I was recently reading an article, “Contaminated Site Update: Rough And Ready Allocation Of Liability” (Nicholas R. Hughes, McCarthy Tétrault, LLP), that discussed innocent-purchaser exemption under British Columbia’s (BC) Environmental Management Act (EMA).
The article outlines the necessary actions a purchaser must take to qualify for the innocent-purchaser exemption, including conducting “all appropriate inquires.”
The language in the EMA sounds very familiar. In many ways, it mirrors language in the United States Comprehensive Environmental Response and Liability Act, or CERCLA.
What that legislation did in the US is encourage redevelopment of “contaminated” sites by providing liability protection for purchasers (assuming they conduct all appropriate inquiries).
How do the US approach and the BC approach differ from that of Ontario? There are some similarities and some (significant) differences.
Environmental Site Assessment in Ontario
Conducting environmental site assessment in Canada or the US has many similarities, including the use of Phase I Environmental Site Assessment (ESA) standards. In Canada, the Canadian Standards Association (CSA) has an established standard for a Phase I ESA – CSA Z768-01. This is similar (different search radii) to the US version ASTM 1527-13. Similarly, Canada has a Phase II ESA (CSA – Z769-00).
In Ontario, you will have to do additional tasks beyond those outlined in the CSA Phase I ESA if you are also seeking to complete a Records of Site Condition in compliance with O. Reg. 153/04.
Records of Site Condition
The Records of Site Condition (RSC) is completed to determine if the site meets acceptable standards for the specified land use. The RSC is filed with the Ministry of Environment and Climate Change (MOECC) and must be completed by a Qualified Person (QP).
RSC Phase One: Must be conducted by a QP; the study area is a minimum of 250 metres from the boundaries of the property; the database search is more extensive; and the aerial photographs go back to the first development at the property, if possible.
CSA Phase I ESA: A QP is not required, only a “competent person”; the study area is properties adjacent to the site; the regulatory search is less extensive; and the aerial photographs don’t necessarily go back to the first development of the property.
If you are changing your land use to a more sensitive land use (e.g., industrial to residential), you would be required to submit a Records of Site Condition. CSA-compliant Phase I ESAs are typically acceptable for transactions where land use is not changing (i.e., industrial to industrial)
The current legislation in Ontario does not have the same innocent landowner defence as BC does (or the US). In fact, as we have pointed out previously, we, along with others, believe that innocent landowners should have better protection put in place (see “Innocence” When It Comes to Environmental Liability Means Nothing).
So where does all of this leave you if you are buying or selling property in Ontario? First, clearly define your objectives so you know which guidance to follow (CSA or RSC). Second, understand that your liability is still a potentially-open issue, regardless of which standard you follow. Third, consult with your legal counsel so they can help you with developing the best legal strategy in your transaction.
If you have questions about environmental assessments, please feel free to contact me (cpare@dragun.com) at 519-979-7300, ext. 114.