On February 20, 2015, Parliament introduced Bill C-52, an Act to amend the Canada Transportation Act and the Railway Safety Act. Bill C-52 is meant to strengthen the liability and compensation regime for federally regulated railway companies. Particularly, the Bill will, among other things:
- establish minimum insurance levels for freight railway operations;
- establish that a railway company is liable, without proof of fault or negligence, subject to certain defences, for damages resulting from an accident involving crude oil, up to the level of the company's minimum liability insurance coverage; and
- establish a fund that is financed by levies on shippers to cover the damages resulting from a railway accident involving crude oil that exceed the minimum liability insurance coverage.
Our view:
Bill C-52 is part of the Federal government's continued response to the increase in shipments of crude oil by rail, as well as accidents that have occurred recently, such as the Lac-Mégantic disaster on July 6, 2013.
The Federal government and the Province of Québec have encountered problems paying for the cleanup costs resulting from the Lac-Mégantic disaster. Montreal, Maine & Atlantic Canada Co. (MM&A), the railway company involved in the disaster, filed for protection from its creditors in August of 2013, unable to pay for the hundreds of millions of dollars in cleanup costs and legal claims. MM&A's insurance policy had a per occurrence limit of $25 million.
We expect that Bill C-52, along with other regulations that have come into force over the past year, will continue to increase the costs of shipping crude oil by rail. As these costs rise, there will be increased pressure to alleviate pipeline capacity issues in both Canada and the United States.
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