Emergency management and the polluter pay principle

Emergency management and the polluter pay principle

Issue: Emergency management and the polluter pay principle

Emergency management and the polluter pay principle [PDF 1082 KB]

Simply put, the companies are responsible for paying all the costs arising from spills on their pipelines, without limit, when the spill is their fault. The National Energy Board (NEB or Board) enforces the polluter-pay principle, which protects the public from having to pay for clean-up. When a spill occurs, the NEB requires all necessary measures to be taken to make the pipeline safe, clean up the spill and remediate the environment, regardless of the cost to the company.

Companies are also required to compensate those who have sustained damage. If someone isn’t satisfied with the compensation provided by the company, they can seek compensation under negotiation processes that are made available, or sue the company in court. The NEB can also order companies to pay other parties, such as municipalities or landowners.

What if the spill isn’t the company’s fault?

Companies are still held responsible for costs even if a spill isn’t their fault. There are “absolute liability” rules in place, which make major oil pipeline companies liable for all costs and damages up to $1 billion, regardless of fault. This liability limit, irrespective of fault, is unique to Canada. The NEB can also order a company to pay other parties, even if it exceeds the absolute liability limit.

What kind of costs does the company have to pay?

The types of costs that companies are responsible for in the event of a spill include response costs by governments or people, damages or loss caused to other parties, and environmental damages. Environmental damages include the “non-use” value of public resources. This means companies are held accountable for damage to resources that don’t necessarily have commercial value and may never or seldom be used, such as damages to remote public park land.

How does the NEB make sure companies can actually pay?

The NEB requires companies to maintain sufficient financial resources to pay for a spill. Companies operating major oil pipelines are required to demonstrate a minimum $1 billion of financial resources, or more if the NEB decides it to be necessary. This can include cash reserves, insurance, bonds, letters of credit and guarantees. The NEB also requires a certain amount of that money to be readily available, so that immediate response and clean-up costs can be covered right away.

What happens if the company goes bankrupt and can’t pay?

If a company is unable to pay the costs to clean-up a spill, the NEB can assume control of the spill response. The NEB can then access money that can be recovered from the industry.

How does the NEB ensure spills don’t happen in the first place?

The NEB relies on a proactive approach to incident prevention by setting clear expectations for industry. We evaluate project proposals, monitor compliance and enforce rules. Compliance activities include inspections and audits, related to security, public safety and environmental protection.

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