Supreme Court of Canada ruled 7-2 against government
The former AbitibiBowater mill in Grand Falls. — File photo by The Advertiser
Finance Minister and Attorney General Tom Marshall said the province fought the good fight on the Abitibi mill cleanup, but doesn’t regret the expropriation of the company’s assets.
The Supreme Court of Canada has ruled against the government in its effort to force insolvent newsprint giant AbitibiBowater Inc. to pay for an environmental cleanup.
“Thank God we expropriated.
“If we hadn’t expropriated, the company still would have gone into double-C double-A protection or into bankruptcy protection, and we would have been left with nothing but the contaminated assets,” Marshall said.
“By expropriation, we got the valuable assets — the power plant, the water rights, the valuable timber and we got the land that wasn’t contaminated.”
The court’s 7-2 ruling was greeted with disappointment by the environmental group that intervened in the case.
The province wanted the top court to decide whether a debtor’s statutory duty to remove environmental contamination is extinguished under Companies’ Creditors Arrangement Act.
The company, now operating as Resolute Forest Products, had filed for protection under the act in 2009.
The province wanted to force the company to clean up five contaminated sites, estimated to cost at least $100 million.
They include the defunct Grand Falls-Windsor paper mill that the province mistakenly expropriated in December 2008.
The government only meant to take the water and timber rights from the company, and associated hydroelectric dams, but in the rush to pass legislation through the House of Assembly, the government accidentally took the mill property as well.
The precedent set by the high court decision could put the province on the hook for billions in the future when faced with situations of other insolvent industries, Marshall acknowledged.
“What it’s done, it’s taken the environmental orders which are issued by a regulatory agency to protect the public and has equated that with the ordinary claims of creditors,” Marshall said.
“It has not given it a priority. I think a lot of people will be upset with that.”
The high court acknowledged the so-called “polluter pay” principle, but ruled it wasn’t enough to give the province the victory it has now failed to achieve in three levels of court.
“Our argument all along was we weren’t seeking money. We, under the Environmental Protection Act, had issued a number of orders,” Marshall said.
“We were not seeking money, but ordering Abitibi to clean up its mess.”
Environment Minister Tom Hedderson said the province will have to look to future budgets to come up with the cash for the cleanup.
He said there’s no chance now of recovering any cleanup money.
Hedderson gave no timeline on the job, but noted the work that has already begun in nearby Buchans as addressing health risks.
The province has $1 million in environmental cleanup line items each year and that will pay for assessments needed before any other major work begins, Hedderson said.
There have been some small assessments related to the contamination.
“We’re in a position now where we can get into the larger picture and start to prioritize and get what needs to be done as quickly as we possible can,” he said.
Neither NDP Leader Lorraine Michael — who was in the House for the 2008 expropriation vote — nor Liberal Leader Dwight Ball — who was not in government at the time — were surprised.
“We should not have expropriated the mill. That was a mistake,” Ball said. “We got an environmental liability here we don’t want.”
Michael said the house was rushed into supporting government’s measure.
“And that’s the thing that I regret the most — that I didn’t really put brakes on that day and say this seems to be going awfully fast,” Michael said.
“We were led to believe by (then premier Danny) Williams the bankruptcy was imminent and taking the action with regard to the water rights and the power rights, etcetera, would be extremely important for the province. We all acted under the urgency he was pushing as premier.”
Michael also said the lesson of rushed decisions should be heeded when it comes to the Muskrat Falls project.
The Quebec Court of Appeal earlier refused to hear the province’s appeal against the Montreal-based company.
A spokesman said the company was pleased with the decision. “The decision of the Supreme Court speaks for itself,” said Seth Kursman.
The Supreme Court ruled against the province, essentially telling it that it had to get in line with other creditors.
Writing for the majority, Justice Marie Deschamps, now retired, said allowing the province to operate outside the bankruptcy law regime would be akin to asking all other creditors to pay the province.
The ruling acknowledged the “polluter pay” principle, but said in this case it did not give the province any special status that would move it ahead of other creditors.
“In the insolvency context, the province’s position would result not only in a super-priority, but in the acceptance of a ‘third-party pay’ principle in place of the polluter-pay principle,” Deschamps wrote.
“Nor does subjecting the orders to the insolvency process amount to issuing a licence to pollute, since insolvency proceedings do not concern the debtor’s future conduct. A debtor that is reorganized must comply with all environmental regulations going forward in the same way as any other person.”
The case has been politically charged and attracted attention from the governments of Alberta, Ontario and British Columbia as well the environmental groups, which were all granted intervener status.
“This case is a loss for the environment,” said Beatrice Olivastri, the head of Friends of the Earth Canada.
The ruling will ultimately have a negative effect on the ability of provinces to deal with polluters, she said.
Olivastri predicted the provinces will have to ensure companies “have enough money in the pot” to pay future cleanups at the time they grant licences for new projects.
Ecojustice lawyer William Amos, who represented Friends of the Earth, said the high court missed a chance to infuse insolvency law with the polluter-pay principle.
“And ultimately, unless the federal government goes about amending federal insolvency law, taxpayers may end up on the hook for significant environmental liabilities because provinces will be in a much more difficult situation,” he said.
“They will find it much more difficult to issue an order to remediate if companies will simply anticipate being able to argue that they should get in line with the rest of the creditors.”
The province rushed through legislation to seize Abitibi timber and water rights, along with a hydroelectric power station, after the failing company announced it was closing the Grand Falls-Windsor mill.
The federal government subsequently agreed to pay AbitibiBowater $130 million to settle a claim under the North American Free Trade Agreement.
Remediation orders will have to be issued and acted upon well before a company goes under, Amos said.
“This decision demonstrates clearly that federal insolvency laws require significant reform so that they don’t serve to protect companies and investors at the expense of taxpayers and regulators. The Companies’ Creditors Arrangement Act must be amended by Parliament so that taxpayers aren’t left holding the bag when companies go insolvent.”
Amos said corporations often use bankruptcy as a strategic move to restructure debt, and not necessarily purely because of financial crisis.
The Supreme Court addressed that point in its ruling, and disagreed.
“No matter what risks are at issue, reorganization made necessary by insolvency is hardly ever a deliberate choice. When the risks materialize, the dire costs are borne by almost all stake holders,” Deschamps wrote.
“To subject orders to the claims process is not to invite corporations to restructure in order to rid themselves of their environmental liabilities.”