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ENVIRONMENTAL LAW CONFERENCE—2013 PAPER 4.1 Remediation Agreements: Balancing Competing Interests These materials were prepared by Olga Rivkin of Bull, Housser & Tupper LLP, Vancouver, BC, for the Continuing Legal Education Society of British Columbia, November 2013. © Olga Rivkin 4.1.1 REMEDIATION AGREEMENTS: BALANCING COMPETING INTERESTS I. Introduction .................................................................................................................................1 II. Regulatory Framework ................................................................................................................1 A. Contaminants and Applicable Standards .................................................................................................. 2 B. Investigating Contaminated Sites ............................................................................................................... 3 C. Remediating Contaminated Sites ............................................................................................................... 3 III. Remediation Agreements ........................................................................................................... 5 A. Gas Station Investigates Adjacent Roadway ............................................................................................ 5 B. Vendor Remediates Lands .......................................................................................................................... 6 C. Tenant Remediates Lands ........................................................................................................................... 7 IV. Working with an Environmental Consultant .............................................................................. 8 V. Conclusion .................................................................................................................................. 9 I. Introduction The Environmental Management Act, S.B.C. 2003, c. 53 (the “EMA”) sets out the statutory framework for identifying, investigating and remediating contaminated sites in BC. A site is considered contaminated if it contains certain controlled substances in the soil, water, groundwater, or sediment. After the site is investigated and the types and concentrations of contaminants have been identified, a contaminated site can be remediated to numerical or risk-based standards. The method and scope of investigation and remediation depend on a number of factors including the site-related objectives, the types and concentrations of contaminants, the financial means of the proponent, and the available technologies. At times, when delineating the scope and method of investigation or remediation, the proponent may also have to address the interests of others. Consider, for example, a gas station operator who needs to access an adjacent roadway to investigate the extent of migrated contaminants. The local authority operating the roadway may be concerned about the disruption to traffic and, accordingly, may refuse to agree to intrusive investigation methods. Another situation is where a vendor of real property agrees to remediate the property. If the purchaser intends to develop the property, the remediating vendor may have to consider the purchaser’s intentions when selecting the remediation method. As a final example, a tenant in an industrial park remediating contamination it caused may need to consider how to accommodate the interests of the landlord and of other tenants using the park. The landlord in this instance, may want to be notified in advance of any work, and ensure that the work is done with minimum disruption to the business of the park. Relying on the above hypothetical scenarios, this paper will examine how elements of the EMA regulatory scheme translate into balancing competing interests when selecting and negotiating an investigation or a remediation strategy. II. Regulatory Framework The EMA sets out the framework for identifying, investigating and remediating contaminated land in BC. The EMA is accompanied by a number of regulations as well as protocols, policies, technical and administrative 4.1.2 guidance documents and fact sheets published by the Ministry of Environment (the “MOE”).1 Collectively, these enactments, protocols and policies describe, among other things, what constitutes a contaminated site in BC, what steps may be taken to investigate such a site, and what methods of remediation may be available. A. Contaminants and Applicable Standards The EMA defines the term “contaminated site” as follows2: an area of the land in which the soil or any groundwater lying beneath it, or the water or the underlying sediment, contains a) a hazardous waste, or (b) another prescribed substance in quantities or concentrations exceeding prescribed risk based or numerical criteria or standards or conditions. Hazardous waste is defined in the Hazardous Waste Regulation, BC Reg. 63/88 (“HWR”) and includes, among other things, biomedical waste, waste oil and waste asbestos.3 Prescribed substances and applicable standards are set out in Schedules 4, 5, 6, 7, 10 and 11 of the Contaminated Sites Regulation, BC Reg. 375/96 (“CSR”). The standards are divided into numerical and risk-based and, further, into generic numerical, matrix numerical, site-specific and interim. The MOE explains