Many industries are increasingly concerned with predicting the damage that climate change will cause to people, business and the environment. And businesses are asking themselves a related question: what can be done to mitigate climate change-related liability?
The first wave of litigation regarding alleged climate-related damages is already under way. Currently, for plaintiffs pursuing climate change-related claims against private entities, only the most novel legal theories are in play. But the severity of recent hurricane activity in the southeastern United States and fires in California are being attributed by some commentators to the impacts of climate change. As such events occur, we will see more lawsuits alleging climate change liabilities, and we will see an array of legal theories develop as well.
This is the first of several articles in which we will discuss key aspects of the legal landscape for climate change law and address notable examples of current matters in that landscape. This article uses a recent incident at a fish farm to shine a light on emerging concerns and strategies for limiting legal risk from climate-related damages.
Farmed salmon escape: a cautionary tale
Late last month, state and tribal authorities in the Pacific Northwest declared a state of emergency when up to 305,000 farmed Atlantic salmon escaped into the Pacific waters off the coast of Washington state after a structural failure occurred in the farm's containment system. That area contains sensitive wild Pacific salmon fisheries. Some Atlantic salmon were subsequently caught a distance away in American and Canadian waters. The net pens were owned and operated by a Canadian aquaculture company incorporated in Nova Scotia but operating in Washington state.
The incident poses acute cleanup challenges, but it also illustrates potential liability issues arising from environmental accidents of the type that rising sea levels and more violent weather events may cause. The incident may not directly implicate climate change – the failure appears to arise from strong tidal flows and aging equipment. But it provides a cautionary tale and an opportunity for companies in environmentally intensive industries to consider options for mitigating liability, especially as climate change stands to increase the likelihood and magnitude of such incidents.
The salmons' escape demonstrates two key factors: first, environmental accidents caused by natural conditions can raise novel legal questions and create uncertainty about how best to respond; second, some of these accidents will inevitably play out across borders. Furthermore, in such incidents, risks may arise across a wide range of potential liabilities, including government prosecution for statutory and regulatory violations, as well as more commonplace tort and contractual claims.
Some regulatory issues
Different governments treat Atlantic salmon differently, creating a patchwork of potential issues for the farm owner. Canada does not currently list Atlantic salmon introduced by farmers as either an "invasive" or "controlled" species under federal or provincial law. But Washington state and Alaska designate Atlantic salmon found in their waters as "invasive," which provides a basis for state enforcement actions.
The farm owner could also possibly face enforcement in Canada under the Fisheries Act, RSC 1985, c. F-24 or the Canadian Environmental Protection Act, 1999 (SC 1999, c. 33), which could support prosecution and penalties under the Environmental Enforcement Act, SC 2009, c. 14. In the United States, responsible parties may be liable for harm caused to Pacific salmon populations under the Endangered Species Act, (16 U.S.C.A. § 154033), the Resource Conservation and Recovery Act (42 USCA § 6972), the Comprehensive Environmental Response, Compensation, and Liability Act (42 USCA § 9659), or the Clean Water Act, ((33 U.S.C. §1251), and for violations of aquaculture regulations and other state laws.
Tort claims also a possibility
Aside from regulatory enforcement, following an event like this responsible parties could face tort claims. If the escaped salmon were to cause tangible damage to or interfere with the enjoyment of private property, then affected third-party owners could bring claims for private nuisance, negligence and trespass. For instance, the escaped salmon or fish-farm effluent could damage or interfere with the use of a private shoreline or dock – or even another fish farm. Such claims could be readily analogized to land-based farming incidents like pesticide drift or livestock escapes.
Even where no private property is damaged, public nuisance, negligence or trespass claims can arise from damage or interference with public lands. In British Columbia v Canadian Forest Products Ltd., 2004 SCC 38, the Supreme Court of Canada recognized the provincial and federal crown's ability to seek damages for harm to the environment where a third party causes environmental degradation or loss of ecological amenities. This is additional to the Crown's pre-existing common law remedy of injunctive relief.
US courts also recognize the state's right to recover for environmental damage under parens patriae (the doctrine giving the state standing to sue when its wildlife is injured) and the doctrine of public trust (see, eg, State, Department of Environmental Protection v Jersey Central Power & Light co., 336 A 2d 750 (US NJ Sup Ct 1973)). But state governments are not the only entities that see themselves as stewards of the environment: Wild Fish Conservancy Northwest, a Washington state conservation group has advised if its intent to sue the releasing aquaculture company for discharging the salmon and other waste.
Environmental incidents like this may also have novel impacts on business contracts, particularly where force majeure is invoked. A force majeure clause relieves a party of contractual obligations in certain circumstances, particularly when environmental conditions (often termed "acts of God") render performance impossible. As climate change increases exposure to extreme environmental events, contracting parties will be more likely to invoke force majeure clauses to avoid liability where conditions outside their control have intervened.For instance, the aquaculture company that owns the fish farm alleged that strong tides coinciding with the recent solar eclipse were the true culprit behind the failure of its nets. This allegation has been dismissed by experts, but, had it been substantiated, the company might have declared a force majeure event to excuse a subsequent failure to deliver fish to a purchaser, or to purchase contracted goods itself.
Similarly, severe flooding could impede the production or transportation of goods, triggering force majeure clauses throughout the chain of commerce.
Environmental and climate events may also pose problems for contracting parties on the front end, when negotiating and drafting contract obligations. Boilerplate force majeure clauses often require the triggering event to be both unforeseen and impossible to prevent. But whether climate change related events are unforeseen, and how far parties must go to avoid such events and perform under their contracts, are legal questions that are only starting to be asked. Contracting businesses are well advised to consider such questions when negotiating terms, rather than waiting until a dispute arises.
These are only examples, but they illustrate the breadth of new risks businesses may face arising from incidents caused by environmental events that have been aggravated by climate trends. The focus in this alert has been on a fish farm incident, but these larger trends already affect businesses across nearly all sectors. Businesses would be wise to consider what steps they can take to limit their exposure.
Prudent business strategy would include carefully assessing with counsel the kinds of claims that may arise from your business activities and considering whether to acquire insurance specifically to protect the business in such cases. Another step to consider: be aware of technical measures that, when properly implemented, could safeguard against incidents. For instance, preliminary investigations suggested that the fish farm's nets may have been overdue for replacement. When drafting contract terms, contemplate how severe environmental events and climate change can affect your business operations and ability to perform. Consider abandoning boilerplate force majeure provisions for more tailored terms.
Finally, if your business faces an environmental incident despite best efforts, consult with counsel about the scope of liabilities that the business may face, and the defenses available. Environmental liability can devastate a business, and it is likely that businesses will increasingly face this concern as climate change challenges our built environment. Being proactive can be protective.