Ship-source Oil Pollution Fund

Bunker Convention

The new Bunker Convention (see section 4.4.3) remain open for signature and ubsequent ratification. �he real difficulties that must be overcome in order to bring this Convention into force presents another opportumty to illustrate the foresight ofCanadian legislators in establishing the MPCF in 1971 and the OPF m 1989.

On March 23, 2001, the IMO adopted a new International Convention on Civil Liability for Bunker Oil Pollution Damage to establish a liability and compensation regime for pill ofoil carried � fuel in hips' bunker�. !o come into force the Convention requires ratification by 18 State including five each w1th not le than one million gross tons ofregistered ships, once these criteria have been met the Convention will come into force 12 months later. Th1s could take some time. Fmther, to bring the Convention into force in Canada, the appropriate legi.lation would have to be introduced in Parliament with changes to Canadian law. In the meantime, in anada - unlike most other countries - the SOPF, as directed by the Administrator, can continue to be u ed to pay claim. for oil pilL from all classes ofshipsand includes oil from ships' bunker .

Environmental Damages

Compensation for environmental damage is handled differently under the MlA, the 1992 L , 1992 International IOPC Fund Convention and the US OPA 90. See ection 4. 1 .2.

For those whowish to know more about some current thinking on thi ubject ee ection 4. 1 .3. The documenL referred to are available on request to the SOPF office.

Positive Developments

There are very positive things happening in Canada with indu try and government agen ie credible results towards ensuring an effective and efficient re pon e to marine oil pill . development and programs currently established for the protection ofthe environment, a me of the trategie under di cu ed in thi report, include the following:

The DFO/CCG Aerial Surveillance Program - ection 4.2.3

The DFO/CCG Oiled Wildlife Project - ection 4.2.4

The Environment Canada Sensitivity Mapping Program - ection 5.

The Certified Response Organizations - ection 5.4

The Environment Canada Damage Fund - ection 4. 1.1

The Regional Environmental Emergency Team (REET) - ection 4.2. 1

The CCG On-Scene Commander Cour e- ection 5.6

Oil Spill Seminars - section 5.9

Legislative Developments - section 4.4 that are achie ing

These Canadian initiatives for the prevention, preparedne , re pon e and en ironmental re t ration hould be een as good news for all Canadians, as well as hipowner , in urer , and the oil indu try. eat the OPFare encouraged by these positive initiatives.

In closi�g, we are grateful for the support received, the challenge , ucce e and al o the problem e p rien ed thi year which had to be addressed. I welcome suggestion on how we can impro e OPF er ice

Thi nnual R port ofthe Ship- ource Oil Pollution Fund (SOPF) covers the fiscal year ended March 31, -002.

The report de 1ibe Canada' domestic compensation regime. Fir t there i the SOPF which covers all classes of hip a ell a per i tent and non-per istent oil and mystery spills. In addition, Canada is a Contracting State in an international compen ation regime that mutualizes the risk ofpollution (persistent oil) from sea-going tankers.

The financial tatu ofthe SOPF is reported, including claim settlements in Canada and the amount ofpayments by the SOPF to the international Fund Canadian claims totalljng approximately 134,000 before interest were settled and paid in the approximate aggregate amount of $104,000 ($11 1,000 including interest). This year the Admjnistrator paid an amount ofapproximately 2.9 million out of the SOPF to the 1992 IOPC Fund for incidents outside of Canada. As at March 31, 2002, the balance in the SOPF wa 316,491,470.73.

During the fi cal year commencing April 1, 2002, the maximum liability ofthe SOPF i $1 36,28 1,1 17.60 for all claim for one oil pill. This amount i indexed annually o uch le (MPCF/SOPF) ha been impo ed ince 1976.

During the fi cal year, the Miru ter ofTran port ha the tatutory power to impo e a levy for the SOPF of 40.87 cents per metric tonne of "contributing oil" imported into or hipped from a place in Canada in bulk as cargo on a ship. The le i indexed annually to the con umer price index.

The OPF i liable to pay claim foroil pollution damage or anticipateddamageat any place in Canada, or in Canadian waters including the ex lu ive economic zone ofCanada, cau ed by the di charge ofoiJ from a hjp.

The cia e ofclaim for which the OPF may be liable in Jude the following:

• • • claim for oil pollution damage; Jaim for co and expen ofoil pill Jean-up including th co t ofpre enti e mea me ; and, Jaim for oil pollution damage and I an-up co t where the identity ofthe hip that cau ed the di charge cannot be e tabli hed (m tery pill ).