this division as follows: The contaminated sites legislation and [CSR] define two general types of standards: • Numerical standards are acceptable concentrations of substances in soil, surface water, groundwater, vapour and sediments. • Risk-based standards define acceptable risk levels from exposure to substances at sites. To meet stakeholders’ request for flexibility the [MOE] has further developed these [numerical standards] into five specific types of standards: • General numerical standard and criteria are intended to protect human health and the environment at any site regardless of site-specific features except land water, sediment or vapour use. • Matrix numerical standards separate environmental and human health protection components. Compared with generic numerical standards, these ones [matrix numerical] feature a more flexible matrix of soil quality standards. • Site-specific numerical standards are derived using models, equations, site data and specific site features. These are [the] most flexible numerical standards and apply only to a specific site.4 • Director’s interim standards5 are environmental quality standards that a Director of Waste Management has the legal power to adopt when he or she chooses to. Such standards … must be adopted in regulation after one year.6 Typically, generic or matrix numerical standards are relied upon to assess possible contamination, and numerical or risk-based standards are relied on to determine remediation requirements. 1 EMA, ss. 63, 63.1 and 64. This paper will refer to Protocols, Technical Guidances and Fact Sheets, all of which can be found at the MOE website at <http://www.env.gov.bc.ca/epd/remediation>. 2 EMA, s. 39(1). 3 HWR, s. 1. See also the Ministry of Environment’s Hazardous Waste Legislation Guide, <http://www.env.gov.bc.ca/epd/hazwaste/regs/pdf/haz_waste_leg_guide.pdf>. 4 See Protocol 2, Site Specific Numerical Soil Standards and Technical Guidance 3, Environmental Quality Standards. 5 At this time there is a Directors’ interim standard entitled “Industrial land use human health protection—intake of contaminated soil standard for lead.” This standard is considered an addendum to matrix numerical soil standards. 6 Fact Sheet 13, Environmental Quality Standards. 4.1.3 B. Investigating Contaminated Sites The EMA contemplates a number of methods of investigating contamination, ranging from a non-intrusive preliminary site investigation to an intrusive detailed site investigation.7 The duration, complexity and intensity of investigation depends on the site, the purpose of the investigation, and the possible contaminants of concern.8 An initial preliminary site investigation typically includes non-intrusive methods, such as a review of historic records, visual inspection of the site, and interviews with current and former owners. It does not include sampling of soil. A more in-depth preliminary site investigation may include intrusive methods, such as sampling of soil, analysis of soil, and investigation of subsurface conditions. 9 A preliminary site investigation may be sufficient in some circumstances. For example, a property vendor may conduct a preliminary site investigation to ascertain its potential liability from contamination of property. The results of the preliminary site investigation may be sufficient for the vendor to take steps to minimize such liabilities when entering into a sale agreement for the property. A detailed site investigation must be preceded by a preliminary site investigation. It must explore specific areas, depth and degree of contamination, and consider procedures to identify substances that may cause adverse effects. It also must evaluate the extent of hazardous waste contamination, if any. Without being exhaustive, a detailed site investigation may include surface soil sampling, borehole soil sampling, and excavating groundwater monitoring wells.10 A detailed site investigation is typically required to develop a remediation plan and to conduct a risk assessment, and must provide enough information to accomplish these tasks. C. Remediating Contaminated Sites As mentioned previously, a site can be remediated to either numerical or risk-based standards.11 The numerical standards are the standards set out in the schedules to the CSR, as discussed in part II(A) of this paper. Risk-based standards describe a method of evaluating the potential for chemical exposure to cause harm.12 Risk-based evaluation is performed using mathematical equations to determine at what concentrations exposure is unacceptable to humans and the environment. 7 EMA, s. 41. 8 As a process separate to that of investigation, the MOE sets out a process for classifying contaminated sites into high risk sites and non-high risk sites. High risk sites may require a different (likely, more time-sensitive and responsive) investigation and remediation approach than non-high risk sites. For more information on site risk classification, see Protocol 12, Site Risk Classification, Reclassification and Reporting, Procedure 12, Procedures for preparing and issuing contaminated sites legal instruments and Procedure 16, Procedures for determining if a Director should require the submission of a Site Risk Classification Report under Protocol 12, and Fact Sheet 45, Site Risk Classification. 