October 10, 2020
Marine Liability Act
Department of Transport
(This statement is not part of the Regulations.)
As part of the Government of Canada’s Oceans Protection Plan, the Marine Liability Act (MLA) was amended in December 2018 to modernize the Ship-source Oil Pollution Fund (SOPF). footnote 1 These amendments updated the SOPF’s levy and sought to ensure that exporters of oil reported their bulk oil movements by ship to the Government in order to contribute to the compensation regime, should the levy be imposed.
Amending the Marine Liability and Information Return Regulations (the Regulations) is necessary to have exporters report their bulk oil exports by ship to the SOPF’s Administrator, in order to implement the new provisions of the MLA that require the filing of information returns by exporters of oil and set out the obligation of these exporters to pay a levy and supplementary levy (should they be imposed).
There are no plans to impose the levy at this time, given the SOPF is fully capitalized, but there is a need for the Government to be able to receive annual reports on the bulk export of oil by ship. Consistent with the polluter pays principal, this is to ensure that both importers and exporters, whose shipments of oil pose a risk to Canada’s marine environment while being transported, are liable to contribute to the fund that provides compensation in Canada for oil spills.
Oil pollution from ships can cause environmental damage and result in economic losses. Therefore, it is important to ensure that there is adequate compensation available for clean-up operations and economic losses. The SOPF is Canada’s domestic compensation fund and a special purpose account in the Public Accounts of Canada to compensate claims for oil pollution damage from ships. The SOPF is available to pay compensation for reasonable claims for oil pollution response costs and expenses for any type of ship that discharges any type of oil (e.g. persistent and non-persistent oil, including bunker oil used for propulsion and operation of ships) in Canadian waters, including oil spills from unknown sources (i.e. mystery spills). The SOPF’s Administrator assesses claims and makes offers of compensation to claimants in accordance with the MLA. The Administrator also ensures that Canada’s obligations to report persistent oil receipts and to pay contributions on behalf of oil receivers in Canada to the International Oil Pollution Compensation Funds (IOPC Funds) are met. In the unlikely event that the SOPF is depleted, it can be replenished through a levy on cargo owners involved in marine shipments of oil by ship. The levy to capitalize the SOPF (previously the Maritime Claims Pollution Fund) has not been in effect since 1976.
In contrast to the SOPF, the IOPC Funds only pay compensation for oil pollution damage caused by persistent oil carried on board a ship as cargo or in the bunkers of such a ship (i.e. tankers). As a member state of the IOPC Funds, Canada must, annually, report receipts of “contributing oil,” as defined in the 1992 Fund Convention (i.e. crude and/or heavy fuel oil, which can be referred to as persistent oil). The reporting requirements for the IOPC Funds are set out in Part 2 of the Regulations.
In addition to the SOPF and IOPC Funds reporting requirements, Part 3 of the Regulations also requires receivers of hazardous and noxious substances, including non-persistent oil, to report the type and quantities of substances they receive to the SOPF Administrator or the Minister of Transport, depending on the substance that is received, for the purposes of the 2010 Hazardous and Noxious Substances (HNS) Convention. The HNS Convention adds to the oil spill compensation regime by covering more substances (e.g. non-persistent oils [gasoline, light diesel oil, kerosene], chemicals, noxious liquids, gases) and additional types of damage, such as loss of life and personal injury, related to HNS incidents. With respect to non-persistent oils, Part 3 requires that persons in Canada report the total quantity of non-persistent oils received if they receive over 17 000 metric tons annually.
The amendments to the MLA introduced a modernized levy that would simplify the payment process
Furthermore, the amendments introduced a supplementary levy to repay any loans that were provided to the SOPF from the Consolidated Revenue Fund, should the annual levy be insufficient.
Currently, only receivers (i.e. importers and those who receive oil shipped domestically by sea) who, annually, receive more than 150 000 metric tons of persistent oil, or more than 17 000 metric tons of non-persistent oil are required to file information returns with the Administrator, which helps to determine liability to pay. In the event that the obligation to pay the levy or supplementary levy was imposed, only receivers would be required to pay; exporters would not be required to pay. This leaves a gap between those that create the risk of pollution damage by the transportation of oil by ship and those who would actually be liable to contribute to the SOPF.
The changes to the MLA, which need to be brought into force by order in council, along with the proposed Regulations, would help close this gap by ensuring that exporters report the type and amount of oil exported by sea annually. This would enable contributions to be paid into the SOPF by both receivers and exporters of persistent and non-persistent oil, in line with the polluter pays principle, should a levy be imposed in the future.
Paragraph 125(d) of the MLA provides the Governor in Council the authority to make regulations to implement the exporter annual reporting requirements, which would factor into any possible future reimposition of the levy.
