Palmer Road Properties Corp. v. Ontario (Environment, Conservation and Parks), 2018 CanLII 107726

Environmental Review Tribunal

Tribunal de l'environnement

ISSUE DATE: November 05, 2018

CASE NO.: 11-176

PROCEEDING COMMENCED UNDER section 140(1) of the Environmental Protection Act, R.S.O. 1990, c.E.19, as amended

Appellant: Palmer Road Properties Corp. (ERT Case No. 11-176)

Appellant: Sidney Street Properties Corp. (ERT Case No. 11-177)

Appellant: Nortel Networks Limited/ Corporation Nortel Networks Limitée (ERT Case No. 11-178)

Appellant: Corporation of the City of Belleville (ERT Case No. 11-183)

Respondent: Director, Ministry of the Environment, Conservation and Parks

Subject of appeal: Order issued under sections 18, 196 and 197 of the Environmental Protection Act regarding the discharge of contaminants impacting groundwater

Reference No.: 8835-8J4QRU

Property Address/Description: 250 Sidney Street

Municipality: City of Belleville

ERT Case Nos.: 11-176

ERT Case Name: Palmer Road Properties Corp. v. Ontario (Environment, Conservation and Parks)

Heard: October 23, 2018 by telephone conference call

APPEARANCES:

Parties	Counsel
Nortel Networks Limited/Corporation Nortel Networks Limitée	Alexandria Pike
Corporation of the City of Belleville	David DeMille
Sidney Street Properties Corp. and Palmer Road Properties Corp.	Ian Brady
Director, Ministry of the Environment, Conservation and Parks	Paul McCulloch

DECISION DELIVERED BY HUGH S. WILKINS

Background

1Nortel Networks Limited/Corporation Nortel Networks Limitée ("Nortel") operated a manufacturing business at 250 Sidney Street ("Site") in the City of Belleville ("City") from roughly 1947 to 2000. The Site was sold in 2000 to Sidney Street Properties Corporation ("Sidney Street Properties"). Sidney Street Properties in turn subdivided the property and sold a portion to Palmer Road Properties Corporation ("Palmer Road Properties") and another portion to the City.

2In September 2011, Trevor Dagilis, Director, Ministry of the Environment (now the Ministry of Environment, Conservation and Parks ("MECP")), issued Director's Order No. 8835-8J4QRU ("Director's Order") to Nortel, the City, Palmer Road Properties, and Sidney Street Properties. The Director's Order addresses impacts from contamination by volatile organic compounds ("VOCs"), including trichloroethylene ("TCE"), and their breakdown products on groundwater at the Site. The Director's Order requires, among other things, that the orderees conduct remediation and monitoring work with respect to the Site.

3Nortel obtained protection under the Companies' Creditors Arrangement Act ("CCAA") in 2009 and it has been subject to the oversight of the Ontario Superior Court of Justice (Commercial List) ("Superior Court") with respect to issues regarding its insolvency.

4In September 2011, Nortel, Sidney Street Properties, Palmer Road Properties, and the City appealed the Director's Order to the Environmental Review Tribunal ("Tribunal"). Since that time, assessment and remediation work has been continued with respect to the Site and the Parties have regularly updated the Tribunal as work has progressed. The Tribunal convened numerous telephone conference calls ("TCCs") at which it was informed of the Parties' efforts to resolve the matters and at which procedural issues were addressed and Orders staying the Director's Order were issued.

5The properties owned by Sidney Street Properties and Palmer Road Properties were sold in 2017 to 2589989 Ontario Inc. ("2589989 Ontario"), which is a subsidiary of Toronto Capital Corporation. 2589989 Ontario is not a party to these proceedings.

6On October 18, 2018, Nortel informed the Tribunal by email correspondence that the parties had reached a proposed settlement with respect to the appeals. As part of the proposed settlement, each of the Parties agreed that it would withdraw its appeal and the Director agreed to have the Director's Order revoked in its entirety. The proposed settlement stems from an agreement reached between the MECP and Nortel on October 10, 2018 with respect to the MECP's claim in the CCAA proceedings. The Superior Court approved that agreement on October 17, 2018.

