Protecting Taxpayers and the Environment Through Reform of Canada's Offshore Liability Regime

1. INTRODUCTION AND CONTEXT 1.1 Purpose and Structure 1.2 Background 1.3 Heeding the BP Wake-up Call 1.4 The Need for Liability Reform 2. THE LIABILITY REGIME FOR OFFSHORE OIL OPERATIONS IN CANADA 2.1 Various Statutes and Regulations Combine With the Common Law to Establish the Offshore Liability Regime 2.2 Distinguishing Offshore Liability Rules, Regulatory Offences, and Financial Responsibility (Assurance) Requirements 2.2.1 Offshore Liability Rules and Regulatory Offences 2.2.2 Offshore Liability Rules and Financial Responsibility Requirements 2.3 COGOA and the Accord Acts 2.3.1 Financial Responsibility Requirements are Imposed on the Operator as a Condition of Drilling Authorization 2.3.2 Spills are Prohibited Under COGOA 2.3.3 The Federal Government and, in Limited Circumstances, the Operator are Subject to Unlimited Strict Liability for the Costs of Spill Response Measures 2.3.4 Operators are Subject to Limited Absolute Liability for All Actual Loss or Damage Resulting From a Spill and For All Government and Third-party Voluntary Spill Response Costs 2.3.5 The Maximum Amount For Which an Operator Can Be Absolutely Liable is Limited by Statute 2.3.6 Operators Are Subject to Unlimited Fault-based (Strict) Liability For All Actual Loss or Damage 2.3.7 COGOA Prohibits Double Recovery 2.4 Arctic Waters Pollution Prevention Act 2.5 Inuvialuit Final Agreement--Absolute Liability for Wildlife Harvest Loss 2.6 Fisheries Act--Absolute Liability For Unauthorized Discharge of a Deleterious Substance in Water Frequented by Fish 3. CRITIQUE OF THE CURRENT OFFSHORE LIABILITY REGIME 3.1 The Liability Regimes Established by COGOA and the Accord Acts Suffer From a Number of Weaknesses that Are Not Adequately Addressed by Auxiliary Liability Regimes 3.1.1 Weaknesses of the Arctic Waters Pollution Prevention Act 3.1.2 Weaknesses of the Inuvialuit Final Agreement 3.1.3 Weaknesses of the Fisheries Act 3.1.4 A Comprehensive Set of Legislative Reforms is Necessary to Address the Weaknesses of Canada's Offshore Liability Regime 3.2 Inappropriately Low Maximum Absolute Liability Limits 3.2.1 Weakness: Prescribed Maximum Absolute Liability Limits Fail to Promote a Desirable Industry Safety Culture and Fail to Protect Canadian Taxpayers From Potentially Massive Liability 3.2.2 Weakness: Beyond the Inappropriately Low Absolute Liability Limits, the Unlimited Fault-Based (Strict) Liability Does Not Adequately Protect Canadians 3.2.3 Solution: Abolishing the Maximum Absolute Liability Limit 3.3 Uncertain Availability of Environmental Damages Under Liability Statutes 3.3.1 Weakness: Federal Liability Regimes Do Not Expressly Allow For Compensation For Damages to Natural Resources, and Common Law Availability of Such Compensation Lacks Clarity 3.3.2 Solution: Incorporate An Explicit Statutory Natural Resource Damage Compensation Mechanism, Drawing on Canadian and American Models 3.4 Absence of Explicit Recognition of the Polluter-pays Principle 3.5 Lack of Complementary Mechanisms to Ensure Remediation and Compensation in Cases 3.5.1 Weakness: The Canadian Offshore Liability Regime Lacks Complementary ('Safety Net') Compensation Mechanisms to Protect Taxpayers Where Polluters Cannot or Will Not Pay 3.5.2 Solution: Adopt a Complementary ('Safety Net') Compensation Mechanism Such As a Mutual Insurance Pool or a Dedicated Remediation and Compensation Fund 3.6 Lack of Clarity As To What Constitutes Reasonable Spill Response Measures and Costs And 3. …

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