August 13, 2013

Maine railroad in crash shut out of Canada

The company loses its ability to run across the border because of inadequate liability insurance, which isn't a requirement in the U.S.

By Matt Byrne mbyrne@pressherald.com
Staff Writer

The struggling Maine-based rail company involved in last month's deadly train crash in Lac-Megantic, Quebec, lost its license to operate in Canada on Tuesday after regulators there decided it doesn't carry enough liability insurance.

click image to enlarge

This July 8, 2013 file photo provided by Surete du Quebec shows debris from a runaway train on Monday, July 8, 2013 in Lac-Megantic, Quebec, Canada. A runaway train derailed igniting tanker cars carrying crude oil early Saturday, July 6, killing 47 people. (AP Photo/Surete du Quebec, The Canadian Press)

click image to enlarge

In this July 10, 2013 file photo, Rail World Inc. president Edward Burkhardt speaks to the media as he tours Lac-Megantic, Quebec. (AP Photo/The Canadian Press, Paul Chiasson)

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While the railroad is still legally allowed to operate on the Maine side of the border, the ruling is seen as another major blow to the bankrupt company's chances of survival.

U.S. Rep. Michael Michaud, D-Maine, said Tuesday he will call for a congressional hearing to examine rail safety and insurance issues highlighted by the July 6 accident that killed 47 people just 10 miles from the Maine border.

Michaud's announcement came in response to questions about the Canadian Transportation Agency's decision to prohibit the Montreal, Maine & Atlantic railroad company from operating in Canada because of inadequate coverage.

The company carries $25 million in insurance, but damages in the Lac-Megantic accident are expected to reach at least $200 million.

Michaud called the Canadian decision "concerning, given its impact on the ability of our businesses to ship Maine products to market." He said the matter is complicated and "in need of increased scrutiny," but said it was premature to call for new federal regulations requiring rail insurance in the United States. Railroads operating in the U.S. are not currently required to carry liability insurance.

"I'm committed to working with the state in the best interests of our communities and businesses that rely on this rail line," Michaud said in a written response to questions from a reporter. "Having access to rail is critical to our economy, and the needs of our shippers must remain a priority throughout this process."

Investigators in Quebec continue to investigate why a parked and unattended MM&A train with 73 tank cars of crude oil rolled downhill at nearly 60 miles an hour before derailing in Lac-Megantic, causing explosions and fire that destroyed 40 buildings and killed dozens.

Canadian authorities said that this fall they will re-evaluate the government's insurance requirements for small railways that increasingly carry hazardous materials such as crude oil.

The revocation of the railway's operating license in Canada takes effect Aug. 20, according to the statement by Canadian authorities. It will probably result in the layoffs of the roughly two dozen workers in Canada still with the company following the disaster, said CEO Ed Burkhardt.

Nearly 70 of the company's Maine employees have already been laid off. They and the businesses that have used the rail line are waiting to see whether the company will survive, resume freight service and rehire workers.

Burkhardt said Tuesday that staff members were examining what Tuesday's order will mean for the company.

The company's third-party liability insurance is capped at $25 million, and covers property damage, bodily injury, fire suppression and environmental cleanup. Environmental cleanup costs are expected to top $200 million, and that does not include any damages awarded in lawsuits.

Following the disaster, MM&A contacted Canadian authorities to verify that its insurance and permits with the agency would continue to be valid.

The railroad was given "full and fair opportunity" to demonstrate it had obtained adequate liability insurance following the crash, said Geoff Hare, chairman and CEO of the Canadian Transportation Agency.

"This was not a decision made lightly, as it affects the economies of communities along the railway, (rail company) employees, as well as shippers who depend on rail services," Hare said in the statement. "It would not be prudent, given the risks associated with rail operations, to permit (the rail line) to continue to operate without adequate insurance coverage."

(Continued on page 2)

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