On June 18, 2015, the new Federal Pipeline Safety Act
Bill C-46) received Royal Assent. The Pipeline
Safety Act includes amendments to the National Energy
Board Act ("NEB
Act") and the Canada Oil and Gas
Operations Act. These amendments impose greater obligations
and liability on companies that operate federally-regulated oil and
gas pipelines. The Government's public
statement indicates that the legislative changes will
"strengthen incident prevention, preparedness and response,
and liability and compensation."
A key part of the Pipeline Safety Act is the
codification of the "polluter pays" principle. The stated
purpose of new sections of the NEB Act is to
"reinforce the 'polluter pays' principle by, among
other things, imposing financial requirements on any company that
is authorized under this Act to construct or operate a
Changes to the NEB Act will make any party whose fault
or negligence causes an unintended or uncontrolled release of oil
or gas (a "release") responsible for the resulting costs,
with no limit or ceiling on liability. The costs that can be
recovered include actual loss or damage from the release, as well
as the costs of a Government, Aboriginal governing body or other
party that takes action in response to the release. This liability
is joint and several, which means that the harmed parties can fully
recover from any party who is at fault. As between themselves, the
responsible parties may dispute their respective liability.
Significantly, the additions to the NEB Act set out in
the Pipeline Safety Act will also impose liability on a
pipeline constructor and operator for a release, even where no
fault or negligence is shown. In the case of a pipeline with the
capacity to transport at least 250,000 barrels of oil per day, the
limit of this without-fault (absolute) liability is $1 billion. For
other pipelines, the limit of this without-fault liability will be
set through Regulations. Those companies that construct and operate
pipelines will be required to maintain financial resources
necessary to pay the amount of their without-fault liability
exposure. The NEB may consider the company's financial
statements, letters of credit and insurance in determining whether
this requirement is met. Further requirements in this respect may
be included in the associated Regulations (which have not yet been
published). Pipeline companies may be allowed to participate in a
"pooled fund" to cover their exposure
Claims against pipeline operators and constructors and those
other parties whose fault or negligence has caused a release may be
commenced up to three years after damages are suffered. This is
longer than the usual two-year limitation period for claims. There
is, however, an ultimate six-year limitation period from the date
of a release for a claim to be commenced, regardless of when the
damages are suffered.
The Pipeline Safety Act also sets the stage for new
requirements to be enacted to regulate the abandonment of
pipelines. Broad new powers are included to allow for Regulations
setting out how the NEB will oversee pipeline abandonment and
ensure that pipeline companies retain sufficient resources to cover
the financial consequences from abandoned pipelines. This may
include a requirement for pipeline companies to maintain a fund to
pay for costs and expenses related to abandoned pipelines.
Another notable aspect of the Pipeline Safety Act is
the establishment of a new as-required tribunal to adjudicate
claims for damages from pipeline releases. Further, the legislation
includes a new power to create Regulations that would allow the NEB
to designate a third party to oversee and implement the remediation
and repair required after a release if it is determined that the
pipeline operator and constructor does not have the necessary
financial resources or has not complied with prior NEB
The amendments to the NEB Act and the Canada Oil
and Gas Operations Act that are set out in the Pipeline
Safety Act will come into force on June 18, 2016. Prior to
that time, we expect that Regulations setting a variety of new
rules and NEB powers will be prepared and published, in part to
allow pipeline companies to be ready for any new requirements.
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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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
In Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363, the Alberta Court of Queen's Bench enforced the "immediate replacement" provision in the Canadian Association of Petroleum Landmen 2007 Operating Procedure...
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