To get back to liability, as you understand, our recommendation is to extend the use of the ship-source oil pollution fund into HNS. It's precisely to give an additional layer of protection. This can be adjusted by Parliament, but at present, approximately $160 million Canadian of additional money would be available for each spill of HNS, if we were to do as our association proposes.
The first thing to understand is that if you're trying to look at unlimited or higher liability, you can only look at the SOPF. Why? The way this convention works is that there is a ship involved that is doing the spill; it had an accident. The ship has liability for a first amount of money, which you said is approximately $185 million. In fact it's 115 million SDRs, which is probably about $185 million Canadian or $200 million Canadian. That's what the shipowner and his insurer pay. Beyond that you have the fund for up to 500 million SDRs on the international level. That's how it works.
In the convention, and our association supports the convention, it says the shipowner cannot be asked to pay more, and it says that the fund will not pay more; so it's limited liability for those two. Who else could pay? We recommend that it not be unlimited, but that the SOPF would be used to give an additional layer of protection, at present $160 million, that can be adjusted by Canada. That's our recommendation.
Why do we not believe in unlimited liability? It's pretty simple. It's because it's an idea that is attractive. In French we call it a chimère. It's attractive, but it can never be realized. The reason is as follows. If you have unlimited liability, that obviously means there's no limit. The way the tanker expert panel conceives it, for example, is they say they can't affect the liability of the shipowner; they can't affect the liability of the fund; all they can do is say that SOPF will have unlimited liability for a spill. That way Canadians are guaranteed they will never have to pay anything for a spill. That's the theory.
In reality the way it works is the SOPF would in the Exxon Valdez case where, let's say, $1 billion has come from the international regime and it cost $6 billion, so then $5 billion more has to be paid. Their theory was that the SOPF will borrow $5 billion from the Canadian government and will clean up everything and then will pay back $5 billion, presumably plus some interest, to the government over a period of time. That's the theory they put forward.
We believe that does not work. Why? If you do that, the SOPF triggers the levy to get enough money to pay back the government. It's built into Canada's legislation that if ever the SOPF needs more funding than they have, they then invoke a levy. The levy means that for each barrel or each cubic metre of oil that comes in or goes out of Canada, a charge is going to be paid. Those charges would mostly have to be absorbed by the oil companies that are importing or exporting oil. The SOPF would get the $5 billion back by imposing a levy, presumably over a period of years because it's a lot of money. They would impose a levy that's not there now and would tell the oil companies that they have to pay them so much per barrel from now on until they've paid back the $5 billion, even though they may not have been involved in the spill. That's how it works. They're going to go to the oil companies to get that money back.
What does that mean? This is in no way a criticism of the oil companies, but it means their operating costs have increased, and therefore the price of gas and the products they sell will have to be increased to compensate for that. At the end of the day what happens in that example is that the people who are really paying back the $5 billion are not the oil companies through the levy as much as it is the consumers in Canada who are buying products from these companies, including gasoline, heating oil, etc. That's how it works.
The other choice would be they won't have unlimited liability, in which case the SOPF will pay out its $160 million. If it takes $5 billion more, and let's hope it never happens—the Exxon Valdez is the worst oil spill ever in the world—but if it were to happen in Canada, we would have to figure out what we were going to do. The only thing we could do would be to spend taxpayers' money. That way the taxpayers would have to contribute little by little over the years to refund the spill.
To say that we're going to make the liability unlimited on SOPF is not, in our mind, a real solution. It looks good, but at the end of the day it will be shared among Canadians one way or the other. Although not all Canadians buy gas—most do—not all Canadians pay income tax either. Either way you're just sharing it among the people who are paying.
To our mind, we shouldn't get involved in that. Rather, we should figure out how much we need and set a cap on the SOPF.
