Vol. 135, No. 32 — August 11, 2001

Potato Wart Compensation Regulations

Statutory Authority

Plant Protection Act

Sponsoring Agency

Canadian Food Inspection Agency

REGULATORY IMPACT ANALYSIS STATEMENT

Description

The purpose of the Plant Protection Act is to protect plant life (environment) and the agricultural and forestry sectors of the Canadian economy by preventing the importation, exportation and spread of plant pests (e.g. insects and diseases), and where the Minister determines that, in the circumstances, it is necessary and cost-justifiable to control or eradicate plant pests.

Potato wart is a disease of potatoes caused by the presence of the soil-borne fungal pathogen, Synchytrium endobioticum. Although not a threat to human health, potato wart is a disease of quarantine significance that renders potatoes unmarketable and reduces yield. The disease attacks the growing points on the potato plant, such as eyes, buds and stolon tips and can remain dormant in the ground for as long as 40 years or more as resting spores.

On October 24, 2000, the Canadian Food Inspection Agency (CFIA) confirmed the presence of potato wart disease in a single field in Prince Edward Island and took immediate steps to prevent its spread. These measures included immediately quarantining the area where the disease was found (infested field), establishing a safety zone around the affected area (buffer zone), placing a prohibition on the movement of potatoes and equipment from the affected area and intensifying inspection and surveillance activities. In addition, equipment used on the infested field that was subsequently used on other fields was required to be cleaned and disinfected.

Because of the serious nature of this disease, the United States Department of Agriculture (USDA) implemented an emergency quarantine measure prohibiting the movement of all potatoes from Prince Edward Island into the United States on October 31, 2000. Since then, several bilateral meetings and consultations, including formal North America Free Trade Agreement consultations, have been held with respect to these restrictions. On April 26, 2001, authorities from the United States and Canada agreed to an operational workplan which set out conditions under which shipments of Prince Edward Island table-stock potatoes could resume cross-border trade. This workplan went into effect on April 30, 2001.

This regulatory amendment proposes compensation to growers who have incurred financial losses as a result of complying with phytosanitary measures ordered by the CFIA under the authority of the Plant Protection Act. In May 2001, 236 notices were issued by the CFIA to affected growers. The provisions of the Plant Protection Act allow the Minister to order compensation for specific actions taken to achieve this compliance.

For the purposes of these Regulations, affected fields in Prince Edward Island have been categorized into three field types:

— Category A land — the original field in which the potato wart disease was detected;

— Category B land — the one half kilometre buffer zone set up around the original field (Category A land); and

— Category C land — any fields which have had contact with equipment that was used on the original field (Category A land).

Compensation is therefore based on the degree of contact with the infestation and the amount of financial loss borne by growers in each category. The compensation included in this package applies only to those actions taken in order to achieve compliance with notices issued by the CFIA.

This compensation package applies mainly to costs incurred from October 24, 2000, to July 4, 2001 (after July 4, 2001, the Prince Edward Island Department of Agriculture and Forestry will assume responsibility for cleaning and disinfection of equipment). However, the Regulations provide for continued compensation for loss of land use for potato-growing land beyond 2001.

Alternatives

1. Maintain the status quo

Specific potato growers are directly affected by the restrictions put in place by CFIA under the Plant Protection Act and have incurred costs as a result of these restrictions. Without compensation regulations, growers in affected areas cannot recover any of the expenses incurred in order to comply with notices issued by the CFIA.

2. Introduce compensation regulations

Compensation of growers in the affected areas complements the actions taken by the CFIA to eliminate the disease. Areas where compensation may be made include costs associated with cleaning and disinfection of equipment, disposal of affected potatoes and costs associated with other control measures.

Benefits and Costs

Costs

The estimated direct cost of compensating growers for years 2000 to 2003 will be between $400,000 and $700,000. Compensation to be paid to growers is limited to:

— loss of use of potato-growing land;

— costs for required disposal of potatoes (including costs for potatoes sold for purposes other than those for which they were produced);

— cleaning and disinfection of equipment and potato processing and storage facilities;

— transportation costs for the return of soil from a processing facility to the field of origin;

— costs for additional water required to be provided to clean and disinfect equipment; and

— costs for the construction of crushed stone pads where cleaning and disinfection of equipment takes place.

The compensation amounts included in the Regulations are based on

(a) for loss of use of potato-growing land, the rental cost of replacement land determined by a qualified land appraiser;

(b) for cleaning and disinfection of equipment for Category A land, the actual costs incurred by the grower;

(c) for cleaning and disinfection of equipment for Category B and C land, the actual costs incurred by growers to a maximum determined by the CFIA in consultation with industry and with independent service providers; and

(d) for all other types of compensation, the actual costs incurred by growers.

Regulations have to be made to allow compensation for certain losses incurred, but it is important to note that, under the Plant Protection Act, the Minister cannot pay compensation for future losses.