7On October 23, 2018, the Tribunal convened a settlement TCC at which it received evidence and heard submissions on the proposed withdrawals, revocation and dismissal. For the reasons that follow, the Tribunal accepts the proposed withdrawals of all of the appeals, revokes the Director's Order in its entirety and dismisses the proceeding.

Relevant Legislation and Rules

8The following are the relevant provisions of the Environmental Protection Act ("EPA") and the Tribunal's Rules of Practice ("Rules"):

EPA

Purpose of the Act

3.(1) The purpose of this Act is to provide for the protection and conservation of the natural environment.

Tribunal's Rules

Termination of Proceedings

198. A Proponent or Applicant who proposes to withdraw an application, an Appellant who proposes to withdraw an appeal, or a Director, Risk Management Inspector or Official, Authority or municipality who proposes to revoke a decision that is the subject of the appeal shall notify the Tribunal, other Parties, Participants and Presenters by letter. Any Party, Participant or Presenter who objects to the proposed withdrawal of an appeal or revocation, with the exception of the revocation of an order made under section 74 of the Ontario Water Resources Act, shall notify the Tribunal and the other Parties, Participants and Presenters within ten days of the date of the letter.

199. Where there has been a proposed withdrawal of an appeal as part of a settlement agreement not objected to by any Party that alters the decision under appeal, the Tribunal shall review the settlement agreement and consider whether the agreement is consistent with the purpose and provisions of the relevant legislation and whether the agreement is in the public interest. The Tribunal shall also consider the interests of Participants and Presenters. After consideration of the above factors, the Tribunal may decide to continue with the Hearing or issue a decision dismissing the proceeding.

200. Where a Director, Risk Management Inspector or Official, Authority or municipality proposes to revoke a decision that is the subject of an appeal, the Tribunal shall consider whether the proposed revocation is consistent with the purpose and provisions of the relevant legislation and whether the proposed revocation is in the public interest. The Tribunal shall also consider the interests of Parties, Participants and Presenters. After the consideration of the above factors, the Tribunal may decide to continue with the Hearing or issue a decision dismissing the proceeding.

Issues

9The issues to be addressed are whether the Tribunal should accept the proposed withdrawals of the appeals, accept the proposed revocation of the Director's Order, and dismiss the proceedings under Rules 201 and 202.

Discussion and Analysis

10Where there has been a proposed withdrawal of an appeal as part of a settlement agreement not objected to by any Party that alters the decision under appeal, or where the Director proposes to revoke the decision that is the subject of an appeal, the Tribunal must consider under Rules 201 and 202 whether the proposed withdrawal is consistent with the purpose and provisions of the relevant legislation (in this case the EPA) and whether it is in the public interest. In these regards, the Tribunal must also consider the interests of parties, participants and presenters. The Tribunal has the discretion either to continue with the proceeding or to dismiss it.

11In the present case, none of the Parties objects to the withdrawal of the appeals or revocation of the Director's Order and none opposes the dismissal of the proceedings. There are no participants or presenters in this proceeding. 2589989 Ontario Inc., which has an interest in this matter, does not object to the proposed withdrawals of the appeals, revocation of the Director's Order or dismissal of the proceedings. The Tribunal was informed that owners of affected lands in the vicinity of the Site have been notified of the proposed settlement and none have raised objections to it.

12Under Rule 198, each Appellant that wishes to withdraw its appeal must notify the Tribunal and the other Parties of the proposed withdrawal. In the present case, each of the Appellants was on the TCC on October 23, 2018 and acknowledged notification of the others' proposals to withdraw their appeals. The Tribunal notes that the 10-day period required for providing notice has passed and no objections have been received.

13In support of the proposed settlement, Nortel filed an affidavit sworn by Leanne Burns, dated October 18, 2018. Ms. Burns is an environmental engineer with Golder Associates Ltd. ("Golder Associates"). Golder Associates was retained by Nortel in 1999 to undertake investigatory and monitoring, sampling and remediation and restorative actions related to the Site. Golder Associates conducted a risk assessment, implemented risk management measures and engaged in closure planning.

