The Role of Property Rights in Protecting Water Quality

Elizabeth Brubaker
June 27, 1996

Journal des Economistes et des Etudes Humaines, Volume 7, Number 2/3, June/September 1996, pp. 407-414

Paper Prepared for Property Rights and Environment
An International Conference Organised by the Centre d’Analyse Economique
Aix-en-Provence, France, June 27-29, 1996

Introduction

Property rights have a bad name with Canadian environmentalists. Most prefer regulatory approaches to environmental problems. They place their faith in government, conveniently ignoring its role in destroying the environment. They mistrust property rights and the decentralized decision making that they permit. And they fear that property rights confer the right to pollute.

Environmentalists’ concerns largely reflect an ignorance of the law and of legal history. For centuries, property rights have empowered people to clean up–and to prevent–pollution. They have been particularly useful to those fighting water pollution.

This paper describes the ways in which concerned Canadians have used their property rights to protect water quality. It chronicles the government’s efforts to override these rights. Finally, it recommends two approaches to restoring property rights.

Many of the examples in this paper come from Ontario, a province in central Canada. Ontario is Canada’s most industrialized province. It is home to Toronto–Canada’s largest city. It also borders on three of the Great Lakes and boasts thousands of smaller lakes and rivers. Not surprisingly, the province has experienced countless conflicts over water pollution. Historically, common law property rights have played an important role in resolving these conflicts.

The Common Law

In all Canadian provinces except Quebec, property rights come from the English common law. England passed the common law down to her colonies, including Canada. Both federal and provincial governments have often overridden it with their own statutes. But where they have not done so, the common law continues to apply.

The common law is court-made law. Judges, rather than politicians, created and refined it. In the Middle Ages, local custom often determined a judge’s decision. As decisions were recorded and made available to other judges, legal custom began to replace local custom. Judges followed previous decisions, or precedents, thus entrenching a number of legal principles. From this almost seamless transition from ancient custom to the contemporary common law emerged a number of principles regarding property.

Under the common law, people have very strong property rights: They have the right to both use and enjoy their property. But they also have a responsibility not to interfere with their neighbours’ rights to use and enjoy their property. This principle is as old as the recorded law itself. A thirteenth century legal scholar wrote that “No one may do in his own estate anything whereby damage or nuisance may happen to his neighbour.” The principle is embodied in a maxim that governs court decisions to this day: “Use your own property so as not to harm another’s.” Clearly, that maxim has profound environmental implications. Polluters may not, in using their own property, harm anyone else’s.If they do, their victims may take them to court, demanding both an injunction and damages.

If a victim of pollution convinces the court that, on the balance of probabilities, his case has merit, the court will likely issue an injunction: It will order the defendant to refrain from acting in a particular way or, in some cases, require it to take specific action. Injunctions are the most common remedies in Canadian property rights cases. In fact, before 1877, Ontario courts had no choice but to issue injunctions if they found that plaintiffs’ property rights had been violated. Courts now have the authority to grant damages instead of injunctions. But they are often reluctant to do so.

Such reluctance is well-founded. Judges cannot put a dollar value on many injuries. Only the victim himself can know what value he places on clean water, or how much money he would be willing to accept for living with pollution. But the victim does not determine the amount of court-awarded damages. In other words, by substituting damages for an injunction, a court forces the victim to sell his property rights at its price.

In contrast, injunctions allow the victim to negotiate his own price. If his environment is priceless, he may simply tell the polluter to go away. Alternatively, he may bargain away his rights or reach a compromise that benefits both him and the polluter.

Furthermore, only injunctions can prevent the recurrence of property rights violations. A court that replaces an injunction with damages says, in effect, that a polluter who is willing to pay may go on polluting. The court thus licenses the pollution. Fortunately, courts generally reject this role.

Pollution usually violates people’s common law property rights in one of three ways. It may be a trespass, or a nuisance, or a violation of someone’s riparian rights. Descriptions of each follow.

Trespass

Under the common law, it is a trespass to place anything upon someone else’s property. It does not matter if the substance is toxic or perfectly harmless. Nor does it matter if there is a lot of it or just a tiny bit. As one judge explained, “every invasion of private property, be it ever so minute, is a trespass.”

Landowners and tenants have often used trespass law to keep pollutants off their property. They have fought sawdust from a lumber mill, fluorides from an aluminum plant, and pesticide spray. Those living along rivers have used trespass law to prevent sewage discharges from littering the rivers’ beds and banks.

