In Nathan Reicheld v. His Majesty the King, 2024 ONSC 5016 (Reicheld), the Ontario Divisional Court provided helpful clarity on the definition of “operator” under the Oil, Gas and Salt Resources Act, R.S.O. 1990, c. P12 (the Act) and commentary on who may be held responsible for environmental remediation. The Court granted an application for judicial review, setting aside the decision of the Designee of the Minister of Natural Resources and Forestry compelling the applicant to remediate wells.
Background
Glenfred Gas Wells Limited (Company) was incorporated in 1965 to extract and distribute natural gas deposits in Ontario. Glenn Reicheld and Fred Reicheld (Fred) (the grandfather and father of the applicant) had been the directors of the Company since 1965.
The applicant was never a shareholder, director or officer of the Company. In 2012, Fred was diagnosed with Parkinson’s, and the applicant acted as a volunteer, by assisting his father with certain activities relating to the company such as reading gas meters and occasionally interacting with regulators including the Technical Standards and Safety Authority. Since Fred was uncomfortable with technology, the applicant provided his contact information so that people could communicate more easily with the Company through him. The Company declared bankruptcy in 2022.
Between July 2021 and October 2021, an inspector appointed under the Act inspected 62 wells licensed to the Company, and found that all were hazards to the public and the environment. The inspector issued three plugging orders on July 30, 2021, October 4, 2021, and December 17, 2021, against the applicant and his mother, Sally Reicheld (Sally), holding that they were “operators” as they were associated with the Company and had “decision-making authorities.”
The applicant and Sally appealed under s. 7.0.2 (1) of the Act to the designee of the Minister of Natural Resources and Forestry (Designee). The appeal was heard over three days where 11 witnesses testified. The applicant and Sally argued that neither was an “operator” under the Act. The Designee dismissed the applicant’s appeal but allowed Sally’s appeal. The Designee found that the applicant’s dealings with multiple regulatory agencies and customers on substantive issues, through a variety of communication methods, over an extended time period, constituted “substantial evidence” that he was an operator.
The Designee substituted the Inspector’s orders with three new orders compelling the applicant to plug, repair, and conduct weekly inspections of the wells with new dates for completion. The applicant applied for judicial review of the Designee’s orders.
The legal framework
Under s. 1(1) of the Act, an “operator” in respect of a work is defined as:
a) A person who has the right as lessee, sub-lessee, assignee, owner or holder of a licence or permit to operate the work,
b) A person who is authorized under subsection 10(1.1) to operate the work without a licence,
c) A person who has the control or management of the operation of the work, or
d) If there is no person described in clause (a), (b) or (c), the owner of theland on which the work is situated.
S. 7.01(a) of the Act authorizes an inspector, appointed by the Minister, to order an operator to plug a well if the inspector is of the opinion that the well is a hazard to the public or the environment. These orders are known as “plugging orders.”
S. 7.0.2 (2) allows the minister to designate, “for the purpose of disposing of an appeal” of an Inspector’s order, one individual, two individuals, any odd number of individuals greater than one, or an agency, board or commission. In this instance, the “Designee” was a single individual.
Divisional Court decision
The Court identified two key issues on the application for judicial review:
- Whether the applicant had “control” or “management” of the operation of the work.
- Whether a volunteer who is giving assistance to a disabled family member, and who has no legal or financial connection to the work where the wells are located, can be considered as an operator with control or management of the work in question.
The Court applied the standard of reasonableness to the Designee’s decision, and concluded that it was unreasonable to find that the applicant was an “operator” within the meaning of the Act.
The Court examined a number of decisions made under the Canadian Environmental Protection Act, 1999 (S.C. 1999, c. 33) [EPA], as well as the Ontario Superior Court of Justice decision in Bilodeau v. Her Majesty The Queen in the Right of Ontario, 2022 ONSC 1742 (Bilodeau) decided under the Act.
In Bilodeau, the Divisional Court judicially reviewed the decision of a designee under the Act, upholding a plugging order against Mr. Bilodeau, who was found to be an “operator” because he had the power to control and manage the wells in question. As noted in paragraph 62 of Bilodeau, this included the ability to “make things happen,” and the power to “prevent things from happening.”
Based on the analogous jurisprudence, the Court found that the legal power to make decisions concerning the works in question, or the ability to influence the decisions of people with the legal power, is necessary for a person to be identified as an “operator.”
The Court held that the Designee was required to justify the designation of a person as an operator in light of these requirements, which they did not do. The Court further noted that it would be “unfair” and “unreasonable” to interpret the Act such that a low-level employee who carries out functions in relation to an enterprise could be held liable for the pollution caused, unless it can be established that this person had decision-making authority in relation to that enterprise. The Court found the same unfairness would apply to persons like the applicant, who assumed the role as a volunteer to help out a sick relative, but drew no financial benefit from his role.
The Court ultimately held that it was unreasonable for the Designee to find that the applicant was an operator liable for remediating environmental damage associated with the business operations in the absence of evidence that the applicant had the legal or de facto power to make decisions with respect to Company’s activities, or the ability to strongly influence the person who did have that legal power. The evidence showed that the applicant had no such authority in respect of the Company’s business. The fact that the applicant was knowledgeable about issues and could communicate about them would not automatically confer decision-making authority on the applicant.
Key takeaways
This decision is one of the few cases providing clarity on who is an “operator” under the Act; someone with “management” and “control” over the business of a company translating into (i) decision-making authority or (ii) the ability to influence a person with decision-making authority.
In a broader context, attribution of liability in environmental law has been, and continues to be, a thorny issue. “Management” and “control” are overlapping concepts. Defining their precise contours and fastening liability is a challenge that courts regularly have to meet. When deciding whether to fasten liability or not, the Court distilled previous jurisprudence on the subject, and with its two-part test to determine who is an “operator,” provided a framework for courts and tribunals to follow.
For more information, please reach out to the authors, Dina Awad and Zain Mookhi.
