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Who Pays When Polluters Can’t?

In theory, Canadians are pretty comfortable with the polluter pay principle, at least when it applies to other people. (We do not seem to feel the same way about carbon taxes.) In theory, the polluter-pay principle ensures that polluters, rather than the public or the immediate victims of pollution, bear the cost of repairing damage done to the natural environment.

As described by the Supreme Court of Canada in Imperial Oil Ltd. v. Quebec (Minister of the Environment):

In fact, that principle has become firmly entrenched in environmental law in Canada. It is found in almost all federal and provincial environmental legislation, as may be seen: Canadian Environmental Protection Act, 1999, S.C. 1999, c. 33; Arctic Waters Pollution Prevention Act, R.S.C. 1985, c. A‑12, ss. 6, 7; Fisheries Act, R.S.C. 1985, c. F‑14, s. 42; Waste Management Act, R.S.B.C. 1996, c. 482, ss. 26.5(1), 27(1), 27.1, 28.2, 28.5; Environment Management Act, R.S.B.C. 1996, c. 118, s. 6(3); Environmental Protection and Enhancement Act, R.S.A. 2000, c. E‑12, ss. 2(i), 112, 113(1), 114(1), 116; Environmental Management and Protection Act, 2002, S.S. 2002, c. E‑10.21, ss. 7, 9, 12, 14, 15, 46; Contaminated Sites Remediation Act, S.M. 1996, c. 40, ss. 1(1)(c)(i), 9(1), 15(1), 17(1), 21(a)); Environmental Protection Act, R.S.O. 1990, c. E.19, ss. 7, 8, 43, 93, 97, 99, 150, 190(1); Pesticides Act, R.S.O. 1990, c. P.11, ss. 29, 30; Ontario Water Resources Act, R.S.O. 1990, c. O.40, ss. 16.1, 32, 84, 91; Crown Forest Sustainability Act, 1994, S.O. 1994, c. 25, s. 56(1); Environment Act, S.N.S. 1994‑95, c. 1, ss. 2(c), 69, 71, 78(2), 88, 89, 90; Environmental Protection Act, S.N.L. 2002, c. E‑14.2, ss. 8(1), 9, 28, 29, Part XIII; Environmental Protection Act, R.S.P.E.I. 1988, c. E‑9, ss. 7, 7.1, 21; Environmental Protection Act, R.S.N.W.T. 1988, c. E‑7, ss. 4(2), 5.1, 6, 7, 16. (See R. Daigneault, “La portée de la nouvelle loi dite ‘du pollueur‑payeur’” (1991), 36 McGill L.J. 1027.) That principle is also recognized at the international level. One of the best examples of that recognition is found in the sixteenth principle of Rio Declaration on Environment and Development, UN Doc. A/Conf. 151/5/Rev. 1 (1992).

In practice, however, the actual polluter is often no longer around. When a choice must be made between doing nothing, paying from the public purse, or imposing the costs on the innocent, regulators are increasingly turning to picking the pockets of the innocent. Is this good public policy?

A classic recent example is Kawartha Lakes (City) v. Ontario (Director, MOE). A home heating oil tank full of furnace oil spilled on private land. Everything about this is regulated by the province, which does not require such tanks to have full secondary containment, and does not require tank owners to have appropriate cleanup insurance. In this case, the homeowners’ insurance ran out before the cleanup was completed, leaving oil migrating through municipal sewers and onto the municipally owned lakefront and Sturgeon Lake. The City was entirely innocent of any wrongdoing, and had nothing to do with the spill. They argue, however, that both the homeowners and their insurers were negligent in creating the spill and in failing to clean it up.

The Ministry of the Environment (MOE) could have cleaned up the spill at municipal expense, and used its own powers to recover the cost from the homeowners. They could even have ordered the City to clean up the spill, but in a way that would have entitled the City to provincial compensation for its efforts. Instead, the MOE ordered the City to clean up the spill at municipal expense.

