Vol. 150, No. 10 — May 18, 2016
Registration
SI/2016-24 May 18, 2016
SAFE AND ACCOUNTABLE RAIL ACT
Order Fixing June 18, 2016 as the Day on which Certain Sections of the Act Come into Force
P.C. 2016-303 May 6, 2016
His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 40(1) of the Safe and Accountable Rail Act, chapter 31 of the Statutes of Canada, 2015, fixes June 18, 2016 as the day on which sections 2 to 8, 10 to 14, 36 and 37 of that Act come into force.
EXPLANATORY NOTE
(This note is not part of the orders.)
Proposal
An order in council is necessary in order to bring into force sections 2 to 8, 10 to 14, 36 and 37 of the Safe and Accountable Rail Act (the Act) on the publicly announced implementation date of June 18, 2016 (one year from the date of the Act’s royal assent). These sections of the Act establish an enhanced rail liability and compensation regime that includes the following elements:
- Enhanced, risk-based minimum insurance levels requirements for railway operations and construction, ranging from $25 million (M) to $1 billion (B);
- Liability without the need to prove fault or negligence for railway accidents involving crude oil and other goods designated by regulation; and
- A supplementary, shipper-financed compensation fund for accidents involving crude oil and other goods designated by regulation, referred to as the Fund for Railway Accidents Involving Designated Goods (the Fund).
An order in council is also required in order to bring into force sections 15 and 16 of the Act on the publicly announced implementation date of June 18, 2017 (two years from the Act’s royal assent). These sections of the Act implement the full amount of enhanced insurance levels for railways carrying moderate to significant quantities of dangerous goods (increasing from $50M and $125M, as of June 18, 2016, to $100M and $250M, respectively, as of June 18, 2017).
Purpose
These orders will fully implement the enhanced rail liability and compensation regime set out in the Act, thereby ensuring that sufficient resources are available to compensate victims and pay for clean-up costs in the event of a railway accident involving dangerous goods. These orders support the government priority to reinforce rail safety, in line with the Minister of Transport’s mandate letter.
Background
Montreal, Maine and Atlantic Railway (MMA), the railway involved in the July 6, 2013, derailment in Lac-Mégantic, Québec, had inadequate insurance to cover the scope of damages, and subsequently went bankrupt. The government of the day committed in the 2013 Speech from the Throne to “require shippers and railways to carry additional insurance so they are held accountable.” Two phases of stakeholder consultations on the rail liability and compensation regime were held in 2014, with input provided by railways, a range of commodity shippers, provincial governments and the Federation of Canadian Municipalities.
Bill C-52, the Safe and Accountable Rail Act, was tabled in Parliament on February 20, 2015 and received royal assent on June 18, 2015. It amends the Canada Transportation Act in order to establish a strengthened liability and compensation regime for federally regulated railways.
Once the relevant provisions of the Act are in force, these railways will be required to hold one of four minimum levels of insurance that are based on the type and volume of dangerous goods carried annually (ranging from $25M to $1B, as set out in Schedule IV of the Act). The Canadian Transportation Agency will be responsible for administering and enforcing the new insurance requirements.
Insurance |
Crude oil (tonnes per year) |
Toxic inhalation hazard |
All other types of dangerous goods (tonnes per year) |
|---|---|---|---|
$25M |
0 |
0 |
< 40 000 |
$100M |
> 0 - < 100 000 |
> 0 - < 4 000 |
≥ 40 000 |
$250M |
100 000 – < 1.5 M |
4 000 – < 50 000 |
– |
$1B |
≥ 1.5 M |
≥ 50 000 |
– |
To mitigate the impact these changes would have on short line railways carrying moderate to significant quantities of dangerous goods, the former government announced the middle two insurance levels, the $100M and $250M levels, would be phased in
- 12 months after the bill’s passage, initial levels would be set at 50%, i.e. $50M and $125M.
- 12 months later, full levels would be implemented.
The Act also establishes liability without proof of fault or negligence for railways for accidents involving crude oil or other goods designated by regulation, up to the amount of their minimum liability insurance coverage. Finally, the Act provides for the establishment of the Fund, which will cover any liabilities resulting from a crude oil accident (or other designated good) that exceed the railway’s minimum insurance level. The Fund will be financed through a levy of $1.65 per tonne of crude oil transported by federally regulated railways, indexed annually to inflation. Railways will be responsible for remitting the levy to the Fund. If a railway fails to remit the levy as required, the amount owing is a debt to Her Majesty in right of Canada.
Federal-provincial implications
The new insurance requirements are applicable to federally regulated railways holding a certificate of fitness issued by the Canadian Transportation Agency. A federally regulated railway is one that operates across provincial/territorial or international boundaries; is owned, controlled, operated or leased by a federal railway; has been declared by Parliament to be for the general advantage of Canada; or is an integral part of an existing federal undertaking.
Consultations were held with provincial governments and the Federation of Canadian Municipalities in developing this regime, given that federally regulated railways operate across Canada. Provinces and territories remain responsible for establishing insurance requirements for railways under their jurisdiction.
Financial implications
In line with the polluter pays principle, this Act enhances insurance requirements and establishes a supplemental compensation fund to ensure there are sufficient resources available to pay for liabilities that result from railway accidents. The objective is to hold companies accountable for the impact of their operations so that industry, not the taxpayer, will be financially responsible for any accidents that could occur in the future.
Under the Act, in the event that a railway accident occurs that results in the need for compensation exceeding the amount held in the Fund, the difference will be loaned from the Consolidated Revenue Fund on terms and conditions set by the Minister of Finance. Any amount lent to the Fund in this manner will be recovered through the levy on crude oil shipped by rail or on any other good that may be designated by regulation in the future, and potentially, through a special levy on railways.
In accordance with the Act, the costs of administering the Fund are to be paid out of the Fund itself.
Consultation
Consultations were undertaken in 2014, as part of Transport Canada’s comprehensive review of rail liability and compensation. During the review, Transport Canada officials met with shippers, railways and their associations, the Federation of Canadian Municipalities and provinces.
Departmental contact
Marcia Jones
Director
Rail Policy Analysis and Legislative Initiatives
Transport Canada
Email: marcia.jones@tc.gc.ca
Telephone: 613-998-1918