Spot the Trend: Increasing Environmental Penalties in Canada

On March 26, 2021, Teck Coal Limited (“Teck Coal”) entered a guilty plea on two counts of unlawfully depositing a deleterious substance into water frequented by fish, contrary to s. 36(3) of the Fisheries Act. Teck Coal was ordered to pay a total of $60 million in fines and monetary court orders arising from the infractions under the Fisheries Act. In addition to the monetary penalty, Teck Coal was ordered to comply with direction given under the Fisheries Act requiring pollution reduction measures.[2] The charges resulted from an investigation by Environment and Climate Change Canada (“ECCC”), which concluded that Teck Coal’s operations were depositing deleterious coal mine waste rock leachate (consisting of selenium and calcite) into the upper Fording River in southeastern British Columbia.[3]

This article examines the trend of increasing penalties in Canada resulting from prosecution of environmental offenses.

Shift in Policy?

The penalty to Teck Coal is the highest ever imposed by a Canadian court for violation of the Fisheries Act and the majority of the fine, $58 million, will go to the Government of Canada’s Environmental Damage Fund. By imposing this large fine, the Government of Canada appears to be taking an aggressive stance in relation to environmentally damaging conduct. Does this indicate a shift in policy on a broader scale?

Trend of Increasing Environmental Penalties in Canada

There appears to be a trend of increasing penalties for environmental offences in Canada as environmental issues continue to be at the forefront of public and political discussion. Governments at both the Federal and Provincial levels continue to seek stiff penalties for individuals and corporations that break the law.

The Canadian Environmental Protection Act 1999 (“CEPA, 1999”) came into force in March 2000 with the aim to prevent pollution and protect the environment and human health. Building on the legislative framework introduced under CEPA, 1999, the Environmental Enforcement Act (“EEA”) was introduced in stages:

• Stage 1 in December 2010 wherein the bulk of the EEA came into force;
• Stage 2 in June 2012 wherein amendments related to the fine regime and sentencing provision of CEPA, 1999 came into force with an accompanying regulation to allow enforcement with increased penalty provisions;
• Stage 3A in June 2017 wherein the Environmental Violations Administrative Monetary Penalties Regulations (“EVAMP”) came into force, enabling the use of administrative monetary penalties for certain violations of legislation administered by the ECCC;
• Stage 3B in July 2017 wherein all remaining amendments to the Canada Wildlife Act, Migratory Birds Convention Act, 1994 and Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act came into force; and
• Stage 4 in December 2020 commenced the beginning of the mandatory review of fine and sentencing provisions of the Acts enforced by ECCC.

The EEA established a stiffer penalty regime to give the Federal Government a stronger tool to use when pursuing environmental offenders and sanctioning harmful conduct. The EEA strengthened and harmonized enforcement regimes under nine of Canada’s Federal environmental statues. ECCC is responsible for the administration and enforcement of the pollution prevention provisions of the Fisheries Act and the enforcement provisions in other legislation under the EEA.

In many cases, the Federal officers (as members of ECCC and certain other agencies) will coordinate their investigations and efforts with the respective Provincial environmental authorities or ministry. In Alberta, the Environmental Protection Enhancement Act (“EPEA”) operates to promote the protection and wise used of the environment. Fines and penalties can be issued when an individual or corporation contravenes the provisions of the Act.

Recent Trend of Environmental Fines in Canada

Our review indicates that since 2014 there has been an increasing number of fines over $1 million issued in Canada. There are examples of large fines prior to this time, however, amendments to the Fisheries Act in 2012 and other factors appear to have resulted in precedents for larger penalties in recent years. In our view, one of these other factors is the “ratcheting-up” effect of increasing fines. Essentially, as fines increase, the baseline for assessing a penalty also increases. The effect is that the baseline continues to rise and accordingly so will the penalties ultimately issued. Inflation also contributes to the “ratcheting-up” effect as there is often a perception that penalties should increase commensurate with the purchasing power of the dollar. As an illustrative example, when looking at precedents in consideration of an appropriate sentence, a penalty of $200,000 issued for an offence 10 years ago would be viewed in the context of how much that amount was worth at the time, and a penalty of $250,000 may be viewed as comparable for a similar offence today.

Each matter is unique and will turn on the specific facts, however, in our view there is little doubt that environmental penalties are increasing in Canada. The following discussion looks at a number of the more significant penalties in recent years.

