By Theo van de Kletersteeg
As a non-resident of British Columbia, I can afford to take a dispassionate view of the heated emotions in that province over additional pipelines, expansions of existing pipelines, and the increased tanker traffic that the pipelines will feed. After all, when there are accidents which will invariably occur, they will not impact me directly. There is no question that, as an entrepreneur, I welcome the thought of increased economic activity resulting from the huge anticipated volumes of incremental exports.
Yet, considering B.C.’s natural beauty, and the risk of a major accident occurring as a result of system failure, human error or force majeure (B.C.’s location on a seismic fault line), I am sympathetic to those who want nothing to do with more oil flowing through the province to its ports. I am not an expert on these matters but, as the preceding article clearly demonstrates, it seems to me that those who oppose the pipelines have a compelling case: the province simply does not have the capability to respond adequately to a large-scale disaster, and the consequences of a large-scale disaster could have immeasurable impacts on the lives of many people, not to mention the environment, for decades. Is it any wonder for people to be up in arms over this issue when they consider the potential consequences? It seems to me that compromise must be possible, rather than complete rejection by environmentalists or relentless pushing by promoters who feel they have an inalienable right to put citizens at risk. A solution might be found through the adoption of a very unconventional approach. We have become accustomed to governments looking after our well-being. However, governments no longer have the financial means to carry out those tasks as well as they did in the past, and cutbacks are the order of the day. Moreover, my experience has been that whatever governments can do, private enterprise can do better, faster, and at lower cost. Accordingly, I see the current pipeline dilemma as an opportunity to significantly re-engineer the respective responsibilities of government and private enterprise in a manner that may suit both, and may serve as a model to be implemented in other situations. Governments have made significant progress in implementing private-public partnerships: undoubtedly some will prove not to be successful in future years, but the idea and its early implementations have achieved success well beyond expectations. Furthermore, the idea of shifting cost burdens to users has been implemented successfully on many occasions, with an example of the latter being the provision of airport infrastructure and the cost of navigation and security systems at the nation’s airports. Within the context of the current heated debates, it should not be difficult to find citizens that, for the good of the community, would agree to help found a new organization tasked with finding and implementing the best technical and financial solutions to mitigate technical and environmental risk, while ensuring that sufficient capital is available to deal with the consequences of accidents involving the carriage of oil, no matter how disastrous any calamity might be. I see this new organization as consisting of representatives of all of the principal stakeholder groups, namely oil producing companies, pipelines, terminals, ports, shipowners, ocean carriers, citizen groups, as well as provincial and federal governments. Financing to support its activities would be provided by all participants except citizen groups. Its activities would consist of the following:
1. To identify the technical feasibility and cost of state-of-the-art (“world-class”) solutions to prevent, and to deal with pipeline spills and waterborne accidents involving oil and petrochemicals,
2. To negotiate with private insurers to purchase insurance to cover all foreseeable and unforeseeable direct and indirect costs of oil spills and accidents, including loss of life, damage to property, loss of economic opportunity, etc. The amount of coverage that needs to be purchased must be very large indeed, to ensure that no compromises need to be made if and when calls are made on this coverage. In view of the damages sustained in the case of the Deepwater Horizon well blow-out, required coverage might well be in the order of $50 billion or more. Payouts should occur under all circumstances, no matter who is at fault, if indeed anyone is at fault.
3. To design and implement a scheme whereby all stakeholders will, on a pro-rata and continuous basis, be responsible for the cost of supporting this organization and its financial obligations.
4. To design and implement a scheme whereby all stakeholders will on a continuous basis continue with the activities outlined above, always seeking new ways to maximize protection from oil spills and accidents in the province and, when they do occur, to ensure that funds and other resources are available to deal with the impacts of such accidents in the most timely and effective manner possible.
This proposal should work because the private industries that stand to benefit the most from the carriage of oil and petrochemicals would be made responsible for dealing with the cost of preventing accidents, and dealing with accidents. Budget cuts and support for industry have caused citizens to lose confidence in government’s ability to protect them and, in any event, why should taxpayers be held responsible for potentially huge losses when operators under-engineered their facilities to minimize the capital cost of such systems, and to increase their return on investment, or when their employees took irresponsible actions? On the other hand, participants in the oil industry have the cash and the necessary relationships with insurance companies to assure the necessary protection, at the lowest possible cost. Furthermore, the new relationship between citizens and corporations in the oil trade would be based on a perfectly natural balance: oil companies and pipelines can make as much money as the market and the taxman will let them, but only after they hold the citizenry harmless from the potential negative consequences of operating their businesses. Governments should love this proposal because it takes them off the hook as the primary “protectors” of the public interest. I have no doubt that others will be able to improve on the above ideas. At this point, it’s not the specifics that are important – it’s the principle that when corporations are the principal financial beneficiaries of their activities, they have an obligation to hold society financially harmless from their activities, without downloading their responsibilities to the taxpayers.
(Reprint of an article that was originally printed in the Canadian Sailings issue of October 22, 2012)