In one turn-of-the-century case, a New York farmer complained that upstream sewers polluted his creek. He argued that the filth piling up on the creek’s bed and along its banks constituted a trespass. The court agreed. It gave the polluting town a year to build a new sewage system. But after that, it ruled, the town would no longer be allowed to pollute the creek. The court acknowledged that its decision would inconvenience the public. Regardless, it said, ongoing trespasses have to be restrained.

Not surprisingly, the town did not like that decision. It argued that its sewage was only one of many sources of pollution, including another town and several tanneries. Cleaning up its effluent would not clean up the creek. The court agreed that the town’s sewage constituted only a third of the pollution in the creek. But that made no difference. The farmer had the right to sue whomever he wanted. If he wished to take on all polluters, fine. If he wished to target just one, that, too, was fine. Higher courts agreed: The injunction would stand.

Nuisance

Trespass law prevents direct, tangible invasions. For indirect invasions, and for those that cannot be seen or touched, a branch of the common law called nuisance law often applies. A nuisance interferes with the use or enjoyment of private property. Like trespass, nuisance is not tolerated by the courts.

Nuisance law has been of tremendous help to those fighting pollution. People have used it to protect themselves from smoke, steam, and fumes. They have used it to challenge road salt and leaking oil tanks. Foul smells are often nuisances, as are noise and vibrations. In the 1920s, one judge went so far as to say, “Pollution is always unlawful and, in itself, constitutes a nuisance.”

A famous nuisance case of the nineteenth century dealt with water pollution. It was an English case. English cases have greatly influenced the Canadian common law: Canada long relied on English precedents and, until 1949, took the highest court appeals to England for resolution.

The case concerned Birmingham, England, which built a large public sewer in 1851. The sewer dumped the town’s filth into the local river. The owner of a downstream estate complained that the sewage caused disease. It killed fish. Cattle could not drink from the river. He could not wash sheep in it. For four years, the town promised him it would stop polluting. But it did nothing. Fed up, he turned to the courts.

At the trial, Birmingham did not deny that dumping sewage was highly offensive. It never admitted, however, that it could correct the problem. Instead, it argued that the court should allow the pollution for the public good. It warned of disaster if it was not allowed to dump its sewage into the river. In its words, “The evil that must ensue if the Court should interfere would be incalculable. . . . Birmingham will be converted into one vast cesspool . . . The deluge of filth will cause a plague, which will not be confined to the 250,000 inhabitants of Birmingham, but will spread over the entire valley and become a national calamity. The increase of population, inseparable from the progress of a nation in industry and wealth, is attended of necessity by inconvenience to individuals . . . In such cases private interests must bend to those of the country at large.”

Birmingham’s argument failed to impress the judge who heard the case. In fact, he dismissed it as an “extreme position . . . of remarkable novelty.” He was not, he explained, a public safety committee. His job was simply to interpret the law and to define who had what rights. In this case, the plaintiff had a clear right to enjoy his river–a right to water that cattle could drink and fish could swim in. Birmingham, in creating a nuisance, had violated that right. It was not allowed to do that. In the judge’s words, “Public works . . . must be so executed as not to interfere with the private rights of individuals.”

The judge concluded that he must grant an injunction, regardless of its consequences. As he explained, “It is a matter of almost absolute indifference whether the decision will affect a population of 25,000 or a single individual.” Accordingly, he ordered Birmingham to discontinue the nuisance.

Riparian Rights

As noted above, both trespass and nuisance law have been used to stop water pollution. Most often, however, people wanting to protect water quality have used a branch of the common law called riparian law. Riparians are the people who own or occupy land beside lakes and rivers. Under the common law, they have the right to the natural flow of water beside or through their property. In the words of one judge, “every riparian proprietor is entitled to have the waters of the stream that washes his land come to it without obstruction, diversion, or corruption.”

Without obstruction, diversion, or corruption. That restriction covers virtually any threat to our lakes and rivers. Hydro dams obstruct rivers. Massive water exports divert lakes and rivers. And of course toxic effluents corrupt them. In fact, corruption covers any sensible changes to water quality, from discolouration to thermal pollution to the hardening of water.

Since the middle of the nineteenth century, riparian rights have played a crucial role in cleaning up lakes and rivers in both England and Canada. Riparians have fought coal mine discharges, pulp and paper mill wastes, other industrial effluents, storm-water runoff, and sewage discharges.

