Decision Date: March 24, 2014

Panel: Alan Andison

Keywords: Waste Management Act – ss. 26.5(1), 27.1, 27.2, 27.3; remediation order; responsible person; contaminated site; minor contributor; constitutional validity

Subject of the Appeals

Halme’s Auto Service Ltd. (“Halme’s”) and Petro Canada Limited (“Petro Canada”), now known as Suncor Energy Inc. (“Suncor”) filed separate appeals against a remediation order (the “Order”) issued on June 10, 1998, by the Regional Waste Manager (the “Regional Manager”), Vancouver Island Region, Ministry of Environment (the “Ministry”). The Order was issued to Halme’s, Petro Canada, and Chardale Enterprises Ltd. (“Chardale”), and requires remediation on a parcel of land located at 9793 Chemainus Road, Chemainus, British Columbia (the “Site”). The Order directed all named persons to remediate the Site, but did not name the person(s) who contributed most substantially to the Site becoming a contaminated site, nor did it allocate the remediation costs among the named persons. Upon completion of remediation, the Order required the named persons to obtain a certificate of compliance.

In addition, Halme’s and Suncor filed separate appeals against a determination of minor contributor status (the “Determination”) issued on October 30, 1998, by the Regional Manager. The Regional Manager determined that Chardale was a minor contributor in respect of the contamination at the Site, and limited Chardale’s liability for the cost of remediating the Site to 4.5% of the total remediation costs.

All of the appeals were heard together.

Background

The Site was the location of a retail gasoline station from approximately 1954 to 2004. In or about 1958, two underground storage tanks were installed at the Site. Gasoline was stored in the tanks and sold to retail customers. Suncor’s predecessors delivered the gasoline that was stored in the tanks at the Site from the mid-1950’s to May 2004.

Halme’s operated the gasoline station from 1964 to 1993 and was a fee simple owner of the Site from May 1979 to early 1993. During that time, Halme’s and Suncor’s predecessors were parties to various lease and sublease agreements. From 1972 to 1994, Suncor’s predecessors and Halme’s had a Retailer Dealer Sales Agreement, which provided that the gasoline did not become the property of Halme’s until it passed through the pumps immediately before sale to a retail customer. In 1993, Halme’s sold the Site and business thereon to Chardale, and assigned the existing lease and sub-lease agreements to Chardale. Chardale was the owner of the Site in fee simple when the appeals were heard.

In March 1980, a leak from one of the underground storage tanks was discovered. Suncor’s predecessors arranged to replace the two existing underground tanks, and Halme’s agreed to pay for the new tanks only. It was disputed whether, or to what degree, any gasoline contamination and/or contaminated soil was removed or remediated at the time the tanks were replaced. In 1989, a third underground storage tank was installed at the Site.

In 1995, Chardale hired EBA Engineering Consultants Ltd. (“EBA”) to conduct an environmental assessment at the Site. In their report, EBA stated that, based on soil samples, there was an “indication of significant weathered gasoline contamination of the subsoils of the tank nest”. The soil samples showed gasoline contamination above statutory standards.

In April 1996, the three existing underground storage tanks on the Site and associated distribution lines were removed, and new tanks were installed in a new tank nest location on the Site. Seacor Environmental Engineering Ltd. (“Seacor”) was retained by Chardale to conduct investigations and environmental monitoring of the Site. Seacor observed that the removed storage tanks were in “good condition” but the “distribution piping was heavily rusted and pitted”. Soil samples and ground water samples taken by Seacor near the former tank nest and at other locations on the Site exceeded the statutory standards for gasoline contamination.

In December 1996, Chardale leased the Site to a company later known as Chemainus Fuels. Under the lease agreement, Chardale agreed to remediate the Site. However, Chardale did not remediate the Site, and Chemainus Fuels sought a court order that it was entitled to undertake remediation and set-off all reasonable remediation costs against monies payable to Chardale under the lease. In August, 1998, the BC Supreme Court granted the order sought by Chemainus Fuels.

In or about September 1997, at Chardale’s request, the Regional Manager appointed an allocation panel (the “Allocation Panel”) to determine whether Chardale should be granted minor contributor status. The Allocation Panel concluded that Chardale was a “responsible person” under the Act, but was a “minor contributor”, and was responsible for 4.5% of the costs of remediating the Site. The Regional Manager adopted the opinion of the Allocation Panel, when he issued the Determination.

In November 1998, after the Order and Determination had been issued, Chemainus Fuels retained Levelton Engineering Ltd. (“Levelton”) to develop a remediation plan for the Site. The remediation plan received an approval in principle from the Regional Manager, and Levelton commenced remediating the Site. The appeals were held in abeyance while the remediation efforts took place.

In May 2004, Levelton issued a site investigation report, which concluded that approximately 700m3 of contaminated soil remained below a building on the Site, and could not be excavated without removing the building. Levelton had installed oxygen release compounds in the soil under the building, but the compounds did not significantly degrade the zone of contaminated soil. Levelton also identified a plume of contaminated ground water associated with the zone of contaminated soil. The contaminated water was found to be migrating off-site to the adjacent property, where a residential building was located.

