Transfer payments to the Government of Yukon for the remediation of the Marwell Tar Pit Site to support the Contaminated Sites Program: Terms and Conditions

Table of contents

1. Summary

The Marwell Tar Pit Site (approximately 2.5 acres) located in the industrial area of the City Of Whitehorse was transferred to the Government of Yukon in August 1970 as a part of the block land transfer to accommodate the growing needs of the City of Whitehorse.

The Marwell Tar Pit Site was operated as a petroleum refinery, built on behalf of the United States Corp of Engineers, to process crude oil extracted from Norman Wells, Northwest Territories. The refinery operated between 1944 and 1945 after which it was subsequently closed and dismantled. Waste products from the refinery operations were deposited in what is currently referred to as the Marwell Tar Pit. These activities were directly related to Canada`s national security efforts in its role in supporting the Allied Forces during World War II.

In Budget 2004, the federal government set aside $500 million to cost-share the remediation of certain contaminated sites located on non-federal land, with provincial and/or territorial governments. In 2005, the federal government established Policy Framework for Shared-Responsibility Contaminated Site Project Funding which set out criteria for funding a portion of clean up costs for certain contaminated sites on non-federal lands, to the extent the contamination is a direct result of federal government activities or where the contamination resulted from the Government of Canada's national security efforts.

The Department of Indian Affairs and Northern Development (DIAND) mandate, with respect to the development and use of natural resources in Canada's three northern territories, involves the delivery of a number of programs and services including, the management of land, water, mineral and oil and gas resources in the Northwest Territories (NWT) and Nunavut, the protection of the northern environment, and taking a leadership role in global issues that impact the North, such as climate change and the long-range transport of pollutants into the Arctic. The experience and expertise of Northern Affairs staff has resulted in an expanded delivery role for both the northern and First Nation/Inuit components of the department's activities related to the northern contaminated sites program, northern contaminants program, climate change and the implementation of the DIAND sustainable development strategy.

The Marwell Tar Pit Site is clearly an exceptional case since the Government of Canada neither directly or indirectly contributed to, nor mandated, the activity that created the contamination. At the request of Environment Canada, DIAND`s Northern Affairs Organization has taken the lead role on this project on behalf of the federal government because of its experience in dealing with contaminated sites in the North.

The primary purpose of this authority is to enable DIAND to transfer funds to the Yukon Government toward meeting Canada's financial obligations arising from the cost-sharing agreement negotiated under the authority granted in the April 2007 Treasury Board decision.

2. Purpose and Objectives

In order to discharge the Government of Canada's obligations arising from the cost-sharing agreement with another level of government, a separate Authority for the Minister of Indian Affairs and Northern Development is necessary which would guide making and monitoring transfer payments to the Yukon Government.

The overall objective and expected outcome of this authority would be to remediate the Marwell Tar Pit Site which is a contaminated site on non-federal land for which the Yukon Government will be the project proponent. Although the Marwell Site is not located on federal lands and DIAND is not the custodian department its remediation will make a direct contribution to DIAND's Northern Affairs Organisation's Strategic Outcome - "The North":

The objectives of transfer payments under this authority are:

Expected Result Performance Indicators
Completion of the Phase III Environmental Site Assessment. Completed, and approved, final Phase III report.
All regulatory approvals, to commence remediation, received. Land Use Permit, Water License and Letter of Acceptance from the Yukon Environmental Assessment Board

3. Application and Duration

This authority will be effective April 1, 2010. The time frame for remediation and monitoring of the Marwell Tar Pit Site is expected to last 11 years. Not later than April 1, 2015 the Northern Contaminated Sites Program of DIAND in consultation with DIAND's Audit and Evaluation Sector intend to review the relevance and effectiveness of the transfer payment program and continued need for this Authority and to seek any necessary amendments. The Program will also provide an update on the progress made in the implementation of the cost-sharing agreement to remediate the Marwell Site.

