Bloomberg News

Quebec Disaster Sparks Debate on Costly Rail Safety Measures (1)

July 17, 2013

Quebec Rail Disaster May Lead To New Rules

A police handout image shows the burnt remains of an area of Lac-Megantic in Quebec after the massive fire that was caused by a derailed oil transporting train. Source: Sûreté du Québec via Bloomberg

A runaway oil train that killed scores of people when it slammed into a Quebec town is bringing renewed calls on both sides of the U.S.-Canada border for tougher safety rules for railroads.

Regulators and watchdogs have sought for years improvements to a common tank car design shown to be susceptible to rupture when derailed, while labor unions have pushed for a ban on trains being operated by a single crew member.

Both issues have been cited as potentially contributing to the July 6 crash of a Montreal Maine & Atlantic Railway Ltd. train that derailed in Lac-Megantic, about 250 kilometers (155 miles) east of Montreal. The accident incinerated 30 buildings in the town’s center and killed as many as 50 people. Canadian investigators are still probing the cause of what is the nation’s worst rail disaster in more than a century.

“Major disasters like this often reveal regulatory failures or highlight gaps in regulatory coverage,” said Katie Greenhaw, regulatory policy analyst at the Center for Effective Government, a Washington-based watchdog. “Other times it shows that there’s lax enforcement of existing regulations.”

In Canada, the opposition New Democratic Party is calling for a minimum of two crew members on trains carrying dangerous goods, and a deadline for retiring DOT-111 tank cars, the model that regulators and watchdogs have repeatedly cited and was used on the MM&A train. Party member and Canadian lawmaker Olivia Chow said municipalities should also know when and where dangerous goods are traveling by rail through their towns.

Cost Increase

Regulations on rail shipments of crude oil are likely to tighten in the wake of the accident, raising operating costs, Moody’s Investor Service said in a July 11 research note.

“Canadian and U.S. authorities are likely to increase the regulatory burden on rail shipments of crude and petroleum products, increasing capital and operating costs for rail companies,” according to Moody’s note. “Past rail accidents and catastrophic oil spills have led to strong and costly new regulations.”

CSX Corp. (CSX:US) Chief Executive Officer Michael Ward today fielded a question from an analyst who asked whether the Quebec accident may lead to more regulation.

CSX Reaction

“They’re still investigating what the cause of it is, and I think until the cause is known it’s a little hard to speculate whether there would be additional regulations or not,” Ward said on a conference call after the Jacksonville, Florida-based company reported second-quarter results. “I’m hopeful that as they determine the cause of this, if there’s something to be learned to make us safer, we want to learn from that.”

Labor unions in both countries say they plan to redouble efforts to convince regulators to ban one-person train crews. The MM&A train was operated by a single engineer, who parked the train for the night and left it unattended. A second person can ensure procedures are followed in operating and parking trains.

In the U.S., while no regulation or law bans the use of one-person rail crews, regulations dictating what the engineer and conductor do in the locomotive effectively prohibit the practice. Collective bargaining agreements between more than a dozen rail-worker unions and the railroads who employ them have kept two operators in most trains running in the U.S.

Union Plans

Some short-line and non-union trains run with a single operator, and larger railroads in collective bargaining have sought support for one-person crews.

“Rail safety is not just an employee issue,” said James Stem, national legislative director for the Sheet Metal, Air, Rail and Transportation union’s transportation division, which was formerly the United Transportation Union. “Rail safety impacts every community that railroads go through.”

Stem said his union, which represents railroad conductors, and the Brotherhood of Locomotive Engineers and Trainmen, may re-file a petition with the U.S. Federal Railroad Administration asking the agency to require multiple-person operating crews rather than leaving the decision to railroads and unions to work out at the bargaining table.

“There’s a certain period of time when the event is still fresh in the mind of the public and action is indeed a possibility,” said Lloyd Burton, a University of Colorado-Denver law and public policy professor who published a 2011 paper on railroad regulation following disaster.

