Regulatory Update: New Federal Pipeline Safety Act

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The federal government introduced Bill C-46, the Pipeline Safety Act (the “Bill”) for first reading on December 8, 2014.  The Bill is intended to strengthen the safety and security of pipelines regulated under the National Energy Board Act and the Canada Oil and Gas Operations Act.

For the first time the government is introducing the “polluter pays” concept.  This means that pipeline companies will be responsible for costs due to unintended releases of oil, gas or other commodities released from pipelines.  The Bill also expands the National Energy Board’s (the “NEB”) powers to ensure companies are responsible for abandoned pipelines.

The Bill will require that major pipeline companies maintain a minimum of $1 billion to be able to respond quickly to incidents.  The NEB will also have the power to order companies to hold larger amounts by various methods such as letters of credit.

The Bill includes two new causes of action when operators are (1) at fault or (2) subject to absolute liability.  For at fault claims, operators would be jointly and severally liable for actual loss or damage caused in addition to costs incurred by Canada, a province or any other person in response to an incident.  With respect to absolute liability claims, major operators would be liable for up to $1 billion without proof of fault or negligence for any pipeline releases.  The limitation period for both causes of action would be three years which is longer than the two year standard limitation period for most statutes.  Under the Bill governments can also pursue operators for environmental damages and the NEB can order reimbursement of cleanup costs incurred by governments, Aboriginal governing bodies or individuals.

The Bill has passed first reading and is with the Standing Committee on Natural Resources.  Click here for the full text of the Bill  (http://www.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Mode=1&DocId=6825928)