Benefits

The main benefit of the proposed compensation is to support the implementation of the eradication measures by defraying some of the costs incurred by growers. This may lower government transaction costs of enforcing these measures by encouraging reporting and continued co-operation between CFIA and growers to effect required actions. The CFIA actions with respect to potato wart are not in place to protect human health, but growers business interests which in turn have an impact on the local economy. Failure to address this disease will negatively impact on Canada's seed potato and table stock exports. Last year, the total value of Canada's potato exports for both seed and table stock was $156,806,210.

Consultation

On May 23, 2001, the CFIA held a meeting with industry representatives regarding possible compensation regulations. At this time, the CFIA informed those present of the process to promulgate such regulations under the Plant Protection Act. The Province of Prince Edward Island, the Prince Edward Island Potato Board and growers are all supportive of compensation regulations and are anticipating that compensation will be provided.

In June and July 2001, two rounds of direct consultation with the Province of Prince Edward Island, the Prince Edward Island Potato Board and affected growers were held. During these consultations, affected parties were presented with the types of losses that could be considered for compensation under the provisions of the Plant Protection Act. A third consultation was conducted with growers to determine the losses that they incurred for the supply of water to provincial cleaning and disinfection units.

In total, 23 growers and the Prince Edward Island Potato Board were contacted. Detailed comments were received from 14 individuals. The following is a summary of the major issues identified during this consultation process and CFIA's response to the concerns expressed.

Issue No. 1: Loss of value of land and inability to use or rent land for potato production in the short-term.

Concern: Land restrictions have reduced land values and forced growers to seek replacement land to rent for potato production. Rental land is difficult to find and often requires extra preparation to make it suitable for producing potatoes.

Response: Although the CFIA recognizes that land values for the land presently under restriction have decreased, the Agency is bound by the provisions of the Plant Protection Act with respect to what costs can be considered for compensation. Future loss of income is not covered by the Act, nor is decrease in land value. The Agency is limited to providing compensation for the rental of land which replaces the original land on which potatoes were to have been grown.

Issue No. 2: There are additional costs for supplying water to the cleaning and disinfection crews employed by the Province of Prince Edward Island.

Concern: Although the Province of Prince Edward Island has agreed to assume the responsibility for cleaning and disinfection of equipment for the remainder of 2001, the Province does not have the capacity to supply all of the water necessary to complete this activity.

Response: The CFIA has modified its original compensation proposal in response to this concern raised by growers. Compensation will now be made available for growers who have incurred costs to supply additional water to the provincial cleaning and disinfection units.

Issue No. 3: The land use restrictions presently in place need to be removed or modified in some cases.

Concern: Growers cannot make long-term decisions with respect to their land because they do not know when the restrictions will be removed or modified.

Response: The CFIA recognizes that growers are anxious to resume normal potato production on their land; however, this concern falls outside the scope of these Regulations. Discussions to determine the next steps to eradicate the disease from the field originally infested with the disease and to determine when land use restrictions may be removed or modified are underway.

Issue No. 4: Workload of the provincial cleaning and disinfecting equipment.

Concern: The provincial cleaning and disinfecting units may not be able to meet demand from growers requiring their service.

Response: The CFIA has confirmed with the Prince Edward Island Department of Agriculture and Forestry that extra cleaning and disinfecting equipment has been purchased. This extra equipment, coupled with the compensation available to growers who are required to supply additional water, should allow the cleaning and disinfecting units to operate in a timely manner.

Compliance and Enforcement

Compliance will be obtained through the use of the following mechanisms under authority of the Plant Protection Act:

Contact

Mr. Robert Carberry, Executive Director, Plant Products Directorate, Canadian Food Inspection Agency, 59 Camelot Drive, Nepean, Ontario K1A 0Y9, (6l3) 225-2342 (extension 4751) [Telephone], (613) 228-6606 (Facsimile).

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to paragraph 47(q) of the Plant Protection Act (see footnote a), proposes to make the annexed Potato Wart Compensation Regulations.

Interested persons may make representations with respect to the proposed Regulations within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to Mr. Robert Carberry, Executive Director, Plant Products Directorate, Canadian Food Inspection Agency, 59 Camelot Drive, Ottawa, Ontario K1A 0Y9. Telephone: (613) 225-2342 (4751); Fax: (613) 228-6606.