Riparians have also used their rights to prevent pollution. One of the most recent successful cases occurred in Sudbury, Ontario. In 1970, a riparian went to court to prevent a speed boat regatta on a small lake. She feared that 60 racing boats would contaminate the lake. The judge issued an order forbidding the races.

The plaintiff’s riparian rights, the judge explained, entitled her “to the flow of water through or by her land in its natural state.” By polluting the lake–regardless of whether the pollution caused any harm–the planned races would violate her property rights. In such a case, said the judge, the court should grant an injunction as a matter of course.

The Erosion of Common Law Property Rights

Unfortunately, governments have, over the centuries, made it increasingly difficult for the victims of pollution to sue. They have extinguished riparian rights and other property rights by passing laws that supersede them. As one judge explained, “The Legislature is supreme, and if it has enacted that a thing is lawful, such a thing cannot be . . . an actionable wrong.”

In Ontario, the erosion of riparians’ common law property rights began in 1885. That year, a man named Antoine Ratté filed a lawsuit against several of Canada’s most notorious polluters. Ratté owned a waterfront lot and a pleasure boat rental business on the Ottawa River. He objected to water pollution from upstream sawmills. Sawdust, bark and blocks of wood piled up on the river bank and formed floating islands, interfering with boat traffic. Stinking gasses, accumulating in the rotting sawdust, frequently exploded.

Mr. Ratté’s lawsuit alarmed the Ontario government, which wanted to shield the polluting sawmills and the jobs they provided. The government passed a law curbing the courts’ ability to protect Mr. Ratté’s property rights. Citing the public interest, it ordered courts to consider the lumber trade’s economic importance before issuing injunctions against sawmill pollution.

The Ontario government afforded similar protection to pulp and paper mills in 1949. Four years earlier, the Kalamazoo Vegetable Parchment Company (KVP) had started up a pulp and paper mill on the Spanish River in Northern Ontario. In those days the Spanish River was a popular tourist destination. Its clean water and abundant game fish made it a perfect northern resort. When KVP started up its mill, that changed. Every day, the mill released several tons of wood fibres and chemicals into the Spanish River. The river began to stink. It tasted disgusting. Fish died by the thousands.

A fisherman, a farmer, and several tourist operators sued KVP. The plant, they claimed, was violating their property rights and destroying their businesses. It should be shut down. The judge agreed. People living along rivers, he said, have common law property rights to clean water. No industry–no matter how important–may alter the water’s character in any way. The judge issued an injunction: If KVP did not clean up its act within six months, it would have to close.

In an effort to save KVP, the provincial government amended a statute governing development on lakes and rivers. Just as it had done years before with sawmills, it instructed the courts to consider the economic importance of a polluting pulp mill before issuing an injunction against it. Armed with the new amendment, KVP went to the Supreme Court of Canada, to ask it to reconsider the injunction. The court ruled that the injunction should stand.

The government, however, was determined to keep KVP alive. In the Attorney General’s words, “The development of the north country depends upon industry, and we cannot allow industry to close down.” And so the government passed a law dissolving the court injunction.

The following years saw further erosion of Ontarians’ riparian rights. In the mid-1950s, two riparians launched separate cases against two municipalities that polluted rivers with sewage. Both won injunctions against the sewage pollution. In one case, the court found that the pollution constituted a nuisance; in the other case, the court found that the pollution violated the plaintiff’s riparian rights.

The judge in the latter case acknowledged that his decision to issue an injunction would be expensive for the defendant, and for other communities that had similar sewage systems. But as he explained, he could not “permit the doctrine of utilitarianism to be used as a make-weight in the scales of justice.” He went on, “be it ever remembered that no one is above the law. Neither those who govern our affairs, their appointed advisers, nor those retained to build great works for society’s benefit, may act so as to abrogate the slightest right of the individual, save within the law.”

The Ontario government responded predictably: It changed the law. In the name of the public interest, it dissolved the injunctions against the polluting municipalities. It then went further: It deemed any sewage project approved by the government to be operated by statutory authority. The Leader of the Opposition described what this meant: The government could now allow municipalities to pollute Ontario’s rivers. He explained, “Once the Department of Health gives approval, each one of these streams–in effect–can have sewage dumped into it.”

The Attorney-General said the same thing in a very different way. In his words, “This means that the courts would not have power to grant an injunction to stop the operation of a sewage disposal plant to the inconvenience and detriment of all the inhabitants of the municipality.” Courts, in short, could not order sewage plants to stop polluting if such an order would inconvenience their operators.

