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It Pays to Pollute in BC

Pollution reduces property value — and property taxes. That creates an incentive to slow brownfield remediation, experts say.

Michelle Gamage 18 Jan 2022TheTyee.ca

Michelle Gamage is a Vancouver-based journalist with an environmental focus who regularly reports on climate for The Tyee. You can find her on Twitter @Michelle_Gamage.

British Columbia’s property assessment for industrial areas is meant to give property owners a clear understanding of the value of their land. But there’s a serious loophole for companies looking to pay less property tax, according to experts.

The loophole goes something like this: pollution decreases a property’s overall value, so corporations who wrap up a mine, creosote plant or even a neighbourhood gas station are incentivized to delay cleanup and remediation, as they pay less property taxes on the polluted land.

This loophole creates two main problems. First, it rewards companies for delaying site remediation, according to Derek Holloway, a retired BC Assessment senior appraiser.

Second, it creates a glut of brownfields, industrial or commercial properties that sit abandoned or under-used because of pollution.

Though this policy is a provincial one, it impacts Indigenous communities and municipal governments the most, often simultaneously damaging their ability to properly collect property taxes and blocking them from taking on the brownfield cleanup themselves.

Larry Reynolds, a lawyer with a PhD in environmental law, says the provincial government already has the tools it needs to order companies to immediately clean up these sites, or for the government to remediate the site and sue the company for the cleanup costs — but lacks the political will to take action.

For their part, the provincial government says it’s unaware of any disincentives to delay remediation caused by property tax rules, and says it’s making progress on getting B.C.’s 25,000 brownfields cleaned up.

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Readers can browse these remediated and non-remediated brownfields via a government database by adding the ‘environmental remediation sites’ layer. Image via DataBC.

Every year, BC Assessment calculates what each commercial, industrial and residential property in the province could be reasonably sold for. A new mansion next door can make your assessed value go up. Being rezoned as a floodplain can push the value down, Holloway says.

B.C. property tax rates are based off of the assessed value of a property, multiplied by the property tax rate.

When pollution is discovered on a property it drives the value of the land down — if the owner sold the property, the buyer would need to pay for site remediation.

This means owners of polluted sites pay lower property taxes than other owners who never polluted their land, or who already paid for costly remediation.

This can create big property tax breaks in the Lower Mainland, where land is so highly valued.

In one case in Burnaby, creosote pollution dropped a property’s value from $6 million in 2000 to a minuscule $2 in 2001. Today, after remediation, the property is worth $46.5 million.

In another case, the ship-building company Seaspan, which owns commercial ferries, a ship refuelling service and shipyards in Vancouver and Victoria, dragged its feet on cleaning up creosote pollution for 24 years and successfully argued, because the pollution was not cleaned up, its shipyards on the Burrard Inlet were over-valued from 2013 to 2019. The Property Assessment Appeal Board agreed. BC Assessment and the District of North Vancouver took the case to the B.C. Supreme Court, winning on a point of assessment law. Seaspan is now appealing the BCSC decision in the B.C. Court of Appeal.

While the case is still before the courts, the DNV has earmarked money for the “Seaspan tax reassessment” in its 2020 annual report, noting that the municipality’s total property tax revenue was down 6.1 per cent from 2019 — due in part to a tax levy reduction during COVID, but also due to the $6.8 million Seaspan tax reassessment.

Holloway says industrial land on the District of North Vancouver’s waterfront was also undervalued from 2013 to 2016, which adds “insult to injury” because Seaspan would have already been benefiting from reduced property taxes before it appealed its land assessment.

When The Tyee contacted Seaspan for an interview, a company spokesperson declined to comment on the issue, as it’s an ongoing legal matter.

The DNV also declined an interview, citing similar reasons.

These cases aren’t unique, says Holloway, who told The Tyee he saw “literally hundreds” of similar cases during his 28-year career.

“It’s gotten so that every time a property owner finds out there’s pollution on their land, they go running to the Property Assessment Appeal Board to appeal their land value,” Holloway says.

Depending on what kind of pollution is in question, the provincial government has the ability to order cleanups under several different pieces of relevant legislation, including the Environmental Management Act, the Mines Act or the Oil and Gas Activities Act, the Ministry of Environment and Climate Change Strategy told The Tyee in an email.

