FEDERAL NEWS

Canadian Environmental Assessment Act Amendments

On July 12, 2010 the Budget Implementation Bill (Bill C-9) received Royal Assent, passing into law some significant and controversial amendments to the Canadian Environmental Assessment Act (“CEAA”).

As previously reported in the April 6, 2010 edition of Environment@Gowlings (available here) the amendments to the Canadian Environmental Assessment Act made by Bill C-9 now provide the Minister of the Environment with the express authority to limit the scope of a project for which an environmental assessment is required to only “one or more components of that project”.  The amendments also provide that this authority can be delegated to the Responsible Authority of the project, subject to any conditions that the Minister may specify. 

It is anticipated that this new “scoping power” will be used by federal agencies to limit the scope of federal environmental assessments to those components of the project that triggered the requirement for a federal environmental assessment under the CEAA in the first place, such as the need for a permit under the federal Fisheries Act. This may result in those project components or activities being subject to the less rigorous CEAA Screening process, rather than the project as a whole being subject to a full Comprehensive Study. 

With the enactment of these amendments, both new projects and existing projects yet to be scheduled for a Comprehensive Study are subject to these scoping provisions which may take them out of contention for the Comprehensive Study process.  However, projects that were already scheduled to undergo Comprehensive Studies prior to the enactment of these amendments are required to be continued and completed as scheduled.

Other notable amendments to the CEAA as a result of Bill C-9 include transferring the authority for environmental assessments for large energy projects from the Canadian Environmental Assessment Agency to either the Canadian Nuclear Safety Commission or the National Energy Board, depending on who is the Responsible Authority for the project, which, in the government’s opinion, have more expertise than CEAA when dealing with these types of projects.  Also, provisions currently found under the Exclusion List Regulation, 2007 that exempt certain federally funded projects from the CEAA are now permanently incorporated into the CEAA, with Schedule 4 to the Exclusion List Regulations being repealed and replaced by a new Schedule 3 in the CEAA specifying the federally funded projects and classes of projects exempt from the CEAA process.

To view Bill C-9 in its entirety, see
http://www2.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Parl=40&Ses=3&Mode=1&Pub=Bill&Doc=C-9_4

Canada Consumer Product Safety Act

The new Bill C-36 Canada Consumer Product Safety Act was tabled on June 9, 2010.

The draft legislation is essentially the same as the previous Bill. It modernizes the regulatory regime for consumer products in Canada, except for those products which are regulated by other federal legislation, such as cosmetics, devices, drugs or food within the meaning of Section 2 of the Food and Drugs Act, Pest Control Products regulated by the Pest Control Products Act, feeds regulated by the Feeds Act and fertilizers regulated Fertilizers Act. A full list of products which are not regulated are set out in Schedule 1 to Bill C-36.

The Bill continues the prohibition against manufacture, import, advertising or sale of a consumer product listed in Schedule 2. The test for determining whether or not other products should be restricted has been broadened. The definition of “danger to human health or safety” includes “any exposure to a consumer product that may reasonably be expected to have a chronic adverse effect on human health”. This expands the reach of the legislation relative to long-term exposure to chemicals.

For further information please see:
http://www2.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Parl=40&Ses=3&Mode=1&Pub=Bill&Doc=C-36_1

REGIONAL

July 27, 2010 Western Climate Initiative Announcement

The Partner jurisdictions of the Western Climate Initiative (WCI) released a comprehensive strategy on July 27, 2010.  Known as the “Design for the WCI Regional Program”, the strategy sets-out specifics regarding a cap-and-trade program, emission limits and reporting requirements, policies to encourage energy efficiency and innovation, and emission offsets.  The WCI Partner jurisdictions include 7 U.S. states and 4 Canadian provinces.  An economic analysis conducted by the Partner jurisdictions predicts that if the strategy is full implemented, cost savings could total $100 billion by 2020.

