Energy Probe Research Foundation
August 1, 2001

Table of Contents

1. Introduction
2. A Failure of Regulation and Enforcement
   • The province’s long-standing authority to regulate water systems
   • The province’s adoption of a cooperative approach to municipal water providers
   • The province’s reluctance to enforce the law against municipal water providers
   • The province’s preference for voluntary compliance
   • The deterrent value of mandatory compliance
   • Red flags: Expressions of concern regarding the lack of monitoring and enforcement and warnings of poor municipal performance
   • Living a lie: Stubborn oblivion to the failures of municipalities and regulators
   • The swinging pendulum: The movement towards, then away from, and back to mandatory compliance, with little effect on water utilities
3. Factors Contributing to the Province’s Refusal to Strictly Enforce Laws Protecting Public Health and the Environment.
   • The province’s close relationship with municipalities
   • Conflicts of interest: Operational
   • Conflict of interest: Financial
   • The Investigation and Enforcement Branch’s lack of independence
4. The Privatization of Municipal Water Utilities
   • Privatization would have brought expertise, innovation, and capital investment to the municipal water sector
   • Privatization would have made possible better regulation
   • The privatization of testing labs did not cause the Walkerton tragedy
5. The Financing of Municipal Water Utilities
   • The perverse effects of grants and subsidies
   • The province’s unimplemented policy to replace grants and subsidies with full cost pricing and private sector financing
6. Notes

Introduction

The following arguments focus on the effects of government policies and practices on the events that occurred in Walkerton in the spring of 2000. They do not generally address Walkerton-specific issues that arose outside of the context of government policies and practices. This is in no way intended to diminish the role that these issues played in the tragedy. Indeed, the contamination of the water source by Dr. Biesenthal’s cattle, the failure of the municipality and its Public Utilities Commission to build, maintain, operate, and finance a system that could detect and deal with such contamination, and the unforgivable behaviour of the Koebel brothers are key elements of the tragedy. An understanding of these issues, which were canvassed in detail in Part 1A of the Inquiry, is central to assigning responsibility for the tragedy and ensuring that a similar tragedy does not occur in the future. However, Energy Probe Research Foundation was not granted standing in Part 1A of the Inquiry. We will not, therefore, focus our attention on the issues that arose there, except as they relate to policy issues that arose in Part 1B.

A critical examination of government policies and practices indicates that the Walkerton tragedy can in large part be explained by the provincial government’s failure to put into practice three clearly articulated policies. Although the province identified regulation and enforcement as its core responsibility, its regulation of provincial water systems – including that in Walkerton – was grossly inadequate. Although the province identified greater private sector involvement as a way to solve many of the problems plaguing provincial water systems – such as the lack of expertise and efficiency at the Walkerton PUC – it failed to implement its pro-privatization policy. And although the province identified the perverse effects of grant and subsidy programs – including the lack of accountability and sustainability characteristic of the Walkerton PUC’s finances – it failed to implement more sustainable alternatives, such as full cost pricing.

A Failure of Regulation and Enforcement

Walkerton was a victim of an unworkable approach to regulation – one based on cooperation rather than coercion, and trust rather than verification.

The province consistently failed to monitor the performance of the Walkerton PUC and to force it to comply with laws governing the health and safety of drinking water. The province did not bother inspecting the Walkerton system throughout much of the 1980s. Paul Cavalluzzo, referring to Willard Page’s book of documents, noted that “as far as Walkerton is concerned, there were frequent inspections in the late 1970s and early 1980s, maybe up ’til about 1982 … And then we had no inspections between 1981 or ’82 until 1991 or ’92. We have no reports of any inspections.” Jim Mahoney explained that “during that period of time, there was no regimen in terms of how frequent[ly] inspections had to be performed, or to what level inspections had to be formed, or what documentation was associated with inspections.”⁽¹⁾

Even when the Walkerton system was inspected, and problems were discovered, the province failed to follow up in a meaningful way. In 1995, when E. coli was discovered in Walkerton’s water, when the chlorination system was found to have problems, and when it was determined that insufficient samples were being collected, no orders were issued. The province preferred to rely on voluntary compliance.⁽²⁾

In 1997, the province did not even retain the non-compliant system on its non-compliance list. When asked how the Walkerton PUC fell off the list, Tim Little replied, “there was some correspondence or consultation with Walkerton that indicated to the local district office that they were going to conform with the minimum sampling reporting requirements and, therefore, they were not to be on the list. And, therefore, because it was … a document that provided our Assistant Deputy Minister with accurate information of the number and of the systems that would be requiring orders or receiving orders, down the road, Walkerton was removed because of the advice that they had been given, that they would conform.”⁽³⁾ When asked whether a red flag should have been waved when, withing six months, the PUC was not doing what it said it would do, Mr. Little admitted, “Some action should have been taken.”⁽⁴⁾

Michelle Zillinger’s May 1998 report on the Walkerton PUC, written after a routine SWIP inspection, indicated that the PUC was collecting an insufficient number of bacteriological samples, was not monitoring chlorine residuals, and was not maintaining operator training records. And yet, the IEB was not expected to follow up: “No further action [was] required.” Indeed, Julian Wieder explained that, since the PUC had not violated legal requirements regarding sampling and monitoring, he would not have done an investigation.⁽⁵⁾ However, as discussed below, the unenforceability of guidelines is no excuse. Mr. Wieder acknowledged that the province could have imposed enforceable rules: It could have issued a new Certificate of Approval or it could have issued a directive or order requiring the Walkerton PUC to act.⁽⁶⁾

The province’s long-standing authority to regulate water systems

The problem was not that provincial regulators could not regulate; it was that they would not regulate. The province has had the authority to regulate water systems for more than a century. Jim Jackson traced the province’s regulatory authority back to 1884. He explained that the Public Health Act of that year required cities, towns, and villages to submit their plans for public water supplies to the Provincial Board of Health for its review and comments. After 1884, public health legislation consistently called for provincial approval of waterworks.⁽⁷⁾

Laws governing water quality have always been enforceable. Erv McIntyre stressed that the province had the authority to prosecute long before the Ministry of Environment’s Investigations and Enforcement Branch (IEB) was established: “the powers have always existed for the Regions to do it, and to write it up, to give it to Legal Services Branch to lay the charges and carry out a prosecution, absolutely, it’s always existed.” He disagreed with the suggestion that, prior to 1985, the Ministry lacked the institutional capacity to engage in enforcement, saying that they “prosecuted many things” before the IEB was set up.⁽⁸⁾

Although guidelines have not been legally enforceable, there have been many ways to give the provisions in them the force of law. According to Jim Jackson, the Ministry could issue an enforceable order requiring that a particular thing be done. Alternatively, it could amend a facility’s Certificate of Approval to impose a specific enforceable condition.⁽⁹⁾ Certificates of Approval may include conditions regarding source protection, operations and maintenance, performance, funding, staffing, training, monitoring, and reporting. As William Gregson explained, such conditions elevate the requirements to the realm of standards. Prosecutions may occur as a result of noncompliance with such standards.⁽¹⁰⁾

The province’s adoption of a cooperative approach to municipal water providers

Despite its authority to enforce laws and regulations governing water quality, the province has rarely chosen to do so. It has adopted a cooperative approach to municipal water providers. This cooperative approach has been unique to municipalities; non-municipal offenders have not generally been given the same special treatment.

Erv McIntyre, who, as a Regional Director for the Ministry of Environment, was responsible for ensuring compliance with provincial statutes, stressed the Ministry’s cooperative relationship with municipalities: “Water was always viewed as being a very cooperative thing.”⁽¹¹⁾

According to Jim Jackson, this attitude dates back to the 19^th century. He noted that under the Public Health Act of 1884, municipal waterworks were treated differently than “pollution emitting things.” He continued, “The legislature apparently expected people to do the right thing with respect to waterworks … I think that the legislature thought that if there were suggestions or principles laid down with respect to water, it would be rather difficult for a municipal council or a local commission to ignore them and distribute dangerous drinking water.”⁽¹²⁾ (Difficult or not, the historical record indicates that many municipalities did indeed distribute dangerous water.)

The cooperative nature of the province’s relationship with the municipalities remained strong in the 20^th century. James Merritt explained that in 1957, when the Ontario Water Resources Commission was created, there was a “sense of support [for] and help to municipalities.” The Commission was given tools to help municipalities technically and financially.⁽¹³⁾ According to William Gregson, the Commission, and later the Ministry of Environment, maintained the unique culture of cooperation between the province and municipalities: “in the era of the 1960s through to [the] mid-1980s, when we were dealing with municipalities in … matters relating to drinking water, there were high levels of cooperation, mutual agreement, unlike your other areas where we issued approvals which might relate to industrial or contaminant discharges. There was not that same adversarial relationship, if you will, that existed at the time, and the spirit was one more of … there being a common goal, that we each had an interest in.”⁽¹⁴⁾ Mr. Gregson explained, “there was no reason to believe that there would be resistance” from an owner to constructing works as approved.⁽¹⁵⁾ Apparently, despite numerous indications to the contrary, the province still expected municipalities “to do the right thing.”

Mr. McIntyre confirmed that the high level of cooperation with municipalities existed at the time of his retirement in 1993.⁽¹⁶⁾ He also suggested that this differed from the Ministry’s approach to other classes of offenders, explaining that the culture that now exists at the Approvals Branch is to work cooperatively with applicants for Certificates of Approval, “especially in the water side.”⁽¹⁷⁾ Mr. Gregson maintained that the cooperative approach continues, to a large extent, today.⁽¹⁸⁾

The province’s reluctance to enforce the law against municipal water providers

The clearest expression of the cooperative relationship has been in the province’s reluctance to enforce the law against municipal water providers. The MOE’s tools range from cooperation to dialogue, encouragement, instructions, and, if needed, orders.⁽¹⁹⁾ The Ministry has clearly preferred to use any of the former tools rather than the last one.

When asked about the number of field orders issued to municipal water treatment plants between 1995 and 2000, Mr. Shaw replied, “we do not have that number available…. I do know it is not zero, I simply know it is a very low number.” When asked about the number of Director’s orders issued to municipal waterworks under the SWIP program between 1990 and 2000, he replied, “I expect that it was either a very low number as in one or two or none…. It’s possibly zero.”⁽²⁰⁾ Tim Little knew of no orders issued by 1997.⁽²¹⁾

Investigations have been few and far between. Indeed, drinking water plant violations have hardly appeared on the IEB’s radar. Julian Wieder, Acting Program Manager of the EIB, noted in his statement of anticipated evidence, “Historically, IEB did not receive many occurrence reports in relation to communal drinking water” and that it “spent very little time” on the issue.⁽²²⁾ He later said that IEB received “very few” occurrence reports related to water treatment plants⁽²³⁾ and described communal drinking water issues as “one of the minor programs that the Branch would have spent time on.”⁽²⁴⁾

Prosecutions have, accordingly, been rare. Since 1989, the Legal Services Branch has recorded only 13 prosecutions of 22 parties with a total of 12 convictions.⁽²⁵⁾ The Legal Services Branch’s numbers do not include prosecutions that were undertaken by the IEB and initiated by Certificates of Offence or Offence Notices.⁽²⁶⁾ Because the Ministry does not track enforcement statistics by source or sector, it is impossible to determine how many enforcement actions of any kind the IEB has taken against municipal water plants.⁽²⁷⁾ It is clear, however, that the number is very low.

