In July of this year, a fine of $2.7 million was levied against Kirby Offshore Marine Operating LLC following its guilty plea for violations of the Fisheries Act involving a spill of diesel fuel and lubricants near Edge Reef in British Columbia.[1] Approximately 107,552 litres of diesel fuel and 2,240 litres of lubricants were released into the waters, both of which substances are considered to be detrimental to fish and migratory birds under the Fisheries Act. The nearly $3 million fine represents the largest fine that has ever been imposed following one single spill incident of a deleterious substance into water frequented by fish.[2]
The news of this massive fine raises a broader question: are the fines now being handed out for environmental offenses rising faster than inflation? And if so, to what end? Our review of penalty levels in Canada looks at the legislative changes in the minimum and maximum environmental fines, and whether these changes in the law are actually having any real effects on the quantum of fines environmental offenders are receiving. The recent Kirby headline of its $2.7 million fine suggests they are. And finally, is there any indication that these larger fines are changing behaviour?
Up, up, up: The Recent Pattern in Environmental Fine Laws
Ushering in the legislative shift at the federal level was the new Environmental Enforcement Act (EEA) enacted by the Conservative government in 2009. This legislation introduced a new fine regime that establishes mandatory minimum fines for individuals and corporations, as well as higher maximum fines for a new category of “designated offences”. The maximum fine for an individual convicted of a designated offence, upon indictment, became $1 million, with a mandatory minimum fine of $15,000. For corporations, the jump was even larger: a corporation can be subject to a fine of $6 million and a mandatory minimum fine of $500,000 for these offences.[3] Further, upon second and subsequent offences for a “substantially similar” offence falling under the EEA, all fines are automatically doubled.[4]
This pattern of handing out much higher fines for corporations than those for individual offenders is a recent phenomenon not confined to the federal regime. Under Ontario’s Environmental Protection Act (EPA), there are similarly substantial differences between fines charged to corporations and those charged to individuals. For instance, individuals charged with an offence under the EPA are subject to a maximum fine of $50,000 upon first conviction and $100,000 upon subsequent conviction,[5] whereas a corporation charged with the same offence would be subject to a maximum fine of $250,000 upon first conviction and $500,000 upon subsequent conviction.[6] Under Alberta’s Environmental Protection and Enhancement Act, corporations are subject to fines 10 times those for individuals for the same offences: with a maximum of $100,000 for individuals and $1 million for corporations.[7]
Under Ontario’s EPA, the large majority of increases to maximum fines were enacted in 2005 under a provincial Liberal government. The maximum fine levels were almost doubled in 2005, and are now very significant amounts.[8] Even more dramatic has been the introduction of mandatory minimum fines for certain enumerated offences listed under subsection 187(3) of the Act.[9] For these specific offences, prior to 2005, individuals convicted would be subject, upon first conviction, to a maximum fine of $50,000 and upon subsequent conviction, a maximum fine of $100,000.[10] Following the 2005 changes, an individual is subject to not only a maximum fine of $4 million but also a mandatory minimum fine of $5,000.[11] This combination of maximum and minimum continues for second and subsequent convictions, resulting in an individual subsequently convicted of one of these offences facing a maximum fine of $6 million, and a mandatory minimum fine of $20,000.[12]
The provincial trend of increasing the maximum fines associated with environmental offences is not confined to Ontario and Alberta. The equivalent provincial legislation in Quebec, the Environment Quality Act[13], underwent a fivefold increase in its minimum and maximum fines in 2011.[14]
The introduction of these mandatory minimums is noteworthy, as it essentially removes judicial discretion in ordering a lower fine in appropriate circumstances; this contributes to the overall move towards higher fines. These substantial fines on the books signify a larger trend in the increasingly punitive way environmental offences are being enforced and penalized.
Application – Are these changes translating into higher average fines?
