Mcgill's Annual Graduate Law Students
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- Do Not Cite - OLD HARRY: WHO WILL PAY FOR NATIONAL DAMAGES IN CASE OF A SPILL? McGill’s Annual Graduate Law Students Conference, 7th ed.: Emerging Scholars, Emerging Scholarship Presented to the Organizing Committee By Stéphanie Roy (ID: 260563710) 4577 words May 10, 2014 - Do Not Cite - TABLE OF CONTENTS Abstract ........................................................................................................................................... 1 Introduction .................................................................................................................................... 2 1. Possible Effects of A Spill Caused by Old Harry's Exploitation or Magdalen Islands’ Fear .................................................................................................................................................. 3 2. Liability for Oil Spills Caused by Offshore Platforms ........................................................ 5 2.1. The Regulatory Regime ................................................................................................... 5 2.2. Civil Damages and Clean up Costs ................................................................................. 6 2.3. Liability Limit and Ability to Pay ................................................................................... 9 2.4. Types of Damages Covered ........................................................................................... 11 Conclusion ..................................................................................................................................... 13 ii - Do Not Cite - ABSTRACT Old Harry is an oil and gas prospect located in the Gulf of St. Lawrence on the border between Quebec and Newfoundland. It has neither been drilled nor exploited yet, but the Government of Quebec has demonstrated openness to its exploration, while the Government of Newfoundland has clearly announced its intention to do so. The purpose of this presentation is to identify who will pay for national damages in case of a spill. I will explore the different components of liability for oil spills caused by the exploitation of offshore platforms, based on federal regulations applicable in Newfoundland. The federal government has yet to adopt any statute regulating offshore oil exploitation in Quebec. The 2010 BP Deepwater Horizon case has shown that oil spills from offshore platforms can have major impacts on the marine environment, impacts that will likely last for decades. It has also brought attention to the dangers that come with such exploitation. The Gulf of St. Lawrence is a sensitive ecosystem hosting many species. Hence, a spill in this geographical area could be a major threat to Magdalen Islands fishermen and the marine environment in its whole. However, the damages that can be awarded under the absolute liability regime are capped at $30 million CAD. Meanwhile, BP has paid a total of $42.2 billion USD, including criminal and civil charges (and the litigation is ongoing) as well as clean up costs for Deepwater Horizon. Compared to the magnitude of these damages, the Canadian liability limit obviously seems insufficient; therefore it is doubtful that the Islands, the Province and the marine environment are well protected in the event of a large spill. As oil and gas companies would not be condemned to pay the entire civil damages, Canadians who will suffer these damages won’t be able to recover them entirely. Accordingly, Canadians are likely to pay a fraction of the bill if such a disaster happens. Keywords: oil and gas exploitation, offshore platforms, joint management, oil spills, no fault, and liability cap. 1 - Do Not Cite - INTRODUCTION Old Harry is an oil and gas prospect located in the Gulf of St. Lawrence on the border between Quebec and Newfoundland. It has neither been drilled nor exploited yet, but the Government of Quebec has demonstrated openness to its exploration, while the Government of Newfoundland has clearly announced its intention to do so.1 The purpose of this presentation is to identify who will pay for national damages in case of a spill. I will explore the different components of liability for oil spills caused by the exploitation of offshore platforms, based on federal regulations applicable in Newfoundland since the federal government has yet to adopt any statute regulating offshore oil exploitation in Quebec.2 The 2010 BP Deepwater Horizon case has shown that oil spills from offshore platforms can have major impacts on the marine environment, impacts that will likely last for decades. 