2014:

Bloom Lake:

After pleading guilty to 45 charges under the Fisheries Act, Bloom Lake General Partner Limited (“Bloom Lake”) was ordered to pay $7.5 million in relation to several incidents including the breach of a tailings pond dam in Quebec. Infractions at the Bloom Lake mining site included releases of non-compliant effluent and ferric sulfate into fish bearing water. A likely aggravating factor taken into account for the stiffness of the penalty was Bloom Lakes’ failure to follow direction given by the Inspector.[4]

For a time, the Bloom Lake penalty was the largest fine ever imposed in Canada for environmental infractions. Over 200,000 cubic meters of deleterious substances was released following the breach of the Triangle Tailings Pond dam and the value of the fine likely reflected the severity level of the release.

2016:

Gwaii Wood Products:

In January 2016, three companies were fined a total of $2.2 million and other penalties for offences committed in October 2010. The provisions of the Fisheries Act in force in 2010 applied in this case as the new legislation came into force after the offences were committed but before the case made its way to court.

The three corporate defendants were involved in logging operations in British Columbia. Each conviction arose from harmful alteration, destruction, or disruption of fish vegetation near tributaries which fed into the Kumdis Bay Estuary, Mallard Creek and Mallard Creek itself, all in violation of Section 35(1) of the Fisheries Act.[5]

Teck Metals:

In March 2016, Teck Metals Ltd., (“Teck Metals”) pleaded guilty to three offences under the Fisheries Act and was ordered to pay a $3 million penalty for numerous deleterious effluent discharges into the Columbia River in British Columbia.

Teck Metals discharged substances including effluent which contained copper, cadmium, chlorine or pH and ammonia that were all present in high enough concentrations to be harmful to fish. Over 125 million liters of effluent was released between November 2013 and February 2015.[6]

2017:

Canadian National Railway:

Canadian National Railway Company (“CN”) pleaded guilty and was fined $2.5 million in relation environmental infractions that occurred in April 2015. The investigation determined that the oil-water separator and fuel storage system at Bissell Yard in Alberta was not compliant with the applicable Regulations, which caused about 90 liters of diesel to be released to the storm sewer. CN attracted the largest of its fines for deposit of a deleterious substance to fish-bearing water, in violation of the Fisheries Act, resulting in a $2 million penalty.

In addition to the Federal penalties, CN was fined $125,000.00 under Alberta’s EPEA for release of a substance that may cause a significant adverse effect and failure reasonably remediate after a release to the environment.[7]

Prairie Mines:

In June 2017, Prairie Mines & Royalty ULC (“Prairie Mines”) pleaded guilty to two offences contrary to the Fisheries Act and was sentenced to pay a monetary penalty of $3.5 million. In addition to the fines under the Federal legislation, Prairie Mines pleaded guilty to one count under Alberta’s EPEA and was given further penalties.

These charges arose from a spill at the Obed Mountain Mine. A dike that was holding back waste water at the mine failed, resulting in over 670 million liters of contaminated water and sediment spilling into the Apetowun Creek and Plante Creek which impacted the Athabasca River.[8]

Sherritt:

On October 3, 2017, Sherritt International Corporation (“Sherritt”) pleaded guilty to three counts under the Fisheries Act in relation to the Coal Valley Mine spill which occurred near Edson, Alberta. In August 2012, ECCC officers visited the mine and determined that effluent deposited from a wet water pond was deleterious to fish. A direction was issued under the Fisheries Act compelling Sherritt to stop the deposit. However, following a subsequent investigation, it was revealed there were two previous effluent releases from the same waste water ponds into the Erith River (part of the Athabasca River watershed) in July 2011. Sherritt was fined $1.05 million for the violations.[9]

Teck Resources:

In October 2017, Teck Resources Ltd., (“Teck Resources”) was fined $1.425 million for three violations of the Fisheries Act. The charges stemmed from an investigation in 2014 which concluded that Teck Resources was releasing harmful effluent into Line Creek, a British Columbia waterway with a high fisheries value. Several dead fish were spotted in ponds near Teck Resources’ Line Creek coal operation near Sparwood in southeastern British Columbia.[10]

2018:

Irving Pulp:

On November 5, 2018, Irving Pulp & Paper Limited (“Irving Pulp”) was ordered to pay a $3.5 million penalty following pleading guilty to three offences under the Fisheries Act. In addition to the fine, Irving was given direction pursuant to the Fisheries Act to implement appropriate planning to work toward building a new effluent treatment system.[11]

The charges arose from several infractions that occurred between June 2014 and August 2016 wherein improperly treated and deleterious effluent was released into the St. John’s River in New Brunswick.

