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March 29, 2010

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PAGE 8 An online resource tool 1.800.263.3269 ntitled-6 1 1/28/10 4:34:45 PM Focus On ENERGY/ENVIRONMENTAL LAW Questioning financial assurance rules BY DARYL-LYNN CARLSON For Law Times the province's own financial assurance requirements fall far short of what a toxic-spill or contaminated-site remediation would actually cost a company to do the work. In Detox Environmental Ltd. v. Director, Ministry of the Envi- ronment, the company success- fully challenged the govern- ment's own rules following an incident involving a small spill of PCBs. But a year later, the parties are still working to re- solve the matter. The mishap occurred when one of the Bowmanville, Ont.- based company's vehicles, which haul PCBs and other biomedical waste, experienced a ruptured disk that was de- tected immediately. The company had an emer- gency crew available to service the vehicle and successfully limited any amount of toxic spillage. During the incident, a road to an industrial area was closed, thereby inconvenienc- ing some traffic. The Ministry of the Envi- ronment then reviewed the company's licensing and certifi- cation and determined it didn't have the requisite financial as- surance of $100,000 required by the province under its due- Tribunal decision challenges regulations A diligence regulations. But the company initiat- recent Environmental Review Tribunal deci- sion has affirmed that ed an appeal of the provin- cial requirements, noting it in fact had $5 million worth of insurance that it argued provided significantly more resources to tap into in the event of any contamination than the $100,000 mini- mum mandated by the gov- ernment in the form of cash, bond or irrevocable letter of credit. "We basically said, 'Here's the insurance,' and the insurance makes a lot more sense than the pres- ent requirements," says Paul Mack, a lawyer with Mack Kisbee & Greer in Oshawa who advised Detox in its dealings with the ministry. During the hearing, a ministry financial-assurance program professional testified that insurance policies are pref- erable for permanent facilities but not for other purposes, such as a vehicle that could cause an incident while in transit. The ministry initially main- tained that vehicle insurance wasn't preferable because it would then have to launch a review of all insurance policies and their terms. But the ministry also ac- knowledged that the $100,000 in financial assurance would indeed fall short of covering the costs incurred due to an incident of spillage or contamination. Get Our Environmental A year after the decision, the parties are still resolving the matter as Detox Environmental tries to satisfy government rules, says Paul Mack. It admitted as well that there have been 15 cases in which companies with the required amount found it wasn't enough when they did have to draw on it for a cleanup. Therefore, it accepted the company's appeal and amend- ed a section of the required cer- tificate of approval that states: "The company shall maintain financial assurances in a form that is acceptable under the [ministry's] guideline F-15, or a successor document, in the amount of $100,000 in a form satisfactory to the [ministry] director for PCB waste and PCB-related waste manage- ment system." Get Our Environmental w Specialistson Your Team! We help you help your clients. Call us. The tribunal also affirmed that insurance can be an ac- ceptable substitution in some circumstances. More than a year later, the situation has still not been en- tirely resolved. Mack says the company is in the process of providing the ministry more de- tails on its insurance policies in order to satisfy the government that its coverage is sufficient and will be available to cover the costs of any contamination. "Now the ball is back in my client's court to go back to the ministry and give more details on the insurance and what . . . the insurance would cover in this kind of situation," he says, noting that the on- going process is costly for his client. While the matter hasn't necessarily led to any sig- nificant changes in the regulatory requirement, it has caught the attention of environmental lawyers. Dianne Saxe of Saxe Law Office has reviewed the case on her blog, while Barry Weintraub, a partner at Rueter Scargall Bennett LLP, says he's sur- prised the ministry even proceeded with the mat- ter because the incident was relatively minor. "The only adverse ef- fect was traffic was closed off in an industrial park," says Weintraub. "So in looking at it, I am still wondering why the Ministry of the Environment chose to prosecute this case. It made no sense from the beginning as it was a trivial incident that shouldn't have resulted in charges." He maintains that the defi- nition of adverse effect within the Environmental Protection Act should be interpreted us- ing strict legal principles if the province is going to lay charges and deem an incident a bona fide offence. Weintraub also points to the Law Specialists*on Your Team! Our team of environmental lawyers includes 5 Environmental Law Specialists* fact that the company found it- self in a position where it had to defend its due diligence. But usually under those circum- stances, a party involved in an incident doesn't have to prove the precise cause — only that it had taken all reasonable mea- sures possible to prevent it. "But the ministry in this case took the position that because the company couldn't prove the precise cause in this incident, then its due-diligence defence must have failed," Weintraub says. "So, while it's not a new le- www.willmsshier.com * Certified by the Law Society of Upper Canada ENVIRONMENT, ENERGY & RESOURCES LAW www.lawtimesnews.com Juli Abouchar 416 862 4836 Doug Petrie 416 862 4835 John Willms 416 862 4821 Donna Shier 416 862 4822 Marc McAree 416 862 4820 gal principle, it is an interest- ing case and one that doesn't necessarily create any new law, but it really does reaffirm prin- ciples that have been out there for quite some time but haven't been put in practice. There are not that many cases that con- sider the due-diligence defence on a detailed basis." Weintraub adds that the com- pany's legal costs have been exor- bitant. "The cost of the defence in this matter is significantly more than any fine the company could have been required to pay to the province." LT Law Times #MS07-06B – 7-7/8" x 4-7/8" March 29, 2010 • Law TiMes

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