COURT OF APPEAL FOR ONTARIO

2012 ONCA 884

DATE: 20121217

DOCKET: C53545

Winkler C.J.O., Pepall J.A. and Smith J. (ad hoc)

BETWEEN

St. Mary’s Cement Inc. (Canada)

Applicant (Appellant)

and

Municipality of Clarington

Respondent (Respondent)

Harry C. G. Underwood and Brendan Brammall, for the appellant

Ian Godfrey and Jon Smithen, for the respondent

Heard: November 20, 2012

On appeal from the judgment of Justice David G. Stinson of the Superior Court of Justice, dated March 11, 2011, with reasons reported at 2011 ONSC 1533, 81 M.P.L.R. (4th) 275.

Winkler C.J.O.:

A. Overview

[1] This is an appeal by St. Mary’s Cement Inc. (Canada) (“SMC”) from a decision on an application for the interpretation of a municipal zoning by-law. SMC is proposing to substitute alternative fuel for part of the conventional fossil fuel currently used in its cement manufacturing process. The proposed fuel is recovered from post-recycling and post-composting materials. The appellant took the position that the by-law permits it to continue the manufacturing process with the new fuel. The respondent, the Municipality of Clarington (“Clarington”), disagreed.

[2] The application judge interpreted the by-law in favour of Clarington and held that the use of the alternative fuel would be an impermissible change in land use.

[3] The determinative issue in this case is whether SMC’s proposed use of alternative fuel constitutes a new land use that is not permitted at the site in question. I conclude that it does not constitute a new land use. For the reasons that follow, I would allow the appeal.

B. Background

[4] SMC operates a cement manufacturing plant on the north shore of Lake Ontario in the Municipality of Clarington, within the Regional Municipality of Durham. Clarington’s By-Law 84-63 permits the use of the site for a “cement manufacturing plant” as well as any accessory uses that are “customarily incidental and subordinate to, and exclusively devoted to, the main use”.

[5] SMC is proposing to substitute fuel consisting of post-composting and post-recycling materials for some of the conventional fossil fuel that it currently uses.

[6] Clarington opposes SMC’s proposal on the basis that it would give rise to a new land use; namely, the use of the site as a “waste disposal area,” which is not permitted under the by-law. Clarington therefore maintains that an amendment to the by-law is required for SMC to use the new materials. Further, Clarington takes the position that the alternative fuels are not “customarily” used in the cement industry in Ontario and therefore do not fall within the scope of the accessory use provision of the by-law.

[7] SMC contends that its proposal does not give rise to a new land use. In the alternative, it argues that use of the alternative fuels is a permissible accessory use authorized under the by-law.

[8] Clarington’s objection gave rise to the instant application. The application judge issued an order declaring that SMC’s proposed use was neither a permissible use nor an acceptable accessory use under the by-law.

C. The Zoning By-Law

[9] The SMC plant comprises approximately 321 hectares and is zoned as an “Extractive Industrial (M3) Zone.”

[10] Section 25.1 of the by-law lists the “Permitted Uses” of land within an M3 zone. Any use that is not permitted is prohibited. A cement manufacturing plant is not listed as one of the permitted uses in s. 25.1. However the plant is subject to a specific site exception in s. 25.4.1, which reads:

Notwithstanding Section 25.1, those lands zoned M3-1 on the Schedules to this By-law may, in addition to the other uses permitted, be used for a cement manufacturing plant and a maximum of two (2) residential dwelling units for a manager, caretaker, watchmen, or other similar persons employed on the same lot and their families.

[11] Section 3.1(a) of the by-law permits “Accessory Buildings, Structures and Uses”:

Where this By-law provides that a lot may be used or a building or structure may be erected or used for a purpose, that purpose shall include any accessory building or structure or accessory use...

An “accessory use” is defined in s. 2 of the by-law to mean:

[A] use established during or after the establishment of the main use which is customarily incidental and subordinate to, and exclusively devoted to, the main use of the lot, and located on the same lot as such main use.

“Use” is also defined in s. 2 of the by-law to mean:

[T]he purpose or function for which a lot or building or structure, or any combination thereof, is designed, arranged, occupied or maintained and when used as a verb, “USE” shall have a corresponding meaning.