Before becoming involved in the Walkerton investigation, Gordon Robertson had been involved in only two other investigations concerning communal drinking water – one before 1995 and one after 1995.⁽²⁸⁾ Julian Wieder was certain that there had been other prosecutions as well as these two, but he did not know the precise number. “There were very few,” he admitted. He thought that the number of charges laid between 1990 and 2000 may have been in the range of 20 – certainly more than two and less than 100. When pressed, he admitted that the number could have been less than ten, although he suspected it was probably more.⁽²⁹⁾ Former IEB investigator Nancy Johnson could think of only one water treatment plant prosecution to add to Mr. Robertson’s two examples; and it was not a municipal plant but a small communal plant.⁽³⁰⁾

The province’s preference for voluntary compliance

This dearth of prosecutions has not been an accident. It reflects a conscious attitude long and pervasively held throughout the Ministry of Environment: a preference for abatement over enforcement, or for voluntary over mandatory compliance.

James Merritt (who believes that more rigorous enforcement is useful⁽³¹⁾) agreed that “historically, the MOE Abatement staff had been adverse to a regulatory or enforcement approach.” He explained that “there was a sense of reluctance to use things like orders” and that although the introduction of field orders was designed to make enforcement easier, “there was still a sense of reluctance to … issue field orders.”⁽³²⁾ Mr. Merritt refused to ascribe this attitude to changes in the political wind or the direction of the government: “I think there’s a long history in the Ministry of being reluctant to … move to the mandatory instruments…. I don’t think there’s … sudden changes of pattern in that.”⁽³³⁾

Robert Shaw confirmed that the Ministry had historically emphasized voluntary compliance. He agreed that “the Ministry of Environment solely saw its role initially as sort of an educational role.”⁽³⁴⁾ Between 1957 and 1974, inspections were conducted to educate operators rather than to force them to comply with laws and regulations: “An important aspect of the inspection was to transfer knowledge to the operators…. Voluntary compliance action [was] sought with the report recommendations.” The province continued to seek voluntary compliance between 1974 and 1989. Between 1990 and 1994, “There was still an educational component to the inspections” and “voluntary compliance was initially sought,” as it was during the period from 1994 to 2000.⁽³⁵⁾

Erv McIntyre exemplified this preference for voluntary compliance. He maintained that prosecuting a water provider for not having a Certificate of Approval would not serve a useful function. “What [was] a prosecution going to prove,” he wondered.⁽³⁶⁾ He added, “I don’t view that taking anything to court makes water any safer….You tried to help people, rather than take them to court.”⁽³⁷⁾ Willard Page was another self-proclaimed “proponent of abatement, and not legal action.” That philosophy, he explained, “guided me through my career.”⁽³⁸⁾

A number of reasons were offered in defence of abatement. Abatement was perceived as being easier and faster than enforcement. William Gregson noted that it involved fewer logistics.⁽³⁹⁾

Mr. McIntyre expressed concerns about the time required for enforcement. While he agreed that laying charges would be a way of informing the public of offences, he protested, “but that doesn’t proceed very quickly.” He only reluctantly acknowledged that “it might get things done.”⁽⁴⁰⁾ Also on the question of speed, Mr. Robertson noted that an investigator could spend considerable time putting together a warrant. He admitted, however, that the investigator’s colleagues in abatement could go in in the meantime.⁽⁴¹⁾

James Merritt countered claims that issuing orders could invite appeals and delay compliance: “in many cases there weren’t appeals and … simply going through the process of issuing a notice of intent to issue an order often brought significant attention and resolution.”⁽⁴²⁾ In fact, speed was one of the reasons he favoured mandatory compliance.⁽⁴³⁾

The deterrent value of mandatory compliance

Others favoured mandatory compliance for its deterrent value. When cross examining Erv McIntyre, the Environmental Coalition’s Douglas Chapman suggested that the reason for prosecuting offenders is two-fold: “to set an example to act as a deterrent to that same municipality, for instance, so it wouldn’t commit another offence. And equally important to all of the municipalities in the rest of the country, so they’d be more careful.” Mr. McIntyre agreed that deterrence is a valid reason to conduct prosecutions.⁽⁴⁴⁾

James Merritt confirmed that mandatory compliance is a deterrent. He agreed with Ian Roland’s suggestion that “you see compliance more quickly as you move more quickly through … the continuum from voluntary to mandatory compliance [both] from the particular operator that you’re concerned with and from other operators who may also not be in compliance, but are alert to and aware of the mandatory compliance steps being taken.” He added, “if one sector is prosecuted, then the presumption is that other sectors doing that same type of business will decide to move more quickly.” He offered the Ministry’s experience in prosecuting foundries as an example: “when we’d started prosecuting some of the foundries, we saw some very quick changes to other foundries.”⁽⁴⁵⁾

To the extent that this theory of deterrence is accurate, stronger enforcement of the laws against any non-complying facility – and not just Walkerton itself – would have sent a message to the Walkerton PUC and would have prompted it to take greater care.

Red flags: Expressions of concern regarding the lack of monitoring and enforcement and warnings of poor municipal performance

Although the Ministry of Environment may have preferred voluntary compliance, other parties, most notably the Provincial Auditor, frequently pressed it to enhance its monitoring and enforcement programs. The Ministry had a great deal of evidence that its preferred approach was not working and that municipal plants were performing poorly. Regardless, it was extremely slow to respond to increasingly insistent recommendations for change.

The Provincial Auditor’s 1987 report pointed to self-initiated inspections as an important means of monitoring.⁽⁴⁶⁾ The following year, the Auditor’s report expressed concerns about the lack of inspections for municipal water plants and the lack of reporting on whether treatment plants were meeting health and aesthetic standards.⁽⁴⁷⁾ It concluded that “the Ministry’s monitoring and control procedures to ensure water and sewage were treated in accordance with the Ministry requirements were weak.” It warned, “it is imprudent to restrict inspections to situations where problems have already been identified since the purpose of regular inspections is primarily preventative and protective” and advised, “Regular inspections are essential for the Ministry to ensure that plants are properly maintained to enable them to continue to meet treated sewage and water quality standards.”⁽⁴⁸⁾

It took the province two years to address the deficiencies noted in this report. Finally, in 1990, “as a result of the … concerns identified by the Provincial Auditor,” it created the Sewage and Water Inspection Program (SWIP).⁽⁴⁹⁾ According to Jim Mahoney, in the first cycle of SWIP inspections, the Ministry discovered that “most facilities didn’t know whether they had Certificates of Approval. Most facilities didn’t know what the policies and guidelines of the day were.”⁽⁵⁰⁾ Between 1990 and 1992, SWIP identified 151 water treatment plants as being out of compliance.⁽⁵¹⁾ The next cycle of inspections revealed more problems. Mr. Shaw agreed that, by the end of the 1992-94 cycle of inspections, “the failure of municipal water works to comply with the sampling program requirements is a serious problem that warrants MOE efforts to ensure compliance at this point” … but that “the Ministry was still proceeding with voluntary abatement.”⁽⁵²⁾

The Auditor’s 1994 report again raised concerns about inadequate monitoring, poor performance, and the lack of timely follow-up action on problems. It recommended that MOE enforcement actions be strengthened. Enforcement, it advised, should include the issuance of director’s orders.⁽⁵³⁾ In response to the report, the Ministry promised improved reporting and abatement follow-up. Regardless, the Operations Division Work Plan Manual only required inspections every four years for some plants. And in 1998, water treatment plants were deemed optional.⁽⁵⁴⁾

Concerns about inspections re-surfaced yet again in the Auditor’s report for 2000. The report charged that “the Ministry did not have an adequate system in place to review the terms and conditions of existing Certificates of Approval to ensure that they met current environmental standards.”⁽⁵⁵⁾ It noted a significant reduction in inspections since 1996, recommended increased inspections to enforce environmental legislation, and encouraged the use of more stringent compliance measures where appropriate.⁽⁵⁶⁾

Warnings about lax monitoring and enforcement came from other sources as well. A March 1996 report prepared by the Management Audit Branch identified staff’s inability to effectively monitor reporting requirements. Mr. Gregson was unaware of any follow up or specific response to deal with this failure to monitor conditions of Certificates of Approval.⁽⁵⁷⁾

In a letter dated July 31, 1997, Phil Bye wrote to Tim Little to express his concerns about the consequences of not proceeding with mandatory abatement: “In some cases I feel, because of our indecision to proceed with mandatory abatement action, we have lost ground with certain municipalities who are further out of compliance than a year ago.”⁽⁵⁸⁾

In July 1999, an internal evaluation of the district inspection function identified shortcomings in tracking and follow up of deficiencies.⁽⁵⁹⁾ The internal report provided plenty of ammunition for those arguing for better monitoring and enforcement: “A study by Environment Canada provided convincing evidence of the need for a consistent inspection program…. [A] KMPG study found support for the proposition that enforcement action provides better assurance of compliance than voluntary approaches…. The SWIP reports along with subsequent database updates indicates a definite linkage between [the] inspection program and the communal water compliance rates…. The Florida Department of Environmental Protection and the New York Department of Environmental Conservation confirm … that frequency of inspections is directly related to the compliance rate of a facility…. They have concluded that a regulatory presence is important for sustaining higher compliance rates.”⁽⁶⁰⁾

Despite a decade of reports and recommendations, and a decade of assurances that something would be done, the province remained unable to bring large numbers of municipalities into compliance. Robert Shaw presented an historical overview of the inspections of municipal water treatment plants. He noted that an internal report summarizing the inspections of 1992-94 identified inadequate sampling at 51 percent of the 532 plants inspected. In other words, at least 271 plants were not sampling adequately. (The problem likely also existed at some of the 75 plants that were not inspected.) After May 2000, the Ministry inspected 659 municipal water treatment plants and identified 367 plants with significant deficiencies. Inspectors found inadequate sampling programs at 267 plants – over 40 percent of the plants. Shockingly little progress had been made over the previous decade.⁽⁶¹⁾

Living a lie: Stubborn oblivion to the failures of municipalities and regulators

Despite the plethora of evidence suggesting that concern was warranted, many parties seemed to be in denial about the lack of enforcement, the state of the province’s water systems, and the municipalities’ ability or willingness to fix the problems. In many cases, the denial persists.

When asked why it took the Ministry from 1986-87 to 1993 to bring model conditions into play, Mr. McIntyre replied, “with the atmosphere of co-operation that we always had with the municipalities, and with water supplies especially, … the conditions weren’t viewed as being particularly necessary because we really didn’t encounter much difficulties in getting the things done.”⁽⁶²⁾ It is difficult to fathom how anyone who had seen the results of the first SWIP inspections could deny MOE’s difficulties in getting things done.

Even with the benefit of hindsight, few are willing to admit just how badly they failed. For example, Jim Mahoney insisted, “I think that SWIP was quite successful, actually, in getting municipalities on the bandwagon of what is adequate in terms of monitoring for their works.” When Mark Mattson protested, “but Mr. Mahoney, it wasn’t really just to get them on the bandwagon. I think it was pretty clear that it was to bring about conformance. And certainly the May 2000 inspections belie any suggestion that SWIP brought about conformance in water treatment plants in Ontario; wouldn’t you agree?” Mr. Mahoney replied, “No, … I wouldn’t.”⁽⁶³⁾ Mr. Mattson was correct: Inspections were intended as “a mechanism by which all facilities can be brought to a minimum acceptable level of operation and service delivery.”⁽⁶⁴⁾ SWIP’s ultimate goal was performance. There can be no doubt that the program failed to achieve that goal.

Julian Wieder also tried to defend an indefensible program. He refused to agree that enforcement of regulations with respect to water treatment plants was a low priority within the Ministry of Environment. He maintained that if IEB didn’t receive occurrence reports, “that either means that they didn’t come across any violations that they wanted the Investigation and Enforcement Branch to prosecute or they weren’t looking.”⁽⁶⁵⁾ The inspection reports indicate that the Ministry found many problems. It is hard to believe that correcting them was a high priority.