The cap-and-trade (C&T) program will be implemented through each individual jurisdiction implementing a C&T program through state and provincial legislation.  Each jurisdiction’s program will issue “emission allowances” in order to meet the jurisdiction’s specific emissions goal.  Emission allowances will be able to be bought and sold and there will be no restrictions on who can own allowances.  A regional allowance market will be created by the Partner jurisdictions to ensure that allowances issued in one jurisdiction will be usable and tradable in all other jurisdictions.  The available allowances in the market will be reduced over time through a requirement that each emitter turn in one allowance per ton of CO₂ once every three years.

Emission offsets will also be included in each jurisdictions C&T program.  In order to qualify for an offset, an emission reduction must occur outside the sectors regulated under the C&T program and meet other specific criteria to ensure high quality. Offsets would be eligible for compliance purposes.  

The C&T program will include a regional auction mechanism as one mechanism to distribute allowances.  The portion of allowances auctioned will vary across the WCI jurisdictions.

The planned program start date for the WCI regime is January 2012.  Accordingly, implementation regulations may be expected in the WCI jurisdictions between now and then.

For the WCI announcement see : http://www.westernclimateinitiative.org/news-and-updates

QUEBEC

Proposed Amendments To The Regulation Respecting Mandatory Reporting Of Certain Emissions Of Contaminants Into The Atmosphere

The Québec Government published in the Gazette officielle du Québec of June 9, 2010 the Draft Regulation amending the Regulation respecting mandatory reporting of certain emissions of contaminants into the atmosphere (Draft Regulation) for a sixty (60) day comment period. The main purpose of the Draft Regulation is the mandatory reporting of greenhouse gas (GHG) emissions. For this purpose, the Draft Regulation sets the levels at which emitters must submit their GHG emissions declaration to the Minister of Sustainable Development, Environment and Parks. Accordingly, the Draft Regulation sets forth the information required to be submitted with the declaration as well as the methods of calculation to be used in order to properly quantify the reported GHG emissions. These draft amendments announced by the Minister of Sustainable Development, Environment and Parks, on June 2, 2010 are aimed at harmonizing the common rules agreed to within the Western Climate Initiative (WCI) of which Québec is a party towards reducing the level at which GHG emissions must be reported and establishing methods for calculating the reportable emissions. While the present Regulation respecting mandatory reporting of certain emissions of contaminants into the atmosphere only requires Québec enterprises with GHG emissions of 50,000 tons CO₂ equivalent to declare their emissions, this level, as per the harmonization with WCI, shall be reduced through the amendments proposed by the Draft Regulation to 10,000 tons CO₂ equivalent  Also, emitters of 25,000 tons CO₂ equivalent or more of GHGs will be required to have their emissions declaration audited by a certified organism.

The methods of calculation integrated into the Draft Regulation will apply to industrial activities such as, namely, fixed combustion installations, refinery gas combustion, electricity production, lime production, petroleum refineries, pulp and paper mills, sodium carbonate production, product manufacturing, import of electricity, aluminum production, cement production, coal storage, hydrogen production, steel and iron production, petrochemical production, and lead and zinc production. The Draft Regulation can be reviewed (in French only at this time) at: http://www.mddep.gouv.qc.ca/air/declar_contaminants/reglement.htm

Proposed Amendments To The EQA Create Administrative Penalties And Increase Fines

On April 15, 2010 the Minister of Sustainable Development, Environment and Parks, tabled Bill 89 entitled An Act to amend to Environment Quality Act in order to reinforce compliance which proposes to introduce namely new administrative penalties and to increase existing penal sanctions under the Environment Quality Act (“EQA”).  The proposed amendments would also allow the Minister to delegate the power to issue orders in certain circumstances.  Thus, the proposed amendments provide that where a person or a municipality that carries on any works, constructions or activities contrary to the EQA or its regulations, an order or an approval, authorization, permission, attestation, certificate or permit, the Minister, for a period of not more than 30 days, can order the person or municipality to stop such works, constructions or activities if the Minister is of the view that they cause serious harm or damage, or create a risk of serious harm or damage to human health or the environment.  The order can also be renewed for an additional period of 60 days.  The order can further require that a person or a municipality take, within the time period determined by the Minister, the measures required to prevent or reduce the harm or damage or risk of harm or damage.  According to the proposed changes, the Minister could also delegate the power to issue such an order and any order made by the delegatee will be deemed to be an order of the Minister. 

