On December 19, 2014, after pleading guilty to 45 counts for infringements of the Fisheries Act 1. and its Metal Mining EffluentRegulations,2. Bloom Lake General Partner Limited ("Bloom Lake") was penalized some $7.5 million. The investigation by Environment Canada into Bloom Lake's operations was the largest undertaken to date and resulted in both the largest Canadian penalty for environmental infractions and the biggest contribution to the Environmental Damages Fund ("EDF").3. Given that all but three of the counts were governed by the Act's former penalty regime, the new regime that was brought into force on November 25, 2013 basically did not apply. The penalties for each charge followed a pattern typical in a plea negotiated situation under the Act's former regime: a relatively small fine and a much larger payment into the EDF. Had the new regime applied, the quantum of the penalty imposed upon Bloom Lake could have been significantly higher.
Facts
Bloom Lake, a subsidiary of Cleveland-based Cliffs Natural Resources Inc., operated an iron ore mine near Fermont, Quebec. On the basis of publicly-available material, an Inspector's Direction was issued for the Bloom Lake mine site on December 15, 2010. On September 7, 2011, given that Bloom Lake had failed to implement the measures required by the 2010 Inspector's Direction, Environment Canada initiated a formal investigation, which included the execution of search warrants at Bloom Lake's mine site and corporate offices (in Montreal), undertaken by over 25 agents who compiled a vast and comprehensive evidentiary record.
Environment Canada concluded that from April 2011 to September 2014, Bloom Lake had committed hundreds of infractions of both the Act and the Regulations. The brunt of the infractions stemmed from Bloom Lake's mishandling of its mining effluent (e.g. design and operation of its tailings ponds, overflowing water retention structures, and lack of water drainage facilities on the mining site).
More specifically, Environment Canada's investigation
revealed that: (i) there had been a breach of the mine's
Triangle Tailings Pond dam whereby, over the course of seven days,
there had been a release of over 200,000 cubic meters of
deleterious materials into fish-bearing waters; (ii) there had been
a release of some 14,500 liters of ferric sulfate into water
frequented by fish;
(iii) Bloom Lake had, on several occasions, not informed the
Department of Fisheries of certain releases of deleterious
substances; and, (iv) Bloom Lake had, on a series of occasions,
failed to take samples and conduct analyses of its effluent as
required.
GuiltyPleas and Sentencing
On December 18, 2014, in appearing before the Honourable Justice Pierre Labelle, Bloom Lake recorded guilty pleas to 45 counts.4 Thirty counts were laid by way of summary proceedings and fifteen by indictment. Once guilty pleas had been recorded on each of the counts, the Crown and counsel for Bloom Lake made a joint submission that a sentence totalling some $7.5 million be imposed, providing a detailed schedule of each count, the events it related to, the suggested fine and the suggested payment to the EDF.5. Justice Labelle then recessed in order to give due consideration to the merits of this submission.
On December 19, 2014, the parties reconvened before Justice Labelle. The Court stated that on the basis of the applicable principles of sentencing laid out in the Criminal Code, in light of certain aggravating factors (e.g. the seriousness of the infractions) and mitigating factors (e.g. the fact that Bloom Lake had fully cooperated during the course of the investigation and that it had chosen to plead guilty), and referencing the principles from the Alberta Court of Appeal decision in R. v. Terroco,6. it believed that the suggested sentence was not unreasonable and that it would therefore give effect thereto.
Justice Labelle noted, in passing, that he had not received any information as to whether Bloom Lake had any previous record of similar offences and that he had not been presented with formal proof of the irreversibility of the damages Bloom Lake caused to the environment. In relation to the latter point, the Court nonetheless acknowledged that it was easy to understand that the environment had been greatly affected.
Ultimately, Bloom Lake was sentenced to pay a total of $7.5 million, with $6.83 million thereof comprising Bloom Lake's penalty contributions to the EDF. On December 19th, immediately after the sentencing hearing was concluded, Bloom Lake remitted just over $6 million to Environment Canada. In undertaking a review of the quantum levied for each count, the highest Pre-Amendment fine vis-à-vis the Act was $97,500 and the highest Post-Amendment fine, some $400,000; additionally, the single-highest payment that Bloom Lake was ordered to make to the EDF was $877,500.
Commentary
On November 25, 2013, amendments first introduced by the federal government in 2012, which affected the applicable penalties for contravening (notably) sections 35(1) (serious harm to fish, formerly harm to habitat) and 36(3) (deleterious deposits) of the Act, came into force. Prior to that date ("Pre-Amendment"), the applicable fine for a summary offence was limited to a maximum of $300,000 and for an indictable offence the maximum was $1,000,000. No minimums applied.
As of November 25, 2013 ("Post-Amendment"), the new provisions introduced minimum sentences, provided for substantially higher maximum fines, and drew distinctions between individuals, small revenue corporations (defined as corporations with yearly revenues of $5 million or less), and other (larger) corporations. More specifically, the new, Post- Amendment penalty regime's maximum and minimum fines for larger corporations are now: (i) for a first summary conviction offence, there is a minimum fine of $100,000 and a maximum of $4 million; (ii) for a repeat or subsequent summary offence, these minimum and maximum fines double; (iii) for a first indictable offence, there is a minimum fine of $500,000 and a maximum fine of $6 million; and, (iv) for a repeat or subsequent indictable offence, these minimum and maximum fines double. Individuals and small revenue corporations face lower fines.
Given that all but three of the charges levied against Bloom Lake related to Pre-Amendment infringements, the new penalty regime was not in issue. On the charges under the Post-Amendment regime the fines were above the minimums, with no discussion by the Court about the new regime. One can safely assume that the $7.5 million Bloom Lake was fined on December 19th could have been substantially greater had the infractions all been captured by the new, Post-Amendment penalty regime.
While certain commentators have critiqued the federal government's increased emphasis upon dissuasion (i.e. reliance upon higher fines), as opposed to increased enforcement, the penalties imposed against Bloom Lake amount to a strong cautionary precedent, even though the case attracted little media attention.
Given the particularly egregious nature of the (repeated) offences committed by Bloom Lake and the company's lack of diligence in ensuring that potential / actual harm to the environment was avoided or otherwise minimized, the plea negotiations involved, and the announcement right after the judgment that Bloom Lake was shutting its operations, it remains to be seen whether this case will act as much of a precedent for other enforcement actions pertaining to violations of the Act or the Regulations. Nonetheless, companies would be well- advised to ensure that that their reporting practices and operating safeguards are in full compliance with what is required by applicable laws.
Footnotes
1. R.S.C., 1985, c. F-14 (the "Act").
2. SOR/2002-222 (the "Regulations").
3. The EDF is a manifestation of the "polluter pays principle", to help ensure that those responsible for causing environmental damage or harm to wildlife pay to fix that type of harm. The EDF is a specified purpose account, administered by Environment Canada, to provide a mechanism for directing funds received as a result of fines, court orders, and voluntary payments to priority projects that will benefit Canada's natural environment.
4. Worthy of note: the majority of the infringements of the Act resulted from violations of section 36(3) (counts 1 thru 28, for depositing deleterious substances, many in violation of the Regulations), section 38(6) and its successor s. 38(7.1) (counts 29 thru 33, for failing to meet the Inspector's Direction), section 38(4) (counts 34 thru 37, for failing to report); and various other infringements of the Regulations.
5. Most counts covered a time span and multiple events. For example, count 26, with the individual largest penalty ($975,000 from a $97,500 fine and $877,500 to the EDF), covered fifteen different events over seventeen months involving deleterious deposits of suspended solids.
6. 2005 ABCA 141.
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