On February 1, 2021, a number of amendments to BC's Environmental Management Act (the "EMA") and the associated Contaminated Sites Regulation (the "CSR") came into effect (the "Amendments"). The Amendments include new requirements on owners and operators of properties used for industrial and commercial purposes, and a shift from the long-standing "Site Profile" system to a more onerous "Site Disclosure Statement" system.
At a high level, the most significant departures from the previous regime are:
- Categories of industrial and commercial lands subject to the amended regime are now set out in a schedule, with the potential for more categories to be added in the future; and
- When certain events occur – such as ceasing operations and decommissioning – owners and operators of "specified industrial or commercial use" properties must prepare a Site Disclosure Statement ("SDS") and hire an environmental consultant to conduct a preliminary site investigation ("PSI") and submit both the SDS and the PSI results to the Ministry of Environment.
Below we describe the key changes in greater detail (Part A), and offer some hypothetical scenarios to demonstrate how these may impact commercial and industrial real estate transactions in BC (Part B).
A. Four primary changes
1. Mandatory site disclosure statements
First, the amended EMA requires regulated persons to provide a SDS. The new SDS system applies to a wide range of sites that are (or may be) contaminated. It also introduces a new defined term: "specified industrial or commercial use," that refers to activities listed in Schedule 2 of the CSR that are now subject to the new SDS requirements.
Section 40 of the EMA now requires owners and operators of lands that have been used for "specified industrial or commercial uses" to provide an SDS to applicable regulators and municipalities when:
- seeking subdivision, rezoning, or building permit approvals;
- decommissioning or ceasing operations; and
- seeking creditor protection or filing for bankruptcy.
The amended EMA also requires vendors of properties used for these "specified industrial or commercial uses" to provide an SDS to the purchaser.
The amended CSR in turn provides a number of industry and circumstance-specific exemptions from these broad categories, including where a site is already subject to a regulatory instrument or other processes under the EMA.
2. Mandatory preliminary site investigations
The second notable change (and perhaps the most consequential) requires many persons who are obligated to provide an SDS to also conduct a PSI (the requirements of which are prescribed in the CSR) and provide the results of the PSI to a director of the Ministry of Environment (s. 40.1 of the EMA). An important exception here is for vendors of real property that do not otherwise meet the requirements for "decommissioning" or "ceasing operations." Such vendors selling a property "as is" are only required to provide an SDS to the purchaser.
This new "mandatory investigation" provision is in addition to the existing authority of a director to order owners or operators to undertake site investigations (as set out in s. 41 of the EMA).
3. The administrative penalties regulation amendments
The third notable change is with respect to penalties, with the Administrative Penalties (Environmental Management Act) Regulation being amended to provide an administrative enforcement regime to support the new SDS system. The potential maximum penalties are:
- $75,000 per day for contraventions of certain EMA provisions; and
- $40,000 per day for contraventions of certain CSR provisions.
These administrative penalties can be enforced against parties who fail to provide an SDS or fail to fulfill the automatic site investigation requirements.
4. Local Government Act and Vancouver Charter amendments
Finally, the Local Government Act ("LGA") and Vancouver Charter have also been updated to incorporate the new EMA and CSR provisions. This update continues the Ministry of Environment oversight of specified municipal approvals related to potentially contaminated sites, which is commonly referred to as a "freeze and release."
Under this system, municipalities must not approve specified zoning or permitting applications until they have received one of several "notices" from the Ministry of Environment granting permission. Under the previous regime, the Ministry of Environment made such determinations based solely on the Site Profile and whatever other public data was available. As a result of the recent Amendments, the Ministry of Environment will now be able to rely on an SDS and the results of the PSI undertaken by the applicant when issuing such notices.
B. Hypothetical transaction scenarios
The following scenarios illustrate how the Amendments create new considerations for real estate transactions involving lands used for a "specified industrial or commercial use."
1. Selling "specified industrial and commercial use" property "as is"
- The only regulatory requirement on vendors selling the "specified industrial and commercial use" property "as is" is to provide an SDS to a prospective purchaser.
- Further site investigations may, however, be voluntarily conducted by the owner, and the results provided to the purchaser in order to accommodate the deal.
2. Selling "specified industrial and commercial use" property after ceasing operations
- For business reasons, an owner may choose to shut down operations at the "specified industrial and commercial use" property well in advance of the sale. Depending on the extent to which industrial operations have ceased and how long operations are ceased for, this owner may be required by the EMA and CSR to:
- Provide an SDS to the registrar of the Ministry of Environment;
- Provide the results of a PSI to a director of the Ministry of Environment; and
- Provide an SDS to the purchaser.
3. Selling "specified industrial and commercial use" property after decommissioning
- To accommodate a deal, an owner may agree to decommission and remediate parts of the "specified industrial and commercial use" property prior to sale. Depending on the extent to which the site has been decommissioned, this owner may be required by the EMA and CSR to:
- Provide an SDS to the registrar of the Ministry of Environment;
- Provide the results of a PSI to a director of the Ministry of Environment; and
- Provide an SDS to the purchaser.
4. Seeking to rezone or redevelop "specified industrial and commercial use" property before sale
- To attract purchasers, an owner may seek municipal approval to rezone or redevelop the "specified industrial and commercial use" property to a more valuable land-use prior to sale. Depending on the intended use of the property (and corresponding municipal approval that will be required), such owner may be required under the EMA and CSR to:
- Provide an SDS to the applicable municipality;
- Provide the results of a PSI to a director of the Ministry of Environment;
- Seek a "notice" from a director of the Ministry of Environment (such notice allows the municipality to approve the application); and
- Provide an SDS to the purchaser.
- Further, under the updated provisions of the LGA and the Vancouver Charter, the applicable municipality would:
- Assess the SDS;
- Forward the SDS to the registrar of the Ministry of Environment;
- 'Freeze' the zoning application until it has received a "notice" from the Ministry of Environment; and
- If a "notice" is received, "release" the zoning application and proceed with making a decision whether to approve or deny.
C. Next steps
Our Environmental Team will continue to monitor the implications of these Amendments. Should you have any questions about the consequences of these changes on your business or real estate transaction, we encourage you to contact any member of our team.