Waste Management of Canada Corporation v. Municipal Property Assessment Corporation, Region 26, 2020 CanLII 48636

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 13, 2020

FILE NO.: WR 164343

Assessed Person(s): Waste Management of Canada Corporation

Appellant(s): Waste Management of Canada Corporation

Respondent(s): Municipal Property Assessment Corporation, Region 26

Respondent(s): The Town of Petrolia and Lambton County

Property Location(s): 4052 Oil Heritage Road

Municipality(ies): The Town of Petrolia and Lambton County

Roll Number(s): 3819-000-060-13900-0000

Appeal Number(s): 3249152, 3313522, 3367097 and 3410453

Taxation Year(s): 2017, 2018, 2019 and 2020

Hearing Event No.: 729595

Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31

APPEARANCES:

Parties	Counsel
Waste Management of Canada Corporation	Robert Brazzell
Municipal Property Assessment Corporation	Jeffrey Feiner
The Town of Petrolia and Lambton County	Cynthia B. Kuehl

HEARD: March 3, 2020 in person

ADJUDICATOR(S): Jean-Paul Pilon, Member

DECISION

OVERVIEW

1The issue before the Assessment Review Board (the “Board”) in these appeals is one involving regulatory provisions that address the taxation of landfilling and waste management sites in Ontario.

2The landfilling and waste management site at issue in this decision is located at 4052 Oil Heritage Road in the Town of Petrolia and Lambton County (the “Subject Property”). The Subject Property includes two buildings: one known as a flare building and one known as a flare stack that were built in 2005 and 2009 respectively. These buildings are used to burn landfill gases which contain high levels of methane, a potent greenhouse gas.

3In 2011, Waste Management of Canada Corporation (“Waste Management”), in partnership with a licensed electricity distributor, additionally built what the parties to the appeals describe as a “landfill gas to energy facility” (referred to in this decision as the “Facility”), which generates electricity from the combustion of methane.

4The single question before the Board in these appeals is set out in an Agreed Statement of Facts (“ASF”), where the parties seek a determination as to “whether the Facility…should be excluded from the valuation of the land.”

Background / Areas of Agreement

The Subject Property

5The ASF sets out the uncontested factual background underlying the issue to be determined by the Board beyond the introductory facts stated above.

6The ASF notes that the landfilling site is currently open and receives waste not generated from its own operations. As noted above, the landfilling site predates the Facility.

7The Facility was built by Waste Management in partnership with the licensed electricity distributor also described above, Bluewater Power Corporation (“Bluewater”), which receives financial return on its investment. The Facility is operated by Waste Management which has a contract with the Independent Electrical System Operator (formerly Ontario Power Authority) for the sale of power to the power grid operated by Bluewater. The parties also agree that the Facility is expected to continue generating electricity once the landfill is closed.

A Summary of the Regulatory Background

8Landfills are regulated under the Environmental Protection Act, R.S.O. 1990, c. E.19 (“EPA”). They require Environmental Compliance Approvals (“ECA”) from the Ministry of the Environment, Conservation and Parks (“MECP”). The parties agree that the operations at the Subject Property have been compliant with its ECAs, including meeting the requirements of landfill gas collection.

9Regulations made pursuant to the EPA require that landfill sites, like the Subject Property, include environmental control mechanisms. These regulations also set out the standards and reporting requirements for operators of landfilling sites, including for the collection, burning and use of landfill gas, as described in more detail later in this decision. In the ASF, the parties further agree that “landfill gas may either be burned in a flare stack, which converts the methane to carbon dioxide, a less potent greenhouse gas, or can be used as a fuel for engines/turbines that generate electricity.”

10In the case of the Subject Property, the collection of landfill is mandatory. The landfill gas can then either be flared or used to generate electricity.

11The parties also agree that “the current value of the Subject Property shall be determined without regard to the value of the Flare Building and Flare Stack (their capitalization).” They say that “at issue in this appeal is whether the current value of the Subject Property should be determined without regard to the value of the Facility.”

12In the ASF, the parties provide two complete valuation scenarios for the taxation years that were at issue at the hearing, 2017, 2018 and 2019, the latter two of which were deemed appeals related pursuant to section 40(26) of the Act.

13After the hearing but before this decision was issued, a further appeal was deemed for the 2020 taxation year. By way of a joint post-hearing submission, the parties confirmed that these same valuation scenarios should apply to that taxation year as well.

14The first scenario would apply if the Facility is included in the valuation of the land, and the second, if the Facility is not included in the valuation of the land.

Issue for the Hearing

15The single issue for the Board to determine in the appeals is whether the Facility should be excluded from the valuation of the land.