Bill 89 also proposes the creation of new administrative penalties. A person designated by the Minister can impose an administrative penalty when ascertaining that a person or municipality has failed to comply with certain provisions or obligations under the EQA.  The amount of the administrative penalties will vary between $250 to $2 000 for a natural person and from $1 000 to $10 000 for a legal person depending on the nature of the non-compliance.  For instance, if a person refuses or neglects to give a notice required under the EQA or to furnish information, studies, research findings, expert evaluations, reports, plans or any other documents required under the EQA or its regulations, or if a person fails to comply with a condition, restriction or prohibition relating to an approval, authorization, permission, certificate, attestation or permit granted under the EQA or its regulations, or fails to comply with a contaminated site rehabilitation plan approved by the Minister, such conduct can give rise to administrative penalty.  It is important to note that the administrative penalty imposed may be in addition to any penal proceedings instituted against the person or municipality as a result of a contravention of the same provisions based on the same facts, unless the person or municipality has been convicted of the offence before notification of the administrative penalty.  The limitation period to impose an administrative penalty is two years from the date of the failure to comply.  The administrative penalty is imposed by notification of a notice stating the amount of the administrative penalty, the reasons it was imposed, and the right of the party concerned to have the matter reviewed by the Minister and, as the case may be, to contest the matter before the Administrative Tribunal of Quebec.  A review of the decision may be applied for in writing, within 30 days of the notification of the notice.

Bill 89 further provides for the increase of existing penalties under the EQA.  Fines would thus be increased, for an offence by a natural person, to $1 000 000 and to $6 000 000 for an offence by a legal person in certain cases and namely, in case of a contravention to the general prohibition to pollute set forth in Section 20 of the EQA.  Because of the summer recess of the National Assembly, the adoption of Bill 89 will likely occur later this autumn.  The bill can be reviewed at:

http://www.assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-89-39-1.html

Regulation Respecting The Charges Payable For The Use Of Water

As mentioned an earlier edition of Environment@Gowlings, March 31, 2010 was the deadline under the Regulation respecting the declaration of water withdrawals to submit to the Ministry of Sustainable Development, Environment and Parks the required declaration of any water withdrawal directly from a source that totals an average daily volume of 75 cubic meters or more for the year 2009.  The purpose of this declaration is to enable the Ministry to eventually establish and collect charges for the use of water in the industrial sector.  In the wake of this obligation, the Government published in the Gazette Officielle of May 5, 2010 the Draft Regulation respecting the charges payable for the use of water which is presently subject to a 60 days comment period.  The draft regulation establishes charges for the use of water in the industrial sector, whether the water comes from a water distribution system or is taken directly from surface water or groundwater.  A rate of $0.07 per cubic meter of water used is set for certain large users, namely those in the sectors of bottled water production, beverage manufacturing, fruit and vegetable canning and pickling, non-metallic mineral product manufacturing, pesticide, fertilizer and other agricultural chemical manufacturing, inorganic chemical manufacturing and certain activities in oil and gas extraction.  A lower rate of $0.0025 per cubic meter of water used is set for other industrial sectors, namely mining, quarrying, oil and gas extraction, and manufacturing. 

For the purpose of measuring the volume of water used annually, the draft regulation requires every person subject to charges for the use of water to install measuring equipment,  the installation, operation, monitoring and measurement of which meets the requirements set under the Regulation respecting the declaration of water withdrawals adopted in August 2009.  The installation of such equipment will be required within 24 months of the coming into force of the draft regulation.  The obligation to pay the charges set under the draft regulation would apply as of 2010 and the annual declaration and the applicable charges for that year would have to be sent no later than March 31, 2012.  Unpaid charges will bear interest and, in addition, a percentage of the amount of the unpaid charges will be imposed as a penalty according to the delay during which the charges remain unpaid.  The charges for the use of water payable under the draft regulation, as well as the interest and additional amounts payable, will be paid into the Quebec Green Fund for the purpose of ensuring water governance.  The draft regulation is available at:

