Canada: Federal Government Introduces New Legislation To Enhance Pipeline Safety

On December 8, 2014, the Honourable Greg Rickford, Canada's Minister of Natural Resources, introduced for first reading the Pipeline Safety Act (Bill C-46). Through proposed amendments to the National Energy Board Act (Act) and the Canada Oil and Gas Operations Act, Bill C-46 includes a number of measures designed to strengthen the safety and security of pipelines regulated by those Acts.

New Incident Prevention Measures

  • The Bill will enshrine for the first time in NEB legislation the "polluter pays" principle, making pipeline companies fully responsible for the costs and damages they cause through the release of oil, gas or any other commodity from a pipeline [s. 16 of the Bill, adding ss. 48.11-48.17 to the Act].
  • It clarifies and expands the audit and inspection powers of the NEB.
  • It expands the NEB's powers to ensure companies operating pipelines remain responsible for their abandoned pipelines [ss. 13-15 of the Bill, s. 48.49 Act].

New Liability and Compensation Measures

  • The Bill will build on a pipeline company's unlimited liability under common law or civil law, for damage caused by their fault or negligence.
    • Fault and Negligence – Making pipeline companies and any other persons who by fault or negligence cause a spill, jointly and severally liable for a variety of damages, including (i) all actual loss or damage caused to any person and (ii) the costs incurred by Canada, a province or any other person in response to an incident [ss. 48.12(1)-(3)].
    • Absolute Liability – Making all companies who operate a pipeline "absolutely liable," without proof of fault or negligence, for any releases from a pipeline, up to a limit of liability for major pipelines (over 250,000 barrels/day) of $1 billion. For smaller pipelines, the regulations will specify the limit. This new, absolute liability is in addition to the unlimited liability provisions in the Act and at common law [ss. 48.12(4)-(12)].
    • Statutory Causes of Action – Creating new statutory causes of action for both fault and absolute liability claims, which may be pursued in any court of competent jurisdiction, with a limitation period of three (and not more than six) years [ss. 48.12 (10)-(12)]. This is a longer than the standard two-year limitation period in most limitation statutes.
  • The Bill will provide governments with the ability to pursue pipeline operators for the costs of environmental damages.
  • It will provide the NEB with the authority to order reimbursement of spill cleanup costs incurred by any governments, Aboriginal governing body, or individuals [s. 48.15].
  • It will expand the NEB's authority to recover costs incurred for incident response from industry, in exceptional circumstances.

New Incident Preparedness and Response Measures

  • Financial Assurance – The Bill will require companies that operate pipelines to hold a minimum level of financial resources, set at $1 billion for companies operating major pipelines. These financial resources must be readily accessible to ensure rapid response to any incident. It will also give the NEB the power to order greater amounts be held, and in the manner it specifies (e.g., letters of credit, guarantees, bonds or suretyships and insurance) [s. 48.13].
  • Pooled Fund – It will allow companies to create a "pooled fund" in a manner approved by NEB regulation, to hold these minimum levels of financial resources [s. 48.14].
  • Enhanced NEB Authority for Spill Response & Reimbursement – It will provide the NEB with the authority to take control of incident response and cleanup in exceptional circumstances, if a company is unable or unwilling to do so, and to order the reimbursement of any level of government, Aboriginal governing body or person for their cleanup costs. The NEB may also draw on the pooled fund to finance such a cleanup or reimbursement, or may make payment out of the Consolidated Revenue Fund [ss. 48.16 - 48.17, 48.46].
  • Pipeline Claims Tribunal – The Bill will establish a new, ad hoc Pipeline Claims Tribunal to "examine and adjudicate, as expeditiously as the circumstances and considerations of fairness permit, the claims for compensation made under this Act in relation to the release" from a pipeline. The Tribunal will have all of the powers, rights and privileges that are vested in a superior court, but it will not be bound by a court's rules of evidence (as is the case for most administrative tribunals) [ss. 48.18-48.34].
  • Claims and Hearing Process – The Bill sets out in detail a compensation claims and hearing process before the Tribunal and the conditions in which, after a Tribunal award, the Board must pay a claimant's compensation. Payment may be made from the Consolidated Revenue Fund [ss. 48.35-48.42, 48.46].

Minister Rickford's announcement builds on previous federal government action to strengthen pipeline safety in which the NEB was provided with authority to levy administrative monetary penalties and increased the number of inspections and audits that it conducted. Collectively, these initiatives strengthen the NEB's ability to ensure the safety pipeline infrastructure while allowing Canadian's to benefit from resource development.

Other non-legislative actions pursued by the federal government include working with Aboriginal communities and industry to develop a strategy to better integrate Aboriginal peoples in pipeline safety operations, and seeking guidance from the NEB on the use of best available technologies for pipeline projects. The improvements proposed by Minister Rickford are connected to the federal government's plan for Responsible Resource Development, which strengthens environmental protection, enhances Aboriginal engagement and streamlines the review of major resource projects to make the regulatory process more timely and predictable.

The federal government news release is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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