16The Board agrees with the Municipal Property Assessment Corporation’s (“MPAC”) submission that arriving at an answer requires an analysis of two separate questions: first, is the Facility used “exclusively for landfilling activities?” and, second, is the Facility a “gas collection system?” The first question is important, because absent that exclusive use, the entire tax excluding section would not apply. The second question is important, because MPAC’s position is that the Facility is a “gas collection system,” a further condition precedent to the tax exclusion.

17The circuitous evolution of the parties’ positions in the course of these appeals is not recited here because it is not relevant to the issue to be decided. It is more important to note that, at the hearing, the only party to take the position that the Facility should be included in the value of the land was the Municipality.

18The Municipality argued that the burden of proof in this hearing lay with MPAC.

19The Board notes that section 40(17) of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”) provides that “where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.” In addition, regardless of the burden of proof, section 40(19) of the Act provides that “after hearing the evidence and the submissions of the parties, the Board shall determine the matter.”

20Here, MPAC’s burden of proof as set out in section 40(17) of the Act does not apply because the correctness of the current value of the land was not in dispute. The parties already determined what that value would be in each of two scenarios, depending on the Board’s determination in this decision on the single remaining issue in dispute. The question was instead whether the current value of the Subject Property should be determined without regard to the value of the Facility, where it was the Municipality that sought a decision that the Facility should not be excluded from taxation. As a result, the Board finds that it was the Municipality and not MPAC that had the burden of proof in this proceeding before the Board.

21In the hearing process set out by the Board, to which no party objected, it was the Municipality that made its submissions first. MPAC and Waste Management responded second and the Municipality replied third.

RESULT

22For the reasons that follow, the Board finds that the Facility should be excluded from the valuation of the land.

ANALYSIS

23For the reasons set out below, the Board finds first, that the Facility is on a portion of a landfilling site, and second, that the Facility is used for landfilling activities. It then determines that the exclusionary provision applies, because having determined that the Facility is on a landfilling site engaging in landfilling activities, it meets the requirement of exclusive use set out in the regulation.

Regulatory Provisions Pertaining to Landfills

24Amendments to O. Reg. 282/98 to the Act (the “Regulation”) were made following the submission of reports authored by John Wilkinson, who was retained to review the assessment of landfills in Ontario (the “Wilkinson Reports”). In those reports, Wilkinson recommended the creation of a new landfill property class, where none had existed previously. The result was section 43.2 of the Regulation, which essentially sets out a two-step process to the analysis.

1. The Exclusion Only Applies if Exclusively Used for Landfilling Activities: Section 43.2(1) of the Regulation

25The first provision of section 43.2 of the Regulation is that it “applies to any portion of land in a landfilling site… that is used exclusively for landfilling activities… (emphases added).”

26The italicized terms “landfilling site” and “landfilling activities” are defined in section 14.3(3) of the Regulation (and are given the same meaning in section 43.2 pursuant to section 43.2(5) of the Regulation). These are that a “landfilling site” is defined as “land for which an environmental compliance approval has been issued in respect of landfilling activities.” The term “environmental compliance approval” within that definition is defined as “an environmental compliance approval within the meaning of the EPA.”

27“Landfilling activities” is defined as “activities related to the operation of a landfilling site…but does not include on-site thermal treatment of the waste or the transfer, sorting, shredding, recycling or composting of the waste.”

2. Current Value

28If the land in a landfilling site is used exclusively for landfilling activities, the analysis would then move on to determine whether the Facility is one described in section 43.2(3)(b) of the Regulation. This provides that “the current value of the land shall be determined without regard to the value of…structures, machinery, equipment or fixtures that are associated with…gas collection systems (emphasis added).” “Gas collection system” is also defined in section 43.2(5) of the Regulation as “facilities to detect, monitor, collect, redirect, treat, utilize or vent landfill gasses.”

29The ASF also notes that regulations made pursuant to the EPA provide that…

landfill gas can be controlled either by burning and/or using it. Landfill gas may either be burned in a flare stack, which converts the methane to carbon dioxide, a less potent greenhouse gas, or can be used as a fuel for engines/turbines that generate electricity.

30An email from an MECP official appended to the ASF indicated that landfill gas collection is mandatory, that “MECP only regulates methane capture for landfill sites, (and) the site owner can choose either to flare or use (sic) to generate electricity.” The email goes on to say that “(A)s such the Waste ECA does not have requirement (sic) for power generation facility” but that “due to exhaust gas emission (sic), the power facility shall have an approval” pursuant to the EPA.

