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Administrative Penalties in Alberta: Overview and Latest Trends

Gilbert Van Nes 1

Scope of This Chapter

Unfortunately, while administrative penalties are used in Alberta’s environmental regulatory scheme, they are not used directly to address wildlife protection. Administrative penalties can be used incidentally to protect wildlife under legislation such as the Environmental Protection and Enhancement Act 2 (EPEA), the Water Act,3 and the Public Lands Act 4 (PLA).

This chapter provides an overview of the administrative penalty regime in Alberta and will examine a recent case before the Alberta Environmental Appeals Board (EAB), Alberta Reclaim and Recycling Company Inc v. Alberta Environment and Parks (Alberta Reclaim).5 It will conclude with a brief overview of some of the economic models used by the US Environmental Protection Agency (EPA) with respect to administrative penalties.

Environmental Protection and Enhancement Act

EPEA was the first Alberta environmental statute to include administrative penalties. EPEA provides:

237(1) Where the Director is of the opinion that a person has contravened a provision of this Act that is specified for the purposes of this section in the regulations, the Director may, subject to the regulations, by notice in writing given to that person require that person to pay to the Government an administrative penalty in the amount set out in the notice for each contravention.

(2) A notice of administrative penalty may require the person to whom it is directed to pay either or both of the following:

(a) a daily amount for each day or part of a day on which the contravention occurs and continues;

(b) a one-time amount to address economic benefit where the Director is of the opinion that the person has derived an economic benefit directly or indirectly as a result of the contravention.

(3) A person who pays an administrative penalty in respect of a contravention may not be charged under this Act with an offence in respect of that contravention.

(4) Subject to the right to appeal a notice of administrative penalty to the Environmental Appeals Board, where a person fails to pay an administrative penalty in accordance with the notice of administrative penalty and the regulations, the Minister may file a copy of the notice of administrative penalty with the clerk of the Court of Queen’s Bench and, on being filed, the notice has the same force and effect and may be enforced as if it were a judgment of the Court.

The original provisions for administrative penalties were brought into force on September 1, 1993. However, the ability to assess “a one-time amount to address economic benefit” was enacted in 2002.

The Administrative Penalty Regulation6 (the Regulation) details what is required to be included in the administrative penalty and provides for a two-year limitation period.

Notice of administrative penalty

2(1) The provisions set out in the Schedule are the provisions in respect of which a notice of administrative penalty may be given under section 237 of the Act.

(2) A notice of administrative penalty must be given in writing and must contain the following information:

(a) the name of the person required to pay the administrative penalty;

(b) particulars of the contravention;

(c) the amount of the administrative penalty and the date by which it must be paid;

(d) a statement of the right to appeal to the Environmental Appeals Board given under section 91(1)(n) of the Act.

(3) A notice of administrative penalty may not be issued more than 2 years after the later of

(a) the date on which the contravention to which the notice relates occurred, or

(b) the date on which evidence of the contravention first came to the notice of the Director.

The Regulation also details how the penalty is to be assessed, including the determination of the base penalty and the factors to be considered in adjusting the base penalty. The Regulation prescribes a maximum of $5000 per day.

Penalty assessment

3(1) Subject to subsections (2) and (3), the amount of an administrative penalty for each contravention that occurs or continues is the amount set out in the Base Penalty Table but that amount may be increased or decreased by the Director in accordance with subsection (2).

BASE PENALTY TABLE
Type of Contravention

(2) In a particular case, the Director may increase or decrease the amount of the administrative penalty from the amount set out in the Base Penalty Table on considering the following factors:

(a) the importance to the regulatory scheme of compliance with the provision;

(b) the degree of wilfulness or negligence in the contravention;

(c) whether or not there was any mitigation relating to the contravention;

(d) whether or not steps have been taken to prevent reoccurrence of the contravention;

(e) whether or not the person who receives the notice of administrative penalty has a history of non-compliance;

(f) whether or not the person who receives the notice of administrative penalty has derived any economic benefit from the contravention;

(g) any other factors that, in the opinion of the Director, are relevant.

(3) The maximum administrative penalty that may be imposed for the purposes of section 237(2)(a) of the Act is $5000 for each contravention or for each day or part of a day on which the contravention occurs and continues, as the case may be.

The structure of the administrative penalty regime under the Water Act and the PLA, and other environmental legislation, is substantially similar. However, the key detail that is missing from all of this legislation is how to deal with “a one-time amount to address economic benefit.” No guidance is provided in either the Acts or the regulations as to how to determine this amount.