The recent pattern towards increased legislated maximum fines in and of itself is largely unsurprising, given the appeal of appearing “tough on environmental offences” in today’s political arena. But has this tough legislative stance actually had any bearing on the average fine being doled out to environmental offenders?
The short answer is that across Canada, in the past 2-3 years specifically, the data shows that regulators have been handing out stricter fines mirroring their tougher legislation, both in the frequency of fines being given for convictions and in the quantum of those fines on average.
While historically in Canada, environmental fines were used sparingly as enforcement tools to ensure environmental compliance compared to other jurisdictions, this approach underwent a dramatic shift in 2014.[15] As mentioned above, one significant aspect of this has been the introduction of mandatory minimums. This results in larger average fines, as judges no longer have the ability to order fines below applicable levels.
Further, the value of “large” fines (meaning, over $75,000) issued across Canada between 1991 and 2009 totalled an average of $1.4 million per year.[16] This has shot up to $3.9 million on average in 2015 to an average of $32.2 million in 2017.[17] While the total quantum of large fines and penalties has decreased to $15.7 million in 2018, the apparent “drop” in aggregate fines is based on one large fine having been levied in 2017 (see footnote)[18]. Excepting out this one fine, the trend has continued, as evidenced by an increase in the number of large fines and penalties issued, which has increased from 28 to 34 in 2018.[19] Compared against 2014, the total amount of fines issued in 2017 has increased by nearly $10 million.[20] Virtually all Canadian jurisdictions increased the amount of large fines issued in 2017 compared to 2016.[21]
Noteworthy Trends and Particularities
Although there has been a relatively consistent increase across Canada, there are a few regional particularities to take note of, including a regional divide from east to west regarding the focus of enforcement efforts. Western provinces have shown a commitment to cracking down specifically on water-related offences, while central and eastern Canada appear to target their large fines primarily on air matters.
The three provinces which have been the most consistent users of fines to enforce compliance with environmental laws are Ontario, British Columbia, and Alberta.[22] In particular, Ontario has always been one of the most active jurisdictions in terms of enforcement of environmental laws by way of fines; of the total $26 million worth of environmental fines issued by both provincial and federal governments from 1991 until 2010, a whopping $14 million was collected in Ontario alone.[23] Ontario continues to lead the pack when it comes to the current trend of heftier fines in recent years, as it has undergone a 63% increase each year in average fine amount and its total fine amount has increased by almost $10 million in 2017 compared with 2014.[24]
Although all jurisdictions have contributed to this pattern of increasing fines, the most significant increases to happen in recent years have been in Saskatchewan, Quebec, and Alberta.[25] Quebec has had a dramatic increase in large fines, issuing over $9 million in fines in 2017, accounting for 29% of the total fines issued in Canada that year.[26] This spike in environmental fines by Quebec has been an extremely recent phenomenon, as Quebec issued zero “large” fines in 2015.[27] As well, a newcomer to the top 5 list of fine issuers in Canada is Saskatchewan, which levied $2.6 million in fines for environmental offences in 2017.[28]
There is also a regional divide between west and central/east Canada in their fine-issuing patterns whereby western provinces including B.C., Alberta, and Saskatchewan appear to be focusing their enforcement measures on water-related environmental offences,[29] provinces in central/eastern Canada, including the big fine issuers of Ontario and Quebec, appear to be utilizing environmental fines more to target air-related offences.[30] However, there appears to be a decrease in 2018 in the number of air-related fines compared to past years, while the “other” category is on the rise from 4% in 2017 to 33% in 2018. As well, water offences have become more of a nationally recognized enforcement priority across the country, now accounting for almost half of all large fines issued in Canada in 2018.[31]
Effects on Behaviour?
