Canadian Underwriter

Adherence to polluter pays principle should remain at the core of Canada’s preparedness, response to oil spills

December 4, 2013   by Canadian Underwriter

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Ensuring Canadian taxpayers do not bear any liability for tanker oil spills in Canadian waters – adhering to the polluter pays principle – are among the key assumptions underpinning recommendations for improving the country’s preparedness and response to ship-source oil spills, notes a report released late Tuesday afternoon.

“The foundational principles of the Regime, such as the public-private delivery model and the adherence to the polluter pays principle, remain at the core of Canada’s preparedness and response to ship-source oil spills,” concludes the report by the Tanker Safety Expert Panel, A Review of Canada’s Ship-Source Oil Spill Preparedness and Response Regime – Setting the Course for the Future.

Representing the first of a two-phase review by an independent, three-member panel, the report focused on the current Ship-source Oil Spill Preparedness and Response Regime south of the 60th parallel. Panel members are charged with reviewing Canada’s current tanker safety system and proposing measures to strengthen the system. Specifically, they are assessing the system’s structure, functionality, industry requirements and overall efficiency and effectiveness.

Recommendations of the panel – of which there are 45 – to improve the regime relate to five key areas:

  • spill planning and the response resources allocated to prepare for spills should be based on risks specific to a geographic area;
  • potential polluters should be prepared, through their contracted response organizations, to arrange a response to a worst-case scenario through cascading resources and mutual assistance agreements that supplement a response organization’s risk-based response capacity;
  • a timely response to a spill is a key factor in mitigating its effects;
  • response planning should be focused on whatever strategies are identified for a geographic area that will most effectively limit the environmental, socio-economic impacts of a spill; and
  • Canadian taxpayers should not bear any liability for spills in Canadian waters.

The report notes that Canada’s Ship-source Oil Pollution Fund “is available to pay compensation for reasonable claims for oil pollution response costs or preventive measures taken to minimize damage caused by the discharge of oil from a ship, of any class, in Canadian waters.”

In the case of a catastrophic spill that exceeds available international compensation, the fund could provide addition compensation, if needed. However, despite the fund having “a current reserve of approximately $400 million, its total liability for claims for any one spill is approximately $161 million,” panel members write in the report.

As such, the panel makes the following two recommendations meant to support the polluter pays principle and to insulate taxpayers from costs.

  • The current limit of liability per incident within the Ship-source Oil Pollution Fund should be abolished. The fund should process and pay for all admissible claims, subject to the Consolidated Revenue Fund’s consent to loans in favour of the Ship-source Oil Pollution Fund for amounts sufficient to allow all admissible claims to be paid to claimants. The loans would be reimbursed with interest to the Consolidated Revenue Fund from future revenues of levies on oil transported by ship to, from and within Canada.
  • The funding activities of the Ship-source Oil Pollution Fund should be broadened to allow the fund to establish an emergency account to support oil spill operations undertaken by the Canadian Coast Guard when it assumes the role of on-scene commander.

Other recommendations within the report include the following:

  • The Government of Canada should implement a risk-based Area Response Planning model to prepare for ship-source oil spills.
  • The Canadian Coast Guard should ensure the Area Response Plans identify the resident capacity (e.g., equipment, personnel, management systems) required to address all probable spill scenarios in the area of response. The plans should also include all of the response organizations’ arrangements for cascading resources and mutual assistance agreements required to address a worst-case discharge.
  • The Government of Canada, in consultation with the provinces and territories, should develop a strategy for the timely disposal of oily waste, and incorporate the results of this strategy into the area response planning model.
  • Transport Canada should collaborate with response organizations and other industry partners to determine the new costs associated with implementing the Area Response Planning model. All parties should then work together to develop a fee structure that will fund this new model.
  • The Canadian Coast Guard, jointly with Transport Canada, should analyze spill data on a regular basis to identify lessons learned and to improve the Regime.
  • The Government should conduct a risk assessment of wrecks in Canadian waters to identify potential pollution sources and to inform future policy decisions.

“Generally, we found that the foundational principles of the Regime have stood the test of time, but that there are a number of areas that could be improved to enhance Canada’s preparedness and response to ship-source oil spills,” panel members note. “We believe these recommendations are achievable and affordable, and will set the course to enhance Canada’s Ship-source Oil Spill Preparedness and Response Regime, including its liability and compensation component,” the report adds.

“I look forward to studying the report, speaking with stakeholders about their views, and discussing it with my cabinet colleagues,” federal transport minister Lisa Raitt says in a press release thanking the panel for its work. “The government will take all necessary actions to prevent oil spills, clean them up should they happen, and ensure that polluters pay,” Raitt emphasizes.

The press release cites activities undertaken by the federal government to protect the marine environment and ensure that marine transportation is safe and efficient, including investing in a suite of measures and reviewing legislative and regulatory frameworks.

The independent panel is made up of chair John Gordon Houston, former president and CEO of the Vancouver Fraser Port Authority who had a seagoing career spanning three decades; Richard Gaudreau, who practised law from 1969 until the end of 2012 and has experience in all activities related to maritime and admiralty law, including carrier liability, environmental law and all aspects of marine and protection and indemnity insurance; and Michael Mackay Sinclair, a former director of the Bedford Institute of Oceanography in Nova Scotia who holds a Ph.D. in Oceanography from the University of California.

The panel consulted with pan-Canadian industry stakeholders, spill response organizations, owners and operators of oil-handling facilities, vessel owners and operators, ports, industry associations, Aboriginal organizations, federal and provincial governments, and U.S. officials, as well as solicited written submissions from the public via its website.

Panel members are scheduled to begin working on the second report early in 2014, examining national requirements for ship-source spills of hazardous and noxious substances, including liquefied natural gas, as well as the state of oil spill preparedness and response in the Arctic.

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