Environmental Law 2022 – Waste Management

Law and Practice

1. Regulatory Framework

1.1 Key Environmental Protection Policies, Principles and
Laws

In Canada, the federal (national) and provincial/territorial
(regional) governments have responsibility for the protection of
the environment. Federal laws generally apply to all projects or
operations throughout the country, while provincial/territorial
laws apply only to those projects or operations located within the
specific province or territory.

The key federal laws governing environmental protection
include:

• the Canadian Environmental Protection Act, 1999;




• the Fisheries Act;




• the Impact Assessment Act;




• the Transportation of Dangerous Goods Act;




• the Species at Risk Act; and




• the Canadian Navigable Waters Act.

Provinces bolster these laws with legislation within their
jurisdiction, such as British Columbia’s Environmental
Management Act or Ontario’s Environmental Protection Act.
Territories also have legislation within their jurisdiction, such
as Nunavut’s Environmental Protection Act.

Each one of these acts is underscored by regulations, orders and
guidelines designed to ensure compliance and further the goals of
each respective act.

2. Enforcement

2.1 Key Regulatory Authorities

The key federal regulatory authorities in Canada include:

• Environment and Climate Change Canada;




• Fisheries and Oceans Canada;




• the Impact Assessment Agency of Canada;




• Crown-Indigenous Relations and Northern Affairs Canada;




• Transport Canada;




• Parks Canada; and




• Natural Resources Canada.

Other key regulatory authorities exist in each province or
territory, many of which will co-ordinate their approach to
regulation and enforcement with their federal counterparts.

3. Environmental Incidents and Permits

3.1 Investigative and Access Points

Most regulatory authorities employ officers or other enforcement
personnel, who are often granted the power to conduct inspections
and investigations. These inspections and investigations may be
routine or in response to suspected regulatory breaches. For
example, a federal fishery officer may enter and inspect a facility
or vessel if they have reasonable grounds to believe that federal
fishery regulations are being breached. In this example, they may
also open containers, examine fish or take samples of them, conduct
tests, or take copies of documents. Regulatory officers
investigating an offence may be required to obtain search warrants
or may request voluntary disclosure.

The approach to the enforcement of environmental law varies
according to the severity of the environmental incident or breach
of the regulation. Whenever possible, Canadian authorities enforce
environmental law through voluntary agreements and specific orders
to comply. Canadian authorities will hold polluters responsible for
the clean-up costs of pollution or contamination, and may seek
further penalties where necessary.

3.2 Environmental Permits

Types of Permits

Environmental permits are issued by the federal and
provincial/territorial governments, depending on the nature and
location of the activity.

Environmental permits may be necessary for a wide variety of
activities. For example, activities that may harm a threatened or
endangered species will require a permit under the federal Species
at Risk Act, while activities related to forestry will require a
permit from the relevant provincial or territorial regulatory
authority. While federal and provincial jurisdictions may not
strictly overlap in this instance, environmental activities often
require both federal and provincial permits and authorisations,
thereby increasing compliance concerns for businesses. Some
activities will also require municipal or regional permits and
authorisations.

Depending on the circumstances, some projects may be able to
obtain multiple environmental permits through a single process, but
this is not always the case. Project proponents or operators in
Canada will need to obtain permits from each of the responsible
government authorities, at the federal and provincial/territorial
levels, as required. As noted above, either federal or provincial
environmental assessment (or both) may be required before permits
may be issued.

Change of Control

Investors looking to purchase Canadian projects or operations
will want to ensure they acquire the project’s associated
permits. Most environmental permits can be transferred, but
government consent may be required to do so. This can require a
lengthy process in some circumstances, which may trigger
consultation with Indigenous groups. Usually, change of control
will not trigger the need for government consents, but the specific
requirements of the applicable legislation as well as the language
of the permit itself must be carefully reviewed to determine
whether government consent is required.

Time Limit

Environmental permits are usually time-limited, but the duration
of the authorisation will depend on the nature of the activity
being permitted. Permits can often be renewed, but may require
additional regulatory processes in order to secure a renewal.

Conditions

Permits typically contain conditions that accord with the
requirements of the legislation under which they are granted.