D. SMC’s Proposal

[12] SMC currently uses petroleum coke (“petcoke”), a by-product of crude oil refining, as fuel for its cement manufacturing process. Most of the petcoke is transported to the site by lake freighter, and the rest arrives by truck. SMC has proposed to conduct a time-limited demonstration project in which three alternative fuels would be substituted for up to 30 percent of the petcoke currently used. According to the proposal, the fuels would be transported exclusively by truck and delivered on a “just-in-time” basis shortly before their use. Three alternative fuel types are proposed: post-composting residual plastic film from a composting plant, post-recycling paper bio-solids, and post-recycling residual materials from a recycled paper plant. It is hoped that this project will reduce the plant’s dependency on non-renewable fossil fuels and cut costs. SMC has applied for the necessary approvals to the Ministry of the Environment under s. 27 of the Environmental Protection Act, R.S.O. 1990, c. E. 19 (the “EPA”). These approvals are pending the outcome of this appeal.

[13] Similar alternative fuels have been used by other cement manufacturers in plants in other jurisdictions including Quebec and British Columbia, as well as the United States and Europe.

[14] SMC operates another cement plant in the Town of St. Mary’s in south-western Ontario. That site has proposed to use one of the same fuels proposed for use at the Clarington plant, pending approval by the Ministry of the Environment. The Town of St. Mary’s has a similar by-law but, unlike Clarington, the Town took the position that the use of alternative fuel does not constitute a change in use, that fuel storage and handling is an accessory use, and that no additional planning permission is required.

[15] Should the Clarington pilot project demonstrate that the alternative fuels can be used without any significant change in emissions or environmental impact, SMC plans to seek regulatory approval for long-term use.

[16] SMC filed expert evidence on the application to the effect that the project will not create adverse neighbourhood effects. While the substitution of fuels would result in some increased truck traffic, the system of alternative fuel delivery is enclosed and, by design, the process would not create additional litter, odour or dust nuisances. Instead, the use of post-recycled and post-compost materials is proposed to have environmental benefits and its substitution for petcoke is expected to reduce the plant’s greenhouse gas and sulphur emissions.

E. Decision Below

[17] The application judge referred to the correct legal principles in interpreting the Clarington by-law. The modern principles of statutory interpretation apply equally to the interpretation of a municipal by-law and a statute: Montréal (City) v. 2952-1366 Québec Inc., 2005 SCC 62, [2005] 3 S.C.R. 141, at para. 10. Thus, the interpretation of a by-law involves consideration of the text of the by-law, the intent of municipal council, and the purpose and scheme of the by-law as a whole: Neighbourhoods of Windfields Limited Partnerships v. Death (2008), 48 M.P.L.R. (4th) 183 (Ont. S.C.), at para. 33, aff’d 2009 ONCA 277, leave to appeal to S.C.C. refused [2009] S.C.C.A. No. 253.

[18] The application judge decided that the proposed fuel substitution would bring the subject lands outside the expressly permitted use of the land as a “cement manufacturing plant.” At para. 30 of his reasons, he concluded:

While I agree that SMC’s use of the site for the manufacturing of cement will continue to be a permitted use under the Demonstration Project … in my view, through the introduction of a fuel that falls within the EPA definition of waste, SMC is introducing a new and additional use on the site, because it will be disposing of industrial waste. As such, SMC will be operating a waste disposal area on the site.

[19] The application judge also rejected the argument that use of the proposed alternative fuel was an accessory use to the main use of the site as a cement manufacturing plant, holding, at para. 33, that “[t]he evidence does not support the conclusion that the proposed use is common or customary within the Municipality of Durham or Province of Ontario.”

F. Analysis

(i) The error in the decision below

[20] In my view, the application judge erred in concluding that the use of “waste” as fuel brought the plant within the definition of “waste disposal area,” and that it therefore constituted a new and additional use. In reaching this decision he did not apply the express language used in s. 2 of the by-law to define “waste disposal area.”