14In her affidavit, Ms. Burns stated that Nortel's initial remediation efforts at the Site included:

• implementation of in-situ chemical oxidation in the northwestern portion of the Site and to the north of the Site as well as at the southeast corner of the Site and south of the Site;
• installation of a groundwater extraction and collection system in the southeast portion of the Site; and
• implementation of a recovery system for impacted groundwater from sumps located within the building on the Site.

15Since the filing of the appeals, Nortel undertook further investigations, groundwater monitoring and in-situ chemical oxidation, which culminated in its Restorative Action Plan, dated March 2016. That Plan proposes a risk assessment approach to environmental management of portions of the Site and affected neighbouring properties. Ms. Burns stated that risk assessments were undertaken for VOC impacts at the Our Lady of Fatima Catholic School ("School") property, which neighbours the Site to the north, and at several residential, commercial, industrial and community properties in the vicinity of the Site. She said the risk assessments were reviewed and revised based on comments received from MECP and the environmental consultants retained by the other orderees under the Director's Order.

16Ms. Burns stated that the risk assessment at the School concluded that potentially unacceptable human health risks exist there. To address these risks, she said risk management measures were established including: (1) vapour intrusion mitigation for the existing school building through the implementation of a sub-slab depressurization system to address known indoor air impacts; and (2) implementation of a health and safety plan to address potential inhalation of vapours by maintenance workers.

17She stated that Nortel's risk assessments on- and off-Site also identified potentially unacceptable risks to human health as well as to the environment. These risks are to:

• utility maintenance workers via incidental ingestion and dermal contact with soil and groundwater at the Site and identified neighbouring properties;
• utility maintenance workers via inhalation of outdoor air in a trench at the Site and at identified neighbouring properties;
• landscape maintenance workers via incidental ingestion and dermal contact with soil at the Site;
• indoor workers via inhalation of indoor air if a building were to be constructed at the Site in the future;
• indoor residents and indoor workers via inhalation of indoor air at identified off-Site properties; and
• terrestrial ecological receptors with respect to direct contact with soils at the Site.

18She said that the following measures were identified to mitigate these risks:

• a soil cap or hard cap over a portion of the Site to prevent direct contact by landscape maintenance workers or by terrestrial plants and soil organisms;
• a health and safety plan for utility maintenance workers to prevent direct contact with soil and/or groundwater and inhalation of vapours;
• soil vapour intrusion mitigation for existing buildings at neighbouring properties with known indoor air impacts;
• indoor air monitoring at an affected neighbouring residence; and
• specific requirements to be considered with respect to any future construction of buildings on the Site.

19Ms. Burns stated that sub-slab depressurization systems at the School and at a commercial building near the Site and a combined sub-slab depressurization system and sub-membrane depressurization system at an affected off-Site residence have been implemented and are now operational.

20Ms. Burns stated that Nortel's work has to a significant extent satisfied the requirements in the Director's Order and that only the implementation of ongoing management measures and closure activities should be required in the future. She said it will cost approximately $3.5 million to complete the outstanding work, address reasonable future management requirements, and ensure adherence to the risk management measures established through Nortel's risk assessments, including with respect to the ongoing operation of the sub-slab depressurization and sub-membrane depressurization systems and other risk management measures that have been undertaken.

21Nortel submits that the proposed withdrawal of its appeal and revocation of the Director's Order is in the public interest given the uncertainties arising from its insolvency and given that there is no prospect of it emerging from the CCAA proceedings. It submits that the remaining work with respect to the Site has been identified and the associated cost has been reasonably estimated. Nortel emphasizes that the funds that will be paid under the proposed settlement agreement will be applied to cover most of the estimated costs.

22The Director confirmed that environmental investigations and remedial work conducted by Nortel and also by Sidney Street Properties have resulted in the development of a risk management approach to the contamination at and near the Site. The Director submits that the work with respect to the Site has addressed many of the adverse effects caused by the contamination, but that additional monitoring and other measures still need to be implemented. He filed Golder Associates' Risk Management Closure Plan, dated October 2018 ("Closure Plan"), which describes the outstanding work that needs to be done.