So, while it has been established that there is an intention to increase environmental fines through changes in legislation, and that such increases have actually happened, are these efforts changing behaviour? The answer appears to be yes, to a degree. Even though there is some discussion about the effectiveness of increased regulatory penalties on the levels of pollution, and the likelihood of materially contaminating events occurring,[32] there is a general consensus that a stringent deterrence regime incorporating significant fines is at least an element of an effective environmental harm reduction strategy.[33]
It will be interesting to observe developments unfold as regulators continue to implement and enforce these new, stricter environmental fine regimes on the books. Currently, the bottom line seems to be that environmental offenders, whether corporate or individual, wherever located across Canada, can expect to be met with heavier-handed treatment of the law. And, so long as the regulatory authorities provide direction on how to comply and to reduce risk, and have a record of enforcing the laws in place, it is likely to contribute to reducing contaminating activities in jurisdictions across Canada.
[1] “Use and Environmental Management of Natural Resources in Canada”, Dragun Corporation Environmental Advisors”, https://www.dragun.ca/environmental-management-of-raw-and-refined-natural-resources/.
[2] Ibid.
[3] Government of Canada, Fine Regime Under the Environmental Enforcement Act (14 June 2017), online: https://www.canada.ca/en/environment-climate-change/services/environmental-enforcement/acts-regulations/about-act/fine-regime.html.
[4] Ibid.
[5] Environmental Protection Act, R.S.O. 1990, c. E.19 at s. 187(1) [EPA].
[6] Ibid at s.187(2).
[7]Environmental Protection and Enhancement Act, R.S.A. 2000, c. E.12 at s.228(1) [EPEA].
[8] For instance, whereas prior to 2005 the maximum fine for an individual upon first conviction was $20,000 and upon subsequent conviction was $50,000, now, upon first conviction, an individual is subject to a maximum fine of $50,000 and upon subsequent conviction, a maximum fine of $100,000. (Ibid at s. 187(1).)
[9] Includes offences related to liquid industrial or hazardous waste; discharge of contaminants; and failing to comply with a term or condition of an environmental compliance approval, or other license or permit under this Act in relation to contaminant discharges (EPA, supra note 5 at s.187(3)).
[10] Ibid at s. 187(5).
[11] Ibid.
[12] Ibid.
[13] Environment Quality Act, CQLR c Q-2 [Environment Quality Act].
[14] Before this shift, individuals convicted of certain offences including the release of containments were subject to a mandatory minimum fine of $2,000 and maximum of $20,000; this is contrasted with the current version of the Act which features mandatory minimum fine of $10,000 and a maximum of $1 million for individuals convicted of the same offences. (Ibid at s. 115.32)
[15] Ibid at p. 2.
[16] Ibid.
[17] Ibid at pp. 2-3.
[18] Note: The 2018 Berkley Canada Report shows that the quantum of Canada’s large environmental fines and penalties has been creeping up from 2014 until 2017 with what appears to be a sudden drop in 2018. However, it is important to note that this apparent decrease in 2018 is due in large part to a landmark case in 2017 wherein Volkswagen was fined $15 million as part of its settlement deal with the Competition Bureau of Canada, the most costly environmental fine ever given in Canada, for conducting misleading environmental marketing of certain diesel vehicles. Although this fine is noteworthy, it can alternatively be characterized as a Competition Act matter as opposed to a true environmental matter. Setting aside the Volkswagen fine, there was only a difference in total quantum of large fines handed out in 2017 compared to 2018 of $1.5 million. Additionally, the total number of large fines levied increased from 27 in 2017 to 34 in 2018. As a whole, the established pattern of Canada undergoing an overall increase in large environmental fines has continued into 2018.
[19] Berkley Canada White Paper, “Environmental Fines and Penalties Report, 2018 Update Report”, Berkley Canada White Paper (March 2019), at p. 4 [Berkley White Paper, 2018].
[20] Berkley Canada White Paper, “Environmental Fines and Penalties Report, 2017 Update” Berkley Canada White Paper (March 2018), at p. 6 [Berkley Canada White Paper, 2017].
[21] Ibid at p. 5.
[22] Ibid at p. 4.
