Vale SA's Inco Ltd. must compensate residents of an Ontario town for polluting properties near a nickel refinery for decades, a lawyer said at the start of a trial that tests the province's environmental laws. The lawsuit, filed in 2001 by a group of residents of Port Colborne, Ontario, was the first in the province to be certified as a class action against a company over long-term environmental damage. The Court of Appeal for Ontario overturned two lower court rulings in 2005 and approved the group suit. The Supreme Court of Canada declined to hear Inco's appeal.

"A profit-making entity, for commercial purposes, contaminated the properties of its neighbors," Kirk Baert, a lawyer for the residents, told Superior Court Judge Joseph Henderson today in Welland, Ontario. Under British and American law, "the polluter pays for the problems their contamination caused," Baert said.

The plaintiffs are seeking C$400 million ($387 million) in compensatory and punitive damages, plus interest. Inco operated the nickel refinery in Port Colborne, 145 kilometers (90 miles) south of Toronto on the shore of Lake Erie, from 1918 to 1984. The refinery spewed tons of nickel oxide into the air, contaminating properties downwind, the provincial Ministry of the Environment said in a report in September 2000.

The contaminants posed a risk to the environment and to the health of some Port Colborne residents, according to the report. Nickel oxide is classified by the Canadian government as a cancer-causing substance. Residents of Port Colborne's Rodney Street area, where about 1,000 people live, said their home prices fell about 45 percent compared with elsewhere in the region after the report was released.

Inco's Denial
Inco has disputed the residents' claims in its statement of defense, saying Port Colborne property values didn't decline after September 2000. Residents knew for decades about the elevated nickel levels in the soil, which don't pose a health risk, the company said.

Inco has always complied with Ontario environmental laws and regulations, the company said. Brazil's Vale SA acquired Inco in 2007 for $16.7 billion and renamed the unit Vale Inco. The trial is scheduled to take about two months. The case is Between Ellen Smith and Inco Ltd., 12023/01, Ontario Superior Court of Justice (Welland).

(By Joe Scheneider*, Bloomberg / Mines and Communities, 19/10/2009)

* To contact the reporter on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net