The levy, which can be set by order by the Minister of Transport, after consulting with the Minister of Fisheries and Oceans, can be imposed indefinitely or until a time specified in the order as per section 114 of the MLA. The amount of the levy, which is set out in section 113 of the MLA, is subject to annual inflation adjustments and would be imposed on each metric ton of oil that was reported in the previous calendar year. However, while receivers and exporters of non-persistent oil are required to report quantities received or exported exceeding 17 000 metric tons, they would only be required to pay the levy if they receive or export more than 20 000 metric tons.
The objective of the proposed Regulations is to ensure all parties that ship oil to, from and within Canada, contribute to the shared liability regime for providing compensation for oil pollution damage, based on the total annual amounts shipped by weight.
The objective will be achieved by setting out annual reporting requirements for every person who exports by ship, in a calendar year, more than 150 000 metric tons of persistent oil (or contributing oil) in bulk as cargo, or more than 17 000 metric tons of non-persistent oil in bulk as cargo, as provided for in the MLA. This includes setting out the aforementioned reporting thresholds in regulation. This reporting obligation is needed to determine levy contributions on those persons required to pay into the SOPF, should a levy be activated in the future.
By establishing annual reporting requirements on exporters, the proposed regulatory amendments would help share the financial burden amongst all oil receivers and exporters, considering they all share a risk when oil is shipped.
The proposed amendments would require persons (i.e. exporters) in Canada to report the total quantities of each type of persistent or non-persistent oil they have exported in bulk as cargo on a ship, if, in a calendar year, they export
The proposed amendments would define the required content of such submission, in line with current reporting requirements for receivers of oil.
In the case of non-persistent oil, persons would be required to provide the name of the person for whom they exported the oil or the name of the person who exported oil on their behalf, if another party was involved in exporting oil. This follows the agent/principal concept that is in place for the reporting of receipts of non-persistent oil under the 2010 HNS Convention. If the person who physically exports the non-persistent oil acts as an agent for a principal, then the principal (i.e. the owner of the cargo) shall be deemed to be the exporter (this only applies if the principal is located in Canada).
To ensure that information is reported consistently and accurately, the proposed Regulations would require that the agent report the name of the principal and the type and quantity of non-persistent oil exported on the principal’s behalf and that the principal report the name of the agent and the type and quantity of non-persistent oil exported from the agent.
The proposed amendments would require that reports on exported oil for a calendar year be filed on an annual basis no later than February 28 of the following calendar year. This is consistent with the requirements to file reports on receipts of oil with the SOPF Administrator.
The requirement to file information returns would be applied to exports of oil by sea in the same manner as is currently used for receipts of either persistent or non-persistent oil. That is
It is important to note that only oil that is exported by sea would need to be reported. For this purpose, the Regulations establish the boundaries of what qualifies as “by sea” on the east coast of Canada by drawing a straight line from Cap-des-Rosiers to West Point, Anticosti Island, and from Anticosti Island to the north shore of the St. Lawrence River along the meridian of longitude 63° W. Oil will only have been considered to be exported from eastern Canada if it has been carried past this boundary on the St. Lawrence River. In the case where oil is exported to the United States and there is no carriage by sea (e.g. an export from Montréal to a port on the U.S. side of the Great Lakes via the St. Lawrence Seaway), the shipment would not be subject to the proposed Regulations.
The proposed regulatory amendments include minor amendments to clarify certain provisions and to ensure consistency with the amendments made to the MLA in 2018. The proposed regulatory amendments would also remove reference to paragraph 110(3)(b) of the MLA as the per incident limit of liability was deleted as part of the legislative amendments in 2018. The proposed amendments would also clarify that receivers of persistent oil must report the quantity of each type of persistent oil received.
Transport Canada has engaged broadly across all of Canada’s coasts on potential marine safety and environmental protection enhancements, including in 2016, when the Department undertook engagement with Indigenous peoples and stakeholders in the lead-up to the launch of the Oceans Protection Plan. In August 2018, a discussion paper outlining the proposed legislative amendments to strengthen marine environmental protection and marine safety was released. The discussion paper sought feedback on the overall direction of the proposed amendments. It was posted online, and emailed to over 1 700 individuals representing Indigenous communities and organizations, marine stakeholders and users, other levels of government, environmental non-governmental organizations, and other stakeholders. In addition, Transport Canada held some 26 meetings and engagement sessions leading up to the introduction of the amendments to the MLA in 2018.
