Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 40 - Evidence - March 26, 2013


OTTAWA, Tuesday, March 26, 2013

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day, at 6:01 p.m., to study the current state of the safety elements of the bulk transport of hydrocarbon products in Canada.

Senator Richard Neufeld (Chair) in the chair.

[English]

The Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld, I represent the Province of British Columbia in the Senate and I am chair of this committee.

I would like to welcome honourable senators, any members of the public with us in the room and viewers all across the country who are watching on television.

Oh behalf of the committee, I would like to take a moment to extend a warm welcome to our newest members: Senator Mike MacDonald from Nova Scotia, and Senator Betty Unger from Alberta. It is good to have you both here.

I would like to take a minute to thank Senator Johnson, who was on the committee for a while but has other duties to go to, and to recently retired Senator Brown. From the time I arrive here four years ago, Senator Brown was on this committee and we very much appreciated his contribution as a valuable member.

I would now ask senators around the table to introduce themselves, beginning with the deputy chair, Senator Grant Mitchell from Alberta.

Senator MacDonald: Michael MacDonald from Nova Scotia.

Senator Unger: Betty Unger.

Senator Seidman: Judith Seidman from Montreal, Quebec.

Senator Wallace: John Wallace from New Brunswick.

Senator Massicotte: Paul Massicotte, Quebec.

Senator Ringuette: Pierrette Ringuette, New Brunswick.

The Chair: I would like to introduce our clerk, Lynn Gordon, and two Library of Parliament analysts, Marc LeBlanc and Sam Banks.

On November 28, 2012, our committee was authorized by the Senate to initiate a study on the safe transportation of hydrocarbons in Canada. The study will examine and compare domestic and international regulatory regimes, standards and best practices relating to the safe transport of hydrocarbons by transmission pipelines, marine tanker vessels and railcars. The committee has held nine meetings to date on this study.

I would like to welcome, from Transport Canada, Gerard McDonald, Assistant Deputy Minister, Safety and Security; Marie-France Dagenais, Director General, Transport Dangerous Goods; Luc Bourdon, Director General, Rail Safety; and Sylvain Lachance, Executive Director, Legislative, Regulatory International Affairs.

As I understand it, Mr. McDonald, you have opening remarks that you will give on behalf of the group and then we will go to questions and answers.

I apologize for being late, but we had a duty in the house, we had to vote, and there was no sense starting at five, so I apologize for taking some of your time that probably could have been better spent someplace else doing something, but we appreciate you being here. I would like everyone to remember that this committee leaves for the airport tonight, and I think we should be probably done by 7:30. We have about an hour and a half, so if everyone could keep their questions as short as possible, and the answers also. That way we will get through more, and if we do not get it all done perhaps you could come back at another time. We would have loved to have had a couple of hours or longer, but we thank you for being here.

Gerard McDonald, Assistant Deputy Minister, Safety and Security, Transport Canada: Thank you for the opportunity for us to speak to you today on the safe transportation of oil to, from and within Canada.

I am sure there are many questions you will have for us, and we will get to those as quickly as possible. Before that, I have a few brief comments just to situate our programs on how we regulate the safe transportation of oil in Canada.

To protect Canadians and the environment, there are three principal pieces of legislation and their accompanying regulations and standards that establish the Canadian safety net for the safe transport of hydrocarbons to, from and within Canada. These are the Canada Shipping Act, 2001, the Transportation of Dangerous Goods Act and the Railway Safety Act.

As well, the risks associated with the transport of hydrocarbons in the North are addressed by the Arctic Waters Pollution Prevention Act.

[Translation]

I would like to spend a few minutes speaking about these three mature programs and Canada's emergency response capabilities.

First, the marine safety and security program and the Canada Shipping Act, 2001. The Canada Shipping Act, 2001 is the principal piece of legislation that governs the activities of Canadian vessels in all waters and all vessels in Canadian waters. Transport Canada has comprehensive regulations, inspection and enforcement programs in place to enhance the safety of ocean-going vessels and tankers.

[English]

Among the key programs in place are assistance with mandatory pilotage zones, navigation safety measures and National Oil Spill Preparedness and Response Regime. We have Port State Control and Flag State Control; Port State Control being the inspection of foreign ships in Canadian ports, while Flag State Control involves the inspections of Canadian flagged vessels. We have spill prevention through our National Aerial Surveillance Program and, of course, we certify seafarers and the crewing of Canadian ships.

As you may be aware, on March 18 the government announced a number of measures toward the creation of a world-class tanker safety system. The implementation of eight tanker safety measures was announced, along with the introduction of the safeguarding Canada's seas and skies act, and the creation of a tanker safety expert panel to review Canada's current tanker safety system and propose further measures to strengthen the system.

The proposed Safeguarding Canada's Seas and Skies Act, which is amending the Canada Shipping Act, 2001, will strengthen the current requirements for pollution prevention and response at all handling facilities; will increase Transport Canada's oversight and enforcement capacity by equipping marine safety inspectors with enhanced tools to facilitate compliance and enforcement; will introduce new offences for contraventions of the act and extend penalties relating to pollution; and will enhance response to oil spill incidents by removing legal barriers that could otherwise block agents of Canadian response organizations from participating in cleanup operations.

[Translation]

In addition, Transport Canada will increase the number of inspections to ensure that all foreign tankers are inspected on their first visit to Canada, and annually thereafter.

We will expand the national aerial surveillance program. We will review existing pilotage and tug escort requirements to see what more will be needed in the future. More ports will be designated for traffic control measures, starting with Kitimat.

We will work with our colleagues at Environment Canada on new scientific research on non-conventional petroleum products, such as diluted bitumen, to enhance understanding of these substances and how they behave when spilled in the marine environment.

[English]

We will also work with the Canadian Coast Guard, which will be establishing an incident command system that will allow it to respond more effectively to an incident and integrate its operations with key partners. They will also ensure that a system of aids to navigation comprised of buoys, lights and other devices to warn of obstructions and to mark the location of preferred shipping routes is installed and maintained, and the Coast Guard will develop options for enhancing Canada's current navigation system, and here I refer to aids to navigation and hydrographic charts, et cetera.

