The Alberta Court of Queen's Bench (the "Court") has added to the relatively sparse case law on whether an extension to a limitation period will be granted under section 218 of the Environmental Protection and Enhancement Act, RSA 2000, c. E-12 ("EPEA") in Paramount Resources Ltd v Grey Owl Engineering Ltd, 2022 ABQB 333. Through this decision, the Court clarified the application of section 218 of the EPEA and found that it cannot be used to extend limitation periods in situations where a party liable for remediation costs seeks contribution from another party.
Section 218 allows a judge to extend a limitation period where the allegation is that the release of a substance into the environment has caused an adverse impact. The purpose of section 218 of the EPEA is to balance policy considerations of the polluter pays principle and the difficulty plaintiffs may face in "discovering" environmental contamination, against prejudice to defendants in defending claims that are past the prescribed limitations period.
Background
Paramount Resources Ltd. ("Paramount") was the owner and operator of a pipeline. In 2004, Paramount commenced work on the pipeline to convert it from a simple steel pipe to a carrier pipe. The various Defendants were involved in this conversion work. The work was completed in 2004. In April of 2018, two leaks were discovered in the pipeline and operation was discontinued. Paramount was required to remediate resulting environmental damage at a cost of approximately $20 million.
On February 6, 2019, Paramount commenced an action against the Defendants alleging negligence in their work on the pipeline. Specifically, Paramount asserted that the Defendants had failed to bury the pipeline deep enough underground to avoid exposure to frost. The Defendants applied for summary dismissal on the grounds that the claim was commenced outside of the 10-year ultimate limitation period in section 3(1)(b) of the Limitations Act, RSA 2000, c L-12 ("Limitations Act"). Paramount denied that the 10-year limitation period had passed or, in the alternative, applied for an extension of the limitation period pursuant to section 218 of the EPEA
The 10-Year Limitation Period
The Court first addressed whether the 10-year limitation period had passed. Under the Limitations Act, Paramount's claim would have arisen when the alleged negligent act occurred in 2004 (when the pipeline was not buried deep enough) and the 10-year limitation period would have expired in 2014. The claim was not commenced until 2018. The ultimate 10-year limitation period does not depend on discoverability and instead runs from when the claim arose.
Paramount, however, asserted that the negligence claim in issue was essentially a claim for contribution and indemnity and, therefore, section 3(3)(e) of the Limitations Act should apply. Section 3(3)(e) provides that "a claim for contribution arises when the claimant for contribution is made a defendant in respect of, or incurs a liability through the settlement of, a claim seeking to impose a liability on which the claim for contribution can be based, whichever occurs first." Paramount argued that it became liable under the EPEA in April 2018 when the leaks were discovered and, therefore, the 10-year limitation period did not start to run until April 2018.
A claim for contribution requires that the defendant(s) be directly liable for the same damage as the claimant. In this case, Paramount asserted that, under EPEA, the Defendants could have been directly liable for the environmental damage. Section 107(1)(c) of the EPEA defines "a person responsible for the contaminated site" as a "person responsible for the substance that is in, on or under the contaminated site" and section 1(tt) defines "person responsible" as "every person who has or has had charge, management or control of the substance or thing, including, without limitation, the manufacture, treatment, sale, handling, use, storage, disposal, transportation, display or method of application of the substance or thing". Paramount argued that the Defendants had charge or responsibility for ensuring that the pipeline installation was properly done and therefore fell within the definition of "person responsible".
The Court rejected this argument, in part based on concerns that Paramount's interpretation of "person responsible" would unduly expand the scope of liability under EPEA for contractors and subcontractors. The Court found that, even if the Defendants had caused the leak through negligent work performed on the pipeline, they would not be directly liable under EPEA because they never had charge of the substances transported in the pipeline within the meaning of section 1(tt). As a result, the Court concluded that Paramount's claim was not properly a claim for contribution under section 3(3)(e) of the Limitations Act, the ultimate 10-year limitations period applied, and Paramount's claim was, therefore, limitations barred.
Section 218 of the EPEA
Having found that Paramount's claim was barred by the 10-year limitation period under the Limitations Act, the Court went on to consider whether Paramount's claim could be saved by an extension under section 218 of EPEA. Section 218 allows the Court to grant an extension of any limitation period "where the basis for the proceeding is an alleged adverse effect resulting from the alleged release of a substance into the environment." In considering an application under this section, the judge is to consider the following factors:
a. when the alleged adverse effect occurred;
b. whether the alleged adverse effect ought to have been discovered by the claimant had the claimant exercised due diligence in ascertaining the presence of the alleged adverse effect, and whether the claimant exercised such due diligence;
c. whether extending the limitation period would prejudice the proposed defendant's ability to maintain a defence to the claim on the merits;
d. any other criteria the court considers to be relevant.
The Court noted that underlying the analysis is a balancing of the competing policy objectives of the Limitations Act and EPEA: on the one hand, finality and difficulties associated with the erosion of evidence over time; and, on the other hand, ensuring that polluters pay for cleanup, and difficulties with timely discovery of environmental damage.
The Court observed that this was not a case of long-undetected contamination creating problems for an innocent party years later. Rather, Paramount discovered the leaks from its own pipeline within a matter of days. As such, the Court held that the policy objectives of section 218 EPEA did not outweigh those of the Limitations Act in this case. The purpose of Section 218 is for situations where, in absence of an extension of limitations periods, costs of remediating environmental contamination may fall to an innocent party, or society at large. This case, by contrast, was a dispute about who was liable for the contamination, as between Paramount, as owner and operator, and the various contractors and subcontractors who worked on the pipeline.
The Court acknowledged that, assuming the cause of the leaks was the Defendants' negligence, a result where Paramount was limitations-barred from claiming against the Defendants resulted in unfairness. However, the Court found that such unfairness was a "necessary side effect" of limitations legislation, and irrelevant to whether section 218 can be used to extend the limitation period. Section 218 does not exist to remedy unfairness against a party, but rather to prevent the societal injustice that would result from parties responsible for environmental contamination avoiding an expensive remediation bill.
Key Takeaways
PARAMOUNT RESOURCES LTD. 