The Environmental Management Act, for example, prohibits pollution and gives the government the power to hand out penalties when companies break the rules.

But this enforcement can be extremely slow. In the Seaspan case, creosote pollution was discovered to be leaking into the Burrard Inlet in 1995 — but it wasn’t until 2010 that government finally ordered the company to clean up the site. Seaspan was fined $35,000 in 2017 for not having followed this order — which is 0.5 per cent of the $6.8 million the company may eventually get back in returned taxes.

Impeding new business in small towns

In rural areas of B.C., where land doesn’t command big city sell prices, companies often simply fence off their brownfields and settle into paying low property taxes instead of taking on costly remediation.

Remediation costs vary hugely depending on the type of pollution in question. In the Seaspan case, the company told the Property Assessment Appeal Board its creosote remediation cost around $40 million. And even then, pollution remained. In 2019, when remediation was almost complete, creosote could still be found in soil at least 16 metres deep. Metal contamination will be on site forever, the company reported.

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The abandoned Silverdaisy mine site, which sits between Skagit and Manning Provincial Parks, BC. Photos by Joe Fanning, Wilderness Committee.

In 2020, the Union of BC Municipalities put forward a motion asking the province to modify the Assessment Act so local governments could collect a new tax on brownfields.

But the province rejected the motion, ruling that because remediation is expensive — often costing more than the entire property is worth — adding a new tax would not be the best way to get sites cleaned up.

“Property taxes are not an effective fix for a problem that is not related to property tax,” the Ministry of Finance told The Tyee in an emailed statement. More appropriate tools include co-ordinating site remediation or issuing a site remediation order, the ministry said.

Remediation orders, the ministry continued, can be issued when “there is risk to human health or all other options for compliance have been resolved.”

It was only after Seaspan was given a remediation order in 2010 that it started to appeal its shipyards’ assessed value.

A lot of brownfields are old gas stations or similar sites that could have new businesses built on them, but new construction is prohibited because the topsoil can’t be disturbed, says Union of BC Municipalities Coun. Brian Frenkel.

That’s “frustrating” for local governments — especially when the province could order all currently non-remediated brownfields to be cleaned up within, say, 10 years, Frenkel says. A provincewide brownfield cleanup project would be a huge employment opportunity, he adds. While he estimates it would cost the province $300 million to clean up 15,000 brownfields, Frenkel says that investment would pay off when all the fenced-off spaces become commercially viable again and new businesses begin contributing higher property taxes to local governments.

District of Vanderhoof Mayor Gerry Thiessen says his small town has six brownfields in its downtown core, which is only around 10 blocks long. The amount of accessible space these brownfields take up has an “absolutely massive” impact, Thiessen says.

“A vacant piece of property with a cage wire fence wrapped around it is not a picture of economic future,” he adds.

Vanderhoof council is aiming to develop a strategy with the province to make these sites viable again, in order to bring business back downtown.

Imperial Oil owns three of the six brownfields in Vanderhoof. In an email to The Tyee, public and government affairs manager Keri Scobie said remediating sites is “a priority” for Imperial Oil and that one of the sites could be cleaned up and put back on the market by the end of 2022, pending an assessment. Estimating a timeline for the remediation of the other sites isn’t possible, she added.

Contaminating traditional diets

Between industrial activity and human impact, we’ve ended up with “an absolutely staggering” amount of pollution, says Peter Ross, senior scientist and director of Raincoast Conservation Foundation’s Healthy Waters program.

This translates into extremely high levels of contaminants in Indigenous traditional diets — pollution can get into waterways, and eventually works its way up the food chain.

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An abandoned gas well site, riddled with contaminated soil and known to be contaminating groundwater just metres from the Tsea River, a river of great cultural significance to the Fort Nelson First Nation. Photo by Garth Lenz.

The average member of a coastal First Nation will eat 15 times more seafood than the average Canadian, who eats around five kilograms of seafood each year, Ross says. The average Inuk will eat 25 times more seafood. Pollution moves around easier in the ocean and dangerous chemicals are often fat soluble, which means they’re more likely to end up in living things, like algae or fish, Ross says. Pollutants can also accumulate in berries, wild game or food farmed from contaminated sites, but not to the same degree as in the ocean, Ross says. Pollutants in the environment have been linked to increased risks for diabetes and high cholesterol for Indigenous people who eat traditional diets.

