Gas Station Legacy
When more than one party is held responsible for the remediation of a contaminated site, how is the cost for the clean-up to be allocated among them? On what basis should one party have to pay a great...
When more than one party is held responsible for the remediation of a contaminated site, how is the cost for the clean-up to be allocated among them? On what basis should one party have to pay a greater or lesser portion of those costs than another? While the answers to these questions in any given case remain something of a mystery, the British Columbia Supreme Court has recently provided some clues.
As a consulting engineer, you may be called upon in such cases to give an opinion on how much contamination occurred, and when. In the B.C. case, expert consultant evidence was a key component in how the court allocated the remediation costs.
The facts in Gehring v. Chevron Canada Limited, decided last November, were as follows. The plaintiffs, Mr. Gehring and Mr. Robertson, owned property in Salmon Arm, B.C., which they had purchased 14 years earlier. In March 2004, an assistant regional waste manager determined that the property was a contaminated site. The plaintiffs spent over $100,000 removing contaminated soil from the property. They then started a legal action asking that the remediation costs be allocated among seven defendants.
Long before the plaintiffs had purchased the property, it had been used as a retail gas station, complete with underground storage tanks, gasoline pumps, and lines from the underground storage tanks to the pumps. This situation lasted for about 38 years, until the previous owner removed the underground storage tanks and piping, and sold the property to the plaintiffs.
The seven defendants were two companies and their directors who sold gasoline from the property to retail customers from 1949 to 1963 (Shiskin Motors), and from 1963 to 1978 (L&L Motors); Chevron Canada, who sold gasoline to the operators for two of those years; and the property owner and its director who had removed the underground storage tanks and piping (Firestone).
The court found that the contamination — petroleum and hydrocarbon — resulted primarily from long, slow leaks from the valves and piping. The leakage had occurred at a slightly increasing rate over the 38 years that the gas station was in operation and may have been from loose connections or small holes, or both. A secondary source of the leaks was the unprotected, single wall underground tanks themselves, which began leaking after they were over 20 years old. The total volume in leaked gasoline was in the range of 10,000 to 20,000 litres. The existing contamination continued to spread during the period that Firestone and the plaintiffs owned the property, right up until the plaintiffs began remediation.
In apportioning liability among the five defendants who were held responsible for the remediation costs (the claims against Chevron and Shiskin were dismissed), the court acknowledged that there is no precise formula for allocating responsibility. The primary factors at play were said to be a person’s degree of involvement in the conduct which contributed to the contamination, and the relative due diligence of the responsible persons, “bearing in mind the increasing public awareness of environmental concerns over time.”
The court held that L&L Motors and its director were responsible for 66% of the contamination of the property during their 14.5 years of operation, which included most of the 1970s when “the public was increasingly aware of the problems of gasoline contamination.” The court also found that L&L Motors’ inventory system was inadequate to detect minor slow leaks, given that it did not compare purchases with inventory plus sales. Given these factors, the court held that L&L Motors and its director were responsible for 50% of the total remediation costs.
While Fireside and its director did not cause any of the contamination, the court considered that during Firestone’s 13.5 years of ownership, it knew that the property had been used for the retail sale of gasoline and that there had been gasoline odours while removing the previously drained underground tanks and piping. Firestone had not, however, investigated or remediated the contamination. On that basis, combined with the fact that public awareness of the problems of gasoline contamination was increasing, the court held that Firestone was responsible for 25% of the total remediation costs.
The plaintiffs, surprisingly, were also held 25% responsible. The court considered that while they did not know until 1996 that the property had been used as a gas station, they could have found out years earlier had they been more diligent when purchasing the property. The court again emphasized that the problems with gasoline contamination were well known by the time the plaintiffs became owners of the property.
It would have been preferable had the court given some more general guidance on just how remediation costs should be allocated in future cases. Nevertheless, this decision is sure to have a chilling effect on owners, current and future. Passive owners, like the plaintiffs, who fail to do their due diligence early on, may be faced with hefty clean-up expenses down the road. In this case, it was a costly lesson.
In future, purchasers and owners must pay closer attention to the purchase and sale agreement and to who will be responsible for contamination. If you are working with a potential purchaser, it is even more essential now to impress upon them how important it is to complete the appropriate environmental due diligence process. To add to your credibility, you should keep good notes, take photographs and preserve what evidence there is.
Robin D. Bajer is an associate in the Vancouver office of Miller Thomson LLP.