Evidence of meeting #33 for Natural Resources in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was offshore.
A recording is available from Parliament.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
In the event that they would claim that they couldn't be proven at fault or negligent, the legislation still provides that they're liable.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Cullen. Your time is up.
Go ahead, please, Mr. Regan. You have up to seven minutes.
Liberal
Geoff Regan Liberal Halifax West, NS
Thank you, Mr. Chairman.
In the event I don't get a second round—I'm checking on that because we started a few minutes late—I would defer my 420 seconds to the second hour.
Conservative
The Chair Conservative Leon Benoit
I don't think that can really be done, Mr. Regan, but you will get an opportunity in the second hour.
Liberal
Geoff Regan Liberal Halifax West, NS
Thank you very much.
Thanks very much for coming this morning.
Let me go to this question about absolute liability and the $1 billion, and whether that's really sufficient. Why is it your conclusion that $1 billion is sufficient in terms of absolute liability when we hear the number from the gulf of $42 billion?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
I guess the question would be, how many incidents have there been outside of the gulf that were over $1 billion? The answer would be none. The Gulf of Mexico incident is an incident of proportions we've not seen anywhere else in the world to date.
The amount of $1 billion in absolute liability is quite consistent with other countries. It's a significant amount of money. It's an amount that's consistent with what we would expect to be an extraordinary incident in a Canadian context. Certainly companies always have unlimited liability when at fault and when negligent.
Liberal
Geoff Regan Liberal Halifax West, NS
In terms of setting it at $1 billion versus where it is now, which is much, much lower, is the thinking that you don't have to be that low anymore because the rest of the world isn't, and therefore, in terms of trying to be competitive, you don't have to do that? Is that what this is about?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
No, I don't think we would suggest that we needed to kind of....
I think our context was that the absolute liability regime had been established in the mid to late eighties. At that point in time, the legislation didn't provide for an increase over inflationary pressures. If you had taken the $30 million and the $40 million respectively and added inflationary pressures, today you'd be in the order of $70 million to $80 million, which is consistent with where the United States is.
We felt that in the Canadian context we have fewer projects; we have larger companies, and we have operations that have had a record that has been quite stellar in terms of their safety. We felt that providing for the absolute liability of $1 billion was a reasonable amount of money within the context that we find in Canada.
Liberal
Geoff Regan Liberal Halifax West, NS
The bill provides for the minister to have discretion to lower the limit for absolute liability below $1 billion.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
That's correct.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
It's very specific. It's seen as an exceptional authority, and it's in this context: should a company have a project that seems to have a demonstrably lower risk, perhaps a smaller project, they may seek a lower amount with the regulator. The regulator will do the scientific and independent assessment. The regulator can come to a determination that it's reasoned in this exceptional circumstance, and would then appeal to both ministers with recommendations. That would be the minister of the province and the natural resources minister. Both ministers would have to agree and take that advice. Then there could be a provision for a lower amount.
The example we used when we had been in our context was that there were a number of natural gas projects in the Canada-Nova Scotia offshore area where we'd find the end of a field, a project that might have a smaller amount, the environmental risk was lower, the risk to safety was lower, all the elements of the project were lower, and it was a pretty known environment. Those may be cases—may be—where there could be a consideration for those projects to allow for the development to occur but to do so while respecting that there may be a smaller amount of liability that's required as proof. Of course, the companies would remain to have unlimited liability when at fault or negligent, but in the instance of those projects....
That's one example. It's certainly one that is part of the discussion with our provincial counterparts, and part of the conversation around recognizing and balancing both the development and preservation of the environment.
Liberal
Geoff Regan Liberal Halifax West, NS
The bill does not require an operator to provide proof that they have the financial resources to pay for the full amount of an at-fault liability. Why wouldn't you require them to have proof of that in some way?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
Well, that would hold, in common law today, that they require the ability to provide for unlimited liability when at fault or negligent. We've provided in the bill that they require proof of financial responsibility for absolute liability, the amount that we would expect.
The financial responsibility is the same level or higher, if you will, than the absolute, but we've not provided for the possibility that they be ready for an unknown amount.
Liberal
Geoff Regan Liberal Halifax West, NS
Whom did you consult in the oil and gas sector on this bill and what were their views regarding the $1 billion versus no cap at all?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
We consulted with a number of industry operators. We consulted with industry associations, legal and environmental groups, first nations north of 60, and we consulted with provinces. There were mixed feelings about the amounts. Some wanted the amounts to be much lower; others were comfortable with the amount that—
Liberal
Geoff Regan Liberal Halifax West, NS
I specifically asked not about governments, but about the oil and gas sector, the industry.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
Most of the operators who operate in Atlantic Canada were consulted in the discussions. Since the announcement was made, I think, last June, we've had broad consultations with all kinds of different stakeholder parties.
Liberal
Geoff Regan Liberal Halifax West, NS
You were saying that some of these people you talked to had one view and wanted a lower cap and others did not. What was the view in the industry is what I'm asking.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
It was mixed, is what I said. Some preferred it to be lower, some were comfortable with what we had established. I think their view was it didn't have to be as high as it was because companies all act in the way that one would expect. But you'd have to ask them.
Liberal
Geoff Regan Liberal Halifax West, NS
Why does the bill fail to provide regulation-making provisions for calculation of non-use damages?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
Why does it not provide regulations?
Liberal
Geoff Regan Liberal Halifax West, NS
Yes. Regulation-making provisions for the calculation of non-use or environmental damages.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
I think we provided for the ability for governments to pursue those activities through the courts. That will allow, as we have in other elements of the bill.... There are two parts. One would be that the government may provide for a claim to courts for compensation for non-use. The second is an aggregating factor in setting the determination by the court.
I think this is consistent with other federal environmental legislation regarding non-use damages.