2019:

Syncrude:

Syncrude Canada Ltd., (“Syncrude”) was ordered to pay a fine of $1.775 million in relation to one count of violating the Migratory Birds Convention Act, 1994. Syncrude was charged with depositing or permitting the deposit of a substance that is harmful to migratory birds as 31 great blue herons were found deceased in an abandoned sump near Fort McMurray, Alberta. Additionally, Syncrude pleaded guilty to one count under Alberta’s EPEA and was ordered to pay an additional fine of $975,000.[12]

Kirby:

Kirby Offshore Marine Operating LLC (“Kirby”) plead guilty to three charges of violating Federal legislation in relation to a spill from the ‘Nathan E. Stewart’ vessel into the Seaforth Channel near Bella Bella, British Columbia on October 13, 2016. The tugboat ran aground, resulting in the release of approximately 107,552 liters of diesel fuel and 2,240 liters of lubricants into the water. Both substances are deleterious to fish and migratory birds. Kirby Offshore Marine Operating LLC owned the Nathan E. Stewart.[13]

Kirby was given the following fines:

• $2.7 million for the offence of depositing a deleterious substance into water frequented by fish, in violation of the Fisheries Act;
• $200,000 for the offence of depositing a substance harmful to migratory birds, in violation of the Migratory Birds Convention Act, 1994; and
• $5,000 for the offence of failing to comply with the pilotage requirements under the Pilotage Act.[14]

Husky Oil:

In June 2019, Husky Oil Operations Limited (“Husky Oil”) was ordered to pay $2.7 million in fines for one count of violating the Fisheries Act and one count of violating the Migratory Birds Convention Act, 1994. The charges arose from an incident in July 2016 where 225,000 liters of heavy crude oil leaked from a Husky Oil pipeline, near Lloydminster, on the Saskatchewan side of the border. Of the total leakage, 90,000 liters entered the North Saskatchewan River.[15]

Husky Oil also pleaded guilty to one violation under the Saskatchewan Provincial environmental legislation for this incident.

2020:

Volkswagen Aktiengesellschaft

In January 2020, Volkswagen Aktiengesellschaft (“Volkswagen”) was ordered by the Ontario Court of Justice to pay a $196.5 million fine after pleading guilty to 60 charges for offences under CEPA, 1999; 58 counts for unlawfully importing vehicles into Canada that did not conform to prescribed vehicle emissions standards, and 2 counts for providing misleading information. The fine was directed to the Government of Canada’s Environmental Damages Fund. This was by far the largest environmental fine in Canadian history; however, it is somewhat on an outlier given the highly unique facts. This matter was part of Volkswagen’s global emissions cheating scandal where they faced hefty penalties in several countries.[16]

Drever:

On February 18, 2020, Drever Agencies Inc., (“Drever”) pleaded guilty to an offence under the Fisheries Act in relation to a charge for depositing a deleterious substance into water frequented by fish and was fined $1.25 million.

The ECCC responded to a solvent spill located on commercial property in Wetaskiwin, Alberta. The investigation determined that approximately 1800 liters of Petrosol solvent leaked from a storage tank owned by Drever and entered a nearby creek. Through laboratory analysis, it was confirmed that the solvent was deleterious and harmful to fish.[17]

2021:

Gibson:

In March 2021, Gibson Energy ULC and GEP ULC (collectively “Gibson”) was fined $1.5 million for two counts of violating the Fisheries Act. The charges arose from an incident that occurred in March 2014 when employees located a leak in the fire suppression system. From the leak site, chlorinated water escaped the system and entered an unnamed creek and the North Saskatchewan River. The chlorinated water was of a sufficient level to be harmful to fish in the river.[18]

What to Expect in the Future

Based on the trend in the recent years, there is little doubt that governments will seek, and courts will impose significant fines for contraventions of various Federal and Provincial environmental legislation. Powerful sentencing provisions, particularly in Federal legislation, give governments a strong tool to make offenders pay. The prevalence of stiff penalties and “ratcheting-up” effect often leads to fines that sting, which can no longer be viewed as a cost of doing business.

For more information on these issues and how they may affect you or your business, please contact Sean Parker in Edmonton, Michael Barbero in Calgary or another member of our Energy, Environment and Regulatory Practice Group.