9 CSR, s. 58 contemplates that a preliminary site investigation may proceed in two stages: a non-intrusive stage and an intrusive stage. These can either take place concurrently or sequentially. Although each investigation is unique, there are general steps followed in each preliminary site investigation. See Technical Guidance 10, Checklist for Reviewing a PSI Preliminary Site Investigation for a checklist of preliminary site investigation steps. Also, for a good discussion of preliminary site investigations see Ahab Abdel-Aziz and Nathalie Chalfour, The Canadian Brownfields Manual, LexisNexis Canada Inc., 2004 at chapter 16. 10 See The Canadian Brownfields Manual, supra, note 9 at chapter 17. See also, Technical Guidance 1, Site Characterization and Confirmation Testing, Technical Guidance 8, Groundwater Investigation and Characterization, Technical Guidance 4, Vapour Investigation and Remediation and Technical Guidance 11, Checklist for Reviewing a Detailed Site Investigation. 11 CSR, s. 16. 12 The Canadian Brownfields Manual, supra, note 9 at 19-2. See also, Protocol 13, Screening Level Risk Assessment, Technical Guidance 7, Supplemental Guidance for Risk Assessment and Fact Sheet 14, Demystifying Risk Assessment. 4.1.4 Typically, a site has been remediated in accordance with the numerical standards if, among other things: • the concentration of the prescribed substances in the soil is greater than or equal to the applicable generic numerical or the lowest matrix numerical soil standards; • surface water or groundwater does not contain any prescribed substance with a concentration greater than the applicable generic numerical water standards; and • the vapour at the site does not contain any prescribed substance with a concentration greater than the generic numerical vapour standard for the relevant substances.13 The risk-based remediation standards are considered to be met, among other ways, if: • for each non-threshold carcinogenic substance,14 the calculated human lifetime cancer risk due to exposure to that substance at the site is less than or equal to 1 in 100,000, and • for each substance for which a hazard index15 is calculated, the hazard index due to exposure of a human to that substance at the site is less than or equal to 1.16 The EMA contemplates that a person remediating a site must give preference to remediation methods that provide permanent solutions.17 That said, methods of remediation vary depending on numerous factors, including the type of the site, the types and concentrations of contaminants, the proponents finances and objectives, and the available technologies. At the very basic level, the proponent may have to decide whether to proceed by removing contaminated material by excavation or pumping and then treating such material on or off site; or whether to proceed by treating contaminants without removing them. Building on these elements, without being exhaustive, the proponent may also have to consider more detailed aspects of the remediation process, such as the following: • if contaminated materials are removed and treated off site, would these be relocated to a licensed disposal facility (which may be costly), or to another site and, in case of the latter, would a soil relocation agreement be required18; 13 CSR, s. 17. 14 The CSR defines the term “carcinogenic substance” to mean any chemical classified by (a) the International Agency for Research on Cancer as a group 1 [carcinogens to humans] or group 2A [probably carcinogens to humans] carcinogen, or (b) the United States Environmental Protection Agency as a group A [carcinogens to humans] or group B1 [probably carcinogens to humans] carcinogen. For the list published by the IARC, see < http://monographs.iarc.fr/ENG/Classification/index.php>. For the list published by the US EPA, see <http://www.epa.gov/ttnatw01/toxsource/carcinogens.html>. 15 The CSR defines the term “hazard index” as the sum of hazard quotient for any substance over all exposure pathways. The term “Hazard Quotient (HQ)” is defined as a formula of the estimated daily intake for any substance having non-carcinogenic deleterious effects and a reference dose (being an estimate of the maximum daily exposure level to a substance that is unlikely to produce an appreciable risk of non-carcinogenic deleterious effects during a lifetime of exposure to that substance). 16 CSR, s. 18(3). Also, pursuant to s. 18(1) of the CSR, a person may request that the local Medical Health Officer responsible for the area recommend alternate risk-based standards. These would be developed through a public community-based consultation process. See, Technical Guidance 3, Environmental Quality Standard. Also, Protocol 13, Screening Level Risk Assessment describes the process for completing a screening level risk assessment. 17 EMA, s. 56. 18 EMA, s. 55, CSR, ss. 40 to 46 and Schedules 7 and 10. See also, Administrative Guidance 7, Completing and Submitting an Application for a Contaminated Soil Relocation Agreement, Administrative Guidance 8, Contaminated Soil Relocation Agreement Processing Requirements for Approved Professionals, and Fact Sheet 41, Relocation of Soils from Contaminated Sites. 