31All of this prefaces the analysis below on the two questions to be answered: is the Facility used “exclusively for landfilling activities?”; and, is the Facility a “gas collection system?”

Statutory Interpretation

32The essential approach taken by the Board on statutory interpretation principles was set out in Bela Acres Holding Inc. v. Toronto (City), 2019 CanLII 64631 (ON ARB) (“Bela Acres”) at paras. 26 to 31.

33In that decision, the Board adopted the modern approach to statutory interpretation in Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 SCR 27 (“Rizzo Shoes”) at para. 21, that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.” That decision then noted that if such an analysis gives rise to more than one interpretation, the Board is to look to “the context of the provision, the scheme of the Act, the object of the Act, and the intention of the Legislature.”

Issue 1 - Is the Facility used “exclusively for landfilling activities”?

34The first provision of section 43.2 of the Regulation is that it “applies to any portion of a landfilling site… that is used exclusively for landfilling activities.”

Landfilling Site

35As noted above, a landfilling site is “land for which an environmental compliance approval has been issued in respect of landfilling activities.” The Municipality argued that Waste Management had been meeting its obligations using the flare buildings alone before it built the Facility. As a result, it took the position that the landfilling site could not be extended to include the Facility.

36Assuming the Facility is engaged in a “landfilling activity”, a question that is addressed below, there is nothing in this part of the Regulation that would prevent environmental compliance approvals from being modified to address the evolution of landfilling sites over time. A plain reading of this part of the Regulation merely sets out the requirement of approval, and the parties acknowledged that all parts of the landfilling site at all times had such approval, including the Facility.

37The Board therefore finds that the addition of the Facility does not change the central fact that it is situated on a portion of a landfilling site.

Landfilling Activities

38The definition of “landfilling activities” includes “activities related to the operation of a landfilling site” including “environmental control activities on the landfilling site.” The definition has a number of exclusions, but none of those exclusions relate to the generation of electricity (the function of the Facility), or the sale of electricity generated.

39The term “environmental control activities” within the definition of “landfilling activities” is not defined. MPAC argued environmental control is the function of the Facility in controlling the discharge of contaminants through the generation of electricity. The Municipality argued that the Facility is not an environmental control activity because the Facility was not required where the landfill had otherwise been compliant with its ECAs.

40The Board concurs with MPAC on this point because the process of using landfill gases to create electricity is a known method of dealing with such gases, and that activity is compliant with the regulatory scheme within which it is operating. It is an interpretation that is harmonious with the scheme of this part of the Regulation, which specifically enumerates exceptions in the definition.

41As a result, the Board finds that the Facility is an environmental control facility as captured by the definition

Exclusivity and the Sale of Electricity

42Having determined that the Facility is on a portion of a landfilling site and that it is engaged in landfilling activities, the next question is whether the landfilling site is being used exclusively for landfilling activities. On this point, the Municipality argued that the use is not exclusive because the property is being used to generate electricity for sale.

43The Municipality argued the facts of this case are analogous to those that were before the Board in 2317089 Ontario Ltd. v. Municipality Property Assessment Corporation, Region 05, 2018 CanLII 241 (“2317089”).

44In 2317089, solar panels had been installed on the roofs of barns, where the electricity generated using those solar panels was sold to the Ontario Power Authority. MPAC changed the classification of the land from farm and vacant land to industrial because the solar panels were no longer an “ancillary installation on the rooftop of a building or other structure,” the requirement pursuant to section 42.3(1) of the Regulation for the farm and vacant classifications. In its decision, the Board concurred with the reclassification, finding that the solar panels were not ancillary installations because their installation was a primary use of the property for the years in question. The Board therefore confirmed the assessments.

452317089 is distinguishable from this case. Factually, the circumstances are not analogous, where 2317089 addressed solar panels on barns and this proceeding involves landfills. 2317089 also applied an entirely different part of the Regulation applicable to that context, and it is schematically different from the part of the Regulation considered here. They are different provisions applicable to different circumstances.

46The factual circumstances underlying 2317089 and this case both involve the sale of electricity. However, the issue in 2317089 was the “ancillary” sale of electricity and the issue here is whether Waste Management’s use of the landfill facility is exclusively for landfilling activities.

47In 2317089, the Board determined at para. 21 that the purpose of the applicable regulations was “to ensure that property tax does not act as a disincentive to energy generation, particularly small-scale generation by persons who are not ordinarily in the business of power generation.” The amendment to the Regulation to address landfills had an entirely different purpose and distinguishing scope that went beyond small-scale electricity generation on barn roofs. This is set out at page 9 of Wilkinson’s April 2016 report, when he wrote that cell liners and methane gas capture equipment should “be excluded from the assessed value to recognize the greater good of these features.”