http://www.mddep.gouv.qc.ca/infuseur/communique.asp?no=1665

Regulation To Increase Charges Payable For The Disposal Of Residual Materials

In November 2009, when the Minister of Sustainable Development, Environment and Parks tabled the draft Residual Materials Management Policy and 2010-2015 Action Plan, one of the measures proposed to reduce the volume of residual materials generated and landfilled in Québec besides their recovery and reclamation was to increase the charges payable for their disposal in authorized landfill site. The Minister thus tabled the draft Regulation to amend the Regulation respecting the charges payable for the disposal for residual materials, the purpose of which was to prescribe additional charges for the disposal of residual materials in certain disposal sites over a fixed five year period.  The disposal sites subject to the charges are, namely, engineered landfill sites, construction or demolition waste landfill sites and residual materials incineration facilities covered in the Regulation respecting the landfilling and incineration of residual materials.  The objective of prescribing these additional charges is to further reduce the quantity of residual materials that are sent for disposal and to enable the establishment of funds that will be used to finance the program for the treatment of organic matters by biomethanization and composting.  On June 23, 2010, the Government adopted by order in council 526-2010 the Regulation to amend the Regulation respecting the charges payable for the disposal for residual materials which now confirms the additional charges of $9.50 for each ton of residual materials accepted for disposal at these sites for the period between October 1, 2010 and September 30, 2015.  The Regulation shall come into force on October 1, 2010.  The regulation can be reviewed at:

http://www2.publicationsduquebec.gouv.qc.ca/home.php

ÉEQ 2008 Schedule Of Contributions Effective As Of July 7, 2010

On June 23, 2010, the Government ordered by Order-in-Council 524-2010 the approval of the 2008 schedule of contributions established by Éco Entreprises Québec for the “Containers and Packaging” and “Printed Matter” Classes of materials aimed by the Regulation respecting compensation for municipal services provided to recover and reclaim residual materials.  The deadline for companies falling under this obligation to submit the required report to Éco Entreprise Québec pursuant to this regulation is October 5, 2010.  Applicable fees established under the tariff must be paid by November 4, 2010.

Information concerning the 2008 tariffs can be found on the Éco Entreprise Québec website at:http://www.ecoentreprises.qc.ca.

MSDEP ClimatSol Site Rehabilitation Program Extended

In its last budget, the Québec Government decided to extend the ClimatSol program for another five years, until March 31, 2015. The ClimatSol program was originally introduced in 2007, with an expected end date of March 31, 2010 and an initial budget of $50 million. To date, only $28 million in financial assistance has been provided to help municipalities rehabilitate contaminated sites located in their territory.

The Budget 2010-2011 states that the 5-year extension, along with the easing of program requirements, will enable Ville de Montréal, among others, to carry out four priority projects for the consolidation of its urban fabric:

• the Brenntag and Canada Malting site in the borough of Sud-Ouest;
• the Namur–Jean-Talon sector in the borough of Côte-des-Neiges–Notre-Dame-de-Grâce;
• the Dominion Bridge site in the borough of Lachine;
• the Albert-Hudon site in the borough of Montréal-Nord.

The government will also offer Ville de Québec $10 million in additional financial assistance to help it complete two projects that will consolidate its downtown area:

• the Pointe-aux-Lièvres site;
• the Estimauville site.

To that end, the funding of the Ministry of Sustainable Development, Environment and Parks will be increased by $2 million per year as of 2010-2011. For more information concerning the Claimat Sol program see: http://www.mddep.gouv.qc.ca/sol/terrains/climatsol/index.htm (in French only)

IN THE COURTS

River Basins Require a “Hard Look” not a “Quick Glance”

On March 5th of this year, Judge Collyer of the United States District Court for the District of Columbia, ordered the U.S. Department of the Interior to halt work on the Northwest Area Water Supply (NAWS) Project pending further environmental impact studies.  The decision in Manitoba v. Salazar displays an interesting application of U.S. administrative law doctrine along side the adoption of a river basin focused evaluation of a major water project.

