It's not safe for a polluter to trust a subsequent owner to clean up contamination, even if the polluter has specifically paid for the cleanup, and even if the new owner signs a contract relieving the original polluter of liability. None of this will prevent environmental regulators from ordering the original polluter to pay for the cleanup again, according to the Ontario Environmental Review Tribunal in Superior Fine Papers Inc. v. Director, Ministry of the Environment.
The Ministry of the Environment ("MOE") issued a cleanup order to three consecutive owners of a defunct paper mill in Thunder Bay: Cascades Fine Papers Group Inc. ("Cascades"), its parent company, Cascades Inc., Thunder Bay Fine Papers Inc. ("Thunder Bay Fine Papers"), and Superior Fine Papers Inc. ("Superior"). The Order required them, among other things, to dredge and repair a wastewater lagoon clogged with sludge. Cascades appealed, primarily on the ground that it had already paid for the necessary work.
When Cascades sold the mill, 14 years ago, it paid the buyer $4.5 million to take the mill and to assume responsibility for most of its environmental issues, except certain obligations for which Cascades gave an Environmental Indemnity. Three months later, the buyer went into receivership, without dealing with any of the wastes. In 2008, Cascades paid the buyer a further $500,000 to dredge the Lagoon, and to relieve Cascades from any further liabilities relating to it. The buyer/ receiver took the money but did not dredge the lagoon. In 2009, knowing of all these issues, Superior bought the Site from the receiver. However, it ran out of money, did not dredge the lagoon or otherwise resolve the waste issues. The MOE order followed.
Cascades appealed, arguing that it had already paid for remediation of the waste disposal site and the lagoon, and should not have to pay again for the same work. If the buyer had diverted the money that Cascades had paid expressly for environmental work, Cascades should not be penalized. Instead, it argued, sole responsibility should lie with Superior, which had knowingly accepted responsibility for these issues when it bought the property.
The Environmental Review Tribunal flatly rejected these arguments. In essence, they said, it was Cascades' fault (and its lawyers?) that it had allowed its money to be used for non-environmental purposes:
Regarding the argument that Cascades has already paid to address the environmental liabilities... the fact that Cascades has paid another person to remediate the Site, does not relieve Cascades of its responsibilities under this statute... in selling the Site to Thunder Bay Fine Papers, Cascades chose to structure the sale transaction by discounting the sale price for the Site by an estimate of the amount which would be required to address the environmental issues on the Site. While this may have been a prudent business decision, it failed to include a sufficient guarantee that Cascades' responsibilities under the EPA would be implemented by subsequent owners. It also failed to include security provisions to ensure that the necessary funds could only be used for these responsibilities.[emphasis added]
In theory, Cascades might be able to sue Superior to recover the double payment, but if (as Superior claims) it is impecunious, this will offer little comfort.
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