Although the chances of a massive oil tanker spill off the coast of northern B.C. are slim, documents reveal that Enbridge (TSX:ENB) would not have to pay the cleanup costs for an ocean spill related to its $5.5 billion Northern Gateway pipeline project.
Still, maritime law experts argue that even though the oil giant can’t be forced to pay for a tanker spill, the law is clear about who would have to pay and there’s a hefty chunk of change set aside to cover just such a disaster.
“When you are talking about oil from ships, it is the most regulated area of marine activity [out there],” explained Gary Wharton, a maritime law expert at Vancouver’s Bernard & Partners.
Last week, in Kitimat, public hearings began into the planned Northern Gateway project, a twin pipeline system that would ferry oil and condensate between Edmonton and the West Coast.
Thousands of Canadians have allegedly signed up to speak about the project during public hearings in the coming months.
Environmental groups, First Nations and political parties such as the NDP have blasted Northern Gateway for the environmental risk it poses.
Despite the fact that the system runs 1,177 kilometres through mountain ranges and across fish-bearing creeks (which Enbridge would be responsible for in the event of a spill), opponents are mostly concerned about the possibility of a tanker spill in the narrow channels off B.C.’s coast.
Enbridge has said an oil spill has the potential to occur once in 350 years, based on 220 double-hauled, tug-escorted tankers travelling to and from B.C. each year.
But the company pointed out in its project application that the ship owner, not Enbridge, is strictly liable for damage from oil spills.
“Whether or not the ship owner is at fault for the oil spill or negligence caused the oil spill, the ship owner would be responsible for oil spill costs,” Enbridge wrote in its application.
Environmentalists have voiced concern that it might be hard to hold an internationally registered ship owner accountable for a massive spill in B.C.
Maritime law experts, however, say a number of rock-solid insurance policies have been set up to protect the public from bearing the full brunt of cleanup costs.
“I suspect we probably have the best package in the world at the moment,” explained Alfred Popp, administer of Canada’s Ship-source Oil Pollution Fund in Ottawa.
For starters, ship owners must carry insurance to cover liability costs up to approximately $136 million.
Should the cost of the cleanup exceed that amount, a second source of funding kicks in from the International Oil Pollution Compensation Fund, which, Popp said, would raise the total coverage to more than $300 million.
If that’s still not enough, Canada has also signed on to a supplemental international fund that would increase coverage to $1.14 billion.
On top of that, Popp’s Ship-source Oil Pollution fund has money set aside to increase the total compensation for any one disaster to $1.299 billion.
But environmentalists are quick to point out that the Exxon Valdez oil spill off Alaska’s coast in 1989 cost a lot more to clean up than today’s insurance policies cover.
“Using the Exxon Valdez spill as an example, conservative estimates for the cost of that spill were $3.5 billion … so in the case of a major spill Canadian taxpayers could be on the hook for billions of dollars worth of cleanup and compensation costs,” said Katie Terhune, an energy campaigner with the Living Oceans Society.
Josh Paterson, staff counsel with West Coast Environmental Law, agreed with Terhune, and pointed out that the oil industry “gold standard” is to mop up only about 15% of a spill.
But Wharton said significant improvements have been made in the design, safety measures and regulations surrounding tanker movement since Exxon Valdez.
Enbridge, meantime, has already designed an hour-by-hour response plan should the worst occur.
Although nothing is guaranteed, Popp believes today’s funds go a long way toward protecting Canadian taxpayers from the cost of cleaning up a massive oil spill.
“One should hesitate to predict, but I would say the taxpayers are probably pretty well protected,” said Popp.
Enbridge could not be reached for comment. •