The Canadian Fuels Association, the Canadian Association of Petroleum Producers and the Canadian Maritime Law Association were consulted via a discussion paper that was sent in January 2018 specifically on the modernization of the SOPF’s levy. Comments received were supportive of the proposed changes. Stakeholders were consulted on the changes to the levy and how contributing shipments would be calculated for reporting. Stakeholders were also specifically consulted on the feasibility of reporting shipments of oil as discussed in the proposal, including using the same reporting system that is being used for receivers.
The Canadian Fuels Association commented that export volumes are currently already being tracked and reported on a monthly basis to the Canada Energy Regulator (CER) [formerly the National Energy Board] in accordance with the National Energy Board Export and Import Reporting Regulations and recommended that the Canada Energy Regulator reporting be reviewed and utilized to inform the proposed SOPF reporting changes. The information collected by the CER is reported in volume and the information being sought under these Regulations and the proposed amendments is in weight (metric tons), thus the information collected by the CER did not meet the needs of Transport Canada.
Following royal assent of the legislative amendments to the MLA on December 13, 2018, a letter regarding the development of reporting regulations for the export of persistent and non-persistent oil was sent to the stakeholders in March 2019. The letter notified them that the regulatory development project was targeting 2020 for completion, and would include a public comment period as part of the pre-publication of the proposed Regulations in the Canada Gazette, Part I.
In accordance with the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, Transport Canada completed an assessment of modern treaty implications. No impacts on modern treaties have been identified. Likewise, the proposed Regulations are not expected to have a disproportionate impact on Indigenous groups.
Instruments other than regulation, such as standards, policies, and economic instruments, were deemed inappropriate to obtain the outcomes needed, as they would not ensure that stakeholders report their oil exports. There is no viable alternative to the current Regulations and the proposed amendments as the reporting information is necessary for the Government to determine who may be required to pay should a levy be activated.
Affected stakeholders already collect and store information about their oil exports for operational purposes and for reporting to the Canada Energy Regulator. However, further work by those reporting may be required to convert this information from volume to weight. Metric tons is the unit of measurement used in the shipping industry and is consistent with the existing reporting requirements under the international conventions. For consistency, metric tons would also be used for exporters. The proposed amendments would require affected stakeholders to submit a report annually via an electronic reporting system that has already been developed for reporting oil receipts.
However, there would be administrative costs associated with the requirement for exporters to report annually the amounts of persistent and non-persistent oil exported in the previous calendar year to the Administrator of the SOPF.
The total present value cost to affected stakeholders would be $12,406.78 (in 2019 Canadian dollars, 7% discount rate, and base year of discounting in 2020) for a 10-year period between 2021 and 2030.
It is estimated that approximately 30 companies would be affected by the proposed amendments. These 30 companies would be expected to spend up to 60 minutes per year compiling and reporting persistent and non-persistent oil exported by ship from Canada, for a total of 30 hours per year and 300 hours over 10 years. The estimated wage, including overhead, of the responsible employee is $51.96 per hour.
There would be additional administrative costs associated with familiarization with the electronic reporting system. It is estimated that the 30 stakeholders would spend no more than 60 minutes, once over a 10-year period, to become familiar with the reporting system, for a total of 30 hours over 10 years. The estimated wage, including overhead of 25%, of the responsible employee is $51.96 per hour. footnote 3
The existing reporting practice is that impacted industry stakeholders self-report using an electronic reporting system that has already been developed by Transport Canada. The system is currently being used by receivers of oil and hazardous and noxious substances to file their annual information returns, if above prescribed thresholds.
Incremental government costs would be limited to those of the client manager responsible for overseeing the reporting system to assist the new companies that must report and for the modification to the reporting system to receive reports of oil exports. These costs are expected to be minimal.
The proposed Regulations would have no impacts on small businesses as none of the affected stakeholders is a small business.
All costs associated with the proposed amendments would be administrative in nature.
Adjusted to 2012 dollars, and discounted at 7% for the base year of 2012, the total present value of the administrative cost of the proposed amendments is estimated to be $5,606. The annualized administrative costs would be $798, or $27 per business.
As stated in the cost section, the following assumptions were made:
Stakeholders were consulted about substantive reporting requirements as well as the use of the reporting system, but were not specifically consulted on the above assumptions related to the administrative burden.
The proposed amendments are not related to a work plan or commitment under a formal regulatory cooperation forum nor do they contribute to regulatory alignment between jurisdictions. The proposed amendments do ensure alignment within the Canadian liability and compensation regime for oil spills by ensuring that both receivers and exporters of oil report the type and amount of oil received or exported by sea annually. This would enable the SOPF to collect contributions from both receivers and exporters, thus closing a gap between who creates the risk of pollution damage by transporting oil in Canada and who would actually be liable to contribute to the SOPF.