Appealing Administrative Penalties

One of the key pieces in any administrative penalty scheme is provision for an appeal mechanism as follows:

91(1) A notice of appeal may be submitted to the Board by the following persons in the following circumstances:

(n) where the Director requires a person to pay an administrative penalty under section 237, the person to whom the notice is directed may submit a notice of appeal;7

With an appeal mechanism in place, the administrative penalty can be registered as an order of the court and enforced without the need to prove the administrative penalty in court.

Alberta Reclaim and Recycling

The first time an economic benefit case came before the EAB was in Alberta Reclaim 8 as follows:

Alberta Environment and Parks (AEP) issued an Administrative Penalty for $844,778.00 to Alberta Reclaim and Recycling Company Inc., Mr. Johnny Ha, and Mr. Shawn Diep (the Appellants) for contraventions of the Beverage Container Recycling Regulation under the Environmental Protection and Enhancement Act. AEP determined the Appellants transported beverage containers into the Province of Alberta to operate a non-permitted bottle depot in Edmonton, obtained refunds for these beverage containers, and failed to comply with the terms and conditions of the Permit for the operation of the Andrew Bottle Depot. The Administrative Penalty included a penalty assessment of $75,000.00 and an economic benefit assessment of $769,778.00 for a total of $844,778.00.

The key issue, in this case, was what should the economic benefit calculation be based upon, total revenue or total profit? The director (the statutory decision maker for Alberta Environment and Parks) based the assessment on total revenue.

In the Alberta Reclaim case, the board discussed the following four possible approaches to determine the basis for the economic benefit calculation:9

[95] . . . [The] Director discussed four different approaches to determining how economic benefit should be assessed. The Director suggests that different approaches should be used depending on the “type” of contravention that occurred.

[96] Under the first approach, the activity is described as “always unlawful,” meaning there was no lawful way to carry out the activity. An activity that is “always unlawful” cannot be made lawful by way of an authorization (i.e., an approval, licence, or permit) under the regulatory scheme. According to the Director, in such a situation the economic benefit should be assessed as the total revenue generated by the activity without any deduction for costs.

[97] Under the second approach, the activity was unlawful at the time the revenue was generated, but it could be made lawful by meeting certain requirements. This type of activity is one that was carried out without the appropriate regulatory authorizations but is one for which the proper authorizations could have been obtained. If the proper authorization had been obtained, the activity would have been lawful. According to the Director, in such a situation the economic benefit should be assessed as the total revenue generated by the activity less the reasonable costs associated with the activity.

[98] The Director did not review the third and fourth approaches in significant detail in his evidence because, in his view, the first approach was appropriate for dealing with this case. The third and fourth approaches both relate to contraventions resulting from the failure to expend funds to be in compliance with the regulatory scheme. The third approach was described as applying where actions were taken to avoid incurring costs, where subsequent expenditures cannot correct the non-compliance. The fourth approach was described as applying where actions were taken to delay incurring costs, where subsequent expenditures in the present can correct the non-compliance. The Director did not state how the economic benefit should be assessed in these cases; but presumably, it would be the total revenue earned as a result of the avoidance or delay in incurring the costs of compliance, adjusted for the reasonable costs associated with carrying out the activity. However, in these cases, the time value of money would play a more significant role in determining the economic benefit.

The board agreed with the director that the appropriate basis upon which to assess the economic benefit amount was the total revenue. As stated, this was a case where the actions of the appellants would always be unlawful.

There are other cases before the EAB and the Public Lands Appeal Board that will continue to expand the analysis of economic benefit in administrative penalties.

United States of America’s Environmental Protection Agency

The best resources to understand how administrative penalties work can be found at the EPA.10 Among the resources to be considered is the Resource Conservation and Recovery Act—Civil Penalty Policy.11

In addition to this policy, the EPA has developed a number of penalty and financial models to assist in the determination of the appropriate economic benefit amount. These models have yet to be used in Alberta but are likely the next step in the development of economic benefit analysis.

These models12 include:

BEN—Calculates a violator’s economic benefit of noncompliance from delaying or avoiding pollution control expenditures.

. . .

ABEL—Evaluates a corporation’s ability to afford compliance costs, cleanup costs or civil penalties.

. . .

INDIPAY—Evaluates an individual’s ability to afford compliance costs, cleanup costs or civil penalties.

. . .

MUNIPAY—Evaluates a municipality’s or regional utility’s ability to afford compliance costs, cleanup costs or civil penalties.

. . .

PROJECT (6.7.0)—Calculates the real cost to a defendant of a proposed supplemental environmental project.