3 It has also brought attention to the dangers that come with such exploitation. The Gulf of St. Lawrence is a sensitive ecosystem hosting many species. Hence, a spill in this geographical area could be a major threat to Magdalen Islands fishermen and the marine environment in its whole. However, the damages that can be awarded under the absolute liability regime are capped at $30 million CAD. Meanwhile, BP has paid a total of $42.2 billion USD, including criminal and civil charges (and the litigation is ongoing) as well as clean up costs for Deepwater Horizon. Compared to the magnitude of these damages, the Canadian liability limit obviously seems insufficient; therefore it is doubtful that the Islands, the Province and the marine environment are well protected in the event of a large spill. As oil and gas companies would not be condemned to pay the entire civil damages, Canadians who will suffer these damages won’t be able to recover them entirely. Accordingly, Canadians are likely to pay a fraction of the bill if such a disaster happens. In addition, it is unsure whether the regime covers natural resources damages, which might not be compensated and therefore assumed by Canadians as well. 1 Sue Bailey, “Ottawa and Quebec reach deal on Old Harry oil and gas royalties”, Canadian Press (24 March 2011) online: CTV News <montreal.ctvnews.ca> [Bailey]. 2 Stéphanie Marin, “Accord entre Québec et Ottawa sur le gisement Old Harry”, La Presse (23 March 2011) online: La Presse <http://www.lapresse.ca> [Marin]. 3 Tina M. Smith, “Wildlife Protection and Offshore Drilling: Can There Be a Balance Between the Two?” (2011) 6:2 Fla & M U L Rev 349 at 377 [Smith]. 2 - Do Not Cite - 1. Possible Effects of A Spill Caused by Old Harry's Exploitation or Magdalen Islands’ Fear A theory suggests that Old Harry was named after a nearby community situated in the archipelago of Magdalen Islands. It is a prospect on the border of Quebec and Newfoundland in the Gulf of St. Lawrence; it has been estimated to contain up to two billion barrels of crude oil and trillions of cubic feet of natural gas.4 In fact, Quebec has demonstrated interest in its exploitation since it started negotiating with Ottawa 12 years before to reach an agreement on the joint management and revenue sharing under the liberal government. There was no accord yet between Quebec and Ottawa as there was for Newfoundland and Labrador and Nova Scotia (Atlantic Accords) since there is no offshore platform exploited in Quebec yet.5 According to this agreement, the province will receive an amount equivalent to 100% of royalties from the exploitation of its resources.6 Canada will have to adopt statutes regarding offshore oil and gas exploitation in Quebec and oil spills.7 The former Premier Pauline Marois from the Parti Québécois was of the opinion that all relevant environmental studies would have to be conducted but was not closed to the exploitation, believing that the province should follow Norway’s example.8 The newly elected liberal party has yet to announce its position on Old Harry’s exploitation. Both provinces have jurisdiction over a portion of the reserve. For the moment, they still disagree on the territorial limits of the prospect and this could lead to arbitration between them if they do not reach an agreement.9 Corridor Resources Inc. has applied for the approval of the regulator Canada-Newfoundland and Labrador Offshore Petroleum Board (“C-NLOPB”) to drill by the end 4 Ryan Cleary, “Playing Old Harry: Why hasn’t the largest known undrilled marine structure in Canada been developed?”, Natural Resources in Atlantic Canada Magazine 12:2 (July/August 2010) 18, online: Atlantic Business <www.antlaticbusinessmagazine.ca> [Cleary]. 5 Bailey, supra note 1; Cleary, supra note 4 at 20. 6 Bailey, supra note 1; See “2011-025 Accord entre le gouvernement du Canada et le gouvernement du Québec sur la gestion conjointe des hydrocarbures dans le golfe du Saint-Laurent (Old Harry)” in Secrétariat aux affaires intergouvernementales canadiennes, “Ententes intergouvernementales canadiennes déposées au bureau des ententes”, online: <www.saic.gouv.qc.ca> [SAIC]. The agreement is not public. 7 Marin, supra note 2. 8 Annie Mathieu, “Gisement Old Harry: il faut prendre le temps, dit Marois”, Le Soleil (6 August 2012) online: La Presse <http://www.lapresse.ca>; See also Hugo Séguin. "Le PQ au pays de l’or noir." (2013) 762 Relations 4. 9 Marin, supra note 2. 3 - Do Not Cite - of 2014.10 This would be a single exploratory well and the drilling would last 50 days.11 Corridor Resources submitted an environmental assessment on December 20, 2011 that is still under study.12 Still, this upcoming exploratory drill is worrisome for residents of the Magdalen Islands, which are well known for their beautiful landscapes and beaches.13 As the Islands are located 80 kilometers from the Old Harry Prospect, the residents fear the offshore exploitation and the risk of spills that accompanies