Environmental permits are generally obtained by applying to the
appropriate government authority with responsibility over the
permitting scheme; for example, permits around fish or fish
habitats will commonly be obtained from Fisheries and Oceans
Canada.

In many cases, the applicable legislation explicitly states that
environmental permits will only be granted to individuals or
businesses that can show they are qualified to hold them. As an
example, the federal Nuclear Safety and Control Act forbids
transfers of licences unless the licensee can show that they are
authorised to carry out the particular activity granted under the
licence.

Appeals

Some permitting regimes, but not all, will allow for an appeal
to a quasi-judicial authority (often an administrative tribunal) or
a member of the federal government – ie, a minister. In all
cases, the decision to grant or refuse a permit can be reviewed by
the courts through an application for judicial review. Further
appeals from these decisions may find themselves in courts of
competent jurisdiction.

4. Environmental Liability

4.1 Key Types of Liability

The key types of liability faced by project proponents or
operators in Canada for environmental damage or breaches of
environmental law include monetary fines, remediation orders, the
loss of environmental permits and prosecution.

Environmental legislation, such as the Fisheries Act, includes a
provision that makes it an offence to fail to comply with the
legislation. Furthermore, the Fisheries Act and others like it
state that any committed or continued offence that occurs over time
will be considered a separate offence for each day the
contravention occurred. The result is that offenders may be subject
to multiple convictions and large monetary fines should
environmental breaches continue. It is often possible for an
employee, agent or a director or officer to be held personally
responsible for an offence under environmental legislation.

5. Environmental Incidents and Damage

5.1 Liability for Historical Environmental Incidents or
Damage

Subject to available defences, a current or purchasing operator
or landowner will be subject to liability if they acquire
contaminated land. The Canadian liability regime is designed to
ensure that liability always falls on either past or present owners
or operators of land in order for federal and provincial
governments to avoid incurring remediation costs.

5.2 Types of Liability and Key Defences

Liability

Most environmental legislation in Canada operates on the
“polluter pays” principle, which requires the party that
caused the harm to the environment to bear the ultimate cost of any
clean-up or remediation.

However, Canadian contaminated sites legislation can impose
liability for historic environmental incidents or damage on a
current operator or landowner of contaminated land; for example, if
the new landowner is aware of the contamination and takes no steps
to mitigate its spread, then the new landowner may be liable
(subject to the various defences set out in the legislation).

There are several types of liability for environmental incidents
or damage in Canada. Project proponents, operators, or suppliers
and transporters of products may face liability for pollution or
harm to the environment, for failing to comply with specific
environmental regulations or permits; for the ownership, operation
or control of contaminated sites; or for the supply of products to
contaminated sites. They may also face claims of nuisance or
negligence from private parties affected by contamination.

Defence

A defence of due diligence is normally available to parties
accused of breaching environmental legislation, as well as various
common law and equitable defences. However, there are some offences
where due diligence is not available.

A Relevant Case

A case that demonstrates many of the key principles and issues
in a contaminated sites context is JI Properties Inc v PPG
Architectural Coatings Canada Ltd, 2015 BCCA 472. This appellate
decision provides commentary on the legislative/regulatory regime,
the status of pre-legislation comfort letters and due diligence by
the defendants, the operation of limitation periods on
environmental damage, and the scope of reasonably incurred
remediation costs.

6. Corporate Liability

6.1 Liability for Environmental Damage or Breaches of
Environmental Law

As previously noted, Canada has adopted the “polluter
pays” principle for environmental liability, and this includes
corporations. Corporate entities that damage the environment or
breach environmental legislation will be liable for the harm
caused. This can include damage caused by oil spills and sewage
pollution, or breaches of regulations around wildlife, fisheries,
the transportation of dangerous goods, the disposal of hazardous
materials and contaminated sites.

6.2 Shareholder or Parent Company Liability

It is uncommon in Canada for the shareholders or parent company
of a polluting corporate entity to be held liable for environmental
damage. However, Canadian contaminated sites legislation contains
broad liability provisions that may apply to shareholders or a
parent company that owns, controls, or manages a contaminated piece
of property. Also, in very rare circumstances, a party or
government may seek permission from the court to “pierce the
corporate veil” and sue the parent company for actions taken
by the subsidiary.

