Environmental Appeal Board

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1 Environmental Appeal Board Fourth Floor 747 Fort Street Victoria British Columbia Telephone: (250) Facsimile: (250) Mailing Address: PO Box 9425 Stn Prov Govt Victoria BC V8W 9V1 Website: DECISION NOs EMA-005(c) and 2010-EMA-006(c) In the matter of two appeals under section 100 of the Environmental Management Act, S.B.C. 2003, c. 53. BETWEEN: Seaspan ULC (formerly Seaspan International Ltd.) APPELLANT AND: Vancouver Fraser Port Authority APPLICANT (Third Party) AND: Fibreco Export Inc. and BC Ltd. APPLICANTS (Third Parties) AND: Director, Environmental Management Act APPLICANT (Respondent) AND: Domtar Inc. THIRD PARTY AND: Attorney General of British Columbia PARTICIPANT BEFORE: A Panel of the Environmental Appeal Board Robert Wickett, Q.C., Panel Chair Cindy Derkaz, Member Blair Lockhart, Member DATES: October 15 18, 2013 PLACE: APPEARING: Vancouver, BC For the Applicants: Vancouver Fraser Port Authority: Fibreco Export Inc. and BC Ltd: The Director: For Seaspan ULC: For Domtar Inc: For the Attorney General of BC: Nicholas R. Hughes, Counsel Aiden Cameron, Counsel Janice H. Walton, Counsel Rachel Barker, Counsel Dennis Doyle, Counsel Robert W. Hunter, Counsel Jana McLean, Counsel Camille Chisholm, Counsel Gary A. Letcher, Counsel Andrea C. Akelaitis, Counsel E.W. Hughes, Counsel

2 DECISION NOS EMA- 005(c), 006(c) Page 2 APPLICATIONS APPLICATIONS FOR COSTS [1] The Vancouver Fraser Port Authority (the Port ), Fibreco Export Inc. and BC Ltd. (collectively Fibreco ), and the Director, Environmental Management Act (the Director ), each apply to the Board for an order for costs against the Appellant, Seaspan ULC ( Seaspan ). [2] The applications are made pursuant to section 95(2)(a) of the Environmental Management Act, S.B.C. 2003, c. 53 (the EMA ), which states as follows: 95(2) In addition to the powers referred to in section 93(2) [environmental appeal board], the appeal board may make orders as follows: (a) requiring a party to pay all or part of the costs of another party in connection with the appeal, as determined by the appeal board; [3] The Applicants submit that Seaspan s appeals, which Seaspan largely abandoned on the third day of a 20-day hearing, were manifestly deficient and without merit. They assert that the meritless appeals, combined with issues arising from the evidence of Seaspan s expert witness, Mr. William Donald, warrant an order for costs by the Board under section 95(2)(a) of the EMA, and in accordance with the Board s published policy regarding costs. [4] Domtar Inc. ( Domtar ) is a Third Party in Seaspan s appeals. It does not apply for costs against Seaspan and takes no position on these applications. [5] The Attorney General of BC (the AGBC ) is a Participant in the appeals and, similarly, makes no application for costs and takes no position on the applications. BACKGROUND [6] These appeals relate to a contaminated site located at 10 Pemberton Avenue, North Vancouver, BC, the current location of Seaspan s Vancouver shipyard. The site is located adjacent to Burrard Inlet. [7] To understand the history leading to these applications for costs, a fairly detailed background leading to the appeals, and these costs applications, is required. The legislative regime [8] The cleanup of contaminated sites in BC is governed by Part 4 of the EMA which is administered by the Ministry of Environment (the Ministry ). The legislation provides the Director with broad powers to deal with contamination, including the authority to issue orders to any one or more persons responsible for the remediation of a contaminated site. [9] The Ministry encourages voluntary remediation, particularly when dealing with sophisticated parties in respect to a complex site. The overarching goal of the

3 DECISION NOS EMA- 005(c), 006(c) Page 3 EMA is to encourage and, if necessary, require responsible persons to remediate the contamination in a timely and effective manner and to take steps to protect the environment from further degradation. A remediation order is usually issued as a last resort when efforts by the Ministry to persuade responsible persons to undertake voluntary remediation have failed. [10] The EMA imposes joint and several liability on all responsible persons, subject to some exceptions or limitations. It contemplates that disputes among responsible persons with respect to liability, and the allocation of cleanup costs will, ultimately, be resolved in a cost recovery action in the BC Supreme Court. The EMA encourages responsible persons to deal with environmental contamination and damage resulting therefrom quickly, and to determine the monetary issues later. The contamination and remediation order [11] In the present case, Seaspan and Domtar were identified as responsible persons for the contamination at the site as early as Initially, they attempted to work together to identify, delineate and come up with a plan to remediate the contamination. Various options for remediation were considered; however, after ten years of protracted negotiations with respect to the responsibility to remediate and remediation methodology, no conclusions were reached, and no plan for remediation was agreed to. [12] Given the seriousness of the contamination and its migration into Burrard Inlet, the Director issued two draft remediation orders to encourage the parties to engage in remediation. However, this strategy failed. [13] On February 16, 2010, the Director issued a Remediation Order (the Remediation Order ) to Seaspan and Domtar pursuant to section 48(1) of the EMA. In his 22-page Reasons for Decision, the Director states: 3. It is undisputed that the parcel of land on Burrard Inlet, previously owned and operated by Domtar and presently owned and operated by Seaspan, is the source of serious contamination and significant environmental concerns. 4. Those concerns were described as follows in a 2002 report prepared by Golder Associates Ltd. for Seaspan and Domtar: Key environmental issues relate mainly to historical use of the western part of the Site as a wood-preserving (creosoting) plant, and past and present use of the entire Site for shipbuilding and ship repair activity. 5. A large portion of the past 15 years has been spent investigating the extent of the contamination problem The primary contaminants of concern are NAPL (creosote), PAHs, metals and tributyltin (TBT). The Ministry described these contaminants in its August 28, 2003 technical review of the site investigation reports conducted on behalf of Seaspan and Domtar:

