On February 20, 2015, the Government of Canada introduced the Safe and Accountable Rail Act1, detailing proposed amendments to federal railway legislation, including the Canada Transportation Act2.  The amendments are in response to the 2013 Lac-Mégantic train derailment and are aimed at, among other things, strengthening the liability and compensation regime for federally-regulated railway companies transporting certain dangerous goods, including crude oil.

Minimum Insurance Requirements

The amendments establish minimum liability insurance levels for freight railway operations.  The minimum liability insurance coverage is based on the type and volume of goods transported and ranges from $25,000,000 for transportation of minimal quantities of dangerous goods to $1,000,000,000 for transportation of large volumes of dangerous goods, including crude oil.  Railway companies that do not maintain the applicable minimum liability insurance will be prohibited from operating and may be subject to a fine of up to $100,000.

A railway company operating a train that is involved in an accident will be liable for the losses, damages, costs and expenses in relation to the accident up to the amount of the minimum liability insurance coverage that the company is required to maintain and such liability does not require proof that the railway company was at fault or acted negligently.  A railway company may also be liable for amounts in excess of their minimum liability insurance where an accident has resulted from an act or omission of the company committed with intent to cause the accident or recklessly and with the knowledge that the accident would probably result.

Shipper-Funded Fund for Railway Accidents Involving Crude Oil

The amendments also establish a compensation fund, financed by levies on shippers, to cover the losses, damages, costs and expenses resulting from railway accidents involving crude oil or other designated goods that exceed the minimum liability insurance coverage.  Shippers will be required to contribute $1.65 per tonne (or approximately $0.23 per barrel) of crude oil shipped on a federal railway to the fund.

The new liability and compensation regime for railway shipment of dangerous goods, which is based on the “polluter pays” principle, makes railway companies and shippers responsible for the cost of accidents and brings railways in line with other modes of transporting dangerous goods, including pipelines and marine tankers.