How do you know if land is contaminated?

In Canada the provinces and territories have adopted the principles of a three-phase environmental site assessment (ESA) to guide the rehabilitation process for contaminated sites. We are discussing Phase 1 ESA.

The Canadian Standards Association (CSA) defines a standard Z768-01 (R2006), Phase I Environmental Site Assessment. This is the standard accepted by all provinces, except British Columbia (B.C.). These reports will include reference to geology and hydrogeology.

B.C. has its own vocabulary but does end up with a report that is similar in content and thoroughness to the other provinces.

There is a concern that the Phase 1 ESA is being extended beyond the original intent. The original intent of Phase 1 is to define the scope of the necessary rehabilitation. The assessment may be a legal requirement for a site that has either already been determined as being contaminated or a site that is suspected of being contaminated.

What has become common is this assessment is becoming a part of the due diligence process for financial institutions who are the lenders considering the mortgaging of commercial and industrial real estate transactions.

Municipalities are often setting up a higher standard for ESA then the provincial requirements.

In Alberta the land is looked at in terms of former occupancy or use. An example would be a former lumber mill may still be leaking creosote into the nearby river system. Another example would be a very old building that may have had asbestos used in the construction.

British Columbia will look at zoning, plant closure or even a property-related bankruptcy is considered for an ESA.

In Manitoba there is a registry of sites that are known or suspected to be contaminated. If your site is listed on this registry then there will be an ESA requirement.

Ontario requires an ESA when certain changes in land use are proposed: from industrial or commercial to residential or park.

How does this affect insurance?

Canadian insurers use a principle where the liability and financial consequences lands on the owner of the land who caused the pollution. This is not always something that can be proved. So what happens if it can’t be proved as to when the pollution started?

When the contamination is discovered now the claims process will determine if the owner of the land at that point becomes responsible to clean things up. So if you want to protect yourself from this financial consequence then the Phase 1 ESA becomes a good tool to start the process of determining if you are at risk and then what to do next.

If your operation has a risk of causing contamination then you need to have some pollution coverage for this environmental exposure. Talk to your agent or broker to be sure of the limitations of what protection you have in place. Take control of your insurance.