When the Ontario government enacted the Brownfields Statute Law Amendment Act (the "Brownfields Act") in 2001, more certainty was injected into the process of redeveloping properties that have or are perceived to have environmental contamination (brownfield properties) in Ontario.
Under this brownfields regime, parties (including property owners, developers, lenders and receivers) are provided certain protection against regulatory cleanup orders and cost liability. The phase-in of the new brownfields regime was completed in October of 2005.
In an effort to clarify some of the provisions dealing with regulatory liability protections and to further encourage brownfield development, Ontario introduced the Budget Measures and Interim Appropriation Act, 2007 (Bill 187) early last year.
Bill 187 received Royal Assent on May 17, 2007, although not all sections came into force. In order for many of these amendments to take effect, revisions are required to O. Reg. 153/04, the Records of Site Condition regulation.
This article briefly discusses some of the recent changes in the brownfields regulatory landscape as a result of Bill 187, as well as the proposed cleanup standards currently being considered by the Ministry of the Environment (the "Ministry").
Existing Regulatory Protections
The Brownfields Act introduced a regime which allowed for protection against certain cleanup orders upon filing of a Record of Site Condition ("RSC") on the Environmental Site Registry. Unless there is a change in property use to a more sensitive use, such as going from industrial to residential, the filing of an RSC is voluntary and there is no provision requiring that an RSC be filed.
The benefit of filing an RSC, however, is that it protects certain parties from being issued Ministry cleanup orders. This allows eligible parties to move forward with the development of a brownfield site, with protection from facing a cleanup order in the future. The eligible parties include: (a) the person who filed the RSC and any subsequent owners of the property, (b) occupants of the property at any time after the RSC was filed, and (c) persons with charge, management or control of the property at any time after the RSC was filed.
Bill 187 Limits Circumstances When RSC Protection May be Lost
There are certain "reopeners" or circumstances in which RSC protection may be lost. Bill 187 clarifies the circumstances in which immunity is lost. Many of these clarifications limit the potential liability of "innocent parties" who did not cause or contribute to the contamination.
New Process for Filing RSC
In the past, there were significant uncertainties as to when the Ministry would conduct audits on the information submitted for an RSC, leading to uncertainty in the process. Bill 187 introduces a new process for filing an RSC and the possible audit of that RSC. This amendment has not been proclaimed into force and regulations will be required before this new process will take effect.
Under the new process, when an RSC is submitted, the Ministry will conduct an initial review and must be satisfied that all the required documents have been submitted. Once satisfied, the Ministry will issue a notice of receipt.
Other Bill 187 Amendments
Bill 187 eliminates the option of addressing contamination by means of "horizontal severances" (separating ownership of the property at the surface level so the owner of the air rights does not have liability). All contaminants in the land and groundwater that are on, in or under the property and prescribed by the regulations or standards specified in a risk assessment must now be within the standards. This is a significant change because remediating a property using "horizontal severances" was seen as a cost-effective approach. This amendment is now in force.
Bill 187 extends civil liability protection for municipalities and conservation authorities who rely on RSCs in issuing planning approvals and building permits if the RSC is inaccurate. This revision provides additional comfort to municipalities and eliminates the need for peer reviews (having another consultant review the RSC materials), thereby expediting the process and reducing the time municipalities would otherwise take in issuing planning approvals and building permits. This amendment is also now in force.
New Cleanup Standards Being Proposed
In the spring of last year, the Ministry proposed new clean-up standards for assessing and undertaking cleanup work. These are the technical specifications as to the permissible level of contaminants.
Under the proposed guideline, some of the current standards have become more stringent, for example with respect to benzene and trichloroethylene. In other cases, existing standards have become less stringent, as for example, with respect to vinyl chloride.
Once the new standards are finalized, the Ministry intends to introduce a phase-in period (an 18-month time period has been discussed) to permit parties already engaged in existing brownfield redevelopment plans to use the existing standards for the filing of an RSC. The new updated standards are not intended to apply retroactively. Rather, the updated standards are intended to apply only after the phase-in period has passed.
Bill 187 amendments have injected further certainty into the brownfields regulatory regime and the process of obtaining an RSC. Of significance are the amendments that clarify and limit the circumstances in which RSC protection from Ministry cleanup orders may be lost. These amendments are designed to encourage brownfields development and should reduce some of the risk of uncertainty for developers, owners, purchasers and vendors.
While uncertainty exists regarding the new proposed cleanup standards, parties that are currently engaged in remediation should complete their remediation and file the RSC as soon as possible to ensure that they receive the benefit of the existing cleanup standards.
It is also important to note that Bill 187 does not address civil liability related to contamination, including claims associated with off-site migration to neighbouring properties. As a result, it remains important that vendors and purchasers adequately allocate this risk in any agreement of purchase and sale by conducting the necessary environmental due diligence and ensuring that the appropriate indemnities, representations and warranties, and perhaps environmental insurance, are included in the purchase agreement.
Ed: An unabridged version of this article appeared in Real Estate Brief Spring 2008.