Pipeline Safety Act Questions and Answers

On 19 June 2016 the Pipeline Safety Act came into force, making important changes to the National Energy Board Act (NEBA), and to some extent the Canada Oil and Gas Operations Act (COGOA). Further information regarding the legislative changes can be found on our website under Regulations, Guidance Notes and Related Documents under the National Energy Board Act.

  1. What is included in the Pipeline Safety Act amendments?
  2. How will this legislation affect current projects?
  3. What is Absolute Liability?
  4. How is the Absolute Liability limit set?
  5. Why doesn’t the NEB currently consider a company’s financial responsibility and ability to pay if there’s a spill?
  6. Why are small companies exempt from Absolute Liability?
  7. How many NEB regulated companies will be subject to the minimum $1 billion liability?
  8. Under what circumstances would absolute liability less than $1 billion be considered?
  9. How are pipelines abandoned?
  10. Weren’t companies responsible for pipelines after abandonment before? What did the act change?
  11. Who will be responsible for an abandoned pipeline if a pipeline company ceases to exist? Will a landowner be able to have issues addressed on their farm if the company does not exist?
  12. When would the taxpayer be on the hook to pay for a spill?
  13. What if a company goes bankrupt after a spill? Will taxpayers be on the hook for cleanup costs?
  14. Who is responsible for keeping pipelines safe?
  15. How are farmers impacted by the changes to the legislation?
  16. Can a landowner/farmer receive a financial penalty?
  17. What can a landowner do to avoid issues/enforcement actions?
  18. If a landowner/farmer causes damage to a pipeline will they liable for damages and/or spill cleanup? Are they liable in case of negligence?
  19. What does the NEB do to keep pipelines safe?
  20. How does the NEB ensure companies are complying with the new legislation and regulations?

Q1. What is included in the Pipeline Safety Act amendments?

The Act will predominately affect the following aspects of the NEB’s legislation:

  • Company absolute liability and financial resource requirements, to pay for pipeline spills
  • Board jurisdiction over pipelines, post-abandonment
  • Damage prevention requirements
  • Board powers to assume control of a pipeline release
  • Greater clarity regarding audits
  • Enforcement powers in the North

Q2. How will this legislation affect current projects?

  • All NEB-regulated companies are required to abide by current legislation, regulations, standards and Board orders.

Q3. What is Absolute Liability?

  • Companies already had unlimited liability when proven to be at fault or negligent. The concept of absolute liability means that companies operating major oil pipelines will now also be liable for all costs and damages up to $1 billion, regardless of fault.

Q4. How is the Absolute Liability limit set?

  • The Absolute Liability limit is set for companies operating major oil pipelines in the Act, and this will be done for other pipelines in the regulations. The criteria used to assess applicability of the $1 billion limit is the company’s capacity to transport at least 250,000 barrels of oil a day from a pipeline or pipelines.
  • It is also important to understand that the legislation requires a company to hold a minimum amount of financial resources to pay the Absolute Liability limit that applies to it, or any greater amount that the NEB may specify. ($1 billion liability = $1 billion financial resources)
  • The NEB can order a company to have financial resources that are greater than the limit of liability that applies to them.

Q5. Why doesn’t the NEB currently consider a company’s financial responsibility and ability to pay if there’s a spill?

  • The Pipeline Safety Act enhances our existing legislation which requires the NEB to consider the financial responsibility and financial structure of an applicant for an authorization to construct and operate a pipeline. (Trans Mountain condition required $1.1 billion)

Q6. Why are small companies exempt from Absolute Liability?

  • All NEB-regulated pipeline companies will be subject to an absolute liability limit.
  • Absolute liability for companies that do not qualify as a major oil pipeline will be set out in regulations made by Governor in Council.
  • For small and large companies alike, the NEB can require the company to maintain any amount of financial resources (above the absolute liability limit) that the NEB decides is prudent.

Q7. How many NEB regulated companies will be subject to the minimum $1 billion liability?

