The president and the prime minister agreed that environmental protection and the development of clean energy are inextricably linked and announced plans to work together to build a new energy economy as a key element of a broader economic recovery. The two leaders established the US-Canada Clean Energy Dialogue to enhance cooperation on a number of issues concerning the development and deployment of clean energy.
Canada is a federation. In addition to the federal government, there are 10 provinces and three territories. Matters are delegated at the provincial level to local municipalities (for example, planning, noise control and sewers). The regulation of environment and energy in Canada is relatively well developed. Environmental and energy matters, for the most part, tend to be regulated principally at the provincial and territorial level, although there can often be an important federal role that must not be overlooked. Note that Quebec is a civil law jurisdiction, whereas the rest of Canada has a common law background. The following is a very brief overview of some of the key regulations and issues.
Air, Water and Land
The provinces have the principal regulation of impacts to air, water and land. Generally, provincial, federal and municipal environmental legislation (statutes, regulations and bylaws) include broad provisions that prohibit such impacts without government authorisation. For example, approvals are generally required for the emission of contaminants (which can include noise, heat and other materials, such as particulate, volatile organic compounds (VOCs), etc); the construction, alteration, use or operation of certain equipment (such as equipment that collects and treats waste water that is discharged into the environment) or a waste disposal site; and the taking of water in excess of specified amounts (eg, 50,0000 per day in Ontario). Water resource management and permitting is an important issue in Canada, and in particular in Alberta, for example, where demand for water by the oil sands industry is very significant. While most approvals are issued at the provincial level, federal approvals, reporting or notification can be required, for example, with respect to interference with fish habitats or navigable waters, as well as for the importing and exporting of chemicals and hazardous waste. There are federal reporting obligations relating to emissions to the environment (National Pollutant Release Inventory (NPRI)).
One case involving the application for an approval to use or destroy material in a cement kiln presents a potential issue. In Lafarge Canada Inc v Ontario, which involved an appeal of an approval issued by Ontario's Ministry of the Environment (MOE), the court upheld the appeal tribunal's decision to grant leave to appeal the issuance of an air approval because, in making its decision to issue the approval, the MOE failed to consider certain aspirational principles, including as set out in the MOE's policy documents, such as its Statement of Environmental Values. While the impact of this case remains to be seen, the immediate effect has been to inject some uncertainty into the approvals process.
Regulators at all levels are taking more aggressive steps to protect human health and the environment by reducing the use and creation of toxic substances, and by requiring the disclosure of information about the use of toxic substances.
Spills and Discharges
Generally in Canada, and in particular in Ontario, there is a positive obligation on persons responsible or in control of a contaminant to promptly report spills and certain discharges to designated government authorities. In addition, persons responsible for spills and discharges are generally required to take action to prevent, eliminate or mitigate the adverse effects of a spill or discharge. Legislation at both the federal and provincial levels also requires regulated persons to take certain pre-emptive measures, such as implementing spill-prevention plans.
Environmental violations in Canada are typically dealt with by the provincial attorneys general under legislation that provides for what has been called "quasi-criminal" penalties, including the possibility of large fines and incarceration of individuals (in real jails, not "quasi-jails"). Regulators can issue administrative orders imposing a broad array of requirements, such as investigating potential contamination, restoring the natural environment, submitting plans for achieving compliance with the law and monitoring. Orders can potentially be made against "polluters" (those who caused or permitted contamination) as well as current and past owners or persons in control of the business operation or property in issue.
We have recently seen a move toward civil administrative penalty regimes in some Canadian jurisdictions to complement traditional enforcement tools. For example, Alberta and New Brunswick introduced administrative penalties some years ago. These provide a simple way for the government to essentially "ticket" an alleged offence without engaging the more complex enforcement regime under the attorney general's jurisdiction. Ontario introduced an environmental penalty (EP) regime that has been fully in force since 1 December 2008. An EP is essentially an order that can be issued by the provincial regulatory authority in response to certain infractions of the province's two principal environmental statutes (Environmental Protection Act and the Ontario Water Resources Act). Unlike "traditional" regulatory offences, there is no due diligence defence (reasonable care was taken) available in respect of an EP; "you spill, you pay" is essentially the underlying basis of liability. In addition, even if a regulated person is issued an EP order, it can still be prosecuted for an offence for the same incident.