48Wilkinson also observed at page 8 of the same report that “property taxes are not consequential in the context of the overall operating costs and revenues of landfill sites,” where the purpose of the applicable regulations in 2317089 was specifically to ensure that tax did not act as a disincentive to small-scale electricity generation. These are entirely different scenarios.

49This determination is further supported by the fact, pointed out by Waste Management in its submission, that the generation of electricity in 2317089 was unrelated to other activities on the land, where the generation of electricity here is directly related to managing landfill gases on the land.

50As a result, the Board finds the 2317089 decision to be of no precedential value in determining the question before the Board in these appeals.

51The Municipality argued that the sale of the electricity generated by the Facility which produces a financial return is inconsistent with its use as a landfilling site and as an environmental control measure. The Municipality further argued that there is no requirement for the Facility to produce any environmental benefit, any benefit in the public interest, nor was there any requirement under the existing ECA or the EPA regulations for the manufacture and sale of electricity. It contrasted this with the flare building and the flare stack which burn landfill.

52The Board returns, however, to the definition of “landfilling activities” which can include both the generation of electricity, as determined above, and the sale of that electricity. This is because that definition essentially has two parts, the first which includes those activities that are included in the definition, and, in the second part, those activities that are not included.

53The Board determined above that the generation of electricity is included as “environmental control activities on the landfilling site.” The definition then has a number of exclusions: “on-site thermal treatment of the waste or the transfer, sorting, shredding, recycling or composting of the waste.” The Board finds that it must be the case, where if the Facility is an “environmental control activity,” that any limitations would have been specified in the excluding part of the definition.

54The Municipality argued that environmental control facilities should not include a facility that generates power and then sells it, because the landfill was compliant with its ECA without it and the Facility was not a requirement. In fact, the MECP email referred to above indicates that a landfill owner can make the choice as to whether to flare or generate electricity. In addition, MECP approved the addition of the Facility.

55The Municipality further argued that the Facility should belong in the industrial property class because that classification includes “land used to manufacture or transform electricity.” The Municipality’s position was that it would be unfair to other electricity manufacturers for the Facility to be considered otherwise. However, the issue before the Board is not classification; it is instead whether the Facility should be excluded from the valuation of the land, as clearly set out in the ASF.

Finding on Issue 1

56For these reasons, the Board finds that the Facility is used exclusively for landfilling activities.

Issue 2 - Is the Facility a “gas collection system”?

57As noted above, the second question is to determine whether the Facility is a “gas collection system” pursuant to section 43.2(3)(b) in which case the current value of the land would be determined without regard to the Facility. A “gas collection system” is defined in section 43.2(5) as “facilities to detect, monitor, collect, redirect, treat, utilize or vent landfill gases.”

58As a result of the analysis below, the Board finds that the Facility is, in fact, a “gas collection system.”

ECAs

59As noted earlier, the parties acknowledge in the ASF that the Facility has been compliant with its ECAs which have been amended over time.

60The first point is that these ECAs appended to the ASF, particularly the one dated February 28, 2011 (on its first page) the same year the Facility was built, and the following one issued on April 4, 2014, each made reference to both a “gas collection system” (at para. 45) and a “gas utilization facility” (at para. 36 of Schedule “A”). The former is exactly the term used in section 43.2(3)(b) of the Regulation, and, regarding the latter, section 43.2(5) of the Regulation defines “gas collection system” as “facilities to…utilize...landfill gases.” These ECAs were issued pursuant to the EPA and prior to the Wilkinson Reports, but the Board finds there must be meaning in the fact that the applicable amendments to the Regulation, which were the result of the Wilkinson Reports, use identical and almost identical terminology.

Limited Class Rule

61The Municipality cited the statutory interpretation principle ejusdem generis, also known as the Limited Class Rule, which holds that “where a class of things is modified by general wording that expands the class, the general wording is usually restricted to things of the same type as the listed items” (Schnarr v. Blue Mountain Resorts Limited, 2018 ONCA 313 at para. 52(i)).

62In the Municipality’s submission, the specific terms in the definition of “gas collection system” in the Regulation, such as “detect”, “monitor”, “treat” and “vent”, point to an environmental protection purpose consistent with Wilkinson’s recommendations.

63In its submission, the more general terms, “collect”, “redirect” or “utilize”, should be “read together with these other terms to restrict their interpretation to referring to when landfill gasses as collected, redirected, or utilized for an environmental purpose.”

64This would, in the Municipality’s submission, be consistent with the “public interest/environmental protection purpose of these provisions, as revealed in the Wilkinson Reports.”

