Environmental Liabilities

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Environmental liabilities consist of estimated costs related to the remediation of contaminated sites, estimated costs related to obligations associated with the retirement of tangible capital assets and other environmental liabilities.

Contaminated Sites

A liability for remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the Government is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the Government's best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the cash flows required to settle or otherwise extinguish a liability are expected to occur over extended future periods, a present value technique is used. The discount rate applied is taken from the Government's Consolidated Revenue Fund monthly lending rates for periods of one year and over. The discount rates used are based on the term rate associated with the estimated number of years to complete remediation.

The Government has identified approximately 9,800 sites (11,600 sites in 2014) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Government has identified approximately 2,400 sites (2,500 sites in 2014), where action is possible and for which a gross liability of $5,810 million has been recorded. A recovery of $17 million has also been recorded resulting in a net liability of $5,793 million ($4,796 million in 2014). This liability represents the Government's best estimate of the costs required to remediate sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date. A net present value technique has been used for sites where the cash flows are expected to occur over extended future periods.

Asset Retirement Obligations

A liability for an asset retirement obligation is recognized when all of the following criteria are satisfied: there is an agreement, contract, legislation, or a constructive or equitable obligation that obligates the Government to incur retirement costs in relation to a tangible capital asset, the past event or transaction giving rise to the retirement liability has occurred, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. These costs are normally capitalized and amortized over the asset's estimated useful life based on the Government's best estimates of the cost to retire the tangible asset. If the related asset is fully amortized, the asset retirement obligation is expensed. The liability reflects the present value of estimated future cash flows required to retire the assets where amounts can be reasonably estimated and is expected to be settled as the related sites, facilities or assets are removed from service.

The asset retirement obligation is $6,502 million ($6,345 million in 2014) of which Atomic Energy of Canada Ltd. has recorded $6,487 million ($6,327 million in 2014) for nuclear facility decommissioning. These costs are normally capitalized and amortized over the asset's estimated useful life based on the Government's best estimates of the cost to retire the tangible asset. The liability reflects the present value of estimated future cash flows required to restore the assets where amounts can be reasonably estimated and is expected to be settled as the related sites, facilities or assets are removed from service.

Other Environmental Liabilities

A liability for unexploded explosive ordnance (UXO) affected legacy sites is recognized when there is an appropriate basis for measurement and a reasonable estimate can be made. These liabilities are present obligations arising from past transactions or events, the settlement of which is expected to result in the future sacrifice of economic benefits.

The recorded environmental liabilities are adjusted each year, as required, for present value adjustments, inflation, new obligations, changes in estimates and actual costs incurred.

If the likelihood of the Government's responsibility is not determinable, a contingent liability is disclosed in the notes to the consolidated statements. If measurement uncertainty exists it is also disclosed in the notes to the consolidated statements.

The Government has identified approximately 918 UXO (865 in 2014) suspected sites for which clearance action may be necessary. Of these sites, 57 (63 in 2014) are confirmed UXO affected sites. Based on the Government's best estimates, a liability of $1.3 million ($2 million in 2014) has been recorded for clearance action on 5(6 in 2014) of the confirmed UXO sites. The remaining 861 suspect sites are currently in the assessment stage and a reasonable estimate cannot yet be determined. Of these sites, the obligation for clearance action is likely for 68 sites, indeterminable for 774 sites and unlikely for 19 sites.

The Government's ongoing efforts to assess contaminated sites, asset retirement obligations and UXO affected sites may result in additional environmental liabilities. Any additional liabilities will be accrued in the year in which they become known and can be reasonably estimated.

Table 5.7 presents the liability balances of the custodian departments and Crown corporations for remediation liabilities for contaminated sites, asset retirement obligations and other environmental liabilities.

Table Summary

The table presents, to the nearest dollar, a two-year comparative of the environmental liabilities. It consists of three columns; a detailed listing of components; current year ended March 31; previous year ended March 31. The first series of rows presents the remediation of contaminated sites by department followed by a total and by crown corporation followed by a total. There is also a total for all liabilities related to the Remediation of contaminated sites. The second series of rows presents future asset restoration by department followed by a total and by crown corporation followed by a total. There is also a total for all liabilities related to Future asset restauration. The last row represents the total of the table.

