MPs debate proposal to raise liability limits to $1 billion for nuclear operators, offshore oil and gas industry

Federal politicians debated this week a proposed law that would increase the absolute liability for offshore oil and gas companies, as well as nuclear operators, to $1 billion.

Bill C-22, the Energy Safety and Security Act, was tabled in January by then-Natural Resources Minister Joe Oliver.

On Wednesday, Greg Rickford – who replaced Oliver last week as Natural Resources Minister – moved in the Commons to have C-22 be read a second time and referred to committee. Several members spoke on the bill and debate was adjourned.

If passed into law, Bill C-22 would “increase the absolute liability to $1 billion, from $30 million in the Atlantic offshore and $40 million in the Arctic offshore,” said Kelly Block, the Conservative MP for Saskatoon-Rosetown-Biggar, in the House of Commons Wednesday.

“This means that fault or negligence does not have to be proven for that amount.”

Bill C-22 also proposes to “require that operators demonstrate at least a $1 billion financial capacity to ensure they have sufficient funds if an incident were to occur,” Block added.

“Currently the regulators require proof of an operator’s financial capacity in an amount between $250 million and $500 million,” she said in the Commons. “We intend to raise the minimum financial capacity to $1 billion, in line with operators’ absolute liability. Regulators may require higher amounts if deemed necessary.”

Bill C-22 would also make several changes to the Nuclear Liability Act (NLA), which stipulates that nuclear operators, are “without proof of fault or negligence, absolutely liable” for breaches of duties imposed by NLA.

Currently, nuclear operators are required to have basic liability insurance of at least $75 million for each nuclear installation, and that amount has not changed since 1976.

Nuclear power plant operators have a duty to ensure “that no injury to any other person or damage to any property of any other person is occasioned as a result of the fissionable or radioactive properties, or a combination of any of those properties with toxic, explosive or other hazardous properties, of nuclear material” which is in their installations.

In addition to nuclear power plant operators, organizations subject to NLA include nuclear research reactors, fuel processing plants and facilities for managing used nuclear fuel.

The strict liability component of Bill C-22 is significant, suggested David McGuinty, Liberal MP for Ottawa South.

“The polluter would be held strictly liable for whatever occurred on its watch with respect to pollution of that kind,” McGuinty said Wednesday. “That is a very big step for Canada to be taking and is one that we will be exploring, I know, in greater detail in committee.”

Brad Trost, Conservative MP for Saskatoon-Humboldt, noted that the billion-dollar coverage applies to companies who have not been negligent.

“If a company is negligent, as it is assumed (British Petroleum) was in the Gulf (of Mexico), it can be sued and can end up paying more than $1 billion.”

In Canada, nuclear reactor operators buy liability and first-party property insurance through the Nuclear Insurance Association of Canada (NIAC), a non-profit association of insurers. As of last year, NIAC was comprised of 16 companies – including primary insurers, reinsurers and Lloyds – and was providing 92% of the Canadian market for the $75-million liability coverage required by NLA.

“One reason why the government has introduced this legislation is that the industry is asking for certainty,” said Trost, who is a member of the Standing Committee on Natural Resources. “While not having this legislation in place will not stop all nuclear development in the country, the industry has been calling for it so they know both what they are required to spend on their yearly insurance costs and what the legal framework would be should there be an accident.”

A previous bill that proposed to raise the mandated coverage, for nuclear operators, to $650 million died on the order paper after Prime Minister Stephen Harper prorogued Parliament Dec. 30, 2009.

If passed into law, Bill C-22 “would include a longer limitation period to submit compensation claims for bodily injury from the current 10 years to 30 years,” resulting from nuclear incidents, noted Cheryl Gallant, Conservative MP for Renfrew-Nipissing-Pembroke, in the Commons. “The 10-year limitation period would be maintained for other forms of damage. Finally, it would elaborate the features of the quasi-judicial claims tribunal to be established to replace the regular courts if necessary.”

Several members of the New Democratic Party had serious concerns about the bill.

Francois Choquette, NDP MP for Drummond, Quebec, suggested the coverage requirement for both offshore oil and nuclear is not enough, referring to the Fukushima, Japan nuclear disaster in March, 2011 and the explosion in April, 2010 of the Deepwater Horizon in the Gulf of Mexico.

“It is a step in the right direction and a good start,” Choquette said of Bill C-22. “We will obviously support this bill at second reading so that it can be referred to committee, where we can make some improvements to it.”

Part 1 of Bill C-22 would amend the Canada Oil and Gas Operations Act, the Canada Petroleum Resources Act, the Canada-Newfoundland Atlantic Accord Implementation Act and the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act.

In addition to raising the absolute liability to $1 billion, it would require that a company applying for permission to drill, develop or produce offshore oil or gas “must demonstrate that it has the financial resources required to pay the greatest of the amounts of the limits of liability that apply to it.

“Under this legislation, operators would be permitted to guarantee their financial liability with traditional insurance and up to 50% with other forms of financial security, such as provincial government guarantees, letters of credit, and self-insurance,” Gallant said.