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Oct 1, 2013

Assessing the Costs of Reclaiming Contaminated Land

By: John Fox

Buying contaminated land to develop housing gives you a different perspective on environmental due diligence. The basic emphasis shifts from a liability analysis to an economic and a regulatory one— from “What’s my exposure?” to “What do I have to do to get a building permit?”

In a situation where the land is being changed from a less to more sensitive use— e.g., from industrial to residential—the Environmental Protection Act requires the developer to file a Record of Site Condition (RSC) with the Ministry of the Environment (MOE) before a building permit can be issued. This filing, sometimes called Regulatory Closure, is a key moment in the development process. There will still be things to worry about, including tomatoes (I’ll get to that shortly), but builders can at least now predict the development’s timing and costs as though the land were clean.

Taking ownership of a contaminated site involves risk. Owners, as well as their directors and officers, are potentially liable for remediation costs where contamination exceeds MOE limits, or if contamination is migrating to a neighbour’s property. Step One in managing that risk is to get all the info you can about it. The right to conduct environmental investigations should always be a condition of your purchase.

That means your choice of consultant matters. There are four things I look for in a consultant. First, can they carry the file right through to Regulatory Closure? The more complex the submission, the higher the level of qualification required. I don’t want to change horses halfway through. Second, I don’t want them to sell themselves by disrespecting the MOE. That’s not the attitude you want in the room when you have to problem-solve with those same officials. Third, can they speak science to scientists and English to the rest of us? The ability to translate the science into something comprehensible to you, the Ministry, your lenders, the local community and anyone else is valuable. And finally, will they prepare a reasonable budget and schedule that can be used to keep them accountable? Your consultant will soon come back with the results of their work in the form of Phase 1 and Phase 2 Environmental Site Assessments. The form of the ESAs is mandated by the regulations. The big pile of paper you will get is not your consultant’s fault, but they should go further than just hitting the regulatory requirements. Have your consultant complete their due diligence with a view to how the RSC is best achieved—through remediation or risk assessment. The consultants have to be active members of your advisory team and should have an eye to the end game.

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