7. Personal Liability

7.1 Directors and Other Officers

Several pieces of federal environmental legislation impose
responsibilities on directors and officers for their company’s
environmental performance. Penalties for environmental damage or
breaches of environmental law can include:

• being fined or imprisoned for the corporation’s pollution,
  even if the corporation has never been prosecuted or
  convicted;




• being fined for the corporation’s failure to obtain the
  necessary permits or approvals, follow required environmental
  processes, or report spills;




• being prosecuted for failure to take all reasonable care to
  prevent the corporation from causing or permitting pollution;




• being heavily fined or imprisoned for the corporation’s
  contempt of court where there are repetitions of events that led to
  a previous environmental conviction; or




• being personally liable for the costs of remediating historic
  and current property contamination associated with any real estate
  that the corporation owns, controls or occupies, or formerly owned
  or controlled.

7.2 Insuring Against Liability

Most directors and officers in Canada rely on director and
officer insurance to insure them against any errors and omissions
made in the course of their duties. Given the serious consequences
of potential environmental breaches, it is not uncommon for
directors and officers to have coverage for environmental breaches
as part of their insurance policies. However, such policies are
often additional and expensive, as they are not traditionally
included as part of standard policies.

Directors and officers may seek further indemnification from the
company itself for any liability that arises from their role in the
company; however, this may be of little help if the company becomes
insolvent due to environmental penalties.

8. Lender Liability

8.1 Financial Institutions/Lender Liability

It is unlikely that financial institutions or lenders will be
liable for the environmental damage caused by one of their clients.
However, Canadian contaminated sites legislation contains broad
liability provisions that may apply to a lender who owns, controls
or manages a piece of property. For example, if a lender realises
on security taken on real property assets that are contaminated,
the lender may have sufficient “control” over the
situation to incur liability for the clean-up.

8.2 Lender Protection

To protect themselves from liability risk, lenders should
investigate the potential environmental liabilities inherent in an
undertaking before investing, and should ensure that money is
allocated towards meeting environmental contingencies. Furthermore,
lenders can make it a term of any lending agreement that the owner
or operator of a site meets and/or exceeds any environmental
regulations or policies in furtherance of the agreement. Finally, a
lender could ask for an indemnity or for the provision of an
insurance policy naming them an additional insured in order to
further mitigate any potential fallout from an environmental
offence.

9. Civil Liability

9.1 Civil Claims

Civil claims for compensation or other remedies can be brought
through common law causes of action, such as nuisance, negligence,
trespass, or loss of property value, or through statutory causes of
action set out in environmental legislation.

9.2 Exemplary or Punitive Damages

Canadian courts of inherent jurisdiction almost always have
jurisdiction to award exemplary or punitive damages. However,
generally speaking, they are unlikely to award such damages unless
the conduct in question is high-handed, malicious, arbitrary or
highly reprehensible. The bar for awarding punitive damages is
high, but punitive damages have been awarded in certain
jurisdictions, such as Alberta, for breaches of environmental
responsibilities.

9.3 Class or Group Actions

Class actions are available for environment-related civil
claims. However, class actions in Canada must first be
“certified” by a court in order to proceed. This process
ensures that the claim raises common issues and that a class
proceeding is the preferred way to resolve those issues. However,
few environment-related cases have made it past this initial
threshold.

9.4 Landmark Cases

Two appellate decisions, released in 2013 and 2014, confirmed
that class action regimes are not often appropriate to remedy
environmental harms: Canada (Attorney General) v MacQueen, 2013
NSCA 143 and Windsor v Canadian Pacific Railway Ltd, 2014 ABCA 108.
Although environmental causes of action may seem to involve common
issues among class members, proof of those claims is often an
individual issue.

10. Contractual Agreements

10.1 Transferring or Apportioning Liability

Indemnities and other contractual arrangements can be used to
transfer or apportion liability for environmental pollution or
breaches of law, although the appropriate terms for each set of
parties will be fact-specific. However, third parties –
including regulators – are not likely to be bound by such
agreements, and are entitled to prosecute or seek compensation from
the party who is liable at law. Polluters relying on such
indemnities and contracts must seek indemnification or compensation
through those mechanisms on their own.