4.1.5 • if remediation includes pumping and remediation of groundwater, where would the treated water be discharged, in what quantities and would a permit from a local authority be required to do so19; and • would remediation require ongoing monitoring; for example, on sites where groundwater quality does not improve immediately after remediation is undertaken.20 The regulatory scheme set out in the MOE is complex. It is a mix of law, policy and technical concepts, many of which, when applied on the ground raise significant practical implications. The following part of this paper will illustrate, by using hypothetical scenarios, how the concepts described above turn into points of negotiation when investigation and remediation affect interests of persons other than the proponent. III. Remediation Agreements The scenarios below are hypothetical. They were developed to illustrate situations when the scope and method of investigation or remediation may be limited by the following: A. • adjacent property uses; • prospective uses of the contaminated site; and • concurrent uses of the contaminated site. Gas Station Investigates Adjacent Roadway In some instances, the scope and method of investigation and remediation may be limited by adjacent property uses. Consider an instance where a gas station operating near a roadway requires access to the roadway to investigate if any contaminants have migrated from the gas station site.21 In BC, most local roadways are owned and maintained by municipalities. In our example, therefore, the gas station will have to approach the municipality to access the roadway to conduct the intended investigation work. The municipality will likely be concerned about the disruption to traffic that such work may cause. Accordingly, among other things, the parties will want to consider the following: • what types of site investigation methods are contemplated; • would the road or a portion of a road be closed to traffic during the course of the investigation; and • what happens if contaminants are identified. The parties may define the scope of work broadly: “Investigation” or “Investigate” or “Investigating” means any action to investigate the existence, nature, location, source and extent of [contaminants] within the [defined area] in accordance with the requirements of the [EMA], including, but not limited to, sampling of soil, groundwater and vapour and including any action to restore the [defined area] as a result of such investigations to the satisfaction of the [municipality], acting reasonably, to its pre-existing condition. 19 Regional districts and municipalities often have bylaws regulating discharge into their sanitary and storm sewers. These bylaws may restrict the types and concentrations of substances that can be discharged, and impose permitting and fee requirements. These restrictions and requirements may impact the selected method of remediation. 20 See, Technical Guidance 8, Groundwater Investigation and Characterization. 21 This situation may arise, for example, if the gas station wishes to identify the scope of the contamination so as to ascertain its potential risk of liability. 4.1.6 Or, narrowly: “Investigation” or “Investigate” or “Investigating” means any action required to conduct stage one preliminary site investigation. From the gas station’s perspective, the narrow definition will likely be too restrictive to result in sufficient information. But, from the municipality’s perspective, the narrow definition will ensure that there will be no unexpected traffic disruptions. The parties may consider a middle ground, where the gas station will have flexibility over what investigative works it can undertake and the municipality will have a way to control the duration of these works, the nature of these works, or both. For example, the municipality may stipulate that the investigation must be completed within one year after commencement. It may also seek to review and approve, or comment on, any investigation plan before it is implemented: Prior to commencing the Investigation [a broadly defined term], [the property owner] will submit to the [municipality] for its review and comment, a proposed plan and scope of the Investigation. [The municipality] may retain an environmental consultant to assist it with the review of the proposed plan of Investigation [possibly, at the cost of the property owner]. [The municipality] will provide its comments on the proposed plan of Investigation within 30 days of receipt of such plan. [The property owner] will consider the comments of [the municipality] and make such revisions, if any, as [the property owner] deems necessary, acting reasonably, to respond to [the municipality’s] comments. Also, the parties may agree to commission a traffic management plan addressing the management of traffic on the investigated area and nearby roads or highways during the course of the investigation as well as the issue of traffic management and safety including the use of flag persons, signage, fencing and other traffic control devices and a communication plan for the public, including neighboring property and business owners. The more extensive the area subject to the investigation and the more prolonged the investigation, the more detailed and thorough the traffic management plan would likely have to be. Depending on the parties’ relative bargaining powers and the objective of the investigation, the parties may agree that if contamination is found in the roadway, the gas station will remediate such contamination within a set time. The parties may also consider other ways to address the roadway contamination in the above scenario. For example, the parties may agree on