In addition to such laws that have blatantly weakened property rights, hundreds of more subtle regulations, permits, and licences have had the same effect. When a government licenses an activity, it generally licenses all of that activity’s inevitable results, including any inevitable pollution. To the extent that pollution is an inevitable result of their carrying on approved activities, the polluters are operating under “statutory authority.” Polluters often claim immunity from civil suits, using statutory authority as their defence. They argue that some activities inevitably produce pollution. Government authorization of such an activity, if it did not include its subsequent pollution, would be useless. The government does not knowingly do useless things. Thus, in authorizing an activity, Parliament must have intended to authorize its inevitable pollution.

Once a government has authorized an activity, those affected by it lose their rights to sue. Parliament, in its wisdom, has overridden the common law. It has replaced legal decisions with political decisions. In other words, it has removed decision-making power from those affected by pollution, and placed that power securely in the hands of politicians and bureaucrats.

And what have successive Ontario governments done with their new powers to control water quality? They have permitted pollution that no downstream riparian would tolerate. It is hardly surprising that remote governments have not made good decisions about the environment. They do not understand local priorities, and they do not share local values. How can a provincial government know about the many uses of a particular river? How can it estimate the value of those uses to local riparians? Without that information, how can it foresee the consequences of permitting pollution?

Almost any government has powerful political and economic incentives to allow pollution. It is loath to take on industries that dump toxic metals and chemicals into our waters. It is loath to threaten jobs–even expensive, temporary, or ultimately counterproductive jobs. Jobs mean votes. The government thus does the expedient thing: It transfers the costs of pollution to its victims. If the effects–no matter how bad–are concentrated on a few riparians, the political costs are low. Nor need political costs rise if the effects are dispersed over many. People may love to swim, but swimming rarely makes or breaks a provincial election.

The provincial government also has economic incentives to permit some kinds of pollution. It operates many of the sewage treatment plants that pollute the province’s waters. Furthermore, it often finances improvements to plants it does not operate. A crackdown on sewage polluters would be very expensive for it.

Riparians, of course, also respond to incentives. In this, they are no different from governments. But their interests–economic and other–usually lie in clean water. Riparians’ livelihoods may depend on clean water. Clean water increases their property values. It improves their health and the quality of their lives. And unlike governments, whose time frames rarely stretch further than the next election, riparians are more likely to take a longer view of resource use and destruction. Riparians will fight for clean water if they have the tools to do so. History suggests that there are no better tools than property rights.

Strengthening Property Rights

How can we strengthen people’s property rights? How can we restore the pollution- fighting powers that citizens enjoy under the common law?

One approach entails constitutional change: The federal government should enshrine property rights in the Charter of Rights and Freedoms. Protecting property rights in the Charter will raise the legal hurdles of overriding them. The economic costs will be higher if governments have to compensate people for expropriation. And the political costs will be higher if governments have to acknowledge that their actions violate an acknowledged right.

A more direct approach is to ensure that laws and regulations do not override people’s common law property rights. When authorizing an industry’s activities, governments should specify that they are not legalizing trespasses, nuisances or violations of riparian rights. Such clauses were common in the laws of nineteenth-century England. Inserting them into contemporary laws would provide both citizens and the environment with immeasurable protection.

Conclusion

Armed with strong property rights, the victims of pollution will start to clean up the waters flowing by their land. Sometimes they will choose to prevent harmful developments. Other times the rights holders and polluters will reach a compromise: The polluters will install abatement equipment or change their operations. Occasionally polluters will simply buy out rights holders: They will make it worth their while to allow them to pollute. Such decisions will be arrived at freely and fairly; they will reflect the values and circumstances of all directly involved parties.

It may be precisely this last possibility that frightens many environmentalists: Decentralized decision making allows for decisions that they may not like. What many environmentalists forget is that decision making by governments has resulted in hundreds of environmental disasters. Given their incentives, governments are likely to continue to make decisions that put growth and job creation before water quality.

While there will doubtless be cases in which individual rights holders allow pollution, experience indicates that they will be relatively rare, and that the resulting damage will be relatively confined. People have demonstrated time and again that they place a very high value on clean water. They have proven themselves to be responsible stewards. One need only look at the legal case books for reassurance. On page after page, they illustrate that armed with strong property rights, people can and do protect lakes and rivers.

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