Law Times

LAW TIMES / MAY 12/19, 2008 FOCUS Securities Commission's recent staff notice on environmental li- ability reporting is nothing more than a heads-up. However, the staff notice 51-716 issued at the end of February does send a strong sig- nal that environmental liabil- ity disclosures are to be taken as seriously as other financial and market factor disclosures for those traded on the Toronto Stock Exchange. And that's not necessarily a bad thing, says Rick Sutin, se- nior partner at Ogilvy Renault LLP, noting the notice echoes a shift in public thinking around the environment. "Its proactive," he says. "It's better than the OSC coming back to companies and saying, 'You've been doing it all wrong,' [and laying charges]." He says the U.S. is head- OSC signals environmental liability disclosures are serious I Notice echoes shift in public thinking BY IAN HARVEY For Law Times t may seem like it's another day, another reporting re- quirement, but the Ontario because it does not specifically identify how the estimate re- lates to that issuer, and there- fore does not provide meaning- ful information to investors," the bulletin went on. "It's no different from dis- says. "Look at Wal-Mart and its environmental account- ability demands on suppliers, it's because their customers are demanding that change." Gray Taylor, chairman of the cussion of known threats to a company's business plan," Su- tin says. "It's a way of saying we know things are changing, with carbon taxes and Alberta's announcement on reducing greenhouse gases, and we don't know what other forms it will take, so its incumbent on an issuer to start discussions on what they're doing and to be cognizant of the impact and how they are going to plan for the costs associated with it." In some cases, he says, it could be an asset; a forestry operation may find it has valuable carbon credits vested in its properties. "This is happening at all levels; consumers are demand- ing accountability and change around the environment," he ing down the same road and demanding public companies pay more attention to environ- mental issues. The disclosure of environ- mental liability — and an es- timate of what that is in terms of dollars — is another factor to rate the company's viability in the marketplace, since ex- posure to being hit with en- vironmental cleanup orders or an environmental disaster like a spill can wreak havoc on anyone's bottom line. Some companies, obvi- environmental group at Ben- nett Jones LLP, though, is a little more disturbed. "It's a shot across the bow and an indication the OSC is on the same agenda with Alberta," he says. The difficulty, he add, is that if companies can't quantify the risk, they have to describe it as best they can. And that opens up a can of worms many clients are reluc- tant to get into, he says, put- ting them in a choice between risking enforcement or enter- ing into the precarious task or predicting a future that may never come to pass. "We've had disclosure rules for materiality and now the landscape is changing in terms of importance of trying to quan- tify the environmental im- pact on an issuer in terms of liability," says Philippe Tardif at Borden Ladner Gervais LLP. "Really the OSC is just reminding is- suers of the need to provide some quantification num- bers and that those require- ments have always been there, so it's not that the OSC is adopting a brand new approach. On its con- tinuing disclosure moni- toring program it has re- viewed a handful of reports and found that many come up short of the mark." He said it's a prudent thing anyway for compa- nies and notes the Canada Pension Plan and Ontario Municipal Employees Re- tirement System have both instructed their fund man- agers to review environmen- tal and social risks as well as fiscal data when making their decisions. LT PAGE 13 'It's a shot across the bow and an indication the OSC is on the same agenda with Alberta,' says Gray Taylor. A practical guide on regulatory and corporate liability essential for lawyers working in regulatory fields… Help your clients better manage risk and improve due diligence ously, will have a higher risk than others, especially those in mining, for example, or oil and gas development. In the notice the OSC noted: "The management discussion and analysis of some of the TSX- listed issuers we reviewed in- cluded a detailed analysis of the issuer's environmental estimates. For example, in discussing rec- lamation costs, one issuer stated that its operations are subject to environmental laws in the vari- ous countries where it has closed mines and open mines. "The issuer then stated that technical issues made the recla- mation of closed mines uncer- tain, which, together with any future changes in environmental laws, made estimating reclama- tion costs difficult. Nevertheless, the issuer provided a breakdown of its estimated reclamation costs for its closed mines and its open mines, and provided the basis and methodology for mak- ing these estimates. The issuer concluded its analysis by noting that it recognized changes in its estimated reclamation costs im- mediately for closed mines and amortized any changes in its es- timated reclamation costs over the life of its open mines." However, it said, by contrast other TSX-listed issuers used boilerplate phrasing with mini- mal or no analysis, or did not discuss the environmental esti- mates at all." "We are of the view that boil- erplate disclosure is insufficient T Find expert guidance and insightful analysis on: An Act to Amend the Criminal Code (Criminal Liability of Organizations) Get authoritative guidance in dealing with regulators Order your copy today! www.canadalawbook.ca www.lawtimesnews.com ARCHIBALD_Regulatory and Corporate Liability (LT 1-2x4) 1 5/7/08 12:06:30 PM

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