Nancy Johnson likewise refused to condemn enforcement as inadequate. Mark Mattson pressed, “it seems to me that there really wasn’t an enforcement culture prior to ’95 with respect to water treatment plants and there didn’t seem to be one post-’95 either, is that fair?” Ms. Johnson replied, “Well, where it was warranted, I think enforcement was taking place.”⁽⁶⁶⁾ Why the ongoing violations didn’t warrant enforcement she did not say.

Several of the parties examined seemed, like their 19^th century predecessors, to hold an unshakable belief that municipalities would do the right thing. According to Julian Wieder, “Most people, if you approach them and you say, hey, you’ve got a problem here, you need to solve it. They say, oh, what do I do? And they go ahead and solve it.”⁽⁶⁷⁾ Of course, if that were the case, non-compliance rates wouldn’t have remained so consistently high over the years, with so many plants re-offending year after year.

Bern Schnyder, the Director of MOE’s Laboratory Service Branch, explained that he was not concerned by the warning that municipalities might cut sampling if costs rose. Referring to the Ontario Drinking Water Objectives, Dr. Schnyder said, “I felt that this was what would be followed by any responsible municipality.”⁽⁶⁸⁾ He later added, “I assume they are professional and have a concern for their constituents like everybody else does.”⁽⁶⁹⁾ Helen Demshar echoed this assumption that municipalities would do the right thing: “I would emphasize that municipalities are a responsible level of government, and I would expect them to be acting accordingly.”⁽⁷⁰⁾ Such faith appears to have been misplaced.

The first step in solving a problem is acknowledging that it exists. It is time to stop living the lie that municipalities have done and will do the right thing and that regulation has been and will be a success. It is time to admit that water providers have not been managing their systems safely and that regulators have utterly failed to force them to do so.

The swinging pendulum: The movement towards, then away from, and back to mandatory compliance, with little effect on water utilities

A number of witnesses maintained that in the mid-1980s, attitudes about compliance gradually evolved and that the Ministry moved away from voluntary compliance. According to Erv McIntyre, in 1985 “the attitude changed with the change in government and we became more enforcement oriented.”⁽⁷¹⁾ The government established the IEB that year. The following year, the Ontario Water Resources Act and the Environmental Protection Act were amended, placing more emphasis on prosecutions.⁽⁷²⁾ And indeed, the number of prosecutions undertaken by MOE did increase.⁽⁷³⁾

However, there is no evidence that the number of prosecutions of municipal water providers increased. They remained rare exceptions to the rule. In fact, the government actually weakened its compliance policy for water utilities in 1991. Before then, the policy required that compliance be completed within 180 days. In 1991, that requirement was changed to forbid unsatisfactory progress towards compliance for more than 180 days.⁽⁷⁴⁾

After its supposed change in attitude, it took the Ministry almost a decade to threaten non-compliant municipalities with legal action. Jim Mahoney explained that “1995 was a watershed for the program in that we had sent out to all municipalities a minimum expectation for sampling and indicated in that correspondence that we would be following-up with … Director’s Orders where conformance wasn’t attained voluntarily.”⁽⁷⁵⁾ However, orders in any significant volume were slow to materialize. Indeed, it took the Walkerton tragedy to shake up the Ministry and, at long last, prompt the issuance of hundreds of orders.

Just as witnesses pointed to a move towards enforcement in the mid-1980s, several also pointed to a move away from enforcement in the mid-1990s. But here again, there is no evidence to suggest that the change applied to water utilities.

The annual enforcement summaries for 1991 to 1998 and 1992 to 2000 indicate that enforcement activities decreased in 1995, ’96, and ’97 from levels achieved in 1991, ’92, ’93 and ’94 and then increased again after 1998.⁽⁷⁶⁾ Julian Wieder attributed the decrease to a backlog at the Legal Services Branch, some voluntary abatement initiatives, staff layoffs, and the 1996 OPSEU strike.⁽⁷⁷⁾ He called into question, however, the relevance of any decrease to the actual numbers of investigations and prosecutions. He noted that, although the number of occurrence reports referred by Abatement to IEB in 2000 were just 50 percent of what they had been a decade earlier, the number of investigations and prosecutions remained comparable to the earlier time period.⁽⁷⁸⁾

Nancy Johnson also failed to link the change in attitudes towards enforcement to a change in attitudes towards water treatment plants. Ms. Johnson maintained that there was a “paradigm shift” from 1995 to 1996 and that she had the impression that “enforcement was no longer favoured in the Ministry of Environment.”⁽⁷⁹⁾ However, she later admitted that the shift in the enforcement culture did not relate specifically to water treatment plants.⁽⁸⁰⁾

(For a different interpretation of enforcement figures, see Thomas Adams’s submission, on behalf of Energy Probe Research Foundation, to Part II of the Inquiry. Mr. Adams demonstrates that enforcement peaked in 1991 or ’92, began to decline in 1992 or ’93, and then began to increase in 1997. Mr. Adams’s figures call into question the relevance of any of the purported causes of the decline in enforcement. Regardless of when or why the decline occurred, the fact remains that it had no impact on water utility prosecutions: The province did not prosecute non-compliant municipalities either before or after the mid-1990s.)

The pendulum now appears to have swung back to mandatory compliance. In March 2000, the Ministry responded to the above-mentioned July 1999 internal report (and anticipated the Provincial Auditor’s report) by issuing “a clear direction to field staff to pursue more aggressive use of mandatory abatement actions against violators.”⁽⁸¹⁾ This “direction” came in a letter from Cal Hannah, the director of the west central region, and was distributed on behalf of all of the divisional directors. He wrote: “As you know the Government, the Minister and the Deputy Minister have given us a strong clear message that the Ministry of the Environment needs a stronger, tougher enforcement program to achieve a higher level of compliance. It is clear to us, in order to implement this direction a pendulum must move more towards mandatory abatement and further away from voluntary abatement. It’s also clear that … we must have strict adherence to the compliance guideline.”⁽⁸²⁾

The frequency and role of inspections has also improved, at least for the time being. In 2000, for the first time in a decade, the province inspected all of the municipal water plants. Commencing the 2001-02 fiscal year, “all municipal water treatment plants will be inspected on an annual basis…. [T]hese [inspections] are now totally compliant-oriented.”⁽⁸³⁾

Factors Contributing to the Province’s Refusal to Strictly Enforce Laws Protecting Public Health and the Environment.

The province’s close relationship with municipalities

One of the factors explaining the province’s preference for cooperation over coercion was the close relationship between the regulator and the regulated. In a discussion of the infrequency with which the province had prosecuted municipalities before 1985, Erv McIntyre noted that municipalities “were considered children of the Province.”⁽⁸⁴⁾ He later agreed that “this relationship among the regulated entity of the municipality and the Ministry was very close” and that the Ministry commonly refers to municipalities as its clients.⁽⁸⁵⁾ James Merritt confirmed that “the people we were … bringing forward through the enforcement process in some respects were our client.”⁽⁸⁶⁾ He was more adamant later: “clearly one of them [our clients] would be the regulated community.”⁽⁸⁷⁾

This close relationship with municipal water providers influenced the province’s attitudes towards enforcement. Julian Wieder recalled that in the 1970s, senior Ministry managers believed laying charges against municipalities would be counterproductive: “it was very much a hand in glove type operation.”⁽⁸⁸⁾ Gordon Robertson acknowledged that “there’d be some concern with some officers” about laying charges against municipalities or PUCs.⁽⁸⁹⁾ Nancy Johnson also recalled a municipal sewage investigation in which “there was reluctance [on the part of Abatement] initially to pass it over.”⁽⁹⁰⁾

Conflicts of interest: Operational

In some cases, the relationship between the regulator and the regulated has been even closer than that between parent and child or service-provider and client. When the Ministry of Environment regulated the plants that it operated, one branch of the Ministry would face the prospect of prosecuting another branch of the same Ministry: The director that oversaw both branches and approved a prosecution would in effect be approving the prosecution of himself. Such conflicts of interest inevitably discouraged prosecutions of government-operated plants. They may well have also deterred the government from prosecuting municipally-operated plants, since doing so would have set a precedent that might then have applied to the government plants.

James Merritt agreed that “conflicts arose because in addition to the Ministry of Environment operating, owning and providing funding for water and sewage facilities, the Ministry of Environment was also responsible for setting and enforcing standards for Ontario water and sewage facilities.”⁽⁹¹⁾ Mr. Merritt recalled his personal experience of the conflict. When he was the director of the Central Region, he had approximately 500 staff reporting to him, half of whom were plant operations people and half of whom were regulators. He explained, “So I would in fact have reporting to me the inspector of the same branch – or same group that I was responsible for the operation [of]. So there was a clear conflict in that.”⁽⁹²⁾

When asked if there was “ever any tension within the Ministry, where IEB was asked to investigate and prosecute its own employees,” Julian Wieder answered, “Definitely.”⁽⁹³⁾

In the rare event that the Ministry did prosecute one of its own plants, the operating authority enjoyed special treatment. In 1993-94, when Gordon Robertson laid charges against the Lambton area water treatment plant, which was owned and operated by the Ministry of Environment, and a guilty plea was entered on behalf of the Ministry, there was no fine set. Mr. Robertson explained the thinking behind that decision: “there wasn’t much use in … having the money come out of the budget for the Ministry of Environment and be sent forth to the consolidated revenue fund.” The operator was charged and did receive a fine.⁽⁹⁴⁾

That the government had long been intent on protecting itself from the hand of the law was suggested by Jim Jackson. He described a government measure to immunize from legal challenges the sewage treatment plants it operated. The 1957 Ontario Water Resources Act deemed approved sewage works to be operated by statutory authority, making it “very difficult to undertake a successful action.” He explained, “At the time that was passed, the Province was embarking on a program of constructing sewage works pursuant to contracts with municipalities throughout the Province, so that had the effect of protecting the Province, the Ontario Water Resources Commission, from lawsuits with respect to sewage works that were being operated with their approvals and the orders.”⁽⁹⁵⁾ Although the measure pertained to sewage treatment, it was illustrative of the conflict of interest that arose when government both provided a services and set the rules governing it.

The Ontario Clean Water Agency (OCWA) was created, in part, in an attempt to address such conflicts. James Merritt explained that clearing up conflicts of interest was an important concern and one of the drivers behind the creation of the agency.⁽⁹⁶⁾ Unfortunately, OCWA’s creation did not resolve the conflicts. The agency remains, in Mr. Merritt’s words, “an agent of the province.”⁽⁹⁷⁾ Mr. Merritt agreed that OCWA is still government owned and that it is still government backed in terms of its risks and liabilities. He also said that all of OCWA employees were Ministry staff. He himself had gone from the Ministry to OCWA and back to the Ministry, and the person he replaced at the Ministry went on to OCWA.⁽⁹⁸⁾ One would expect employees moving through this revolving door to retain a good deal of sympathy for their former – and perhaps future – colleagues.

Conflict of interest: Financial

In addition to being in a conflict created by government agencies – OWRC, MOE, or OCWA – operating water plants, the government was in a conflict created by its agencies financing those plants.

The Ministry was always concerned about the financial implications of enforcement. Mr. McIntyre agreed that one factor that had to be taken into consideration in all situations was “the cost and the ability of the municipality to pay for the costs.”⁽⁹⁹⁾ More often than not, the province itself ended up bearing many of the costs. According to Brian Nixon, under the Provincial Water Protection Fund, municipalities with fewer than 1,000 residents were eligible for 90 percent funding.⁽¹⁰⁰⁾ Government officials would certainly have understood that if they required expensive capital improvements to small municipal systems, they would likely have to foot the bill.

These operational and financial conflicts may shed some light on the apparent contradiction of the province’s willingness to prosecute municipalities in areas other than water treatment. Julian Wieder noted that a number of municipalities were charged in regards to their solid waste handling.⁽¹⁰¹⁾ Because the province does not operate municipal landfills, and because it does not provide significant subsidies to finance improvements to such facilities, it may well be restrained by fewer conflicts in these areas.

