Who Pays for
an Oil Spill #clearfacts #whopays #oilspill

Limits of Liability for Tankers

The amount which a tanker owner is liable to pay depends on the size of the tanker and how much oil it can carry.

• Gross tonnes is a measure of volume inside a vessel including all areas from keel to funnel and bow to stern. Aframax tankers, common in Pacific waters, are a maximum of 68,000 gross tonnes while Ultra Large Crude Carriers, common in Atlantic waters, are a maximum of 310,000 gross tonnes.
• These values, presented in Canadian dollars, have been approximated based on a conversion from Special Drawing Rights as of October 10, 2019. The actual amount of compensation available fluctuates depending on conversion rates which would be calculated as of the date of an incident.

Ship-Source Oil Pollution Fund

The Ship-source Oil Pollution Fund (SOPF) is Canada’s domestic oil spill fund to ensure claims for oil pollution damage in Canadian waters are paid. Spills can be caused by the discharge of oil from any type of vessel or be of unknown origin (often called mystery spills).

Funded by levies collected from oil cargo companies in the 1970s and with an accumulated surplus of over $408 million in 2019, the SOPF can provide unlimited compensation for oil pollution damage caused by any type of oil spill from any type of vessel. In the case of persistent oil spilled from a tanker’s cargo or ship’s fuel tanks, the SOPF provides additional compensation if international funds are exhausted.

The SOPF is a special purpose Government of Canada account, established under Part 7 of the Marine Liability Act to protect taxpayers while facilitating the payment of claims from ship-source oil pollution in Canadian waters. Amendments in 2018 to the Marine Liability Act improved the SOPF.

The SOPF has:

• An unlimited per-occurrence limit of liability;
• The authorization to temporarily transfer funds from the Consolidated Revenue Fund if the SOPF is depleted;
• Alignment with international conventions for claims for economic losses (notably lost revenue) caused by oil pollution;
• Liability for the costs and expenses incurred by the Minister of Fisheries and Oceans or any other person for measures to prevent oil pollution damage even without a grave and imminent threat of a spill;
• Provision of up-front emergency funding to the Minister of Fisheries and Oceans for significant oil pollution incidents.

The SOPF is both a fund of the last resort and of the first resort, at the choice of the claimant.

At last resort, the SOPF compensates victims of oil pollution damage when they have been unable to obtain full compensation for damage from the shipowner or any other party through Court action or settlement.

At first resort, any person – including the Crown – may file claims directly with the SOPF, which will investigate and assess the claim, make the claimant an offer of compensation, and, once accepted, seek to recover the amount paid from the polluter or other responsible party.

Types of Claims

The majority of claims submitted to the SOPF are in response to wrecked, derelict or abandoned vessels that pose a threat of oil pollution to Canada’s coastlines. For example, between 2005 and 2016, the number of incidents involving wrecked, derelict or abandoned vessels resulting in claims totalled 58% of the incidents for which the SOPF received claims. Fishing boats generate a larger number of claims than any other type of vessel, but tugs and barges are responsible for higher monetary value claims.

Under the SOPF’s “last resort” model, claims for compensation can be submitted for any kind of reasonable loss, damage, costs or expenses, including economic losses, caused by oil pollution, if:

• The shipowner does not or cannot pay;
• The shipowner is not liable under the Civil Liability Convention or Bunkers Convention;
• The International Fund and Supplementary Fund are not liable or the claim exceeds their limits;
• The SOPF Administrator is considered a party to proceedings against a shipowner;
• The cause of the oil pollution is unknown (mystery spill).

Under the SOPF’s “first resort” model, none of these restrictions apply: claims for compensation are submitted directly with the Administrator, who assesses and pays the claim and then pursues the shipowner, the International Funds, or any other liable party as is deemed reasonable.

Claims for compensation can also be submitted to the SOPF for costs and expenses incurred by the Minister of Fisheries and Oceans or others taking action to prevent an oil spill, even when the threat of oil pollution damage is later determined not to be grave and imminent. Actions to respond to grave and imminent threats of pollution are eligible under the International Fund or the Supplementary Fund.

Making a Claim

Anyone involved in responding to an oil spill or the threat of an oil spill, or anyone who suffers damages as a result of an oil spill, can make a claim to the SOPF for compensation.

The SOPF is available for claims of all sizes with a simplified process for claims up to $35,000.

Incidents Handled by the SOPF in 2018/2019

These incidents were a result of spills and leaks from a variety of vessel types, most of which were abandoned and derelict, including fishing boats, cruise ships, pleasure craft, ferries, tug boats, commercial ships and barges as well as mystery spills.