reciprocal releases and indemnities arising from the roadway contamination. If the gas station intends to remediate the gas station site but not the roadway, the parties may consider installing a barrier under the roadway to prevent recontamination of the site. To a large degree, the course of action will depend on the ability and the willingness of the parties to accommodate their respective land uses. B. Vendor Remediates Lands In some instances, the method and scope of remediation may depend on the prospective use of the site. Consider an instance where a vendor and a purchaser of real property agree that the vendor will remediate the property to a certain standard. In such instance, the parties would be prudent to set out the following in advance of the remediation: • what are the contaminants being remediated and to what standard; • what method of remediation will be used; and • what is the goal of the remediation. The parties may define the term “contaminants” broadly: “Contaminants” means any pollutants, contaminants, hydrocarbon contaminants, underground tanks, asbestos materials, hazardous, corrosive or toxic substances, hazardous waste or waste of any kind or any other substance which is regulated, prohibited or controlled under any Environmental Laws [usually, a defined term]. 4.1.7 Or, narrowly: “Contaminants” means the substances listed in Schedule X to the [agreed upon approval in principle] … The scope of the definition will, in part, be directed by where the parties are in their investigation, and how much they know about the types and concentrations of the contaminants.22 In our example, the vendor and the purchaser would also be prudent to consider the standard of remediation: numerical or risk-based. The distinction between numerical and risk-based standards may translate into the substances in question being removed from the site to the extent that they exceed applicable standards, or being left on the site and managed or monitored for their effect on human health and the environment. This distinction may be important. Consider, as part of our scenario, if the vendor and the purchaser agree that the vendor will remediate the lands to a residential standard and will obtain a certificate of compliance to evidence the remediation. Let us assume that the parties do not specify the method of the remediation. The vendor, being the remediating party, commissions a remediation plan contemplating that contaminants will remain on the site and will be managed by placing a hard surface cap at a certain depth. If, hypothetically, the purchaser intends to develop the site without an underground component, this method may not affect the purchaser’s proposed development. If, however, the purchaser intends to build an extensive underground component as part of their development, this method may result in the purchaser incurring additional (perhaps, unexpected23) remediation expenses when they excavate the site below the hard surface cap. In our scenario, one way that the vendor and the purchaser can avoid a disagreement is by defining what they consider to be the acceptable completion of remediation with reference to an agreed upon set of documents and standards: “Completion of Remediation” means that the [environmental consultant] has completed the remediation in accordance with the [agreed upon approval in principle] and [agreed upon remediation plan] and that the [certificate of compliance to an agreed upon standard] has been issued. C. Tenant Remediates Lands In some instances, remediation has to be balanced with interests of third parties using the contaminated site. We have considered a situation where a gas station investigates an active roadway. Consider a slightly different scenario. A tenant in an industrial park has caused contamination and, pursuant to the terms of the lease, has an obligation to remediate this contamination. The landlord and the tenant, in such instance may want to consider a number of matters including how the remediation work will be reconciled with the use of the land by other tenants. Partly, this will be a similar exercise to that described in the above examples: the landlord and the tenant will have to carefully define the duration and the scope of the work being conducted and understand the level of disruption that this work will cause. The landlord may also require that prior to commencing any work, the tenant provides notice to the landlord describing the activities to be performed. This will allow the landlord to notify the other existing tenants of the types of disruption and to put in place infrastructure to accommodate the other tenants. As part of the remediating tenant’s obligations, the landlord may insist on the following: 22 For a discussion on allocating liability and due diligence in a sale/purchase context, for example, please refer to the presentation and materials prepared for this course by Gary A. Letcher and Andrea C. Akelaitis. 23 The vendor and purchaser, in this example, could also account for the cost of additional remediation as part of the valuation of the contaminated property. For a discussion on valuating contaminated property, please refer to the presentation and materials prepared for this course by Larry Dybvig, David Perry and Graham Walker. 