Who Watchdogs BC’s Ship Breakers?

[Editor’s note: This piece is a followup to a Tyee special report called 'Where Should Ships Go When They Die,' which took a deep dive into how a pop-up ship recycling company called Deep Water Recovery Ltd. set up shop in Baynes Sound, in an ecologically sensitive area responsible for half of the province’s oyster production. Read yesterday’s part one of our followup.]

A patchwork of overlapping regulatory boundaries surrounding the ship-breaking industry has a local Vancouver Island government going to court in order to bring a foreign-owned company in line with local laws.

The Comox Valley Regional District is seeking an injunction against a local ship-breaking business in attempt to shut it down, alleging it violated regional bylaws.

Other opponents to the business, including a local advocacy group and the K’ómoks First Nation, strongly oppose the operation because of its potentially harmful environmental impacts.

Deep Water Recovery Ltd. and its sister company, Union Bay Industries Ltd., sit on the shoreline of Baynes Sound, a 40-kilometre long channel off the east coast of Vancouver Island. This area hosts a provincial shellfish reserve and is recognized by Fisheries and Oceans Canada as an Ecologically and Biologically Significant Area.

The K’ómoks First Nation says the area is important for its economic, food, social and ceremonial purposes. It's also where half of B.C.’s shellfish are produced.

A potentially hazardous industry setting up shop in a vital ecosystem creates environmental concerns — which is traditionally the purview of the province.

But in this case, regulation has fallen to the regional government.

Why has the province downloaded responsibility onto the lowest level of government, which has the smallest amount of resources?

When The Tyee requested an interview with the Ministry of Forests to explain this step, the government said it would not comment on a case that is currently before the courts. The province is not named in the regional district’s lawsuit.

As part of its advocacy work, the Concerned Citizens of Baynes Sound Society or CCOBS — which opposes ship breaking in the region — has been filing FOI requests with the provincial government to access all correspondence related to Deep Water and Union Bay Industries. These FOI’d documents and emails have been shared with The Tyee.

The emails lay out a case that environmental lawyer Carla Conkin recognizes as a strategy she calls “project splitting.”

Conkin is the legal representative for the Concerned Citizens of Baynes Sound but is not involved in the lawsuit.

Project splitting is where a business divides a project so they can take small pieces to get required authorizations instead of going through the whole regulatory process normally required for large projects, she says.

The “divide and conquer” strategy “works government against itself,” she adds.

When Union Bay Industries sold to new owners it was likely done through a share transfer and not an asset purchase, which means it wasn’t obvious to government regulators that there was a behind-the-scenes change of control, Conkin says.

According to FOI’d documents, when representatives for the new owners first contacted the Ministry of Forests, Lands, Natural Resource Operations and Rural Development in 2018, they asked if they could build a marina. At the time they said they'd keep using the area as a log sort. Then they asked to moor barges, then asked to pull barges out of the water. Then to dismantle them.

Conkin, who has seen the same FOI documents that were shown to The Tyee, says the company was “systematically trying to suggest these are minor use changes.” This flies the company under the radar and avoids triggering a proper assessment and consultation where regulators could review the use change, she says.

In B.C. if a company wants to use Crown land, like the beach between the low tide and high tide mark, it needs to get a licence of occupation from the Ministry of Forests. The company is only allowed to use the Crown land for the specific purpose named in the licence, according to the Ministry of Forests.

When the new owners took over Union Bay Industries they also took over the existing licence that allowed the company to handle and store logs, because the previous business had been a log sort facility for 30 years.

But, as Deep Water and Union Bay Industries director Mark Jurisich told The Tyee in an interview in February, the plan was always to do ship breaking.

Pushing for piecemeal changes is part of the project-splitting strategy, Conkin says. If a company is asking for a change of use, regulators would ideally look at the entire project so authorizations match what’s actually happening on the ground, she adds.

When provincial regulators realized Union Bay Industries and Deep Water were not using the licence for log handling they issued a cease and desist order, demanding the companies stop all ship-breaking activities.

The companies did not comply.

Instead of issuing fines or revoking the original log handling licence, provincial regulators worked with the company over the next year and wrote them a new licence that allows the companies to move ships over the foreshore so they can be ship broken in the upland portion of the site, which falls under the regional government's jurisdiction. The lease expires in September 2038.

Conkin says project splitting puts the province between a rock and a hard place because the province doesn’t want to stop Deep Water from doing important projects like pulling sinking barges out of the water, but also wants it to be compliant. “It creates a bit of a domino effect,” she adds. “The company just works at the government on a piecemeal basis, and then they end up with the authorization that they're looking for, without having to go through the hoops.”

