Pipeline Operator Seeks To Extend Limitation Period After Environmental Issues Are Discovered
September 29, 2022
Anyone involved in large construction projects, including those in the oil and gas industry, will know that projects often involve large teams representing different companies or organizations. When issues arise, there can be questions about who is responsible for remediation and its associated costs. In addition to identifying who the responsible party is, there may also be questions about whether or not that party still has an obligation to assist.
In a recent decision from the Court of Queen’s Bench of Alberta, the court looked at a situation where an environmental leak in a pipeline required an estimated $20mm to repair. Still, the company from whom payment was sought said the time limit for their responsibility under the Limitations Act had passed.
Pipeline requires $20 million in environmental remediation
The relationship as relevant to the matter began in 2004 when the plaintiff “PRL”) began a project to convert its pipeline from steel pipe to “carrier” pipe, which included the insertion of a fibreglass liner into the existing pipeline. They hired the defendant company (“GOE”) to manage the project, though third parties were hired to supply materials and install the fibreglass lining.
The project was completed that same year, and the pipeline functioned as expected for 11 years when it was discontinued. It wasn’t until PRL attempted to reactivate the pipeline in 2017 that problems related to environmental leaks were noticed. The pipeline was not buried underground enough to avoid water freezing at or above the frost line. To avoid freezing, the pipe must have been buried between 1.5-1.8 meters. The pipe was not dug deep enough in several areas, including somewhere it was only 0.4 meters deep.
PRL sought to have GOE found liable for the work needed to fix the leak, but GOE claimed the 10-year ultimate limitation period had expired.
Had the 10-year drop-dead limitation period expired?
GOE relied on the Limitations Act, which states that a defendant is entitled to immunity from liability in a claim if a claimant does not seek a remedial order within 10 years after the claim arose. It goes on to state,
(3) For the purposes of subsections (1)(b) and (1.1)(b),
(a) a claim or any number of claims based on any number of breaches of duty resulting from a continuing course of conduct or a series of related acts or omissions, arises when the conduct terminates or the last act or omission occurs;
(e) 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;
PRL, however, took the position that the limitation clock did not start running when the work on the pipeline was complete. Instead, it only started running when the pipeline leak was discovered in April 2018. Furthermore, they state that Section 3(3)(e) of the Limitations Act applies because PRL was made to remediate the issue under the Environmental Protection and Enhancement Act (“EPEA”). PRL said that they were only looking for GOE to contribute to the environmental remediation, not any other damages related to the pipeline.
Is the plaintiff able to use the EPEA to extend the limitation period?
The court noted that the EPEA allows for a judge to extend a limitation period for the commencement of a civil proceeding where the basis of that proceeding is an alleged adverse effect from the release of a substance into the environment. The court must consider four factors. They are:
(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.
Generally speaking, statutes of limitation are useful because they provide finality to people and organizations who should be able to continue on without a looming threat of litigation. In addition, memories fade over time and evidence can be list. Limitation periods help address those risks.
That said, the EPEA focuses on broader environmental objectives and the societal benefits of having someone clean up an environmental mess if they are responsible for it. The court cited cases where the EPEA was used to extend limitation periods much further than the five years being requested in this case. However, there was one important distinction the court called out. Most extensions under the EPEA have been used to ensure that someone was responsible for environmental cleanup. In this case, PRL has already been ordered to remedy the damage from the pipeline, which means this isn’t a case of whether anyone (or any business) can be held accountable. Rather it is a question of which party is to be held responsible.
The court acknowledged that dismissing the claim based on the Limitations Act might result in unfairness, but that unfairness is a necessary side effect of limitations legislation. The EPEA does not exist to remedy the injustice. Thus, the court found that granting an extension under the EPEA would not accord to the Act’s purpose and therefore declined to give an extension of the limitation period.
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