4 DECISION NOS EMA- 005(c), 006(c) Page 4 NAPL NAPL [non aqueous phase liquid] in the form of creosote is extensively distributed across the site. There is a major source zone in the northern area of the site (with a thickness of 7.5m), as well as several other large sources closer to the shoreline (with thicknesses up to 11m). The NAPL extends into the foreshore sediments essentially to the southern end of the Synchrolift. PAHs [Polycyclic aromatic hydrocarbons] The additional coring work completed by Golder in the boat basins allowed for a vertical description of the contamination throughout the sediments. The highest mean total PAH concentration of 23,700 ug/kg was associated with the zone of NAPL at a depth of 2-3m below the 1967 dredge line, maximum total PAH concentrations were still up to 175x the SedQCtscriteria and 70x the site-specific risk-based value. Metals The majority of the exceedances for metals in surface sediment were contained in the Inner Boat Basin area and within the upper 1m of sediment material. TBT TBT concentrations were elevated in surficial sediments in the Inner Boat Basin and concentrations ranged up to 20,000 ug/kg under the Synchrolift. 8. Domtar and the various corporate predecessors for which it is responsible operated a wood preserving facility on the parcel presently owned by Seaspan from at least 1923 through These operations contaminated soil, sediment and groundwater. Because the contamination is mobile, it has been migrating into Burrard Inlet and contaminating a sensitive aquatic environment on an ongoing basis. 9. Seaspan has owned and operated the upland source site since When it acquired the Domtar parcel, Seaspan knew of the site s previous use While the parties have received considerable regulatory prompting and committed resources to investigation and remediation planning, they have been unable, in the absence of legal compulsion, to produce a final remediation plan and begin the necessary remediation work. [14] The creosote contamination referred to by the Director as migrating from the upland source site (Parcel A, identified below) to other portions of the site and Burrard Inlet, is often referred to as the plume. [15] The Remediation Order requires Domtar and Seaspan to address contamination found in soil, groundwater and sediments in the following parcels of land, and a water lot, owned by various parties (the Site ): 1. Parcel A lands owned by Seaspan and acquired from Domtar, part in 1965, and part in Domtar had previously operated a sawmill and creosote treatment facility on this parcel.

5 DECISION NOS EMA- 005(c), 006(c) Page 5 2. Parcel B federal lands owned by the Port and leased by Seaspan. This parcel consists of fill material placed on the tidal flats Parcel C the water lot parcels held by the Port and leased to Seaspan for ship building and repair operations. From 1923 to 1963, Domtar had leased part of Parcel C for creosote wood treatment. 4. Parcel D federal lands owned by the Port and leased by the District of North Vancouver until In 2013, the District of North Vancouver surrendered its lease and Seaspan and Fibreco leased portions of this parcel. It was also previously a tidal flat. 5. Parcel E land owned by BC Ltd. but occupied by Fibreco. This parcel was previously a tidal flat. [16] In summary, at the date of the hearing, Seaspan either owned or leased Parcels A, B, C and part of Parcel D not leased by Fibreco. As such, Seaspan had sole control of the access to, and the activities on, those parcels. [17] Parcels B, D and E are due west of Parcel A and are generally referred to by the parties as the Western Front. The water lot, Parcel C, is south of Parcel A. [18] The Director determined that both Domtar and Seaspan were responsible persons under the EMA and liable for the cleanup of the Site. In his Reasons for Decision, the Director explained that he named Domtar to the order because Domtar is the most substantial contributor of the contamination and the primary polluter as a result of its former wood preserving activities. He named Seaspan to the order because Seaspan has owned and operated Parcel A, the upland source site, since 1965 and that, when it acquired the parcel from Domtar, Seaspan knew of its previous use. The Director also found that, while Seaspan did not produce the creosote, creosote-related contamination has been migrating into Burrard Inlet from Seaspan s property, on Seaspan s watch, and that Seaspan had likely added to that contamination by way of pile driving in the contaminated area. [19] The Director ordered both responsible persons to prepare and deliver a remediation plan and put that plan into effect, to post financial security and to register a covenant under section 219 of the Land Title Act, among other things. In his Reasons for Decision, the Director acknowledged that the Port was likely a responsible person; however, he elected not to name the Port in the order. [20] Subsequent to the Remediation Order, the Director issued further decisions to Seaspan and Domtar, including: An April 12, 2010 final determination of contaminated site pursuant to section 44 of the EMA. This decision confirmed the description of the Site and that it met the statutory definition of contaminated site. A January 8, 2013 decision approving two different final site remediation plans, one submitted by Seaspan and the other submitted by Domtar. It was left to these two parties to determine which plan to implement at the Site. 1 In this decision tidal flats are also referred to as mud flats.