In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.
As the proposed Regulations deal with reporting requirements for bulk exports of oil, differential impacts on the basis of identity factors such as gender, race, ethnicity, sexuality and age are not anticipated.
The proposed Regulations are expected to enter into force in spring 2021.
Therefore, those persons who export persistent and non-persistent oil in bulk as cargo would be required to file information returns over the 2021 calendar year and report this data to the Administrator of the SOPF by February 28, 2022.
Reports would be made through an electronic reporting system that would allow persons to select from a predetermined list of substances and fill in a preset form with the information required to be reported under the proposed Regulations.
Under the MLA, exporters of persistent and non-persistent oil are required to file reports on the quantities of oil exported, in accordance with the Regulations. The proposed Regulations would require exporters of persistent and non-persistent oil to report by February 28 the type and quantities of oil they exported in the previous calendar year.
As per the MLA, any person who fails to file the necessary report is guilty of an offence and liable on summary conviction to a fine not exceeding $250,000. The 2018 legislative changes also brought in administrative monetary penalties as an additional enforcement tool. Failure to file an information return can result in a maximum amount of $50,000 for an individual and $250,000 for any other person, e.g. a company.
In addition, the Minister may
The same penalties also apply to those that obstruct or hinder the Administrator or knowingly make a false or misleading statement; omit, falsify or destroy books or records.
Manager/Senior Policy Advisor
International Marine Policy
Place de Ville, Tower C
330 Sparks Street
Notice is given that the Governor in Council, pursuant to subsection 117.1(1.1) footnote a and paragraph 117.1(4)(a) footnote b of the Marine Liability Act footnote c, proposes to make the annexed Regulations Amending the Marine Liability and Information Return Regulations (Exporters).
Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Caitlin O’Boyle, Manager/Senior Policy Advisor, International Marine Policy, Marine Policy, Department of Transport, Place de Ville, Tower C, 330 Sparks Street, Ottawa, Ontario K1A 0N5 (tel.: 613‑993‑4895; email: firstname.lastname@example.org).
Ottawa, October 5, 2020
Assistant Clerk of the Privy Council
1 The portion of subsection 1(2) of the Marine Liability and Information Return Regulations footnote 4 before paragraph (a) is replaced by the following:
Boundary of sea (east coast)
(2) For the purposes of these Regulations, the St. Lawrence River ends and the sea begins at a straight line drawn
2 Subsection 2(1) of the Regulations is replaced by the following:
Consumer price index
2 (1) For the purposes of paragraph 113(3)(b) of the Act, the average of the Consumer Price Index for any 12-month period must be calculated by dividing by 12 the aggregate of the Consumer Price Indexes, excluding the food and energy components, for each month in that 12-month period.
3 (1) The portion of subsection 3(1) of the Regulations before paragraph (a) is replaced by the following:
3 (1) This section applies in respect of contributing oil that
(2) Subsection 3(2) of the Regulations is replaced by the following:
(2) Any person who receives, in a calendar year, contributing oil in a quantity exceeding 150 000 metric tons must file with the Administrator, no later than February 28 of the following calendar year, an information return in the form established by the Minister in respect of that oil.
(3) Paragraphs 3(4)(a) and (b) of the Regulations are replaced by the following:
(4) Paragraph 3(4)(c) of the French version of the Regulations is replaced by the following:
4 (1) Subsection 4(3) of the Regulations is replaced by the following:
(3) A receiver who receives, in a calendar year, contributing cargo in the form of non-persistent oil in a quantity exceeding 17 000 metric tons must file with the Administrator, no later than February 28 of the following calendar year, an information return in the form established by the Minister in respect of that cargo.
(2) Paragraph 4(5)(a) of the Regulations is replaced by the following:
5 The Regulations are amended by adding the following after section 4:
4.1 (1) This section applies in respect of contributing oil and non-persistent oil that has been exported by sea from a place in Canada or an offshore installation in the exclusive economic zone of Canada, in bulk as cargo on a ship, and is to be unloaded at a place outside of Canada.
(2) Any person who exports, in a calendar year, contributing oil in a quantity exceeding 150 000 metric tons or non-persistent oil in a quantity exceeding 17 000 metric tons must file with the Administrator, no later than February 28 of the following calendar year, an information return in the form established by the Minister in respect of that oil.
(3) For the purposes of subsection (2), the quantity of contributing oil or non-persistent oil is the aggregate of the quantity exported by the person and the quantities exported by associated persons.
(4) The information return must include
S.C. 2018, c. 27
6 These Regulations come into force on the day on which subsection 734(2) of the Budget Implementation Act, 2018, No. 2 comes into force.