to warn: failing to warn the claimant of the presence of contaminants, and of the potential dangers associated with those contaminants.

 

Environmental liability and asset/share transfers

18. In what circumstances can a buyer inherit pre-acquisition environmental liability in an asset sale/the sale of a company (share sale)?

Asset sale

In asset sales, buyers and sellers can allocate risk according to the terms of the contract. Typically, risk and responsibility for environmental matters is allocated through representations and warranties, indemnification provisions and covenants.

Subject to any contractual allocation of risk or liability, sellers remain liable for breaches of laws before closing the transaction and buyers assume liability for breaches of laws post-closing. Buyers who take over ongoing breaches of laws or discharges step into the problem. Buyers will not (subject to the provisions of the contract) assume liability for damages caused by the seller before closing. However, many provinces make both past and present owners or occupiers of land liable to the government for contamination. In these cases, sellers and buyers can be liable jointly and severally to the government for these claims or orders.

Share sale

Buyers inherit all environmental liabilities of sellers in share sales. This can include regulatory liability, including potential charges or orders under environmental legislation, or civil liability.

In some share sales, buyers obtain an indemnity from the seller under the contract for pre-closing environmental liabilities. However, that operates only between the seller and the buyer and will not affect the buyer's liability to third parties or to the government.

 
19. In what circumstances can a seller retain environmental liability after an asset sale/a share sale?
 
20. Does a seller have to disclose environmental information to the buyer in an asset sale/a share sale?

Asset sale

Generally, there is no requirement for disclosure of environmental information in a sale of property or a business, subject to laws regarding misrepresentation and latent defects. Under the common law, if a seller has knowledge of a defect in the property that is not readily ascertainable to a buyer through the exercise of reasonable due diligence, these latent defects must be disclosed.

Share sale

Publicly held companies must provide information to investors about any material facts, which can include environmental conditions.

In addition, environmental records are routinely reviewed or site investigations routinely undertaken as part of due diligence before purchase of shares or assets (see Question 21).

 
21. Is environmental due diligence common in an asset sale/a share sale?

Scope

Due diligence in environmental matters is routine in both asset and share sales. The scope of the due diligence varies for transactions. However, the following are commonly undertaken:

  • Review of relevant records and prior environmental reports, government filings and material correspondence.

  • Database searches of various environmental registries of information on historic issues and potential sources of contamination in the immediate area of property.

  • Title searches and historic fire insurance records and municipal directories to understand historic risks.

  • Phase I and, in appropriate circumstances, phase II environmental site assessments (ESAs) (which include some of the above activities) to assess potential historic contamination.

  • Environmental compliance audits to assess ongoing compliance with environmental regulations.

Types of assessment

Buyers commonly undertake technical site inspections, conduct interviews with current employees, and take samples to better understand environmental performance and potential environmental liabilities (see above, Scope).

Environmental consultants

Generally, environmental consultants undertake Phase One and Two ESAs and environmental compliance audits. Buyers should consider contractual issues (for example, limitation on liability, limitation on scope) and ability of third parties (for example, lenders and subsequent buyers) to rely on the assessment when negotiating with contractors.

 
22. Are environmental warranties and indemnities usually given and what issues do they usually cover in an asset sale/a share sale?

Generally, environmental representations and warranties are given in both asset and share transactions. The scope and complexity of these warranties and indemnities vary with the complexity of the transaction, the type of business and the negotiating position of the parties.

Typical representations and warranties include:

  • Compliance with environmental laws.

  • Obtaining all necessary environmental permits and compliance.

  • Proper import, use, treatment and disposal of hazardous materials.

  • No outstanding or pending investigations or legal proceedings about environmental matters.

  • No contamination in soil or groundwater above applicable criteria.

  • No specified hazards (for example, underground storage tanks, waste water or waste disposal sites, or specific toxic substances) at the property.

  • Proper maintenance of environmental records.

  • No pending changes to laws that can materially affect the business.

Indemnification clauses are negotiated on a transaction-by-transaction basis. However, generally, the following are discussed:

  • Whether there are limitations to the indemnity either in time or amount.

  • Whether there are specific types of claims for which the indemnity will not apply.

  • Whether the indemnity covers only third party and government claims or also covers voluntary clean-up of impacted properties. In this case, whether the seller or buyer can control the clean-up is also often considered.

 
23. Are there usually limits on environmental warranties and indemnities?
 

Reporting and auditing

24. Do regulators keep public registers of environmental information? What is the procedure for a third party to search those registers?

Public registers and third party procedures

Environment Canada maintains registries of information regarding regulations, orders, permits and other activities under various federal environmental statutes, including the CEPA, CEAA and SARA. These registries are available on the internet (for example, the CEPA register is available at www.ec.gc.ca/lcpe-cepa/).

Most provinces also maintain registries on various environmental topics, typically available on the internet. Some can also require registration and fees. For example, in British Columbia the public can view the Site Registry for a fee (the registry contains information obtained by the provincial government on the environmental condition of lands).