6 DECISION NOS EMA- 005(c), 006(c) Page 6 The Appeals [21] Although the three costs applications only relate to Seaspan s appeals, a complete understanding of the applications, and this decision, must also include reference to Domtar s appeals. [22] The Board received five appeals against the Director s above-noted decisions. Domtar and Seaspan each appealed the Remediation Order (Appeal Nos EMA-004 and 2010-EMA-005). Seaspan alone appealed the Director s final determination of contaminated site (Appeal No EMA-006). [23] Both Seaspan and Domtar also appealed the January 8, 2013 final site remediation plans (Appeal Nos EMA-002 and 2013-EMA-003). [24] The Port and Fibreco, as current owners and/or lessees of portions of the Site, were added as Third Parties to the appeals. Seaspan and Domtar were made Third Parties in each other s appeals. [25] In addition, the Port filed a Notice of Constitutional Question dated June 1, The AGBC was added as a Participant for the sole purpose of addressing the constitutional question. [26] The Board consolidated the appeals and ordered that they be heard together. Due to the complexity of the appeals, a four-week hearing was scheduled from September 30, 2013 to November 1, [27] Prior to the hearing, Seaspan applied to have its appeal of the January 8, 2013 decision heard and decided separately. The application was granted. In Seaspan ULC v. Director, Environmental Management Act, Decision No EMA- 002(c), May 9, 2013; [2013] B.C.E.A. No. 8 (Q.L.), the Board dismissed Seaspan s appeal. With the disposition of this appeal, there were four appeals remaining to be heard, commencing September 30, Seaspan s remaining appeals [28] Seaspan s Notice of Appeal of the Remediation Order contained eight grounds for appeal. It alleged that the Director erred: 1. By finding that Seaspan is a responsible person with respect to all or some of the 5 parcels; 2. By finding that Seaspan is responsible for the contamination of all or some of the 5 parcels; 3. By not finding that the Port is a responsible person with respect to all or some of the 5 parcels; 4. By finding that he had the authority to make the Order with respect to the Port owned parcels (b), (c) and (d); 5. By imposing unreasonable requirements, including deadlines, under Remediation Requirements 1 and 4 of the Order; 6. By finding that Seaspan must post security for the remediation works at the Site; 7. By ordering a Land Title Act s. 219 covenant, be registered against parcel (a), or alternatively only against parcel (a); and

7 DECISION NOS EMA- 005(c), 006(c) Page 7 8. By finding that the purposes in EMA s. 48(1) would be unlikely to be satisfactorily met by the entry of notations in the site registry. [29] In contrast, Domtar s appeal of the Remediation Order did not challenge the finding that it is a responsible person. [30] Seaspan s appeal of the April 12, 2010 final determination of contaminated site decision identified procedural fairness and due process grounds for appeal relating to the Director s refusal to grant Seaspan an extension of a 31-day deadline for comments on the Director s preliminary site determination of February 16, Seaspan had requested the extension due to witness availability. [31] After the appeals were filed against the Remediation Order and final determination in 2010, there was a lengthy period of negotiation and submissions to the Director with respect to the form of remediation plan to be implemented at the Site. Although the appeals were originally scheduled to be heard in January 2011, the negotiations and submissions resulted in requests for postponements, first to October 2012, and then to April and May of Each postponement was sought by Seaspan, with the concurrence of Domtar. The hearing was later scheduled to be heard from September 30, 2013 to November 1, [32] During the course of the appeal process leading up to the hearing, Seaspan s grounds for appeal went through various changes and modifications. For instance, although it appeared from its Notice of Appeal that Seaspan was challenging the Director s finding that Seaspan was a responsible person under section 48 of the EMA, Seaspan advised that this was incorrect; it was challenging its responsible person status under section 46, by claiming that it was an innocent purchaser. This occurred during its preliminary applications for production of documents in November and December of 2012, more than two and one-half years after it filed its Notice of Appeal with the Board. [33] In the Board s June 11, 2013 decisions on the applications for production of documents (Decision Nos EMA-004(a), 005(a), 006(a); and 2011-EMA- 003(a), June 11, 2013; [2013] B.C.E.A. No. 9 (Q.L.)), the Board states at paragraphs 76-79, [76] Regarding its own appeal, Seaspan states in its November 16, 2012 submission that it is not alleging that it should be removed entirely from the Order.. [Board s emphasis] [77] [78] Seaspan also clarifies that it is not appealing the finding that its shipyard operation contributed to the metals contamination found in parcel (a) and the inner boat basin. [Board s emphasis] [79] It further states that it is not appealing the finding that, as the current owner of parcel (a) of the Site (the upland source parcel that was previously owned/operated by Domtar), it is a responsible person so far as the contamination on that parcel is concerned [Seaspan s emphasis]. However, it then states that this acceptance of responsibility for parcel (a) is subject to Seaspan being able to