The province declined to answer emailed questions about its role in regulating ship breaking and enforcing its own cease-and-desist orders against Deep Water and Union Bay Industries.

Jurisich directed The Tyee to his lawyer for questions. The lawyer said he could not comment on an issue before the courts, but added Deep Water “intends to vigorously defend the lawsuit.”

Whose jurisdiction is it anyways?

It’s not clear what level of government is responsible for regulating ship breaking. Ships moored offshore are under federal jurisdiction, the foreshore belongs to the province and upland is the regional district’s area.

Canada doesn’t have specific ship-breaking regulations that clear this question up — but regional and federal governments say it’s the province’s job.

In a February 2022 interview, Daniel Arbour, director of Comox Valley Regional District Area A, which covers Baynes Sound, told The Tyee environmental concerns are “almost exclusively” in the purview of the province.

Transport Canada similarly told The Tyee the province, not the federal government, is responsible for permitting the breaking and dismantling of ships.

But the province did not enforce its cease-and-desist order and later approved a new licence that would let the companies haul ships out of the water to be ship broken on land under the regional government's jurisdiction.

The main regulatory tool regional districts have for regulating businesses are bylaws, Arbour told The Tyee in July. Because of this, businesses operating in rural areas are “more free” but still have to follow local laws around zoning and building permits. The company would also be required to follow provincial and federal regulations where applicable.

Regional districts can’t even issue business licences, which would allow the local government to review a business before it sets up shop, Arbour says.

This is why bylaws are so important for regional governments and why the Comox Valley Regional District is taking the ship-breaking operation to court for violating zoning bylaws.

Arbour says the court case is seeking to shut down ship-breaking operations. The regional government has also passed a resolution to ask senior levels of government to step up and better regulate ship breaking in B.C.

Under the Declaration on the Rights of Indigenous Peoples Act passed in November 2019, the province is required to consult with First Nations on matters related to industry operating on their traditional territory.

In April 2020, when the province notified Deep Water it would need to consult with the K'ómoks First Nation, whose traditional territory includes the area of Union Bay, the nation said its representatives weren’t able to meet in person due to COVID-19 concerns and that it was focusing on emergency operations at that time, according to FOI’d documents.

Later, when the nation requested a Zoom meeting with several ministries so the regulators could assure the nation “there will be absolutely no impacts to KFN's aquaculture facility,” Jurisich reprimanded the province and called the request an “abuse of privilege” because his business has “nothing to do with a traditional way of living.”

In a December 2021 statement that criticized Deep Water’s operations, the K’ómoks First Nation said the business is located in a “shellfish rich and sensitive ecological area” that supports important shellfish stocks for the nation’s economic, food, social and ceremonial purposes.

The shift to ship breaking: a chronology

So how did regulating ship breaking end up getting downloaded to the lowest level of government? The documents obtained through FOI legislation shed light on what happened.

When a company wants to change what it uses Crown land for it needs to submit an application to the province, which then goes through the process of referrals, public hearings and First Nations consultations.

This all costs money.

Back in 2018 when Union Bay had recently been taken over by new owners a company representative reached out to the province and asked if the company could build a marina. The representative noted their concern that a formal application could be denied — which would be a waste of “a lot of time and effort,” according to FOI’d documents.

Instead of applying for a change of use, the company “divided and conquered” by using the project-splitting approach, Conkin says.

In September 2019, another representative told the ministry it “will continue on with log handling now partially in addition to tying up barges (no dissembling of barges).”

A month later they asked if they could “store and tie up barges.”

When the province asked how barges were related to logs, the company replied “vessel storage and tie up will occur for the purpose of facilitating vessel haul out. There are no other changes to location or area of this lease.”

Next, in November 2019, came the first request to haul a sinking barge out of the water. The province gave the company permission “for this one-time removal of the barge only.”

This seems to be when the government caught on to the fact that the property was no longer being used to store logs, as it asked the company to amend its lease.

Deep Water complied, applying to change its lease to “industrial general” from “log handling” so it could drag vessels over the beach to the upland site to dismantle them.

The upland site is the regional district’s jurisdiction. Arbour says during this time “co-ordination between agencies” was poor and that the entire situation highlights deficiencies in the way different levels of government collectively interact with industry.

The process also did a poor job of checking in with First Nations, he added.

Around this time the province was trying to co-ordinate consultation with the K’ómoks First Nation, but the band office was scrambling to respond to the COVID-19 pandemic, which delayed the process.

In April 2020, the province gave special permission to Deep Water to haul a second barge out of the water.

Members of the Concerned Citizens of Baynes Sound told The Tyee they could see and hear how Deep Water started ship breaking vessels on a regular basis in December 2020.