The federal government and a number of provinces also maintain publicly available databases that list environmental enforcement activities, including the identity of entities found guilty of environmental offences subject to administrative penalties and fines.

 
25. Do companies have to carry out environmental auditing? Do companies have to report information to the regulators and the public about environmental performance?

Environmental auditing

In Canada, there is no broad or general requirement that companies carry out environmental auditing or report information about environmental performance.

Reporting requirements

Generally, approvals issued under provincial environmental protection legislation contain conditions that require:

  • Keeping certain records.

  • Undertaking certain measurements of environmental performance indicators at regular intervals.

In addition, certain regulations impose auditing and reporting requirements on companies in certain circumstances (for example, in Ontario for hazardous waste management or toxic substances reduction).

 
26. Do companies have to report information to the regulators and the public about environmental incidents (such as water pollution and soil contamination)?

Generally, if a spill, accidental discharge of a contaminant or other environmental incident occurs, companies (together with any person responsible for the incident) must report the incident to the appropriate governmental agency.

In Ontario, everyone who discharges a contaminant or causes or permits the discharge of a contaminant into the environment must notify the Ministry of the Environment (section 15, EPA). In addition, any person having control of a pollutant that is spilled and every person who spills or causes or permits a spill of a pollutant, must notify the Ministry of the Environment immediately, in addition to the municipality where the spill occurred, among other entities (section 92, EPA).

 
27. What access powers do environmental regulators have to access a company?

The powers of inspection and investigation granted to governmental agencies are very broad both at federal and provincial levels.

During an inspection in Ontario an enforcement officer can, among other things (Part XV, EPA):

  • Take samples for analysis.

  • Conduct tests or take measurements.

  • Examine, record or copy any document or data, in any form.

  • Require the production of any document or data, in any form as required under the EPA.

  • Make reasonable inquiries of any person, orally or in writing.

Canadian courts draw a distinction between inspections that are carried out for the purpose of securing compliance with a regulatory statute, investigations that are done for the purpose of determining whether there has been a breach of a statute, and prosecuting for that breach. If the enforcement officer is conducting an investigation his powers are restricted and the person being investigated can:

  • Require the enforcement officer to obtain a search warrant before conducting the search.

  • Insist on the presence of legal counsel.

  • Refuse to answer questions.

In Ontario, as in many provinces, it is an offence to hinder or obstruct an enforcement officer in the performance of his duties (section 184, EPA).

 

Environmental insurance

28. What types of insurance cover are available for environmental damage or liability and what risks are usually covered? How easy is it to obtain environmental insurance and is it common in practice?

Types of insurance and risk

A range of environmental insurance products are available in Canada. The most common is pollution legal liability coverage generally available for new conditions and unknown pre-existing conditions. This coverage is sometimes used on brownfields development sites.

Pollution liability insurance is also available for contractors where their general policies do not provide coverage.

Clean-up cost cap insurance is available to cover remediation cost overruns and provide certainty of clean-up costs. However, it is becoming less common and difficult to obtain.

Directors' and officers' insurance is available to cover the costs of government-ordered environmental remediation.

 

Environmental tax

29. What are the main environmental taxes in your jurisdiction?

Environmental taxes are not common in Canada. However, there are some exceptions including for example British Columbia, which taxes purchases of fossil fuels under its carbon tax.

The federal tax code does not generally provide tax breaks for environmental activities. However, there are some special programmes periodically applied, for example rebates for upgrades to higher efficiency equipment or transit use.

Tax liability

The British Columbia carbon tax is paid by all consumers of fossil fuels (individuals or companies). However, there are some exceptions for particular industries (for example, fuel that is used as a raw material in an industrial process to produce or upgrade another fuel or manufacture another substance).

In addition, both the federal government and several provinces have imposed a variety of taxes on goods (for example, tires and fuel). Product stewardship programmes (for example, programmes for reusing and recycling consumer goods) also impose fees on importers or brand owners of a variety of wastes and hazardous products.

Tax rates

The rates for carbon tax in British Columbia are set out in a schedule to the Carbon Tax Act 2008, and vary between types of fuel. The rate escalated annually between its initial year of 2008 and 2012, at which point the rate became fixed. Currently, the rates range from 2.94 cents per litre for ethane to 11.01 cents for petroleum coke. The petrol tax rate is currently 6.67 cents per litre. Funds from the carbon tax are directed to the Pacific Carbon Trust, which allocates funds for projects that provide carbon offsets.

 

Reform

30. What proposals are there for significant reform (changes) of environmental law in your jurisdiction?

The federal government re-wrote the two most significant federal pieces of environmental legislation (CEAA and the Fisheries Act) in legislation that came into force in 2012, with additional amendments in 2013. The government also announced that it intends to review the federal SARA. However, no draft legislation has been released to date.

 

The regulatory authorities

Environment Canada

Main activities. Administers federal environmental legislation such as CEPA, SARA and MBCA. It also provides scientific and technical information about the environment and is Canada's primary weather service.

