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 and the Canada Oil and Gas Operations Act.The amendments are effective June 18, 2016.
Key amendments include codification of the “polluter pays” principle, which will make any party whose fault or negligence causes an unintended or uncontrolled release of oil or gas responsible for the resulting costs, with no limit or ceiling on liability. The costs that can be recovered include actual damages 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.
The amendments to the NEB Act will also impose liability on a pipeline operators and constructors 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 strict liability is $1 billion. For other pipelines, the limit will be set through new regulations. The statute of limitations to initiate these claims is three years after damages occur but no later than six years after the date of the release. Liability for these claims is joint and several. Accordingly, a plaintiff may recover all the damages from any of the defendants regardless of their individual share of the liability. Companies that construct and operate pipelines will be required to maintain financial resources necessary to pay the amount of their strict liability exposure. The NEB may consider the company’s financial statements, letters of credit and insurance in determining whether this requirement is met. Pipeline companies may be allowed to participate in a “pooled fund” to cover their exposure. Stay tuned for the details to come through new NEB regulations.
The Pipeline Safety Act also clears the way for new rigorous regulation of pipeline abandonment. Extensive new powers are established that allow NEB to oversee pipeline abandonment, including requiring financial assurance from owner/operators to cover the costs related to abandoned pipelines. The Pipeline Safety Act establishes a new as-required tribunal to adjudicate claims for damages from pipeline releases and authorizes NEB to designate a third-party to oversee repairs and remediation if the operator fails to comply with NEB direction.