8 DECISION NOS EMA- 005(c), 006(c) Page 8 establish that it is entitled to an exemption under section 46 (1)(d) of the Act [the innocent purchaser exemption].. [83] Domtar also notes that Seaspan did not claim this section 46 exemption in its Notice of Appeal of the Order, or any of its other Notices of Appeal. Although Domtar does not object to Seaspan s reliance on this section, it points out that subsection (iii) of section 46(1)(d) sets out the following essential precondition to establishing that a person is not responsible for remediation: the owner or operator did not, by any act or omission, cause or contribute to the contamination of the site [Domtar s emphasis]. If Seaspan is relying upon the exemption in section 46(1)(d), then Domtar submits that Seaspan s contribution to the contamination or its migration, its knowledge and diligence, are issues to be determined. Therefore, the documents that Domtar has requested are relevant on the basis of Seaspan s exemption claim alone. [34] Based on Seaspan s submissions in the context of the document production application, the Board found that: [98] It is apparent that Seaspan is not contesting contamination by the metals found in parcel (a) and in the inner boat basin in parcel (c). However, from its Notice of Appeal, remedies sought, and some of its statements in its submissions, the Panel cannot find, with any degree of confidence, that Seaspan is narrowing this exemption claim to only parcel (a). Unfortunately, Seaspan s clarifications in its submissions have not made its intentions clear, in fact, the opposite is true. [99] Having considered all of its statements, the clearest indication of Seaspan s intent is found in its December 10, 2012 submissions, which were its final submissions in reply to Domtar s application: Seaspan is appealing the extent to which it is a responsible person with respect to the other parcels comprising the Site, and the extent to which it is responsible for the contamination of all or some of the 5 parcels. However, those issues will involve a section 46 analysis, not a section 48 analysis. (page 9 of December 12, 2012 submission) [Emphasis added] [35] Of particular relevance to these costs applications is another submission by Seaspan which is discussed by the Board regarding the Western Front (Parcels B, D and E), during the document production application: [173] Seaspan states that it intends to argue that the creosote contamination on the Western Front did not end up there due to migration from parcel (a); rather, it was placed there by Domtar. It submits that photographs of the Site taken from 1926 and 1948 indicate that Domtar, or its corporate predecessors, may have dredged the inner boat basin and used the dredged material to infill the mud flats to the west of parcel (a). To the extent that the dredgeate

9 DECISION NOS EMA- 005(c), 006(c) Page 9 transported and placed by Domtar is the source of the contamination found at, and around, the Western Front, Seaspan maintains that it is not responsible for such contribution, as it did not migrate from parcel (a). [Emphasis added] [36] Seaspan s position regarding the Western Front was confirmed in a June 21, 2013, letter to the Board and all parties. In it, Seaspan advised that it was abandoning certain grounds of appeal and amending other grounds. Seaspan conceded that it was a responsible person for Parcels A and C. It abandoned grounds 1 and 2 of its appeal with respect to Parcels A and C and as a result has limited the document production so ordered. Seaspan also asserted that it was not a responsible person for the Western Front (i.e., Parcels B, D and E) on the grounds that creosote contamination did not migrate from Parcel A to the Western Front. [37] Seaspan s claim that the contamination of the Western Front was not due to migration from Parcel A became its main argument on appeal. However, its theory as to the cause of the contamination on the Western Front appears to have changed from dredgeate located on the tidal flats (per the 2012 document application, above) to the presence of boomed creosote-laden timbers on the flats (evidence of Mr. Donald at the 2013 hearing, discussed below). [38] Seaspan then goes on to state in its letter of June 21, 2013: Seaspan s position is that any creosote contamination of the Western Front was not due to migration from parcel (a), but was directly deposited there by Domtar s storage of treated timber piles on the tidal flats that are now buried under the Western Front. As a result Seaspan is not a responsible person with respect to parcels (b), (d) and (e). (page 4) [39] In advance of an oral hearing, the Board requires the parties to provide a Statement of Points which outlines their respective cases. Domtar and Seaspan delivered their Statements of Points with respect to their appeals on or about July 22, [40] In its Statement of Points dated July 22, 2013, Seaspan claims, in the alternative, that it is an innocent purchaser with respect to Parcel B (para. 34). However in its opening written submissions at the hearing, Seaspan states on page 5: With respect to Parcel (b), Seaspan abandons its claim to be an innocent purchaser for the purposes of these appeal proceedings only. In the footnote to this statement, Seaspan states: Seaspan reserves the right to claim the status of innocent purchaser and /or minor contributor, and to rely on any other claim or status that might limit its liability, in any future cost recovery action that may arise in relation to this or a related contaminated site. [41] Seaspan filed an expert report by Mr. William Donald, P.Eng., Keystone Environmental Ltd. ( Keystone ), dated August 8, 2013, in which he states that the tests did not indicate that the plume was continuous (from Parcel A to the Western Front). In his professional opinion, the creosote contamination found in the