The Investigation and Enforcement Branch’s lack of independence

The Investigations and Enforcement Branch (IEB) of the Ministry of Environment lacks the independence essential for effective policing.

IEB’s enforcement officials are not independent of the Ministry. They are not seconded from the Solicitor General’s office. This is in contrast to the lawyers in the Legal Services Branch, who are seconded from the Attorney General’s office. When asked if IEB investigators are “second tier policemen, in that they’re not independent of the Ministry,” James Merritt agreed, “you’re right, they work through a chain of command of the Ministry, through to the minister.”⁽¹⁰²⁾ According to Mr. Merritt, the Ministry has not considered seconding its IEB people from another ministry to give them more independence.⁽¹⁰³⁾

Nor, within the Ministry, is IEB independent of the Abatement division. There is broad recognition that abatement and enforcement activities should be separated from one another. James Merritt explained that the Special Investigations Unit was set up in part to distinguish enforcement from abatement and to reduce the conflicts that occur when the same party is conducting both functions: “there was a sense that general environmental officers could potentially be conflicted in terms of their work with … an industry or a discharger through the regular abatement program and at some point in that process would have to decide to prosecute a case … and that was a difficult decision to make and to establish what that point was…. I think the primary purpose was to start to make a specific difference between those two activities.” Mr. Merritt agreed that “the abatement officer has an ongoing relationship with the client, … as a result of that there may be a conflict of interest if, at the same time, he or she was to prosecute … that client.”⁽¹⁰⁴⁾

Jim Mahoney likewise explained that “at the Ministry of Environment, we want to as much as possible separate the inspections component of the district office from the prosecution component under IEB. If you mix the two together, there’s a danger of looking upon environmental officers doing the inspections as going out, gathering information for prosecution and that is something that we’re not supposed to do…. It’s important that we keep those two functions separate.”⁽¹⁰⁵⁾

However, the two functions are not separate: They work hand in glove. Abatement staff filter all of the information that reaches IEB. Julian Wieder, Acting Program Manager of the EIB, noted in his statement of anticipated evidence that “The IEB is not a frontline response branch. It is largely reliant on occurrence reports completed by Abatement staff and forwarded to IEB management…. It is up to Abatement staff, guided by the Compliance Guideline, to decide whether to involve the IEB.” Mr. Wieder noted that while the IEB may conduct special projects on a proactive basis, it has never initiated a special project in relation to communal drinking water.⁽¹⁰⁶⁾

Gordon Robertson noted that IEB cannot really know if abatement is referring an appropriate number of municipal cases: “as investigators, we don’t know what the findings of every single inspection [are], we have no idea…. The only time we would really know is when a violation – potential violation was referred by way of occurrence to EIB or if the inspector came and spoke personally with … one of us.”⁽¹⁰⁷⁾

Although abatement and enforcement staff work closely with one another, there has often been tension between them. The two different cultures have not always coexisted peacefully within the same ministry. Nancy Johnson recalled that in 1985, “we [the IEB] were an enforcement culture that was superimposed on a voluntary compliance situation and weren’t that welcome in all corners … of the Ministry of the Environment, particularly Abatement.” Such friction is difficult to maintain. Sooner or later, the distinct cultures begin to meld. Ms. Johnson “saw some coming together of those cultures” in the early 1990s, as “a more integrated approach” developed and the divide between the two was bridged.⁽¹⁰⁸⁾

Mr. Wieder’s statement points to some remaining tensions between Abatement and the IEB. The former may be slow in forwarding occurrence reports, may refuse to take samples that will be used by the IEB, and may be reluctant to involve the EIB early on in the process. Mr. Wieder’s comments suggested one reason for this tension: Too much enforcement activity would make the Abatement staff look bad. When MOE was formed, he said, “Laying charges was viewed as a negotiation failure. This culture was particularly prevalent in relation to the Ministry’s role in water and wastewater projects, many of which were run and/or funded by the MOE’s Utility Operations Section.”⁽¹⁰⁹⁾

The laying of charges, by its very nature, indicates a failure of the voluntary approach. Every charge laid by an enforcement officer is a testimony to the failure of his colleagues elsewhere in the Ministry. If the charge is laid against a plant operated by OCWA, it is also evidence of a failure of former Ministry colleagues to perform adequately and of Ministry officials to exercise responsible oversight of the agency. As long as IEB remains within the Ministry, conflicting loyalties are likely to restrain enforcement.

Other factors also interfere with IEB’s independence. After IEB officers are alerted by Abatement staff to problems, they cannot initiate investigations on their own. Before 1996, investigations needed to be approved by a regional manager. Now, investigations require authorization from a manager in Toronto.⁽¹¹⁰⁾

Once the decision has been made to enforce a law protecting public health or the environment, it remains subject to a number of political approvals. Erv McIntyre agreed that it was probably true that in the early 1980s, “at least five or six levels of officials, all the way up to the Minister had a veto over an abatement officer’s recommendation to prosecute.”⁽¹¹¹⁾ The issue of whether or not to prosecute was thus quite discretionary.⁽¹¹²⁾ Prosecutions remain discretionary. In the words of

Mr. McIntyre, “the boss always has the power to veto.”⁽¹¹³⁾ He agreed, “not the policemen in the field that decided there were reasonable and probable grounds that an offence had been committed, but rather the Minister of the Environment.”⁽¹¹⁴⁾ According to Julian Wieder, after 1991 the minister was not involved in discussions relating to the laying of charges. Senior management, however, continued to be briefed.⁽¹¹⁵⁾ He mentioned another layer of potential political interference as well: “if the Crown wished to withdraw the charge[s], even though they had been laid by the police officer, they have the authority to do that, as the representative of the Attorney General.”⁽¹¹⁶⁾

If IEB officers do not feel that enforcement is proceeding as warranted, they are not free to communicate their concerns to the outside world. After the government changed in 1995, IEB’s media relations were constrained. Press releases had to be approved not only by the Communications Branch but also by the Minister’s and Premier’s offices. Inquiries from the media had to be referred to the Communications Branch for answers or approval of IEB’s answers. Gordon Robertson complained, “you feel like you’re being muzzled.”⁽¹¹⁷⁾

The Privatization of Municipal Water Utilities

Walkerton was a victim of extremely poor operating and management practices. The PUC was overseen by part-time commissioners with little knowledge of water treatment and distribution – simply concerned citizens with no specific training or experience.⁽¹¹⁸⁾ Although responsible for setting policy,⁽¹¹⁹⁾ they were not required to familiarize themselves with pertinent legislation or guidelines or to monitor operations to ensure compliance.⁽¹²⁰⁾ The commissioners concerned themselves primarily with financial issues and left operations and compliance issues entirely to staff.⁽¹²¹⁾ Tragically, the PUC staff was ill-equipped to handle those responsibilities. Senior members were poorly trained, incapable of performing some essential tasks, and unable to maintain compliance with provincial standards. In Part 1B of the Inquiry, Mr. McIntyre said that if operators didn’t follow his instructions, he would tell their bosses to fire them. When asked what would happen if their bosses didn’t fire them he replied, “Are they out of their mind.”⁽¹²²⁾ Walkerton’s commissioners must have been out of their minds not to fire employees that were incompetent, drank on the job, and falsified records.

An experienced private water company, overseen by a professional board of directors, could have introduced desperately needed expertise, innovation, and efficiency into Walkerton’s water system. Had the government acted on its policy, as articulated by Cabinet, to encourage private sector involvement in the provision of water, Walkerton might have called upon a private company for assistance, and the tragedy might have been avoided. However, the government did almost nothing to implement its privatization policy. Indeed, it actively discouraged some kinds of privatization.

It is not surprising, given the government’s failure to promote privatization, that, in Richard Radford’s words, “it’s something [Walkerton] never did consider.”⁽¹²³⁾ His remarks echoed those of Janice Hallahan. When asked, “Was there any discussion about potential privatization of the water services and whether or not that might be of benefit to the community?” she replied, “no, there wasn’t.” When pressed, “And not just at this meeting but at anytime up to May 2000, was there any discussion of privatization … of the PUC?” she again replied, “No, there was not.”⁽¹²⁴⁾

Richard Radford was not even aware that private firms might be interested in his town: “we have probably little chance of … attracting a … private sector partner into an expansion of our … collection system or a new well or something of that nature.”⁽¹²⁵⁾ Provincial advice could well have alerted Walkerton to the potential for private sector participation. The government’s failure to offer such advice or otherwise facilitate privatization may well have contributed to the Walkerton tragedy.

Energy Probe Research Foundation hoped that this issue would be more thoroughly canvassed in Part 1B of the Inquiry. However, our counsel’s submission on standing and his subsequent letter to Commission Counsel Paul Cavalluzzo (suggesting that the government’s failure to implement its privatization policy was central to understanding the Walkerton tragedy) failed to stimulate the Commission’s interest in this issue. Mr. Cavalluzzo declined to call witnesses to address the issue.⁽¹²⁶⁾ The government’s counsel discouraged exploration of the issue: Glenn Hainey objected to questions about legislation discouraging privatization as being “so far afield.” Although the Commissioner agreed, saying “as far as I’m aware I haven’t heard any evidence that would suggest even by the most liberal standard [the] relevance of privatization to what happened in Walkerton in May of 2000,” he added, “having said that, I’m open to be persuaded to the contrary.”⁽¹²⁷⁾

We believe that there is sufficient evidence to draw on to show that, in fact, the government’s privatization policies and practices were as relevant to what happened in Walkerton as were any other government policies and practices. They were relevant in that they were designed to solve an acknowledged problem but were then not implemented. Often the failure to implement a policy has extreme consequences – note the consequences of the government’s failure to inspect water facilities, to follow-up on inspections when they did occur, or to enforce laws and regulations. The government’s failure to implement its privatization policy was no exception.

Privatization would have brought expertise, innovation, and capital investment to the municipal water sector

Energy Probe Research Foundation regrets that the anticipated benefits of privatization were only superficially addressed in Part 1B of the Inquiry. Documents that we intended to introduce (before being discouraged from doing so) indicated that the government, having studied the issue at length, expected privatization to bring numerous benefits.⁽¹²⁸⁾ Because these documents are not part of the public record, and remain subject to our confidentiality agreement, we will not refer to them here. We will limit our argument to information that appeared in evidence.

The Ministry of Environment was alert to the purported potential of privatization as early as May 1995, when it prepared a document about the Common Sense Revolution. It noted the CSR’s declaration that “many things that government does can be done cheaper, faster and better by the private sector.”⁽¹²⁹⁾ If true (and experience suggests that it is), private involvement would have been a boon for the water sector. Who would not have wanted water services to be delivered more cheaply, faster, and better?