Finally, with respect to the Arctic Waters Pollution Prevention Act, which applies to waters off Canada's northern coast, 60 degrees north and out to the limits of our Exclusive Economic Zone, the act requires that an experienced ice navigator be on board tankers and shipping control systems, which are designed to keep vessels carrying more than a certain amount of fuel — in this case 453 cubic metres — including tankers, is kept away from ice conditions that they are not built to withstand.

I will turn now to the Transportation of Dangerous Goods Act. The essential elements of this act were designed with the sole purpose of promoting public safety in the transportation of dangerous goods. Public safety is defined in the act as protecting people, property, health and the environment.

[Translation]

The transportation of dangerous goods program requires that dangerous goods be properly classified and be transported in a proper means of containment with appropriate safety markings. In addition those shipping dangerous goods must ensure that: appropriate shipping documents accompany the goods; they have appropriate emergency response assistance plans for the goods being transported; they report incidents; and their employees are trained to handle and transport the goods.

There are more than 30 million shipments of dangerous goods in Canada every year with 99.99 per cent reaching their destination without incident. Shipments of oil and gas must comply with the act and its regulations and standards. Oil and gas are routinely shipped safely across the country every day.

Transport Canada verifies compliance through inspections. CN and CP are inspected regularly as part of Transport Canada's risk-based inspection program.

[English]

The act and regulations are enforced by federal and provincial inspectors. Memoranda of agreement exist with each province and territory on shared enforcement, resulting in the provinces focusing primarily on highway inspections, whereas the federal government deals with the marine, rail and air transport, as well as shipper activities for all modes.

Finally, for the Railway Safety Act, it helps ensure that Canadians, the Canadian economy and the environment benefit from a mature safety regime for railway operations. The Railway Safety Act establishes freight car safety rules for equipment. These rules require that cars are free from safety defects through the use of safety inspections by certified car inspectors at specified locations.

The Railway Safety Act also establishes Canadian rail operating rules that cover everything from crew responsibilities, switching requirements, movements across public crossings at grade, securing and coupling of equipment and track/occupancy control systems.

[Translation]

The Railway Safety Regulations outline the minimum requirements for federally regulated railway companies. If there is an increase in rail traffic to specified levels, then more frequent track inspections would be required in accordance to the rules, class of track and annual tonnage transported on the rail line.

The Railway Safety Act provides improvements in infrastructure to promote safer grade crossings, save lives and prevent derailments associated with crossing accidents. The grade crossing improvement program provides for government funding, in partnership with municipalities and railway companies, to enhance safety at those rail crossings across Canada.

The amendments to the Railway Safety Act that will come into force on May 1, 2013 will require railway companies to obtain a safety-based railway operating certificate and to submit environmental management plans.

Now that you have an understanding of the legislation and regulations that protect Canadians and the environment during the transport of hydrocarbons, I would like to take my remaining time to discuss emergency response.

[English]

On the marine side, Canada's liability and compensation regime for oil spills is based on the "polluter pays" principle, which means that the polluter is always responsible for paying for the cost of an oil spill cleanup, including third party damages. This means that if a ship causes a spill, its owner is liable for losses and damages under federal legislation.

Furthermore, in accordance with international conventions, shipowners are subject to compulsory insurance to an amount which is linked to the tonnage of the vessel. If the amount of damages exceeds the shipowner's liability, international and domestic funds provide additional compensation to a total amount of approximately $1.36 billion.

Transport Canada is reviewing Canada's liability and compensation regime and is taking further action to ensure that it has a world-class tanker safety system for shipping resources safely through Canada's waterways before any major new energy export infrastructure becomes operational. The review is expected to be completed in the fall of 2013 and will guide Transport Canada as it modernizes the Ship-source Oil Pollution Fund, examining its overall application and use.

Likewise, with the Transportation of Dangerous Goods Act, it works on the "polluter pay" principle as well. Emergency Response Assistance Plans are required by the TDG regulations for certain dangerous goods that necessitate special expertise and response equipment. For oil, an Emergency Response Assistance Plan is required only if the transport is done by a unit train of 17 or more inter-connected rail tank cars filled to at least 70 per cent capacity, carrying oil under the classifications of UN1202, 1203 or 1863. Any person who offers for transport or imports one of these dangerous goods must submit a plan to the TDG directorate, which will then review the plan and, if it is found adequate, will approve it.

[Translation]

Emergency response assistance plans (ERAP) are intended to enable industry to assist local emergency responders by providing them with technical experts and specialized equipment at an accident site. Such assistance is available to local firefighters at no cost in response to an incident involving ERAP dangerous goods in transport.

In addition, Transport Canada operates the Canadian Transport Emergency Centre (CANUTEC) to assist emergency response personnel in handling dangerous goods emergencies. CANUTEC is staffed by bilingual professional scientists specialized in emergency response and experienced in interpreting technical information and providing advice to first responders.

The centre operates 24 hours a day and handles some 30,000 phone calls a year related to safety. In the event of an emergency involving dangerous goods, Canadians can call CANUTEC for immediate professional help. First responders (fire, police and ambulance) use this service on a regular basis.

[English]

That concludes my opening remarks, and we would be happy to take your questions on any of these subjects. Thank you very much.

The Chair: Thank you. I have a long list, but I will ask a few questions to start, if I could. Do I understand, both on the East Coast and on the West Coast, that double-hulled tankers are required as of today, right now?

Mr. McDonald: Yes, they are. Double-hulled tankers have been introduced since 2004 or 2005, I believe. In actual fact, all ships operating on both the East Coast and the West Coast are double-hulled tankers. Under the law, I believe it is not fully required until 2015 for smaller vessels but, in actual fact, all vessels operating now are, in fact, double- hulled.

The Chair: I have read in some places and have heard that the tankers that would be going into Kitimat, for example, would have compartments in them. For a VLCC, what size would those compartments be? There are still people saying that just because it is double-hulled does not mean it cannot be penetrated. For myself, I would like to know how much oil could be lost if one of those compartments were punctured in a bad accident and how many barrels of oil that would hold?

