Pollution pocketbook is a short blog series regarding how our laws and policies incorporate the polluter pays principle. See also Pollution Pocketbook #1.

How the polluter pays principle (PPP) is applied to oil and gas development in Alberta stands as a great example of the issues faced in realizing an effective PPP regime. Of late, the media has brought attention to the issue to orphaned, suspended and unreclaimed oil and gas well sites (for more information see the AER website).  A key policy concern with oil and gas reclamation and remediation is the timing of when the polluter pays to address environmental harm.

Ideally we should pay for our pollution so early that we are in the realm of pollution prevention rather than paying for the pollution we emit.   Spending on pollution abatement equipment to meet mandated emission standards avoids the various difficulties of a polluter pays system (i.e. the monitoring of pollution and the financial ability to pay, monitoring environmental effects, and the administration and enforcement of polluter payments). Pollution prevention is also often cheaper than paying to clean up our pollution and avoids other costs to the economy caused by pollution (which may not be picked up through a PPP regime).

A timely and effective polluter pays approach drives pollution prevention as well as the cost of emissions incents investment in emission avoidance.  A PPP operates best (in theory) at the time of pollution, but rarely does this occur.

Applying PPP promptly is beneficial as it can:

  • Minimize costs to the polluter as increases in future remediation costs are avoided (both in terms of inflation and in terms of increased likelihood of more complex remediation);
  • Minimize the risk to the public purse; if we don’t require immediate payment for pollution, an effective PPP approach will ensure there is financial security posted by the polluter to avoid the risk of general government revenue being used to address environmental harms;

If a polluter goes out of business due to insolvency other creditors may have priority over environmentally related claims pursued by government. According to the Parliamentary Budget Office in spring of 2015, the public liability related to Federal Contaminated Sites Inventory was $4.9 billion. $1.8 billion of this relates to five sites, three of which were formerly privately run mining operations.   (Remediation costs  – Colomac Mine – $91,867,521 to 2015, appears near completion – the company was reportedly required to post $1.5 million in financial security) , Faro Mine $200,669,106.62 to 2015 for ongoing  remediation, ~$30 million for care and maintenance, and Giant Mine $255,634,308.66 to 2015 for ongoing remediation, ~$15 million for care and maintenance)

Insufficient financial security to cover costs of remediation and insufficient monitoring and enforcement regarding releases can mean significant costs to taxpayers as well as significant delays in putting land back into use.

The issue of payment for remediating environmental damage was dealt with in the case of Nortel Networks Corporation (Re) (leave to SCC denied) which confirmed that remediation orders may be subjected to creditor priority (i.e. stayed) where the obligation “is in substance monetary and is in substance a provable claim” (at para 32).  This results in the environment being treated as any other creditor and may result in the costs of environmental harm being transferred (at least in part) to government .

  • Minimize the risk to creditors; the earlier pollution is paid for the less likely there will be an impact on creditors if they are superceded by an environmental order in the case of insolvency (see discussion of Nortel).
  • Minimize risks to executives and directors where environmental laws provide for pursuing orders against directors and officers of a company.

While prompt payment for remediating environmental harm mitigates financial risks there are economic and practical barriers to realizing a timely PPP system:

  • Creditors are more willing to invest in ventures where a return will be realized prior to regulatory liability accruing to the operator. Similarly, a polluter may have the ability to pay later rather than earlier (having profited from the polluting activity).
  • Remediation of contamination while operations are ongoing is typically impractical as it would require suspending many activities essential to production.
  • “Pay as you emit” systems are rare and when used may incent jurisdiction shopping (where it is feasible) or may create a competitive disadvantage. This is a typical argument against new or different environmental regulations, although examples of the economic impact resulting from environmental regulation are not always evident.
  • Environmental harms may not be immediately knowable. Managing cumulative effects and the need to identify all the relevant polluters and their relative environmental impact (both in isolation and cumulatively) challenges a polluter pays system.  A precautionary polluter pays system would target emissions regardless of provable harm and avoid questions of causation.

Several of these concerns (both positive and negative) apply to Alberta’s conventional and unconventional oil and gas industry.  The ELC (along with Ecojustice) has recommended pursuing a timely abandonment and reclamation approach (while maintaining suspended wells when justified) (See the ELC’s Reclaiming Tomorrow Today ).

Similarly, the timing and nature of reclamation of the oilsands is an ongoing concern, with significant uncertainty around how much tailings pollution will be addressed through a robust polluter pays approach (not to mention regulatory gaps in payment for air emissions resulting from operations).  The posting of financial security for reclamation and remediation of open pit mines is deferred, relying instead on the value of resources in place creating a level of financial risk.