NAWS is a joint venture between the United States and the State of North Dakota, designed to withdraw water from Lake Sakakawea and transfer it across the continental divide via a 45-mile-long pipeline.  The system would withdraw over 3.5 billion gallons of Missouri River water every year.

The continental divide is the name given to the hydrological separation between watersheds that drain to opposite parts of the continent.   In the northern United States, water from the northeast side of the divide will drain north to Canada and into the Hudson Bay Basin.  To the southwest of the divide water drains into the Missouri River Basin and eventually to the Gulf of Mexico.  These basins are ecologically distinct from each other and contain a variety of different species across the food chain.

In 2002, the Province of Manitoba sued the U.S. Department of the Interior and the Bureau of Reclamation (collectively Reclamation), alleging that a 2001 Environmental Assessment (EA) and subsequent Finding of No Significant Impact (FONSI) for the NAWS project violated the National Environmental Policy Act (NEPA).  In addition, Manitoba also alleged that Reclamation was acting arbitrarily and capriciously under the Administrative Procedure Act given that it failed to take a “hard look” at the risks and consequences of transferring foreign biota from the Missouri River Basin to the Hudson Bay Basin.

Manitoba was successful in their claim and Reclamation was prohibited from proceeding with any construction that would limit the agency’s ability to choose between water treatment options.

In late 2008, Reclamation issued an Environmental Impact Statement outlining water treatment options for NAWS.  The agency also reissued the EA and associated FONSI.  Reclamation’s preferred alternative for water treatment consisted of chemical disinfection and ultra violet treatment of Missouri river water prior to transportation into the Hudson Bay Basin.

Manitoba sued, this time joined by the State of Missouri, seeking to continue the hold on the NAWS project.  The basis of their claim was that Reclamation was acting “arbitrary” and “capricious” by:

1.         Failing to take a “hard look” at the cumulative impact on Missouri River and Lake Sakakawea water levels

2.         Failing to take a “hard look” at the consequences of inter-basin biota transfer into the Hudson Bay Basin

In finding that Reclamation had in fact failed to take a “hard look” at the cumulative impact to water levels, the Court adopted a high standard to be met in dismissing potential environmental impacts. 

Reclamation concluded in the original EA that the potential impact to water levels would not be measureable given that the yearly withdrawal from the system represents only 0.00058 % of the annual flow of the Missouri River.  Additionally, the agency also concluded that in light of other past, present and reasonably foreseeable future withdrawals, the cumulative impact would not be significant and no further evaluation was required.

The Court concluded that such a “rudimentary calculation” in support of “conclusory remarks” is not sufficient to discharge Reclamation’s NEPA obligations.  Judge Collyer appears to take particular issue with the fact the Reclamation provided no data and no analysis in support of this conclusion and describes the agency’s consideration of the project in isolation as “a glance at the issue, not a hard look”.

The decision on this issue suggests that agencies are required to perform actual analysis based on data where at a glance the potential for impact appears very low.  The result is that the distinction between scoping of an EA and the dismissal of a potential issue becomes somewhat unclear.   What is certain is that when dealing with water projects under NEPA, the process of dismissing an issue as insignificant may require some hard science.

In dealing with the issue of inter-basin biota transfer, the Court placed a similarly high bar in terms of what is required in dismissing a potential impact as insignificant.  Reclamation sought to rely on the fact that the probability of a pipeline failure is low and the same across all the considered alternatives.  Judge Collyer emphasized that it is not sufficient to dismiss the potential impact purely because the probability of breach is low; the consequences must also be analyzed and considered. 

It is suggested in the decision that there exists some proportionality between the degree of potential harm and the extent of the analysis required.  Judge Collyer states “when the degree of potential harm could be great, i.e., catastrophic, the degree of analysis and mitigation should also be great”. 

The Court also dismissed Reclamation’s argument that they had no obligation under NEPA to take a “hard look” at the consequences of foreign biota transfer into Canada, given that it is within the territory of a foreign country.  In doing so, Judge Collyer makes it clear that “NEPA requires agencies to consider reasonably foreseeable transboundary effects resulting from a major federal action taken within the United States”.