Ottawa, August 1, 2001

RENNIE M. MARCOUX
Acting Assistant Clerk of the Privy Council

POTATO WART COMPENSATION REGULATIONS

INTERPRETATION

1. The definitions in this section apply in these Regulations.

"Category A land" means the land described in Schedule 1. (terrain de catégorie A)

"Category B land" means any field which lies in whole or in part within 0.5 km of the Category A land. (terrain de catégorie B)

"Category C land" means land that has had direct contact with equipment used on Category A land. (terrain de catégorie C)

"potato wart" means the potato disease caused by the presence of the soil-borne fungal pathogen, Synchytrium endobioticum. (gale verruqueuse de la pomme de terre)

COMPENSATION

2. (1) The Minister may order that compensation be paid to a grower who operates a farm for the production of potatoes on Category A, B or C land that the person owns or leases and who

(a) in accordance with a notice under the Plant Protection Act or Plant Protection Regulations received in the year 2000 or 2001, disposed of potatoes or potato by-products, treated equipment or a place used in the production of potatoes or was prohibited or restricted from using a place because of infestation or suspected infestation by potato wart;

(b) reported taxable farm income from the sale of potatoes in the year immediately preceding the year in which the notice was received;

(c) suffered a loss as a result of the disposition, treatment, prohibition or restriction;

(d) has taken all reasonable measures to mitigate the loss, including, if applicable:

(e) submits an application for compensation to the Minister within three years after the date of receipt of the notice.

(2) The grower may amend an application for compensation at any time before the expiration of the period referred to in paragraph (1)(e).

(3) A grower may submit an application after the expiration of the period referred to in paragraph (1)(e) if

(a) there were exceptional circumstances beyond the grower's control that prevented the grower from submitting an application during that period; and

(b) the application is submitted within 14 days after those circumstances cease to exist.

AMOUNT OF COMPENSATION

Category A Land

3. (1) The compensation to be paid to a grower who operates a farm on Category A land must not exceed

(a) in respect of a loss suffered because of a prohibition imposed on the use of that land, the cost of renting replacement land for any year in which potatoes would have been grown on the original land in accordance with the usual crop rotation for that land, to a maximum of $750 per hectare per year;

(b) in respect of a loss suffered because of the disposal of potatoes and potato by-products, the total of the grower's direct costs for the disposal, to a maximum of $40,000;

(c) in respect of a loss suffered because of the cleaning and disinfection of potato processing or storage facilities, the total of the grower's direct costs for the cleaning and disinfection, to a maximum of $50,000; and

(d) in respect of a loss suffered as a result of the cleaning and disinfection of equipment used on the land, the total of the grower's direct costs for the cleaning and disinfection.

(2) The total amount of compensation paid under paragraph (1)(a) must not exceed the fair market value of the land.

Category B Land

4. (1) The compensation to be paid to a grower who operates a farm on Category B land must not exceed

(a) in respect of a loss suffered as a result of a restriction imposed on the use of that land, the cost of renting replacement land for any year in which the potatoes would have been grown on the original land in accordance with the usual crop rotation for that land, to a maximum of $750 per hectare per year;

(b) in respect of a loss suffered because of the disposal of potatoes or potato by-product, the total of the grower's direct costs for the disposal, to a maximum of $30,000; and

(c) in respect of a loss suffered because of the cleaning and disinfection of equipment used in the production of a crop referred to in Schedule 2, the total of the grower's direct costs for the cleaning and disinfection that were incurred from the date of issuance of the notice requiring the cleaning and disinfection to July 4, 2001, to a maximum of the applicable amount set out in Table 1, 2 or 3 to that schedule.

(2) The total amount of compensation paid under paragraph (1)(a) must not exceed the fair market value of the land.

Category C Land

5. The compensation to be paid to a grower who operates a farm on Category C land in respect of a loss suffered because of the cleaning and disinfection of equipment used in the production of a crop referred to in Schedule 2 must not exceed the total of the grower's direct costs for the cleaning and disinfection that were incurred from the date of issuance of the notice requiring the cleaning and disinfection to July 4, 2001, to a maximum of the applicable amount set out in Table 1, 2 or 3 to that schedule.

OTHER COMPENSATION

6. The compensation to be paid to a grower who operates a farm on Category A, B or C land in respect of a loss suffered because of the transportation of soil from a potato processing or storage facility back to the field from which it originated must not exceed the total of the grower's direct costs for the transportation, to a maximum of $20 per tonne.

7. The compensation to be paid to a grower who operates a farm on Category A, B or C land in respect of a loss suffered because of supplying of additional water for the cleaning and disinfection of equipment, in the case where the Prince Edward Island Department of Agriculture and Forestry is unable to meet the demand for water, must not exceed the total of the grower's direct costs for supplying the additional water, to a maximum of $700 per field per year.

8. The compensation to be paid to a grower who operates a farm on Category A, B or C land in respect of a loss suffered because of the acquisition of crushed stone for use in constructing a cleaning pad on or near a field from which equipment is moved for cleaning and disinfection must not exceed the total of the grower's direct costs for the stone, to a maximum of $20 per tonne.

APPLICATION FOR COMPENSATION

9. (1) An application for compensation must be on a form provided by the Minister and signed by the grower and must include the following information and documents together with any other information and documents that are necessary for the Minister to determine whether the application meets the requirements of these Regulations:

(a) the grower's name, address and telephone number and, if applicable, the grower's facsimile number and e-mail address;

(b) the legal description of the land in respect of which the grower is making the application;

(c) a copy of every notice issued in respect of the land referred to in paragraph (b);

(d) whether the grower is a sole proprietorship, corporation, partnership, cooperative, association or an organization and the names, addresses and telephone numbers and, if applicable, the facsimile numbers and e-mail addresses of its owners or directors, as the case may be;

(e) evidence to substantiate the amount of the loss, including

(f) evidence to substantiate that the grower has made every reasonable effort to mitigate the loss.