4. Definitions

"Contaminants" means petroleum hydrocarbons and other substances found in the soil and water, including groundwater, that are associated with the installation, operation and dismantling of the oil storage facilities that occurred generally between 1943 and 1952, located where the Marwell Tar Pit now is, for the refinery that processed crude oil extracted from Norman Wells, Northwest Territories;

"Eligible Expenditures" means expenditures incurred by Yukon for the carrying out of the Project including, Project Management (salaries and benefits for the Project Manager and staff assigned to support the Project Manager), reasonable and justifiable O&M expenditures including contract costs, consultations, and communications activities directly related to the carrying out of the Project;

"NCS Class 1 site" means a site defined as a Class 1 site pursuant to the Canadian Council of Ministers of the Environment National Classification System for Contaminated Sites Report, CCME EPC-CS39E, March 1992;

"Plan of Restoration" means a plan of restoration as described in the Contaminated Sites Regulation (Yukon), applicable to the Site;

"Project" means the Remediation of the Site with respect to the Contaminants as described in 2.0;

"Remediation" means the prevention, minimization or mitigation of an impact through the development and application of a planned approach to make improvements at a site in order to remove, destroy, contain or otherwise reduce availability of Contaminants to receptors of concern, and to remove, destroy or contain safety hazards, which improvements may require monitoring and care and maintenance;

"Risk Assessment" means the systematic process of evaluating the existing and future potential risks to human health and the environment from exposure to Contaminants in order to estimate cancer risks, hazards or risks to the environment in accordance with protocols approved or adopted under the Contaminated Sites Regulation (Yukon);

"Site" means the area of land containing the Contaminants as determined by the Site Assessment including that portion of vacant Commissioner's land, Lot 263 (rem), Group 804, Plan 40189 CLSR designated as a contaminated site pursuant to s.114(2) of the Environment Act (Yukon) [Notices of Designation dated May 4, 1998 and September 5, 2000];

"Site Assessment" means a site assessment as described in the Contaminated Sites Regulation (Yukon) of all the land which includes Contaminants; and.

"Surplus" means the amount by which funds, provided by Canada and Yukon, exceed Eligible Expenditures incurred by Yukon for carrying out the Project.

5. Eligible Recipients

The recipient of transfer payments under this authority will be the Yukon Government. Transferred funds will support capacity for the delivery of activities related to consultations and if required to accommodate, care and maintenance, monitoring, remediation and management planning, regulatory approvals, engineering, construction, and remediation of the Marwell Tar Pit Site in the Yukon.

6. Stacking Provisions

Under the framework for shared responsibility sites, the Yukon Government cannot access other government funding for the same project. The agreement however provides that if the Yukon Government receives or recovers any funds at any time from any source for the Remediation of the Site, Canada shall be entitled to receive from Yukon 70% of any such funds received or recovered. Any such funds will constitute a debt due to Canada and may be offset against other funds owing by Canada to the Yukon Government.

The maximum level of total federal share will not exceed 70% of the eligible costs or $4.758 million of the total project cost, unless additional contaminated soil is discovered.

The program officer responsible for administering the agreement will review financial information submitted by the Yukon Government, and if required, will initiate appropriate procedures.

Any amount to be repaid to Canada will be established as a debt due to Canada and recorded by Canada as an account receivable.

7. Third Party Delivery

Where the recipient delegates authority or transfers funding received under this authority to an agency (i.e. an authority, board, committee or other entity authorized to act on behalf of the recipient), or to another third party, the original recipient of federal funds shall remain liable and accountable to Canada for the performance of the obligations under the transfer payment agreement.

8. Method of Delivering and Method of Payment

The cost-sharing agreement with the Yukon Government is a multi-year agreement covering a period of eleven (11) years and is reflective of arrangements between two responsible public governments. This agreement is consistent with the framework set out in Appendix I of the Directive on Transfer Payments, with provisions considered appropriate for agreements between federal-provincial-territorial governments.

Under the cost-sharing agreement, the Yukon Government is responsible for development of the remediation plan and will deliver it to Canada. Canada is responsible for 70% of the eligible project costs. Canada would make a single annual payment at the beginning of each fiscal year. Any payment by Canada or Yukon under this Agreement is subject to the requirements of the Financial Administration Act (Canada) that call for an appropriation for that purpose in the fiscal year in which the payment is to be made.

