Supreme Court says companies must pay for Grassy Narrows mill-site maintenance

Two forest-product companies are on the hook for maintaining a mercury waste site near Ontario's Grassy Narrows First Nation, the Supreme Court of Canada has ruled.

The 4-3 decision Friday brought some clarity to a dispute that bubbled up decades after serious environmental contamination took place in the region.

Untreated mercury waste from a pulp-and-paper mill's operations in Dryden, Ont., entered the English-Wabigoon river system in the 1960s. In addition to causing health problems for some residents, the toxic byproduct of chemical production used for bleaching in the paper-making process led to closure of a commercial fishery and hurt tourism.

In 1971, the mill owners of the day built the disposal site to contain mercury-laced waste. Six monitoring wells were installed and four others were added later.

The operation's ownership changed over time as a result of various transactions. In 1998, Weyerhaeuser entered into an agreement with Bowater to buy some of the pulp-and-paper assets. It wanted to exclude the waste-disposal site due to the possible environmental liabilities.

Site was abandoned in 2011

Severing the site took some time, however. Title was therefore registered in Weyerhaeuser's name until August 2000.

Bowater filed for bankruptcy protection in 2009. The waste-disposal site was abandoned in April 2011, with court approval, during the bankruptcy proceedings.

However, the Ontario government issued an order obligating Weyerhaeuser and Bowater to repair disposal site erosion, do water testing, file annual reports, prevent any leaks and give the provincial Environment Ministry $273,063 as financial assurance with respect to the site.

Weyerhaeuser and Resolute Forest Products, the successor of Bowater, argued that an indemnity granted in 1985 to the owners of the paper facility at the time — part of a settlement with the Grassy Narrows and Islington First Nations — applied to them as well, but the province disagreed.

An Ontario judge ruled in favour of the companies in 2016, saying the language of the indemnity should cover the two subsequent owners.

The Ontario Court of Appeal agreed that the 1985 indemnity applied to the ministry's environmental order. But it found Resolute was not entitled to indemnification and said the lower court should decide whether it applied to Weyerhaeuser.

In its decision, the Supreme Court said the 1985 indemnity does not apply to the province's 2011 order, meaning Resolute and Weyerhaeuser are liable for the costs of maintaining the disposal site.

A majority of the high court concluded the judge who initially heard the case made "palpable and overriding errors of fact."

The indemnity was intended to cover only proceedings arising from the discharge, or continued presence, of mercury in the ecosystem, not those related to mercury in the waste-disposal site, the court said.

In a statement, Resolute expressed disappointment with the ruling.

Since at least 2011, although no longer the owner of the Dryden waste site, Resolute has continued environmental monitoring agreed upon with the ministry on a voluntary basis, the company said.

Resolute will continue its monitoring and the posting of financial assurance while an appeal of the province's order proceeds to the Ontario Environmental Review Tribunal, the company added.

A Weyerhaeuser spokesman was not immediately available.