There i al o an important tatutory pro i ion for a wide) defin d cia ofp r on in the anadian fi hing indu try that may claim again t the OPF for lo of in orne au ed b an oil pill from a hip.

In the ca e of my tery pill on id rable in e tigati n i metim required, be au e the OPF i not liable for non hip- ource pill . Howe er, the OPF i liable "if the au e ofthe oil pollution damage i ur1known and the Adrnini trator ha been unable to e tabli h that th curr n e that ga e ri e to the damage wa not cau ed by a hip".

Protection ofthe marine en ironm nt fr m il p llution i the central theme addre ed in the ection on I ue and Challenge

Canada' pecial purpo e account -the Environmental Damage Fund - wa e tabli hed in 1995 to manage compen ation for damage to the en ironment re ulting from pollution incident . A a cu todian of the Fund, En ironment Canada continue to actively pur ue and enhance it framework for implementing an environmental damage a e ment and re toration proce .

The third inter e ional working group of the 1992 lOPC Fund ha been di cu ing i ue ofenvironmental damage under the 1992 Convention The working group i con idering whether or not to modify the 1992 Fund' po ition in re pect ofthe adrni ibility ofclaim for the co t of rein tatement of the environment, and ofclaim for the co t of environmental impact tudie . Propo al were ubmitted to the working group by a number of State and

Ship-source Oil Pollution Fund

organizations. The International Tanker Owner Federation Limited drew attention to the anadian nvironmcntal Damage Fund, uggesting that it might be a model to follow.

Compensation for environmental damage is handled differently under the MLA, the J 992 L , the l 992 lOP und Convention, and the US OPA 90.

The 1992 CLC and the 1992 IOPC Fund Convention, in their definition of "pollution damage", provide '.'· :that compensation for impairment ofthe environment other than los ofprofit from such impairment shall be ltmJted to costs ofreasonable measures of reinstatement actually undertaken or to be undertaken."

The MLA provides, "Where oil pollution damage from a ship results in impairment to the environment, the ov.:�er of the ship is liable forthe cost ofreasonable measures ofrein tatement actually undettaken or to be undertaken.

In the US, OPA 90 provides for payment ofnatural resource damage claim from the Oil Spill Liability Tru t Fund. The technicallyjustified reasonable cost for reinstatement/restoration mea ures, for which compen arion i available under the 1992 CLC and the 1992 IOPC FundConvention might equate to primary re toration under the ROA regulations. However, the further measure ofOPA NRDA is:

• • the diminution in value ofthose natural re ource pending re toration; plu the reasonable cost ofassessing those damages

The 1992 CLC and the 1992 IOPC Fund Convention do not, by their definition ofpollution damage, cover the latter SOli ofcompensation provided by the NRDA regulations or other theoretically ba ed a e ment ofenvironmental damage.

An update is provided on the issue ofplaces ofrefuge fordamaged hip at ea. The IMO continue to examine conditions under which littoral states should provide a safe place of refuge in heltered area for hip in immediate danger. There is a broad consensus internationally forthe need to addre the i ue of helter for hip in peril.

It is said that there is a "tradition" ofports offering refuge to endangered hip . Today, a damaged tanker loaded with oil is often con idered an unwelcome guest by the littoral state, becau e ofpotential oil pollution damage. In orne cases the coming into a place ofrefuge could reduce the threat of pollution.

TheComite Maritime International (CMI) has developed, in con ultation with the IMO ecretariat, a que tionnaire with a view to collecting as much information as po sible concerning the law applicable in the countrie ofC member associations on the access ofa distre ed ve el to a place ofrefuge where nece ary work can be undertaken to stabilize her condition and, if appropriate, to tran hip her cargo. The Canadian Maritime Law Association (CMLA) is working on a response to this questionnaire.

The international management code (IMO Code) forthe afe operation of hip addre e the re pon ibilitie ofpeople who manage and operate ships. This codeprovide an international tandard for afe hipboard operation and for pollution prevention. The ISM Code came into force on July 1, 1998, forcertain type of hip , including oil tanker , other types must comply by July 1, 2002. Every hip will then require a afety management certificate and a do ument of compliance issued by its flag state, or arecognized organization. Recent casualtie in Europe highlight concern about the effectiveness ofthe ISM Code. The secretary-general ofIMO, Mr Wtllian1 0' eil, initiated an a e ment ofthe effectiveness and impact ofthe ISM Code so far. A report was submitted to the IMO Mruitirne afety Committee in midMay, 2002.

