Assessing Environmental Risk in Light of Evolving Standards

By Scott Pitsch, Operations Manager, DLS Group Inc.

 Fuel oil spills are properly dealt with in accordance with Part X (Spills) of the Environmental Protection Act (EPA).  Section 93 of the EPA states that “the owner of a pollutant and the person having control of a pollutant that is spilled and that causes or is likely to cause an adverse effect shall forthwith do everything practicable to prevent, eliminate and ameliorate the adverse effect and to restore the natural environment”.  The MOE defines practicable as “capable of being affected or accomplished”.  It has been our experience that in nearly all cases, it is entirely practicable to remediate properties affected by fresh spills to their pre-spill conditions.  When assessing the practicable limits of remediation, insurers need to consider several factors beyond project cost, including the remediation technique(s) used to affect the clean-up and the quality of the previous assessment/remediation work.  For example, if the remediation contractor has shown poor quality control measures which produced excessive costs and contamination remains in part due to their sub-standard work, one cannot say that it is impracticable to complete the remediation.  These issues may be revealed during a peer review process and would ultimately be decided upon by the courts. 

 Over the years, many fresh residential fuel oil spills have been remediated to satisfy the 2004 Standards or their predecessor, the 1997 Guidelines for Use at Contaminated Sites in Ontario.  As a result, residual levels of petroleum hydrocarbons frequently remain in the soil or groundwater at concentrations that are not acceptable.  Although these properties were remediated to the Standards of the day, many of those Standards have now changed.  Unless residual contamination at a property is present at concentration levels below the new 2009 Standards, these properties will be considered to be contaminated under the Environmental Protection Act.  Insurers should be advised that these circumstances represent a significant long-tail risk depending on the number of claims that were remediated to the old guideline criteria or Standards, and the severity of each residual impact.  These situations typically come to the forefront during property transactions when the seller has an obligation to disclose the environmental condition of their property to potential purchasers.  If for example a property experienced a residential fuel oil leak and it was remediated to the former guideline criteria, the potential purchaser may not buy the property due to the residual contamination.  This can leave the insured with a depreciated property for which he/she may seek further compensation.  There may also be difficulty in securing financing as lending institutions in the province are sensitive to this risk as well.    

 If a property owner, who has been impacted by a fuel oil spill/release, elects to file a Record of Site Condition (RSC) following remediation to the Brownfield Standards, they could receive limited immunity from future MOE orders relating to investigation and remediation of the property.  An RSC is a document that is filed on the MOE’s Environmental Site Registry to summarize the environmental condition of a property, as certified by a Qualified Person, as of a particular date.  A Qualified Person is recognized by the MOE and must be a member in good standing of the Association of Professional Geoscientists of Ontario or the Professional Engineers Ontario.  The RSC process was developed by the MOE to ensure the protection of human health and the environment during Brownfield redevelopment. With respect to residential fuel oil spills, RSCs are rarely filed because they cannot offer protection against the risk of potential future liability from migration of contaminants off-site.

 There are other important changes to the legislative regime that may add to the above risks.  These include new sampling techniques for volatile organic compounds (VOCs) and light-end petroleum hydrocarbons.  VOCs are hydrocarbon compounds that have low boiling points and therefore evaporate readily.  Propane, benzene, and other components of gasoline are all VOCs.  The MOE has now indicated that they intend to adopt USEPA 5035A methodology for analysis of these chemical compounds in soil during the filing of an RSC.  This is a closed system “purge-and-trap” process for analyzing soil that uses the improved techniques of methanol field stabilization or hermetically sealing sampling devices. According to AGAT Laboratories, this change is required because studies have shown that samples collected via the current traditional approach of simply packing soil into a sample jar with no head space are prone to lose up to 90% or more of their VOC content prior to quantitative analysis due to volatilization and degradation.  Consequently, these new sampling procedures will result in a substantial increase in VOC concentrations realized at contaminated sites; concentration levels which are more representative of the actual levels in soil.  In some cases, the realized concentrations can be 10 to 100 times higher when using the new sampling methodologies as opposed to traditional methods.  Therefore, the concentrations that remain at properties remediated to the old Standards may actually be significantly greater than what has been reported where traditional soil sampling methodology was used.  As a result of this variability, the residual concentration levels may not only exceed the new Standards but also the old Brownfield Standards.

 The MOE also intends to introduce new procedures for the assessment of soil vapour intrusion and the potential for vapours emanating from subsurface contamination to migrate into and concentrate inside structures.  In November 2010, the MOE published a document for review and comment entitled “Draft Technical Guidance: Soil Vapour Intrusion Assessment”.  The intent of this document is to provide guidance to the environmental consulting industry to thoroughly assess and identify contaminated sites which may be potential candidates for vapour intrusion and if so, whether vapours may be present at concentrations that pose an unacceptable exposure risk to occupants of a structure at and in the vicinity of a contaminant source.  While the procedures are mainly focused on risk assessment for the purpose of filing an RSC, they contribute to the awareness and concern for residual contamination that may remain following a fuel oil spill and subsequent remediation.

Our discussion poses many questions – “What will happen to properties that have been remediated to the old Standards especially if residual concentrations of contaminants in soil or groundwater exceed the new 2009 Standards”?  “What will happen to properties impacted by a fresh fuel oil spill that have been remediated to the new 2009 Standards and not to the Standards specified in accordance with Part X of the EPA”?   “Could these properties be considered to be contaminated unless they are remediated and restored to pre-spill conditions”?  With the new sampling procedures described above, the concentrations may indeed be significantly greater than previously documented.  If the contamination remains beneath a residential dwelling or any structure, additional assessment may be required to evaluate the potential risk for vapour intrusion and impacts to human health.

 Additional questions:

 • How will these situations impact the property owners’ ability to sell their homes in the future?

• How will lending institutions view these properties during future mortgage applications?

• From an insurer’s perspective, what is the potential liability associated with these risks?

 The answers to these questions should be given serious consideration when evaluating exposure for previous claims and they should also be considered when adjusting new oil spill claims.  Remediation to pre-spill conditions to restore the natural environment may be more expensive upfront but will definitely ensure that long-tail liability and exposure is minimized.

 Scott Pitsch is Operations Manager of DLS Group.  In this capacity he provides oversight to environmental assessment, remediation and peer review projects.  He also assists legal counsel in the course of environmental prosecutions and civil litigation.  Mr. Pitsch is registered as a Qualified Person with the Ministry of the Environment for the purpose of conducting Environmental Site Assessments and filing Records of Site Condition.