The Need to Strengthen the Liability and Compensation Regime for Rail in Canada
From Transport Canada
The July 2013 derailment in Lac-Mégantic highlighted the need to strengthen the liability and compensation regime for rail in Canada. The railway involved – the Montreal, Maine and Atlantic Railway (MMA) – did not have enough insurance to cover damages, and went bankrupt.
Stronger liability and compensation requirements came into force on June 18, 2016, under the Safe and Accountable Rail Act (the Act). The Act amends the Canada Transportation Act. It ensures that more resources are available, if a rail accident occurs, to:
- compensate victims
- pay for clean-up costs
- protect taxpayers
New measures under the Act:
- require federally regulated freight railways to hold a minimum insurance of $25 million to $1 billion, based on risk
- define railway liability, including liability without proof of fault or negligence for crude oil accidents
- create the Fund for Railway Accidents Involving Designated Goods, which:
- is financed by crude oil shippers
- pays compensation when a railway’s mandatory insurance level is not enough to cover the full cost of damages from a crude oil accident
The Fund is financed by a levy on shipments of crude oil by rail. All shippers of crude oil carried by a federally regulated railway in Canada must pay a per-ton levy on crude oil.
The Fund provides additional compensation for crude oil accidents involving a federally regulated railway. If the damages are higher than the railway’s minimum required insurance, the Fund covers all remaining costs.
The Fund is a specified purpose account within the Government of Canada’s Consolidated Revenue Fund. The Minister of Transport is able to discontinue and re-impose the levy as needed, for any specified time period.
There is no limit on claims to the Fund. In the unlikely event that accident damages are more than the railway’s insurance coverage and the amount in the Fund combined, the Consolidated Revenue Fund would act as a backstop. Any public money loaned from the Consolidated Revenue Fund would be repaid with interest through levies.
An Administrator is appointed by the Governor in Council to manage the Fund. The Administrator is responsible for:
- establishing and paying out claims
- ensuring records are properly maintained
- submitting an annual report to Parliament
The levy is indexed to inflation and adjusted based on changes to the Consumer Price Index. For the fiscal year starting April 1, 2017, the inflation-adjusted amount is $1.69 per tonne.
Responsibility for paying and collecting the levy
Shippers pay the levy. The levy applies to crude oil transported by federally regulated railway in Canada.
Railway companies collect and remit the levy amounts to the Fund. Every railway company that is the first to carry traffic to which the levy applies (at a rate other than an interswitching rate) must collect the levy and remit it.
Deadlines for remitting the levy
The levy must be remitted by the railway company on a quarterly basis in each calendar year. It must be remitted within 30 days after the end of the calendar quarter in which the levy became due. Therefore, the deadlines for remittance are:
- January 30
- April 30
- July 30
- October 30
The first payments to the Fund were remitted on July 30, 2016 for the June 18-30, 2016 period.
How to remit the levy
The levy is remitted to Transport Canada, who processes the payment. Click here for more details.
2016-2017 Annual Report
The Fund’s first Annual Report covers the June 18th, 2016 (entry into force of the statutory provisions governing the Fund) to March 31st, 2017 period.
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The Fund is developing a draft Claims Manual which will be available for comments and recommendations. Please click here if you wish to be added to the distribution list.
The Fund for Railway Accidents Involving Designated Goods Workshop – Ottawa, Ontario
The Fund for Railway Accidents Involving Designated Goods (FRAIDG) held a workshop in Ottawa on November 30, 2017.
The purpose of this workshop was to plan and strategize with key stakeholders in order to improve the FRAIDG’s indemnification readiness and efficiency on specified issues related to claims, liability, and compensation regarding railway accidents involving designated goods.
The workshop touched upon the triggering of the FRAIDG claims process, the draft Claims Manual, claims valuation and claims assessment process, and next steps.
It became evident that in order for the Fund to fulfill its mandate, i.e. to be prepared to process claims and indemnify claimants in an efficient way should an accident happen, it should begin engaging with key stakeholders immediately.
In the coming months, the FRAIDG will circulate the amended draft claims manual and its draft policies. It will also consolidate its key stakeholder network by engaging and meeting with various key stakeholders.
Over the upcoming year, the FRAIDG will develop discussion papers that look at potential grey areas. Some of these discussion papers may be issued jointly with other agencies that share the same issue(s).
This document summarizes the workshop, including some of the feedback provided during and after the workshop.
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Office of the Administrator
Fund for Railway Accidents Involving Designated Goods
180 Kent St., Suite 830
Ottawa, Ontario K1A 0N5
Tel.: (613) 991-1727
Fax: (613) 990-5423
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