As of June 19, 2016, the new Federal Pipeline Safety Act has come into force, including significant amendments to the National Energy Board Act (NEB Act) and changes to the Canada Oil and Gas Operations Act.

As we discussed last year when the Pipeline Safety Act was passed, the new legislation imposes greater obligations and liability on companies that operate federally-regulated oil and gas pipelines. 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 pipeline.”

Among the important items being implemented through the new legislation are the following:

  • Additional damage prevention requirements are imposed on pipeline operators – both at the time of construction and during operation. At the same time as the Pipeline Safety Act came into force, new Regulations implementing the damage prevention provisions of the new legislation also became effective.
  • 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.
  • The additions to the NEB Act will also impose liability of up to $1 billion on a pipeline constructor and operator for a release, even where no fault or negligence is shown. 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.
  • 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.
  • The Pipeline Safety Act also empowers the NEB to regulate the abandonment of pipelines. This includes oversight to ensure that pipeline companies remain liable for post-abandonment costs and expenses.