A Phase II environmental site assessment delivered to a regional investment group in late autumn revealed petroleum hydrocarbon contamination extending across approximately 1,800 square metres beneath a commercial property the group had conditionally agreed to purchase in a mid-sized city in central Canada. The property, a 2.4-hectare parcel containing a decommissioned fuel distribution facility and 3 former service bays, had operated under the ownership of a national petroleum retailer for 27 years before being sold to a private holding company 9 years earlier. The holding company had leased portions of the site to a trucking operator and an automotive repair business while leaving the former fuel storage infrastructure in place beneath the surface.
The contamination appeared to originate from 4 underground storage tanks that had been installed in the early 1980s and decommissioned without removal in the mid-2000s. Soil sampling indicated benzene concentrations exceeding applicable provincial standards at 6 of 12 sampling locations, with groundwater monitoring suggesting that a contaminant plume had migrated approximately 40 metres toward an adjacent property housing a daycare centre and community health clinic. The environmental consultant's preliminary remediation estimate ranged from $1.2 million to $2.8 million depending on the selected approach, with timelines spanning 18 to 36 months.
The private holding company that currently owned the property carried a commercial general liability policy but had declined environmental liability coverage when it acquired the site, relying instead on representations from the petroleum retailer that all contamination had been addressed during the original sale. The trucking operator that leased the southern portion of the property maintained a contractors pollution liability policy obtained 4 years earlier at the insistence of a municipal contract requiring such coverage. The automotive repair business, which had operated on the site for 7 years and stored waste oils and solvents in an outdoor containment area near the northeastern boundary, carried no environmental coverage of any kind.
The regional investment group's purchase agreement included environmental representations and warranties, an indemnification clause referencing pre-existing contamination, and a requirement that the holding company obtain a pollution legal liability policy with the investment group named as an additional insured prior to closing. The provincial environmental regulator had not yet issued any compliance order but had opened a file following notification of the assessment results, and the community health clinic had retained environmental counsel to investigate potential claims related to the migrating plume.