The decision on this issue emphasizes that the concept of the river basin is becoming central to the evaluation of environmental impacts of major water projects.   In many ways it is similar to legislative change of the International Boundary Waters Treaty Act in the late 1970’s when a basin-based mandate, rather than frontier water based mandate, was adopted.

Future EAs of major water projects in the United States will have to address river basin scale issues and be sure to perform adequate analysis in evaluating a very broad range of potential impacts.

Case Comment

Smith v. Inco

The recent decision of Smith v. Inco is the result of a long and hard-fought environmental class action suit.  From the early certification issues up to the final $36 million award for damages, this case offers insight into how environmental class actions are treated in Ontario.

Factual Background

From 1918 to 1984 Inco owned and operated a nickel refining plant in the south east portion of Port Colborne.  During its operation, the refinery emitted waste products into the air, including nickel oxide. Since 1984, Inco’s business activities in the city have not included nickel refining.

The Ontario Ministry of the Environment (MOE) regulated the refinery and conducted periodic testing of soil in Port Colborne since the early 1970’s.  The soil sampling conducted in 1998 and 1999, as part of a phytotoxicological study, revealed that nickel levels in soil throughout many parts of Port Colborne far exceeded the MOE guideline of 200 parts per million (ppm).  The report outlining the results of the 1998 sampling session was released to the public on January 26, 2000. 

In early 2000, Inco, the MOE, the Regional Niagara Public Health Department and the City of Port Colborne agreed to undertake a Community Based Risk Assessment (CBRA) for the entire City of Port Colborne.  In September of 2000, the MOE decided to commence a Human Health Risk Assessment (HHRA) for the residential area between the Inco property and the Welland Canal.  

After September of 2000, information regarding the extent of the nickel contamination, the potential health effects of nickel in soil, and information regarding safety precautions was widely distributed to the public. 

The results of the HHRA were disclosed in March 2002 and suggested a soil intervention level for nickel of 8,000 ppm.  Based on this level, 25 properties were identified as requiring remediation.  As of the date of the decision all the identified properties, except that of the representative plaintiff, had been remediated to below the intervention level.

Judicial Background

The original Statement of Claim proposed a class of plaintiffs consisting of approximately 17,000 individuals, including:

1) people owning and / or occupying property in a large portion of the city since March 1995;

2) students attending schools in the same area since March 1995; and

3) all living family members (parents, grandparents, children, grandchildren, siblings, and spouses) of the individuals included in #1 and #2.

The claim alleged that the nickel contamination caused by the Inco refinery has lead to physical and emotional damage of those included in the class as well as extensive damage to their lands, homes and businesses.  The total amount of damages claimed was $600 million along with $150 million in punitive damages.

Certification of the proposed class action was unsuccessful in the Superior Court.  Certification was rejected on several grounds.  In respect of health-related claims the Court was of the opinion that the determination of the causal-link between the nickel contamination and the alleged health effects would necessarily require individualized inquiries.

In response to the Superior Court decision, the claim was narrowed to include only the claim for property devaluation and emphasis was placed on the effect of the public disclosure of the contamination issues.    

On appeal to the Ontario Court of Appeal, the proposed class was certified.  The Court found that the problem regarding the extent of individual issues as compared to issues common to the class had been overcome by the narrowing of the claims.  The Court found that the individual assessment of property devaluation was separate from the determination of liability to the class.  The individual assessment of damages was therefore suited to the aggregate assessment process and would not overrun the issues common to the class.

The Decision

With a certified class of approximately 7,000 individuals, Smith, as the representative plaintiff, pursued Inco for damages resulting from trespass, nuisance and strict liability according to the doctrine in Rylands v. Fletcher (the Rylands doctrine).  Justice Henderson’s analysis of the causes of action reads like a succinct tort law textbook.