[21] I agree with the application judge that the proposed fuel falls within the broad definition of waste under the EPA. Section 2 of the General Waste Management Regulation, R.R.O. 1990, Reg. 347, sets out an expansive list of materials designated as wastes under the EPA, including post-recycling and post-composting materials regulated by Recycling and Composting of Municipal Waste Regulation, O. Reg. 101/94. “Waste” is not defined by the by-law; the Official Plans of Clarington and Durham define the term by reference to the EPA definition. Since by-laws are the means by which official plans are implemented, the terms of the official plans aid in the contextual interpretation of the by-law: Aon Inc. v. Peterborough (City) (1999), 1 M.P.L.R. (3d) 225, at para. 18.

[22] The parties agree that use of the subject lands as a “waste disposal area” is not permitted. The term “waste disposal area” is defined by s. 2 of the by-law as “a place where garbage, refuse or domestic or industrial waste is dumped, destroyed, or stored in suitable containers.” Under the by-law, a “waste disposal area” is neither a generally permitted use nor a use listed under the site specific exemption for the subject lands.

[23] Under the proposal, however, SMC would not be dumping, destroying or storing waste. As a result, there is no “waste disposal area” within the meaning of the by-law. Accordingly, the sole use continues to be the use expressly permitted by s. 25.4.1 of the by-law – that is, the operation of a “cement manufacturing plant.”

(ii) “Waste disposal area”

[24] The application judge concluded that because SMC would be operating a waste disposal area on the site it would be introducing a new use to the site. This conclusion is based on his finding that the proposed activity falls within the definition of “waste disposal area.” In reaching this conclusion he failed to consider, and therefore analyze, the wording of the definition as it appears in the by-law. In adopting this approach to the construction of the by-law he fell into error.

[25] The site must be used for “dumping”, “destroying” or “storing” waste to fall within the definition of a “waste disposal area.” Clarington contends waste is “destroyed” when it is burned as fuel in a cement kiln.

[26] SMC’s use of the alternative fuel would not be considered “destruction of waste”, just as the use of petcoke fuel would not be characterized as the destruction of petcoke. In both cases, fuel is being used productively as part of the permitted use – the manufacturing of cement.

[27] Reading the definition of “waste disposal area” in the context of the by-law as a whole, and in the context of the official plans, the purpose of the definition is clear: the Municipality seeks to regulate land that is used for the purpose of removing, containing or managing unwanted materials. Conversely, SMC is proposing to use the materials as a resource for an existing and approved manufacturing process. The fact that the fuel materials are being diverted from the waste stream is not, on the facts of this case, determinative of the land use. In this context it is worth noting that petcoke is a “by-product” of petroleum production, and by definition, would itself be a waste product if it did not have a productive use. The use of one fuel as opposed to another does not alter the fact that the SMC plant is in essence a cement plant and not a waste disposal area.

(iii) Is the proposed use of the land a prohibited additional use?

[28] Clarington submits that even if the proposal does not fall within the definition of “waste disposal area”, the proposed substitution of fuels is a use that is still prohibited because the by-law does not permit any kind of waste processing at the SMC site. The by-laws should be interpreted in the context of the Official Plans for Durham and Clarington. Clarington argues that the provisions in the Official Plans show an intention to regulate the land use aspects of waste handling. Neither the M3 Zone, nor the M3-1 Exception Zone, explicitly lists any kind of waste processing as a permitted use. By contrast, another provision in the by-law explicitly allows for a “waste transfer station and material recovery and recycling facility for solid non-hazardous waste.” Therefore, by implication, it is Clarington’s position that any kind of waste processing activity is a new use that would require explicit permission.

[29] Clarington cites the decision of this court in 1121472 Ontario Inc. v. Toronto (City) (1998), 1998 CanLII 4637 (ON CA), 39 O.R. (3d) 535 (C.A), at para. 15 as authority for the proposition that land may have more than one use, and if one of the uses is prohibited, that use is not saved because the primary use is permitted. Applying this reasoning to the instant circumstance, Clarington asserts that the proposed use of alternative fuel constitutes a second use of the subject lands, namely the handing of waste, which is not permitted.

[30] I cannot accede to this submission that the use of the alternative fuel by SMC constitutes a second use. All the above arguments by Clarington are contingent on a finding that the SMC proposal would introduce an additional use of the land. In my view, there is no additional use in the present circumstances. This is a complete answer to the line of argument advanced by Clarington.