Sylvain Lachance, Executive Director, Legislative, Regulatory International Affairs, Transport Canada: I will have to do some calculations. A VLCC, for example, has a capacity of 200,000 tonnes to 320,000 tonnes and typically will be divided transversely, three tanks this way and longitudinally by about another seven or eight tanks, so you are looking at probably 24 tanks, eight of them being in the middle. With a double hull, the likelihood of a tank completely emptying would be very, very small. It would take a large catastrophic failure for that to happen. If one tank emptied, you would be looking probably at 20,000 tonnes, which is 140,000-barrels, perhaps.

The Chair: I think that is very good information for us to have. I will let you get back to us with how that configuration is on a VLCC, and also the Panamax, the four types of tankers.

Mr. McDonald: It is not same for every ship, obviously. Each ship is designed differently, so the amount of each sector might be different, but we can give you sort of a general idea.

The Chair: Every ship coming in would have compartments, not just double-hulled but compartments; is that correct?

Mr. McDonald: Yes, that is correct.

The Chair: You inspect all LNG tankers that come to Canada. On the East Coast, do you now inspect tankers?

Mr. McDonald: Yes, we do, absolutely.

The Chair: How many of those arrive a year to Canaport?

Mr. McDonald: To Canaport? Are you talking about LNG tankers? I do not have that information. We can certainly find that out for the committee.

The Chair: Okay, if you would do that, please.

The refined products go up and down. I am familiar with the West Coast, and there is lots of refined product moved. Is that refined product moved in double-hulled barges and those types of things, or is that something that will still be enforced?

Mr. Lachance: The smaller tankers, including barges, are not required to be fully double-hulled until 2015, or at the end of 2014. In a year or a little bit from now, they will all be double-hulled.

The Chair: Even the small ones going into some of the smaller communities along the coast will all be double-hulled.

Mr. Lachance: That is correct, barges, et cetera.

The Chair: Thank you.

Senator Mitchell: I would like to begin really in the weeds, but it is important, Mr. Lachance. I wanted to check your map to confirm it. I think you said there is 250,000 tonnes at the minimum in one of the larger ships.

Mr. Lachance: Not at a minimum. For VLCC, maximum is 320,000.

Senator Mitchell: So it is 250 to 320, just to make it easier. You are saying there are 24 sections.

Mr. Lachance: About 24.

Senator Mitchell: That sounds like 10,000 tonnes, not 20,000 tonnes. This is important.

Mr. Lachance: Quick math, yes.

Senator Mitchell: I am not trying to put you on the spot. Then you said there is about 70 barrels per tonne, but I think you mean 7.

Mr. Lachance: It is seven barrels per tonne, approximately, yes.

Senator Mitchell: If the whole thing emptied, one section, it would be 70,000 barrels and not 140,000.

Mr. Lachance: Sorry. That is right.

Senator Mitchell: It is important to know.

I am looking at page 6 of your presentation, Mr. McDonald. This is not a trick question, but we were told by some officials at a company that we met with in Calgary a couple of weeks ago that oil and gas are not dangerous goods. That may have been in the context of they are not nitroglycerin or something, but you state clearly that shipments of oil and gas must comply with the act and its regulations and standards, and I think you are referring to the Transportation of Dangerous Goods Act. You would not know what that person meant when he said it, but does it mean anything to you in general terms?

Marie-France Dagenais, Director General, Transport Dangerous Goods, Transport Canada: Oil and gas can be classified by the shipper in different manners. Most of the petroleum crude oil right now is transported under UN 1267, which is a dangerous good. It depends on the flash point. It is kind of getting into the technical terms.

The heavier the oil and fuel is, the less it is a dangerous good because the flammability and spreading are not the same. However, there are some types of oil and fuel — diesel, for instance, and different types — that fall under the dangerous goods program.

Senator Mitchell: That is a very interesting clarification. We have been under the impression — at least I have — that somehow liquid natural gas does not pose some of the environmental problems that heavy oil seems to concern people about, and probably rightly so, because it just evaporates. Is it considered a dangerous good?

Ms. Dagenais: It depends on the flash point and flammability. As I say, Transport Canada does not classify the goods. It is a mandatory obligation on the shipper who ships the dangerous goods. They need to classify it and say what type of good it is.

As I say, the biggest percentage of oil transported is petroleum crude oil, which is a dangerous good.

Senator Mitchell: Thank you.

Mr. McDonald, on page 4 of your presentation, you say, "We will work with the Canadian Coast Guard who will be establishing an incident command centre system, ensuring systems" et cetera. When will that incident command centre system be set up? Will it be on both coasts? Where will it be? Also, is there a specific budget for it now?

Mr. McDonald: Yes, it was announced as part of the world-class measures announced on the 18th. It will apply to all of Canada; essentially for any spill in Canada, the Coast Guard will assume incident command and be able to control all resources associated with any spill.

As far as the time line, I do not have that information in front of me, but we can get that from the Canadian Coast Guard for you.

Senator Mitchell: You said there was a budget?

Mr. McDonald: Yes.

Senator Mitchell: Could you get us that, too, please?

Mr. McDonald: Yes.

Senator Mitchell: I will go on a second round.

Senator Seidman: Thank you. You talked about the liability issues. I will ask you a bit more about that because you have responded to the report of the Commissioner of the Environment in the fall of 2012. He raised concerns about outdated liabilities. Transport Canada did indeed acknowledge that and started a review of the process.

Maybe you could tell me what Canada's current liability is for marine pollution incidents.

Mr. McDonald: Perhaps I will ask my colleague, Mr. Haché, to join us. He is an expert in that regard. Rather than me getting it wrong, I will let him give us the exact numbers.

Daniel Haché, Director, International Marine Policy, Transport Canada: Good evening, honourable senators. The system we have in Canada for liability and compensation is one of the best in the world, and I am not just saying that. Basically, it covers all reasonable response costs that are actually undertaken and also covers preventive measures, as well as cleanup. It is about ship-source oil. It is also supplemented by international conventions and funds, as we have discussed. It is multi-tiered, and it is a shared responsibility between the ship-owner and the shipper, which is to say the cargo owner. It is a polluter, plain and simple, as we have also said in Mr. McDonald's notes.

