A Big Step Toward Public Confidence in Federally Regulated Pipelines: Canada’s Proposed Financial Requirements Unveiled

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Courtesy of Stikeman Elliott via Canadian Energy Law. View original article here.

With the publication of the Pipeline Financial Requirements Regulations in Part I of the Canada Gazette on September 29, 2016, the federal government provided pipeline companies a first glimpse at the absolute liability (i.e. liability without proof of fault or negligence) regulatory regime first set out in the Pipeline Safety Act, SC 2015, c. 21 (PSA), which amended the National Energy Board Act, RSC 1985, c. N-7 (NEBA).

The PSA, which came into force on June 19, 2016, provided the National Energy Board (NEB) with jurisdiction over pipelines post-abandonment, and provided the NEB with powers to assume control of pipelines in the event of a release. The PSA also established a limit of liability without proof of fault or negligence of $1 billion for pipelines carrying at least 250,000 barrels of oil per day. Determination of absolute liability limits for all other pipelines was, however, left to be prescribed by regulation.

The regulatory impact analysis statement that accompanies the proposed regulations sets out the three main objectives behind the Pipeline Financial Requirements Regulation:

  • Support the establishment of the “no-fault” absolute liability regime for companies operating federally regulated pipelines;
  • Ensure pipeline companies are adequately prepared to cover response, remediation costs, and liability claims, in the event of an unintended or uncontrolled release from their pipelines; and
  • Ensure that liability and financial resource requirements for pipeline operators are commensurate with the risks associated with their respective operations.

While the PSA reaffirmed that federally regulated pipeline companies under the jurisdiction of the NEB have unlimited liability for unintended or uncontrolled releases that are the result of their own fault or negligence, the proposed regulation sets out a “no-fault” absolute liability limit for pipeline companies, divided by commodity types and asset class (s.2(1)).

Courtesy of Stikeman Elliott via Canadian Energy Law. View original article here.