In a recent decision of the Court of Appeal, British Columbia’s program for recycling scrap tires — Financial Incentives for the Recycling of Scrap Tires (FIRST) — was upheld, overturning a lower court trial decision to strike it down.
In 1989, a task force commissioned to examine solid waste management strategies for B.C. identified used vehicle tires as causing “unique disposal problems.” The government noted that only 10 to 15 per cent of the 2.5 to 3 million used tires discarded every year were actually recycled, with remaining tires sent to landfills, used in slash burning operations or stored in stockpiles. The government and public were concerned that these practices created health and fire risks.
On July 1, 1990 the provincial government introduced a $3 environmental levy on the sale of new vehicle tires. Revenue generated from the levy was credited to the Sustainable Environment Fund (SEF), which had been created under the Sustainable Environment Fund Act (SEFA).
On February 27, 1991 the government established the province-wide FIRST collection and recycling program for certain used tires. The program was designed to provide incentives for scrap rubber processors and others to recycle scrap tires. The SEF supported the program.
The FIRST program provides financial incentives for registered generators, transporters, processors and end-users of tires. Generators of tires are encouraged to make their stock of old tires available to registered transporters. The transporters are given credits for transporting tires to registered processors who are paid a certain amount of money depending on how they use the tires.
The program applies to passenger and light truck tires up to a 16-inch rim but excludes off-road tires. Participation is not mandatory and there are no sanctions for those that fail to participate. Retailers still have the option to stockpile used tires or deliver them to landfills.
Originally, the intent was for regulations to be passed under the Waste Management Act (WMA), and regulations were drafted to prohibit tire disposal at landfills and provide outdoor storage controls and a retail take-back program. But this draft Scrap Tire Regulation was never actually promulgated for a number of reasons, including the success of the FIRST program, which made the regulations unnecessary.
Valley Rubber Resources Inc. of Kamloops, B.C. operated a business that processed and produced by-products from scrap tires. The business depended upon a supply of scrap tires from various sources, including tire retailers. The company was not a registered participant in the FIRST program and felt disadvantaged since it was not receiving subsidies. As a result, the company commenced an action in B.C.’s Supreme Court, seeking an order declaring that the government did not have the authority under existing legislation.
The Supreme Court rejected the argument that the FIRST program was authorized by the SEFA and found that, while it provided the authority to fund the program, it did not authorize the program itself. The Court concluded that the FIRST program was more than mere formulation of policy and government expenditure, and held that the effect of the program was to regulate the scrap tire recycling industry. As such, the Court held that the province was purporting to regulate within a field occupied by the WMA, and was required to pass the FIRST Program.
The government appealed the decision to the B.C. Court of Appeal, arguing that the lower court had erred in law in finding that neither the SEFA nor the general spending power provided legal authority for the payment of incentives in relation to the recycling of scrap tires. The government also argued that the Court had erred in determining that the FIRST Program could only be implemented pursuant to WMA regulations.
The Court of Appeal held that the FIRST program is not a regulatory scheme in that the program does not have the power of law. Participation is not mandatory and no sanctions attach to those who choose not to participate. Payments are made by the government to those participants who deal with used tires in a manner set out in a policy, which is considered to benefit the environment.
But Valley Rubber argued that those who participate in the program have an economic advantage and that a processor can’t compete with a competitor who receives subsidies. The company argued that since all companies were forced to adhere to the program to avoid this competitive disadvantage the industry was essentially regulated.
The Court of Appeal rejected this argument and held that government policy is often devised to change the way different sectors of the economy operate, but that the program itself does not have the force of law if there is no enforceable obligation to participate in it.
The Court of Appeal also determined that the provisions of the WMA do not prescribe a code that covers all aspects of recycling. Municipalities and regional districts are given authority to devise waste management plans, which include provisions for recycling. However, the WMA does not indicate that this is the only way in which government can address recycling issues, nor does it otherwise preclude a province-wide recycling incentive program that can co-exist with local waste management plans and bylaws. So the FIRST program will continue in British Columbia.
Rosalind Cooper, LL.B. is a partner with Fasken Martineau DuMoulin LLP, with offices across Canada. Ms. Cooper is based in Toronto, Ontario. E-mail Rosalind at firstname.lastname@example.org