New Canadian Offshore Liability Regime Becomes Effective 26 February
The Energy Safety and Security Act (ESSA), passed in 2014 by the Harper government, introduced changes to the liability regimes governing Canada’s offshore oil and gas industries. These changes are slated to be effective on 26 February and include increasing the amount of security required to be provided to CAD 100 million, raising the cap on absolute, or no-fault, liability from CAD 30 million (CAD 40 million in the Arctic) to CAD 1 billion and empowering offshore regulators to issue administrative monetary penalties.
In their current form, the guidelines and regulations indicate that participants in Canada’s offshore oil and gas industries will be required to post CAD 100 million security in respect of each operations authorization for the drilling for or development or production of petroleum. While not perhaps initially appreciated, this change in regulatory practice may be one of the most significant changes implemented by ESSA. However, ESSA provides relief from this financial responsibility requirement where participants demonstrate their participation in a pooled fund that is maintained at a minimum of CAD 250 million.