Mr. Speaker, I rise today in support of the safe and accountable rail act.
Following the tragic July 2013 accident at Lac-Mégantic, our government acted quickly to strengthen safety in Canada's rail and transport of dangerous goods systems. Our actions have been based on three fundamental elements of rail safety, which are prevention, preparedness and response, and liability and compensation. This bill relates to the third of those pillars, liability and compensation. Today, I would like to outline how this proposed legislation would strengthen our liability and compensation regime for federally regulated railways.
The events of Lac-Mégantic highlighted the importance of having a strong liability and compensation regime for rail, and adequate compensation available in the event of a major accident. In the 2013 Speech from the Throne, we committed to hold railways and shippers accountable. To act on this and to examine how to strengthen our regime, we undertook a comprehensive review, which included two rounds of extensive consultations with a wide range of stakeholders, including railways, shippers, provinces, the Federation of Canadian Municipalities, and the insurance industry.
Our objective has been to ensure there are sufficient resources to adequately compensate potential victims and pay for cleanup costs. Our aim is also to make sure that the polluters pay, so that the taxpayers do not shoulder the financial burden in the event of an accident. These key principles are also central to the liability and compensation regimes that are currently being updated in other modes and sectors, such as offshore oil and gas, marine tankers, and pipelines. This proposed legislation would achieve these goals by sharing liability for rail accidents between railways and the shippers of crude oil, clarifying liability to benefit claimants, making more resources available for compensation, and ensuring compliance with the new regime.
What we are proposing is a two-tier system similar to the approach taken for marine oil tankers. The first tier would enhance insurance for federally regulated railways by imposing risk-based mandatory minimum insurance requirements. The second tier would share accountability for rail accidents with shippers of certain dangerous goods through a supplementary compensation fund.
Let me get into some of the specifics of the first tier, enhanced railway insurance. The responsibility for railway accidents rests first with the railway. The bill would establish minimum mandatory insurance levels that are explicitly linked to risk. The Canadian Transportation Agency would assign railways to a minimum insurance level based on the type and volume of the specific dangerous goods they carry. The minimum mandatory insurance requirements take into account the potential severity of accidents. The requirements range from $25 million for railways that carry few or no dangerous goods to $1 billion for railways that transport significant volumes of dangerous goods. Insurance would cover the damages involving third party injury or loss of life, third party property damage, and the risk associated with a leak, pollution, or contamination.
The bill would also clarify the railway's liability for accidents involving crude oil. Railways would automatically be liable up to their insurance limit without having to prove fault or negligence, and the railways would have to be operationally or physically involved in the accident in order to be held liable. This would give potential victims more certainty regarding their compensation claims, and it would protect taxpayers from having to cover the excess liability that we know can result from a catastrophic accident. For other accidents, liability would continue to be established through the courts, based on fault or negligence, as it is today.
I will turn to the second tier of the proposed new regime, which is the shipper-financed compensation fund. As I mentioned earlier, railway companies, through their insurance, would be the payers of the first resort for rail accidents. However, for accidents involving crude oil, any damages above the railway's liability limit would be covered by the fund. This fund would be financed by shippers through a levy of $1.65 per tonne of crude oil carried by the federally regulated railway and deposited into a special account of the consolidated revenue fund.
Our focus on crude oil for the fund responds first and foremost to the concerns that were expressed in relation to the Lac-Mégantic incident. Clearly, Canadians are concerned about the growing volumes of oil being transported by rail across long distances and through many communities, a trend that is expected to continue. Our approach recognizes that this is a new and significant phenomenon and we need to have adequate measures in place to hold the industry accountable. However, in the future some other dangerous goods could be scoped into the fund through regulation.
The combination of the enhanced insurance requirements and the supplementary fund would provide sufficient resources to cover the vast majority of potential accidents. The fund would be the payer of last resort in the rare event of damages from a rail accident involving crude oil surpassing the railway's insurance level. Furthermore, should an accident be of such a magnitude to deplete the resources held in the compensation fund, the consolidated revenue fund would be called upon to act as a backstop. This would ensure that all damages resulting from a rail accident involving crude oil would be covered.
It is important to emphasize that even in such an extreme situation the taxpayer should be protected. Any public money loaned to the compensation fund would be repayable with interest on terms set by the Minister of Finance through levies on the industry.
Another important part of establishing this compensation fund is putting in place an administrative body that can manage the fund effectively and in a cost efficient manner. To that end, we are modelling the fund's administration on that of the ship source oil pollution fund in the regime of marine tankers. A fund administrator would be responsible for establishing and paying out claims after the railway's liability limit was reached. As well as reporting on the management of the fund to Parliament through the minister of transport, after paying out claims, the fund administrator would be able to seek reimbursement from any at fault third parties through the courts.
The fund would achieve two important goals. First, it would ensure that shippers are held accountable for the liabilities associated with transporting their dangerous goods. This reflects the fact that shippers are a part of the polluter pays equation and that the nature of their products contribute to transportation risk. Second, the fund would provide added resources that could be called upon to compensate for damages, if required.
The benefits of this two-tiered regime that I have just described would only be felt if it operates as designed. That is why we have included enforcement mechanisms to ensure compliance. To ensure railways comply with the enhanced insurance requirements and collect and remit levies for the fund, monetary penalties of up to $100,000 per violation could be applied. Penalties would not be applied to shippers. Instead, to ensure that levies were paid, a railway's common carrier obligations to the shipper would be conditional on the shipper paying the required levy to the railway. In other words, the goods would not be shipped without payment of the levy.
A robust liability and compensation regime for rail complements our government's actions to further strengthen the safety of our rail system and the transportation of dangerous goods. Putting this legislation in place would ensure that should other rail accidents occur polluters would be held accountable and would provide the resources needed to compensate victims and to clean up the environment. I therefore urge all members to adopt the bill.
I come from an area of the country in southern Ontario, from a community that has been known as the railway capital of Canada. At different times, 36 different railways have run through St. Thomas, Ontario. It is quite proud of its railways heritage and its railway safety. As far as I know, we only had the one significant accident. In 1886, Jumbo the elephant was hit by a train in St. Thomas, Ontario. The largest elephant known to man, P.T. Barnum lost one of his greatest assets. I believe he would have wished this type of insurance plan was in place to have compensated him when Jumbo the elephant went down that day to the train in St. Thomas, Ontario.