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Environmental Regulation and Safety Outcomes: Evidence from Canadian Energy Pipelines

by Walls, W. D. and Zheng, X.

This paper investigates the effects of more stringent environmental regulation—specifically, paying amortized abandonment fees as accrued and absolute liability for adverse events—on the safety performance of Canadian oil and gas pipelines. We construct a comprehensive monthly data set that includes pipeline incidents and accidents, throughput, regulatory intensiveness, and physical characteristics for fourteen federally regulated energy pipelines in Canada. The results show that imposingabandonment fees is positively and significantly related to increases in the probability and number of pipeline incidents. A 10% increase in the share of abandonment fees in sale revenues is associated with 1.63 more incidents per month. Establishing absolute liability since 2016 is significantly associated with decreases in the probability of pipeline serious accidents: The probability of accidents decreased by 3% per month since the establishment of absolute liability. Also, imposing absolute liability is most effective for large oil pipelines, which are subject to the highest liability. Oil pipelines subject to the highest liability reduced accidents by 0.343–0.389 per month, while accidents of natural gas pipelines declined by 0.048–0.052 per month.

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