New Pipeline Safety Act Passed in Canada, Expect New Broad Regulations from the NEB

June 30, 2015 § Leave a comment

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.

Pipeline Safety Act Moving Through Canadian Parliament

March 21, 2015 § Leave a comment

Coined the Polluter-Pays enactment, Bill C-46  would amend the statutory liability regime for federally regulated pipelines in Canada. The bill imposes unlimited liability of pipeline operators  if an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline that they operate arising from their fault or negligence,  and requires financial assurance for the life of assets including post abandonment.  The bill:

  • establishes the limit of strict liability (without proof of fault or negligence) at no less than one billion dollars for companies that operate pipelines that have the capacity to transport at least 250,000 barrels of oil per day and at an amount prescribed by regulation for companies that operate any other pipelines;
  • requires that companies that operate pipelines maintain the financial resources necessary to pay the amount of the limit of liability that applies to them;
  • authorizes the National Energy Board (NEB) to order any operator of a pipeline with an unintended or uncontrolled release of oil, gas or any other commodity occurs to reimburse any government institution the costs it incurred in taking any action or measure in relation to that release;
  • requires that operators remain responsible for their abandoned pipelines;
  • authorizes the NEB to order operators to maintain funds to pay for the abandonment of their pipelines or for their abandoned pipelines;
  • allows the Governor in Council to authorize the NEB to take, in certain circumstances, any action or measure that the NEB considers necessary in relation to an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline;
  • allows the Governor in Council to establish, in certain circumstances, a pipeline claims tribunal whose purpose is to examine and adjudicate the claims for compensation for compensable damage caused by an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline;
  • authorizes, in certain circumstances, that funds may be paid out of the Consolidated Revenue Fund to pay the costs of taking the actions or measures that the NEB considers necessary in relation to an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline, to pay the costs related to establishing a pipeline claims tribunal and to pay any amount of compensation that such a tribunal awards; and
  • authorizes the NEB to recover those funds from the company that operates the pipeline from which the release occurred and from companies that operate pipelines that transport a commodity of the same class as the one that was released.

As of March 9, 2015, Bill C-46 was referred to the Standing Committee on Natural Resources.  For more details, read the full bill text.

NEB Clarifies Financial Filing Requirements

May 24, 2014 § Leave a comment

shutterstock_172987337On May 22, 2014, the National Energy Board (NEB) of Canada issued a letter outlining next steps in developing financial filing requirements for  all NEB-authorized activities and regions covered by the Canada Oil and Gas Operations Act (COGOA).  Draft guidance was released for public review in May 2013, with a comment period that closed October 31, 2013. The letter outlines NEB’s intent to invite interested persons to provide specific comment on a draft risk matrix in the fall 2014. The draft risk matrix will set out prescribed Financial Resources and Financial Responsibility requirements for operations based on level of risk. The Board does not anticipate releasing a draft of its Financial Filing Requirements for comment, until after Parliament has considered Bill C-22.

In the interim, the Board advised Applicants to demonstrate Financial Responsibility for spills and debris pursuant to section 27 of COGOA for consideration on a case-by-case basis.

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