Our laws typically focus on the assessed environmental risk associated with an activity (as well as ability to pay and related economic consequences) in determining when a polluter should pay.  We ask for financial security for activities that are likely to be higher cost or which have higher risk.  Other than that we typically rely on chasing polluters to pay for clean up.

Efficiency and certainty in applying a polluter pays systems is best served (assuming pollution prevention is not an option) by requiring:

  1. sufficient financial security upfront, or
  2. requiring payment for permitted emission at the time of pollution, and
  3. having sufficient administrative capacity to monitor and promptly enforce against “accidental” or illegal emissions.

Failing to integrate this seemingly obvious approach to get polluter’s to pay risks a “dine and dash” by those who have sidled up to the resource buffet.

For more on this topic, see Micheal Hebert’s “Nortel Networks: Untidy Intersection of Environmental and Insolvency Laws or Head on Collision? and Diane Saxe’s “Perverse Abitibi test produces perverse results in Nortel, Northstar appeals”

Last week was a busy week for climate change law and policy….

A victory for strong domestic climate change action: Urgenda Foundation v. State of the Netherlands

In the Netherlands, a landmark decision in a climate liability lawsuit was issued (see decision and related newspaper articles here, here (1) and here). The suit was initiated by the Urgenda Foundation – a citizens’ platform for climate change action – seeking a court ruling requiring that the Dutch Government do more to address the issue of climate change. The Hague District Court ruled that the Dutch Government must take action to ensure that Dutch emissions are at least 25% lower than 1990 levels by 2020.

The Court held that, as a matter of legal protection and in accordance with its duty of care, the Dutch Government must do more to avert the imminent danger caused by climate change. As stated by the Court (2):

…the possibility of damages for those whose interests Urgenda represent, including current and future generations of Dutch nationals, is so great and concrete that given its duty of care, the State must make an adequate contribution, greater than its current contribution, to prevent hazardous climate change.

In coming to this conclusion, the Court recognized “a link between the protection of the rights and freedoms of individuals and the environment” (3). Further the Court held that, as a developed country, the Netherlands must take a lead in preventing climate change and cannot hide behind the argument that the solution to global climate change does not depend solely on Dutch efforts.

Alberta’s Climate Change Action Plan

Closer to home, the new Alberta Government announced its plan for addressing climate change (see here). As a first step, the Specified Gas Emitters Regulation (SGER) under the Climate Change and Emissions Management Act is being extended (it was set to expire June 30th) and modified. The SGER sets emission intensity limits and establishes a system of emission offsets and credits for facilities producing at least 100,000 tonnes of CO2. The amendments to the SGER will raise the emission intensity improvements required by regulated emitters (to 15% in 2016 and 20% in 2017). In addition, the compliance price will be increased to $20 per tonne in 2016 and $30 per tonne in 2017 (for every tonne a regulated emitter fails to meet its reduction target).

As a second step in its climate change plan, an advisory panel on climate change led by Professor Andrew Leach of the University of Alberta has been established. The goal of the advisory committee is to review the province’s climate change policy, consult with all relevant stakeholders and provide advice on a permanent set of greenhouse gas reduction measures. The advisory committee intends to submit its report to the Government of Alberta in the fall of 2015. The work of the advisory committee will feed into a comprehensive climate change action plan that the Government of Alberta will be armed with when it attends the Paris Climate Change Conference in December 2015.

COP21: United Nations Climate Change Conference in Paris

The world is preparing for the international climate conference to be held in Paris late 2015. This conference will be the 21st session of the Conference of the Parties to the 1992 United Nations Framework Convention on Climate Change. The aim is “to reach, for the first time, a universal, legally binding agreement that will enable us to combat climate change effectively and boost the transition towards resilient, low-carbon societies and economies” (from the COP21 website). In light of this international push for concrete climate change action, it is encouraging to see the Alberta Government finally making serious efforts to address this great challenge as has already been done by the governments of British Columbia, Ontario and Quebec.

1.  In particular, note the comments by climate change law and policy scholar Michael Gerrard in the article:

The effects of Wednesday’s decision could ripple far beyond the Netherlands, said Michael B. Gerrard, the director of the Sabin Center for Climate Change Law at Columbia Law School. “I think this will encourage lawyers in several other countries to see if they have opportunities in their domestic courts to pursue similar litigation,” he said.

