Operator Financial Obligations

Operators must demonstrate to us that they are financially capable of acting in a responsible manner for the life of the proposed activity. This means that we need to be satisfied that they have the financial resources available to respond to an incident. This is a requirement that is set out in the legislation.

We make sure that an operator has the necessary proof of financial responsibility and resources before we can issue an authorization to work in the Canada-Nova Scotia offshore area. We review financial requirements applications submitted by an operator as part of our larger Activity Authorization review process. This review helps us ensure that an operator is able to act in a responsible manner for the life of the activity.  If an incident happens, this ensures that an operator has the funds to pay for claims.

We have developed guidance for operators to follow to meet our expectations. View our Guidelines Respecting Financial Requirements here.

Learn more below about the financial requirements for Activity Authorizations and the claims affected parties may make if they experience economic loss from an incident.

Activity Financial RequirementsWe verify that operators have, or have access to, $1 billion. This is a requirement to be able to work in the Canada-Nova Scotia offshore area. Learn more below.

The Accord Acts establish that operators undertaking work or activities in relation to the drilling for, or development or production of oil and gas resources in the Canada-Nova Scotia offshore area are liable for the loss or damage that they may cause as a result of an incident (i.e. spill or debris). If a spill or debris is the result of a contractor’s fault or negligence, the operator is jointly and severally liable with the contractor.

The basic objectives of the financial requirements are to:

  • Confirm that an operator has the ability to pay for all actual losses or damages incurred by any person as a result of any spill or debris, which includes loss of income, future loss of income and with respect to any Aboriginal peoples of Canada, loss of hunting, fishing and gathering opportunities
     
  • Require an operator to pay any costs and expenses reasonably incurred by any person respecting spills or debris

Financial requirements are based on a polluter pays principle and can be broken down into three categories:

  •  Absolute Liability - Operators are liable, regardless of negligence or fault, for damages up to $1 billion. If an operator is liable, liability is unlimited
     
  • Financial Responsibility - Operators provide $100 million to us in a form of unfettered financial documents (i.e. a deposit allowing us direct access to funds). For example, we typically accept letters of credit from an operator that list us as a beneficiary. These letters of credit are issued by a Canadian chartered banks as set out in Schedule I of the Bank Act
     
  •  Financial Resources - Operators demonstrate they have assets or the capacity to obtain $1 billion through the submission of financial documents to us. For example, we require operators to submit a yearly statement of net assets and funding arrangements, and also request to see quarterly and annual financial statements and credit ratings. Some operators can also provide other forms of proof in the form of insurance, a letter of credit, guarantee agreement, etc.

Our Oversight Role

Application Review

As part of our application review, we determine if the submission for financial requirements is in compliance with the legislation and meets our expectations as laid out in the Guidelines Respecting Financial Requirements. We work collaboratively across our organization to determine if the financial requirements application is acceptable for the type of activity being applied for. In some cases, we may increase the amount that has to be submitted for financial requirements to greater than $1 billion if the activity is deemed to present higer risk. If the proposed activity poses significantly less risk, an operator may request financial requirements be lowered below the legislated amounts. If that is the case, we ask for a risk assessment to help guide our review. We, through our Board members, may recommend to the federal Minister of Natural Resources and the provincial Minister of Energy and Mines to decrease the amount based on things such as our knowledge of the area, the application and risk assessment submitted by an operator. It is the Ministers’ responsibility to make the ultimate decision to lower the amount of financial requirements. 

Monitoring

It’s also our job to make sure the financial requirements are met for the lifecycle of the proposed activity and for a period of time after the activity is completed. We monitor an operator’s financials by reviewing their yearly statements of net assets and funding arrangements, annual and quarterly financials and credit ratings. This is completed to confirm that an operator continues to be able to meet the legislated requirements and our expectations once they have been authorized to work in the Canada-Nova Scotia offshore area.

 

Claims and CompensationProperty owners and those working in the fishing industry may make a claim to an operator if they have experienced economic loss because of an incident. Learn more below.

Claims

The Accord Acts gives us the authority to make an operator pay out all claims associated with spills or debris, as appropriate. In the event an operator fails in these duties, the Accord Acts allows us to manage and control the work or activity and take all reasonable measures in relation to the spill or debris and pay out claims for damages as prescribed. Funds would only be used by us if an operator does not take responsibility or follow our directions.

Compensation

Property owners and those working in the fishing industry can recover economic loss resulting from a spill or debris, which can be attributed to an operator. Additionally, governments may seek compensation for environmental damages.This ensures that any damages to species, coastlines or other public resources will be addressed.

Property owners and those working in the fishing industry who may suffer damages, including loss of income, as a result of a spill or debris have various compensation mechanisms available:

Typically, property owners and those working in the fishing industry should contact the responsible operator for compensation as soon as they can. Compensation available through our process is only applied in situations where the property owner or those working in the fishing industry and the responsible operator have not been able to reach an agreement. Those who apply to us for compensation must follow our application process by completing our claims form and providing all relevant documents including invoices or appraisals. We assess claims on a case-by-case basis, and evaluate claim eligibility and potential value of compensation.