But First Nations’ hands are tied when it comes to cleaning the pollution up, says Whispering Pines–Clinton Indian Band Chief Michael LeBourdais.

First Nations don’t get to say where mines or gas stations get built and have to lobby the province and federal government to get the sites cleaned up, LeBourdais says.

Projects should be required to leave the environment the exact same way they found it, he says, adding that he’s not against resource extraction, but rather development that ruins the land for seven generations.

LeBourdais says he drives past “half a dozen” brownfields every time he drives from his house, which is just north of Kamloops, into town.

“It would be nice if it was incumbent on me to clean it up, but the Indian Act says we can’t do much,” he says. Brownfields are private property — so First Nations have no jurisdiction.

This form of environmental racism, where Indigenous communities are exposed to higher levels of pollution, plays out again and again across Canada, Ross says, noting the Grassy Narrows First Nation’s exposure to mercury and the Aamjiwnaang First Nation’s exposure to chemical plants as examples.

But ordering companies to immediately clean up brownfields can backfire, Ross says.

“We have lots of examples of companies not wanting to clean up and if they’re faced with a big liability, they’ll declare bankruptcy and disappear,” he says. “[It’s] a reality that we see all the time.”

The Tyee asked how much the province had budgeted for brownfield remediation that companies were unable to take on themselves. In response, the Ministry of Environment pointed to its public accounts, which show B.C. spent $485 million in 2021 cleaning up “contaminated sites in the province that are no longer in productive economic use.” The largest chunk went towards mine sites — $320 million in 2021.

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The Granduc copper mine, which overlooks the Salmon Glacier in northwestern BC, sat fallow from 1984 to 2010. Photo by Dave Mandel via iStock.

Environment Minister George Heyman told The Tyee a multi-ministry working group is developing policy options to address brownfields.

“There are still polluted sites in B.C. and we want to address that, while at the same time minimizing any burden or risks to taxpayers,” Heyman told The Tyee in an interview. “As well as putting in place the measures to prevent this kind of backlog and financial liability from incurring and being incurred in the future.”

When asked about how brownfields seem to incentivize delayed site remediation, the Ministry of Environment and Climate Change Strategy, and Ministry of Finance said they were not aware of such a problem. If their policies were having unintended consequences, the ministry said, they would look into it.

Environmental lawyer Larry Reynolds doesn’t buy that.

He says the government has had all of the tools it needs to get sites cleaned up since 2003 when they passed the Environmental Management Act.

Every time there’s an industrial project proposed, politicians tell the public they can balance economic benefit and environmental harm — but they can’t, Reynolds says.

“Economic development wins out over environmental protection on an ongoing basis,” he says. “That’s why we have tens of thousands of contaminated sites. That’s why we’re seeing parkland diminish, species shrink and drinking water get polluted.”

Holloway, the retired BC Assessment senior appraiser, says if the government was serious about cleaning up brownfields it could amend the Assessment Act to prevent site owners from benefiting from reduced property taxes.

Reynolds says that’s a good idea, but warns tax breaks are just the “cherry on top” of the larger issue of the lack of political will to order corporations to clean up their pollution.

“If we were enforcing our contaminated site laws, we wouldn’t have to be going through this,” he says. “If we were enforcing contaminated site cleanup, within two to three years we wouldn’t be talking about taxes because there wouldn’t be brownfields. This all comes back to a government failure to clean up contaminated sites.”

Holloway says people don’t realize how important it is for large businesses to pay their taxes.

When municipal governments can’t access property taxes, and local businesses are struggling because of COVID-19, those governments will inevitably turn to increased residential property taxes to try and recoup the revenue, he says.

“Seaspan can browbeat the environment and the ministry and it’s the District of North Vancouver that suffers,” Holloway says.

“[The DNV’s] annual statement set aside $6.8 million. Who will make up the difference? The rest of the DNV taxpayers.”  [Tyee]

Read more: Politics, Environment

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