MOE's Environmental Penalty Regulations
In June 2007, the Ministry of the Environment (MOE) passed two new regulations – O. Reg. 222/07 under the Environmental Protection Act (EPA), and the corresponding O. Reg. 223/07 under the Ontario Water Resources Act (OWRA) – to support the implementation of the environmental penalty provisions contained in the EPA and the OWRA.
The concept of “environmental penalties” (EPs) was introduced into the EPA and OWRA in 2005 through the Environmental Enforcement Statute Law Amendment Act, 2005 (EESLAA), as part of the government’s plan to address the serious problem of industrial spills in Ontario. The EP provisions in the EPA and OWRA allow MOE Directors to issue orders to “regulated persons,” requiring such persons to pay an administrative financial penalty in relation to a spill, unlawful discharge or other prescribed offence under those Acts.
The two new EP regulations, along with five new supporting guidelines developed by MOE, now provide the important details of how, when and to whom the EPs may be issued. The EP regulations also enable the implementation of the EP provisions. The frst phase – which allows EPs to be issued for serious offences (such as a spill, limit exceedance, failure to report and failure to restore) – came into effect on August 1, 2007. The second phase – which allows EPs to be issued for less serious offences (such as a failure to sample, report and keep records) – comes into effect on December 1, 2008.
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Implications of the Decision
Fewer spills and better responses
The goal of the EP regulations is to reduce the number of spills occurring, and minimize the harm that results when spills do occur. To achieve these goals, the ministry hopes that the imposition, or mere threat, of EPs will encourage regulated facilities to:
- take steps to prevent spills and discharges;
- take steps to mitigate the effects of spills/discharges on the environment and human health;
- implement environmental management systems; and
- take steps for the protection of the environment beyond the minimum legal requirements.
The EPs also follow through on the provincial government’s “you spill, you pay” promise by ensuring that those who are responsible for the spills are the ones paying the penalty.
EPs only apply to MISA Facilities
The EPA and OWRA state that EPs may only be issued to a “regulated person.” The EP regulations have defined a “regulated person” as a person who owns or operates a MISA (Municipal Industrial Strategy for Abatement) or MISA-like facility. Accordingly, EPs may only be issued to the approximately 148 industrial facilities that are currently included in the nine MISA sectors (i.e., the organic and inorganic chemical manufacturing, industrial minerals, metal mining, metal casting, iron and steel manufacturing, electric power generating, pulp and paper, and petroleum sectors), or to other new entrants into a MISA sector.
MOE stated that it chose to restrict the definition of “regulated person” to the MISA facilities because these facilities account for a significant portion of the reported spills to land and water each year. However, there are other major dischargers which have not been made subject to the EP requirements. For example, municipal sewage treatment facilities are significant contributors to water discharges, and were also originally intended to be a key part of the MISA program when it was created in 1986 (i.e., the missing “M” in MISA). However, MOE could expand the definition of regulated persons to include municipal facilities or other industrial sectors at a future time.
EPs only apply to prescribed offences relating to water and land The EP regulations set out a restrictive list of offences for which EPs may be issued. The prescribed list includes offences that broadly relate to spills or unlawful discharges to water, as well as to land, but not to air.
EPs provide a new abatement tool
EPs add one more option to the array of abatement and enforcement tools available to MOE staff. The ministry’s newly amended Compliance Policy (F-2), which guides ministry decisions regarding which tool(s) to use when responding to a potential offence, recommends the possible use of EPs for moderate to severe offences. The Compliance Policy also clearly states that the use of an EP does not preclude the ministry from also referring that same offence to MOE’s Investigations and Enforcement Branch (IEB) for further investigation and possible prosecution. In fact, in the case of serious offences, the Policy now requires staff to refer the case to the IEB. This mandatory requirement to refer all serious offences to the IEB was added to the final version of the Compliance Policy in response to concerns expressed by environmental groups.
Because EPs are expected to be a faster, easier and less resource intensive option than court proceedings, EPs may be used in place of prosecutions in many cases and thus, may result in a reduction in the total number of cases prosecuted by MOE.
Calculation of the EP amount is strictly defined by the regulations
When the concept of EPs was introduced, there was considerable concern from some stakeholders that the EPs would be a form of judicial penalty and, thus, the application of EPs in conjunction with prosecutions would result in “double jeopardy” (i.e., a situation where a defendant is tried twice for the same offence), which is generally prohibited by common law. Therefore, in developing the EP regulations, the ministry has endeavoured to create a rigid and objective formula for calculating EPs, with a minimum of discretion, to ensure that the EPs are administrative penalties, and not judicial penalties.