The bulk of the discussion on these issues is with regard to the nature of the Rylands doctrine and public and private nuisance.  With respect to the Rylands Doctrine, the Court took a broad approach to the “non-natural” use requirement in rejecting Inco’s argument that operating a refinery in an industrial city while complying with all zoning and environmental regulations was a completely nature use of the property.  The Court emphasized that the nickel was not naturally on the land and that the refining of nickel is a “special” not an ordinary use of the land.  

The Rylands doctrine as presented in this decision, is broad in terms of its constituent elements and suggests that in Canada a wide range of circumstances could give rise to strict liability in an environmental harm context. 

With respect to public and private nuisance, this decision correctly identifies the distinction between the two actions.  The Court dismissed the public nuisance cause of action given that no harm to a public resource, public comfort or public health had been alleged in this case.  The injury claimed by the class was simply widespread harm to private interests which is properly pursued through private nuisance.

Additionally, the decision addressed the role of government standards in determining whether the material harm requirement of private nuisance had been met.  The opinion of the Court was that the 8,000 ppm intervention level arising from the HHRA had absolutely nothing to do with civil liability associated with damage to property.  Inco’s position that no material harm occurred where the nickel levels were below the 8,00 ppm standard was rejected on this basis and the Court emphasized that “it is for the Court, not the MOE, to determine if the nickel contamination is material.”. 

The question remains whether this will be the case in future environmental class action decisions given that there was little to no dispute regarding Inco’s role in the nickel contamination.  Complex factual scenarios regarding the release of contaminants may lead to greater uncertainty in the application of well established causes of action to large classes of individuals.

Inco challenged the claim on the grounds that it was statute-barred due to the expiry of the 6 year limitation period (as it was at that time).  Inco argued that most of the plaintiffs would have known of the nickel contamination as far back as 1990 or earlier.  In dismissing Inco’s argument, the Court acknowledged that most of the plaintiffs would have known or ought to have known of the nickel contamination on their property at that time, but went on to decide that such knowledge was not of any consequence.  Because the claim was framed in reference to the public disclosure of the contamination issues and the effect on property values, the Court concluded that the limitation period did not start running until the plaintiffs knew or ought to have known that the nickel on their property caused their property to be devalued. 

The Court, in addition to having to address the limitation issue with respect to a relatively intangible causation chain, had to apply the discoverability principle in the context of a class action.  The Court was left to decide how many of the class members would have to know the material facts of the cause of action for the limitation period to begin; one, the majority, or all?

The Court decided that the cause of action arose on February 15, 2000, the day that the information regarding the effect on property values was disseminated to the public through local real estate agents.  Prior to that date only an “insignificant minority” would have known or ought to have known of the damage.  After that date the “majority of the public” would have known or ought to have known of the damage.

Almost the majority of the written decision is consumed by a discussion and analysis of the specific public disclosures that were made before and after January 2000 and an evaluation of expert evidence regarding the causal connection between the disclosures and the diminution of property values in the city. 

The expert evidence which served as the basis for the finding of causation, was formulated by comparing property values for the City of Port Colborne to the property values for a “comparator city”: Welland, Ontario.  Various datasets were analyzed by a series of expert witnesses.  In the Court’s opinion, the most reliable dataset and expert concluded that after the public disclosures were made, the increase in property values in Welland began to significantly outpace the increase in property values in Port Colborne.  The finding of causation was also premised upon the fact that no other event had occurred in Port Colborne that could so drastically have affected aggregate property values.

The Court found that the property values in Port Colborne had been depressed by 4.35% from 1999 to 2008 due to the public disclosure of the nickel contamination.  The Court arrived at a total aggregate loss of $36,000,000 through the calculation of 4.35% of the total residential property value of the city based on the number of residential properties (7,965) and the average value of $103,395 per residential property.       

What is interesting to observe about Smith v. Inco is the process which occurred from the early attempts at certification up to the final decision.  It is clear that the certification process served the valuable role of narrowing and confining the range of issues suitable to be heard in a class action format.

As illustrated in this decision, if the issues are sufficiently narrowed, the determination of both liability and aggregate damages can be performed in manner almost identical to an individual suit.  However, it is apparent that reliability of expert evidence will be a key consideration in determining which position is successful.