Absolute liability for offshore drilling in Canada to increase to $1 billion

Companies drilling for oil on Canadian shorelines will likely see increased absolute liability costs in the fall, rising from $30 million on the Atlantic and $40 million in the Arctic to $1 billion nation-wide.

Joe Oliver, Canada's natural resources minister, has drafted the bill in coordination with the governments of Nova Scotia and Newfoundland and Labrador.

“Today’s $1 billion milestone in our plan for Responsible Resource Development will ensure that accountability for operators in the Atlantic offshore is updated and in line with international standards,” said Oliver in a statement on Tuesday.

Under current laws, oil and gas companies are required to pay up to $40 million for spills regardless of why they occurred. For spills caused by fault or negligence, Canada operates under a "polluter pays" law, which provides for unlimited liability payments.

But the revised legislation did not go far enough to satisfy some environmental activists.

“No one should be allowed to drill in Canada's Arctic Ocean," said Christy Ferguson, a spokesperson for Greenpeace Canada, in a statement. "But if the Harper government allows companies to go forward recklessly, they should be responsible for the full cost of any damage they cause, full stop.”

Canada's absolute liability of $30 to $40 million pales in comparison to other developed countries, including the United States.

Canadian absolute liability compared Source: Office of the Auditor General of Canada

Creative Commons image by Ingrid Taylar