Bill C-52 (Historical)

Safe and Accountable Rail Act

An Act to amend the Canada Transportation Act and the Railway Safety Act

This enactment amends the Canada Transportation Act to strengthen the liability and compensation regime for federally regulated railway companies by establishing minimum insurance levels for railway companies and a supplementary, shipper-financed compensation fund to cover damages resulting from railway accidents involving the transportation of certain dangerous goods.
Among other things, the amendments
(a) establish minimum insurance levels for freight railway operations based on the type and volume of goods that are transported;
(b) require the holder of a certificate of fitness to maintain the liability insurance coverage required by that Act, and to notify the Canadian Transportation Agency without delay if its insurance coverage is affected;
(c) establish that a railway company is liable, without proof of fault or negligence, subject to certain defences, for losses, damages, costs and expenses resulting from a railway accident involving crude oil or other designated goods, up to the level of the company’s minimum liability insurance coverage; and
(d) establish a compensation fund in the Accounts of Canada, financed by levies on shippers, to cover the losses, damages, costs and expenses resulting from a railway accident involving crude oil or other designated goods that exceed the minimum liability insurance coverage.
The enactment also amends the Railway Safety Act to, among other things,
(a) allow a province or municipality that incurs costs in responding to a fire that it is of the opinion was the result of a railway company’s railway operations to apply to the Canada Transportation Agency to have those costs reimbursed by the railway company;
(b) clarify the Governor in Council’s power to make regulations respecting the restriction and prevention of access to land on which a line of railway is situated, including by means of fences or signs on that land or on land adjoining it;
(c) authorize a railway safety inspector who is satisfied that there is an immediate threat to the safety or security of railway operations to order a person or company to take any measure that the inspector specifies to mitigate the threat;
(d) authorize the Minister to require, by order, a company, road authority or municipality to follow the procedures or take the corrective measures that the Minister specifies if the Minister considers it necessary in the interests of safe railway operations;
(e) provide the Governor in Council with a regulation-making power regarding the submission of information that is relevant to the safety of railway operations by any person, other than the Minister to any person;
(f) authorize the Minister to order a company that is implementing its safety management system in a manner that risks compromising railway safety to take the necessary corrective measures; and
(g) declare that certain regulations and orders that were made under the Railway Act are deemed to have had effect from the day on which they were made under that Act and that those regulations and orders continue to have effect from that day as if they were made under the Railway Safety Act.

Safe and Accountable Rail Act

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Speaker, would the member comment on the fact that in the last two years there have been 11 major derailments involving the transportation of oil in this country and in the United States? By some fateful luck, the only one that involved a loss of life was the tragic one at Lac-Mégantic. Clearly that is not a record that any government should be proud of, and I do not think the government should be proud of its actions to date on trying to keep Canada safe.

The bill would raise the amount of insurance, but ought we not protect the public rather than just insure the railroads?

[Matthew Kellway, NDP, Beaches—East York, ON]

Mr. Speaker, I know my colleague is a tremendous advocate in the west end of Toronto for rail safety on behalf of not only his constituents but all Canadians. He raises a critically important point about the frequency of derailments that we are witnessing across this country. I would remind the House that just last month there were three derailments and, thankfully, those derailments took place in relatively remote parts of the country.

However, as we see a million barrels of oil rolling through cities and towns across this country daily, we face the very real and imminent possibility of enormous catastrophes. There are, quite literally, tens of thousands of Canadians who live within a stone's throw of railway tracks in some of the largest cities. It is not, I should say, just about the transportation of oil by rail, it is also about all dangerous goods and the catastrophic effects of those dangerous goods spilling in some very densely populated cities across this country.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Mr. Speaker, legislation is definitely extremely important. Without legislation, we have no laws to implement. Parliament has to legislate, but the government has a fundamental role to play when it comes to implementing the law. It has to ensure that the law is enforced.

In its last number of budgets, the government allocated far fewer resources to inspection and enforcement at Transport Canada. As my colleague said, since the Lac-Mégantic tragedy, only one extra inspector has been hired. There is a serious problem regarding not only the legislation, but also its implementation.

I would like my colleague to elaborate a bit more on the government's true willingness to ensure rail safety for Canadians.

[Matthew Kellway, NDP, Beaches—East York, ON]

Mr. Speaker, my colleague raises an excellent point, that laws and regulations are but paper in the absence of their implementation.