In the United States, climate policy has already been shaped, in part, by the courts, he said. In the 2007 case, Massachusetts v. Environmental Protection Agency, the Supreme Court supported Massachusetts’ argument that the Clean Air Act empowered the government to regulate greenhouse gases.

The new case is distinctive because it finds an independent basis for government obligation to deal with environmental issues, Mr. Gerrard said. “The U.S. case was based on a statute,” he added. “This wasn’t.”

2. Decision at paragraph 4.89.
3. Decision at paragraph 4.48.

Where will the province’s regional plans be going with the new government?  It’s anyone’s guess at this stage.  Regardless, environmental information relevant to our region will continue to be collected by a variety of organizations (include government and non-government organizations).  This information should inform our environmental planning, whatever form it takes.

The ELC champions environmental planning, and the laws that support it, that drive toward clean air, clean water and a healthy environment for all Albertans.  To foster the dissemination of environmental information we have created www.ournorthsask.com .

The new website and information hub provides:

  • Links to environmental information (regarding water, air, land, biodiversity, and cumulative effects),
  • Background information on regional plans, and
  • Starts the discussion around risks and opportunities in the regional planning context

In addition to www.ournorthsask.com the ELC will be partnering with other organizations to hold information and planning forums to work toward a sustainable environment in the North Saskatchewan region. (You can subscribe for notifications through the “Keep in touch” button on the website)

The election is behind us and a new majority government is before us.  There will undoubtedly be a time of listening and learning across the province: within government, within industry, within non-government organizations, among all Albertans.

What are some of the possible new directions for environmental policy? Recognizing that having an election platform translate into policy is fraught with challenges, the NDP platform spoke to the following environmental policy matters (paraphrased):

  1. loans for green retrofits
  2. phasing out coal-fired electricity and expanding renewables (and co-generation in the oil sands)
  3. reinvesting carbon capture and storage funds into public transit
  4. strengthening environmental oversight and regulation (with science, best practices and consultation being central)
  5. leading on climate change (including an energy efficiency strategy and a renewable energy strategy)
  6. banning gas drilling in urban areas
  7. protecting the Castle Wilderness Areas.

Some specific directions and some general; all likely having their own challenges. Priorities will arise, policy will evolve and the ELC looks forward to participating in the learning process and championing strong environmental laws so that all Albertans can enjoy clean air, clean water and a healthy environment.

Earlier this month, we had the opportunity to participate in the Alberta Energy Regulator (AER)’s Best-in-Class Initiative. This initiative is being conducted by the University of Pennsylvania through its Penn Program on Regulation to develop the tools and framework necessary for the AER to become a best-in-class regulator. It will generate a framework for identifying and achieving important organizational, legal, policy, and deliberative responsibilities facing the AER (and other regulators) and enable the AER to measure and track its performance against best-in-class attributes.

Over the course of the three day workshop and dialogue, several characteristics repeatedly emerged as being essential to a best-in-class regulator:

  • A best-in-class regulator must operate in a transparent fashion. This includes providing easy access to information (and information being presented in an understandable format) and clarity around decision-making.
  • A best-in-class regulator must effectively engage with stakeholders and the public. This requires active engagement, understanding of different perspectives and open communication.
  • A best-in-class regulator must be fair and credible. Integral to this characteristic is a regulator that is independent from government.

In addition to these characteristics, it was repeatedly expressed that a best-in-class regulator needs to operate within a best-in-class regulatory system. The regulatory system must provide clear environmental objectives and policy direction for the regulator and industry. In the event that environmental objectives or policy are lacking, a best-in-class regulator will work to have these established. In our view, it is essential that there be a forum to engage stakeholders and the public in setting environmental objectives and policy.  Recognizing that, as regulator for Alberta’s energy industry, the AER plays a central role in the protection of our natural resources and environment, it is incredibly important that we have a transparent and accountable regulator.

We are encouraged that the AER is seeking to become a best-in-class regulator and look forward to the outcome of this initiative. If you are interested in this initiative, more information can be found at The Penn Program on Regulation website. As well, submissions can be made by the general public at comments@bestinclassregulator.org.

scales earth

At the recent 2015 Canadian Bar Association Symposium on “Environment in the Courtroom” in Calgary, I delivered a presentation on the topic “Judicial Notice of Climate Change”.  The presentation focused on the question of whether or not courts have accepted climate change as a scientific fact so that no further proof of its existence or cause would be required in courtrooms.