The total compensation available is $1.36 billion for spills of persistent oil from tankers. The ship-owner is responsible up to $145 million for his insurance. His insurance is basically based on the tonnage of the ship, so he has a limited responsibility in that regard.

Once we have obtained the $145 million, then the international funds garnished by the shippers kick in. We are party to a couple of funds and conventions. One is the 1992 International Oil Pollution Compensation Fund, and Canada is also party to the International Oil Pollution Compensation Supplementary Fund.

The 1992 fund adds to this up to $180 million. The supplementary fund adds to this $875 million. Those are the two international funds.

Canada is unique in that it has its own national fund. For each incident, that will add a fourth tranche of $160 million per incident. That makes the total of $1.36 billion for the regime in Canada.

Senator Seidman: You are referring to the current regime?

Mr. Haché: This is the current regime.

Senator Seidman: In your undertaking to re-evaluate the liability issues, are you looking at increasing the liability?

Mr. Haché: We are, in a sense. We will examine a number of possibilities, but the control we have is only on our Canadian fund. To change the international funds, such as the ship-owner portion, has to do with an international convention. The same thing goes for the two international funds. The only impact we have is on our own Canadian Ship-source Oil Pollution Fund.

We are looking at the adequacy of the amount, based on a risk analysis. That has not yet been done; that is one thing we are looking at. We are also looking at how we can amend the fund through our own regulations and acts.

We have also gone down to the United States and looked at what they are doing and what kind of amounts and funds they have. They have a fund for emergencies. They have $50 million that is readily accessible to the President, and they also have a research and development fund. We are looking into that, as well, so that we can augment the Canadian fund to see if we can have a better assessment of the total amount, as well as an emergency fund and a research and development fund.

Those are the things we will be looking at between now and the fall of 2013.

Senator Seidman: Therefore, there is some international standard you are looking at, or you are looking at other countries to see what kinds of things they do. Is that correct?

Mr. Haché: That is right. We feel we have a very good system. In the U.S., the total of what they can put per incident is whatever is in the balance of their fund or $1 billion, whichever is less. Right now, we are at $1.36 billion with the combination of all the tranches I described before.

Senator Seidman: Could you tell me what the liability issues are from rail accidents, which are different from marine accidents? I do not know if that is a different situation.

Luc Bourdon, Director General, Rail Safety, Transport Canada: I do not have that answer. The Railway Safety Act applies to rail operation, and we can only prosecute if there is a violation to that act. If there is a spill, and let us say that everything was in compliance on the train, the Railway Safety Act will not be used to prosecute a company.

Senator Seidman: Is there some kind of minimal assurance requirement?

Mr. Bourdon: That is covered by the CTA before a railway obtains a certificate of fitness from the Canadian Transportation Agency. They have to demonstrate they have enough money to cover liabilities.

Senator Wallace: The number of proposals to move crude off the West Coast is new to the West Coast of Canada. It certainly is not new, as you know, on the East Coast of Canada. Crude oil has been going to the Irving refinery, the largest in the country, since the early 1960s. As I understand it, back in the 1990s, a new spill response regime was developed in Canada and has been in place on the East Coast since then.

I wonder if you might explain how that works, practically speaking. Most if not all vessels — VLCCs — would be flagged foreign. They are coming to Canadian waters. As you have described, the responsibility for the cargo is the cargo owner and the vessel owner. The vessel is required to have an arrangement with a spill response organization in Canada if an event should occur. How does all that come together? Crude is coming into Canadian waters, the public wants to be assured all of these protections in place, so how does it occur? How are the spill response organizations established and how do these arrangements work?

Mr. McDonald: I will start off and then my colleague can jump in if I have missed anything. Essentially, there are four response organizations in Canada. There are three in Eastern Canada, one large, which is the East Coast Response Corporation, and two smaller ones, Point Tupper and the one in Saint John.

Senator Wallace: Alert.

Mr. McDonald: Thank you. You know more than I do. On the West Coast there is Burrard Clean, and they are responsible for response on the West Coast. Each of these response organizations are responsible for a response area and they must be able to respond to regulated limits of spills up to a certain size, and up to 10,000 tonnes is currently in the regulations.

Any ship shipping oil in Canada must have a pre-existing arrangement with one of these response organizations to be able to ship oil in Canada. They are charged a per-tonne charge to have that arrangement. Essentially, that is the way it is set up. Should a spill occur, then it is the responsibility of the ship-owner to contact the response organization. The response organization is set up to respond to these spills. They have caches at various strategic locations around the country and will respond to the spill accordingly. In the almost 20 or more years that the spill response regime has been in place, we have found it to be very effective in responding to all spills that have occurred in Canadian waters.

Senator Wallace: With the experience you have seen in Eastern Canada, where 2 million barrel cargoes are coming through Canadian waters, and since the mid-1990s, all of those vessels are double-hulled, what has been the experience in Canada? Have we had any incidents where a double-hulled vessel has ruptured or run aground?

Mr. McDonald: No. There have been no major occurrences in Canada in probably 30 years.

Senator Wallace: There were some questions earlier about the number of compartments in a VLCC and the double- hulling of those vessels. I believe I am correct in thinking that the cavity between the outer hull and the tanks is somewhere in the range of six or seven feet. It is a very large cavity, not simply something that would be easily pierced. Is that correct?

Mr. Lachance: That is correct. It is two to three metres, yes.

Mr. McDonald: It is certainly wide enough for a human to get in and inspect as well.

Senator Wallace: Yes, exactly. Thank you.

Senator Massicotte: Thank you for being with us. I will ask my questions in French, if you do not mind.

[Translation]

Mr. McDonald, in your presentation, you said that you are pleased with our regulatory system and that Canadians and the environment are well protected. But would you be able to draw comparisons with the United States or Europe, for instance, to support your comments?

Mr. McDonald: Our accident rate is one of the best in the world. However, I have no data that compare our system with others. The panel recently announced by the minister would be in charge of those data.

Senator Massicotte: You are saying that our accident rate is very good, correct?

Mr. McDonald: Yes.

