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July 02, 2007

Environmental Penalties Spill Regime Now In Force

ONTARIO’S BILL 133 ENVIRONMENTAL PENALTIES TOOK EFFECT AUGUST 1, 2007

Spills and MISA Violations Subject To Monetary Penalty Orders

On August 1, 2007 Ontario’s Environmental Penalty (EP) regime took effect. EPs are now authorized by regulations under the Environmental Protection Act (EPA) and theOntario Water Resources Act (OWRA).

EPs are imposed by MOE Director Orders. An EP is intended to be an administrative penalty – it is not a quasi-criminal charge. An EP can also be regarded as a sort of no-fault penalty. That is, an EP can be imposed even if the company exercised due diligence – although due diligence can reduce the amount. A company can be subject to both an EP and an MOE prosecution for the same event. Due diligence is a defence to a prosecution.

EPs can range from a minimum of $1000 per day to $60,000-$100,000 per day where there are “very serious” environmental impacts.

Determining the amount of the fine is subject to assessment and application of a complex series of factors described in guidelines, policies and procedures. For serious penalties, even negotiating the amount is likely to require input from in-house counsel or the company’s environmental lawyers, and could take considerable time.

WHO IS LIABLE – COMPANIES LISTED IN THE REGULATIONS AND MISA-SECTOR DIRECT DISCHARGERS

EPs can only be made against “regulated persons”. These include plants that are listed in the EP regulations by company name and location, plants that are subject to the Effluent reguations for the Metal Mining Sector, and any plants that are discharge wastewater directly to surface water or private sewage system and are in the listed in the EP regulations, namely: electric power generation, industrial minerals, inorganic chemical, iron and steel, metal casting, organic chemical, petroleum and pulp and paper.

EPs will be levied for spills and discharges to land or water, and for certain certificate of approval, MOE order or regulatory violations relating to discharges and their reporting requirements.

REGULATIONS, GUIDELINES, PROCEDURES, POLICIES

Details are provided in the EPA and OWRA regulations found on Ontario's E-laws website. Additional guidance documents include a guideline for implementing environmental penalties, a procedure document for determining whether a contaminant is a toxic substance, a procedure for calculation of the “monetary benefit” component of the EP, and an amendment to the MOE Compliance Policy (F-2) on applying abatement and enforcement tools.

HOW IS THE PENALTY AMOUNT DETERMINED

Penalties are composed of a gravity component and a monetary benefit component. The gravity component is based on the type of violation and the seriousness of the environmental impact. Actions of the company that can reduce the gravity component include measures taken to prevent or mitigate the violation or the effect. A reduction will be made if a company has a qualifying EMS in place at the time of the violation.

The monetary component will assess the benefits the company gained by either avoiding or delaying compliance. For example, the monetary component will apply if a company failed to obtain a C of A, failed to install pollution controls or failed to sample, analyze or report as required by an order, C of A or regulation. In addition, there is a sliding scale for multi-day penalties to reduce the ultimate penalty.

Daily penalties range from minimums of $1,000 to $2,500 for the least serious types of violations with less serious environmental impacts, to a range of $60,000-$100,000 for the most serious types of violations with very serious environmental impacts.

Penalty amounts can also be reduced where a company enters into an agreement with MOE for a “Beyond Compliance Project.”