The appreciation of privatization’s benefits eventually reached the highest levels of the Ministry. Former Environment Minister Norman Sterling noted that privatization “has worked in other jurisdictions.” He commented, “if a private sector company can do the job properly within the regulations, et cetera, then I think that’s an admirable thing to do.” He later added that Seattle “got a much better deal than if they had tried to build it, own it and operate it themselves, so there are instances were you can make this thing work.”⁽¹³⁰⁾

The government began to prepare for privatization in 1996. MOE’s January 1996 business plan anticipated “reduced technical assistance to municipalities seeking to optimize water and sewage treatment facilities.”⁽¹³¹⁾ Apparently the Management Board expected the Ministry to develop policies encouraging the private sector to fill this gap. Its analyst’s review of the business plan noted, “We’ll encourage new partnerships that emphasize expertise … and greater use of private sector delivery.”⁽¹³²⁾

That approach soon became official government policy. An August 1996 Cabinet document advised, “Opportunities for private sector participation in financing and delivering water and sewage services should be enhanced.”⁽¹³³⁾ Andre Castel explained that the document, a minute from the Policy and Priorities Board, set out the new policy “that we would set the rules and somebody else would do the work.”⁽¹³⁴⁾

The privatization policy seems to have been quickly embraced by the Ministry, whose 1997 Business Planning Cycle Update, dated September 1996, vowed that the Ministry would “encourage innovate approaches” to meeting tough rules and standards, “remove barriers to economic activity,” and “encourage, facilitate and support new approaches and partnerships by offering advice and experience instead of writing cheques.”⁽¹³⁵⁾ Two months later, the policy was reinforced by the Who Does What Transportation and Utilities Sub-Panel’s recommendation that “municipalities should access private sector financing for capital works.”⁽¹³⁶⁾

Although enhancing private sector involvement was the stated policy of both the Cabinet and the Ministry, little was done to implement the policy. When asked if enhancing opportunities for private sector participation remained a goal during his tenure, Norman Sterling replied, “Well, nothing happened really in that area.”⁽¹³⁷⁾ When pressed, “was there any encouragement of any private sector involvement?” he replied, “Not that I’m aware of.”⁽¹³⁸⁾ According to Brian Nixon, who managed the Provincial Water Protection Fund, the goals of his programs did not include encouraging private sector financing.⁽¹³⁹⁾ It appears that the only measure the province took to encourage privatization concerned Superbuild.⁽¹⁴⁰⁾ Under that program, OSTAR was designed to lever additional funding not only from other levels of government but also from the private sector. It favours applications with innovative financing schemes, including private sector financing.⁽¹⁴¹⁾

Not only did the province not actively encourage privatization; it actually discouraged full privatization, or the sale of municipal assets. Mr. Sterling admitted, “we passed pieces of legislation which almost discouraged it and did discourage it more than … was the existing case.”⁽¹⁴²⁾ Mr. Sterling was referring to Bill 107, which required municipalities that wished to sell their facilities to the private sector to pay back all grants received since 1978. Mr. Sterling acknowledged that this disincentive to asset sales was the first of its kind in the province. In the past, he said, there had never been anything to prevent municipalities from selling their waterworks; the provision in Bill 107 “was really only the first impediment.”⁽¹⁴³⁾ Nigel Bellchamber also called the grant repayment requirement an impediment to privatization.⁽¹⁴⁴⁾

Privatization would have made possible better regulation

Privatization did not imply deregulation. On the contrary, it went hand-in-hand with a focus on regulation. The Who Does What sub-panel, which recommended greater private sector involvement, also recommended that “the province focus its efforts on setting and enforcing environmental standards and promoting conservation.”⁽¹⁴⁵⁾ The 1996 Cabinet minute that embraced privatization likewise emphasized the importance of regulation: “The province will continue to set and enforce water quality standards to contribute to public health and environmental protection.”⁽¹⁴⁶⁾

Norman Sterling confirmed that privatization did not at all mean deregulation. Indeed, he said that privatization would mean stricter regulation: “one of the advantages of privatization, it’s easier for the government to actually regulate the private rather than the public in some ways because … you don’t have any … political infighting taking place … in terms of that regulation. You have a private sector operator over there and then … you’re not going to get any interference from the local municipal politicians.” He agreed that “there’s no potential conflict of interest and no potential reluctance to prosecute or be involved in enforcement” and that “you would be more willing to deal with them as the situation dictates, rather than for political reasons.”⁽¹⁴⁷⁾

The directors of private firms may also be held to a higher standard of care than the commissioners of public utilities. PUC commissioners’ roles are not set out in legislation. The Public Utilities Act offers little guidance on their responsibilities. According to Kent Edwards, commissioners are not directly liable for prosecution if there are violations of any standards.⁽¹⁴⁸⁾ In contrast, the Business Corporations Act sets out a standard of care for the directors of corporations. It requires the “directors and officers of corporations to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.”⁽¹⁴⁹⁾

In addition to being held accountable through regulation and legislation, private owners and operators are held accountable through the market. Erv McIntyre noted that the market disciplines private operators: “They couldn’t stay … in the business of providing water if they were providing unsafe water. If you were a customer, would you buy their water from them, if they were providing unsafe water? … They’d be put out of business, I think.”⁽¹⁵⁰⁾ No municipality faces such a threat.

The privatization of testing labs did not cause the Walkerton tragedy

The privatization of testing labs cannot be seen as a cause of the Walkerton tragedy. Private labs were capable of meeting the province’s testing needs. They had the skills and the capacity to do so. Bern Schnyder noted that a quality-oriented, accredited lab can do testing satisfactorily. He could not recall anyone ever requesting an inspection of a private lab in the drinking water area because of concerns over the data being produced.⁽¹⁵¹⁾ Nor did he ever hear from a municipality that had trouble finding a lab to do its testing.⁽¹⁵²⁾ Dr. Schnyder was not aware of any backlogs at the private labs.⁽¹⁵³⁾ Michael Brodsky said that there was no doubt in his mind that “there was more than sufficient capacity and availability in the private sector to carry out this testing.”⁽¹⁵⁴⁾

Chief Medical Officer of Health Richard Schabas said in his Statement of Anticipated Evidence and confirmed under cross examination that “there is nothing wrong per se with privatization as long as it is implemented properly and with the appropriate safeguards in place.” If quality assurance and reporting requirements were in place, and if there were adequate capacity within the private system, he thought “we could have an adequate system of laboratory testing.”⁽¹⁵⁵⁾

However, appropriate safeguards, notably reporting requirements, were not in place. Although the province had been aware of inadequate reporting for many years, it failed to legally require proper reporting. There is no evidence to suggest that if the province had passed the appropriate legislation, testing labs would not have complied with it. Richard Wilson explained that while a lab would normally respect its client’s confidentiality, a law requiring the reporting of data to someone other than the client would warrant a change in this convention.⁽¹⁵⁶⁾ Michael Maher likewise maintained that labs would follow any laws requiring them to notify the environment or health ministries of adverse results.⁽¹⁵⁷⁾ In short, the deficiency was not in the labs but in the legislation governing them.

This regulatory deficiency, and the resulting inadequate reporting of test results, did not originate with the privatization of testing labs. On the contrary, as Chuck Le Ber agreed, a pre-existing problem continued following privatization, “as opposed to the problem arising after privatization.”⁽¹⁵⁸⁾ Dr. Le Ber explained that before privatization, public labs were not adequately communicating test results to Health Units. In November 1995, he surveyed all 42 health units to ascertain the degree of adherence to the reporting procedures required in the Ontario Drinking Water Objectives. He found that only 13 of the 21 responding units received drinking water results from either the MOE district office and/or the operating authority, and/or the regional public health laboratory.⁽¹⁵⁹⁾

Dr. Le Ber raised his concerns about inadequate reporting at a meeting of the Technical Advisory Committee on Environmental Biology, and then again at the semi-annual meeting of the Association of Supervisors of Public Health Inspectors in December 1995. He “made it clear to everyone involved that there was an issue with reporting prior to privatization.”⁽¹⁶⁰⁾

In 1996, following the move to private labs, the province strongly recommended that municipalities include in their contracts with testing labs the provision that the lab would report adverse results to both the local Officer of Health and the Ministry of Environment.⁽¹⁶¹⁾ It did not, however, give its recommendation the force of the law. In fact, it did not even require municipalities to report adverse results. The following year, Health Minister Jim Wilson wrote to Environment Minister Norman Sterling expressing concern that there was no legal requirement for the reporting of adverse drinking water test results. He proposed an amendment to the Ontario Water Resources Act requiring adverse results to be immediately brought to the attention of the local Medical Officer of Health.⁽¹⁶²⁾ Mr. Sterling’s decision to disregard the health minister’s advice may well have contributed to Stan Koebel’s tragic failure to report the adverse results that he had received from the lab. (Admittedly, that assertion rests on the debatable assumption that Mr. Koebel would have obeyed the law.)

The Financing of Municipal Water Utilities

The Walkerton PUC did not charge its customers the full costs of their water services. It prided itself on charging low, flat water rates. It received a number of grants over the years. When it did not get further grants, it maintained low rates, despite a documented need for considerable improvements to its system. It implemented no rate increases in 1997, ’98, or ’99. In 1999, its rates were significantly lower than those in other municipalities in the area. In fact, they were less than half of the rates in Kincardine and Port Elgin.⁽¹⁶³⁾ Janice Hallahan described the PUC’s low rates as obviously good for its customers. She said that there was no discussion of the ways in which low rates, in reducing funds for operations, maintenance, and other projects, might be bad for the people of Walkerton.⁽¹⁶⁴⁾

Despite its low rates, Walkerton accumulated reserves.⁽¹⁶⁵⁾ At the end of 1998, the PUC had reserves of over $449,000; that figure had grown to approximately $500,000 by the end of 1999.⁽¹⁶⁶⁾ The PUC was oddly reluctant to spend its reserved money. Although it had commissioned a Water Distribution Needs Study in 1992, it did not discuss spending its reserves on correcting the deficiencies identified in the study.⁽¹⁶⁷⁾

Richard Radford explained the political – and rather arbitrary – nature of investment decisions in Walkerton: “every year when you go through your budget process, it’s very much a decision of weighing out priorities as to whether there’s funds to be expended in the recreation department, whether you rebuild a road. … The issue of whether you do certain projects is a function of those priorities and also of how much Council is willing to include in the tax rate, or in the case of the Public Utilities Commission, how much they are willing to increase their water rates.”⁽¹⁶⁸⁾

Mr. Radford maintained that Walkerton’s council was “a fairly conservative council in that they were not quick to … borrow money.”⁽¹⁶⁹⁾ Its reluctance to borrow or to spend its reserves can only be seen as conservative if it knew that it would not be held accountable for the consequences of not investing enough in its system. There is nothing conservative about a PUC and a municipality exposing themselves to millions of dollars of risk.

The financial disarray in Walkerton – the historic reliance on grants, the improper pricing and investment decisions, and the lack of financial accountability – was symptomatic of a province-wide problem. It reflected an attitude that municipalities and consumers did not have to be responsible for the full costs of running a system and that if things got bad enough, the province would bail them out.

Walkerton was by no means alone in skimping on service in order to minimize costs. In the context of privatizing testing labs, OPSEU’s lawyer suggested that in an “aggressive market-driven model … people shave on quality to shave on costs.” In fact, the municipalities’ responses to the increased costs of testing suggest that shaving on quality to shave on costs occurs in the public sector. Jim Mahoney’s evidence indicated that in 1997, 36 municipalities, representing 74 water plants, had been found not to be conforming with the ODWO sampling requirements.⁽¹⁷⁰⁾ Mr. Mahoney became aware that the cost issue was “identified as the primary reason why they weren’t conforming with the monitoring expectations.”⁽¹⁷¹⁾ This was true even though costs were not by most measures high. The annual cost of a minimum sampling program ranges from $3,000 to $5,000.⁽¹⁷²⁾ Given that the populations of the non-compliant municipalities ranged from 25 to 3,000, annual sampling costs would have been between $1 and $200 per person.⁽¹⁷³⁾ Apparently these municipal providers did not think that they – or their customers – should have to bear these costs.

