Evidence of meeting #51 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 pipelines.
A recording is available from Parliament.
Liberal
Chrystia Freeland Liberal Toronto Centre, ON
What is the thinking behind there ultimately being a public liability?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
A public liability in what sense?
Liberal
Chrystia Freeland Liberal Toronto Centre, ON
Behind the taxpayers ultimately footing the bill in these extreme circumstances.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
In the extreme circumstances, the policy logic behind the taxpayers providing a backstop to cover this, one, would be to ensure that the individual landowners or the individual citizens or any other parties who might be implicated would not be held financially liable; and two, that the response capability is provided for and the dollars are provided. The act provides that, should the government advance funds to the board to cover these things, it would be cost recovered from industry. Taxpayers would be held harmless, if you will, and ultimately, the industry as a whole would pay for the costs associated with an incident or any damages that might be provided and that, again, taxpayers would be protected.
Liberal
Chrystia Freeland Liberal Toronto Centre, ON
How long would it take for that cost recovery to happen?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
That's a great question. I guess the answer would be it depends. To be completely straightforward about it, it depends on the nature of the incident and it would depend on the amount of money involved. If you, for example, imagined an incident that cost half-a-billion dollars, if we move 1.3 billion barrels a year, if the cost to industry was 10¢ on a barrel, then you could compute that it might take so many years for that to be recovered, and the board would recover it on charges per barrel moved by the industry so that the larger players paid more and the small players paid less. We would need to do a financial analysis. The law provides for recommendations being made from the Ministry of Natural Resources to the Minister of Finance on what would be a reasonable period of time, interest and carrying charges covered, and all the elements of ensuring that the government was held harmless, recognizing the capacity of the industry as a whole to cover that cost, over what period of time.
Liberal
Chrystia Freeland Liberal Toronto Centre, ON
Can you give us any sense of what the considerations would be that would go into figuring out a reasonable period of time for industry to pay back Canadians?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
Sure. It would be the extent to which that cost per barrel might impact a company's ability to produce and move things. We don't believe it's an extended period of time. Obviously, at a total of 1.3 billion barrels a year, you can imagine several cents on a barrel over a period of time would accumulate a fair degree of money in a fairly rapid period of time.
Conservative
The Chair Conservative Leon Benoit
Thank you, Ms. Freeland.
We'll go now to our five-minute round. We'll start with Ms. Crockatt, followed by Ms. Block, and then Ms. Duncan.
Go ahead, please, Ms. Crockatt.
Conservative
Joan Crockatt Conservative Calgary Centre, AB
Thank you to our officials for coming in today.
We've gotten into the theoretical, down in the weeds quite a bit, and I'm hoping to bring us back to reality. I'm wondering if you can tell us, what the average cost of a spill in Canada is, realizing that they are very rare and don't happen often.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
Sure. Thank you for the question.
Just in terms of quick facts, for federally regulated pipelines, on average, since 2008 to present—so the last seven years—there have been 6.7 incidents per year in which oil has been spilled. The average volume released was about 1,200 barrels of oil. The average amount of that oil that was recovered was 96%. The average cost of the spills, based on a fairly broad average cost per barrel, is about $3.7 million, all of which has been covered by industry players; none have left those costs to anyone to clean up or to pay, other than the company.
Conservative
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
Correct.
Conservative
Joan Crockatt Conservative Calgary Centre, AB
This bill is allowing for $1 billion. Is that correct?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
In absolute liability.
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
That's correct.
Conservative
Joan Crockatt Conservative Calgary Centre, AB
What is the highest cost spill in terms of cleanup costs that we've actually run into in Canada?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
In terms of the highest cost that we're aware of, I will give you a ballpark. We don't have the exact figure because it's not a federally related one. There was a provincial spill in Alberta, near a lake and a water body, that was in the order of $70 million to $75 million.
Conservative
Joan Crockatt Conservative Calgary Centre, AB
That is the highest cost that we've seen in Canada. With $3.7 million being the average and the highest cost being $70 million, why are we moving to a $1-billion absolute liability here?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
I think it's a fair comment. I appreciate the comment and the question.
We benchmarked and looked at, as I said, a range of different circumstances. We certainly wanted to provide for the potential...and ensure that companies were capable of carrying adequate resources in the event that there was a fairly sizable incident. Despite the history and the enviable record we have, despite the facts and the data that present that the numbers are fairly small, the law provides for $1 billion in absolute and unlimited liability when at fault and when at risk, providing, I think, an adequate degree of protection in terms of what we see.
When we compare ourselves globally, we feel quite confident that the proposed number in the amount of liability that's being presented in the bill is what one would expect in terms of a world-class regulatory system.
Conservative
Joan Crockatt Conservative Calgary Centre, AB
Could you tell us where we are positioned now, just so Canadians know?
I think this bill is in large measure about confidence, perhaps absolute confidence, that we're seeking from Canadians in the event of a spill. Can you tell Canadians what their confidence level should be with this bill in place, and where does Canada sit in terms of the world, should this bill pass?
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
I would start by saying that I think we have an exceptionally strong pipeline safety system in Canada. The data demonstrates that. I think I've just walked through it with you.
Certainly there are still seven incidents a year, on average. Those are seven too many, I think from anybody's perspective. How do you get to zero? You put in place a lot of measures that make sure that people are doing their very best to ensure that pipelines are safe, that they're operated properly, and that in the event something does occur, people are prepared.
In terms of where we stack up globally, to our knowledge no other country in the world has an absolute liability regime for pipelines, so this is unique to Canada. At $1 billion we compare quite favourably with the United States. We compare quite favourably with any other country in the world, that we've established, and certainly we benchmark against what has been the most expensive incident in the history that we're aware of. We also have the minimum financial resource requirements. The United States, the United Kingdom, Australia, and other countries that we would consider to be peers do not have those requirements in law. We have proposed the ability for regulators to respond, something that you would see in other peer jurisdictions that provide this. We have it so that the regulator can compel companies to pay communities, individuals, citizens, governments, and aboriginal groups that may be impacted. Neither the United States nor the United Kingdom has such measures in their statute.
Conservative
Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources
I'd say that we have a world-class system, and I use the words carefully, because world-class, I think, has different meanings to different people. I'd say there are elements of our system that I think are world-leading, in the sense that other countries don't have the same measures, and we feel that they're quite strong. At the end of the day, however, we need to have a pipeline safety system that Canadians can believe in, that industry can work within, and that industry can be held accountable for, and we need to have a regulatory framework that's strong.