W www.ec.gc.ca

Canadian Environmental Assessment Agency

Main activities. Administers CEAA.

W www.ceaa.gc.ca

Fisheries and Oceans Canada

Main activities. Administers the Fisheries Act and the Oceans Act and aquatic species under SARA.

W www.dfo-mpo.gc.ca



Online resources

W www.canlii.org

Description. Canlii contains statutes and regulations from every jurisdiction in Canada in addition to access to Court Judgments and tribunal decisions. Canlii obtains information from, for example, the Department of Justice laws site and similar provincial sources.

W http://canada.justice.gc.ca (www.practicallaw.com/2-106-4146)

Description. The Department of Justice provides a "Laws" website that sets out the official consolidation of federal statutes and regulations.



Contributor profiles

Jonathan W Kahn

Blake, Cassels & Graydon LLP

T +416 863 3868
F +416 863 2653
E jonathan.kahn@blakes.com
W www.blakes.com

Professional qualifications. Canada, Ontario, 1988

Areas of practice. Environmental.

Representative experience

  • Advising a major Ontario municipality on all aspects of its waste management planning, including environmental assessment and other permitting requirements.
  • Providing permitting and environmental assessment advice, and successfully resisting a judicial review application, for one of Ontario's largest wind energy projects.
  • Acting for the First Nation Chiefs of Ontario at the Walkerton Inquiry into the Safety of Ontario's Drinking Water.
  • Acting for Holcim (Canada) Inc in its successful Consolidated Environmental Review Tribunal/Ontario Municipal Board hearing to expand one of Canada's largest dolomite quarries, and to create and maintain wetlands and lakes in the rehabilitated quarry.
  • Acting for both lenders and several property owners in respect of redevelopment proposals in the Toronto Port lands.
  • Acting for the proponent of a significant mining project in Northern Canada including on environmental assessment issues and a judicial review.
  • Advising the buyer of a steel manufacturer with several major steel mills on legacy environmental issues.
  • Acting for a waste management operator faced with 75 charges under Ontario's Environmental Protection Act.

Janice Walton

Blake, Cassels & Graydon LLP

T +604 631 3354
F +604 631 3309
E janice.walton@blakes.com
W www.blakes.com

Professional qualifications. Canada, British Columbia, 1999

Areas of practice. Environmental; forestry; oil and gas; endangered species.

Representative experience

  • Counsel to several major resource-based industries in British Columbia and Alberta in defence and resolution of regulatory charges.
  • Counsel on a judicial review of federal environmental assessment and permitting requirements under the CEAA, the Fisheries Act 1985 and SARA.
  • Leading counsel in a successful appeal of a decision not to issue a permit for a road potentially impacting endangered species before the British Columbia Environmental Appeal.
  • Developing submissions to the House of Commons Committee on Environment and Sustainability regarding review and amendment to SARA and the CEAA on behalf of several national industry associations.
  • Developing an integrated regulatory strategy for endangered species for a major hydropower development project.
  • Counsel in a successful defence of a challenge of permitting of landfill at a pulp and paper mill before the British Columbia Environmental Appeal Board.
  • Advising a construction company on environmental regulatory compliance for redevelopment of major highways and construction of new bridges.

Catherine Powell

Blake, Cassels & Graydon LLP

T +416 863 4010
F +416 863 2653
E catherine.powell@blakes.com
W www.blakes.com

Professional qualifications. Canada, Ontario, 2007

Areas of practice. Environmental; litigation; dispute resolution.

Representative experience

  • Co-counsel for a proponent in a lengthy and complex hearing before a joint board of the Ontario Municipal Board and Environmental Review Tribunal, involving a wide range of environmental and planning issues, and featuring numerous experts.
  • Representing a plaintiff in a civil action related to the contamination of land by an industrial defendant.
  • Representing permit and environmental compliance approval holders with respect to ongoing environmental management issues.
  • Representing a defendant in prosecutions by the Ministry of the Environment and the Ministry of Natural Resources in relation to alleged breaches of the OWRA and the Lakes and Rivers Improvement Act.
  • Representing a provincial government in an insolvency and restructuring matter involving environmental law issues.
  • Representing a consumers' organisation in a constitutional challenge to portions of the Green Energy Act.
  • Advising lenders in renewable energy projects transactions with respect to environmental issues.
  • Advising vendors and buyers in various asset and share sale transactions with respect to environmental issues and liability.

Monika Sawicka

Blake, Cassels & Graydon LLP

T +604 631 4182
F +604 631 3309
E monika.sawicka@blakes.com
W www.blakes.com

Professional qualifications. Canada, British Columbia, 2010

Areas of practice. Environmental; aboriginal law; energy; business.

Representative experience

  • Due diligence and assisting clients on project development issues, including environmental assessments and obtaining permits.
  • Assisting clients on various regulatory compliance matters.
  • Representing corporations in environmental civil disputes and quasi-criminal proceedings.

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