The EP regulations, together with MOE’s new “Guideline for Implementing Environmental Penalties,” define in detail the manner in which MOE Directors must calculate the amount of the EP. The amount of each EP is based on:
- the “type” of offence (which is classified into three types – minor, moderate and major);
- the “seriousness” of the consequences of the offence; and
- other case-specific factors set out in the regulation, including the person’s past compliance record, delays in compliance, the involvement of a toxic substance in the offence, and the duration of the offence.
The amount determined above may then be reduced:
- by up to 30 per cent if the regulated person has taken steps to prevent the offence and/or to mitigate its impacts; and
- by a further 5 per cent if the person had implemented a qualified Environmental Management System (EMS), such as a certified ISO 14001 system.
(For a more detailed discussion of how the EPs are calculated, see the related EP decision review in the Supplement to this year's Annual Report.)
EPs may be reduced for “Beyond Compliance Projects”
To encourage facilities to be environmentally progressive, the EP regulations allow a reduction in the EP amount if a regulated person enters into an agreement with a MOE Director to invest in a “Beyond Compliance Project” (BCP) – a pollution prevention or reduction project that goes beyond what is required by law to prevent, eliminate or reduce the discharge of a contaminant into the environment.
However, the person must invest at least three dollars in a BCP for every one dollar reduction of its EP amount. The high costs required to achieve a reduction in the EP may limit the extent to which this option is actually used.
Public Participation & EBR Process
The ECO commends MOE on its thorough consultation process for the new regulations. Despite the extensive stakeholder consultation, a large number of industry groups still opposed the regulations. Many of these commenters felt that the EP system is patently unfair in that it provides penalties without an opportunity for defence, and is potentially doubly punitive. These commenters also felt that the permitted deductions (for preventative and mitigative measures, EMSs and BCPs) were all too low. Many environmental groups, on the other hand, supported the EP regulations, but expressed concern that the use of EPs may result in a reduction in prosecutions, and thus a weakening of regulatory compliance in the province. (For a detailed discussion of the issues raised by the commenters, see 2007 Review of Spills decision.)
ECO Comment
As noted in the ECO’s review of the EESLAA in the 2005-2006 Annual Report (pages 102-107), the ECO strongly supports the development of EPs. The threat of a penalty for spills or unlawful discharges should persuade companies in Ontario to re-examine their processes and implement pollution prevention measures, which ultimately should help reduce the occurrence of spills and discharges. Further, when spills, unlawful discharges and other related offences do occur, the EP regime provides MOE with an important new tool to promptly and efficiently address those cases.
As noted in the ECO’s [[Classification and Exemption of Spills: Amending Regulation 675/98 of the Environmental Protection Act (EPA)|1999-2000] and [[Environmental Enforcement Statute Law Amendment Act, 2005|2005-2006] Annual Reports, EPs provide a number of advantages over prosecution. As MOE staff struggle with a lack of capacity to adequately enforce all of its laws (see the ECO’s 2007 Special Report, “Doing Less with Less”), EPs should provide ministry staff with a faster, less resource intensive, and less costly means of bringing contraveners into compliance with provincial environmental laws.
However, the ECO believes that although EPs are an important abatement tool, EPs must not displace the role of prosecutions, which are a key enforcement tool in the ministry’s overall compliance strategy. Studies have demonstrated that an emphasis on enforcement correlates with increased regulatory compliance, and further, that companies that have been prosecuted tend to allocate significantly more of their resources towards environmental protection than those that have not been prosecuted.
It is not yet known how the use of EPs will impact the decisions of the IEB and Crown prosecutors to investigate and prosecute alleged offences. Accordingly, MOE is required to conduct a five-year review of the EP program and its impact on the level of prosecutions. The ECO looks forward to reviewing this report, and encourages MOE not only to adjust enforcement strategies, if needed, based on the results of this report, but also to consider whether the EP regulations should be extended more broadly to other sectors (such as municipalities), and possibly to air as well.
Although the new EP regime is indeed complex, the ECO believes that the new EP regulations provide an effective regulatory framework that should hopefully prove to be both objective and transparent. The EP regulations provide detailed calculations that minimize discretion and ensure that penalties are fair and predictable.
The ECO believes that MOE has provided a balanced approach to the calculation of deductions for Beyond Compliance Projects, EMSs and other preventative and mitigative measures. These deductions will hopefully encourage regulated persons to take appropriate steps to safeguard the environment, while ensuring that penalties continue to be substantial enough to act as a deterrent.
| This is an article from the 2007/08 Annual Report to the Legislature from the Environmental Commissioner of Ontario. |
Citing This Article:
Environmental Commissioner of Ontario. 2008. "Environmental Penalty Regulations." Getting to K(No)w, ECO Annual Report, 2007-08. Toronto, ON : Environmental Commissioner of Ontario. 98-102.