10.2 Environmental Insurance

Most commercial general liability policies in Canada exclude
pollution liability. Businesses can purchase an optional pollution
liability extension, although such extensions will be subject to
strict exclusions.

Instead, Canadian businesses may purchase an environmental
liability policy from one of a variety of insurers in Canada. These
policies can provide coverage for liability arising from a sudden
or gradual pollution event, waste management services, storage
tanks and contractors, among other things.

11. Contaminated Land

11.1 Key Laws Governing Contaminated Land

Jurisdiction over contaminated sites is divided between the
federal and provincial/territorial governments in Canada. The
federal government has some powers to issue remedial and
preventative orders regarding water and soil contamination, and has
jurisdiction over any federal lands. All other lands are governed
by provincial contaminated sites legislation.

Provincial Contaminated Sites Legislation

This legislation details hazardous waste disposal and storage,
site investigations, permitting and authorisations, pollution
prevention, site remediation, administration, penalties, etc. All
of these fall under provincial jurisdiction relating to the
environment and property management.

Contaminated sites are defined as areas of land where the soil,
sediment, vapour or groundwater contains a prescribed substance in
quantities or concentrations exceeding risk-based criteria,
standards or conditions. Prescribed substances generally include
hazardous substances such as sulphur, petroleum hydrocarbons, heavy
metals and chlorofluorocarbons (CFCs).

Remediation

When a “responsible person” has not remediated an
identified contaminated site, a regulatory authority can issue a
remediation order to ensure remediation is carried out. This could
occur if the contamination is severe, or if the responsible person
will not voluntarily carry out the remediation requirements.

Persons who may be liable for the costs of remediating a
contaminated site include the current owner or operator of a site,
a previous owner or operator of a site, persons who produced the
prescribed substance found on the site, and persons who transported
the prescribed substance found on the site.

Exclusions

Specific exclusions apply. For example, a prior owner or
operator might not be found liable if they can demonstrate that the
site was not contaminated at the time they owned or controlled it,
and that they did not contribute to the contamination. Similarly, a
current owner who can demonstrate that none of their conduct
exacerbated or contributed to the costs of remediation may not be
found liable.

Limiting liability

More than one person can be liable for remediation of
contaminated land, with liability typically apportioned according
to the degree of fault or contribution by the parties to the
pollution. Gehring et al v Chevron Canada Limited et al, 2006 BCSC
1639 provides commentary on the allocation of remediation costs.
The recent appellate case Victory Motors (Abbotsford) Ltd v Actton
Super-Save Gas Stations Ltd, 2021 BCCA 129 confirmed that, at least
in British Columbia, remediating parties may claim both litigation
legal costs and legal costs incurred throughout the actual
remediation of the contaminated site.

A person liable for remediating contaminated land can seek
recourse from the original polluter or former landowner. Such
actions may be available in contract law, in negligence, or through
a statutory cause of action in some provinces.

A polluter or landowner can transfer liability for a
contaminated site to a purchaser by way of contract. However,
environmental legislation in most provinces permits regulators to
order those who formerly owned or controlled contaminated property
to carry out remediation measures. Parties seeking to rely on
contractual terms to recover their costs or limit liability will
need to seek a remedy through those mechanisms.

12. Climate Change and Emissions Trading

12.1 Key Policies, Principles and Laws

Although a large part of the Canadian economy is resource-based,
the country’s economy varies greatly from coast to coast. The
strategies to combat climate change have therefore been as varied
as the economies in which they are implemented. As it currently
stands, Canadian provinces have a patchwork of different
environmental policies in play, with varying adherence to policies
concerning carbon credits, renewable energy credits and emission
standards.

12.2 Targets to Reduce Greenhouse Gas Emissions

The Canadian Net-Zero Emissions Accountability
Act

Canada is a signatory to the major international climate change
conventions. As a party to the Paris Agreement, Canada has
committed to an economy-wide target to reduce greenhouse gas
emissions by 40–45% below 2005 levels by 2030. The Canadian
Net-Zero Emissions Accountability Act formalises Canada’s
target to achieve net-zero emissions by the year 2050, and
establishes a series of interim emissions reduction targets at
five-year milestones towards that goal.