Senator Massicotte: Are we talking about railway safety or marine safety?

Mr. McDonald: Any mode of transportation.

Senator Massicotte: The three sectors.

Mr. McDonald: The three sectors, yes. I am talking about the accident rate from December.

Senator Massicotte: It is good, but there is no system for comparing us with the United States. How can we find out?

Mr. McDonald: I am going to let Mr. Bourdon answer.

Mr. Bourdon: For train accidents, the criteria used by Canadian companies are the same as those used by American companies so that we can compare ourselves against their industry. The comparisons are primarily for class I railways, so CN/CP and the four major companies in the United States.

For a number of years, the Canadian industry has had better results than our neighbours to the south in terms of train accidents per million train miles.

Senator Massicotte: And the marine sector?

Mr. Bourdon: That is not my area of expertise.

Senator Massicotte: The results are good for railways, but you are not sure about the marine sector. Are you responsible for the pipelines?

Mr. Bourdon: No.

Senator Massicotte: Are you responsible for the shipment of gasoline by truck?

Ms. Dagenais: Yes.

Senator Massicotte: Are our results in that sector good, compared to international standards?

Ms. Dagenais: As Mr. McDonald said, statistics show that 99 per cent of dangerous goods reach their destination safely. There are very few accidents. The rate is very good compared to the Americans.

Senator Massicotte: Could we get a copy of your comparisons? I would like to see the comparison with the United States.

Mr. Bourdon: We can provide you with those documents. CN and CP are the ones that keep track of statistics constantly. We do not really keep them.

Senator Massicotte: You are telling us that we are good, so you must have documents to confirm it, right?

Mr. Bourdon: Yes. However, I must say that it is difficult to make comparisons with Europe, because their railway system is different than ours. In addition, the geography is very different and so is the climate.

[English]

Senator Lang: Thank you very much. I would like to go back to the requirement for double-hulled vessels for tankers. For the record, is this a requirement around the world or are we unique for this requirement?

Mr. McDonald: No, it is a requirement around the world. It is a requirement of the International Maritime Organization and we have adjusted our regulations accordingly to reflect those international requirements.

Senator Lang: Those requirements have been in place for how long?

Mr. McDonald: I would have to check on the exact date, but I believe it is since the early 2000s.

Senator Lang: The one other area that I would like to —

Mr. McDonald: I should add that it was a phased-in implementation. It depended on the year of construction of the ship.

Senator Lang: I would like to move into another area. Of course, the concern in part is the question of the West Coast and your ability to manage the risk involved on the West Coast. Perhaps you could inform the committee as to whether or not you have any concerns about the implications of increased oil tankers activity in the region. If you do not have any concerns, perhaps you can tell the committee why.

Mr. McDonald: We certainly feel with the study we have done in the transportation of West Coast oil — and I think the committee has heard that certainly in terms of navigational challenges — that the navigation challenges there are no more difficult than what we face on the East Coast. We feel that any risks that may be involved with the transportation of oil can be mitigated through a number of safety initiatives. We have talked about double pilotage and the use of escort tugs, as well as increased inspection of the tankers to make sure those calling at Canadian ports are indeed safe.

In terms of our view on whether oil can be shipped safely, we feel that history has certainly proved that it can be shipped safely and has been in Canada for more than a hundred years.

Senator Lang: I would pursue that a little further, if I could. Of course, one of the outstanding issues facing Canada is the question of getting a port on the West Coast and being able to safely ship crude and other petroleum products.

My question is with respect to what they call Cherry Point, which is right next door to the Vancouver strait as far as the Port of Vancouver is concerned. There is major shipping of oil on a daily basis at the present time.

Mr. McDonald: That is correct.

Senator Lang: I do not know if you are aware of this or not, maybe you can look for the information, but how many tankers are going into Cherry Point compared to what is going into the Vancouver port? What are the safety requirements of that port versus the Canadian port? Do you have any information on that?

Mr. McDonald: I do not have those statistics available to me, so I am afraid I cannot respond to that specific question.

Senator Lang: Could you maybe look into it? It would be interesting to find a comparison.

Mr. McDonald: We can certainly find information about the number of shipments. What do you mean when you say as compared to the Canadian port?

Senator Lang: Canadian being Vancouver. Vancouver is right next door. You have all this Alaska oil going into Cherry Point, the way I understand it. What would be interesting from a Canadian perspective is how that compares to what we are looking at, for example, at the Vancouver port or, for example, going out of Kitimat. It is all a question of risk and risk management, and it would be interesting to see how they cope there.

Mr. McDonald: Fair enough.

Senator MacDonald: I want to get back to the movement of product by rail. There has been a substantial increase in the last number of months of the movement of heavy crude to the U.S. by rail and light crude to Canada that comes from the Canadian refineries.

I am curious about the comparison between the regulatory provisions within the American rail system and the Canadian rail system. In terms of the cost of insurance of railing crude through the U.S. compared to the cost of railing crude through Canada, do you have any figures that reflect the comparison of those?

It is my understanding that the cost of insuring these carriers going through the U.S. is substantially greater than the cost of them going through Canada. It is also my understanding that the liabilities going through the U.S. are substantially stiffer than railing through Canada. Do you have anything on that that we can compare?

Mr. McDonald: I do not believe we do, senator; I am sorry.

Senator MacDonald: I wonder how and where we can get that. Do you know where we can get that?

Mr. McDonald: It is not information that we presently collect.

Senator MacDonald: The point I am trying to get to is we are looking at the viability of — certainly I am — railing crude. We know we cannot get world price for crude unless it goes out the ship's bottom. Right now, all this crude is going to the U.S. We are getting West Texas Intermediate or discounted off West Texas Intermediate, yet they are able to send their light crude to Canada at world price.

This country would like that option, but we will not get that option unless we get this heavy crude into a ship spot and into market. I assume that the liabilities and the insurance of carrying this product across Canada as opposed to across the border are significant. These numbers could be used to drive a made-in-Canada solution for this problem. That is why I ask the question.

Mr. McDonald: Fair enough. Like I said, unfortunately, we do not collect that type of data. The insurance and liability aspect on the rail side is handled through the private sector.

