Canada’s Minister of Natural Resources recently announced measures to enhance the liability and accountability of pipeline companies for oil spills. The proposed measures, which have not yet been presented to the Canadian Parliament but are intended to become effective by 2017, introduce absolute liability for owners and operators of federally regulated pipelines. If passed by the Parliament, companies will be liable for up to $1 billion in costs and damages from spills from their pipelines regardless of causation. The proposed legislation also requires companies to have financial resources on hand—namely, a minimum of $1 billion in financial capacity for major oil pipelines—to respond to leaks, spills, and ruptures. It empowers Canada’s National Energy Board (NEB) to access federal money for initial cleanup and remediation costs and to take control of incident response if the responsible company is unwilling or unable to do so. In such circumstances, the proposed measures would also allow NEB to recover from industry any response costs incurred by government, communities or individuals.
The measures are an outgrowth of the Canadian government’s “Responsible Resource Development” plan to streamline review of resource development projects while enhancing environmental protections and consultation. One component of this plan is to achieve a “world-class pipeline safety system,” a goal realized in part by the enactment of new rules last year requiring pipeline companies to develop safety, security and emergency management programs. In a related action to implement the plan, Canada’s Transport Minister also recently proposed measures aimed at developing a “world class tanker safety system.” These rules, like their pipeline counterparts, seek to enhance Canada’s liability and compensation regime in the context of oil spills from tanker ships. They also put in place new response plans and resources in four areas of the country with relatively high tanker traffic and increase the array of available spill cleanup tools (for example, by lifting legal impediments on the use of dispersants and other cleanup methods when their use would bring about a net environmental benefit).
These announcements about new pipeline safety and oil tanker rules came on the heels of actions taken last month by the Canadian Transport Minister to implement recommendations of the country’s Transportation Safety Board to improve safety in rail transportation of crude oil and other petroleum products. Specifically, Transport Canada announced in April that it will require (among other measures) phase-out or retrofitting of certain older tank cars used to transport crude oil and ethanol, and that it will take steps to strengthen emergency response capacity for rail incidents across the country. Transport Canada also proposed increased penalties for violations of railway safety regulations as recently as last week.
Several commenters remarked on the proximity of the recent announcements to the Canadian government’s expected final ruling on the Northern Gateway pipeline project, proposed by Enbridge to transport Alberta oil sands crude across British Columbia for export to markets in the Pacific Rim. The government is expected to approve the project in a final ruling due next month. Some have speculated that the announcements were timed in order to boost public support for the Northern Gateway and other pending pipeline projects.
Canadian Natural Resources officials acknowledge that there has never been a major oil spill where a pipeline company was not responsive, and there has only been one pipeline incident in either Canada or the U.S. to date where response costs have exceeded $1 billion (the 2010 Enbridge oil spill in Marshall, Michigan). Thus, the impact of this proposal may be limited. It remains to be seen whether the U.S. DOT will look to this rule change as something necessary or reasonable to be considered in the U.S.