We have seen from the government no sense of urgency in responding to derailments across this country. The minister talks in the House about working diligently to deal with these issues and yet we have waited two years beyond the disaster at Lac-Mégantic for this bill, which is only a very partial step in a response to what we are seeing across the country. The most important step is the step that puts rail safety inspectors on the job, implementing the laws of this country, ensuring that the Canadian public is safe, and preventing further disasters and derailments across this country.

[Robert Aubin, NDP, Trois-Rivières, QC]

Mr. Speaker, I listened closely to my colleague's speech. I would like his thoughts on what the parliamentary secretary had to say.

He thinks that we should limit our debates in the House in order to speed up a process that has been dragging on for two years already. If there is one thing I have heard myself say a number of times in the House, it is, “We will support this bill at second reading because it is a step in the right direction.”

I have a simple question. With this bill, could the government not do more than just take a step in the right direction and actually solve this ongoing problem?

[Matthew Kellway, NDP, Beaches—East York, ON]

Mr. Speaker, the government is too easily satisfied with its very small steps. What the derailments and the government's lack of action on the issue raise for us is a system of rail safety that has been broken since the Liberals brought in the Rail Safety Act in 1999 where direct federal oversight over public safety with respect to railways was given over to a safety management system allowing the opportunity for railway companies to self-audit and self-manage the safety of Canadians. That is an abdication of the most fundamental responsibility that a government has, which is to protect the safety of Canadians.

The issue of safety has been raised now for years. In 2007 the Canada Safety Council sounded the alarm in a report about the deregulation of Canada's rail system. Here we are now in 2015 and the government chooses to take a very small step in the right direction on the issue.

The purpose of this debate in the House is to raise for the government and for all Canadians the broader issues about a rail safety system that is fundamentally broken and about the government's fundamental abdication of its most important responsibility, which is the safety of Canadians. There is a lot at risk here as we have seen from the frequency of derailments and in particular the Lac-Mégantic disaster.

The New Democratic Party will continue to talk about these issues in the House until the government changes its views on the deregulation of rail safety in the country, or until we replace the government in the House later this year.

[Jeff Watson, Conservative, Parliamentary Secretary to the Minister of Transport]

Mr. Speaker, I am pleased to join the debate here today on Bill C-52, the safe and accountable rail act. The tragic July 2013 derailment in Lac-Mégantic was an unprecedented event that I know none of us will forget.

Our government's response to the tragedy has three fundamental components: accident prevention, preparedness and response, and accountability. Under the first two pillars, our government has introduced a number of measures to address issues related to rail safety and the transportation of dangerous goods. Bill C-52 goes further to address these issues.

Today I would like to speak to the third pillar, accountability, and specifically the liability and compensation regime for rail. The Lac-Mégantic tragedy highlighted the need to further strengthen the rail regime to make sure that if an accident does occur, there are sufficient resources to compensate victims, pay for cleanup and protect Canadian taxpayers.

To do this, our government undertook a comprehensive review of the liability and compensation regime for rail. As part of this review, Transport Canada did in-depth research and analysis and consulted subject matter experts. The department also undertook a two-phase consultation process in which a wide range of stakeholders, including railways, shippers, provinces and communities, shared their views and technical information. All of the input and analysis generated during the review has informed the regime changes put forward in the bill.

Today, I would like to outline how Bill C-52 improves upon the current liability and compensation regime for rail and how these changes would benefit Canadians. Liability and compensation for railway accidents is determined through the courts based on fault or negligence. Under the current regime, the Canada Transportation Act and the Railway Third Party Liability Insurance Coverage Regulations require that a railway company carry adequate third party liability insurance coverage as a condition of receiving a certificate of fitness allowing it to operate.

The Canadian Transportation Agency determines what constitutes adequate insurance on a case-by-case basis. This is based on an assessment of risks associated with the railway's operation. It also makes a comparison with insurance held by railways with similar operations and with industry practices.

Under the Canada Transportation Act, it is up to the railway company to notify the agency in writing whenever it cancels or alters its third party liability insurance coverage, or whenever a change in operations may mean that its coverage is no longer adequate. If the agency determines that a railway's third party liability insurance is no longer adequate, it may suspend or cancel the railway's certificate of fitness.

The Transportation Safety Board's report on the Lac-Mégantic derailment indicated that the Montreal, Maine and Atlantic Railway did not notify the agency of certain significant operational changes, namely its increased transportation of crude oil.

Following the Lac-Mégantic tragedy, it also became clear that the $25 million in insurance held by the Montreal, Maine and Atlantic Railway would be insufficient to cover the scope or damage from this unprecedented and catastrophic accident.

