Who Pays for
an Oil Spill
Surrounded by busy waterways, Canadians invariably have questions about who pays for the costs associated with an oil spill.
For example, if a spill were to happen tomorrow – would Canadians pay for it?
Or how much money is available to respond to a spill?
The purpose of this site, created by Clear Seas Centre for Responsible Marine Shipping, is to outline who pays for the costs related to an oil spill in Canadian waters and to encourage informed conversations about marine shipping in Canada.
The Law in Canada
In Canada, the polluter pays – and there’s one law that oversees the entire system – whether the pollution is cargo oil from a tanker, or fuel or other oil used in propulsion (called bunker oil) from any ship.
The Marine Liability Act (MLA) establishes responsibilities and liabilities and incorporates international compensation conventions into Canadian law.
Under the MLA, the shipowner pays, usually through insurance which they are required to carry.
These limits vary depending on the source of the oil (tanker cargo or bunker oil) and on the size of the ship.
If the costs associated with a tanker cargo spill exceed a tanker owner’s liability limits then additional compensation may be sought from other sources funded by industry. These are: the International Oil Pollution Compensation Funds (IOPC Funds) and Canada’s Ship-source Oil Pollution Fund (SOPF), which are incorporated into the MLA. If the costs associated with a bunker oil spill exceed a shipowner’s liability limits then additional compensation may be sought from the SOPF, as incorporated into the MLA.
Tanker Cargo Spills in Canadian Waters
While some risk is inherent in the transportation of oil, thanks to continually improving preventative measures, the volume and frequency of oil spills has been decreasing in Canada and globally since the 1970s.
While a spill is unlikely to occur, in order to operate in Canadian waters, tankers must always:
- Contribute funds to and have a contract with one of Canada’s four response organizations.
- Carry enough insurance to cover their liability in the unlikely event of a spill.
Limits of Liability for Tankers
The amount which a tanker owner is liable to pay depends on the size of the tanker.
The amount of insurance required for ships smaller than 5,000 gross tonnes.
Ships larger than 5,000 gross tonnes and smaller than 140,000 gross tonnes require an additional $1,128 CDN of insurance per gross tonne above 5,000.
The amount of insurance required for ships larger than 140,000 gross tonnes.
- Gross tonnes is a measure of volume inside a vessel including all areas from keel to funnel and bow to stern.
- These values, presented in Canadian dollars, have been approximated based on a conversion from Special Drawing Rights as of January 5th, 2018. The actual amount of compensation available fluctuates depending on conversion rates which would be calculated as of the date of an incident.
Should claims exceed the shipowner’s limit of liability, the Marine Liability Act makes available additional sources of funding paid for by industry.
The 1992 International Oil Pollution Fund
The 1992 Fund
Financed by entities receiving persistent oil carried by sea.
Pays compensation for oil pollution damage caused by persistent oil when claims exceed tanker owner’s liability or when the tanker owner is incapable of meeting their obligations.
The International Oil Pollution Compensation Supplementary Fund
The Supplementary Fund
Also financed by entities receiving persistent oil carried by sea.
Pays compensation for oil pollution damage caused by persistent oil when claims exceed the 1992 Fund.
The Ship-source Oil Pollution Fund
The SOPF
Financed by levies collected from oil cargo companies.
Pays compensation for oil pollution damage caused by any type of oil spill (including persistent and non-persistent oils) from any type of vessel.
National and International Oil Tanker Spill Compensation Funds
If an oil tanker spills its cargo in Canadian waters, four sources of funding can provide up to $1.51 billion in compensation per incident.


- These values, presented in Canadian dollars, have been approximated based on a conversion from Special Drawing Rights as of January 5th, 2018. The actual amount of compensation available fluctuates depending on conversion rates which would be calculated as of the date of an incident.
And If the Oil Spilled Isn’t Tanker Cargo?
Between 2003 – 2012, 78% of oil spills 10,000 litres or greater in Canadian waters involved bunker oil rather than oil being carried as cargo – meaning that oil tanker cargo has not been the source of most oil spills in Canadian waters.
Should a ship spill bunker oil in Canadian waters, under the MLA, three sources of compensation are available – the shipowner, the shipowner’s insurance, and the SOPF.
Limits of Liability for Bunker Spills
The amount a shipowner is liable to pay depends on the size of the ship.
The amount of insurance required for ships smaller than 300 gross tonnes.
The amount of insurance required for ships larger than 300 gross tonnes and smaller than 2,000 gross tonnes.
Ships larger than 2,000 gross tonnes and smaller than 30,000 gross tonnes require an additional $1,080 CDN of insurance per gross tonne above 2,000.
Ships larger than 30,000 gross tonnes and smaller than 70,000 gross tonnes require an additional $810 CDN of insurance per gross tonne above 30,000.
