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Ontario's Brownfield Reforms:

Proposed Changes to Ontario Regulation 153/04 (aka The Good, The Bad and The....?)

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Ontario Regulation 153/04 was initially released by the Ontario Ministry of the Environment (MOE) in 1996 and revised in 2004. The purpose of the regulation was to encourage the revitalization of Brownfields through the provision of generic assessment standards for soil, groundwater and sediment, and the introduction of the Record of Site Condition (RSC) process, whereby an owner could register their site confirming it meets the applicable standards. Reg. 153/04 also provided long awaited updates the environmental risk assessment process.

In the spring of 2007 the MOE surprised stakeholders by releasing proposed amendments to Reg. 153/04 to the Environmental Registry. As part of the release, the MOE stated "The proposed amendments to Reg. 153/04 would facilitate the return of brownfields into productive land uses". The main amendments included:

  • Strengthened Site Condition Standards
  • Enhanced RSC Integrity
  • Off-Site Liability Protection
  • Streamlined Risk Assessment Process

Due to a huge backlash regarding the lack of notice and prior consultation with stakeholders, in addition to the significant decrease in site condition standards, the MOE came back with revised amendments in October 2008. Since that time the MOE and the various stakeholder groups have had a number of meetings to discuss the proposed changes.

The Good, The Bad and The ..........?

In order to increase RSC integrity, the MOE has included various minimum reporting requirements for Phase I & II Environmental Site Assessments (ESAs) filed in support of an RSC. These requirements go beyond those normally required by the Canadian Standards Association (CSA). The main requirements include additional historical and regulatory inquiries, the provision of conceptual site models, mandatory Phase II ESAs for "potentially contaminating properties", and minimum soil and groundwater sampling requirements. Although these proposed requirements should "level the playing field" by discouraging consultants from taking short-cuts during assessment work, the overall affect will be to drive up the cost and increase the timeframe of Phase I & II ESAs prepared in support of RSCs. The MOE has also proposed a 30 day "Notice Period" in which they will respond to all filed RSCs; however, based on the MOE's track record with regard to regulated response times, it is questionable whether they will be able to meet their own deadlines.

The MOE has introduced a new web-based streamlined (aka Tier II) risk assessment model as an alternative to meeting generic site condition standards or completion of the lengthy and detailed traditional (Tier III) risk assessment. The approval process is to be 8 weeks in comparison to the Tier III process which can take upwards of 12 to 18 months. Unfortunately, the initial model will be limited to only 10 contaminants of concern including various hydrocarbon related parameters (i.e., petroleum hydrocarbons F1 to F4, benzene, ethylbenzene, toluene & xylenes), and a couple of chlorinated solvents (trichloroethylene and perchloroethylene). In addition, the Tier II model will not provide any relief in a potable groundwater use situation and in most cases will not provide significant relief without some form of risk management measures (i.e., engineered controls, such as soil capping, paving, active ventilation etc.).

The introduction of new off-site liability protection for migration of contaminants from a property could prove to be useful; however, it only provides for protection from MOE orders and does not provide any third party liability protection. In addition, the rules and requirements related to this protection are restrictive and difficult to interpret and will require significant additional work to be useful.

The biggest concern to all stakeholders is the MOE's proposed strengthening to the site condition standards. Although the MOE has indicated that due to the use of current science in developing the standards, they will provide greater protection of human health and the environment; the fact is, that approximately 75% of the soil and 50% of the groundwater standards have become more stringent and in many cases, by more than an order of magnitude. This is especially true for many of the common organic contaminants encountered at brownfield sites, such as petroleum hydrocarbons, benzene and chlorinated solvents.

The implications of the more stringent standards are that a property that is "clean" under the current regulatory standards could be "contaminated" under the new proposed standards. The MOE has indicated that they have confidence in previously filed RSCs and that there will be a transition period (proposed 12 months, but now rumoured to be as long as 36 months) whereby an RSC can be filed under the 2004 standards. However, the commercial implications of this transition period will take considerable time to iron out. Some lenders and property investors have indicated that even though the MOE has "grandfathered" previously filed RSCs, that they will not accept an RSC filed under the 2004 standards if the property does not meet the new standards. This will lead to stigmatization of properties and could lead to a decrease in land asset values.

The good news is that the MOE has proposed new less stringent standards for use at "properties within 30 m of a water body" and for "shallow soil properties". The MOE has also revised / increased many the "background" or Table 1 standards which historically were not representative of "real" background soil conditions in Ontario.

The MOE indicated in late October that the proposed amendments were still a "work in progress" and that the process and standards could still change. However, the MOE also indicated that the "roll-out" of the proposed changes could occur as early as January 2010.

What does this all mean and how is going to affect the real estate business in Ontario going forward? More stringent standards are going to lead to more contaminated properties and increased assessment, remediation and/or risk assessment costs. Lenders, property owners, investors and developers are going to need to be extremely diligent going forward on any site with known or potential impacts. There is also no doubt that the time frame for site redevelopment will increase.

Remembering the MOE's statement "The proposed amendments to Reg. 153/04 would facilitate the return of brownfields into productive land uses", overall, the MOE has some good ideas, but without additional changes they will not be practical. Regulated standards which are un-attainable or a risk assessment process that is dysfunctional (as it is in its current form and will likely continue to be) will undermine the economic viability of brownfield opportunities and could lead to an increase in environmentally orphaned brownfield properties.

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