10 DECISION NOS EMA- 005(c), 006(c) Page 10 Western Front more probably than not originated from the storage of creosote treated boomed timbers on the tidal flats of the Western Front. [42] As Seaspan conceded that it was a responsible person for Parcels A and C, which it owns or leases, the primary issue going into the September 30 th hearing in relation to its original grounds 1 and 2 was whether the creosote contamination plume extended from Parcel A into the Western Front. If the creosote contamination on the Western Front is part of a plume of contamination originating from Parcel A, then Seaspan is a responsible person and liable to remediate the entire Site pursuant to the EMA and the Remediation Order. However, if, as Seaspan maintains, the contamination on the Western Front is discontinuous, and unconnected to the plume of contamination originating on Parcel A, then it argues that it is not a responsible person liable to remediate the contamination located on the Western Front. This is because Seaspan did not cause the contamination (it being common ground that Domtar was responsible for the contamination in the first instance) and, Seaspan argues, it is not an owner of land from which contamination had migrated. [43] Finally, one last requested change to Seaspan s appeal should be noted. [44] On September 11, 2013, Seaspan delivered a Supplemental Statement of Points raising, for the first time, a claim that it should be considered a minor contributor with respect to the contamination located on Parcels B, D and E (the Western Front ) under section 50 of the EMA. The other parties objected to Seaspan s proposed minor contributor argument on the basis that they were prejudiced by the late notice. [45] At a prehearing conference on September 13, 2013, the Board directed the parties to tender written submissions with respect to Seaspan s right to advance the minor contributor argument, it being anticipated that the Panel would deliver reasons at the outset of the hearing. The Hearing [46] The hearing commenced before this Panel of the Board on September 30, 2013, with Seaspan s appeals scheduled to proceed first. [47] Seaspan s written opening submissions organized its appeal under two headings: Issue 1: Director has no jurisdiction over federal land, but does have jurisdiction over federal authorities (the Constitutional Issue ), and Issues 2 and 3: Seaspan not responsible for the Western Front. [48] Seaspan s submission that the Director erred in finding it a responsible person for all of the contamination of the Western Front is set out in paragraphs 29 and 30 of its written opening submission as follows: 29. In this appeal, Seaspan will present evidence from Mr. John Wood, Mr. Allen Fowlis and its expert Mr. William Donald that shows why the Director erred in assuming all of the creosote contamination on the Western Front migrated from Parcel (a):

11 DECISION NOS EMA- 005(c), 006(c) Page 11 (a) Mr. Jack Wood is a professional engineer who attended the Domtar site many times in the 1950s, and was the lead engineer at Swan Wooster (the engineering firm used by Seaspan to design and construct the shipyard in 1965 to 1967). He will provide the Board with evidence of Domtar s practice of storing creosote-treated timber piles on the Western Front prior to (b) Mr. Allen Fowlis worked for Seaspan for 40 years, including as CEO for 20 years, and visited the North Vancouver shipyard site at the time Seaspan purchased the west half of Parcel (a) from Domtar. He will describe how Seaspan acquired a clean site from Domtar. His evidence about Seaspan s activities immediately after acquisition of the property further supports the conclusion that Seaspan did not cause or contribute to creosote contamination on any Parcel. (c) Seaspan s expert, Mr. William Donald is a professional engineer and principal of Keystone. He will opine on the causes of creosote contamination on the Western Front. According to Mr. Donald, the creosote Plume on Parcel (a) has only migrated as far as Parcel (b) and a portion of Parcel (d). The remaining contamination on Parcels (d) and (e) is attributable to another cause, being the storage of creosote-treated timber piles by Domtar before Mr. Donald also will explain that the groundwater flow moves in a south to south-east direction. Certainly since Seaspan filled in the tidal flats (forming Parcels (b) and (d)), the groundwater has flowed in a south to southeast direction in Parcels (a), (b) and (d), suggesting it could not have carried contamination onto the Western Front from Parcel (a) after that time. 30. Taken together, their evidence supports the conclusion that Seaspan did not deposit contamination on the Western Front, nor did creosote contamination migrate from Seaspan s Parcel (a) onto the Western Front. Accordingly Seaspan should not have been named in the Remediation Order as a responsible person for all of parcels. [Emphasis added] [49] In the alternative, Seaspan claimed the status of a minor contributor on the Western Front. On October 1, 2013, the Panel dismissed Seaspan s application to raise the minor contributor argument as a ground of appeal (see, Seaspan ULC and Domtar Inc. v. Director, Environmental Management Act (Decision Nos EMA- 004(b), 005(b), 006(b) and 2013-EMA-003(b), (September 15, 2014), unreported)). Evidence of William Donald [50] Seaspan called William Donald as its first witness and counsel advised the Panel that he anticipated Mr. Donald s evidence, including cross-examination, would occupy the balance of the hearing week.

12 DECISION NOS EMA- 005(c), 006(c) Page 12 [51] As the submissions with respect to the costs applications turn, substantially, upon the evidence given by Mr. Donald, it is necessary to review his evidence in some detail, and to distinguish between the evidence he gave in direct examination and the evidence that he gave while under cross-examination. i) Mr. Donald s evidence in direct examination [52] Mr. Donald was qualified as an expert witness to give opinion evidence as a professional engineer with respect to the cause or causes and delineation of creosote contamination in soil, groundwater and sediments at the subject site. 2 [53] He testified that he is a roster professional 3 and that he had prior experience in dealing with creosote contamination on a number of different sites. [54] Mr. Donald had prepared a written expert opinion report dated August 8, 2013 (the Report ). The Report was tendered as the third exhibit in the hearing. Mr. Donald s curriculum vitae ( CV ) was attached to the Report. [55] According to his CV, Mr. Donald is the president of Keystone, a well-known environmental consulting firm located in Burnaby, BC and has 40 years experience in project management and cost control with respect to remediation of contaminated sites. [56] Mr. Donald testified that he was aware of the duty of an expert, as set out in the BC Supreme Court Rules as follows: In giving an opinion to the court, an expert appointed under this Part by one or more parties or by the court has a duty to assist the court and is not to be an advocate for any party. [57] He confirmed that he prepared the Report in accordance with that duty, and that he would provide his testimony in front of the Panel in accordance with that duty. [58] The Report sets out Mr. Donald s expert opinion with respect to the creosote contamination found in the Western Front as follows: Based on the information I have considered and the Assumed Facts, it is my expert opinion that the creosote contamination found in parcels (b), (d), and (e) ( Western Front ), as described in the February 16, 2010 Remediation Order issued by MoE [Ministry of Environment], more probably than not originated from the storage of creosote treated boomed timbers on the tidal flats of the Western Front before the filling of the Western Front to its current elevation. (page 4) [Emphasis added] [59] Mr. Donald testified that, prior to writing the Report, he had considered several background reports prepared by Golder Associates Ltd. ( Golder ) (another 2 Transcript, October 1, 2013, page 13, lines Roster of Approved Professionals established by the Ministry of Environment.