Ships larger than 70,000 gross tonnes require an additional $540 CDN of insurance per gross tonne.
- Gross tonnes is a measure of volume inside a vessel including all areas from keel to funnel and bow to stern.
- These values, presented in Canadian dollars, have been approximated based on a conversion from Special Drawing Rights as of January 5th, 2018. The actual amount of compensation available fluctuates depending on conversion rates which would be calculated as of the date of an incident.
In addition, the SOPF can provide compensation if and when the limit of liability of the shipowner has been reached.
If the largest containership to have called on a Canadian port to date were to spill bunker oil in Canadian waters, the shipowner’s liability under the BUNKER Convention combined with the SOPF could provide up to $282.56 million CDN in compensation.
Ship-Source Oil Pollution Fund
The Ship-source Oil Pollution Fund (SOPF) is Canada’s domestic oil spill fund which can pay claims for oil pollution damage in Canadian waters caused by the discharge of oil from any type of vessel or spills of unknown origin (often called mystery spills).
Funded by levies collected from oil cargo companies, the SOPF can provide compensation for oil pollution damage caused by any type of oil spill from any type of vessel. In the case of tanker spills, the SOPF provides additional compensation if the international funds are exhausted.
The majority of claims submitted to the SOPF concern derelict or abandoned vessels that pose a threat of oil pollution damage to Canada’s coastlines. For example, between 2005 and 2016, the number of incidents involving derelict and abandoned vessels resulting in claims totalled 58% of the incidents for which the SOPF received claims. The majority of these involved fishing vessels.
Incidents Handled by the SOPF in 2016/2017
These incidents involved a variety of vessel types including fishing boats, cruise ships, pleasure craft, ferries, tug boats, commercial ships and barges, many of which were abandoned and derelict; as well as mystery spills.
The number of incidents the SOPF handled during the 2016-2017 year.
The number of claims the SOPF received during the 2016-2017 year.
incidents resulting in claims to the SOPF are related to derelict or abandoned vessels and wrecks.
of the total amount claimed during 2016-2017 was claimed by the Canadian Coast Guard.
The combined amount claimed from the SOPF during the 2016-2017 year.
Recent measures announced as part of the Federal Government’s Oceans Protection Plan aim to strengthen Canada’s polluter pays principle.
Amendments to the SOPF are likely to include the removal of the per-incident limit of liability, making an unlimited amount of compensation available, and will provide a guaranteed top-up in the event that the Fund is depleted.
Canadians are encouraged to share their views on the Oceans Protection Plan and these proposed changes here.
About Clear Seas
Clear Seas Centre for Responsible Marine Shipping is an independent research centre that promotes safe and sustainable marine shipping in Canada.
Clear Seas was established in 2014 after extensive discussions among government, industry, environmental organizations, indigenous peoples and coastal communities revealed a need for impartial information about the Canadian marine shipping industry.
Clear Seas received seed funding in 2015 through equal contributions from the Government of Canada (Transport Canada), the Government of Alberta (Alberta Energy) and the Canadian Association of Petroleum Producers. Our funders saw the need for an independent organization that would be a source of objective information on issues related to marine shipping in Canada.
As an independent research centre, Clear Seas operates at arm’s length from our funders. Our research agenda is defined internally in response to current issues, reviewed by our research advisory committee, and approved by our board of directors.
Our board of directors is composed of scientists, community leaders, engineers and industry executives with decades of experience investigating human, environmental and economic issues related to our oceans, coastlines and waterways.
Our reports and findings are available to the public at clearseas.org
Sources & Citations
- International Tanker Oil Pollution Federation. (2017). Oil tanker spill statistics 2017.
- Tanker Safety Panel Secretariat. (2013). A review of Canada’s ship-source spill preparedness and response: Setting the course for the future.
- International Oil Pollution Compensation Funds. (2017). The 1992 Civil Liability Convention.
- International Oil Pollution Compensation Funds. (2017). The 1992 Fund Convention and Supplementary Fund Protocol.
- Ship-source Oil Pollution Fund. (2017). Limits of Liability and Compensation.
- Council of Canadian Academies. (2016). Commercial Marine Shipping Accidents: Understanding the Risks in Canada.
- Transport Canada. (2017). Civil Liability Insurance for Marine Pollution: Frequently Asked Questions.
- Ship-source Oil Pollution Fund. (2017). Fund Liability.
- Ship-source Oil Pollution Fund. (2017). Statistical Report on Incidents Involving Derelict and Abandoned Vessels and Wrecks that Resulted in Claims with the Ship-source Oil Pollution Fund over a 10-year period.
- Ship-source Oil Pollution Fund. (2017). The Administrator’s Annual Report 2016/2017.