. . .

Conclusion

The use of administrative penalties has many benefits over quasi-criminal penalty schemes. For example, administrative penalties are usually quicker, have few defences, and require a lower level of proof. However, until the introduction of economic benefit, the limitation on the penalty amount could be viewed as “just the cost of doing business.” With the ability to take away the economic benefit that is gained from a violation, administrative penalties have become a very effective tool in deterring non-compliance with a legislative scheme.

In Alberta, this area of law is still emerging, with the foundation for determining the amount of the economic benefit just being established. The next development will likely be the use of the EPA penalty and financial models to adjust the economic benefit amount.

Addendum: April 15, 2020

On April 15, 2020, use of the economic benefit component of administrative penalties was extended to the PLA.13 The PLA provides:

59.3   The director may, in accordance with the regulations, require a person to pay an administrative penalty in an amount determined by the director if the person

(a)  contravenes a provision of an ALSA regional plan, this Act or the regulations that is prescribed in the regulations for the purposes of this section,

(b)  without legal authority makes use of public land,

(c)  as a holder of a disposition or of an authorization under section 20, without the consent of the director, or a person authorized by the Minister to provide consent, makes use of the public land that is the subject of the disposition or authorization for any purpose other than the purpose for which the disposition or authorization is granted,

(d)  contravenes a term or condition of a disposition or of an authorization under section 20,

(e)  contravenes a decision or order made under regulations made under section 9(b.1) or (b.2),

(f)  contravenes section 62.1 or a regulation made under that section, or

(g)  fails to notify the Minister of a transfer, redemption or allotment of shares to which section 114.1(4) applies.

59.4(1) If the director requires a person to pay an administrative penalty under this Act or the regulations, the director shall serve by personal service or registered mail a notice of administrative penalty demanding payment of the penalty.

(2)  A notice of administrative penalty must state the grounds on which the penalty was assessed.

(3)  An administrative penalty to which a notice under subsection (١) relates must be paid within ٣٠ days of the date of service of the notice.

(4)  A notice of administrative penalty under this section may require one or more of the following:

(a)  payment of the penalty determined by the director under section 59.3;

(b)   any person who in the director’s opinion is in receipt of proceeds derived directly or indirectly from any use of public land in contravention of this Act or the regulations to provide an accounting of the proceeds believed by the director to have been received by that person;

(c)  payment by a person referred to in clause (b) of any proceeds referred to in that clause, or an amount equivalent to the value of the proceeds if the person has converted the proceeds. [Emphasis added.]

59.5   A person is liable for an administrative penalty for each day or part of a day on which the contravention occurs or continues, and where this Act or the regulations prescribe the maximum amount of an administrative penalty, the maximum is the maximum for each day or part of a day on which the contravention occurs or continues.

59.6   A person who pays an administrative penalty in respect of a contravention by the person shall not be prosecuted under this Act for an offence in respect of the same contravention.

59.7   A notice of administrative penalty may not be issued more than 2 years after

(a)  the date on which the contravention to which the notice relates occurred, or

(b)  the date on which evidence of the contravention first came to the notice of the director,

whichever is later.

59.8(1) Subject to any right to appeal the notice of administrative penalty, the director may file a copy of the notice of administrative penalty with the clerk of the Court of Queen’s Bench and, on filing, the notice may be enforced as a judgment of the Court.

(2)  On application by the director, the Court may make any order necessary to compel the person receiving a notice under section 59.4 to carry out the terms of the notice.

These provisions were enacted in 2009. However, it is only recently that cases have started to come before the Public Lands Appeal Board. The following cases were heard and decided in 2020. The board quoted the administrative penalties imposed by the director in the cases as follows:

Colette Benson v. Director, Regional Compliance, Alberta Environment and Parks14 (Colette Benson). The administrative penalty provides:

[t]he Parties contravened [a Department Licence of Occupation] . . .
by subletting the land without written consent of the Director; received money or other consideration, as monthly payments for the purpose of allowing access to and use of the public lands without authority; and did receive money in the form of proceeds from the public auction sale of the [Department of Licence Occupation] or other consideration for the purpose of gaining access to the Public Land. . . .
I am assessing an administrative penalty of $1,415,572.50 pursuant to [section] 59.3(b) of the Public Lands Act (for unauthorized use) and 59.3(d) of the Public Lands Act (for contravention of conditions) which has be calculated in accordance with section 171 of the Public Lands Administration Regulation.

