The Conservative government plans to require companies shipping goods on railways to carry extra insurance – a law that would drive up the price of moving oil products.
Stephen Harper’s Speech from the Throne, delivered Wednesday, also said Ottawa will tighten safety standards for companies operating offshore, running pipelines, and increase their required liability insurance.
The policies will eat into profit for oil and gas companies operating in Canada. The pledges surrounding insurance come as energy companies have been steadily cranking up the amount of oil they transport on railways because pipelines stretching to refining hubs are plugged, and new proposals are struggling to gain support. By imposing more stringent regulations on pipelines, the government is hoping to mitigate the potential for spills and win over critics.
Pipelines have long attracted negative attention. The debate around shipping oil by rail, however, had been quiet until a train carrying light oil crashed in Lac-Mégantic, Que., killing 47 people, in July.
The Thorne Speech said that while “new economic opportunities” – it did not specifically reference oil or gas – require rail in order to reach markets, the government intends to implement policies which it believes will make rail transportation safer.
“As efforts to clean up and rebuild Lac-Mégantic demonstrate, railway companies must be able to bear the cost of their actions,” said the speech, delivered by Governor-General David Johnston on Wednesday.
“Our government will require shippers and railways to carry additional insurance so they are held accountable. And we will take targeted action to increase the safety of the transportation of dangerous goods.”
The Throne Speech made no reference to the cargo – 8.1 million litres of light oil from North Dakota’s Bakken region – that blew up in Lac-Mégantic. But the government called what happened in Lac-Mégantic a “disaster,” and the first sentence of the speech paid tribute to those who died.
“Let us begin this day together by honouring in silent reflection those whose lives were tragically taken at Lac-Mégantic,” the speech said.
Cenovus Energy Inc., an oil-sands company, said it will continue to use rail to move some of its oil to market even after new rules are implemented.
“Cenovus is committed to rail being a permanent element of our oil transportation portfolio,” Rhona DelFrari, a spokeswoman for the company, said in an e-mail statement. “Over the long term, we expect about 10 per cent of our oil production will be delivered to customers by rail.”
The government also said it will “set higher safety standards for companies operating offshore as well as those operating pipelines, and increase the required liability insurance.”
The Conservatives also pledged to “enshrine the polluter-pay system into law.”
Changes to insurance surrounding railways had already been in the works. The Canadian Transportation Agency in September said it is reviewing how it determines the minimum insurance amounts for railways and said consultations with insurance and rail firms will start this fall.
Montreal, Maine & Atlantic Railway, which owned the train that crashed in Lac-Mégantic, expects the environmental cleanup costs to total more than $200-million, according to documents filed in a Quebec court. When the train crashed in July, MM&A’s third-party liability insurance was worth $25-million.