THE POLLUTER PAYS? NOT VERY OFTEN!

CCPA Monitor: October 1, 2005

Almost everyone, right up to the Supreme Court of Canada and the United Nations, agrees that polluters should pay for the pollution they cause. Too bad that it doesn’t often happen in reality.

Ontario government data, for instance, obtained through Freedom of Information requests, exposed almost 2,500 violations of wastewater discharge laws over a recent two-year period-only a tiny fraction of which were actually prosecuted. And a recent government report showed that the number of contaminant spills by large industries in Ontario in 2004 were 13% higher than in 2003.

A new Ontario law holds out some hope that these contaminations may be reduced in future, but only if the law is not undermined by backroom deals between polluters and government officials.

The Ontario law, popularly known as the Spills Bill, would for the first time give Ministry of Environment officials the power to directly impose monetary penalties on polluters. The Act was inspired by a seemingly endless string of contaminant spills around Sarnia, Ontario, also known as Chemical Valley for its petrochemical plants. The elements of the new regime are simple. If a company illegally discharges a contaminant or commits another environmental infraction, the Ministry can impose penalties of up to $100,000 per day. The penalty could be appealed but to an environmental tribunal rather than the courts.

Usually when Canadian industry faces a law it doesn’t like, it hints that it will move to a more hospitable jurisdiction. In a competitive global economy such threats merit attention. In this case, however, unhappy business would have a long way to go given that many U.S. jurisdictions have had similar penalty regimes for years.

Government regulators generally prefer persuasion to punishment to bring offenders into compliance, even though Ontario’s violation numbers show it doesn’t work. There are various reasons why persuasion is generally preferred to prosecution.

The first has to do with human nature. Inspectors have an ongoing, often friendly, relationship with officials at companies they oversee. When faced with a choice, even for continuing violations, between taking little action — a disapproving look, a letter, or a follow up visit — or recommending an investigation leading to charges, the inspector will usually choose to be Mr. Nice Guy. If charges are laid, on the other hand, and the company and plant manager’s name have appeared in newspaper headlines, an inspector’s next visit is not likely to be a pleasant experience.

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The second reason has to do with the nature of the court process. Prosecutions are cumbersome, time-consuming, expensive, and involve long delays between an offence and a conviction.

Monetary penalties, on the other hand, offer an effective middle ground between taking little or no action and seeking the ultimate societal sanction of fines and jail terms.   (In fact, when former premier Harris contemplated a similar regime it was the cost savings that most attracted him.)

An in-depth 1990 study in British Columbia by two respected jurists, Murray Rankin and Richard Brown, made precisely these conclusions in their 1990 study which compared legislative schemes that allowed only for prosecutions and those that allowed for both prosecutions and monetary penalties. They found that in the case of the latter (ie including monetary penalties), violators ultimately met some type of sanction and the penalties that were imposed were on average higher than the ones ordered by the courts.

Despite this evidence, industry opposition to the new Act before it became law was strong. Indeed, Warren Kinsella, formerly Prime Minister Chretien’s top strategist, was hired to argue the industry’s case for weakened legislation. When Kinsella met behind closed doors with the provincial Cabinet the opposition parties protested loudly, especially after the Bill was subsequently put to the rather unusual step of a legislative committee’s scrutiny. (The Premier denied that Kinsella’s visit had anything to do with the Bill.) The committee hearings allowed the government to remove key clauses of the bill — including provisions that would make convictions easier to secure for spills and other discharges — but the main elements of the Bill remained.

Monetary penalties are not, however, intended to be a substitute for prosecutions. In fact, the Ontario proposal contemplates that prosecutions will still be pursued in more serious cases, even where monetary penalties have been imposed.

Under the new regime polluters are not entitled to a defence of due diligence, namely that they took all reasonable care to avoid an infraction. This is because the regime is intended to provide an economic incentive for companies to invest in systems that prevent toxic accidents from ending up in the local water source, rather than stigmatizing violators through prosecutions.  Equally important, the Bill will begin to level the business playing field between conscientious companies that invest heavily in preventing spills and laggards that wait for accidents before taking action. (A Ministry inspection blitz in the Sarnia area earlier this year found that a full 20% of companies had no spill prevention or contingency plan in place.)

There is a danger that the new Act will be undermined by the somewhat cozy relationship between some Ministry officials and the industries they oversee. This raises the potential of very minor penalties that amount to no more than an acceptable cost of doing business for companies. An amendment to the Act allowing public appeals against unreasonable fines would have addressed the problem but was rejected by government.

Soon after the bill was first proposed, the Minister of Environment bent to industry pressure by announcing that the monetary penalty regime would only apply to 140 large Ontario facilities. Fortunately, she resisted the push to scrap other key provisions of Act. Indeed, if the Ministry officials use their new powers to ensure that more violations are punished with significant fines then polluter pays principle will no longer be a cute phrase in Ontario. It will be a reality.