Around the same time, the province reminded Deep Water via email that applying for a new lease is not the same as being granted one.

When the company didn’t respond to this warning, the province issued a cease-and-desist order on Feb. 17, 2021, demanding the company stop ship breaking and remove all vessels from the water lot. The order added that failure to comply would result in the existing lease being cancelled and the FLNRORD enforcement branch taking action.

The letter also requested Deep Water submit an environmental management plan as part of its application to modify the purpose of its lease. Failure to do so would result in the application being cancelled.

On the same day the cease-and-desist letter was received, FOI documents show that Jurisich told a consultant who was helping him write an environmental management plan to “keep clear” of “unnecessary distractions” when the consultant asked if the area could have any archeological findings. Jurisich added he was not aware of any.

The next day, Jurisich emailed the province asking if Deep Water could do ship breaking “notwithstanding the current cease and desist letter.”

The province’s threatened enforcement never materialized.

Instead, the province worked with Jurisich to finalize the emergency management plan.

Environmental lawyer Conkin says this is part of industry’s strategy to end up with authorization without having to go through an approval process. A company will ask for one-time permission, like pulling a sinking barge out of the water, and then the government is forced to chose between allowing a barge to sink or approving incremental changes pushed for by a company.

During this time, Deep Water was ship breaking with a foreshore lease that only allowed the land to be used for log handling. In an email, Jurisich even told the province the site employs 11 full-time workers and injects “roughly $100,000 into the local economy each month.”

A new foreshore lease was issued to Union Bay Industries on Oct. 15, 2021, to store and haul vessels out of the water “to facilitate upland activity” — seven months after the cease-and-desist order was issued.

Deep Water did not pause its operations during this time, Jurisich told The Tyee.

It seems like the government got itself “tied in a knot” when it approved piecemeal changes and failed to act decisively on this file, Conkin says.

Environmental law says that if a company is acting “offside” a government can use enforcement measures to shut it down, Conkin says. “That's how it should work.” But reality can be different. “Companies can take advantage and they know how to deal with that,” she says. “This is not new behaviour. You see this on various levels on various projects and reviews all the time.”

Conkin says the lack of co-ordination between the levels of government is concerning. For example, when the regional government found the companies to be non-compliant with local bylaws the provincial lease should have been automatically suspended, she says.

“To me this is happening because we've got issues among governments not co-ordinating and integrating their systems,” she adds.

It’s unclear what enforcement the province has engaged in since it issued the foreshore lease.

Drone footage and complaints

Meanwhile, the Concerned Citizens of Baynes Sound has been using drones to document Deep Water’s operations.

Jurisich says these drones harass his employees.

But drone footage has captured images of barges being dragged across the foreshore and barges being dismantled over permeable ground, and hay bales being used in spill containment over permeable ground — all of which should not be allowed, according to the NGO Shipbreaking Platform.

Jurisich’s lawyer did not respond to questions about why hay bales were used.

Deep Water’s emergency management plan says it will use inflatable rollers to pull vessels out of the water without damaging the sea floor, and will then transfer the vessels onto the site’s paved area for dismantling. But an aerial photo taken by a drone contradicts this and shows vessels being dismantled while on the foreshore, touching the water.

The province also forwarded a complaint submitted by the K’ómoks First Nation Guardian Watchmen to Deep Water days after it was submitted to the province.

According to the FOI’d email from the province to Deep Water, the complaint alleged Deep Water employees were not wearing proper personal protective equipment; that employees were not using any means of containing hazardous materials; and that Deep Water employees dug a hole and buried caustic material on site that they found on a ship that melted hoses. Some of this caustic material spilled into the ocean, according to the complaint.

In a June 2022 email, the Ministry of Forests told The Tyee that forwarding a complaint, and outlining its allegations in detail, is “absolutely a reasonable and responsible step” to try and “understand if the claim was legitimate and to get a sense of the scale and magnitude of any possible impact to the environment.”

The ministry said regulators did “multiple site visits” following this complaint, but “no issues of non-compliance warranted fines.” Regulators have also inspected the site to ensure it is compliant with the Environmental Management Act.

What happens next is up to the courts.

Lawyers for the Comox Valley Regional District, and Deep Water and Union Bay Industries are collecting evidence to be used in the upcoming court case, which does not yet have a hearing date set by the B.C. Supreme Court, a regional district spokesperson told The Tyee.

The district is seeking an injunction against the companies to shut their business operations down, prohibit people from living at the industrial site and to repair alleged damage done to a stream in a provincial park.

None of these allegations have been proven in court. The companies deny any wrongdoing.