In May 2013, the Board was advised that Chemainus Fuels had dissolved in late 2012 or early 2013. At the request of Halme’s and Suncor, the appeals were reactivated in early 2013. The contaminated soil under the building on the Site, and the associated plume of contamination in the ground water, remained an outstanding issue, as this contamination was not remediated by Levelton.

Issues in the Appeals

The submissions of the Appellants gave rise to three primary issues:

1. Whether the Order should be reversed or varied such that Halme’s and/or Petro Canada (now Suncor) should be removed from the Order.
2. Whether the Determination is invalid because section 27.3(3) of the Waste Management Act (the “Act”) (now section 50(3) of the Environmental Management Act) encroaches on the federal government’s exclusive jurisdiction to appoint judges pursuant to section 96 of the Constitution Act, 1867, and therefore, is invalid and of no force or effect as it is beyond the legislative power of the Province.
3. If section 27.3(3) of the Act is valid on a constitutional basis, whether the Determination should be reversed based on errors by the Regional Manager, or changed circumstances after the Determination was issued.

Findings of the Board

Issue 1

The Board found that the Regional Manager properly exercised his discretion in issuing the Order, that there continues to be a need for the Order, and that the parties that were originally named to the Order should remain named in the Order. In making this finding, The Board considered four sub-issues.

First, the Board considered whether Halme’s or Petro Canada should be removed from the Order because they did not contribute most substantially to the Site becoming a contaminated site. Based on the evidence, the Board found that both Appellants contributed most substantially to the Site becoming contaminated. Also, even if only one of the Appellants contributed most substantially, it would still be appropriate to name both of the Appellants to the Order, in the circumstances.

Second, the Board considered whether the Regional Manager failed to take into account private agreements respecting remediation. The Board found that the evidence established that the Regional Manager had considered the relevant private agreements. Further, the Board found that even if the private agreements absolved one of the parties of liability for remediation costs, the agreements could be ignored when naming persons in the Order, to ensure the remediation of the Site. A party could still rely on the private agreements to seek recovery of their remediation costs after remediation was completed.

Third, the Board considered whether the Order contains inadequate reasons or is unworkably vague. The Board found that the Order contains adequate reasons to understand the basis of the Regional Manager’s decision, and that the Order is not unworkably vague.

Fourth, the Board considered whether the requirement in the Order that the responsible persons must seek a certificate of compliance should be removed for lack of jurisdiction. The Board found that the power to require the person(s) named in an Order to apply for a certificate of compliance is within the Regional Manager’s jurisdiction.

Accordingly, the Order was confirmed.

Issue 2

The Board found that section 27.3(3) is constitutionally invalid. In deciding the issue, the Board applied the test set out in Re Residential Tenancies Act, 1979, [1981] 1 S.C.R. 714 [Re Residential Tenancies Act]. This test asks three questions:

1. Does the Power conferred under section 27.3 “broadly conform” to a power or jurisdiction exercised by a superior, district or county court at the time of Confederation?
2. If so, is the power conferred under section 27.3 of the Act a judicial power?
3. If so, is the power either subsidiary or ancillary to a predominantly administrative function or necessarily incidental to such a function?

Concerning the first question, the Board found that the type of dispute that is determined under section 27.3 of the Act broadly conforms to the superior courts’ jurisdiction at the time of Confederation to decide disputes involving a person’s liability, and/or the allocation of liability amongst multiple private parties for damage to land caused by the discharge of harmful substances.

Concerning the second question, the Board found that the power and role of a Regional Manager in making a minor contributor determination is adjudicative or judicial in nature.

Concerning the third question, the Board found that the Regional Manager’s power to make a minor contributor determination under section 27.3 is not a prerequisite for, and is not even tied to, the exercise of powers that seek to achieve the key purpose of the Act, namely, the timely remediation of contaminated sites.

Consequently, based on the Re Residential Tenancies Act test, the Board found that the power conferred on the Regional Manager under section 27.3 is constitutionally invalid. This finding was reinforced by the Board’s finding that section 27.3 breaches the principle of judicial independence as set out in additional case law.

Although the Board found section 27.3 to be constitutionally invalid, the Board determined that it does not have authority to declare the provision invalid. Rather, the Board determined that the appropriate remedy is to read the Act without the inclusion of section 27.3. The result was that the Regional Manager had no statutory authority to make the Determination.

Accordingly, the Determination was found to be void.

Issue 3

Given the Board’s findings under Issue 2, it was unnecessary for the Board to decide Issue 3. However, the Board decided to make findings on Issue 3 in the event that it was wrong on Issue 2.

The Board found that even if section 27.3(3) is valid on a constitutional basis, the Determination should be reversed because it was based on certain findings by the Allocation Panel that were inaccurate or inappropriate in the circumstances. Specifically, some of the Allocation Panel’s conclusions were inconsistent with the findings of the Seacor Report and the Levelton Report, and the Allocation Panel’s formula for assessing the parties’ relative shares of the remediation cost was based on time-sensitive factors, which had since changed.

In the circumstances, the Board found it was appropriate to reverse the Determination.

Conclusion

Accordingly, the appeals of the Order were dismissed, and the appeals of the Determination were allowed.