COMING INTO FORCE

10. These Regulations come into force on the day on which they are registered.

SCHEDULE 1
(section 1)

LEGAL DESCRIPTION OF CATEGORY A LAND

ALL THOSE PARCELS OF LAND situate, lying and being on Lot 19, Prince County, Province of Prince Edward Island, bounded and described as follows, that is to say:

PARCEL 1

COMMENCING at a square stake fixed in the Southeast angle formed by the intersection of the Shore Road leading to Townsend's Corner with the Settlement Road leading to the New Village and running from thence South Thirty-eight (38) chains and Thirteen (13) links to Townsend's land;

THENCE East Ten (10) chains and Eighty-nine (89) links;

THENCE South One (1) Chain and Seventy (70) links to Marchbank's land;

THENCE East Six (6) chains and Fifteen (15) links to land formerly of William Hogg;

THENCE North Thirty (30) Minutes East Thirty-six (36) Chains and Twenty-five (25) links to the Settlement Road leading to the New Village;

THENCE North Seventy-eight (78) degrees and Thirty (30) Minutes West Eighteen (18) chains and Fifty (50) links along said Settlement Road to the stake at the place of commencement, containing Sixty-five (65) acres of land a little more or less and being the farm conveyed by the Commissioner of Public Lands to one Edwin P. Rayner by deed dated the 15th day of December, A.D. 1876 and subsequently conveyed as Parcel No. 1 in a Deed of Conveyance from John C. Pillman and wife to Simmons & MacFarlane Limited dated June 20, 1962 and registered on June 25, 1962 in Liber 128, Folio 126.

SCHEDULE 2
(Paragraph 4(c) and sections 5 and 9)

MAXIMUM AMOUNTS FOR CLEANING AND DISINFECTION OF EQUIPMENT

TABLE 1

POTATO CROP

Item	Column 1 Equipment	Column 2 Maximum cost per cleaning and disinfection ($)
1.	Spring Plough	60
2.	Lime Spreader	30
3.	Res-Till Cultivator	75
4.	Disc	75
5.	Harrow	75
6.	Rock Picker	30
7.	Planter	30
8.	Set Conveyors	15
9.	Grass Sprayer	45
10.	Top Dresser	30
11.	Cultivator or Hiller	45
12.	Pesticide Sprayer and Water Truck	30
13.	Kill Down Sprayer	30
14.	Track Eliminator	60
15.	Winter Wheat Spreader or Bale Buster	75
16.	Windrower	120
17.	Harvester	240
18.	Towing Tractor	15
19.	Chisel Plough	60
20.	Seed or Set Truck	15
21.	Fertilizer Truck	15
22.	Service or Fuel Truck	15
23.	Harvest Truck	15

TABLE 2

CEREAL CROP

Item	Column 1 Equipment	Column 2 Maximum cost per cleaning and disinfection ($)
1.	Lime Spreader	30
2.	Disc	75
3.	Harrow	75
4.	Drill Seeder	45
5.	Pesticide Sprayer	15
6.	Combine	15
7.	Straw Rake	15
8.	Straw Baler	15
9.	Seed or Fertilizer Truck	15
10.	Loader Tractor	15
11.	Service or Field Truck	15
12.	Seed or Fertilizer Delivery Truck	15
13.	Grain Truck	15
14.	Bale Removal Truck	15

TABLE 3

FORAGE CROPS (RYE, ROUND BALE, CHOPPED SILAGE)

Item	Column 1 Equipment	Column 2 Maximum cost per cleaning and disinfection ($)
1.	Lime Spreader	15
2.	Disc	75
3.	Harrow	75
4.	Drill Seeder	45
5.	Pesticide Sprayer	15
6.	Mower	15
7.	Seed or Fertilizer Truck	15
8.	Rye Fertilizer Spreader	15
9.	Fall Plough	60
10.	Service or Fuel Truck	15
11.	Seed or Fertilizer Delivery Truck	15
12.	Hay Cutter	15
13.	Tedder	15
14.	Rake	15
15.	Baler	15
16.	Tractor (Loader)	15
17.	Manure Spreader	15
18.	Manure Truck	15
19.	Bale or Silage Removal Truck	15
20.	Chopper and Wagon	15

Regulations Amending the Ozone-depleting Substances Regulations, 1998

Statutory Authority

Canadian Environmental Protection Act, 1999

Sponsoring Department

Department of the Environment

REGULATORY IMPACT ANALYSIS STATEMENT

Description

The Montreal Protocol

Recognizing that chlorofluorocarbons (CFCs) and halons deplete the ozone layer and have adverse effects on the environment, Canada, along with 23 other nations, signed the Montreal Protocol on Substances that Deplete the Ozone Layer on September 16, 1987.

