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Canada geese swim in the waters of Burrard Inlet as a tanker loads at Kinder Morgan's Westridge Marine Terminal in Burnaby, B.C.DARRYL DYCK/The Globe and Mail

The federal government is preparing to raise liability limits for oil companies that drill off the east and north coasts, and for oil tankers that ply Canadian waters – a move that will increase the cost of doing business offshore.

Ottawa has held a number of consultation meetings with industry, and this spring plans to unveil its plan, which could raise the liability cap into the "billions of dollars" from current levels of $40-million in the Beaufort Sea and $30-million off the East Coast. That low limit of corporate liability has been criticized as a de facto subsidy for companies, which will have to either buy insurance or "self insure" if they face serious financial risk from a potential blowout or spill.

BP PLC has paid out some $28-billion (U.S.) in damages for its explosion and fire in the Gulf of Mexico, and still faces lawsuits. The company recently agreed with U.S. proscutors to pay a record $4.5-billion fine.

Natural Resources Minister Joe Oliver said the government is reviewing its liability system "to make certain that Canada's polluter-pay system remains among the strongest in the world," even as it enhances maritime protection through regulations that require double-hulled vessels and enhanced requirements for navigational tools.

Will Amos of the environmental group EcoJustice, said Canada's current rules are far from world-class, and taxpayers are bearing the risk.

"Oil companies should face unlimited absolute liability for spills, in accordance with the polluter-pays principle," he said.

Said Mr. Oliver: "Our more recent initiatives to increase environmental protection include increasing the number of inspections of federally regulated pipelines by 50 per cent, doubling the number of annual audits, a requirement for double-hulled tankers, mandatory pilotage of vessels and enhancing requirements for navigational tools.

"These and other improvements are environmental protections that did not exist before and we will continue to do more to ensure we meet or exceed world-class standards. In Canada, the foundation of our environmental liability regime is polluter-pay. Our government is committed to periodically assessing financial liability to make certain that Canada's polluter-pay system remains among the strongest in the world."

Editor's note: An earlier online version of this story failed to attribute the quote in the last two paragraphs. This online version has been corrected.

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