Operator Error

MM&A owner Edward Burkhardt, who has defended the single-operator model as safer because there are fewer distractions, blamed the train’s engineer for failing to properly set the brakes on the parked train. Since the accident, he has said the railroad would no longer leave trains unattended overnight.

Claiming operator error is a common way for companies and regulators to deflect responsibility, Burton said. Blaming the operator shields industries and regulatory agencies from accident investigations that might result in systemic reforms, he said.

“Human operator error is typically the first -- and most agencies and firms hope -- the last organizational refuge after an accident,” he wrote in the paper. “The logic is that if the human operator failed in his duties -- to err, after all, is human -- then the system itself must not be broken.”

Thicker Shells

The accident will renew attention on a rule on railcar design that’s languished at the U.S. Pipeline and Hazardous Materials Safety Administration, Burton said. The U.S. National Transportation Safety Board, which can only suggest regulations, has warned that the 30,000 gallon-tank cars are more prone to rupture in crashes than other types of tank cars.

The agency recommended thicker shells and other modifications to strengthen the rail cars. If retrofits couldn’t be done, the NTSB suggested phasing out the use of the DOT-111 for transporting hazardous materials.

As early as 1994 the Canadian Transport Safety Board cited the equipment as prone to puncture during a derailment.

The rail industry has opposed requirements to retrofit cars, saying they could cost as much as $1 billion. The Washington-based Association of American Railroads has supported updated rules for new tank cars and worked with manufacturers on safety improvements.

‘Closely Monitoring’

“We learn from every accident and use this knowledge to continuously improve our safety program,” Kevin F. Thompson, a spokesman for the Federal Railroad Administration, said in an e-mail. “We are closely monitoring the situation in Canada, and will continue to learn from the accident as Canadian authorities complete their investigation.”

In a July 8 statement, then-transport minister Denis Lebel said he asked the department to “examine any other means of improving rail safety over the coming weeks, months and years.”

“We have taken concrete action to increase rail safety. In fact, we have invested over C$100 million ($96.3 million) in rail safety since 2009,” Lebel said in a July 8 press conference. Lebel was replaced July 15 by Conservative lawmaker Lisa Raitt as part of a cabinet-wide shuffle in Canada.

The U.S. Senate Commerce Committee is expecting a report this year it requested from the Government Accountability Office reviewing freight rail safety and the agencies that oversee railroads, said Kevin McAlister, a spokesman for the committee.

Train Control

The disaster may affect the pace of implementing positive train control technology, a centralized electronic communication system that keeps trains from speeding or running into each other. Railroads that operate in the U.S. have a 2015 deadline to install the technology on about 39 percent of track miles. The Association of American Railroads, which represents all the major railroads operating in the U.S., has asked for a delay to the deadline, saying the demand for the equipment will outstrip supply between now and then.

“A lot went wrong and a lot of lives have been lost and things are going to change,” said Steven Paget, an analyst based in Calgary with FirstEnergy Capital Corp. “There is going to be increased public attention on rail transportation.”

The Association of American Railroads considers it “premature to speculate about how and if this accident could influence future regulations or changes to railroad operating procedures,” said Holly Arthur, a spokeswoman. The group will follow investigators’ findings, she said.

Effective Regulation

“Railroads have long told investors that safety is good business,” Anthony Hatch, an independent analyst based in New York who has tracked railroad companies for almost three decades, said in a telephone interview. “You cannot afford to have derailments on the main line take the main line out of service for any period of time. You’re eating up capacity. If you’re running unsafe, you’re running a very costly railroad.”

A disaster points to the need for effective regulation before more people are killed or injured, said Greenhaw, with the Center for Effective Government.

“The important thing is to not forget to urge our policymakers to provide these safeguards, sufficiently provide resources for the agencies that need to implement these safeguards so we don’t forget about them until a situation like this happens,” she said.

To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net; Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net; Gerrit De Vynck in Toronto at gdevynck@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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