In the 2013 Speech from the Throne, our government committed to ensuring that railways carry more insurance. Bill C-52 will implement four levels of mandatory minimum insurance requirements for railways. Under this new regime, the Canadian Transportation Agency will assign railways to a minimum insurance level based on specific criteria focused on the type and volume of dangerous goods hauled.

Railways that carry little or no dangerous goods will be required to hold $25 million in insurance. For railways carrying higher amounts of dangerous goods, there will be an initial requirement to hold either $50 million or $125 million in insurance, depending on the type and volume of dangerous goods carried. One year later, those requirements will double to $100 million and $250 million respectively. This phase-in will provide short line railways with sufficient time to adapt to these new requirements.

Finally, railways that carry substantial amounts of specified dangerous goods, namely class 1 railways, CN and CP, will be required to hold $1 billion in insurance. A railway's third party insurance will have to cover specific risks, including bodily injury or death, property damage and risks associated with pollution.

These new insurance requirements will ensure that the risk associated with a railway's operation is assessed objectively using specific criteria and that a railway's third party liability insurance is aligned with that risk. These requirements will also ensure that there will be sufficient insurance to cover the full cost of the vast majority of potential accidents.

As it stands in the current regime, there are no additional sources of funds to turn to in the event of a catastrophic incident other than the public purse. Often the process for addressing claims in such cases can be lengthy and costly, with delayed and uncertain outcomes for victims.

Bill C-52 ensures that the liability and compensation regime for rail will be able to address a catastrophic incident without burdening the taxpayers. It does so by creating a modernized two-tier regime to cover the cost of accidents involving crude oil, like the one experienced in Lac-Mégantic. This new regime will extend responsibility for compensation beyond railways to include shippers as well. It will also define the liability of railways in order to provide claimants with greater certainty of compensation.

In the case of a rail accident involving crude oil, a federally regulated railway will automatically be held liable without the need to prove fault or negligence. Railways' liability would be capped at their minimum mandatory insurance level and they will have the ability to seek financial redress from at-fault parties through the courts.

Federally regulated railways will also be held liable for crude oil accidents involving any provincially regulated railways operating on their tracks. This will ensure that all railway accidents involving crude oil that occur on federal track are covered through the new regime.

To ensure that liability is shared as designed in the new regime, the bill makes changes to section 137 of the Canada Transportation Act to clarify that railways will not be able to impose their third party liabilities on shippers, for example, through a tariff. Railway insurance will be the payer of first resort, and as I mentioned, would be sufficient to cover the cost of most rail accidents. However, should the damage from a rail accident involving crude oil exceed the railway's insurance level, the new shipper-financed compensation fund would cover remaining costs.

Shippers are part of the polluter pays equation, requiring them to share in the liabilities associated with the transport of their goods, and reflects the fact that the qualities of their product contribute to the risks and costs associated with an accident.

The proposed fund will be financed through a levy on shippers of crude oil. This levy will be set at $1.65 per tonne of oil in the first year. Following this, it will be adjusted annually for inflation based on the consumer price index.

The levy will be collected by federally regulated railways, remitted to the government and deposited in a special account in the consolidated revenue fund. Railways will be required to keep records on the collection of levies.

The Minister of Transport will have the authority to turn the levy off once it has been capitalized sufficiently. We are targeting an amount of $250 million, which we expect will be collected in approximately five years. This estimate is based on a reasonable projection of oil-by-rail traffic growth in the coming years. The minister may then turn the levy on again as necessary.

The shipper-financed fund will be managed by an administrator appointed by the Governor in Council. The administrator will be responsible for establishing and paying out claims once the railway's liability limit is reached.

To ensure transparency, the administrator will report to Parliament, through the Minister of Transport, on the fund's management. There must also be a special examination of the fund at least once every five years.

In the unlikely event of damages from a rail accident exceeding both the railway's insurance and the amount being held in the supplementary compensation fund, the federal government's consolidated revenue fund will cover the remaining costs. The government will then be reimbursed through the levy. A special levy could even be imposed on federally regulated railways in order to accelerate repayment of the amount charged to the consolidated revenue fund.

The two-tier regime for crude oil accidents will provide broad coverage of the cost of crude oil accidents. It will cover all actual loss or damage incurred as well as costs incurred by the federal or provincial crown in responding to the accident. The crown may also seek compensation for the impairment of the non-use value of public resources.

Oil is being transported in growing volumes over long distances across our country and we know that accidents involving crude oil can cause significant harm to people, property and the environment. Creating this second tier of compensation for large-scale accidents involving crude oil is another way that we are adapting to this phenomenon, recognizing the valid concerns of Canadians about the movement of oil by rail.

