Contributed by Robert Lyman © 2016
Recently, there have been three high-profile proposals for the construction of pipelines to transport crude oil from western Canada to east and west coasts for tanker shipment to foreign markets. These include the Northern Gateway Project to the port of Kitimat, British Columbia, the Trans Mountain Expansion Project in the lower British Columbia mainland, and the Energy East Project from Alberta to Nova Scotia. As a result, there has been increased public scrutiny of the safety of the marine oil transportation components of these projects. The projects’ opponents claim that increased oil tanker movement will lead to unacceptably high risks of oil spills that will have major environmental effects. What follows is a summary of a much longer paper that I have prepared on this subject.
Full Document Download link: moving-oil-by-tanker-in-canada-final
The Issue in Context
Over half of the world’s crude oil production of roughly 90 million barrels per day moves to market by seaborne tanker, of which there are about 3,500 moving daily on the world’s oceans. The tanker is the most cost-effective way to move oil. The cost of transporting crude oil by tanker from the Middle East to Canada’s east coast is only half a cent per litre at the pump.
The world’s fleet of tankers has changed greatly over the last fifty years. Despite the immense volume of oil moved, the number of spills and the quantities of oil spilled has declined dramatically. In the 1970’s, 3.2 million tonnes of oil were spilled during an era when large spills gained public attention. In the 2010 to 2013 period, only 22,000 tonnes were spilled worldwide, about one one-thousandth of the annual volumes spilled in the 1970’s. Each year, 80 million tonnes of oil are shipped off Canada’s east and west coasts. There are about 20,000 tanker movements, 85% of which are on the east coast.
Contrary to public perception, large or even medium oil spills are very rare in Canada. The largest oil spill in Canadian history was 46 years ago, in 1970, when the Arrow spilled 10,000 tonnes off the coast of Nova Scotia.
The International and Canadian Regimes Governing Marine Safety
Today’s tanker industry is governed by a comprehensive set of international conventions and domestic laws and regulations that affect every aspect of tanker design, operation, performance standards, safety practices and environmental protection, much of it determined by agreements under the International Maritime Organization (IMO). For example, more than half the tankers that operate world wide today are double-hulled to eliminate or reduce spills in the event of a collision or grounding; as of 2015, all tankers operating within North American waters must be double-hulled. Within Canada, the Canada Shipping Act, 2001 and a wide range of other legislation enable Transport Canada, the Canadian Coast Guard, Environment and Climate Change Canada and other federal organizations to implement the National Oil Spill Preparedness and Response Regime. This regime is based on three pillars: preventing spills from happening; preparing for and responding to spills quickly and effectively; and ensuring that the polluter pays for any damage caused. The regime ensures that Canada is prepared to respond to a marine spill up to 10,000 tonnes.
The regime sets clear roles and responsibilities. The polluter is first and foremost responsible to avoid spills, to take action when they occur, and to pay for the costs of cleanup. They do this by equipping every vessel to deal with spills, and by hiring private Response Organizations located in each region to have available on standby the equipment, resources and trained personal to deal with any spills beyond the vessel’s capability. Transport Canada is responsible for preparedness, including establishing requirements with which Response Organizations must comply. The Canadian Coast Guard is the operational arm of the Canadian government responsible for ensuring an appropriate response to pollution incidents in Canadian waters. It monitors the polluter’s response and will assist if asked, but also stands ready to step in and manage the response itself if it considers that the polluter is unable or unwilling to respond properly. Federal Port Authorities are responsible to maintain safe navigation and environmental protection within port boundaries, including directing and controlling vessel traffic.
Ship owners and operators have a strong financial incentive to avoid spills and to clean them up quickly if they occur. Beyond that, in the rare cases when a spill occurs, there is a multi-tier system to determine liability and compensation. The ship’s insurer pays the first tier on behalf of a ship owner. Ship owners are strictly liable for oil pollution damage up to $145 million. The second tier is the International Oil Pollution Compensation Fund, 1992, which provides an additional maximum amount of compensation of $180 million. The third tier is paid by the Oil Pollution Compensation Supplementary Fund, up to an additional $875 million. Finally, Canada has its own Ship-source Oil Pollution Fund, which provides liability coverage up to $166 million for a single incident. Thus, the total amount of compensation for a tanker spill in Canada would be up to $1.48 billion.
Quantifying the Risks – The Results of Recent Studies
There have been three recent studies done that examine the marine risks associated with proposals to increase tanker movement in Canadian waters. In 2013, Transport Canada contracted with GENIVAR, a leading professional services firm, to conduct a Canada-wide (south of 60 degrees north) risk assessment to determine the national risks associated with oil spills by region. In 2010, Det Norske Veritas (DNV), an international certification body and classification society, performed a marine shipping quantitative risk analysis of the proposed Northern Gateway marine shipping component. In 2013, DNV completed a general risk analysis for the proposed Trans Mountain Expansion Project.
The studies differed to some extent in the methodologies followed, but they all examined the risks associated with oil spills of different sizes and they portrayed the risks in terms of “return periods”, or the average number of years expected between spill occurrences. The GENIVAR study used international spill rates to calculate the probability of spills, even these are far higher than what has happened in Canada in the past. It projected the overall Canadian crude oil spill frequency for spills of 10 to 100 cubic metres (by far the most common) to have a return period of 0.4 years, a spill of 100 to 1,000 tonnes to have a return period of 1.4 years, a spill of 1,000 to 10,000 tonnes to have a return period of 20.2 years, and a spill of over 10,000 tonnes to have a return period of 242.3 years. That, again, is for all of Canada.
The DNV study of the marine risks of the Northern Gateway project compared the risks with and without a number of mitigating measures that it recommended. The subsequent National Energy Board recommendations concerning the Northern Gateway project would have made these mitigating measures a requirement if a certificate were issued. The study concluded that the mitigated return period of a medium oil spill (up to 5,000 tonnes) during the marine transport component would be 350 years; that of a spill exceeding 5,000 cubic metres would be 550 years; that of a spill exceeding 20,000 cubic metres would be 2,800 years; and that of a spill exceeding 40,000 cubic metres would be 15,000 years.
The Trans Mountain Expansion Project involves a pipeline and marine component that has operated for 63 years. The project, if approved, would result in an increase of tanker traffic from 60 to 400 tankers per year, in an area in which tanker traffic represents a small portion of the overall vessel traffic. The DNV report concluded that the increase in vessel traffic resulting from the project would have “a negligible effect on the total incident frequency for the region”. The report further concluded that the frequency of accidents resulting in an oil cargo spill of any size, assuming the adoption of risk-reducing measures recommended in the report, would be 237 years. The frequency of a worst-case oil spill (estimated to be 16,500 cubic metres), assuming risk-reducing measures are taken, would be one in every 2,366 years. The National Energy Board report recommended that a certificate be issued with 157 conditions, including the requirement that the marine risk reducing measures be taken.
Opponents of oil pipeline construction that would lead to an increase in oil tanker traffic rarely base their arguments on an objective analysis of the risks of spills occurring, and they usually postulate the worst-case scenarios as though these were the most likely cases. This seriously undermines the quality of the public discussion and it tends to politicize decisions. Canadians should be able to expect, and indeed they should demand, that decisions about new oil transportation projects be based upon the best evidence available and a cool-headed examination of Canada’s interests from economic, environmental and social perspectives.