  • Currently, five companies will be subject to the $1 billion absolute liability: Enbridge Pipelines Inc., Plains Midstream Canada ULC., Express Pipeline Ltd., TransCanada Keystone Pipeline GP Ltd., Trans Mountain Pipeline ULC.
  • Each of these companies has submitted a plan explaining how it proposes to meet the $1 billion worth of financial resources.

Q8. Under what circumstances would absolute liability less than $1 billion be considered?

  • The legislation states that absolute liability limits for federally-regulated pipelines not covered by the $1 billion requirement will be established through regulations.
  • Natural Resources Canada is developing these regulations. The NEB is working with the federal government and affected stakeholders to develop regulations in a timely and effective manner. There will be opportunities for public comment.

Abandonment

Q9. How are pipelines abandoned?

  • Under the NEB Act, the NEB must hold a public hearing (written or oral) to consider abandonment applications. More information is available on our website under Pipeline Abandonment.

Q10. Weren’t companies responsible for pipelines after abandonment before? What did the act change?

  • Companies were liable for contamination resulting from their pipeline, and had a civil liability obligation for damages that were a direct result of an abandoned pipeline.
  • The Pipeline Safety Act clarifies that the pipeline will remain under the NEB’s jurisdiction in perpetuity or until it is removed from the ground, which means the pipeline company has liability as long as a pipeline remains in place.

Q11. Who will be responsible for an abandoned pipeline if a pipeline company ceases to exist? Will a landowner be able to have issues addressed on their farm if the company does not exist?

  • The NEB has been working since 2009 to establish a pipeline abandonment fund for every pipeline that it regulates. This process involves funds being set aside for each pipeline with a third party.
  • As a result, a landowner will be able to have issues addressed after abandonment regardless of whether a pipeline company continues to exist or not.

Designated Company/ Cost Recovery

Q12. When would the taxpayer be on the hook to pay for a spill?

  • In the event of a release, the NEB requires a company to take any measures required to stop the flow of hydrocarbons, clean up the mess and ensure appropriate environmental remediation. This is not new.
  • The Pipeline Safety Act provides the NEB with the additional authority to order a company to pay others that have incurred costs or expenses in relation to a spill.  
  • In addition, the company would be absolutely liable (that is, liable without proof of fault or negligence) for the applicable limit of Absolute Liability for things like loss or damages and loss of non-use value of a public resources. Where fault has been determined by a court, there would be no limit to what the company could be liable for.

Q13. What if a company goes bankrupt after a spill? Will taxpayers be on the hook for cleanup costs?

  • If the company doesn’t have the financial resources necessary to pay the cost or expenses that might be incurred or the compensation that might be awarded in relation to the spill, then the Governor in Council can take the decision to “designate” it.
  • “Designating” a company sets in motion various procedures that include allowing the NEB to access money in an industry pooled fund and money that may be appropriated from the Consolidated Revenue Fund to pay for costs and expenses.
  • These funds would then be cost recovered from the designated company and other specified companies.
  • In this circumstance, Governor in Council could also establish a tribunal to hear claims of compensation.
  • The Pipeline Safety Act updates the NEB Act to help ensure that if the company cannot pay, the regulated industry, and not the taxpayer, will foot the bill.

Damage Prevention

Q14. Who is responsible for keeping pipelines safe?

  • Preventing damage to pipelines is a shared responsibility. Conducting unauthorized activity near pipelines, or otherwise failing to comply with damage prevention requirements, places the safety of people and the environment at risk.
  • All persons working near pipelines have a responsibility to ensure the safety of the pipelines
  • Whether you are a property-owner, a municipal employee, or a contractor planning a project that involves the construction of a facility, digging, or the crossing of a pipeline compliance with approved safety steps will help ensure your project goes ahead safely and without issues.
  • As a federal regulator of international and interprovincial pipelines, the National Energy Board promotes safe work practices around pipelines through its public awareness initiatives and by monitoring and enforcing compliance with regulatory requirements.

Q15. How are farmers impacted by the changes to the legislation?

