UVic Study: Oil spill would hit taxpayers hard

Environmental Law Centre says compensation on civil liability for damage tops out at $1.3B

By Scott Simpson, Vancouver Sun January 14, 2011



Oil-spill compensation from industry is just a drop in the bucket compared to what would be needed to recover from a catastrophic spill off B.C.'s coast, according to a new report.
Spill compensation, including oil-tanker insurance and an international convention on civil liability for oil-pollution damage, tops out at $1.3 billion, according to a study by the University of Victoria's Environmental Law Centre released Thursday by Living Oceans Society.
That's roughly one-third of the cleanup and compensation costs of the 1989 Alaskan Exxon Valdez spill, and the Exxon spill doesn't even rank in the top 30 largest global spills.
Living Oceans Society issued the report as part of its opposition to a proposal by Calgarybased Enbridge Inc. to build a twin 1,170-kilometre pipeline system that would move oil and condensate between refineries near Edmonton and a deepsea port terminal on the central British Columbia coast at Kitimat. Supertankers, each carrying up to two million barrels of oil, would thread their way through coastal waters to the open ocean, and groups such as Living Oceans Society and Coastal First Nations assert that the environmental risks are too great to be overridden.
Enbridge has an application before the National Energy Board, including a transportation plan it insists will make tanker traffic safe through inside coastal waters.
In an email, Enbridge said that spills are "not inevitable" and while "the probability is remote, Northern Gateway has placed high priority on both the assessment of risks and the measures required to mitigate those risks, as well as response capabilities and the equipment and logistics support a rapid response would require."
The company said that its risk management program reduces the probability of a large spill to once in 2,800 years.
According to the report, there are four tiers of compensation in the event of a spill. One -- a ship owner's liability -- is limited to $140 million by an international compensation fund, regardless of cleanup costs.
A 1992 international convention provides additional compensation up to $317 million, and an international supplementary fund could potentially add up to $750 million.
Finally, there's a ship-source oil-pollution fund to which the Canadian industry contributes. It has accumulated $380 million and will disburse a maximum $155 million for a single incident in circumstances where the previous three sources have maxed out.
"In sum, the total approximate amount of compensation available from all four tiers would be $1.33 billion [Canadian]," the report says.
By contrast, the report states that compensation and cleanup fees for the Exxon spill reached at least $3.5 billion -- and the compensation fund for the BP oil spill in the Gulf of Mexico is $20 billion against an estimated $100 billion in environmental and economic damage.
"In the event of a Valdez-type disaster, over $1.2 billion US in cleanup costs could end up being paid by Canadian taxpayers," the report said.
According to Enbridge, the federal government has the option of raising fees to bolster the oil pollution fund if it believes greater coverage is required.
Jennifer Lash, executive director of Living Oceans Society, said the group wants Canadians to be aware of the financial risks of tanker transport.
"Enbridge, the company that is the proponent for the pipeline, has zero responsibility in terms of an oil spill," Lash said in a telephone interview.
"If there is a catastrophic spill, when you brought in every single source of funding it would still just be a fraction of the money that's required for a cleanup and taxpayers could be left with up to 67 per cent of the cost."
Art Sterritt, executive director of Coastal First Nations, said the study's compensation estimates match his organization's calculations.
"Historically, people haven't even been able to catch up to whoever is liable. We have even more information about what happened in Alaska, the liability issues in and around the people who were damaged there, how the oil companies spent even more money fighting those people in order not to pay," Sterritt said in a phone interview.
He said the total available spill compensation would barely cover a year's worth of fisheries-industry activity on the B.C. coast, including fishing, shellfish farming and salmon aquaculture, according to figures from the B.C. Seafood Alliance.
"Right now the revenue British Columbia gets on the coast from the fishing industry is $1.3 billion a year. That would be the whole coast, but the majority of the revenue comes out of the north [where the tankers would travel]," Sterritt said.
"We are pretty confident that if there was a spill, we would be wiped out."


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