Limitations and Undiscovered Historical Contamination
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It’s Not Dead, it’s Resting: Limitations and Undiscovered Historical Contamination March 31, 2017 Robert K. Omura The seemingly inexorable march is on. Following recent historical contamination cases such as Canada (Attorney General) v. MacQueen, 2013 NSCA 143 and Windsor v Canadian Pacific Railway Ltd., 2014 ABCA 108, it has become slightly more difficult to litigate historical contamination cases.1 In the latest case, Brookfield Residential (Alberta) LP (Carma Developers LP) v Imperial Oil Limited, 2017 ABQB 218, considering the extended limitations period provisions of the Environmental Protection and Enhancement Act, R.S.A. 2000, c. E-12 (“EPEA”), the duly diligent purchaser is left with no recourse against a solvent, “possible” polluter (the other “possible” polluters having disappeared from the jurisdiction) because of the prejudice to the historic “possible” polluter. The Facts The Plaintiff, Brookfield, was a residential developer in Edmonton. One of the defendants, Imperial Oil Limited, operated an oil well, battery and sump on lands owned by the defendant, Larry C. M. Darling, between 1949 and either 1950 or 1954. The well produced crude oil between 1950 and 1957. For some period, Imperial had a salt water storage tank on the site. The well license was assigned to Bay Petroleum in 1954, before passing to Bay’s successor, Tenneco, and then to Mr. Darling in 1961. From 1958 the well was used for salt water disposal. In 1961, Tenneco contracted with Mr. Darling to decommission, remove, and abandon the well.2 The land was later sold to William B. 1 It should be noted that MacQueen and Windsor were class proceedings which add a slight wrinkle to historic contamination cases as discoverability is an individual issue. 2 Tenneco is a Fortune 500 corporation operating in the U.S. It acquired Bay Petroleum, along with Sterling Oil and Del-Rey Petroleum in the 1950s, but appears to have divested itself of its petroleum assets in the 1990s. This left Imperial as the only possible polluter left in the jurisdiction. 2 McEachren who sold it to Robert and Ernest Hiller in 1965. A Reclamation Certificate was issued by the Province in 1968.3 Parts of the land were farmed by the Hillers until 2014. In the fall of 2003, Carma Developers Ltd., the predecessor of Brookfield Residential (Alberta) LP, proposed to purchase the land from the Hillers. As a part of their due diligence, Brookfield hired Hoggan Engineering and Testing (1980) Ltd. to conduct a Phase I Environmental Site Assessment.4 Important extracts from the Hoggan Phase I ESA are cited by Graesser J. as follows: [14] The Hoggan Report, issued November 19, 2003, concluded at p 9: There is no documentation from regulatory/authoritative bodies encountered that indicate land use or the storage of substances on site which would be conducive to site contamination. As a result, the overall potential for environmental contamination at this site is considered to be low, and no further investigation is considered to be necessary. [15} The Executive Summary similarly stated at page 1: The ESA Phase I research into available information revealed no significant environmental concerns with respect to the subject property. No further environmental assessment work is considered necessary for the subject property at the time of this report. [16] Within the Hoggan Report there were the following comments: In the 1950 air photo…in the northwest portion of the study site, some site disturbance is noted. The nature of the site disturbance is unknown, although in the photo it appears that several small storage buildings are present. Approximately 200 meters north of this western portion of the study site, a cleared area with an associated access road can be seen. The configuration of this development is consistent with an oil lease or some similar activity (pp 4-5) There were no areas of significant environmental concern noted in the air photos reviewed. In addition, the disturbance to the soil noted in the northwest portion of the site in the 1950 air photo is noteworthy. (p 5) One other activity with a slight environmental concern is the disturbance to the soil noted in the northwest portion of the site in the 1950 air photo, which was not noted previously in the 1920 air photo, or in any other subsequent air photo. No explanation for this soil disturbance or the presence of small 3 Alberta, Reclamation Certificate No. 6284, August 3, 1968. The Reclamation Certificate is available for review from ESAR. 4 The Phase I ESA was unavailable for review from ESAR. 3 outbuildings is available at this time. However, these activities may be related to the possible oil lease activities which appear to be going on north of the study site in the 1950 air photo. Another possibility is that a second farm yard existed during the period between the 1920 and 1950 air photos. (pp 8-9) On the strength