Parties to the Protocol, now totaling over 170, have implemented control measures to achieve emissions reductions of ozone depleting substances (ODSs). These reductions are intended to prevent damages resulting from the gradual destruction of the ozone layer and thus contribute to protecting ecosystem and human health.

Since 1987, Canada has adopted regulations to meet its Montreal Protocol commitments. The Ozone-depleting Substances Regulations, 1998 control the import, manufacture, use, sale and export of ODSs as well as products containing ODSs.

Metered-Dose Inhalers (MDIs) and the Montreal Protocol

Approximately 7 500 tonnes of CFCs were used worldwide in 1999 to manufacture some 380 million metered-dose inhalers (MDIs) to treat asthma and chronic obstructive pulmonary diseases (about 0.02 kg of CFC per MDI). In 1999, the 10 million MDIs sold in Canada, which are all imported from Europe and the United States, released approximately 200 tonnes of CFCs into the atmosphere. Although the quantities of CFCs being used in MDIs are small when compared to the total quantities of CFCs used in the 1980's, they are considered significant, representing about 7 percent of all ODSs still being produced globally. These quantities are likely to increase due to an increase in the prevalence of asthma.

The Parties to the Montreal Protocol agreed to the principle of essential use exemption for MDIs on the basis that these exemptions would not deprive users from the benefits of prohibited ODSs while industry searches for alternatives. In essence, these essential use exemptions are temporary by nature and become obsolete once an alternative is marketed.

Products containing CFC substitutes are now readily available. The first CFC-free MDI (Aeromir™) was launched in the UK in 1995 and has been available in Canada since January 1998.

In addition, various animal health care products have historically used CFCs. However, these products have been converted to CFC-free formulations or are no longer marketed. It is therefore appropriate that the essential use exception for health care products under the current ODS regulations be reviewed.

Given that Canada is a Party to the Montreal Protocol, and that CFC-free alternatives are commercially available, Canada is now acting to fulfill its international commitment. Specifically, it is proposed that the Ozone-depleting Substances Regulations, 1998 be amended to:

(a) eliminate the current exemption for the use of CFCs in human or animal health care products;

(b) establish a phase-out schedule that will eliminate the use of CFCs in MDIs by January 1, 2005.

The phase-out schedule will prohibit the use of CFCs in:

(a) the production and importation of MDIs containing salbutamol or beclomethasone, effective January 1, 2002;

(b) the sale of MDIs containing salbutamol or beclomethasone, effective July 1, 2002;

(c) the sale of MDIs containing cortico-steroids, effective January 1, 2003; and,

(d) the sale of all MDIs, effective January 1, 2005.

In addition, a number of typographical errors have been identified in the current Regulations, and are corrected in this amendment.

It is proposed that these amendments will come into effect on January 1, 2002.

Alternatives

Given that this initiative is part of the Canada's domestic obligations to meet the requirements of the Montreal Protocol, no other alternatives to amending the existing Regulations have been judged appropriate. Therefore, a regulatory phase-out of CFCs in MDIs, when CFC-free alternatives are available, is the preferred option.

It should be noted that the Canadian phase-out schedule has been tailored to take advantage of the Research and Development efforts of industry to replace CFC formulations. Therefore, other control measures have not been considered because industry has produced CFC-free alternatives and is prepared to phase-out the use of CFC MDIs.

Benefits and Costs

Summary of Benefits and Costs

It is estimated that the phase-out will reduce the release of 3 239 tonnes of CFCs into the atmosphere over the 2001 to 2015 time period.

Overall, there is a net benefit to Canadian society for implementing the proposed phase-out schedule. The net benefit (benefits minus costs) is estimated to be in the order of $900 million.

It is anticipated that the proposed amendments will have a negligible impact on enforcement and government operations.

Problem and Approach

The environmental problem being addressed by the phase-outs is the avoidance of a depletion in the ozone layer and the resulting impacts on humans and ecosystems. The avoided release of CFCs created by the ban is expected to reduce the negative effects of ultra-violet radiation on humans and ecosystems. Thus, the ban is expected to generate societal benefits in terms of avoided future costs. The phase-outs will also create costs and cost savings for producers and users of MDIs containing CFCs.

A number of steps were employed to estimate the net benefit (benefits minus costs) of the proposed phase-out schedule. These steps include:

1. Defining the phase-out schedule for MDI formulations — phase-out time frames are identified above;

2. Identifying inventories and forecast — establishing baseline and forecasting future CFC quantities within the total populations of MDIs sold in Canada;

3. Estimating costs and benefits — identifying assumptions

— Costs for the proposed ban include substitution costs resulting from price differentials between MDIs with and without CFCs.

— Benefits were estimated for avoided health, fisheries, materials and agriculture damages resulting from the avoided release of CFCs; and,

4. Conduct uncertainty testing — understanding uncertainty and communicating results.

Each step will be discussed below.