Who should pay for what has rarely been clear in Ontario. The financing of water systems has been a crazy quilt of different practices. Doug Barnes described the “wide degree of variation” in municipalities’ revenue recovery practices. Some municipalities prefer to raise money through rates while others rely on assessments. Some municipalities have levied development charges.⁽¹⁷⁴⁾ In some cases, water systems have benefited from generous cross subsidies. In Sudbury, for example, a large component of utility costs were historically raised against mining companies that had their own water supplies.⁽¹⁷⁵⁾

Many water facilities have been paid for by provincial or federal grant money. According to James Merritt, “Normally there have been something in the order of $100 million to $200 million a year put in as grants to the … water and wastewater services.”⁽¹⁷⁶⁾ At one point, the environment ministry funded 85 percent of the costs of projects in communities of 1,000 or less. For northern communities, the Ministry of Northern Development funded an additional 7.5 percent of the costs, bringing the total subsidy to 92.5 percent.⁽¹⁷⁷⁾

The province has provided other subsidies as well. When MOE operated plants, it charged municipalities for direct operating costs – staff, chemicals, and energy – but it did not charge them for support services. Management support, human resources, finance, and laboratory support were “essentially provided free.” James Merritt explained that this arrangement was “very advantageous” to municipalities, since the services were probably worth approximately 10 to 15 percent of the overall operating costs.⁽¹⁷⁸⁾

The perverse effects of grants and subsidies

Although grants and subsidies were intended to improve municipal systems, they often did tremendous damage.

One of the effects of the grant and subsidy programs was reduced accountability. Larry Clay explained that there was a general recognition, at both the municipal and the provincial levels, that many jointly delivered programs created uncertainty about accountability. He spoke of the need to clarify accountability “to ensure that people actually knew who was responsible for what.”⁽¹⁷⁹⁾ Grant Hopcroft added that the system was “badly broken. There was a lot of distortion and there was such blurred accountability that in some cases the people didn’t know who to turn to and it needed fixing.”⁽¹⁸⁰⁾

Grants and subsidies also discouraged responsible management and planning on the part of municipalities. As one Superbuild document stated, infrastructure investment decisions were often determined by the availability of subsidies.⁽¹⁸¹⁾ Grant Hopcroft recounted the Who Does What sub-panel’s concern that subsidies “were disincentive[s] to dealing with the real costs of the service and the real needs, capital or otherwise, of a particular system.”⁽¹⁸²⁾ Such considerations as need and efficiency became secondary. With the loss of the efficiency driver came the loss of incentives to introduce new technologies. Mr. Hopcroft explained, “Subsidies dampened innovation and the pursuit of creative management practices, which could better realize efficiencies.”⁽¹⁸³⁾ Brian Nixon explained that prior to 1997, under various grant programs, “cost effectiveness in terms of consideration of alternatives was never explicit.”⁽¹⁸⁴⁾ Mr. Nixon later added, “by not emphasizing cost effectiveness and the … least cost alternative to meet the health and environmental need[s], there … is a tendency to overbuild for potential growth that isn’t yet there…. [I]t was generally felt as a result of previous funding that that’s what resulted in a number of areas, particularly when you get out beyond large urban areas.” Although subsequent programs began to address the problem, he added, “There’s always room for improvement.”⁽¹⁸⁵⁾

James Merritt also noted that overbuilding was common. He explained that in many communities, “plants and systems were oversized with the expectation of future growth, and … in many cases, the costs of running a larger system couldn’t be borne by the … initial users until the population caught up with the system.”⁽¹⁸⁶⁾ Norman Sterling confirmed that many plants were overbuilt under the MAP program and offered as an example North Pine Paginet [Plantagenet?], where the municipality cannot pay for the operation of its plant, which is three times the size required. More generally, he observed, “Didn’t seem to me that when you don’t make the people who are benefiting in the end somewhat financial responsible to their ability, that you encourage them to … be prudent and … frugal about the system that they have.”⁽¹⁸⁷⁾ This tendency to overbuild belies the suggestion that municipalities are fiscally conservative.⁽¹⁸⁸⁾ They may not like to spend their own money, but they have hardly been conservative with other people’s money.

In some cases, the prospect of receiving a grant led, at least in the short term, to underspending rather than overspending. Some communities delayed spending their own money in the hope that a grant program would come along and someone else would pay. As Grant Hopcroft explained, “there was a succession of provincial conditional grant programs related to these areas and so, if you didn’t qualify for one, you’d wait until the next one was announced in the hope that it would cover the particular needs that you hadn’t addressed through your rate structure.”⁽¹⁸⁹⁾ Other communities delayed spending and allowed their systems to deteriorate, thus enhancing their eligibility for a grant. A 1993 MOE memo observed that because the Direct Grant program directed assistance to municipalities with severe environmental and health problems, “the program tended to reward municipalities that did not properly maintain their systems or did not plan for capital upgrades to prevent future environment and health problems.”⁽¹⁹⁰⁾

Non-compliance has often been a ticket to a grant. For example, the Provincial Water Protection Fund, established in 1997, “was designed to offer assistance to municipalities with demonstrated environmental or health problems and financial need.”⁽¹⁹¹⁾ In order to receive a drinking water grant, an applicant had to demonstrate unacceptable concentrations of contaminants in treated water systems or drinking water contaminated at supply source or due to current treatment processes.⁽¹⁹²⁾

When asked if owners and operators would have disincentives to report poor test results (since they would have to pay for improvements), Jim Mahoney replied, on the contrary, that “to secure the funding to improve your works, … you would want to voluntarily consistently provide information to the Medical Officer of Health and the Ministry of the Environment about the status of your compliance … [I]t’s significant in terms of your priority in the evaluations about who gets funding and who doesn’t get funding for infrastructure upgrades.” Noncompliance, he agreed, is “almost like a lobbying tool.”⁽¹⁹³⁾

The Provincial Water Protection Fund also discouraged municipalities from building up reserves. According to Grant Hopcroft, “in anticipation of provincial financial assistance to cover capital costs or replacement, … some systems neglected to build in proper depreciational reserves.”⁽¹⁹⁴⁾ In fact, programs that took municipal reserves into account in determining eligibility may have actively discouraged responsible fiscal planning.⁽¹⁹⁵⁾ Walkerton’s reserves disqualified it from funding under this program.⁽¹⁹⁶⁾ Richard Radford “expressed concern that the province may be applying eligibility criteria for the Water Protection fund in a way that left council feeling that municipalities that had been responsible in their financial management were being punished under that particular program.”⁽¹⁹⁷⁾ Norman Sterling confirmed that grants could discourage the establishment of reserve funds: “it’s important not to give too much money, otherwise people will not, and the municipalities will not, take care of their system as they should. They won’t create reserve funds.”⁽¹⁹⁸⁾

Another concern about subsidies, as expressed by the Who Does What sub-panel, was that “they appear to have discouraged full private sector participation.”⁽¹⁹⁹⁾

Grant and subsidy programs did not just diminish municipal utility performance and accountability: They also diminished consumers’ responsibility for the consequences of their consumption decisions. As Grant Hopcroft explained, “consumers, in some cases, were not paying for the full costs of providing water and sewer services and, as a result, there was little incentive to conserve those resources.”⁽²⁰⁰⁾

Grants and subsidies also created concerns about the equity of tax dollars supporting those who may not have needed assistance. Until 1997, municipalities did not have to demonstrate financial need to qualify for grants.⁽²⁰¹⁾ The Municipal Assistance Program was based on population rather than need. Norman Sterling explained, “If you were a thousand or less you got 85 percent. It didn’t matter whether your household family income was $32,000 or $62,000.”⁽²⁰²⁾ Thus poor and middle-class urban taxpayers could have been subsidizing wealthy small-town residents. Individuals on private systems also subsidized people living in small towns. Jim Mahoney noted that in a privately owned system, sampling costs may be borne by a single individual. Such individuals would not expect subsidies: “you typically wouldn’t be providing public money for private works.”⁽²⁰³⁾ It is not at all clear why those on private systems, who bear their own costs, should also have to support the costs of systems in small towns. Nor is it clear why entire towns, rather than only the needy consumers living in them, should benefit from subsidies. At the same time, it is obvious that some individuals need assistance, and will continue to need assistance, especially if, as discussed below, the province moves to a system of user pay. A 1992 MOE presentation to caucus estimated that user pay could increase annual charges to households in small Northern communities by up to $10,000.⁽²⁰⁴⁾ There is no evidence that the government has considered directly subsidizing those individuals who need assistance. Mr. Mahoney was unaware of any discussions of subsidies or tax breaks targeting needy consumers: “in terms of tax structures and things like that, again there wasn’t, to my knowledge at our level, any discussion.”⁽²⁰⁵⁾

The province’s unimplemented policy to replace grants and subsidies with full cost pricing and private sector financing

In August 1996, Cabinet adopted a new policy regarding grants and subsidies: “The use of provincial grants and subsidies in financing water and sewage infrastructure beyond existing commitments should be phased out.”⁽²⁰⁶⁾

However, the policy existed more on paper than in practice. When asked whether the phase-out of grants and subsidies continued to be the policy after he assumed office, Mr. Sterling replied, “Well in a way and in a way not.” He noted that after the policy was adopted, his ministry got $200 million for the Provincial Water Protection Fund and then “went back and asked for more…. So it didn’t … necessarily mean we stopped asking.”⁽²⁰⁷⁾ Indeed, the PWPF was followed by the $240 million Superbuild OSTAR program.⁽²⁰⁸⁾ There is no sign that the stream of grant programs will dry up. Larry Clay was unaware of any announcement that OSTAR – or any other program – would be the province’s last funding program.⁽²⁰⁹⁾

In fact, it appears that the government may not even have announced its policy to phase out grants. Why, if it knew of the policy, would the Who Does What sub-panel have recommended the phase-out of grants and loans? It did exactly that in November 1996, three months after the government had already adopted the policy. In a letter to the Minister of Municipal Affairs and Housing, it explained, “The sub-panel believes that the current arrangements for the funding of these services must be restructured in order to realize cost savings and efficiencies, ensure long term financial sustainability and enhance financial accountability…. [T]o achieve these improvements, provincial subsidies for these services should be removed.”⁽²¹⁰⁾ Other comments in the letter included: “years of generous provincial subsidies have had some undesirable impacts…. Clearly the current situation is financially and environmentally unsustainable…. To continue to provide provincial subsidies would simply continue to mask the true cost of providing water, artificially skew investment and land use decisions, and undermine efforts to promote water conservation. The sub-panel therefore recommends that, after fulfilling its commitments under the existing provincial grant and loan programs, the province should terminate these programs and not issue new grants or loans.”⁽²¹¹⁾

Whether the Ministry phased out or maintained its grant programs, it understood that municipalities needed to develop alternative – or supplementary – means of financing water systems. The Ministry recognized that its grant programs could not meet the capital needs of the province. The 1999-2000 budget submission noted, “Demands on the Provincial Water Protection Fund (PWPF) far exceed the allocation. Economic studies carried out by the Ministry indicate there is a $6 billion demand for water and sewage infrastructure investment … [over the ten year] period from 1995 to 2005 and another $10 billion demand for below ground infrastructure. Existing programs such as the PWPF provide some assistance to municipalities but these are not sufficient to deal with the range of significant environmental problems and are not flexible enough to deal with special circumstances outside the framework of currently approved criteria.”⁽²¹²⁾

Although the amount of investment required has varied widely over the years, the estimated needs have always exceeded the province’s ability or willingness to pay. Norman Sterling did not know the exact amount of the capital needs for water plants across the province, but he “knew there was significant need.” The numbers, he agreed, would be “well above existing subsidy levels…. So the government obviously had to look into creative ways to seek financing”⁽²¹³⁾

One of those ways, as discussed above, was to seek private sector financing. However, attracting investment by the private sector would not solve the question of who would repay the investors. On that matter, many experts agreed: The responsibility should ultimately rest with consumers, who should pay the full costs of their water use.