Senator MacDonald: As a comment, if we were to experience a major derailment — there is always that possibility — I think both economically and politically we would prefer to do it on our own soil as opposed to in America, particularly as we are trying to negotiate access to the market. I just put that out for consideration.

Senator Mitchell: Mr. Haché, I would like to follow up on your presentation. You said there are four tranches: the two international, the Canada supplemental. Did I miss the first? Is the first tranche the company?

Mr. Haché: The first tranche is the shipowner portion.

Senator Mitchell: The first question concerns that. Apparently — and I do not know this in any kind of deep way — a company could just divide each of its ships up into discrete subsidiaries and, ergo, a very small company. How do you go after them if it is just a boat?

Mr. Haché: The shipowner has limited liability according to the actual weight of the vessel.

Senator Mitchell: It is not unlimited in any way?

Mr. Haché: It is not unlimited.

Senator Mitchell: You cannot go after them. However, it is in the U.S., is it not? We are not as rigorous as them.

Mr. Haché: Then again, they are also looking at other types of punishment, like punitive damages. They go into all sorts of things.

Senator Mitchell: Maybe we should, too.

Mr. Haché: Right now we do not.

Senator Mitchell: All right, but that is a possibility. Second, you mentioned that $1.36 billion compared to the world is significant, but of course 180 of it in the middle two tranches, 180 plus 800 and something, they are international so surely everyone has access to that. How much access do we have to it? We have to apply for it, do we not? They do not just write a cheque and say you have a billion dollars at your disposal any time you want it. It is not like it is easy money.

Mr. Haché: Every time I talked about each of the tranches, I said "up to." I will start a little further back.

When there is a spill and we know there will be compensation, then the P&I club, which is basically a mutual insurance on the shipowner's side, and the international fund will set up a joint office. They will start receiving the claims from the different people who are claiming for money. They will assess the totality of the claim in accordance with the different tranche. The shipowner, therefore, is limited to the weight of the vessel up to a maximum of 145 million.

The two international funds, you have to be signatory to those conventions. The 1992 convention, there are 111 countries contributing to that fund, and that tranche is up to a maximum of $180 million. There are only 28 countries that contribute to the supplementary fund, which is the largest portion at $875 million, and we are signatory to that convention.

Senator Mitchell: Is there any specification as to what the level of balance has to be in those funds so if there is a big spill and the fund drops the 111 countries are required to write a cheque and bring it back up?

Mr. Haché: They will start levies, basically. They will levy the 111 countries within the 1992 fund. They will be levying the 28 countries within the supplementary fund to garnish the fund to be able to pay for the compensation.

Senator Mitchell: I know any given spill will differ in infinite numbers of ways from any other spill, and it is not the BP where the hole was in the ground pumping it up, but how much does it cost to clean up a spill of, say, 28,000 barrels, like the one that was on land in Kalamazoo? How much would that cost offshore? Is $1.36 billion enough? Is it way too much? How does that work?

Mr. Haché: I will refer to some numbers I have. For example, the largest spill we know of that had access to the international fund was the Prestige off the coast of Spain in 2002, and that was $1.4 billion.

Senator Mitchell: How many barrels was that spill?

Mr. Haché: I do not have that number; I am sorry.

Senator Mitchell: Could you get that for us?

Mr. Haché: Yes.

Senator Massicotte: I have a supplementary.

Senator Mitchell: You certainly can, but I have one more question, if I could.

The Chair: You may have a quick one.

Senator Mitchell: Turning to pilotage now, we had an interesting presentation a couple of weeks ago from the Pacific Pilotage Authority. He talked about the two miles in certain kinds of rough waters. I believe he was speaking of the Hecate Strait. It is clear that there are two miles down each side of the islands and the main coast, and then there is a bit where pilots are required, and then there is an open passage in the middle where they are not required. He said they will start helicoptering pilots out to ships that would go through there.

Is that something that should be regulated or is that just something we would leave to their discretion? What is the context of that?

Mr. McDonald: The compulsory pilotage areas are regulated, and those are the areas where you must take a pilot on board. That is done essentially on the advice of the pilotage authorities. If they find they want to add a compulsory pilotage area, they will do a risk assessment. We have a risk-based methodology that they can follow, and it involves consultation with interested parties. They will then make a recommendation to the government and we would pass an appropriate regulation in that regard.

Senator Patterson: We have heard about the effective regime and the good record in shipping hydrocarbons, but there is a new act being introduced that was recently announced. Could you explain whether the act resulted from an analysis of gaps that needed to be improved? What led to the strengthening of the Canada Shipping Act? Is it making a good system better?

Mr. McDonald: Yes.

Senator Patterson: Were there flaws?

Mr. McDonald: We found a couple of weaknesses. The new act that is being introduced, the safeguarding Canada's seas and skies act, is actually a strengthening of the existing Canada Shipping Act, 2001.

There were a number of areas where we saw weaknesses in the act. One was our ability to issue administrative monetary penalties to those who pollute and spill oil. That was an area where heretofore we would have to take them to court in order to get redress against any contraventions of the act.

Another area we saw as a weakness in the act was liability of bringing in foreign cleanup operators to be able to help us out in the event of a spill. One of the problems we saw with the act was that, as liability regimes changed over the years, were we to have a spill in Canada and were that spill to be beyond our capacity, the spill regimes work in such a way as a cascading of resources, so you cannot clean it yourself. You go to the next response organization and ask them to lend you some material to help you clean it up. If we wanted to go to our friends in the States, who are quite willing to offer us resources to be able to help clean up, we noted there was a liability problem within the act. They were not granted immunity from prosecution were they to come and help us out, so we saw that as problem with the act.

Mr. Lachance: We added requirements for oil-handling facilities to submit plans before operation and keep them current. We added enforcement powers to our inspectors to inspect oil-handling facilities and also new enforcement power for our inspectors for response organizations.

Senator Patterson: I think we will have a new oil-handling facility in the Arctic, according to the budget. The naval refueling facility at Nanisivik was announced in the recent budget.