The Yukon Government, will be required to respect and comply with the Conflict of Interest Act, the Conflict of Interest and Post-Employment Code for Public Office Holders or The values and Ethics Code for the Public Service, the Lobbying Act (as appropriate) and that no member of the Senate or the House of Commons shall be admitted to any share or part of the federal funding under this authority or to any benefit to arise therefrom that is not otherwise available to the general public. However, where a comparable legislation of the recipient government exists, or where the application of a federal legislation is not appropriate in an agreement with the other order of government, the recipient government's legislation or none of the above noted legislation would apply.

9. Eligible Activities

Eligible Activities

The primary focus of transfer payments made under this Authority would be to remediate contamination at the Marwell Tar Pit Site. The Yukon government will be the only recipient of funds to implement the cost-sharing agreement titled, "Agreement for Remediation of the Marwell Tar Pit in Whitehorse, Yukon". The Project would be carried out in three Phases.

Phase 1: Preliminary Activities

  1. Project Preparation: Evaluation of available site information and identification of information requirements; preparation of cost estimates for Phase 1 activities; fencing the Site to restrict access prior to and during Site Assessment and Remediation; developing A or B level cost estimates for remedial work.
  2. First Nations: Inform Kwanlin Dun First Nation and Ta'an Kwach'an Council of the Project and begin discussions required pursuant to 5.2
  3. Site Assessment: Develop terms of reference for completion of the Site Assessment and tender contract; conduct Site Assessment.
  4. Risk Assessment: Development of terms of reference for Risk Assessment and tendering contract; completion of Risk Assessment, including development of risk-based remediation standards and preparation of Risk Assessment report; completion of an external review of Risk Assessment report.
  5. Plan of Restoration: Identification of potential Remediation alternatives; selection of preferred Remediation alternatives; development of Plan of Restoration; and determination of need for pilot project(s) to confirm appropriate Remediation solutions.
  6. Pilot Project: Develop terms of reference for pilot project(s) and tender contract(s), if deemed necessary; conduct pilot project(s), if necessary.
  7. Regulatory Review, Assessment and Permitting: Obtaining all permits, licences and authorizations and drafting and submission of Project Proposals as required under the Yukon Environmental and Socio-Economic Assessment Act (Canada) (YESAA). Two YESAA evaluations will be required – a) Site Assessment, Risk Assessment, Pilot Project and b) Plan of Restoration.
  8. Project Management.

Phase 2: Remedial Activities

  1. Remediation: Develop terms of reference for implementation of Plan of Restoration and tender contract; undertake remediation (e.g. removal of Contaminants, in situ treatment of Contaminants and/or engineered containment and stabilization of Contaminants); install network of groundwater monitoring wells; proponent review of site completion report and installation of monitoring wells.
  2. Project Management.

Phase 3: Post-Remedial Activities

  1. Groundwater Monitoring: Implementation of groundwater monitoring program in accordance with the Plan of Restoration.
  2. Site Closure/Capping: Contouring, covering and establishing vegetation (or other surface treatment) compatible with natural surroundings and future use of Site.
  3. Regulatory Approval: Issuance of Certificate of Compliance pursuant to section 116(1) of the Environment Act (Yukon).

10. Eligible Expenditures

Eligible Expenditures include expenditures incurred by the Yukon Government for the carrying out of the Project including, Project Management (salaries and benefits for the Project Manager and staff assigned to support the Project Manager), reasonable and justifiable Operations & Maintenance expenditures including contract costs, consultations and communications activities directly related to the carrying out of the Project

11. Maximum amount payable

Based on the currently available information, Canada is responsible for up to 70% of the total project cost, or to a maximum of $4,758,670.

12. Basis of payments

Canada is committed to making multi-year transfer payments pursuant to the cost-sharing "Agreement for Remediation of the Marwell Tar Pit in Whitehorse, Yukon". Financial certainty pertaining to Canada's share of the total expected cost for the remediation of the Marwell Site for the Yukon Government, who will be the project proponent, is a critical factor in successfully implementing a multi-year remediation plan and in achieving the Government of Canada's objectives set out above.

