If a pipeline spills, who covers the cost? 3 things you should know

No pipeline company ever wants a line to spill or leak, and eliminating incidents is our number one priority as an industry. However, if an incident does occur, the pipeline industry believes in being transparent to the public about who will be held financially responsible.

Canada already uses a “polluter pays” model for pipeline incidents, and on May 14 the Canadian government announced new financial liability legislation that will strengthen that system.

CEPA supports the new measures introduced in the legislation, which is why we are sharing three things you should know about how companies will be held accountable for incidents if the legislation is passed. The legislation will apply to companies that operate federally-regulated pipelines (i.e. pipelines that cross provincial or international borders).

1. Pipeline companies will be liable, even if they are not at fault

If an incident occurs on a pipeline company’s line, that company will have “absolute liability” for costs and damages, even if it is not at fault or found negligent.

Under the new legislation, major pipeline companies will need $1 billion set aside to respond to a leak, spill or rupture.

Tom Pesta, director of Pesta Consulting Ltd. – an agency that advises organizations on pipeline-regulation issues, explained that these measures “formalize existing industry practices and further enhance public confidence that if a pipeline incident occurs, the pipeline company is responsible for all costs to clean up a pipeline spill irrespective of fault.”

2. Companies have unlimited liability when at fault

This law is already in place. A pipeline company has unlimited liability for costs and damages when it is found at fault or negligent.

Although “unlimited liability” and “absolute liability” may seem like complicated terms, the basic principle behind these measures is that if an incident occurs, the polluter pays to clean it up, not the taxpayer.

3. The National Energy Board (NEB) can assume control of incident response and can recover costs from a company

“In the highly unlikely circumstance that the National Energy Board (the federal regulator) would be required to assume control of incident response, the funds will be available to the NEB and recoverable from the pipeline company. This provides additional certainty that a spill will be effectively addressed at no cost to the public,” explained Pesta, who has worked in energy regulation for close to 30 years.

The NEB also has the authority to order a company to reimburse governments, communities or individuals for cleanup costs.

Pipeline safety in Canada: a world-class system and constantly improving

According to Natural Resources Canada, “the rate of spills on federally-regulated pipelines in Canada was 57 per cent lower than in Europe and 60 per cent lower than in the United States over the past decade.”

This is a safety record to be proud of, but we want to continue to do better. The industry’s goal is zero incidents. The reason CEPA supports new liability measures is because they will keep Canada at the top of its class in safety and emergency response.

Read more about how pipeline companies prepare for emergencies:

The Canadian Energy Pipeline Association represents Canada’s transmission pipeline companies who operate approximately 115,000 kilometres of pipelines in Canada. In 2012, these energy highways moved approximately 1.2 billion barrels of liquid petroleum products and 5.1 trillion cubic feet of natural gas. Our members transport 97 per cent of Canada’s daily natural gas and onshore crude oil from producing regions to markets throughout North America.