The City appealed to the Environmental Review Tribunal. They argued that the Order was unfair and contrary to the polluter pays principle, and should have been directed to the homeowners and those responsible for the ineffective cleanup (including the province itself). To make this argument, the City sought to introduce evidence about who was at fault for the environmental damage.

The Tribunal, however, excluded this evidence. They said that this evidence was irrelevant, because everyone knew that the City was innocent. However, they still upheld the order against the City, because the City had failed to show that there was some other effective way to protect the environment, i.e. to ensure proper cleanup of the spill. The City appealed. How could they show that there was another effective way to protect the environment, and thus avoid liability for this expensive order, if they were not permitted to bring evidence about those who were at fault?

Despite this clear and appealing logic, the Ontario Court of Appeal rejected the City’s appeal:

In this case, all agree that the appellant is innocent of any fault for the spill. I agree with the Tribunal and the Divisional Court that evidence that others were at fault for the spill is irrelevant to whether the order against the appellant should be revoked. That order is a no fault order. It is not premised on a finding of fault on the part of the appellant but on the need to serve the environmental protection objective of the legislation.

The tribunal had to determine whether revoking the Director’s order would serve that objective. Deciding whether others are at fault for the spill is of no assistance in answering that question. Evidence of the fault of others says nothing about how the environment would be protected and the legislative objective served if the Director’s order were revoked. Indeed, by inviting the Tribunal into a fault finding exercise, permitting the evidence might even impede answering the question in the timely way required by that legislative objective.

Thus, the MOE was permitted to use its Order powers to download yet more unpredictable costs onto the municipal property tax. The City is attempting to recover its clean up costs in a separate lawsuit against the homeowners, the fuel suppliers, the Province, the Technical Standards and Safety Authority, the remediation contractor, the insurer and insurance adjuster, and the fuel tank manufacturer.

Unfair orders are corrosive to the social contract and sense of justice

Environmental Orders are not, supposedly, punitive. Their aim is to ensure protection of the environment. However, orders that impose huge cleanup costs on the innocent are so instinctively unfair that they can seriously erode the social contract. This is especially so in the many cases where an innocent party has no realistic prospect of compensation, precisely because the original polluter is dead or insolvent.

Imposing cleanup costs on the innocent are something akin to an offence of absolute liability – the orderee may be “morally innocent in every sense” and yet subject to substantial financial losses. As the Supreme Court famously articulated in R. v. Sault Ste. Marie, some claim that absolute liability is justified because it is “efficient” and perhaps will ensure “a high standard of care and attention on the part of those who follow certain pursuits”. In fact, though, imposing absolute liability on the innocent is corrosive to our sense of justice, and unlikely to improve behaviour:

Arguments of greater force are advanced against absolute liability. The most telling is that it violates fundamental principles of penal liability. It also rests upon assumptions which have not been, and cannot be, empirically established. There is no evidence that a higher standard of care results from absolute liability. If a person is already taking every reasonable precautionary measure, is he likely to take additional measures, knowing that however much care he takes, it will not serve as a defence in the event of breach? If he has exercised care and skill, will conviction have a deterrent effect upon him or others? Will the injustice of conviction lead to cynicism and disrespect for the law, on his part and on the part of others? These are among the questions asked. The argument that no stigma attaches does not withstand analysis, for the accused will have suffered loss of time, legal costs, exposure to the processes of the criminal law at trial and, however one may downplay it, the opprobrium of conviction. It is not sufficient to say that the public interest is engaged and, therefore, liability may be imposed without fault…

In determining what should be done in circumstances where the polluter is bankrupt, impecunious, or simply no longer in existence, we should not brush aside concerns of fairness. Imposing cleanup costs on the innocent may get a small number of individual sites cleaned up, but it is bound to do far more harm than good in the long run.

– Dianne Saxe
– Meredith James
Thursday, May 23, 2013

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