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Enbridge wants a break on $1 billion oil spill insurance and liability costs

June 24, 2013

This week the Joint Review Process for the Northern Gateway pipeline and tanker project is listening to final submissions before adjourning to write its recommendations. We were pleased earlier this year when the JRP included the requirement that Enbridge carry at least $950 million in cash and insurance to cover the cost of responding to a land-based oil spill or a spill at the marine terminal proposed for Kitimat.

This amount is based on the actual cost to date to clean up the Kalamazoo River spill of 2010—and they’re still at it. Enbridge continues to claim, in the face of this hard evidence to the contrary, that a land-based spill in B.C. wouldn’t cost more than $200 million to ‘clean up.’

‘Sharing’ the cleanup cost

While $950 million might not be enough cover the cost of a pipeline spill that wipes out salmon habitat in the headwaters of the beleaguered Fraser River, it is apparently a little too rich for Enbridge. The energy giant now says that they don’t want to carry insurance for the full amount of the cost of oil spill response when Northern Gateway suffers its inevitable ruptures, spills and other accidents. Company lawyers devoted a good part of their two-hour oral reply arguing that the federal government could relieve them of this burden by creating an industry-wide fund to respond to all pipeline spills.

"We wonder how the competition feels about having to help underwrite Enbridge’s unenviable track record on spills," said Karen Wristen, Executive Director of Living Oceans. "If a fund were established as Enbridge asked, not only would the entire industry be underwriting Enbridge's safety record, but the strongest incentive to implement safety measures—the cost of cleanup—would be right off the corporate books. Why bother with expensive shutdowns to investigate possible spills if the Oil Spill Fund is going to pay for cleanup?"

Enbridge not liable for tanker spills

The JRP has not required Enbridge to pay for cleanup of a tanker spill on the coast. Living Oceans first raised the alarm that Canadians might well be on the hook for tanker spills in 2010, when we commissioned a review of the regulations and treaties that govern response costs for oil spills from shipping in Canada. There is $1.4 billion available in total compensation. By contrast, cleaning up a spill like the Exxon Valdez disaster cost the equivalent of about $12 billion in 2012 dollars.

Canada has a ship-source oil spill fund that was created just after the true costs of the Exxon Valdez spill were realized. Every business importing or exporting oil contributed a levy per barrel from 1972 to 1976. The levy was discontinued and now contains only about $380 million, and that is solely because taxpayers have been topping it up for the past 40 years. The fund pays out only about $159 million in the event of a spill.

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