23The Director stated that Nortel's risk assessments have identified the risks that the remaining contamination poses and set out the measures that must be implemented to address those risks. He stated that the risk management measures to be implemented are described in the Closure Plan and include:

• maintaining the barrier to site soils at the Site;
• implementing a health and safety plan to be followed by utility maintenance workers;
• maintaining and conducting performance monitoring of the sub-slab depressurization systems installed at three neighbouring properties;
• continuing to conduct indoor air monitoring at neighbouring properties with elevated levels of contaminants;
• imposing restrictions on future construction at the Site; and
• continuing to conduct annual groundwater monitoring for approximately 20 years.

24The Director confirmed that as a result of the settlement agreements in the CCAA proceedings, MECP has been granted a confirmed unsecured claim against Nortel in the amount of $3.5 million (of which approximately 45.49 cents per dollar owed will be distributed under the insolvency process). The Director stated that the funds will be paid to 2589989 Ontario Inc., which is the current owner of the Site. He said he will issue a Director's Order to 2589989 Ontario requiring it to arrange for and be responsible for ensuring that the work required by the Closure Plan is completed and that 2589989 Ontario will be required to provide the MECP with financial assurance in the amount of $1.6 million ("new Director's Order"). He said that under the settlement agreements, MECP releases Nortel and the City from any further environmental liability associated with the Site.

25The Director stated that the new Order will be issued promptly and will require 2589989 Ontario to:

• retain a qualified person to carry out the work required by the Order;
• implement the risk management measures set out in Closure Plan, including the addition of an additional home to be monitored for air quality;
• properly abandon any monitoring wells that are no longer required;
• submit an annual report each year to MECP;
• provide MECP with financial assurance in the amount of $1.6 million; and
• register the new Director's Order on the property title.

26The Director submits that the proposed settlement is consistent with the purposes of the EPA and is in the public interest. He submits that:

• Nortel has addressed the immediate threats to the environment and human health posed by the contamination;
• 2589989 Ontario will be required under the new Director's Order to implement the risk management measures that have been identified to ensure that the remaining contamination does not pose a risk to human health or the natural environment and any potential adverse effects of the contamination are addressed;
• 2589989 Ontario has committed to complying with the new Director's Order. In the event that 2589989 Ontario does not comply, the outstanding work will be partially backed by financial assurance, the Director can arrange for the risk management measures to be carried out, and further cost recovery steps under the EPA can be taken;
• Nortel has undertaken and paid for most of the environmental work that has been completed so far and is making a significant financial contribution towards the costs of the future work to be carried out in line with the polluter pays principle;
• the proposed settlement avoids further litigation between the Parties, which had the potential to consume significant time and resources; and
• all of the Parties consent to the proposed settlement.

Findings

27Taking into account the provisions of the Director's Order, Nortel's insolvency, the work that has been completed, the pending issuance of the new Director's Order to 2589989 Ontario requiring it to arrange for and be responsible for ensuring that the work required by the Closure Plan is completed, and taking into account the financial assurance to be provided to the MECP, the Tribunal finds that the proposed withdrawals of all the appeals and proposed revocation of the Director's Order are consistent with the purpose and provisions of the EPA. The Tribunal also finds that they are in the public interest. The Tribunal is concerned that there are outstanding risks to human health and the environment at the Site and at nearby off-Site locations, including the School, but is satisfied by the assurances of both the Director and Nortel's expert that the issuance of a new Director's Order and the payment of financial assurance will ensure that these outstanding risks are safely addressed and that human health and the natural environment are protected.

28The Tribunal accepts each Party's withdrawal of its appeal, revokes the Director's Order in its entirety, and dismisses the proceeding pursuant to Rules 201 and 202.

DECISION

29The withdrawal of each Party's appeal is accepted and the Director's Order is revoked in its entirety. The appeals are dismissed.

Appeals Withdrawn

Director's Order Revoked

Appeals Dismissed

"Hugh S. Wilkins"

HUGH S. WILKINS

MEMBER

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