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Arbitrator clarifies annual Blue Box funding obligation

A recent arbitrator’s decision has resolved a dispute between Stewardship Ontario and the Resource Productivity and Recovery Authority (RPRA) about costs included in the Blue Box steward funding obligation.

The annual steward funding obligation is the total amount that Ontario stewards must pay to municipalities for operating the Blue Box program and is the most significant driver of steward fees. (Information on the recently set 2020 interim obligation is available here.)

Stewardship Ontario initiated arbitration in October 2018 after being unable to resolve its concerns about three costs included in the obligation and detailed below. The net result of the arbitration is the elimination of one of the cost items. The complete arbitrator’s decision is available here.

In-kind: In addition to the value of in-kind advertising provided by newspaper publishers, a cash contribution by stewards was first included in the 2015 steward obligation, resulting in approximately $1.1 million annually in fees payable by all stewards. The arbitrator accepted Stewardship Ontario’s position that RPRA did not have the legal authority to include this charge in setting the steward obligation and directed RPRA to remove this cost from the 2019 and subsequent obligations.

Material Management: Stewardship Ontario raised a concern that the annual obligation incorrectly included municipal costs for materials that did not fit the definition of Packaging and Printed Paper (PPP). The arbitrator determined that RPRA is entitled to continue including this cost in the obligation and recommended collaboration on a better methodology to identify material in the municipal blue box  that can properly be removed from the steward funding obligation.

Cost Containment: Steward cost containment was introduced in the 2016 obligation in response to growing net municipal costs from a changing Blue Box material mix and to incentivize stewards to develop PPP that is easier and less costly to recycle. Stewardship Ontario questioned the legitimacy of a steward cost containment fee  at the outset and again when the annual amount increased from $2.1 million in 2016 to $7.1 million in the 2019 obligation. The arbitrator’s interpretation of the Blue Box Program Plan is that RPRA is entitled to include cost containment in the steward obligation.  Further, RPRA’s formula for calculating steward cost containment was not unreasonable because, among other things, RPRA is now in the course of reconsidering the methodology in setting the 2020 steward obligation and a forward-looking solution is more reasonable than going over old ground.

 


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