Challenges and Opportunities 2010-2011

In the fiscal year ending March 31, 2011, the Ship-source Oil Pollution Fund (SOPF) faced a number of challenges and opportunities. The core work of settling claims has increased steadily. Since the creation of the Ship-source Oil Pollution Fund in 1989, which succeeded the Maritime Pollution Claims Fund, the Administrator has engaged marine consultants to assist with the investigation and assessment of claims. The number of consultants required over the years has been dependent upon the number of claims filed, and the technical complexity of the clean-up response to oil spill occurrences.

Initially, after the SOPF was established, two individual consultants were normally needed parttime in the office of the SOPF, with occasional field work secondment. During the past few years, however, only one marine consultant has been engaged on contract for a maximum of three days weekly. With just one consultant available the Administrator has found it necessary periodically to engage technical marine surveyors, particularly on the Pacific Coast, to assist with on-site investigations of oil spill incidents.

To deal with increased work load resulting from larger numbers of claims filed with the SOPF, as well as to do as much of the work in house, the Administrator has found it necessary to engage an additional marine consultant at the SOPF offices. Since SOPF consultants have traditionally come from the ranks of retired mariners residing in the Ottawa area, finding suitable candidates to fill these positions has been an additional challenge. The Administrator is actively exploring options to resolve this problem.

Another challenge arises out of the obligation to mount recourse actions. When the Administrator settles a claim, he has the statutory obligation to take all reasonable measures to recover from the shipowner, or any other person liable, the amount of compensation paid to the claimant. In those instances where the claimant elects to file a claim with the Fund as a first resort, the strict time limits within which this must be done are set out in the Marine Liability Act (MLA). Consequently, a major challenge for the Administrator is compliance with these time limits when pursuing action against the shipowner, particularly if litigation is necessary.

The Administrator faces further challenges in those instances where a considerable time lag has elapsed between the occurrence of the incident and the filing of a claim with the Fund. To conduct a thorough investigation and make a sound assessment, the Administrator frequently has to request further particulars about the circumstances surrounding the incident before he is in a position to advance settlement. This often results in further substantial delays.

As noted in previous Annual Reports, the problem of dealing with claims resulting from abandoned and derelict vessels remains an ongoing challenge when it comes to cost recovery. This kind of oil pollution occurrences usually involves old abandoned fishing vessels where the owners cannot be traced or have no attachable assets. Recovery of compensation paid out of the Fund, consequently, becomes impossible. In the past decade nearly $5 million has been paid in compensation for claims involving the removal and disposal of abandoned vessels primarily on the Pacific Coast.

Another challenge facing the SOPF in the course of the fiscal year covered by this report has been the rising demand for the Fund to be represented at government and marine industry conferences and seminars in Ottawa and across the country. Both the Administrator and the principal marine consultant of the SOPF, have been attending and making presentations at these conferences. The aim is to make stakeholders aware of the Canadian regime of liability and compensation for shipsource oil pollution damage. Attendance at these conferences and seminars is also beneficial to the SOPF, since they provide a good opportunity to keep abreast of technical and legal developments in the field of marine transportation. There is, however, a challenge in endeavouring to accommodate the various requests made for assistance as a presenter or panel member at workshops, given the limited work force of the SOPF.

Of particular interest to the Administrator has been the issues surrounding the transportation of oil products to the High Arctic. As with the many conferences in the rest of Canada, it is a challenge for the SOPF to have a representative available to attend the semi-annual meetings held by the Canadian Marine Advisory Council (CMAC) in Northern communities. The participants at those CMAC meetings represent the federal and territorial governments, and a range of sealift operators from the marine shipping industry.

Fortunately, to date, no significant ship-source oil pollution has occurred in Arctic waters. The sealift managers attribute their operational success and safety record in protecting the northern marine environment to the high classification standards of the commercial ships deployed in regions of the Arctic. Moreover, the experience and training for shipboard officers and crew are contributing factors to the prevention of oil spills. The Administrator is cognizant of the fact that, in the Arctic, shipowners do not have the ability to contract with a certified Canadian response organization for preparedness and response to oil spills. There is no response organization north of 60 degrees latitude. Response in this region therefore rests entirely with the Canadian Coast Guard.

The commercial shipping activity throughout the Arctic regions is increasing substantially. Commercial transits of the Northwest Passage are becoming an annual occurrence and are expected to expand in the future. Also, adventure cruises are being conducted annually. Significant in this regard was the incident involving the Bahamian-registered cruise ships, Clipper Adventurer, which ran aground in late August 2010 in the Coronation Gulf. Approximately at the same time, the Canadian-registered tanker, Nanny, loaded with diesel fuel, went aground near Gjoa Haven. Luckily there was no oil spill in either incident –sections 2.39 and 2.40 refer.

Mention has already been made in the last Annual Report concerning amendments to the Marine Liability Act contained in Chapter 21 of the Statutes of Canada, 2009. Those amendments, as anticipated, have not materially affected the claims settlement procedures of the SOPF. The administrative work of the Fund, however, has continued to increase. The Fund now has three full-time employees to deal with this increased administrative burden. Some of the increases are dictated by the amendments to the Marine Liability Act, referred to above, aimed at promoting greater transparency in the affairs of the SOPF, for example, the statutory requirement of an annual audit, but other factors have also contributed to this aspect of the work. The following outlines some specific challenges and opportunities encountered by the SOPF in the last fiscal year:

• Completing the re-location of the SOPF offices to 180 Kent Street with the assistance of Public Works and Government Services Canada and Transport Canada;
• Negotiating health and employment benefits for employees and, subject to applicable conditions, making contributions to registered retirement savings plans;
• Concluding the Memorandum of Understanding with Transport Canada and subsequent commencement of invoicing from various departmental service providers;
• Participating at learning events for Heads of Federal Agencies and exchange of information with various networks of small federal agencies and departments; and
• Concerted effort with Transport Canada to obtain information on oil movement in Canada as part of the Administrator’s in-depth review of reports of contributing oil for the purposes of the International Oil Pollution Compensation Fund (IOPC Fund).

The Administrator welcomes his periodic meetings with the Commissioner of the Canadian Coast Guard and his staff. These meetings are useful to promote mutual understanding, particularly of the claims process and the need for timely and detailed submission of claims to the SOPF.

The growth experienced in recent years, in both core administrative work, has resulted in the transformation of the SOPF. While the increased volume of claims has produced a heavier workload for the marine consultants and the Administrator, it has also had a rippling effect administratively. With this growth, it has been important to establish a more permanent and specialized staff to ensure both claims work and administrative matters are dealt with effectively and efficiently. It is foreseen that these issues will present ongoing and new challenges for the SOPF for years to come.