Although the federal government signed the Paris Agreement and
has set emission targets, Canada is a federal system and the
federal and provincial levels of government have jurisdiction to
regulate matters concerning the environment.

Federal and Provincial Regulations

The Pan-Canadian Framework on Clean Growth and
Climate Change

In recognition of the collaborative approach needed for progress
on climate change, the federal and provincial ministers of the
environment developed the Pan-Canadian Framework on Clean Growth
and Climate Change, which required all provinces and territories to
have carbon pricing initiatives in effect by 2018. However, the
framework gives the provinces and territories the flexibility to
design their own policies to meet emission-reduction targets
through the different initiatives or mechanisms that best suit
their individual economies.

A Healthy Environment and a Healthy
Economy

The federal government subsequently issued a further climate
plan in 2020 – A Healthy Environment and a Healthy Economy.
The plan builds on the efforts that are currently underway through
the Pan-Canadian Framework.

2030 Emissions Reduction Plan

Furthermore, in March 2022, the federal government introduced
Canada’s 2030 Emissions Reduction Plan, which provides a road
map for the Canadian economy to achieve 40–45% emissions
reductions below 2005 levels by 2030, building upon the actions
outlined in Canada’s previous climate plans.

Energy efficiency

Canada maintains a number of legal requirements with respect to
energy efficiency. Regulations apply to a range of products,
including appliances, light bulbs, heating and cooling systems, and
vehicles. Many incentive programmes also exist to support the
construction of energy-efficient homes and buildings, and the
development of energy-efficient industries and businesses.

Carbon pricing

In 2017, the federal government announced that the provinces and
territories in Canada had to develop their own carbon pricing
system that met federal standards or the federal government would
impose its own programme on the provinces and territories. Since
2019, every jurisdiction in Canada has had a price on carbon
pollution, either their own pricing system tailored to local needs
or the federal pricing system. If a province or territory decides
not to price pollution, or proposes a system that does not meet the
minimum standards set by the federal government, the federal system
is put in place.

Clean Fuel Regulations

In June 2022, the Clean Fuel Regulations under the Canadian
Environmental Protection Act, 1999 were registered. The Clean Fuel
Regulations seek to reduce greenhouse gas emissions in Canada by
requiring liquid fossil fuel suppliers to gradually reduce the
carbon intensity of the fuels they produce and sell for use in
Canada over time. The Clean Fuel Regulations set carbon intensity
limits for fuel types and the fuel suppliers must lower the carbon
intensity of the fuels they produce in accordance with those
limits. Suppliers can maintain compliance with the established
limits by participating in a credit market established by the Clean
Fuel Regulations. Credits can be created by undertaking projects
that reduce the carbon intensity of fuels, supplying low carbon
fuels, or supplying fuel or energy to advanced vehicle technology
(eg, electric or hydrogen vehicles). Overall, this new regulatory
scheme aims to reduce emissions while simultaneously driving
innovation in low-carbon and clean energy sectors. The carbon
intensity reduction requirements under the Clean Fuel Regulations
will come into force on 1 July 2023.

13. Asbestos

13.1 Key Policies, Principles and Laws Relating to
Asbestos

Legislation and History of Asbestos Usage

Asbestos management in Canada is governed by occupational health
and safety legislation and environmental legislation. It is
governed federally by legislation such as the Hazardous Products
Act and the Canada Consumer Product Safety Act, and provincially by
legislation such as the Workers’ Compensation Act. The federal
Prohibition of Asbestos and Products Containing Asbestos
Regulations prohibit the import, sale and use of asbestos, as well
as the manufacture, import, sale and use of products containing
asbestos (with some exceptions).

The responsibility for removing or managing asbestos present in
a building generally falls on the building owner. However, in some
provinces the occupier of a building, such as a tenant or project
developer, may also bear some responsibility.