That brings me to the other question I wish to ask. There are four response organizations in Canada on two coasts. We have a third coast that is larger than the other two. With increasing shipping of hydrocarbons with mining activities, who looks after spill response in the Arctic? Is it divided up amongst the four organizations or how does that work?

Mr. McDonald: Spills north of 60 degrees are the responsibility of the Canadian Coast Guard. That is something we have also asked our expert review panel to look at and advise us on how we might want to adjust that regime, given the increase of traffic in Canada's North.

Mr. Lachance: I must add to Mr. McDonald's remark that the shipowners are always responsible to clean up any spills, even in the Arctic, and the Coast Guard is responsible for overseeing the operation and responding if the owner is not capable or is unwilling to respond.

Senator Patterson: Could you give us a quick outline of the expert panel and its time frame?

Mr. McDonald: The expert panel has three members, some of whom you may know. Captain Gordon Houston is the chair of the panel. Captain Houston is a former chair and CEO of the Port Metro Vancouver and has a long and distinguished seafaring background.

We have Dr. Michael Sinclair. Dr. Sinclair is a former director at the Bedford Institute in Nova Scotia. He has a Ph.D. from California and has also worked at the Institut maritime du Québec in Rimouski.

The third member is Richard Gaudreau, a distinguished maritime lawyer from Quebec.

The panel will be doing their study in two tranches. The first tranche will be a review of the regime south of 60. They have been asked to report back to the minister by mid-November of this year. The second half of their study will look at transportation in the Arctic, and the transportation of hazardous and noxious substances. They have been asked to report back to the minister in September of 2014.

Senator Unger: In your paper, Mr. McDonald, you state that Transport Canada will increase the number of inspections to ensure that all foreign tankers are inspected on their first visit to Canada. I am wondering what ensues from that. Have you ever had an issue of non-compliance?

Mr. McDonald: Essentially, that is what we refer to as our Port State Control program. When foreign ships call to Canada, we have a system set up with international compatriots where we inspect foreign ships, keep data on them, and share that data. On a risk basis, we will inspect certain foreign ships when they call to Canada to ensure they are complying with international regulations.

With respect to foreign tankers, we have decided that every time a foreign tanker calls to Canada, on its first visit to Canada, we will make it a policy to inspect that ship. Once a year thereafter, if it calls in Canada, we will inspect the ship again.

These are exhaustive inspections that review the full gamut of compliance of the ship to international regulations. Should that ship not meet any of those standards as set out in the various conventions, we would require those deficiencies to be corrected before the ship would be allowed to leave port.

Senator Unger: You mentioned that you will expand the National Aerial Surveillance Program. Can you explain that?

Mr. McDonald: Yes. For our National Aerial Surveillance Program, we have three aircraft. One is located in Moncton and one is located here in Ottawa. That takes care of the Great Lakes and the Arctic. The third aircraft is located in Vancouver. They undertake regular overflights of the major shipping lanes in search of any oil pollution that might be occurring.

We have a very sophisticated surveillance mechanism, so sophisticated that we can detect as little as a litre of oil up to 25 kilometres on either side of the plane.

This technology was lent to the United States to help them with their Deepwater Horizon clean up.

We do regular overflights, and, with the announcement last week, we will be doing more of those overflights to ensure that there is no pollution in Canadian waters and, if there is, to take appropriate measures against those who have polluted.

Senator Unger: Thank you.

Senator Seidman: Clearly, there is an enormous amount of coordination involved in these emergency response situations, coordination of a lot of response groups — private, public, levels of government departments, just a lot of things going on.

Could you give us some indication of who is really in charge?

Mr. McDonald: Again, depending on which mode you are talking about, it does differ. In the marine mode, as I indicated earlier, we have set up a unified command structure that will authorize the Canadian Coast Guard to oversee all spills. It is still the user who is responsible for a cleanup, but the Coast Guard, should they be required to intervene, would have the ability to assume control over all aspects of the cleanup.

On the rail side, it becomes a bit different because there are jurisdictional issues there. The railways do have unified command structures that they can implement for various spills. I do not know whether Mr. Bourdon or Ms. Dagenais want to give some more detail in that regard.

Ms. Dagenais: We do have our Emergency Response Assistance Plans program, which, we can activate to ensure that companies respond if they have spills that they are responsible for. We have the legislative authority to include any company under that program.

Senator Seidman: There is an oversight, then? Again, it is the chain of command. Who is ultimately in charge if a quick decision has to be made? There are a lot of people involved and a lot of different opinions about what the decisions should be. Is there someone who has the authority to say, "No, this is the decision; everyone move on it?"

Ms. Dagenais: Under the act, I have the authority to activate a plan and to insist that CN and CP activate their plans. I have that kind of the authority, delegated by the minister to the Director General of Transport, Dangerous Goods.

Senator Seidman: Mr. McDonald, you say that the Coast Guard has that authority?

Mr. McDonald: They will have with the incident command structure that they will be putting in.

Senator Massicotte: I just have a quick question on liabilities. I read just last week that there was land spill from, I think, a pipeline. The damages were up to $1 billion, just for direct damages. Why would we still be comfortable, in today's world, with 1 or $1.3 billion in total insurance when you think of all the damage that can occur? Look at what happened in the Gulf of Mexico.

Mr. Haché: The $1.36 billion that I talked about was for ship-source oil pollution of persistent oil from a tanker. It is in that particular situation that we have access to the $1.36 billion.

When it comes to a spill from the pipeline or a train, I —

Senator Massicotte: My point is that, when you see what is happening in the world today with other spills, you are not talking about one or two, but 8, 10, $12 billion. Why do we take comfort in $1.3 billion?

Mr. Haché: According to the numbers I have, the largest spill was Prestige, and the compensation for that was $1.4 billion.

Mr. McDonald: When you are talking about ship-source pollution, you have a finite amount of oil that can be released.

An Hon. Senator: What about the Valdez?

Mr. Haché: It was $4 billion.

Senator Massicotte: Twenty years ago. In today's dollars that is 8, 9 billion.

Mr. Haché: It was $4 billion, but we are looking at apples and oranges, to a certain extent, because there were punitive damages and so on. They were not under the international system.