Provinces have varying levels of fines for non compliance with environmental legislation. Ontario is the most aggressive, with maximum penalties in the millions of dollars per day, and minimum penalties for certain offences. In March 2009 the Canadian federal government introduced the Environmental Enforcement Bill, which, if passed, would introduce larger fines, new sentencing powers and considerations, and strengthen the government's ability to investigate and prosecute offences. This Bill also proposes to enact the "Environmental Violations Administrative Monetary Penalties Act", which would provide regulation-making authority to develop administrative monetary penalties by regulation that could be levied for less serious violations of federal environmental laws.
Contaminated Properties and Brownfield Development
Generally, brownfields are dealt with at the provincial level (except, of course, for federal lands). Brownfield redevelopment has been hindered by uncertainties related to the relatively wide scope of liability in respect of past, current and future contamination, potentially long and uncertain approvals processes, and the high cost of cleaning up a site. Fortunately, as with other jurisdictions, risk assessments have become more accepted to address contaminated properties so they can be redeveloped in an environmentally sustainable manner.
Specific requirements vary among the provinces, but most provide for a form of "certification" for sites that are cleaned up and meet either generic criteria or site-specific criteria based on risk assessment. Such certification provides some degree of immunity from future government cleanup orders (similar to "no further action" letters), but not against civil liability (such as an action by a neighbour for damages caused by nuisance, trespass or negligence). In the province of Ontario, these are called Records of Site Condition (RSC). An RSC is not necessarily required when you are dealing with contaminated property, but people are increasingly using the process either formally (involvement by the MOE with the filing and acceptance of an RSC) or informally (essentially what we call a "private" RSC, where all work is done that would meet RSC requirements but nothing is filed with the government).
Director and Officer Liability
There are specific legislative provisions at the provincial and federal level that establish a positive duty on directors and officers of a corporation to exercise diligence with respect to environmental matters. These provisions expressly create personal liability for directors and officers who fail to exercise reasonable care.
For example, in Ontario, there is a duty on officers and directors to take all reasonable care to prevent the corporation from committing offences including discharging a contaminant in contravention of a statute, order or approval; failing to notify the regulatory authority of such a discharge; and unlawfully disposing of certain wastes. On the face of the legislation, the onus is on the director or officer to prove that he or she took reasonable steps to prevent the commission of an offence.
As with most jurisdictions, environmental claims in Canada are based on nuisance, negligence, trespass and Rylands v Fletcher (strict liability). Issues often arise with respect to causation, timing and damages, including stigma damages related to contaminated property.
In a recent decision (St Lawrence Cement Inc v Barrette), the Supreme Court of Canada upheld a no-fault liability regime for excessive neighbourhood annoyances. This ruling effectively approved a class action in Quebec, where excessive annoyance was caused by a facility even when all regulations were complied with. This may well be a warning to businesses in the common-law provinces that regulatory compliance may not necessarily be a defence to a claim in nuisance.
As elsewhere in North America, investments to maintain and upgrade electricity system infrastructure throughout North America were less than ideal over the past 15 to 20 years, and this is true in Canada as well. Out of necessity, commencing in the past five years or so, major initiatives have been undertaken to revitalise electricity infrastructure. For example, in Ontario alone, the Ontario Power Authority has, since 2005, contracted for new generation supply of 11,559MW representing approximately 40 per cent of current installed capacity and a US$12.8 billion investment in the Ontario electricity system continuing through 2013.