According to the Association of Municipalities of Ontario and the Ontario Sewer and Water Main Contractors, the principle of charging the beneficiaries the full costs, approximately in proportion [to] their demands on the facilities” dates as far back as 1951.⁽²¹⁴⁾ Andre Castel said that “the question of full cost pricing was discussed at regular intervals in the Ministry.⁽²¹⁵⁾ A 1990 study by Ecologistics indicated a need for full cost pricing.⁽²¹⁶⁾ While the Who Does What sub-panel felt that municipalities themselves should decide on their method of charging, it supported the concept of full cost pricing and user fees.⁽²¹⁷⁾ It thought, Larry Clay explained, that “as a consequence of not going to full cost pricing … consumers would have no incentive to promote conservation.”⁽²¹⁸⁾ A 1996 Cabinet submission by MOE advocated full cost pricing for another reason: It maintained that “moving to full cost pricing is considered the pivotal factor in providing commercial incentives and the right economics for moving towards private sector financing.”⁽²¹⁹⁾ Several years later, a proposed strategy document regarding Superbuild noted that the lack of full cost pricing had resulted in “Poor consumer conservation practices, resulting in excessive usage rates and a need for more treatment capacity than should be necessary.”⁽²²⁰⁾

Several witnesses at the Inquiry confirmed the benefits of full cost pricing. Daniel Cayen said, “it only speaks to common sense, that the lower the … price of the commodity, the more … freely it might be used. So that in fact if you … reflect the full cost of the commodity, then conservation practices should follow…. [I]f the price of water truly reflected the cost of producing it, … that would encourage conservation practices.”⁽²²¹⁾ Doug Barnes explained that “there’s a lot of good reasons for full cost pricing.” He mentioned water conservation (since you’re not going to abuse a resource you have to pay for), lower operating costs (including lower electricity costs), reduced need for new expansion (and its associated costs), and preservation of the long-run integrity of the supply.⁽²²²⁾

Despite this broad support for full cost pricing, the Ministry failed to actively promote it. In August 1996, Cabinet had asked MOE for a report on “strategies facilitated by the province for eliminating the province’s operating and capital subsidies, including consideration of the adoption of municipalities of full cost pricing.”⁽²²³⁾ When asked, “Now, what did your Ministry have to say about that?” Norman Sterling replied, “I don’t know…. The Ministry was in favor of it I can tell you that, but I don’t recall whether we actively pursued it.”⁽²²⁴⁾ Andre Castel likewise could not recall the Ministry’s promoting full cost pricing. When asked what had happened to the idea, and where it went, Mr. Castel replied, “I really can’t say.”⁽²²⁵⁾

According to Mr. Barnes, “there has been a policy of encouragement [of full cost pricing] without a policy of enforcing full cost pricing.”⁽²²⁶⁾ He did not, however, offer any specific evidence of encouragement. Kent Edwards recalled that the government had endorsed full cost pricing at various activities, but tacitly acknowledged the inadequacy of the effort: In practice, he said, full cost pricing “was not generally done in municipalities.”⁽²²⁷⁾ Frances Johnston agreed that traditionally, there has not been full cost pricing in the vast majority of municipalities. She did note that the Minister stated in 2000 that “he hopes municipalities go towards full cost pricing.” She also noted that Superbuild is currently looking at the issue.⁽²²⁸⁾

Issuing statements of hope and looking at issues without taking action are not effective ways of solving problems. Tragically, they are typical of the province’s approach to water policy over the last several decades. Successive governments knew that severe problems existed. They developed theoretical solutions to the problems. But they failed to implement the solutions. The tragedy in Walkerton arose from those failures. Only if the government finds the will to put into practice the required policies will future tragedies be prevented.

Notes

1. Transcript, April 17, 2001, p. 48, line 25 – p. 49, line 13.

2. Transcript, October 26, 2000, p. 38, lines 5-16; p. 52, line 8 – p. 53, line 10.

3. Transcript, April 17, 2001, p. 178, lines 15-25.

4. Transcript, April 17, 2001, p. 179, lines 16-20.

5. Exhibit 302, tab 14; Transcript, April 24, 2001, p. 138, lines 4-10; p. 139, line 21 – p. 140, line 3.

6. Transcript, April 24, 2001, p. 141, lines 3-12.

7. Transcript, March 6, 2001, p. 122, line 4 – p. 124, line 2.

8. Transcript, March 7, 2001, p. 114, lines 5-17.

9. Transcript, March 6, 2001, p. 93, lines 4-17.

10. Transcript, March 6, 2001, p. 67, line 20 – p. 68, line 23; p. 69, lines 13-18; p. 71, line 22.

11. Transcript, March 6, 2001, p. 31, lines 20-21.

12. Transcript, March 6, 2001, p. 123, lines 4-17.

13. Transcript, April 12, 2001, p. 96, line 21 – p. 97, line 7.

14. Transcript, March 6, 2001, p. 84, line 17 – p. 85, line 1.

15. Transcript, March 6, 2001, p. 107, lines 1-5.

16. Transcript, March 7, 2001, p. 185, lines 5-8.

17. Transcript, March 7, 2001, p. 100, lines 19-25.

18. Transcript, March 6, 2001, p. 32, lines 4-6; 010307, p. 185, lines 14-17.

19. Transcript, March 6, 2001, p. 71, lines 15-18.

20. Transcript, April 17, 2001, p. 32, line 15 – p. 33, line 11.

21. Transcript, April 18, 2001, p. 23, lines 12-13.

22. Julian Wieder’s statement of anticipated evidence, p. 6.

23. Transcript, April 25, 2001, p. 121, lines 22-23.

24. Transcript, April 24, 2001, p. 107, line 6-10.

25. Transcript, March 6, 2001, p. 98, lines 14-20.

26. Transcript, March 6, 2001, p. 98, line 21 – p. 99, line 5.

27. Transcript, April 25, 2001, p. 128, lines 2-3.

28. Transcript, April 24, 2001, p. 107, lines 21-25.

29. Transcript, April 25, 2001, p. 126, line 9 – p. 127, line 9.

30. Transcript, April 25, 2001, p. 127, lines 19-22.

31. Transcript, April 12, 2001, p. 126, lines 8-10.

32. Transcript, April 12, 2001, p. 127, lines 13-21; also see p. 215, line 19 – p. 216, line 8.

33. Transcript, April 12, 2001, p. 217, lines 4-14.

34. Transcript, April 18, 2001, p. 15, lines 8-11.

35. Robert Shaw, MOE Inspections: Municipal Water Treatment Plants, pp. 2, 5, 9, 12, 13, 19. Also see Transcript, April 17, 2001, p. 43, lines 10-11; p. 44, lines 21-22; p. 76, lines 2-11.

36. Transcript, March 6, 2001, p. 72, line 19 – p. 73, line 2.

37. Transcript, March 6, 2001, p. 73, lines 16-17; p. 74, lines 18-19.

38. Transcript, April 24, 2001, p. 158, lines 18-23, citing Transcript, November 2, 2000, p. 244, lines 21 ff.

39. Transcript, March 7, 2001, p. 134, lines 9-20.

40. Transcript, March 7, 2001, p. 227, lines 9-19.

41. Transcript, April 25, 2001, p. 137, lines 8-14.

42. Transcript, April 12, 2001, p. 128, lines 14-17.

43. Transcript, April 12, 2001, p. 219, lines 13-17.

44. Transcript, March 7, 2001, p. 205, line 21 – p. 206, line 6.

45. Transcript, April 12, 2001, p. 214, line 22 – p. 215, line 17.

46. Transcript, April 17, 2001, p. 52, lines 9-14.

47. Robert Shaw, MOE Inspections: Municipal Water Treatment Plants, p. 10. Also see Transcript, April 17, 2001, p. 51, lines 16-22.

48. Transcript, April 17, 2001, p. 53, lines 6-8; p. 54, lines 6-16.

49. Transcript, April 17, 2001, p. 55, lines 9-12.

50. Transcript, April 17, 2001, p. 88, lines 2-5.

51. Transcript, April 17, 2001, p. 86, lines 4-7.

52. Transcript, April 18, 2001, p. 17, lines 13-17; p. 19, lines 13-17.

53. Robert Shaw, MOE Inspections: Municipal Water Treatment Plants, p. 15; Transcript, April 17, 2001, p. 98, lines 5-8; p. 101, line 18 – p. 102, line 19.

54. Transcript, April 17, 2001, p. 104, lines 1-3; p. 107, line 20 – p. 108, line 6.

55. Transcript, March 6, 2001, p. 135, lines 14-20.

56. Robert Shaw, MOE Inspections: Municipal Water Treatment Plants, p. 21; Transcript, April 17, 2001, p. 136, lines 14-16; p. 137, lines 13-15; p. 138, line 22 – p. 139, line 4.

57. Transcript, March 7, 2001, p. 27, lines 1-8; p. 32, lines 18-25.

58. Exhibit 285, tab 2; Transcript, April 18, 2001, p. 21, line 23 – p. 22, line 3.

59. Robert Shaw, MOE Inspections: Municipal Water Treatment Plants, p. 20. Also see Transcript, April 17, 2001, p. 116, lines 1-6.

60. Transcript, April 17, 2001, p. 120, lines 5-17; p. 134, lines 8-13; p. 135, lines 13-15.

61. Robert Shaw, MOE Inspections: Municipal Water Treatment Plants, pp. 14, 25, 26. Also see Transcript, April 17, 2001, p. 96, lines 2-5; p. 152, line 4 – p. 153, line 10.