  • The NEB’s new damage prevention regulations provide an update to the NEB’s regulatory expectations, and the measures required, for working safely near a pipeline.
  • Farmers’ ground disturbance activities on their lands are restricted in  the “prescribed area” of a pipeline, which is a strip of land measured 30 metres perpendicularly on each side from the centre line of a pipe. This is necessary to protect the farmer as well as the environment. Cultivation that is less than 45 cm deep and any other activities that are less than 30cm deep, and that do not result in a reduction of cover over the pipeline, are not considered ground disturbances according to the Pipeline Safety Act and therefore do not require permission of the pipeline company, or NEB, before proceeding.

Q16. Can a landowner/farmer receive a financial penalty?

  • Administrative Monetary Penalties or AMPs are financial penalties the NEB can impose on companies or individuals for not following certain regulatory requirements, including those related to damage prevention.
  • AMPs can be applied to both companies and individuals. The NEB’s enforcement policy says that AMPs could be used when other enforcement tools such as letters, orders or voluntary commitments are not working.

Q17. What can a landowner do to avoid issues/enforcement actions?

  • In order to avoid enforcement actions, landowners should follow the requirements for authorization outlined in the National Energy Board Damage Prevention Regulations- Authorizations.   These regulations include requirements to:
    • Contacting the pipeline company to obtain its consent to construct a facility near the pipeline or perform a ground disturbance activity within the prescribed area;
    • Contacting the one-call centre or the pipeline company directly if there are no one-call centres serving your area, to have the pipeline located.
  • The NEB has published new Guidance related to Damage Prevention.
  • The NEB requires companies to provide landowners with information on how they can conduct their activities near pipelines safely. This should be done as part of a company’s Public Awareness Program. The NEB audits companies’ Damage Prevention Programs periodically to confirm they are meeting the Public Awareness requirement and holds companies accountable if they do not.

Q18. If a landowner/farmer causes damage to a pipeline will they liable for damages and/or spill cleanup? Are they liable in case of negligence?

  • The absolute liability provisions in the Pipeline Safety Act apply to the company that owns the pipeline, not landowners or other companies such as incorporated farms.
  • Also, the NEB holds the company that owns the pipeline, and not farmers or other parties, responsible for any clean-up costs if there is a spill or rupture. The Pipeline Safety Act puts in place new measures to help ensure that pipeline companies hold enough financial resources to pay these types of costs in the event of a spill or rupture.

Pipeline Safety

Q19. What does the NEB do to keep pipelines safe?

  • The NEB is committed to ensuring pipelines operating in Canada remain safe for people and the environment.
  • Our job starts before a pipeline is even built by reviewing the project application to make sure the project is needed and can be done safely. But we do not simply make a decision on a project and then walk away. We oversee safety for the full lifecycle—from construction and operation to the end of its use. We work alongside communities with the goal of making energy infrastructure the very safest it can be.
  • We know that when companies follow regulations that identify hazards and mitigate risk, pipelines remain a safe and reliable way to transport oil and gas within Canada.
  • We have a number of compliance programs that support our goal of zero-incidents.
    • Safety Management Program
    • Integrity Management Program
    • Emergency Management Program
    • Damage Prevention Program
    • Security Program
  • Through these programs we hold companies accountable, and identify potential issues before they become problems.
  • We will take every measure to protect people and the environment. We have powerful tools to keep companies on track and prevent incidents which we will use without hesitation.
  • This could include issuing administrative monetary penalties, lowering the amount of product a company is allowed to move through their pipeline, and shutting a pipeline down completely if necessary.

Q20. How does the NEB ensure companies are complying with the new legislation and regulations?

  • The NEB actively verifies compliance on all of its authorizations, and takes enforcement actions in cases of non-compliance.
    • In cases of non-compliance, the NEB has a range of tools it can use to enforce its decisions, safeguard safety and protect the environment. These enforcement tools can range from an oral request for immediate compliance to criminal prosecution.
      • Inspections and Audits
      • Safety Order
      • Inspection Officer Orders
      • Stop Work Orders
      • Fines (Administrative Monetary Penalties)
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