Inventory and Forecast

Canadian MDI survey data are available for the years 1992 through 1999. These data provide information on generic and brand name sales as well as sales by product. Based on this information, an annual average growth rate of 6.5 percent was observed. This rate was applied to the survey data to provide a forecast of future MDI sales. Sensitivity testing was conducted using alternate rates of 3 percent and 9 percent. The forecasts of units sold by product and phase-out component are presented in Table 1.

Table 1: Forecast of MDI Units Sold by Active Drug (millions)
Active Drug	Phase-out Start Date	Year of Ban Phase-out
		Year 1	Year 5	Year 10
(a) and (b) Salbutamol and Beclomethasone	2002	6.4	8.1	11.0
(c) Cortico-steroid	2003	1.9	2.5	3.3
(d) Other	2005	4.7	5.9	8.0
Total		13.0	16.5	22.3

The forecast of CFCs released from MDIs was estimated using the number of units sold, and an average of 0.02 kg or 20 grams of CFC per unit.

Cost Assumptions

Cost assumptions by product are presented in Table 2. The maximum price differentials are used to estimate the relative costs or cost savings of requiring a substitution away from CFC products to CFC-free products. For example, for salbutamol, the cost savings of switching from a brand product to a CFC-free product is $8.57 per unit. Conversely, the cost of switching from a generic cortico-steroid formulation to the CFC-free MDI is $18.65 per unit ($68.65 minus $50).

Table 2: Price per Unit by Active Drug
	CFC-MDI, Brand Name	CFC-MDI, Generic	CFC-free MDI
Salbutamol and Beclomethasone	$26.36	$17.81	$17.79
Cortico-steroid	$77.98	$50.00	$68.65
Other	$77.98	$50.00	$68.65

Benefit Assumptions

Environment Canada has been undertaking benefit estimation studies associated with banning the production, importation and uses of ODSs since the early 1990s. These studies estimate the benefits created by reduced ODS emissions, the subsequent avoidance in a reduction in the ozone layer and the change in exposure of humans and ecosystems to ultra-violet radiation. In effect, avoided ozone layer depletion results in avoided future damages to humans and ecosystems.

Estimated monetary benefits are valued based on a per tonne reduction in the release of ODSs. Monetized benefits include:

— health — avoided skin cancers, cataracts and cancer fatalities;

— materials — avoided damages to synthetic polymers in the commercial sector;

— fisheries — avoided damages of ultra-violet radiation on aquatic ecosystems; and

— agricultural — avoided damages of ultra-violet radiation on crops.

The benefit estimation method uses an ultra-violet radiation exposure model developed by the United States Environmental Protection Agency (EPA) to estimate health benefits, and then does a benefits transfer (looks at values reported by EPA and applies them to Canada) for the non-health benefits.

The range of values reported using this method includes a low end estimate of $10 000 per tonne of ODP removed, a central value in the order of $46 000, and a high end estimate in the order of $600 000.

The benefit estimates assume a stream of benefits over a 60-year time period and use a 5 percent discount rate. The 60-year time period reflects the expected change in effects that will result from actions taken in response to the Montreal Protocol. The uncertainty inherent in these estimates is significant. Therefore, a range of estimates is used for sensitivity and uncertainty testing (discussed below).

Cost and Benefit Estimates

Presented below are the detailed calculations for the costs and benefits of each of the proposed phase-out components — (a), (b), (c) and (d) identified above. All figures in this Regulatory Impact Analysis Statement are in year 2000 dollars. Benefit and cost estimates are in present values, using a 5 percent discount rate and are reported with a 95 percent confidence level.

Phase-out components (a) and (b):

(a) prohibit the use of CFCs in the production and importation of MDI salbutamol and beclomethasone formulations, effective January 1, 2002; and,

(b) prohibit the use of CFCs in the sale of MDI salbutamol and beclomethasone formulations, effective July 1, 2002.

A CFC-free alternative is available for salbutamol and beclomethasone formulations in MDIs. This alternative is priced well below the majority of salbutamol and beclomethasone CFC MDIs sold in Canada. As a consequence, the ban will result in significant cost savings due to the substitution of high priced CFC MDIs to lower cost, CFC-free, salbutamol MDIs (i.e. the price of 59 percent of all salbutamol CFCs sold will be reduced). The net cost savings is estimated to be in the order of $323 million over ten years.

The ban is anticipated to avoid the release of approximately 1 600 tonnes of CFCs into the atmosphere. Environmental and health benefits are therefore positive and estimated to be in the order of $323 million.

The net benefit to society of this component of the proposed phase-out is positive, and in the order of $646 million.

Phase-out component (c): prohibit the use of CFCs in the sale of MDI cortico-steroid formulations, effective January 1, 2003.