[23] Nimonik, “Environmental Fines in Canada, 1990-2009” at p. 2 [Nimonik: Environmental Fines].
[24] Berkley Canada White Paper, 2017 supra note 19 at p. 5.
[25] Ibid at p. 5.
[26] Ibid at p. 4.
[27] Ibid at p.5
[28] Ibid at p 5.
[29] Some of the most noteworthy cases in recent years including offences and fines of $2.2 million for offences arising from logging operations and the improper construction of road and stream crossings in B.C., (“Canada: Logging Companies Fined $2.2 Million Under the Fisheries Act”, at: http://www.mondaq.com/canada/x/576972/Environmental+Law/Logging+companies+fined+22+million+under+the+Fisheries+Act.) $172,000 for a pipeline leak in Alberta (“Alberta Energy Regulator fines Murphy Oil $172,500 for 2015 Pipeline Spill”, at: https://calgaryherald.com/business/energy/alberta-energy-regulator-fines-murphy-oil-172500-for-pipeline-spill) $3.5 million for a wastewater leak from a dam failure in Alberta (“Coal Mine Fined $4.5 Million for 2013 spill that contaminated Athabasca River”, at: https://www.cbc.ca/news/canada/edmonton/obed-mountain-mine-fine-athabasca-spill-1.4154792.), and $1.4 million for the discharge of effluent into water frequented by fish in violation of the Fisheries Act in B.C. (“B.C. Coal Mine Company Teck Fined $1.4 Million for Polluting B.C. River, at: https://thenarwhal.ca/b-c-coal-mine-company-teck-fined-1-4-million-polluting-b-c-river/.).
[30] For example, handing out fines for offences such as fines of $175,000 for releasing incinerator ash into the environment in Ontario (“Toronto Company fined $175,000 for Environmental Protection Act Violations” at: https://news.ontario.ca/ene/en/2017/02/toronto-company-fined-175000-for-environmental-protection-act-violations.html.) $265,000 for selling of aerosol products containing ozone-depleting substances in Ontario (“Fastenal Canada fined $265K for selling aerosols with banned HCFCs” at: https://www.cbc.ca/news/canada/kitchener-waterloo/kitchener-fastenal-fined-environment-hydrochlorofluorocarbons-1.4289116.), and $765,000 for the release of PCBs into the environment and the failure to notify in Quebec (“The Hudson Bay Company located in Montreal fined $765,000 for a large release of polychlorinated biphenyls into the environment”, at: https://www.newswire.ca/news-releases/the-hudson-bay-company-located-in-montreal-fined-765-000-for-a-large-release-of-polychlorinated-biphenyls-into-the-environment-606054136.html.).
[31] Berkley Canada White Paper, 2018 supra note 18 at p. 5.
This miscellaneous ”other” category of fines which shot up in 2018 includes a $2.75 million fine arising from the death of migratory birds and a $1.25 million penalty arising from the importing of fuel in violation of the Renewable Fuel Regulation.
[32] Neil Gunningham, Enforcing Environmental Regulation, Journal of Environmental Law, Volume 23, Issue 2, July 2011, Pages 169–201, https://doi.org/10.1093/jel/eqr006 [Gunningham, Enforcing Environmental Regulation].
[33] Gunningham, Enforcing Environmental Regulation, supra note 31 at p. 186.
Bryan C. Williamson, Do Environmental Regulations Really Work?, The Regulatory Review, November 2016, https://www.theregreview.org/2016/11/24/williamson-do-environmental-regulations-really-work/.
Will Amos, Federal government’s enforcement of environmental laws is weak, Ecojustice Blog, December 2011, https://www.ecojustice.ca/federal-governments-enforcement-of-environmental-laws-is-weak-report/.
Joseph Castrilli, Canada’s main environmental law isn’t working, Canadian Environmental Law Association, August 2016, https://www.cela.ca/blog/2016-08-22/canadas-main-environmental-law-isnt-working.