Enhancing compensation for rail accidents involving crude oil will complement efforts we have taken recently to strengthen rail safety and the transportation of dangerous goods, for example, by improving tank car standards. However, recognizing that crude is not the only product that could cause significant damage if involved in a rail accident, there is flexibility in this regime to include by regulation other dangerous goods in the future. The two-tier approach brought forward in Bill C-52 will ensure that enough resources will be available to cover all damages stemming from a rail accident. The increased insurance requirements will hold railways accountable and provide sufficient compensation for the majority of potential accidents. The supplementary fund will provide an additional source of compensation for crude oil accidents and share liability more broadly with shippers.

Robust oversight and enforcement mechanisms are key to ensuring that the strengthened liability and compensation regime functions as intended. The Transportation Safety Board found that the regulatory requirements in place at the time of the Lac-Mégantic derailment did not ensure that an increase in operational risk was reflected in railways' insurance coverage. Therefore, this bill also establishes more robust oversight and enforcement mechanisms to ensure that railways comply with the requirements of the new regime. Railways will continue to be obligated to notify the agency of any changes to their operation that may affect their insurance coverage. Under the new regime, however, the agency is empowered to make inquiries to determine compliance and must suspend or cancel the certificate of fitness of a railway that fails to maintain the minimum mandatory level of insurance.

We have also introduced administrative monetary penalties, AMPs, as an additional means of ensuring compliance. The agency may apply AMPs up to $100,000 to a railway that fails to maintain the correct amount of insurance, or fails to notify the agency of a change affecting its insurance coverage. An AMP of up to $100,000 per violation would also ensure the compliance of railways for collecting and remitting the shipper levies and for keeping records concerning the levies. The Minister of Transport may designate a person to be responsible for assessing compliance and applying these penalties.

Finally, the agency will have clear authority to make regulations concerning the information it needs to verify compliance.

These strong enforcement mechanisms support greater accountability and are critical to ensuring the benefits of the strengthened liability and compensation regime are realized.

Another advantage of the changes brought forward under Bill C-52 is that they bring the liability and compensation regime for rail into step with regimes in other modes and sectors. The polluter pays principle, which is the concept that those responsible for causing damage as a result of their operations should pay for their liabilities, guides the proposed changes to the regime for rail. It is also at the heart of the regimes for marine tankers, the nuclear sector, pipelines, and offshore oil and gas.

There are particularly strong links between the proposed regime for rail and the marine tanker regime, both of which have two tiers: an insurance tier and an industry-financed fund. They share responsibility between different participants in the supply chain. The administration of the rail regime's shipper-financed fund is also modelled on that of the marine regime's ship-source oil pollution fund.

More important, the regime for accidents involving crude oil, including a shipper-financed fund, reflects our government's responsible resource development agenda.

I cannot emphasize enough the importance of the measures put forward in Bill C-52. In addition to further improving rail safety and the transportation of dangerous goods in Canada, this legislation addresses gaps in the liability and compensation regime for rail that were brought to light following the Lac-Mégantic tragedy.

The primary goal of the bill's strengthened liability and compensation regime for rail is to make sure that in the future, should a rail accident occur, victims will be fully compensated and the environment will be remediated. It does this by holding railways and shippers accountable, not by burdening the taxpayer.

I therefore hope that all of my colleagues will join me in supporting the safe and accountable rail act, and help pass it quickly.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Speaker, I am pleased to ask my colleague a question about railway safety. My riding is actually very close to Lac-Mégantic, or just over an hour from the area that was severely affected by a rail disaster, as all my colleagues know.

I am pleased to see that some measures might reassure residents and allay their fears. What I hear most from the people living in the Eastern Townships and Lac-Mégantic is that they want the companies responsible for the spills or railway accidents to also be responsible for the costs resulting from a disaster. These accidents are unfortunate and there will probably be more of them because the number of cars transporting oil is increasing and the quality of the infrastructure seems to be decreasing. Therefore, these disasters could well happen again, as we have seen in northern Ontario.

Could the government member reassure the people of Lac-Mégantic and the Eastern Townships about corporate responsibility in the event of a spill that causes irreparable damage?

[Jeff Watson, Conservative, Essex, ON]

Mr. Speaker, I thank my colleague opposite who has been working obviously on matters related to the Sherbrooke Airport as well, in co-operation with the government. We appreciate his contributions in this House.

