The Government of Canada is committed to protecting the safety and security of Canadians and the environment. No development will proceed unless rigorous environmental protection measures are in place. These goals are part of the Government’s plan for Responsible Resource Development, which aims to create high-quality jobs, economic growth and long-term prosperity for all Canadians.
Canada's environmental record in the Atlantic offshore is already strong. The federal Government and the Governments of Nova Scotia and Newfoundland and Labrador have worked together to update and expand legislation ensuring that Canada’s offshore regime for oil and gas exploration and operations remains world-class.
The proposed changes focus on four main areas — prevention, response, accountability and transparency — and they help to further strengthen safety and security to prevent incidents and ensure swift response in the unlikely event of a spill. These proposed measures address recommendations from the Commissioner of the Environment and Sustainable Development in his fall 2012 report.
Management of Canada’s Offshore Oil and Gas Industry
The Government of Canada shares the responsibility for the management of the offshore with the Government of Nova Scotia and the Government of Newfoundland and Labrador.
Canada’s Atlantic offshore oil and gas industry is regulated by the Canada-Nova Scotia Offshore Petroleum Board and the Canada-Newfoundland and Labrador Offshore Petroleum Board. The focus of these boards is to ensure that operators and drilling contractors comply with the statutory and regulatory requirements of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act and the Canada-Newfoundland Atlantic Accord Implementation Act and exercise due diligence to prevent spills in Canada’s offshore.
In the North, Canada’s oil and gas industry is regulated by the National Energy Board as set out in the Canada Oil and Gas Operations Act (COGOA) and the Canada Petroleum Resources Act (CPRA) and National Energy Board Act. COGOA and CPRA also apply in other parts of the country.
Current Offshore Liability Regime
Canada’s liability regime is founded on the “polluter pays” principle. Currently, there is unlimited liability should parties be found at fault or negligent for a spill. In addition, there is absolute or “no-fault” liability set at $30 million for the Atlantic offshore areas and $40 million for the Arctic offshore. This ensures that, regardless of fault or negligence, the operator is responsible for cleanup costs and damages up to a determined amount.
Before any offshore drilling or production activity can take place, the proponent must provide evidence that it can cover the financial costs and damages that may result from a spill. The financial capacity requirements comprising assets, insurance and potential guarantees typically range from $250 million to $500 million, of which $30 million is required as a deposit for working in the Atlantic offshore areas and $40 million in the Arctic offshore. This deposit is held in trust by the offshore regulator as a letter of credit, guarantee or bond.
Strengthening Offshore Liability Legislation
The Government of Canada has worked with Nova Scotia and with Newfoundland and Labrador to update and expand legislation to further strengthen the safety and security of Canada’s offshore and improve transparency and clarity of operations. The new legislation will amend the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, Canada-Newfoundland Atlantic Accord Implementation Act, the Canada Oil and Gas Operations Act (COGOA) and the Canada Petroleum Resources Act (CPRA).
Highlights of the Proposed Changes:
- Raise the financial capacity requirements for drilling, production and development to at least $1 billion. This change will provide greater assurance that only those companies that have resources to prevent and respond to incidents are active in Canada’s offshore.
- Provide the necessary tools to enable the Offshore Boards to be made “responsible authorities” under the Canadian Environmental Assessment Act, 2012 (i.e., the Boards can be given authority for environmental assessments). This change would ensure that all relevant offshore projects face rigorous CEAA 2012 environmental assessments by the best-placed regulator.
- Provide the authority for the Boards to levy administrative and monetary penalties for regulatory contraventions. This will ensure that regulators have a full tool kit to deal with small infractions before these become larger issues.
- Permit the safe use of spill treating agents where such agents are expected to achieve a net environmental benefit. This will create a new tool for operators to use in response to an offshore spill by allowing regulators to authorize use of chemical dispersants or other spill-treating agents as part of spill response activities.
- Provide regulators with “direct and unfettered access” to $100 million in funds per project or a pooled fund of $250 million. This will ensure that regulators have immediate access to finance in the unlikely case that they need to take direct action to respond or compensate affected parties.
- Reference the “polluter pays” principle explicitly in legislation. This will establish clearly and formally that polluters will be held accountable.
- Maintain and reinforce that liability is unlimited where fault or negligence is proven.
- Raise the absolute liability (no fault or negligence) to $1 billion from $30 million (Atlantic offshore areas) or $40 million (Arctic).
- Establish a basis for governments to seek environmental damages. This will ensure that any damages to species, coastlines or other public resources can be addressed.
- Establish that authorization holders are liable for the actions of their contractors. This will ensure that liabilities can be recovered even if a smaller company is responsible for the incident.
- Make emergency planning, environmental plans and other documents filed with regulators available to the public. This will ensure that the public can review and understand the steps operators take to prevent incidents and respond to them should one occur.
- Establish mechanisms to unitize and manage fields that straddle administrative boundaries separating two or more regulators’ jurisdiction. This will ensure that the benefits stemming from a resource that straddles two or more administrative areas are fairly divided. Initially, these changes will proceed only outside the Atlantic offshore areas; amendments affecting the Atlantic offshore areas are expected to follow at a subsequent time.
- Establish a statutory basis for the regulators to recover their costs from regulated entities. This will establish firmly in law the requirement for contributions from industry to address the costs of regulating the oil and gas activities.
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