This question is quite interesting on many fronts. In the arena of public opinion, as reported in a 2014 Forum Poll survey, while 81% of Canadians believe in climate change, there are still many who deny its existence.  According to the survey, climate denial generally emanated from the following groups: Generation X (18%), males (17%), mid‐income groups (18%), Atlantic Canada (19%), Alberta (20%), Conservative voters (29%), least educated (17%), and Evangelical Christians (32%).

In the arena of politics, there are some very high-profile politicians who also deny the existence of climate change. A couple of months ago, The Washington Post reported that U.S. Senate James Inhofe, who is Chair of the Environmental & Public Works Committee, went on the Senate floor to bring his “proof” that climate change is the “greatest hoax ever perpetrated on the American people”. On the palm of his hand was his piece of evidence: a perfectly round snowball which he later tossed out to an unsuspecting Senate colleague.

Meanwhile, in the academic arena, there are also some very prominent scientists who still deny that climate change is caused by human activities.  The New York Times recently reported that Willie Soon, a scientist at the Harvard-Smithsonian Centre for Astrophysics in Boston, claimed that the variations in the sun’s energy are the cause of climate change and that greenhouse gases cause little risk to humanity. Through the Freedom of Information Act, documents revealed that he received $1.2M from fossil fuel companies for his scientific papers. The article noted that some environmental groups deemed this revelation as clear evidence of “the continuation of a long-term campaign by specific fossil-fuel companies and interests to undermine the scientific consensus on climate change”.

While many public debates continue to rage on whether or not climate change really exists, those debates are interestingly not taking place in the courtroom. As climate change science has developed, courts have increasingly taken judicial notice of it. What is judicial notice? Chief Justice McLachlin in R. v Find,  (2001 SCC 32)  explained that “judicial notice dispenses with the need for proof of facts that are clearly uncontroversial or beyond reasonable dispute”. Thus, whenever a fact is judicially noticed, it is not subject to the ordinary procedural processes for testing evidence such as oaths and cross-examination.

So you may ask, where can the scientific consensus on climate change be found? It is found within the confines of the reports created by the United Nations-endorsed Intergovernmental Panel on Climate Change (IPCC). These reports provide rigorous and balanced scientific information to decision-makers. They are written by hundreds of leading scientists and reviewed by thousands of experts. They provide full scientific, technical and socio-economic assessments on climate change. And what have these reports concluded? That warming of the climate is undeniably happening, that human-caused greenhouse gas emissions are likely causing the climate to warm, and that adverse climate-related impacts are presently occurring and are expected to increase in the future unless significant reductions of greenhouse gas emissions are achieved.

In the landmark case for judicial notice of climate science,  the U.S. Supreme Court in Massachusetts vs EPA (2007) stated that: “[a] well-documented rise in global temperatures has coincided with a significant increase in the concentration of carbon dioxide in the atmosphere.  Respected scientists believe the two trends are related.” It also stated that “[t]he harms associated with climate change are serious and well recognized”.

Indeed, U.S. courts have heavily relied on IPCC reports because they have various indicia of reliability favoured by the U.S. laws of evidence. They are also backed by highly credentialed organizations and scientists. An American Bar Association article noted that in fact, no judge, except in one dissent, has expressed skepticism about the science underlying climate change. In a survey of the more than 400 climate change litigation cases that have been launched in the U.S., it was noted that the debate on climate change in courts is neither based on its existence nor its cause. Rather the debate is based on its detrimental impacts and to whom those impacts can be attributed.

In Canada, the court in Syncrude vs Canada (2014 FC 776) likewise took judicial notice of climate change. As Justice Zinn declared:  “The evil of global climate change and the apprehension of harm resulting from the enabling of climate change through the combustion of fossil fuels has been widely discussed and debated by leaders on the international stage.” Thus, he noted that “[c]ontrary to Syncrude’s submission, this is a real, measured evil, and the harm has been well documented”.

Nevertheless, the success of any climate change litigation will turn on the factual basis that is established by the plaintiffs. Indeed, despite the scientific consensus that greenhouse gas emissions cause climate change, it is difficult to prove the contribution of specific defendants to the problem in a specific location. It cannot be denied however that climate change litigation performs several functions: to keep the pressure on fossil fuel companies and other large emitters, to keep the issue live in the public mind, and to send a strong message to the legislature that comprehensive climate legislation is needed because current statutes are inadequate to address it.

At the end of the day, while courts have taken judicial notice of climate change, the future of climate change litigation is less certain. This is because it hinges on the strong political will and ambition of governments to establish, implement and strongly enforce climate change legislation.