of the Hoggan Phase I ESA, Brookfield offered to purchase the land. The Hillers accepted the offer on February 10, 2004. In 2006, Brookfield hired Stantec Consulting Ltd. to assist in the development of the neighbourhood plan. Stantec performed a Phase I ESA which identified an abandoned oil well and a dry abandoned well on adjacent lands and a water disposal well onsite.5 Stantec recommended that the former wells be located and further investigated because of the possibility of historic contamination. Two years later, Brookfield hired the defendant, Ecomark Ltd., to perform a Phase II ESA.6 One test well indicated the presence of petroleum hydrocarbons requiring “further delineation” by AEP. Ecomark performed further soil tests, concluding in a follow up report that there were no exceedances for hydrocarbons or boron,7 the results from the initial report were “anomalous”, and “no further testing was required” (Brookfield, para. 23). Throughout 2008 to 2010 Brookfield prepared the land for residential development. Strong and persistent hydrocarbon odours were reported, causing Stantec to conduct further soil tests. The soil tests revealed exceedances for hydrocarbons, and later results showed salt contamination. The Claim Against the Solvent, “Possible” Polluter (Imperial Oil Limited) Arguing the Limitations Act, R.S.A. 2000, c. L-12, Imperial moved for summary dismissal of Brookfield’s claim against them. Brookfield applied for an extension of the limitation period under s. 218 of EPEA. 5 The Phase I ESA was unavailable for review from ESAR. 6 The Phase II ESA was unavailable for review from ESAR. 7 This must refer to Tier 1 (Residential) Guidelines for soil samples. There is no indication whether groundwater samples were obtained. See Alberta Environment and Parks, Alberta Tier 1 Soil and Groundwater Remediation Guidelines (Edmonton: Alberta Environment and Parks, 2016). 4 Section 218 permits the court to extend the limitation period for adverse effects resulting from a substance release. Section 218 reads as follows: 218(1) A judge of the Court of Queen’s Bench may, on application, extend a limitation period provided by a law in force in Alberta for the commencement of a civil proceeding where the basis for the proceeding is an alleged adverse effect resulting from the alleged release of a substance into the environment. (2) An application under subsection (1) may be made before or after the expiry of the limitation period. (3) In considering an application under subsection (1), the judge shall consider the following factors, where information is available: (a) when the alleged adverse effect occurred; (b) whether the alleged adverse effect ought to have been discovered by the claimant had the claimant exercised due diligence in ascertaining the presence of the alleged adverse effect, and whether the claimant exercised such due diligence; (c) whether extending the limitation period would prejudice the proposed defendant’s ability to maintain a defence to the claim on the merits; (d) any other criteria the court considers to be relevant. In support of its position, Brookfield raised two cases on s. 218: Wainwright Equipment Rentals Ltd v Imperial Oil Ltd, 2003 ABQB 898 and Lakeview Village Professional Centre Corp v Suncor Energy Inc, 2016 ABQB 288. Two other s. 218 cases were brought to the attention of the Court by Imperial: Jager Industries Inc. v. Canadian Occidental Petroleum Ltd., 2001 ABQB 182 and Floate v Gas Plus Inc, 2015 ABQB 725. In Jager, the Plaintiff bought 50% of the lands in 1979 and the other 50% in 1990. CanOxy operated a sour gas well on the lands from 1958 to 1978 but had reclaimed the well when they abandoned it. Subsurface testing in the 1980’s revealed elevated levels of soluble sulphate and corrosivity. In 1991, CanOxy agreed to lower the wellhead and remove pipelines if Jager agreed to remove the first 25 m³ of contaminated soil; CanOxy would be responsible for any additional contamination. A total of 50,000 m³ of contaminated soil were removed. In 1996, Jager sent CanOxy the bill which CanOxy promptly refused to pay. In 1998 Jager brought a claim against CanOxy. CanOxy argued that Jager’s claim was statute-barred as out of time under the relevant limitations periods. Jager sought 5 relief under s. 206.1 (now s. 218) of EPEA. Kent J. found that Jager had acted reasonably. Upon discovering hydrocarbon odours, Jager immediately notified CanOxy. From 1992 to 1995, Jager did significant investigation to determine the full extent of the contamination. In July, 1996, Jager was advised that the soil had to be removed and the land remediated. Throughout its investigation Jager kept CanOxy informed of its activities, so there was no prejudice to CanOxy. On the three factors in s. 206.1, the Court was unable to make any determination on when the adverse effect occurred, whether Jager was duly diligent, whether CanOxy was prejudiced, or any other factor such as the nature of the adverse effect.