4.1.8 The tenant will: (a) take such measures as may be reasonably necessary to prevent material loss of business by the landlord and the tenants of the landlord; and (b) take such measures as may be reasonably necessary to effectively prevent other occupiers or visitors of the lands from being endangered by the tenant’s activities on the lands; … The landlord may also insist on status reports and inspection of the work and on receiving copies of all reports and certificates of compliance in connection with the lands. For example: The tenant will, at the request from time to time of the landlord, provide the landlord with a detailed summary of its progress in executing [the agreed upon remediation plan] together with true and complete copies of any environmental reports prepared for the tenant in connection with executing the [remediation plan]. The landlord or its authorized representative may at any time upon reasonable prior written notice to the tenant inspect and observe remedial activities undertaken by or on behalf of the tenant in relation to performance of the tenant’ [remediation obligation.] This is not an exhaustive list of situations or issues that may arise when negotiating agreements about the scope and method of the investigation and remediation. Each situation will raise its own set of challenges and stumbling blocks. That said, in most situations, the parties will likely benefit from carefully considering what is being remediated, to what standard and by what method. In some instances, answering these basic questions may be the most difficult part of the negotiation. IV. Working with an Environmental Consultant Investigation and remediation of contaminated sites typically involves the use of environmental consultants and contractors. Depending on the complexity and demands of any given site, a remediation and investigation project team may consist of an accredited environmental professional and a team of technical and non-technical remediation contractors.24 Where only one party is involved in the process, that party may retain the team of professionals as it sees fit. Where more than one party is involved, the choice of the team of professionals and their role may vary. To continue with the hypothetical scenarios above, if a gas station is investigating and, potentially, remediating a portion of a roadway, a municipality operating the roadway may insist that the gas station pay for the cost of an independent consultant to be retained by the municipality to assist it in reviewing the proposed investigation and remediation plans. In the landlord and tenant scenario, the landlord may find it prudent to retain an independent consultant to oversee the work conducted by the tenant or to conduct a peer review of the tenant’s consultant’s recommendations. Also, the landlord may require that the tenant obtain a letter from the tenant’s consultant stipulating that the landlord may rely on the tenant’s consultant’s work. In the scenario where the vendor agrees to remediate the site, the parties are likely to retain independent consultants to assist them with delineating the process of the investigation and remediation. In some circumstances, where disagreements between consultants are foreseeable, the parties may consider building into an agreement a form of dispute resolution where a third consultant is retained to make a final determination. For example: 24 For a discussion on how to assemble a remediation and brownfield development project team see The Canadian Brownfields Manual, supra, note 9 at chapter 20. 4.1.9 If the parties cannot agree on the amendments to the [agreed upon remediation plan] within [X] days of the amendment being submitted by the [vendor] to the [purchaser], the parties will retain [a third environmental consultant] to recommend the amendment and the parties will abide by such recommendation. The vendor and the purchaser will equally share the fees charged by [a third environmental consultant] in connection with such recommendation. V. Conclusion The process of investigating and remediating contaminated sites in BC is governed by a complex web of legislative instruments, protocols, policies and technical guidances. When selecting an appropriate method of investigating and remediating, the proponent has to consider a number of factors, including site-related objectives of the work, the types and concentrations of the contaminants, and the available technologies. At times, the proponent also has to consider interests of other parties impacted by the remediation and investigation process. When third parties are involved, negotiations may benefit from careful consideration of the elements of the EMA regulatory scheme, including the following: what type of investigation is being conducted; what contaminants are being remediated and to what standard; when will remediation be considered completed. These elements will have on the ground implications, including determining how much disruption the work cause, how will this disruption be addressed, and whether there will be a restriction of future development. Defining investigation and remediation elements too broadly or too narrowly may significantly impact one or both parties. Therefore, when approaching investigation and remediation agreements, the better the parties can understand how the basic elements of the regulatory scheme translate into on the ground work, the better they can determine what mechanisms will be needed to accommodate the various interests at play.