Senator Massicotte: You say that the polluter pays. Is it your professional opinion that the insurance amount is still adequate today?

Mr. Haché: We are reviewing our liability and compensation regime to see if it is still adequate.

Senator Massicotte: You think it is adequate, but maybe not.

Mr. Haché: All I can tell you is that we have one of the best systems in the world. We are one of the few countries to have it is its own national piece of 160 million. It is a very comprehensive system, but we will still be looking at it to make it better.

Senator Massicotte: Thank you.

Senator Ringuette: You indicated that your only means, right now, is to go to court to get penalties or compensation in regard to the Shipping Act. In the last 12 years that it has been in place, how many times have you gone to court?

Mr. McDonald: Numerous times, but I do not have the exact number in front of me.

Senator Ringuette: You went to court numerous times in regard to pollution and spills, but you said, in your statement, that you were 99.999 per cent incident free. What was that .0001 incident?

Mr. McDonald: Most of the cases in which we would have go to court would have involved very minor spills from ships for things like oily water separators not working or improper handling of oil on a ship. They were certainly not main oil spills from a tanker.

Senator Ringuette: They are incidents.

Mr. Lachance: They are incidents. There have been incidents where people or ships would deliberately discharge oily water over the side. There is always oily water that accumulates at the bottom of ships, and they need to dispose of it. Those who are less scrupulous have discharged that oil over the side when they think that they are not being watched.

With our aerial surveillance system, we can detect that in the darkness and fog, and we have had cases where we prosecuted those people.

Senator Ringuette: In the last 12 years, for the cases that you are referring to, did you get financial penalties? Was your request that they do the necessary physical manoeuvring to remove the damage, or was it both?

Mr. Lachance: We have the ability to either go to court or administer an administrative monetary penalty, and we have done both. In what we call operational discharge, an incident where a few litres of oil go over the side because of the overflow of tanks and so on, we would administer an administrative monetary penalty.

In the case of deliberate discharge, we have gone to court to prosecute the people.

Senator Ringuette: You would identify that with the planes that you have specified earlier?

Mr. McDonald: That is our primary way of pursuing those offenders.

Senator Wallace: Senator Unger had raised the issue of the inspection of tankers when they first come into Canadian waters, and you described the process you go through.

Before a vessel is ever able to come into Canadian waters, I take it there must be some type of a pre-clearance process, where the history of the vessel is reviewed by your department, so that it is not simply left until it arrives in Canadian waters to do the inspection?

Mr. McDonald: That is part of our Port State Control program. As I indicated, we participate in that program with many countries around the world, and we share common databases on ships. When a ship that we have never heard of before calls in to a Canadian port, we can refer to the database, and it will tell us all the data on record for that particular ship, including its record with respect to particular inspections. From that, we will decide whether further action is needed by Canadian authorities to inspect the vessel or whether we might have any concern with it.

Senator Wallace: Could you reject the ship on the basis of that pre-clearance review and not allow it to come into Canadian waters?

Mr. McDonald: We can do that.

Senator Wallace: As you pointed out, spill response organizations in Canada, on the east coast in particular, are well established. I believe you touched on this. In addition, it is my understanding that spill response equipment and personnel are on the ships and at each terminal, in addition to what the spill response organizations have. Is that correct?

Mr. McDonald: Depending on the cargo that the ship is carrying, they would have varying degrees of spill response machinery on their vessels.

Senator Wallace: Each of the terminals where they are either discharging or receiving cargo is required to have certain amounts of spill response capability. Is that correct?

Mr. Lachance: That is correct. It is part of the emergency response plans.

Senator Lang: I would like to go back to the National Aerial Surveillance Program. There has been no mention of the use of satellites or drones for surveillance.

Mr. McDonald: We use RADARSAT and Environment Canada's Integrated Satellite Tracking of Pollution program, ISTOP, to inform us of where the various vessels are. That allows us to be as efficient as we can be on flights.

We do not go out looking; but we set our targets. They set up a flight plan and determine they can overfly X number of ships on a particular flight. That is what they do.

Senator Lang: To follow up on that, RADARSAT identifies pollution as a possibility, does it not?

Mr. McDonald: I am not as versed on RADARSAT.

Mr. Lachance: I believe it does that but not as currently as our airplanes do it.

Mr. McDonald: With respect to prosecution, you would need the data that we get from our specific flights to have enough to prosecute.

Senator Lang: Could you check that? My understanding under the current RADARSAT is that the surveillance is good enough and that it has identified polluters. On the East Coast, they have sent out the Canadian Coast Guard or someone from DFO to make the necessary arrest for prosecution.

I would like you to verify that. It seems that one of the elements of this is risk to Canadians. With RADARSAT and the billions of dollars we are putting into the new program, you should be using that and letting Canadians know that it is another tool we have and that we are using it, instead of talking about a National Aerial Surveillance Program that no one can understand. I would suggest it should be broken down a bit; and then tell Canadians how we are using it.

Mr. McDonald: We can provide you with more information. As I said, we use RADARSAT and any prosecutions are undertaken by Transport Canada, not the Canadian Coast Guard.

Senator Lang: I am on the Senate Defence Committee and we heard about the use of satellites in the Arctic. As well, they are looking at using drones to cut costs and be more accurate.

Mr. McDonald: Certainly.

The Chair: Senator Wallace asked if you could refuse a ship. Have we ever refused a ship in Canada?

Mr. McDonald: Yes.

The Chair: Does it happen often?

Mr. McDonald: No, because the ships know that we use a port state control regime. They know what their score is. Essentially there is a white list, a gray list and a black list. If you are on the white list, you are probably not going to be a concern for us, but if you are on the gray or the black list, we will pay more attention to you. They know that if they come here and call at a Canadian port, they will be detained. It costs them a lot of money on a daily basis if they are tied up in port. They tend to avoid us and use their ships to ply less restrictive regimes.

The Chair: Thank you. That was very interesting. I appreciate all five of you coming out and answering the questions.

Mr. McDonald: It was certainly our pleasure; thank you very much.

The Chair: I ask for a motion to adjourn.

An Hon. Senator: So moved.

The Chair: Adjourned.

(The committee adjourned.)