Canadian offshore petroleum boards’ liability limits woefully out-dated: Senate report

Canadian offshore petroleum boards have not increased their liability limits for third party damages or clean-up in the event of a spill for 24 years, and as such should consider bringing them in-step with “current economic realities,” according to a Senate report.
The Energy, Environment and Natural Resources Committee, formed following the Deepwater Horizon oil spill, released its eighth report reviewing Canada’s offshore drilling operations.
In the report, the committee noted that both Nova Scotia and Newfoundland and Labrador’s offshore petroleum boards currently have three mandatory levels of operator liability in case of third party damages from an oil or gas spill.
These levels include:
•a $30 million absolute liability fund for damage claimants, irrespective of fault or negligence;
•a $70 million civil liability fund, where there is proof of fault or negligence; and
•the petroleum company wishing to drill in offshore areas must prove a $250 million capacity to pay for third party damages and spill cleanup costs.
There is no ceiling on third party damage claims in the case of fault or negligence or on what offshore operators must pay to clean up a spill, according to the report.
“That said, the committee does not believe that $350 million in funds is an acceptable amount that can be used to cover damages and clean-up efforts in the event of a major spill,” the report says.
The committee noted that as of August 2010, British Petroleum had already disbursed more than $3 billion on damage claims and the clean-up effort. The report added that Canadian boards have not increased their liability limits, even to adjust for inflation, since they were initially set in 1986.
“The committee recommends a comprehensive review of the issue of liability, including whether the thresholds should be adjusted to reflect current economic realities.”