13 DECISION NOS EMA- 005(c), 006(c) Page 13 well-known environmental consulting firm) prior to Keystone s involvement with the Site. [60] Mr. Donald further testified that he gave special attention to the borehole logs prepared by Golder in its efforts to delineate the contamination throughout the Site. In this regard, he testified that he also considered the notes of visual observations made by Golder that are recorded on the borehole logs. In particular, he paid attention to notes of observations of whether soil was fill or native soil. He also considered Golder s observations of creosote sheen and odour in the soil. He noted whether Golder had observed DNAPL (dense non aqueous phase liquid, also known as free floating creosote) in its sampling. He then compared these visual observations of sheen, odour and DNAPL to the actual test results received from the lab in order to assess whether the visual observations were, in fact, evidence of contamination. [61] Mr. Donald testified that the presence of a contaminating substance in soil or water does not inevitably lead to the conclusion that a site is contaminated. Contaminated site is a defined term in the EMA and supporting regulations; contaminating substances must be present in soil or water in amounts in excess of prescribed standards before a site will be defined as contaminated. Mr. Donald testified that, So from my perspective and my opinion, while I would use sheen and odour to guide an investigation, I would rely upon the contaminated site regulation standards to determine whether I do or do not have contamination. 4 [62] Mr. Donald testified that his approach was to look for test results indicating that soil or water had contaminants in excess of the prescribed standards, failing which he could not conclude that a particular soil or water sample was contaminated. In his view, mere observations of odour, or sheen or DNAPL were, standing alone, insufficient to conclude that contamination was present. [63] Mr. Donald testified that, having reviewed the Golder reports, and having been involved in developing a remediation plan for the Site over several years, it was his opinion that the contamination found on the Western Front originated from creosote treated timbers that had been gathered in booms and stored on the mud flats before fill was placed thereon. In his opinion, over a 40-year period, this creosote was released from the treated timbers to the mud flats on the Western Front. [64] Mr. Donald testified that it was his further opinion that contamination resulting from the creosote treated timbers was to be distinguished from the plume of contamination originating from Parcel A. He testified that the contamination plume originating from Parcel A was discontinuous from the contamination on the Western Front. He formed this opinion following his review of the borehole logs prepared by Golder. In particular, he discounted evidence of odour, sheen and DNAPL unless it was confirmed by test results indicating that there was contamination in excess of the applicable standard. 4 Transcript, October 1, 2013, page 53, lines

14 DECISION NOS EMA- 005(c), 006(c) Page 14 [65] Using this analysis, Mr. Donald prepared Figure 1 (Soil Analytical Results), annexed to the Report, to delineate the areas of contamination throughout the Site. Figure 1 shows that the plume of contamination originating on Parcel A is not connected to various pools of contamination present on the Western Front. [66] Having given this opinion, Mr. Donald then took the Panel through the various borehole logs to demonstrate the existence of contamination in various locations. Mr. Donald distinguished between cases where the borehole log contained observations of DNAPL, odour or sheen, but no test results proving that contamination over the standard had been detected. In these instances, he concluded that, despite the presence of DNAPL, odour or sheen, there was no contamination. He also testified that, in those situations where contamination over the applicable standard was reflected in the test results, but where there were no visual observations, he concluded that contamination was present. In other words, his opinion was based entirely upon the existence, or non-existence, of test results indicating the presence of contamination over the applicable standard. [67] Mr. Donald further testified that, in reaching his opinion, he did not take into account any data with respect to groundwater contamination on the Western Front and Parcel A. He testified that he did not consider this data because a figure in the Golder 1998 report shows groundwater moving in a south-easterly direction (away from the Western Front) after the Western Front was filled. 5 He testified that the presence of groundwater contamination on the Western Front was to be expected because the contamination can be disturbed in the native material and will dissolve and move around. [68] Mr. Donald continued: Now that s not to say that there is not groundwater contamination over the Western Front. But we do know that there is creosote contamination within the native materials and we know that the compounds will dissolve to a certain degree in groundwater and they ll move around with dispersion and move with tidal fluctuations as they affect the groundwater. So it s not surprising to see groundwater contamination. And when I look at groundwater contamination and the - the concentrations that we consider contaminated for naphthalene [a constituent element of creosote], it s for aquatic life, ten parts per billion. Naphthalene in soil is 50 parts per million. It s quite a difference. It s not uncommon to see a contaminant --contaminated groundwater plume extend well beyond the area of the source area, the contamination, which may be soil contamination. So I do not draw a conclusion that the soil is contaminated based on groundwater data. I prefer to base soil contamination on soil data. 6 5 Transcript, October 1, 2013, page Ibid, pages