[31] The proposition that partial substitution of alternative fuels constitutes a change in use requiring new planning permission was considered and rejected by the Court of Appeal of England and Wales in R. (ex parte Lowther) v. Durham County Council and Lafarge Redland Aggregates Limited, [2001] EWCA Civ 781. Although Lowther was decided under a different regulatory framework, the interpretive issue in that case is analogous to the present circumstance.

[32] In Lowther, the Lafarge company ran an operation in which kilns were used to produce dolomite. Petcoke served as the primary fuel. Lafarge proposed to substitute a fuel derived from waste solvents for some of the petcoke used and received approval from the Environment Agency. The issue was whether use of the alternative fuel constituted “a material change in use of any buildings or other land” requiring separate planning permission. The court in Lowther noted that waste disposal could constitute a separate and distinct use of land.

[33] In Lowther, the court held that the use of alternative fuel was not a “material change” in land use. At para. 45, Phillips M.R. stated:

I have been unable to identify any principle of planning law that decrees that, simply because waste is matter which has to be disposed of, a person who makes constructive use of the waste for the purpose of some activity other than disposal of the waste, but who incidentally disposes of the waste at the same time, must be deemed to be making two uses of the land, namely waste disposal and the ulterior activity.

[34] Moreover, at para. 54, the Master of the Rolls relied on “the principle that, when one is dealing with waste, the object of the operation is of particular importance when analysing the nature of the activity for planning purposes.” At para. 72, Phillips M.R. agreed that there was no waste disposal use in Lafarge’s burning of the alternate fuel. He concluded that the burning of fuel is a process of “energy recovery” that is “so entirely part of the manufacture of cement for lime that it would be wrong to characterise it as a separate use.”

[35] I find the reasoning in Lowther to be compelling and apposite to the instant case. The burning of fuel is inherent in the production of cement, and the use of alternative fuel does not amount to a separate use of the land.

[36] There may be instances where land truly has two uses, one of which would render the entire enterprise prohibited. Examples of this could include methane recapture from a landfill site or energy generation from a garbage incinerator. These situations could fall within the restricted definition of “waste disposal area.” Phillips M.R. averted to this possibility at para. 58 of Lowther:

In some circumstances an operation may involve a nice balance between the objective of waste disposal and the ultimate objective of the operation. In those circumstances it may be correct to hold that the land is being subjected to two uses, waste disposal and the ultimate objective.

[37] Whether any particular activity constitutes a second use for planning purposes will depend on the facts of the case and specific language of the by-law at issue.

G. Conclusion and Disposition

[38] My conclusion that the by-law does not bar SMC’s alternative fuel use is in no way an invitation to unregulated waste disposal in the municipality. The by-law is still effective against any activity captured by the definition of “waste disposal area,” as it is against any other activity where land is being used for an additional use that is not permitted.

[39] It is worth repeating that the present case is a land use case and not an environmental matter. Even though the by-law does not restrict the substitution of fuels in this case, SMC is still subject to the broad regulatory oversight of the Ministry of the Environment. At para. 10 of his reasons, the application judge emphasized that “the focus of this case is on land use, not environmental regulation.” Use of the proposed fuels still requires s. 27 approval from the Ministry under the EPA, which is pending in this case.

[40] Moreover, it is also important to emphasize that this case is about the interpretation of a specific by-law. It does not involve an issue as to the powers of the municipality.

[41] Given my conclusion that the proposed use of alternative fuel falls within the permitted use under the by-law, it is unnecessary to address the second issue of accessory use.

[42] For the reasons above, I would allow the appeal, set aside the judgment below and the application judge’s order as to costs.

[43] An order shall issue declaring that use of the proposed alternative fuels at the SMC plant in the Municipality of Clarington does not constitute a new land use and is permissible for the purposes of Zoning By-Law 84-63.

[44] SMC is entitled to its costs on the application and the appeal. The costs of the appeal are fixed at the agreed amount of $25,000, inclusive of disbursements and taxes.

Released: “WKW” December 17, 2012 “W.K. Winkler CJO”

“I agree S.E. Pepall J.A.”

“I agree Patrick Smith J. (ad hoc)”