Similarly, the world wide nuclear "renaissance" is alive and well in Canada, with a current proposal to build at least one new nuclear facility in Ontario and possible nuclear facilities in New Brunswick, Saskatchewan and Alberta.
Canada, blessed by its geography, is lucky to have approximately 50 per cent of its electricity generated by hydroelectric facilities, predominantly in the provinces of Newfoundland, Quebec, Ontario and British Columbia. In Ontario, large-scale hydro and nuclear facilities provide base load electricity with the balance of the "stack" being supplied by coal-fired, gas-fired and renewable (wind, solar, biogas, biomass and river-run hydro) forms of generation. Ontario, which has taken a leading role in developing renewable generation, has announced that it will eliminate the use of coal-fired generation in the province by 2014. Following that date, the only large scale-coal fired generation in Canada will be located in Alberta, New Brunswick and Nova Scotia.
Due to the concerns about "dirty" coal, natural gas-fired generation (or "clean" energy) is increasingly becoming the norm when new dispatchable generation is required and consequently the price of natural gas and the "heat rate" of natural gas facilities is setting the marginal price for electricity. Indeed, prior to the recent downturn, there was growing discussion about the impact on natural gas prices caused by the growing demands throughout North America of the electricity industry.
The most significant infrastructure need in Canada is the need to modernise and upgrade transmission systems, including retrofitting transmission and distribution systems to permit the significant amount of "distributed generation" development that is being proposed. This is an investment required in the many billions of dollars and will likely be reflected in the "next wave" of electricity infrastructure projects.
One issue that has arisen is the increasing recognition of the potential legal requirements, which can arise as part of the environmental approval process in which the proponent may have obligations related to consultation with First Nations, or the constitutional duty on the Crown to consult with First Nations (for example, where there may be impact on traditional hunting, fishing and other rights, or treaty rights). In short, potential impacts on First Nations and consultation with First Nations must not be overlooked.
Ontario has introduced the Green Energy and Green Economy Act, 2009 (GEA). The GEA is intended to put Ontario at the forefront of renewable power development by tying support for renewable power development to domestic content requirements with the expectation that a sustainable, vibrant green economy will emerge in Ontario. Some of the noteworthy features of this proposed legislation include: renewable power developers will sell power to the provincial authority under a "feed-in-tariff" system in which qualifying projects will be entitled to a pre-determined rate per kilowatt-hour of renewable power (rates are specific to the form of power); a renewable power project will have an enhanced "right-to-connect" to the provincial electricity grid, alleviating a key constraint to additional green power on the Ontario electricity grid; significant investment in a "smart grid"; and streamlined processes for project regulatory compliance and permitting.
Currently the province of Alberta is the only province with comprehensive regulations limiting industrial greenhouse gas (GHG) emissions. These regulate emissions on an intensity basis, that is, regulated entities are required to meet targets of GHG emissions per unit of production. At the federal level, the Canadian government has been working with a policy that also uses an intensity-based system, and regulations were to be in place by 2010. However, progress has been slowed in implementing that system due to the potential emergence of a US regime, and the Canadian government has acknowledged that it will have to align its regulations and standards with whatever the US federal government ultimately puts in place, most likely a cap-and-trade system. Ontario, Manitoba, Quebec and British Columbia are members of the Western Climate Initiative, which includes California and six other US states. This regional initiative aims to have a cap-and-trade system in place by 2012, and GHG reporting obligations beginning with 2010 emissions.
Canada's oil sands represent the second largest oil deposit in the world, most of which is located in Alberta. Eighty per cent of the oil sands are recoverable using subsurface in situ techniques, while the remaining near surface resources are extractable through surface mining. The primary agencies with jurisdiction over oil sands development are the Alberta Energy Resources Conservation Board and Alberta Environment. Oil sands projects undergo an extensive approvals process, which includes provincial and federal legislative requirements. Matters considered include air emissions, water use and quality, aquatic resources, wildlife, biodiversity, greenhouse gas emissions and land reclamation.