Climate Change Blog Series: Pipeline Safety Act comes into force later this Month

Climate Change Blog Series: Pipeline Safety Act comes into force later this Month

This is the eighth post in the Environmental Law Centre’s new blog series exploring climate change law in Canada. This blog series provides updates on climate change law developments and includes insights from our related law reform research. This blog series is generously funded by the Alberta Law Foundation.

 

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The Pipeline Safety Act (the “PSA”) received royal assent last year and will come into force on June 19, 2016.   The PSA makes several amendments to the National Energy Board Act (the “NEB Act”) and the Canada Oil and Gas Operations Act (the “COGOA”).  The goal of these amendments is to strengthen the polluter pays principle as it relates to federally regulated pipelines.

 

The PSA amendments to the NEB Act include a statement of purpose that the new provisions will “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” (s. 48.11).   With the PSA amendments, the NEB Act imposes absolute liability on companies for uncontrolled releases from their pipelines (s.48.12).  In other words, a company is liable for uncontrolled releases with no need for proof of fault or negligence.

 

The liability limit for a company that transports 250,000 barrels of oil per day is $1 billion (although this can be raised by regulation).  For all other companies, the liability limit is to be set by regulation (which is still forthcoming).  Where a company is found to be at fault or negligent, there is no limit to liability.  Companies are liable for loss and damages caused by the release, the costs and expenses of responding to the release, and the loss of the non-use value of public resources.   In addition, the Board may direct a company to reimburse a federal, municipal or provincial government, an Aboriginal governing body, or any person for any reasonable expenses in taking reasonable steps to deal with the release even if those expenses exceed the liability limit (s. 48.15).

 

In addition to expanded liability provisions, the PSA amendments set financial requirements for companies operating pipelines (s. 48.13).  A company must maintain financial resources to pay the amount of liability that applies to it either by the Act or by order of the Board.  The company must be able, at the Board’s request, to demonstrate it has sufficient financial capacity.  The Board may consider the company’s financial statements, letters of credit, guarantees, bonds or suretyships and insurance.

 

If an uncontrolled release occurs and the Board is of the opinion that a company lacks financial capacity or has failed to comply with a Board order, then that company may be designated (s. 48.16).  Essentially, this means that the Board can take necessary actions to deal with the release and to reimburse expenses incurred by third parties.  A significant amendment is that the amounts paid by the Board may be recovered by imposing fees on those regulated companies that transport the same commodity as was uncontrollably released (s. 48.17).  Such fees are to be imposed by regulations (which would also prescribe the method of calculation and payment of fees).  In the case where a designation is made, a Pipeline Claims Tribunal may be established to examine and adjudicate claims for compensation associated with the uncontrolled release (ss. 48.18 to 48.48).

 

The PSA also makes amendments to the NEB Act and the COGOA with regard to abandonment of regulated pipelines.  An abandoned pipeline is defined as a pipeline that has received an abandonment certificate and remains in place (s. 2 COGOA).  Under the amended NEB Act, the Board may order a company to take any measures, including maintaining financial resources, to ensure it can pay for the abandonment of its pipelines and for expenses related to its abandoned pipelines (s. 48.49).  In addition, the Board may impose other terms and conditions it considers proper when issuing an abandonment order (s. 4.01(2.1) COGOA).  The Board will now retain jurisdiction over abandoned pipelines (prior to the PSA, the Board lost jurisdiction once an abandonment order was issued).

 

Finally, the PSA includes provisions designed to prevent damage to pipelines.  For example, it is prohibited for any person to construct a facility across, on, along or under a pipeline or engage in an activity that causes a ground disturbance unless expressly permitted by regulation or Board order (s. 112).  As well, there is a prohibition against operation of a vehicle or mobile equipment across pipelines unless permitted by regulation, Board order, or within the travelled portion of a highway or public road (s. 112).

 

The ELC is encouraged to see more stringent financial responsibility placed onto companies operating pipelines and stronger adherence to the polluter pays principle.  These is especially timely as large-scale interprovincial pipelines are squarely within the public’s attention in the last few years with the proposed Northern Gateway (see previous post here), Trans Mountain and Energy East pipeline projects.  The potential human and environmental impacts associated with potential failure of such pipelines are certainly paramount in the public’s mind.   These changes may go some way in addressing the financial impacts of uncontrolled releases.  However, it should be kept in mind that these projects also bring concerns with greenhouse gas emissions, habitat disturbances and other potential environmental impacts which cannot be addressed with enhanced financial capacity.  Many of these concerns can only be addressed through thoughtful planning and design that considers cumulative impacts, as well as, the imposition of legally enforceable conditions (and perhaps the occasional NO).

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