Bloomberg News

Canada Suspends License of Railroad in Quebec Disaster

August 13, 2013

Canada Suspends License of Railroad in Quebec Disaster

Workers stand before mangled tanker cars on July 13, at the crash site of a train derailment and fire in Lac-Megantic, Quebec, that happened on July 6, 2013. Montreal, Maine and Atlantic, the Maine-based railroad whose train derailed, filed for Chapter 11 bankruptcy protection Wednesday, Aug. 7, 2013. Photographer: Ryan Remiorz/AP Photo

Montreal, Maine & Atlantic Railway Ltd., whose runaway oil train exploded and killed 47 people in a Quebec town last month, had its operating certificate suspended by Canada’s transportation regulator.

The Canadian Transportation Agency said the carrier lacked sufficient liability coverage in the wake of the disaster in Lac-Megantic, according to a statement today. The suspension of the so-called certificate of fitness will take effect Aug. 20.

Montreal, Maine & Atlantic filed for bankruptcy protection in Canada and the U.S. last week because of potential liability from the July 6 accident, Canada’s worst rail disaster since 1910. A criminal probe by Quebec authorities is under way, the town of Lac-Megantic is seeking financial aid to restore the gutted community and a civil complaint alleges a failure to take steps to prevent the derailment.

“It would not be prudent, given the risks associated with rail operations, to permit MMA and MMAC to continue to operate without adequate insurance coverage,” Geoff Hare, chairman and chief executive officer of the Canadian Transportation Agency, said in the statement.

Cathy Aldana, assistant to Montreal, Maine & Atlantic Chairman Ed Burkhardt, said by telephone that Burkhardt wasn’t aware of the agency’s announcement and that he wasn’t immediately available to comment.

Liability Insurance

Regulators are “not satisfied that MMA and MMAC have adequately restored their third party liability insurance coverage to the same level as prior to the derailment at Lac-Megantic, nor do they have the financial capacity to pay the self-insured portion,” the agency said. The regulator is an independent body that rules on air, rail and maritime transport in the country.

Montreal, Maine & Atlantic holds a $25 million liability insurance policy with XL Insurance Co., according to a Quebec court filing made last week. The policy covers costs for evacuation, fire suppression, pollution cleanup, bodily injury and property damages, according to the filing.

Environmental cleanup costs at Lac-Megantic will probably exceed C$200 million ($193 million), according to the Quebec court filing. XL has failed to make any payments under the insurance policy, and neither Montreal, Maine & Atlantic nor its Canadian unit is able to pay at this stage “given their financial situation,” according to the document.

Crude Shipments

A review of the adequacy of insurance coverage requirements for the issuance of certificates of fitness will begin later this year, the Canadian regulator said today.

Rising shipments of crude oil and other hazardous materials by train “highlight the need to determine how best to ensure that railways, small and large, have appropriate levels of third party liability coverage, including for possible catastrophic events such as Lac-Megantic,” the agency said.

Montreal, Maine & Atlantic owns 510 miles (1,300 kilometers) of track in Maine, Vermont and Quebec, according to its website. Its network offers “strategic links” to tracks owned by Canadian Pacific Railway Ltd. (CP), Canadian National Railway Co. (CNR), Guildford Rail System and other railroads, the company said in its Quebec court filing last week.

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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