NAFTA ruling raises environmental
questions
Mexico ordered to pay California-based
Metalclad $16.7-million after municipality
blocks plans for a hazardous waste dump

HEATHER SCOFFIELD
Parliamentary Bureau
Friday, September 1, 2000

Ottawa -- Mexico has lost a major NAFTA investor lawsuit that
could have serious implications for Canada's ability to pass
environmental regulations and may even affect the way that
Toronto disposes of its garbage.

An independent tribunal under the North American free-trade
agreement ruled this week that Mexico must pay
California-based Metalclad Corp. a total of $16.7-million (U.S.)
as compensation for a Mexican municipality's refusal to allow
the company to run a hazardous waste dump.

The decision is proof that NAFTA and the environment are at
odds, and that municipalities will have a tough time turning
away garbage if foreign corporations are involved, said Michelle
Swenarchuk of the Canadian Environmental Law Association.

"NAFTA is saying, you can have your local rules for dumping, but
if a foreign company wants to dump . . . it can force you to
pay," Ms. Swenarchuk said yesterday. "This case is a terrible
example of how necessary environmental controls can become
near impossible for local communities."

For example, if the Canadian firm that plans to ship Toronto's
garbage to Kirkland Lake, Ont., is bought by a U.S. firm, local
authorities will have a difficult time restricting the foreign
company even if they decide that Toronto's garbage would be
unhealthy for the Kirkland Lake community, Ms. Swenarchuk
said.

The NAFTA ruling is the first time an investor has successfully
used the trade agreement to sue a foreign government for
measures that amount to expropriation. Metalclad had asked
the NAFTA tribunal for at least $113-million in damages,
claiming that municipal authorities in Mexico essentially
sabotaged their investment in a hazardous waste dump by
denying them building permits.

"We won on every ground that we sued," said Metalclad's chief
executive officer, Grant Kesler.

He claims the state governor in Mexico encouraged local people
to protest against the American company and blocked the
progress of Metalclad in an attempt to protect the Mexican
monopoly on hazardous waste.

But Mr. Kesler added that he was disappointed that the NAFTA
tribunal awarded him only a sixth of the damages he had asked
for. Metalclad had sued for lost potential business, but the
tribunal only awarded the company the value of the existing
property in the state of San Luis Potosi, Mr. Kesler said.

But the Mexican government officials and witnesses involved in
the case tell a different story.

They claim that Metalclad was allowed to buy the dump on the
condition that it clean up a massive quantity of hazardous
waste that was polluting the area. And when Metalclad changed
its plans and said it wanted to expand the dump, people living
in the area who had long opposed the dumping of hazardous
waste there rebelled. Municipal permits were withdrawn as local
people began to complain about their babies becoming sick.

"We're not talking about a minor problem here. We're talking
about the same quantity of waste that was in the Love Canal
issue," Hugo Perezcano, the Mexican government's chief lawyer
on the case, said in an interview from Mexico City yesterday.
"It's just sitting there."

The tribunal had nothing to say about the Mexican government's
environmental concerns or the local opposition to Metalclad, Mr.
Perezcano said. "That should raise concerns in the three NAFTA
parties [Canada, the United States and Mexico]," he said.

The Mexican government says it will try to have the award set
aside using a loophole in NAFTA that will let Mexico argue its
case again before a neutral court -- in this case, the British
Columbia court system.

A local environmentalist who was involved in the case, Pedro
Medellin, was dejected about the loss.

"Nobody seems to care much what people think," he said from
San Luis Potosi.
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Mine dumpsite leaks, geologist says
Ex-government official cites
'obvious dangers' in Toronto garbage plan

RICHARD MACKIE
Queen's Park Bureau
Friday, September 1, 2000

Toronto -- The controversial pit in Northern Ontario where
Toronto plans to dump its garbage leaks like a pail with holes in
the bottom, says a former Ontario government geologist who
spent 30 years in the Kirkland Lake area.

Larry Jensen warned that contamination from the dump would
flow through the underground rocks into Lake Temiskaming and
even into the Ottawa River.

"Water passes through that pit from top to bottom through
fractures in the Precambrian granitoid and volcanic rocks. There
are both large and small porous fractures present," he said in a
letter sent last month to Mayor Mel Lastman and to several
Toronto city councillors.

"Anybody with a bit of common sense would realize the obvious
dangers," said Mr. Jensen, who is now retired from the Ontario
Geological Survey.

He noted that water obviously must be flowing out of the former
open-pit iron mine because it is only partly filled with water
after 10 years of rain and snow, and water flowing in from the
northern side.

The water, which flows in at a rate of about 865,000 litres a
day, flows out through fissures and cracks on the south side of
the central pit, he said in an interview. 
"There is no overflow [from the pit], and every other pit of that
calibre has an overflow. Therefore, the water keeps draining
through," he said.

The former central pit of the Adams Mine near Kirkland Lake is
to be used as Toronto's main garbage dump, although it is 600
kilometres north of Toronto.

Under a plan approved by Toronto council on Aug. 2 by a vote of
36 to 20, city staff are to negotiate contracts with the Rail Cycle
North coalition and Republic Services of Canada Inc. The
contracts are to be presented to council in October for final
approval.

Rail Cycle North is to get a 20-year contract worth about
$1-billion to take about 700,000 tonnes a year of city-collected
garbage north by rail and dump it in the former mine pit.

Mr. Jensen said that before the final vote, he would be willing
to take city councillors up to the mine pit to explain on the site
the dangers that the dump will pose to ground water in large
parts of Ontario, not just to the farms immediately to the
south.

"Voting for the development of a Toronto garbage-disposal site
at the Adams Mine site, which has the high potential to pollute
an area many times the size of Toronto, may be economically
expedient but it is morally unconscionable," he said.

The president of Rail Cycle North, Gordon McGuinty, said Mr.
Jensen's warning "is not based on any of the factual, technical
data that has been supplied by the Adams Mine. In other words,
I'm saying he's wrong."

Mr. McGuinty defended the environmental studies that cleared
the way for the pit to become a dump.

"The environmental assessments of the Adams Mine included
every amount of due diligence on every aspect. We did studies
on air. We did studies on dust. We did studies on noise, along
with the hydrology, the surface water and everything," he said.

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