Table 5.7
Environmental Liabilities

  March 31, 2015 March 31, 2014
Remediation liabilities for contaminated sites —    
Departments and agencies —    
Agriculture and Agri‑Food 2,422,353 1,513,644
Canada Border Services Agency 2,479,624 2,320,091
Correctional Service of Canada 2,017,213 3,963,650
Environment 122,609,100 110,916,041
Fisheries and Oceans 104,558,273 96,498,180
Health 167,497 167,482
Indian Affairs and Northern Development 3,017,667,968 2,602,985,802
National Defence 425,387,988 462,424,603
National Research Council of Canada 170,421 168,400
Natural Resources 988,830,523 987,527,496
Parks Canada Agency 24,171,903 20,761,201
Public Works and Government Services 159,863,436 119,571,537
Enterprise Cape Breton Corporation Link to footnote 1 154,686,277  
Subtotal 314,549,713 119,571,537
Royal Canadian Mounted Police 2,874,887 3,121,562
Transport 146,573,661 163,587,726
Miscellaneous adjustment 580,000,000  
Total 5,734,481,124 4,575,527,415
Consolidated Crown corporations and other entities —    
Canadian Broadcasting Corporation 377,000 588,000
Enterprise Cape Breton Corporation Link to footnote 1   158,548,000
Marine Atlantic Inc 431,000 431,000
National Capital Commission 43,850,000 24,224,000
The Jacques‑Cartier and Champlain Bridges Incorporated 31,100,000 35,861,000
VIA Rail Canada Inc. 200,000 500,000
Total 75,958,000 220,152,000
Gross remediation liability for contaminated sites 5,810,439,124 4,795,679,415
Less expected recoveries — Indian Affairs and Northern Development 17,321,495  
Net remediation liability of contaminated sites 5,793,117,629 4,795,679,415
Asset retirement obligations —    
Departments and agencies 566,494 555,149
Consolidated Crown corporations and other entities —    
Atomic Energy of Canada Limited (nuclear facility decommissioning) 6,487,228,000 6,326,556,000
Others 13,920,000 18,288,000
Subtotal 6,501,148,000 6,344,844,000
Total asset retirement obligations 6,501,714,494 6,345,399,149
Other environmental liabilities —    
Departments and agencies —    
National Defence (unexploded explosive ordnance affected sites) 1,312,586 1,989,054
Total environmental liabilities 12,296,144,709 11,143,067,618

Changes in Liability for Remediation of Contaminated Sites

Table 5.8 presents a summary of the changes in liability balances for contaminated sites. In addition to expenditures reducing environmental liabilities previously recorded, the government spent another $32,423,575 ($19,198,394 in 2014) as management and remediation costs on its contaminated sites when these costs became known in the year.

Table Summary

The table presents, to the nearest dollar, a two-year comparative summary o the changes in liability for remediation of contaminated sites. It consists of three columns; a detailed listing of components; current year ended March 31; previous year ended March 31.

Table 5.8
Changes in Liability for Remediation of Contaminated Sites

  March 31, 2015 March 31, 2014
Opening balance 4,795,679,415 4,891,367,062
Less: Expenditures reducing opening liabilities 299,922,633 432,808,848
Add: Changes in estimated remediation costs 1,276,011,671 261,574,058
New liability for sites not previously recorded 38,670,671 75,547,143
Closing balance (gross) 5,810,439,124 4,795,679,415
Expected recoveries 17,321,495  
Closing balance (net) 5,793,117,629 4,795,679,415

Footnotes

Footnote 1

Enterprise Cape Breton Corporation was dissolved in June 2014 and the responsibility for the contaminated sites for Cape Breton Operations was transferred to Public Works and Government Services Canada.

Return to footnote 1 referrer

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