15 DECISION NOS EMA- 005(c), 006(c) Page 15 ii) Concessions of Mr. Donald on cross examination [69] Following his evidence in chief, Mr. Donald was cross-examined by counsel for each of the Port, Domtar, Fibreco and the Director during which a number of important concessions were elicited. [70] Mr. Donald was referred to the Assumed Facts in the Report as follows: ASSUMED FACTS 1. The attached enlargement is [sic] portion of an aerial photograph taken in the 1950s showing 10 Pemberton Avenue and Adjacent lands as they then were. In that photograph, the items that appear to be boomed black timbers laying on the tidal flats on the Western Front, to the west of what was then the Domtar creosote wood treatment plant, are creosote treated timbers; 2. While it is not known over what period of time nor for how long boomed creosote treated timbers were stored in this way on the tidal flats to the west of what was then the Domtar creosote wood treatment plant, I may assume that this practice was followed for some time; 3. The investigations of the soils of the Western Front by Golder Associates Ltd. ( Golder ) which Keystone Environmental has previously referred to, have correctly identified the nature and extent of creosote contamination in those soils; and 4. The attached drawings correctly demonstrate the horizontal and vertical extent of the various components of creosote contamination of the soils of the Western Front and creosote contamination of the sediment in the vicinity of the former wharf head. [71] Under cross-examination, Mr. Donald conceded that the location of the timber booms shown in the aerial photograph appended to his Report did not correspond to the location of the contamination found to exist in the tidal flats of the Western Front as indicated in the Golder reports. [72] Counsel referred Mr. Donald to aerial photographs in Appendix D of the August 8, 2013 report prepared by Domtar s expert, Professor Bernard H. Kueper, including eight photographs dating from 1950 to 1970 (prior to the tidal flats being filled). Mr. Donald acknowledged that the photos did not show boomed black (i.e., creosote treated) timbers stored on the tidal flats. [73] Mr. Donald testified that he relied upon the one photo showing the presence of boomed black timbers on the Western Front as an accurate reflection of history as he had been instructed to do so. [74] With respect to the borehole log data which Mr. Donald testified did not show a contiguous plume stretching from Parcel A to the Western Front, he conceded in cross-examination that, if an environmental consultant observes creosote DNAPL in a borehole or monitoring well, it would not be common practice to send such samples to the laboratory for testing. He agreed that most laboratory managers would be upset if they received samples filled with creosote DNAPL because DNAPL

16 DECISION NOS EMA- 005(c), 006(c) Page 16 (pure) creosote could damage the sensitive laboratory equipment designed to measure contaminants in parts per million. He conceded that there would be no need to test samples containing visible DNAPL creosote because the presence of the contaminant would be obvious to any environmental consultant. [75] Despite this, Mr. Donald testified that, in his view, the presence of creosote DNAPL was not necessarily indicative of contamination as defined in the EMA. He remained of the view that contamination, so defined, can only be confirmed if test results prove the presence of contamination in excess of the numeric limits set out in the regulations to the EMA. [76] Mr. Donald was then directed to the borehole logs for wells drilled in the area between the plume of contamination flowing from Parcel A, and the apparently disconnected plumes of contamination which, Mr. Donald testified, had resulted from the boomed creosote treated timbers on the Western Front. Mr. Donald conceded that the monitoring wells located between these two zones indicated creosote DNAPL, sheen and a strong creosote odour. Mr. Donald conceded that these wells were filled with creosote, but he would not concede that the presence of this creosote DNAPL indicated a connection between the two zones. [77] Mr. Donald also admitted that it did not occur to him to explain in the Report how DNAPL operates in the subsurface of the soil as a mechanism for migration. [78] Mr. Donald further conceded that his description of the soil unit comprising the original tidal flats provided in his Report was different from the description he gave in direct examination, without explanation. In the Report, Mr. Donald found that the contamination of the Western Front is coincident with the coarse-grained native soil (depicted as unit 3 on Figures 2a and 2b of the Report) which formed the surface of the underwater sediment of the tidal flats when Domtar was operating the creosote wood treatment plant. The Report states that the soil above the coarse grained native material is fill material (i.e., units 1 and 2 on Figures 2a and 2b) which was placed on the Western Front after Domtar s operations ceased at the Site. The Report states that creosote contamination does not extend up into the fill. This is an important point which supports the Report s conclusion that, more probably than not, the contamination on the Western Front originated from the boomed creosote treated timbers. [79] Between the date of the Report and Mr. Donald s testimony, Domtar submitted an expert rebuttal report prepared by Dr. Kueper. In the rebuttal report dated September 9, 2013, Dr. Kueper noted that, contrary to the findings stated by Mr. Donald in the body of the Report, his Figures 2a and 2b depict creosote impacts in Unit 2 (located above the former surface of the underwater sediment) and up into Unit 1. Evidence of contamination in the fill material renders Mr. Donald s conclusion about the source of the contamination unsustainable. [80] At the hearing, Mr. Donald testified that the native material is the silt and sands layer (unit 2), which is the key area containing contamination. He did not draw the Panel s attention to this important difference between his evidence in direct examination and his Report. Nor did he offer any explanation as to why he changed his conclusion as to which soil unit forms the native material of the tidal flats.