I want to assure the member opposite that with this bill the government not only is addressing the question of the liability of federally regulated railway companies, but it is also ensuring that the liability regime is shared, in the case of accidents involving crude by rail, to include the shippers, by a new fund, a new levy that would establish the supplementary fund such that when railway companies' insurance level has been maxed out, shippers then will participate additionally in any charges that may result. It might be compensation for victims. It might be for remediation of the environment. It might be the costs of municipal forces, such as firefighters who come to fight a fire related to an accident.

There are a number of charges laid out in the bill. I hope that the member will support it.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Speaker, in incident after incident, particularly in my province of Alberta, the determination by the Transportation Safety Board has been that despite inspections by the government and despite surveillance by the industry saying that the traffic should continue and the rails were safe, time after time, after the fact, after serious incidents, the Transportation Safety Board has determined that the company has replaced rail with defective rail, and it has serious concerns that defective rail simply is not being identified.

Could the member please advise us if he thinks that, given the exponential increase in seriously dangerous rail traffic, maybe it is time to restore ourselves back to a more intensified government surveillance system?

[Jeff Watson, Conservative, Essex, ON]

Mr. Speaker, first of all, I would like to address the exponential growth in oil traffic that is being talked about here. We heard at the standing committee on transport, in our recent study, that oil by rail actually went down by a significant amount last year, relative to 2013. There were some 35,000 fewer carloads, I believe, in 2014. That is not to say that with the pickup in the economy oil by rail could not potentially go up again. That is why we want to provide a safe regime, which includes liability and compensation.

The government is obviously sensitive both to the safety management systems functioning properly, with the creation of a safety culture for the federally regulated railway company and how it enforces its own practices, and to oversight. It has increased the number of railway safety inspectors by 10%. The number of transportation of goods inspectors is up by about 85%.

The government has taken the recommendations of both the Auditor General and the Transportation Safety Board very seriously and is acting on them to ensure that we are fulfilling our responsibility.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Mr. Speaker, in the parliamentary secretary's speech, he talked about some of the consultations being held as part of the bill, including a process of a couple of stages. I wonder if he could comment on some of the things we heard, as part of that consultation, from the Federation of Canadian Municipalities and from the provincial governments about their support for this.

[Jeff Watson, Conservative, Essex, ON]

Mr. Speaker, I thank the member for Tobique—Mactaquac for his intervention and for his strong work on this and a number of important matters the government is engaged in.

We conducted some exhaustive consultations. It was the two-step process the member alluded to and that I talked about in my speech. We were not only consulting with railway companies and shippers, which could be affected by a new liability and compensation regime that is jointly shared by both, but were seeking important information, technical information, and input from municipalities and other stakeholders. Those consultations led to the measures contained in this particular bill.

First of all, we are keeping our commitment that the liability regime should be shared. It is not just railway companies that would be required to be liable. The liability would be shared with shippers.

There is also the establishment of a new fund and in how the levy would be done to ensure that the taxpayers would not be burdened by the cost of either the cleanup or charges to victims. I mentioned earlier first responders and firefighters who attend to a fire. The costs they incur in their cleanup would be covered. Those claims would be fully compensated by the shippers and the railway companies.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Speaker, one of the things that troubles me is the limit on liability. The Lac-Mégantic disaster resulted in about $400 million worth of liability, of which $25 million was covered by insurance. There is $375 million, so far, that we know of, of expense to the taxpayer.

Even if this fund were fully implemented, that would still leave $125 million missing. That is funnily close to the amount the Province of Quebec has been asked to pay, by the Government of Canada, for the failure of a federally regulated system, and of the owners of the vehicles, which is a federally regulated railroad, to contain the vehicles in Lac-Mégantic.

Would the provinces and municipalities be on the hook in the way they are in Lac-Mégantic? Will the government consider reimbursing the Province of Quebec the $155 million it has already spent on the Lac-Mégantic disaster, and it will spend more, as a federal expense, as it was a federal railroad?

[Jeff Watson, Conservative, Essex, ON]

Mr. Speaker, I am not sure that the member has read the provisions of Bill C-52, in which the short-line railways would be expected to carry more liability insurance based on the type and volume of the dangerous goods they are carrying. That is one of the very first ways to ensure that railway companies are bearing increased responsibility for the safe operation and transportation of dangerous goods, specifically crude, by rail.

Beyond those increased levels of insurance, there is the supplementary fund. As I have said, we are targeting that fund at $250 million, but there is obviously flexibility in the way the mechanism of the fund and the implementation of the levy are put to place. That would be done for repayment.

With a review at least every five years, if the risks change, there is flexibility built into the law such that the fund itself and the amounts in the fund could be re-examined and, if necessary, adjusted.