The IMO's timetable for the accelerated phasing out ofthe single-hull oil tanker i al o noted.

On Mru·ch 23, 2001, the IMO adopted a new International Convention on Civil Liability for Bunker Oil Pollution Damage to establish a liability and compensation regime for pills ofoil carried a fuel in hip ' bunker To come into force the Convention requires ratification by 18 States including five each with not le than one million gro tons ofregistered ships, once these criteria have been met the Convention will come into force 12 month later. Thi could take some time. Further, to bring the Convention into force in Canada, the appropriate leai lation would ha e to be introduced in Parliament with changes to Canadian law. In the meantime, fmtunately in C�nada- unlike mo t countries - the SOPF, as directed by the Administrator, can continue to be used to pay claim for oil pill from all classes ofships, including oil from ships' bunkers.

Since 1989, the inter_nati?n� funds have r�ce!�ed approxirnate!y $30. 1 million out ofthe SOPF The report note that the SOPF has potential sigmficant future liabilities formternatwnal incidents.

Th 1971 IOPC Fund Con ention cea e to be in force on May 24, 2002. Canada is now a contracting state to the 1 92 IOP Fund Con ention. e ertheies , the SOPF has contingent liabilities to the 1971 IOPC Fund but only for incident p1ior to a 29, 1999.

The rep01t note pro pecti e changes in the 1992 IOPC regime, including the increase in cwTent compensation limit due in o ember 2003, and the draft Protocol for an "optional" third tier ofcompensation (Supplementary Fund). The draft Protocol haJJ be considered at an IMO Diplomatic Conference scheduled for May 12 to 16, 2003 Canada' primary IOPC coverage alone has gone from 120 million in 1989 to $270 million in 1999. On November 1, -003, p1imary IOPC cover will increase by 50% to $405 million per incident. In Canada an additional $136 million i a ailable from the SOPF. In re ult there will be $541 million ofcover per incident for any tank ship pill in Canada - without Canada being a Contracting State to an IOPC "optional" third tier(Supplementary Fund).

The Canadian IOPC Fund delegation continue to support the development of an "optional" third tier (Supplementary Fund). However, the que tion ofwhetherCanada should become a Contracting State to any IOPC "optional ' third tier (Supplementary Fund) i for Cabinet to decide.

Some of the i sue a sociated with shipowner ' liability are addressed in the report. Debate on the issue of hipowner ' liability in the IOPC "optional" third tier (Supplementary Fund) and/or whether amendments should be made to the pro i ion in the 1992 CLC regarding hipowner ' liability took place during meeting held by the 1992 IOPC Fund third inter e ional working group. The working group ha received ubmi sion by, interalia, the International Group of P&I Club and OCIMF There remain a divergence ofopinion regarding shipowners' liability.

The Canadian interdeprutmental committee continue to review the i ue that may affect Canada in any pro pective change to the international Con ention .

The dmini trator continue hi outreach initiati e by participating in conference , eminar and work hop . During the year he met with management per onnel in federal department , government agencie , and organization ofthe marine indu try. The e activitie included: nending meeting with enior repre entati the tlantic and Pacific R gion of Fi h rie and Ocean and Environment Canada in both

Participating with repre entation from go ernm nt agencie and the marine indu try, in an On-Scene Commander Cour eat the CCG olleg de igned for ffe ti ere pon e to a ignificant oil pill incident.

Pre enting a paperon the Ohio, p n ored b the anadian mp n ati n r gim at the fr hwater pill En ironmental Protection gen i iting the facilitie of the E R re pon e organization in ova otia ympo ium in Cleveland, ddre ing the opening plenary e ion of the anadian Marine d i ory ouncil Conference held in Ottawa during May. trending the aritime onference held in Toronto. The e ion featured paper on the Marine Liability Act, change to the anada hipping t 200I, th hipping Confer nee Ex mption Act, and other Di cu ion were held with organizati n in the and UK including: ITOPF, OCIMF, P&I Club , and the U ationai Pollution Fund entre.

Participating in the "In ight" nfer n eon merg n y r p n e planning for marine indu trie held in ancou er. The dmini trator pre ented a paper on anada' hip- ource Oil Pollution Fund.

During the year the Admini trator, a head of the anadian delegation, attended and reported on the Executive Committee and the A embly e ion of the international Fund , held at IMO Headquarter in London. Extract of hi delegation report on the e proceeding are contained in ppendice B and C.