62. Transcript, March 7, 2001, p. 193, line 23 – p. 194, line 2.

63. Transcript, April 18, 2001, p. 81, line 16 – p. 82, line 1.

64. Transcript, April 17, 2001, p. 89, lines 13-20.

65. Transcript, April 25, 2001, p. 124, lines 20-24.

66. Transcript, April 25, 2001, p. 132, lines 5-10.

67. Transcript, April 24, 2001, p. 159, lines 3-5.

68. Transcript, May 7, 2001, p. 33, lines 4-11.

69. Transcript, May 7, 2001, p. 154, lines 5-6.

70. Transcript, May 7, 2001, p. 334, lines 3-5.

71. Transcript, March 6, 2001, p. 86, lines 7-9.

72. Transcript, March 7, 2001, p. 16, lines 7-9.

73. Transcript, March 7, 2001, p. 113, lines 18-22.

74. Transcript, April 24, 2001, p. 80, line 22 – p. 81, line 13.

75. Transcript, April 17, 2001, p. 80, lines 16-20.

76. Transcript, April 24, 2001, p. 46, lines 4-20; p. 50, line 5-8.

77. Transcript, April 24, 2001, p. 47, lines 3-6.

78. Transcript, April 24, 2001, p. 40, line 25 – p. 41, line 16.

79. Exhibit 304, tab 2; Transcript, April 24, 2001, p. 32, line 17; p. 35, lines 6-7.

80. Transcript, April 25, 2001, p. 133, lines 18-22.

81. Transcript, April 17, 2001, p. 139, line 7-17.

82. Exhibit 288; Transcript, April 17, 2001, p. 142, line 15 – p. 143, line 1.

83. Transcript, April 17, 2001, p. 145, lines 12-18.

84. Transcript, March 7, 2001, p. 115, lines 12-13.

85. Transcript, March 7, 2001, p. 196, lines 7-10; p. 198, lines 12-15.

86. Transcript, April 12, 2001, p. 158, lines 17-19.

87. Transcript, April 12, 2001, p. 225, lines 7-10.

88. Transcript, April 24, 2001, p. 67, line 12 – p. 68, line 6.

89. Transcript, April 24, 2001, p. 65, line 25 – p. 66, line 3.

90. Transcript, April 24, 2001, p. 66, lines 21-23.

91. Transcript, April 12, 2001, p. 196, line 20 – p. 197, line 1.

92. Transcript, April 12, 2001, p. 102, lines 10-21.

93. Transcript, April 25, 2001, p. 128, lines 8-11.

94. Transcript, April 24, 2001, p. 108, lines 6-9; p. 112, line 17 – p. 113, line 7.

95. Transcript, March 7, 2001, p. 118, line 23 – p. 119, lines 4, 11-12.

96. Transcript, April 12, 2001, p. 102, lines 10-21.

97. Transcript, April 12, 2001, p. 224, lines 2-3.

98. Transcript, April 12, 2001, p. 197, line 5 – p. 198, line 5.

99. Transcript, March 7, 2001, p. 196, line 24 – p. 197, line 3.

100. Transcript, June 6, 2001, p. 54, lines 12-13.

101. Transcript, April 24, 2001, p. 65, lines 1-4.

102. Transcript, April 12, 2001, p. 191, line 21 – p. 192, line 2.

103. Transcript, April 12, 2001, p. 193, lines 7-13.

104. Transcript, April 12, 2001, p. 40, lines 2-18.

105. Transcript, April 18, 2001, p. 11, lines 4-23.

106. Julian Wieder, statement of anticipated evidence, pp. 2, 4, 6.

107. Transcript, April 24, 2001, p. 67, lines 1-10.

108. Transcript, April 24, 2001, p. 147, lines 6-13; p. 148, line 22 – p. 149, line 1.

109. Julian Wieder, statement of anticipated evidence, p. 4.

110. Transcript, April 12, 2001, p. 195, line 17 – p. 196, line 14.

111. Transcript, March 7, 2001, p. 205, lines 3-9.

112. Transcript, March 7, 2001, p. 201, lines 3-7.

113. Transcript, March 7, 2001, p. 202, lines 24-25.

114. Transcript, March 7, 2001, p. 203, lines 1-5.

115. Transcript, April 24, 2001, p. 88, lines 5-14.

116. Transcript, April 24, 2001, p. 88, line 24 – p. 89, line 2.

117. Transcript, April 24, 2001, p. 169, lines 1-5; p. 170, lines 5-11; p. 172, line 7.

118. Transcript, November 27, 2000, p. 98, lines 3-4; 010605, p. 117, line 24 – p. 120, line 8.

119. Transcript, June 5, 2001, p. 24, lines 11-13; p. 25, line 8.

120. Transcript, June 5, 2001, p. 38, lines 1-2; p. 45, line 9 – p. 47, line 19.

121. Transcript, November 27, 2000, p. 96, lines 2-4; p. 97, lines 13-16.

122. Transcript, March 7, 2001, p. 225, line 24 – p. 226, line 4.

123. Transcript, June 6, 2001, p. 261, lines 7-10.

124. Transcript, November 15, 2000, p. 65, lines 3-21.

125. Transcript, June 6, 2001, p. 211, lines 12-17.

126. Mark Mattson, letter to Paul Cavalluzzo, May 24, 2001; Paul Cavalluzzo, letter to Elizabeth Brubaker, June 4, 2001.

127. Transcript, May 16, 2001, p. 108, lines 5-24.

128. Elizabeth Brubaker, faxes to the Walkerton Inquiry, May 11, 2001 and May 13, 2001; letter to Paul Cavalluzzo, June 23, 2001.

129. Transcript, May 15, 2001, p. 55, lines 15-18.

130. Transcript, June 27, 2001, p. 231, line 13; p. 232, lines 6-9; p. 234, lines 21-23.

131. Transcript, May 15, 2001, p. 138, lines 14-17.

132. Transcript, May 15, 2001, p. 140, lines 21-23; p. 145, lines 4-7.

133. Transcript, May 15, 2001, p. 155, lines 2-5; also discussed in 010627, p. 230, lines 3-5.

134. Transcript, May 15, 2001, p. 156, lines 13-19.

135. Transcript, May 15, 2001, p. 160, line 14 – p. 161, lines 4.

136. Transcript, June 4, 2001, p. 51, lines 7-9

137. Transcript, June 27, 2001, p. 230, lines 3-10.

138. Transcript, June 27, 2001, p. 235, lines 1-3.

139. Transcript, June 6, 2001, p. 115, lines 3-6.

140. Transcript, June 6, 2001, p. 263, line 23 – p. 264, line 4.

141. Transcript, June 6, 2001, p. 148, lines 2-21.

142. Transcript, June 27, 2001, p. 230, lines 11-12.

143. Transcript, June 27, 2001, p. 235, lines 4-7.

144. Transcript, June 6, 2001, p. 260, lines 5-8.

145. Transcript, June 4, 2001, p. 47, lines 15-18.

146. Transcript, May 15, 2001, p. 155, lines 7-10.

147. Transcript, June 27, 2001, p. 233, line 5 – p. 234, line 5.

148. Transcript, June 5, 2001, p. 120, lines 9-11.

149. Transcript, June 5, 2001, p. 27, lines 5-23.

150. Transcript, March 7, 2001, p. 214, lines 11-21.

151. Transcript, May 7, 2001, p. 49, lines 14-16; p. 59, line 14 – p. 60, line 1.

152. Transcript, May 7, 2001, p. 259, lines 10-18; p. 287, lines 16-18.

153. Transcript, May 7, 2001, p. 260, lines 4-16.

154. Transcript, May 8, 2001, p. 134, lines 5-8.

155. Transcript, June 25, 2001, p. 92, lines 2-7; p. 84, lines 7-20.

156. Transcript, May 8, 2001, p. 188, lines 11-13; p. 189, lines 1-20.

157. Michael Maher, letter to Commissioner O’Connor, July 12, 2001.

158. Transcript, May 9, 2001, p. 41, lines 10-20.

159. Inq. Doc. No. 1079377; Transcript, May 8, 2001, p. 285, lines 4-14; p. 286, lines 8-15. Also see Transcript, May 7, 2001, p. 253, lines 14-21.

160. Transcript, May 9, 2001, p.40, line 20 – p. 41, line 9.

161. Transcript, May 7, 2001, p. 273, line 17 – p. 274, line 11.

162. Transcript, May 8, 2001, p. 312, lines 9-21; p. 316, lines 6-17.

163. Transcript, November 15, 2000, p. 33, lines 1 – p. 34, line 11; p. 42, line 2 – p. 43, line 23.

164. Transcript, November 15, 2000, p. 44, lines 8-19.

165. Transcript, June 5, 2001, p. 55, lines 15-17.

166. Transcript, June 6, 2001, p. 242, line 23 – p. 243, line 10.

167. Transcript, November 15, 2001, p. 34, line 24 – p. 35, line 8.

168. Transcript, June 6, 2001, p. 250, lines 3-15.

169. Transcript, June 6, 2001, p. 240, line 25 – p. 241, line 1.

170. Inq. Doc. No. 1035419; Transcript, May 7, 2001, p. 215, lines 23-25; p. 255, line 24 – p. 256, line 20. Also see Transcript, May 9, 2001, p. 304, lines 7-11, p. 313, lines 9-16.

171. Transcript, May 9, 2001, p. 308, lines 2-7.

172. Transcript, May 9, 2001, p. 306, lines 17-22.

173. Transcript, May 9, 2001, p. 316, lines 3-8.

174. Transcript, June 6, 2001, p. 212, line 23 – p. 213, line 3.

175. Transcript, June 5, 2001, p. 54, lines 4-19.

176. Transcript, April 12, 2001, p. 103, lines 2-9.

177. Inq. Doc. No. 1022463; introduced in Transcript, May 16, 2001, p. 112, lines 7-9.

178. Transcript, April 12, 2001, p. 100, line 22 – p. 101, line 9. Also see Transcript, May 16, 2001, p. 99, lines 7-10.

179. Transcript, June 4, 2001, p. 88, lines 12-22.

180. Transcript, June 4, 2001, p. 89, lines 8-12.

181. Inq. Doc. No. 1019086; Transcript, June 6, 2001, p. 151, line 2 – p. 153, line 23.

182. Transcript, June 4, 2001, p. 45, lines 13-17.

183. Transcript, June 4, 2001, p. 45, lines 18-20.

184. Transcript, June 6, 2001, p. 144, lines 12-14

185. Transcript, June 6, 2001, p. 155, line 6 – p. 156, line 5.

186. Transcript, April 12, 2001, p. 100, lines 10-15.

187. Transcript, June 27, 2001, p. 227, line 23 – p. 228, line 6.

188. Transcript, June 6, 2001, p. 202, lines 19-24.

189. Transcript, June 4, 2001, p. 45, lines 1-6.

190. Inq. Doc. No. 1020472; Transcript, June 6, 2001, p. 146, lines 5-17.

191. Transcript, June 6, 2001, p. 51, lines 21-25.

192. Transcript, June 6, 2001, p. 55, lines 1-8.

193. Transcript, May 9, 2001, p. 318, lines 15-25.

194. Transcript, June 4, 2001, p. 44, lines 20-23.

195. Transcript, June 6, 2001, p. 52, lines 6-7.

196. Transcript, June 6, 2001, p. 62, lines 1-5.

197. Transcript, June 6, 2001, p. 65, lines 8-12.

198. Transcript, June 27, 2001, p. 229, lines 19-23.

199. Transcript, June 4, 2001, p. 45, lines 21-23; Transcript, June 27, 2001, p. 226, lines 15-17.

200. Transcript, June 4, 2001, p. 44, lines 16-19.

201. Transcript, June 6, 2001, p. 143, lines 19-21.

202. Transcript, June 27, 2001, p. 227, lines 18-22.

203. Transcript, May 9, 2001, p. 319, lines 17-18; p. 320, lines 13-14.

204. Inq. Doc. No. 1022421, introduced in Transcript, May 16, 2001, p. 133, line 20.

205. Transcript, May 9, 2001, p. 321, lines 7-9.

206. Inq. Doc. No. 1073658; Transcript, May 15, 2001, p. 154, lines 16-19. Also see Transcript, June 27, 2001, p. 223, line 25 – p. 224, line 2.

207. Transcript, June 27, 2001, p. 224, lines 3-17.

208. Transcript, June 4, 2001, p. 94, lines 7-12.

209. Transcript, June 4, 2001, p. 95, line 23 – p. 96, line 2.

210. Exhibit 352; Transcript, June 4, 2001, p. 39, line 24 – p. 40, line 8.

211. Inq. Doc. No. 1060321; Transcript, June 4, 2001, p. 50, line 21 – p. 51, line 6. Also see Inq. Doc. 1031859; Transcript, May 16, 2001, p. 110, lines 2-5.

212. Exhibit 293; Transcript, May 16, 2001, p. 95, lines 7-22.

213. Transcript, June 27, 2001, p. 237, line 10 – p. 238, line 3.

214. Transcript, June 5, 2001, p. 55, lines 2-5.

215. Transcript, May 16, 2001, p. 115, lines 14-15.

216. Transcript, June 5, 2001, p. 57, lines 14-18.

217. Transcript, June 4, 2001, p. 51, lines 19-24.

218. Transcript, June 4, 2001, p. 66, lines 23-24; p. 69, lines 6-8.

219. Inq. Doc. No. 1074343, Transcript, June 6, 2001, p. 114, line 23 – p. 115, line 2.

220. Inq. Doc. No. 1019086; Transcript, June 6, 2001, p. 152, lines 7-13.

221. Transcript, June 6, 2001, p. 152, lines 17-24.

222. Transcript, June 5, 2001, p. 58, line 25 – p. 59, line 3; p. 126, line 10 – p. 127, line 4.

223. Transcript, May 15, 2001, p. 155, lines 15-17, 22-25.

224. Transcript, June 27, 2001, p. 239, line 25 – p. 240, line 15.

225. Transcript, May 16, 2001, p. 98, lines 6-9.

226. Transcript, June 5, 2001, p. 58, lines 21-24.

227. Transcript, June 5, 2001, p. 59, lines 10-13.

228. Transcript, June 6, 2001, p. 258, lines 16 – p. 259, line 6.