A CFC-free alternative is available for cortico-steroid formulations in MDIs. This alternative is priced above the majority (50 percent) of cortico-steroid CFC MDIs sold in Canada. As a consequence, the ban will result in a cost increase due to the substitution of lower priced CFC MDIs to higher cost, CFC-free, cortico-steroid MDIs. The net cost increase is estimated to be in the order of $ 171 million.

The ban is anticipated to avoid the release of approximately 513 tonnes of CFCs into the atmosphere. Environmental and health benefits are therefore positive and in the order of $112 million.

The net cost (or negative net present value) to society of this component of the proposed phase-out in the order of $58 million.

Phase-out component (d): prohibit the use of CFCs in the sale of all MDI formulations, effective January 1, 2005.

CFC-free alternatives are available or will be available, for all remaining formulations of MDIs. It is anticipated that these alternatives will be priced below the majority (51 percent) of the remaining CFC MDIs sold in Canada. As a consequence, it is anticipated that this phase-out component will decrease prices for the majority of the remaining MDI market. Overall, it is anticipated that there will be a net cost decrease in the order of $24 million over 10 years.

The ban is anticipated to avoid the release of approximately 1 240 tonnes of CFCs into the atmosphere. Environmental and health benefits are anticipated to be positive and in the order of $273 million.

The net benefit to society of this component of the proposed phase-out is in the order of $298 million.

Summary of Results

Table 3 presents a summary of the results by phase-out component. Overall, the proposed amendments result in a net benefit which is significantly positive and in the order of $888 million.

Table 3: Summary of Results for Phase-out Components (Net Present Value (NPV) @ 5%; $ millions)
Component	Costs	Benefits	NPV
(a) and (b)	$(323.22)	$323.25	$646.48
(c)	$170.12	$111.93	$(58.18)
(d)	$(25.18)	$274.61	$ 299.79
Total	$(178.28)	$709.79	$ 888.08

Uncertainty Testing

A risk-based analysis (Monte Carlo simulation) was conducted to ensure that the final results (net benefit) reflect the uncertainty in key input variables (12 variables were subject to uncertainty testing). Uncertainty is factored into the analysis by defining uncertainty ranges around key variables (i.e. the benefit estimate uses a range of $10,000, $46,000 and $600,000). The uncertainty testing also provides an indication of the confidence interval around the final estimates.

Uncertainty testing indicates that the net benefit of the proposed amendment ranges between $63 million and $2 209 million, with a central value in the order of $888 million (see Table 3). Given that this range is always positive, we have confidence that the amendment will result in a positive net benefit for Canada.

Distributional Implications

The net cost savings, or net benefit to society, stemming from the phase-out of MDIs with CFCs will accrue to individuals, institutions and governments. Given that all CFC MDIs are imported into Canada from Europe and the United States, there will be no impacts on Canadian manufacturers. Therefore, the ban results in a cost savings to society, but will adversely impact some international private sector firms.

Consultation

Canada started its consultation process to phase out the use of chlorofluorocarbons (CFCs) in MDIs, following the request from the United Nations Environment Programme that Parties prepare a national transition strategy. Environment Canada, in cooperation with Health Canada, hosted two workshops in July 1997 and December 1997.

Discussion and comments received from stakeholders at these two workshops were incorporated in the transition strategy document, entitled Canadian Initial transition strategy for the phase-out of chlorofluorocarbons (CFCs) in metered-dose inhalers (MDIs) and published in July 1998.

In an effort to strengthen the transition strategy, Environment Canada, in cooperation with Health Canada, prepared a discussion document in the summer of 2000. This document, entitled Phasing out chlorofluorocarbons (CFCs) in metered-dose inhalers (MDIs), was distributed to almost 100 organizations in September 2000; the document was also posted on the Environment Canada's ozone Web site (http://www.ec.gc.ca/ozone/mdi/index_ e.htm).

In parallel, Environment Canada and Health Canada invited stakeholders to attend a consultation workshop in October 2000. Discussion at the workshop and comments received have been amalgamated in a document entitled Comments and Responses. This document has been distributed to all stakeholders and was also posted on the Environment Canada's ozone Web site (http://www.ec.gc.ca/ ozone/ mdi/discussion/comment2e.htm).

Essentially, the document and consultation process concluded that there is consensus supporting the proposed regulatory approach. It was also noted that the proposed phase-out schedule presented above is the preferred option to stakeholders. Stakeholder comments have therefore been taken into consideration in the drafting of the proposed amendments to the current Ozone-depleting Substances Regulations, 1998.

The National Advisory Committee under the Canadian Environmental Protection Act, 1999 (CEPA, 1999) was consulted on these proposed amendments in March 2001. Two comments were received (Alberta and Saskatchewan), in support of the initiative.

The next steps include the publication of the proposed amendments in the Canada Gazette, Part I. The publication is followed by a 60-day period for comments. Any comment provided to Environment Canada will be taken into consideration prior to having these amendments published in the Canada Gazette, Part II.