Landowners or occupiers must conduct a pre-work assessment
before commencing certain building work. Any asbestos found must be
removed, enclosed, encapsulated, or carefully managed prior to
renovations or alterations. The legislation mandates that specific
procedures must be implemented during asbestos removal, relating to
ventilation, waste containers and decontamination.

Asbestos was used frequently in Canadian insulation,
fireproofing and construction until the 1980s. Canada was also an
active producer of asbestos until 2011. As a result, Canadian
exposure to asbestos has been relatively widespread, and
asbestos-related diseases continue to be one of the top causes of
workplace death in Canada.

Litigation

Despite this, asbestos litigation against employers is
relatively uncommon. Canada has a socialised medical insurance
system and most provinces operate a mandatory workers’
compensation scheme, which means that the majority of workers
injured by asbestos exposure will receive medical treatment and
compensation without resorting to litigation.

Where asbestos litigation has been undertaken, it has been
initiated by workers’ compensation boards, the bodies
responsible for administering the workers’ compensation
schemes, and brought against manufacturers of asbestos products to
recover the costs of paying out compensation to workers and their
families.

To establish a claim for damages for asbestos exposure, a
litigant must demonstrate actual physical harm or injury. However,
the long latency period of asbestosis and mesothelioma means that
the injury or harm may not be realised, and litigation not
commenced, for decades.

This has created challenges for Canadian courts. Litigants have
often been exposed to asbestos from a variety of sources over a
long period of time, making causation and the proper apportionment
of liability a difficult issue. More recent jurisprudence suggests
courts will take a more relaxed approach to causation in such
cases; see Clements v Clements, 2012 SCC 32.

One of the leading cases with respect to asbestos liability in
Canada is Privest Properties Ltd v The Foundation Co of Canada Ltd
(1995), 11 BCLR (3d) 1 (SC), aff’d (1997), 31 BCLR (3d) 114
(CA). Privest was the first suit to be tried in Canada involving
asbestos in buildings. The court rejected the plaintiffs’
position that the building in question had been contaminated by the
presence of asbestos-containing spray fireproofing. The court
concluded that the substance at issue was not an inherently
dangerous product, because the fireproofing contained chrysotile,
rather than crocidolite or amosite forms of asbestos. This decision
set a meaningful precedent in Canada by constraining liability with
respect to the use of asbestos in fireproofing and construction. It
also departed significantly from decisions made by earlier US
authorities.

14. Waste

14.1 Key Laws and Regulatory Controls

In Canada, the responsibility for managing and reducing waste is
shared among federal, provincial, territorial and municipal
governments. The federal government regulates the export and import
of waste and the interprovincial movement of waste, while the
provinces regulate the use and disposal of waste. Both
“extended producer responsibility” and “product
stewardship” programmes are used to manage products at their
end of life.

14.2 Retention of Environmental Liability

Whether or not a producer or consigner of waste retains
liability for waste after it has been disposed of by a third party
depends on the province in question. In some provinces, the
legislation includes an automatic ownership transfer provision that
is triggered once waste is accepted by an authorised waste
management facility, which limits further liability of producers or
consigners.

In provinces where such a provision does not exist, any past or
present owner or person that possessed, controlled or managed the
waste remains exposed to liability for the waste after it has been
disposed of by a third party. However, generally speaking, some
direct involvement in the release is necessary in order for the
liability to crystallise. Under both schemes, producers or
consigners remain liable for any damage caused while the waste was
in their possession or in transport.

14.3 Requirements to Design, Take Back, Recover, Recycle or
Dispose of Goods

Producers in Canada are not generally required to take back,
recycle or dispose of goods once they become waste. However,
legislation across Canada is widely used to impose some or all of
the costs of recovery, recycling and disposal of goods on the
producers of waste. These laws are intended to incentivise
producers to design products that can be disposed of
responsibly.

Furthermore, in June 2022, the federal government published the
Single-Use Plastics Prohibition Regulations under the Canadian
Environmental Protection Act, 1999. Under these new regulations,
the manufacture, import, export and sale of six categories of
single-use plastics will be banned by the end of 2025, including
checkout bags, cutlery and straws. The regulations adopt a
staggered timeline to put the ban in place, beginning with
prohibitions on the manufacture and import of the identified
plastics for sale in Canada in the initial stage (effective
December 2022–2023) to a more total prohibition on
manufacture, import and export sales by the end of 2025.