Payments to the Yukon Government will be normally made, on an annual basis, at the beginning of the year. Although the Yukon Government has a well established financial management system comprised of accounting controls, reporting and auditing system in place, Canada will hold back an amount equal to 10% of each fiscal year's projected annual payment until Canada is satisfied with the financial and progress reports.

Remediation projects are inherently uncertain in nature, are often subject to severe weather conditions, logistical and transportation constraints and subject to a short working season which is often unpredictable in the North. The ability of the Yukon Government to carry-over unexpended funds to the following fiscal year will allow the Yukon Government to mitigate some of the risks, noted above, and enter into favourable terms for multi-year contracts with private sector engineering, and environmental firms and other suppliers and better plan and execute remediation activities which are multi-year in nature. Any carried-forward funds will remain subject to Canada's concurrence, annually, and the requirements of appropriate and periodic financial reporting set out in the cost-sharing Agreement.

The cost-sharing Agreement contains indemnification and a release in favour of Canada. Yukon releases Canada from any claims that Yukon might have against Canada respecting the environmental condition of the site. Yukon indemnifies Canada against claims by anyone else respecting the work Yukon is to do under the agreement and respecting the environmental condition of the land after the signing of this agreement. Since the Marwell Tar Pit Site is not a federal contaminated site, the Yukon Government will be the proponent and responsible for carrying out the project. Oversight for the Project will be exercised through the detailed reporting requirements. Once the remediation Phase is completed the Yukon Government will provide Canada an independent Engineer's certification that the remediation has been undertaken as set out in the cost-sharing Agreement.

13. Repayable Contributions

Not applicable

14. Monitoring and Reporting

DIAND has internal control procedures, systems and human resources to ensure due diligence is properly exercised in the development of remediation plans and in, identifying multi-year funding requirements developed by the Yukon Government. This responsibility is shared by DIAND headquarters and regional offices.

15. Governance

Yukon shall carry out the Project in three Phases as described above and shall administer the Project in accordance with the Project Charter set out in the cost-sharing Agreement. Yukon shall submit a proposal for a project pursuant to s.50(1) of the Yukon Environmental and Social Economic Assessment Act (Canada) for the Project prior to carrying out the Site Assessment and prior to implementation of Phase 2 of the Project. The remediation of the Site will be conducted to meet the appropriate restoration standards for industrial land use as set out in the Contaminated Sites Regulation (Yukon).

16. Accountability framework and evaluation

Yukon shall provide Canada the following reports:

  1. within 60 days after each fiscal year end, a Project Progress Report, as set out in the cost-sharing Agreement;
  2. within 60 days after each fiscal year end, a Project Financial Report, as set out in the cost-sharing;
  3. as soon as practicable after the end of Phase 2 of the Project, but no later than June 30, 2017 Yukon will provide a report confirming that Phase 2 of the Project has been completed by Yukon; and
  4. as soon as practicable after the end of Phase 3 of the Project, but no later than June 30, 2021a Final Project Report and a Final Project Financial Report which advises Canada that the Project has been successfully completed and includes evidence that a Certificate of Compliance under section 116 of the Environment Act (Yukon) has been issued in respect of the Site.

The cost-sharing Agreement provides for Canada's ability to conduct audits and evaluations on the effectiveness of the project, as required.

17. Other terms and conditions

DIAND has the capacity to manage the transfer payments under this authority. Other terms and conditions for the cost-sharing Agreement with the Yukon Government respects the federal-provincial-territorial government relations and be consistent with the overarching purpose that funds transferred under this authority are to meet Canada's cost-sharing obligations for the remediation of the non-federal contaminated Site at Marwell.

18. Official languages

As a public government, the Yukon Government is not subject to the Official Languages Act (Canada). However, the Yukon Government must comply with the requirements of its own Languages Act (Yukon), which, in addition to Aboriginal languages, recognizes the equality of status of English and French in the Yukon. The cost-sharing Agreement provides that the Yukon Government produce any signage related to remediation of the Marwell Tar Pit Site in English and French.

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