17 DECISION NOS EMA- 005(c), 006(c) Page 17 [81] Under cross-examination by counsel for the Director, Mr. Donald further conceded that a contaminated site can contain areas where particular samples of soil are below the applicable EMA standard indicating contamination. He agreed that the object in delineating the extent of a plume of contamination is to define its area, rather than the particular spots where soil or groundwater samples exceed the applicable standard. [82] The Golder maps which showed one contiguous plume of contamination stretching from Parcel A to the Western Front were put to Mr. Donald. He testified that he disagreed with the boundaries of the contamination plume established by Golder, despite the fact that he had been instructed to assume that the Golder reports were accurate (see Assumed Facts #3, above). [83] Mr. Donald testified that his assessment of discontinuity of the contaminant plume was based on holes in the data ; i.e., where there was no analytical data, he assumed that it was not contaminated. 7 Specifically, Mr. Donald assumed that, where there was no data indicating an exceedance (soil with contamination in excess of the applicable standard), he assumed that the area was not contaminated. In reaching this conclusion, he paid no attention to the presence of groundwater contamination, DNAPL or special waste. He testified that he ignored DNAPL, odour and sheen for which there were no confirmatory test results indicating contamination. He conceded, however, that he was aware that the Contaminated Sites Regulation, B.C. Reg. 375/96 provides that the presence of odour, sheen and DNAPL are prescribed factors indicating contamination, and can be relied on by the Director in making a determination that a site is a contaminated site. [84] When faced with this suggestion, Mr. Donald conceded that he did err in failing to include DNAPL data in his opinion regarding the boundaries of the contaminant plume. [85] Under cross-examination by counsel for Domtar, Mr. Donald conceded that his task was to look for a trail of creosote so as to delineate the source of the contamination. He conceded that evidence of the trail of contamination required more of an analysis than simply looking at exceedances as defined by the Contaminated Sites Regulation. He acknowledged that evidence, other than test results, can, or may be, evidence of where the creosote originated. In this regard, he testified that certainty is not something usually dealt with by environmental engineers; rather, the object is to use and develop lines of evidence to reach reasonable conclusions. [86] Mr. Donald was then directed to other test results included in the Golder reports which disclosed an analysis of chemical constituents of creosote, other than those referred to in the table that he had relied on. Counsel took Mr. Donald through these various tables which indicated that there were, indeed, test results indicating the presence of contaminants in excess of applicable standards in those borehole logs indicating odour, sheen and DNAPL, but no confirmatory test for creosote. At the conclusion of this aspect of the cross-examination, Mr. Donald 7 Transcript, October 2, 2013, pages

18 DECISION NOS EMA- 005(c), 006(c) Page 18 changed his evidence and agreed that if observations of odour, sheen or DNAPL are made by a consultant, then it is more likely than not that there is contamination present in excess of the applicable standard. [87] Finally, Mr. Donald conceded that the observations of staining indicate that creosote had passed through the soil, and that the odour was evidence of naphthalene, a constituent element of creosote. [88] At the conclusion of his cross-examination, Mr. Donald conceded that if any of the information that he had considered in reaching his conclusion was incomplete, or if any of the assumed facts were incorrect, then, at the very least, he would have to reconsider his opinion. [89] Mr. Donald s cross-examination concluded at the end of the second day of the hearing. Conclusion of the hearing [90] The hearing reconvened on the following day, as it was anticipated that Mr. Donald would be re-examined by counsel for Seaspan, and that the evidence of Mr. Fowlis would then commence. Instead, the Panel was presented with a copy of a letter that had been delivered by counsel for Seaspan to the other parties to the appeals. This letter was marked as Exhibit 6 in the hearing. [91] In summary, the letter advised that Seaspan was abandoning both of its appeals, except with respect to its ground for appeal regarding the nature and form of security and the registration of the section 219 covenant (grounds 6, 7 and 8 of Appeal No EMA-005). The Panel ruled that these aspects of the appeal would be adjourned generally. 8 [92] Following the abandonments, counsel for Fibreco, the Port and the Director indicated that they were each contemplating an application for an order for costs in respect of the Seaspan appeals. Essentially, the Applicants were completely taken by surprise at the rapid collapse of Seaspan s appeals after the evidence of one witness the main witness - and they were concerned that they had been put to the expense of preparing for a lengthy, contentious hearing when Seaspan knew, or ought to have known, that its main claims (as they had evolved over the years) were built on a shaky, or completely absent, foundation. [93] The Applicants sought from the Panel, and were granted, an order requiring counsel for Seaspan to produce Mr. Donald s expert file, including all drafts of reports, working papers and communications with respect to the Report, both from counsel to Seaspan and from Seaspan itself. 8 The abandonments and the Panel s decision to adjourn the remaining issues are set out in a separate decision (see, Seaspan ULC and Domtar Inc. v. Director, Environmental Management Act (Decision Nos EMA-004(b), 005(b), 006(b) and 2013-EMA-003(b), (September 15, 2014), unreported)).