15. Environmental Disclosure and Information

15.1 Self-Reporting Requirements

There are requirements to self-report environmental incidents or
damage to regulators in Canada. These requirements often apply to
spills or releases of environmentally harmful substances such as
oil, sewage and ozone-depleting substances. Larger spills or
releases may also be required to be reported to the public at
large.

In addition to legal requirements to report spills or other
environmental breaches, a failure to notify may be used against an
offender as evidence of conduct worthy of sanction via punitive
damages or an increased fine for a conviction.

15.2 Public Environmental Information

Canadian government agencies often publish environmental
information on their websites. The public may also request
government documents and information through access to information
requests, which apply to nearly all public authorities and bodies
and nearly all government documents.

15.3 Corporate Disclosure Requirement

The disclosure of environmental information in annual reports is
still largely voluntary in Canada. However, under Canadian
securities rules, reporting issuers (which are largely public
companies) must disclose all material information, including
material information about environmental and social issues. Report
issuers may also have disclosure obligations under the policies of
a particular stock exchange.

16. Transactions

16.1 Environmental Due Diligence

Environmental due diligence is typically conducted on M&A,
finance and property transactions in Canada. The level of due
diligence conducted may vary according to the level of risk a
particular property may present (such as a gas station or dry
cleaner).

Share Sale

In a share sale, all the assets and liabilities of the target
company remain with the company, meaning that the buyer will absorb
any outstanding environmental liabilities for historic
environmental damage or breaches of environmental law.

Asset Sale

In an asset sale, the buyer typically does not inherit the
pre-acquisition environmental liabilities associated with the
purchased assets. However, by law, the buyer may inherit liability
for the pre-existing environmental condition of the assets,
especially in the case of a contaminated site. A buyer may also be
liable where it takes over an ongoing situation of regulatory
non-compliance.

Review of Studies, Reports, etc

Typically, a purchaser of Canadian shares or assets will request
the relevant environmental studies, reports, permits, orders, key
correspondence from regulatory authorities and other critical
environmental documents from the vendor. A purchaser can also
search public registries for information regarding the target
company’s environmental compliance, conduct interviews with
senior environmental employees of the target company, or obtain an
environmental audit or site assessment.

Private companies may provide Phase I and Phase II assessments,
with Phase I inspections consisting of database and visual searches
while Phase II inspections consist of site inspection, sample
collection and analysis, and often the provision of a review and
recommendations regarding the site and potential remediation.

16.2 Disclosure of Environmental Information

Disclosure

There is little legislation that mandates the disclosure of
environmental information to a purchaser. In some jurisdictions,
for example, provincial legislation will require a vendor of real
property who knows or should know that the property has been used
for an industrial or commercial purpose to provide a site
disclosure statement to a prospective purchaser. More commonly, the
requirement to disclose environmental information to a purchaser is
built into Canadian contracts. Robust representations and
warranties regarding the property or the company’s
environmental status will create liability where those statements
prove untrue.

Warranties and Indemnities

There are no “typical” environmental warranties,
indemnities, or similar provisions in a share or asset sale; the
allocation of risk depends on the parties themselves. However, it
is common in Canadian business transactions to include
representations, warranties and indemnities that will affect the
allocation of environmental liability. Topics that may be covered
by these provisions include the state of the property, the absence
of contamination and the company’s environmental compliance
status. Often, such warranties and indemnities will be limited in
time.

17. Taxes

17.1 Green Taxes

In Canada, environmental taxes are imposed on activities or
products that have a negative impact on the environment. They are
designed to limit environmentally harmful behaviour through a price
incentive, and are levied on the tax bases of energy,
transportation, pollution and natural resources, among other
things. Examples include federal and provincial fuel consumption
taxes, and provincial taxes on mineral use, waste management and
carbon emissions. Other provisions may allow businesses to recoup
costs or receive accelerated depreciation write-offs for pollution
control or energy conservation equipment and machinery.

Contributing author: Kinji Bourchier

Originally Published by Chambers Global Practice
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