65The Limited Class Rule as quoted by the Municipality applies to a provision structured such that specific items are narrower than the ones that follow, because Sullivan and Driedger on the Construction of Statutes, 4^th ed. at page 178 says that “the class inferred from the list of specific items must be narrower in scope than the general words that follow in the list.” A correct example provided by Waste Management in its written submission suggested this rule of interpretation should apply in a clause referring to “automobiles, trucks, tractors, motorbikes and other vehicles” where other vehicles would not include airplanes applying the rule.

66In this case, however, the Municipality rearranged the provision to make it fit with its submission, which is not a correct application of the rule. In fact, this definition in the Regulation is only a listing of the functions performed by a gas collection system that cannot be said to include terms more specific or general than the others. In addition, there is no obvious common denominator in the definition that would narrow the scope of any general term. The Board therefore finds the Limited Class Rule has no application in these circumstances.

Use and Utilize

67The Municipality also pointed out the unique use of the term “utilize” in the definition of “gas collection system”, where the term “use” is used elsewhere in the Regulation. This, the Municipality argued, means that it should have a different and more technical meaning that alludes to an environmental protection purpose, which would have followed Wilkinson’s recommendation in his reports. The Facility, in the Municipality’s submission, “uses” the landfill gases to generate profit, where the term “utilize” in the definition of “gas collection systems” suggests some other activity.

68The Board disagrees and finds that the terms “use” and “utilized” are used interchangeably and without distinction. This is because the verb “utiliser” is used in the French version of the Regulation interchangeably for the English term “utilize” as well as for the term “use”, where section 65 of the Legislation Act, S.O. 2006, c. 21 provides that “the English and French versions of Acts and regulations that are enacted or made in both languages are equally authoritative.” This means that if the terms are used interchangeably in French, there is no reason they should be different in English.

69The Regulation was the result of the Wilkinson Reports where the recommendation was that “methane gas capture equipment…should be excluded from the assessed value to recognize the greater public good of these features.” The flare stack and flare building are excluded from taxation on that basis pursuant to the Regulation. In the Municipality’s submission, the Facility should not be excluded because it generates and sells electricity instead of burning it.

70The Board concurs with the Municipality’s submission that MPAC’s references to provincial landfill gas capture guidelines, which indicate in their preface that they have been drafted for convenience only, and the 2016 Paris Agreement on reducing greenhouse gas emissions referred to in MPAC’s written material, were not in evidence. The Board therefore agrees that they cannot be relied upon in the determination of this issue before the Board.

71At the same time, however, the Board concurs with MPAC’s further submission that it would be illogical that one activity dealing with landfill waste would be excluded from taxation and not the other. This is because the drafters of the Regulation could have excluded the generation and sale of electricity from the definition of gas collection system but did not. There is nothing in the definition to suggest that these activities would be inconsistent with any other aspect of a gas collection system in the definition.

72Moreover, as noted previously, the parties agree in the ASF that the Regulation provides that “landfill gas may either be burned in a flare stack, which converts the methane to carbon dioxide, a less potent greenhouse gas, or can be used as a fuel for engines/turbines that generate electricity.” They further agree that these recommendations were the result of Wilkinson’s recommendations, including that cell liners and methane gas capture equipment “be excluded from the assessed value to recognize the greater public good of these features (April 2016 report at page 9).”

73In Bela Acres the Board determined that “the context of the provision, the scheme of the Act, the object of the Act, and the intention of the Legislature” should be considered in the event if an analysis gives rise to more than one interpretation. In this case, it is the Wilkinson Reports that set out the context, scheme, object and intention of the intended additions to the Regulation, and it would be illogical, inconsistent and contrary to the public interest for there to be an exclusion on the flare buildings that simply burn methane gases, and no exclusion for the Facility that uses those gases productively to generate electricity.

Finding on Issue 2

74The Board therefore concludes that the Facility is a “gas collection system.”

CONCLUSION

75The Board finds that the Facility is on a landfilling site that is used exclusively for landfilling activities, and that it is a gas collection system pursuant to the Regulation. As a result, the Board finds that the current value of the land shall be determined without regard to the Facility.

ORDER

76As a result of the above determination and the parties’ agreement in the ASF as to what the current value of the Subject Property should be in the event of that determination, the Board finds follows.

77The correct current value of the landfilling and waste management site located at 4052 Oil Heritage Road in the Town of Petrolia and Lambton County is $1,105,000 for the 2017, 2018, 2019 and 2020 taxation years apportioned as follows: $573,000 in the landfill property tax class (HT) and $532,000 in the commercial – new construction property tax class (XT).