Expanding the Scope of Cost-Recovery Actions under BC’s Environmental Management Act

A recent decision of the BC Supreme Court has opened the door for more creative ways for parties to recover remediation costs pursuant to the cost-recovery mechanism in BC’s Environmental Management Act.  The decision of Cordy Environmental Inc. v. Obsidian Energy Ltd., 2023 BCSC 1198, which is currently under appeal, allows contractors to recover the cost of unpaid remediation work against former owners or operators of contaminated sites.

This decision significantly expands the liability of former owners, operators and other responsible persons, who may soon find themselves footing the bill for unpaid invoices they had no part in authorizing.

Background

The cost-recovery mechanism in BC’s Environmental Management Act is primarily utilized by current owners of contaminated sites who seek to recover the costs of remediating the site.  This case differs from the norm in that it is brought by an environmental contractor – Cordy Environmental Inc. – against a former owner of a contaminated site to recover the costs of the contractor’s remediation work after the party who hired them went bankrupt.

The key players are as follows:

• Obsidian Energy Inc.: Historical owner of leasing rights and right of way for a pipeline that caused an oil spill in 2015
• Predator Oil BC Ltd.: Purchased the rights to the pipeline in May 2016
• Opsmobil Energy Services Inc./Ranch Energy Corporation: Obtained the rights to the pipeline in September 2017
• Cordy Environmental Inc.: Environmental contractor hired by Opsmobil/Ranch to remediate the area surrounding the pipeline in March and April 2018

Opsmobil/Ranch was placed into receivership in July 2018 without paying Cordy for its remediation work. 

Due to the bankrupt status of Opsmobil/Ranch, the environmental contractor, Cordy brought a cost-recovery action against the historical owner, Obsidian, seeking to recover the costs of the remediation services it provided to Opsmobil/Ranch.

Cordy brought an application for summary judgment seeking recovery on the basis that, pursuant to the Environmental Management Act, Obsidian was the owner of the site at the time contamination occurred. Obsidian opposed the summary judgement on the basis that Cordy, as the environmental contractor, was not a “person” who had incurred costs of remediation as defined by the Environmental Management Act.

Decision

The court determined that the definition of “person” did not exclude an environmental contractor such as Cordy; provided Cordy incurred reasonable costs of remediation, it was entitled to bring its claim.  The court found that, in remediating the contamination, Cordy provided equipment and employees for which it incurred costs.  Accordingly, the court concluded that Cordy’s claim was appropriate.

The court ultimately held the matter was better suited to a full trial where Cordy could establish which of its costs were reasonably incurred.

Obsidian has appealed the decision.

Implications

• Anyone (not simply owners and operators) who has incurred costs of remediation may arguably have a right to bring a cost-recovery action; and
• The complexity of cost-recovery actions has increased, as have the potential liabilities of former owners and operators of contaminated sites.

If you have any questions regarding how this decision may affect you, please contact any member of our environmental law team, here.