Jason King and Kingdom Properties Ltd v. Director, Regional Compliance, Lower Athabasca Region, Alberta Environment and Parks15 (King and Kingdom Properties). The administrative penalty provides:

The Parties contravened [two Department of Licence Occupations] . . .
by subletting the land without written consent of the Director, [and] received monies for the purpose of allowing access to and use of the public lands without authority. I am assessing an administrative penalty of $734,500.00 pursuant to [sections] 59.3 and 59.4(4) of the Public Lands Act which has been calculated in accordance with section 171 of the Public Lands Administration Regulation. . . .

Normand Menard and Normko Resources Inc. v. Director, Regional Compliance, Lower Athabasca Region, Alberta Environment and Parks16 (Normand Menard). The administrative penalty provides:

[T]he Parties, being a holder of [a Department Licence of Occupation], sublet the land to three separate card lock fuel vendors and additional companies without written consent of the Director and received monies for the purpose of allowing access to and use of public lands without authorization. I am assessing an administrative penalty of $45,000.00 pursuant to [section] 59.3 of the Public Lands Act. I am also assessing payment of $538,448.21 for total proceeds received pursuant to [s]ection 59.4(4) of the Public Lands Act.

The three cases above have now been heard and determined. The Colette Benson case was decided on September 14, 2020. The board held that the amount of the administrative penalty should be calculated based on net proceeds instead of gross proceeds, and as the evidence was unclear, the board determined that it would be reasonable to deduct $144,615.32 to determine the net proceeds amount. The board also found in its decision that the director failed to follow the board’s order to give the appellant additional disclosure that constituted a breach of procedural fairness, which cannot be remedied by the board’s hearing process. The board, therefore, advised the minister to reverse the administrative penalty. The administrative penalty was reversed by the minister of environment and parks.17

As for the King and Kingdom Properties Ltd. and Normand Menard cases, which are both decisions on applications to stay administrative penalties imposed on the applicants, both applications were granted by the board.

It is important to note, whereas the EPEA18 and the Water Act19 speak in terms of “economic benefits,” the PLA speaks in terms of the “proceeds” of the unauthorized activity. The scope and differences between economic benefits and proceeds will be an interesting issue to follow.

Notes

1  General Counsel and Settlement Officer for the Alberta Environmental Appeals Board and the Alberta Public Lands Appeal Board.

2  Environmental Protection and Enhancement Act, RSA 2000, c E-12 [EPEA].

3  Water Act, RSA 2000, c W-3.

4  Public Lands Act, RSA 2000, c P-40 [PLA].

5  Alberta Reclaim and Recycling Company Inc et al v Director, Red Deer–North Saskatchewan Region, Alberta Environment and Parks (18 August 2016), Appeal Nos. 14-025-027-D (AEAB) [Alberta Reclaim].

6  Administrative Penalty Regulation, AR 23/2003.

7  Environmental Protection and Enhancement Act, RSA 2000, c E-12, s 91(1)(n).

8  Alberta Reclaim, supra note 5, Executive Summary.

9  Ibid at paras 95–98.

10  United States Environmental Protection Agency, online: <epa.gov>.

11  United States Environmental Protection Agency et al, Resource Conservation and Recovery Act—Civil Penalty Policy (Washington, DC: Environmental Protection Agency, June 2003), online (pdf): <epa.gov/sites/default/files/2020-05/documents/june2003rcracivilpenaltypolicyamended050620.pdf>.

12  See: “Penalty and Financial Models”, Environmental Protection Agency (accessed August 30, 2021), online: <www.epa.gov/enforcement/penalty-and-financial-models>.

13  PLA, supra note 4.

14  Colette Benson and CRC Open Camp and Catering Ltd v Director, Regional Compliance, Lower Athabasca Region, Alberta Environment and Parks (14 September 2020), Appeal Nos. 18-0015-R (APLAB), 2020 ABPLAB 14.

15  Jason King and Kingdom Properties Ltd v Director, Regional Compliance, Lower Athabasca Region, Alberta Environment and Parks (31 July 2020), Appeal Nos. 19-0005-0006-R (APLAB), 2020 ABPLAB 12.

16  Normand Menard and Normko Resources Inc v Director, Regional Compliance, Lower Athabasca Region, Alberta Environment and Parks (10 November 2020), Appeal Nos. 19-0245-0246 (APLAB), 2020 ABPLAB 20.

17  Alberta Environment and Parks, Ministerial Order 61/2020, online: <open.alberta.ca/publications/ep-61-2021>.

18  EPEA, supra note 2.

19  Water Act, supra note 3.