Pollution pocketbook is a short blog series regarding how our laws and policies incorporate the polluter pays principle.

Featured image

Imperial Refinery, Calgary, AB, Canada. Dept. of Mines and Technical Surveys / Library and Archives Canada / PA-015634

The polluter pays principle (PPP) is aimed at ensuring that those who pollute pay to remedy the environmental harm they cause and that costs to the environment are internalized (to incent us to pollute less).  In applying the principle we generally focus on the party who is the most proximate cause of the pollution: however, our laws don’t make every polluter pay for all pollution.

Who pays? Scale matters

In the context of who pays we see that scale matters. We don’t pay for the pollution from driving our cars (at least not directly).  If we did perhaps we would see more compact cars or cyclists on our streets.  (Driving a car is also a great example of the complexity of calculating how much we pollute, from the resources that go into the car itself, to the fuel, to the infrastructure that must be built and maintained: the sources of payment track an extensive chain of pollution).

On the other hand we do pay utility bills which incorporate costs associated with waste water treatment.  Even then scale matters, as larger urban areas typically treat wastewater more thoroughly then smaller urban areas (taking advantage of the greater number of polluters to meet higher standards).  At different scales the economic feasibility of payment typically differs.

We could require everyone to pay for their specific pollution levels but such an approach would likely be too cumbersome to track and administer. Rather our laws and polices focus on pollution that is likely to create significant harm to people or property.  The greater the risk and gravity of harm that your activity may or does have the greater likelihood PPP will be applied.

Who Pays? Sector matters

Some sectors may pollute but seem to be able to evade application of the PPP.  We know that land conversion and application of fertilizers for agricultural purpose can result in significant pollution.   Some pollution mitigation measures may apply to the agricultural sector, such as the need to create nutrient management plans, but typically the regulations fall well short of a comprehensive polluter pays system.

The exclusion of some sectors from being subject to the PPP may be due to practical, political and economic factors (or combination thereof).  Sectors which result in significant non-point source pollution may avoid application of the PPP due to the difficulty in quantifying the pollution itself and discerning the level of impairment on the environment.  Political, cultural and economic rationale may also be relied upon to justify exceptions to oayment.

(For a general review of the polluter pays principle and agriculture see Margaret Rosso Grossman, “Agriculture and the Polluter Pays Principle”, vol. 11.3 Electronic Journal of Comparative Law (December 2007))

Who Pays? Policy matters

The policy context of the PPP also matters.  Cap and trade policies can be viewed as a form of polluter pays but typically include the “grandfathering” in of polluting activities which predated the policy.  A baseline of pollution credits is often provided to these historic polluters free of charge.  This in turn raises equity concerns as an uneven pollution playing field is created.  An initial auction of credits has been suggested as a better representation of the PPP.

Who should pay? Who could pay?

I have previously proposed (on the heels of the Supreme Court of Canada’s AbitibiBowater decision) that we should expand the net of who is considered to be a “polluter” to those facilitating the polluting activities, possibly all the way to financiers and other creditors.  Such an approach might change our view of pollution and better incorporate environmental considerations from project conception to decommissioning (and bring us a step closer to full cost accounting).    Is such a move radical? (Start the debate in the comment section).

Which polluters pay under our current laws varies widely across jurisdictions and levels of pollution.   Alberta often focuses on those polluters who directly impact land, soil and groundwater. Other impacts on water and air typically involve a level of pollution payment in terms of environmental monitoring and investment in pollution abatement technology.  There remains a large amount of pollution that continues free of charge.

The scale, sector and policy context adds to the complexity of deciding who should pay.  In each case application of the PPP will likely result in economic arguments of why a polluter should not pay.  The complexity and efficiency of specific polluter pays mechanisms (the “how” or “when” we pay) is also central to who pays.

In future blogs we will consider some of the key issues with how the principle is applied in the Alberta and Canadian context and determine whether the right polluters are paying, at the right time, in the right amount.

Polluter pays (in brief)

The PPP is one of the most cited or adopted principles in laws around the world; by way of just a few examples it finds support in Canadian and Alberta law, US federal laws regarding superfund sites and clean water, as well as the Treaty on the Function of the European Union (article 191(2)). 

Governments rely on a host of mechanisms to implement the PPP including:

  • Effluent standards (with related costs of abatement systems and technology)
  • Administrative orders (with related costs or fines)
  • Financial security for remediation and reclamation
  • Pollution taxes
  • Cap and trade or pollution offset systems

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