Compliance and Enforcement

Since the Regulations are promulgated under the CEPA, 1999, the Compliance and Enforcement Policy implemented under the Act will be applied by CEPA enforcement officers. The policy outlines measures designed to promote compliance, including education and information, promotion of technology development and consultation on the development of regulations.

When verifying compliance with these Regulations, CEPA enforcement officers will abide by the Compliance and Enforcement Policy, which sets out the range of possible responses to violations: warnings, directions and environmental protection compliance orders issued by enforcement officers, ticketing, ministerial orders, injunctions, prosecution, and environmental protection alternative measures which are an alternative to a court trial after the laying of charges for a CEPA, 1999 violation. In addition, the policy explains when Environment Canada will resort to civil suits by the Crown for costs recovery.

When, following an inspection or an investigation, a CEPA enforcement officer discovers an alleged violation, the enforcement officer will select the appropriate response, based on the following criteria:

— Nature of the alleged violation: This includes consideration of the damage, the intent of the alleged violator, whether it is a repeat violation, and whether an attempt has been made to conceal information or otherwise subvert the objectives and requirements of the Act.

— Effectiveness in achieving the desired result with the alleged violator: The desired result is compliance within the shortest possible time and with no further repetition of the alleged violation. Factors to be considered include the alleged violator's history of compliance with the Act, willingness to cooperate with enforcement officials, and evidence of corrective action already taken.

— Consistency: Enforcement officers will consider how similar situations have been handled in determining the measures to be taken to enforce the Act.

It is anticipated that the proposed amendments will have a negligible impact on enforcement.

Contacts

Alex Cavadias, Acting Head, Ozone Protection Program Section, Toxic Pollution Prevention Directorate, Department of the Environment, Ottawa, Ontario K1A 0H3, (819) 953-1132, alex.cavadias@ec.gc.ca, or Arthur Sheffield, Regulatory and Economic Analysis Branch, Economic and Regulatory Affairs Directorate, Department of the Environment, Ottawa, Ontario K1A 0H3, (819) 953-1172, arthur.sheffield@ec.gc.ca.

PROPOSED REGULATORY TEXT

Notice is hereby given, pursuant to subsection 332(1) of the Canadian Environmental Protection Act, 1999 (see footnote b), that the Governor in Council, pursuant to subsection 93(1) of that Act, proposes to make the annexed Regulations Amending the Ozone-depleting Substances Regulations, 1998.

Any person may, within 60 days after the publication of this notice, file with the Minister of the Environment comments with respect to the proposed Regulations or a notice of objection requesting that a Board of review be established under section 333 of the Canadian Environmental Protection Act, 1999 (see footnote c) and stating the reasons for the objection. All comments and notices must cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to the Chief, Chemicals Control Division, Department of the Environment, Ottawa, Ontario K1A 0H3.

Any person who provides information to the Minister of the Environment may submit with the information a request for confidentiality under section 313 of the Canadian Environmental Protection Act, 1999 (see footnote d).

Ottawa, August 1, 2001

RENNIE M. MARCOUX
Acting Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE OZONE- DEPLETING SUBSTANCES REGULATIONS, 1998

AMENDMENTS

1. Section 1 of the Ozone-depleting Substances Regulations, 1998 (see footnote 1) is amended by adding the following in alphabetical order:

"metered-dose inhaler" does not include a nasal spray. (inhalateur-doseur)

2. Subsection 16(5) of the Regulations is replaced by the following:

(5) A quarterly report referred to in subsection (1) shall be submitted within 30 days after the last day of the previous quarter whether or not importing or exporting took place during that quarter.

3. Subsection 20(4) (see footnote 2) of the Regulations is replaced by the following:

(4) Subsection 18(1) does not apply

(a) before January 1, 2002 to nasal sprays;

(b) before January 1, 2002 to metered-dose inhalers whose active ingredient is salbutamol or beclomethasone;

(c) before January 1, 2003 to metered-dose inhalers whose active ingredient is a corticosteroid; and

(d) before January 1, 2005 to all other metered-dose inhalers, including those containing a mixture of active ingredients.

(4.1) Paragraph 19(a) does not apply

(a) before July 1, 2002 to nasal sprays;

(b) before July 1, 2002 to metered-dose inhalers whose active ingredient is salbutamol or beclomethasone;

(c) before January 1, 2003 to metered-dose inhalers whose active ingredient is a corticosteroid; and

(d) before January 1, 2005 to all other metered-dose inhalers including those containing a mixture of active ingredients.

4. Paragraph 23(3)(i) of the Regulations is replaced by the following:

(i) refrigerant 509A (HCFC-22/octafluoropropane); or

COMING INTO FORCE

5. These Regulations come into force on the day on which they are registered.

[32-1-o]

Footnote a

S.C. 1990, c. 22

Footnote b

S.C. 1999, c. 33

Footnote c

S.C. 1999, c. 33

Footnote d

S.C. 1999, c. 33

Footnote 1

SOR/99-7

Footnote 2

SOR/2001-2

NOTICE:
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