June 21, 2018
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Canada suspends MMA railroad’s license to operate due to inadequate insurance

A police officer walks amongst axle gear in Lac Megantic, Quebec in this July 9, 2013 file photo. Montreal, Maine & Atlantic Ltd, the railway involved in last month's deadly derailment in Lac-Megantic, Quebec, filed for Chapter 11 bankruptcy protection on August 7, 2013, saying the move would enable the company to preserve the value of its assets.
By Frederic Tomesco, Bloomberg

MONTREAL — Montreal, Maine and Atlantic Railway Ltd., owner of the runaway oil train that 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 Tuesday. The suspension of the certificate of fitness will take effect Aug. 20.

Montreal, Maine and 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 underway, 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 and 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.

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 and 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.

The United States has no equivalent to the MMA railroad license suspended by Canadian authorities and no similar move is apparently being contemplated by federal authorities, a Maine Department of Transportation official said Tuesday.

U.S. Rep. Mike Michaud, however, said he will seek a congressional hearing to examine the issue further. The hearing also will examine “rail safety, including an examination of specific issues such as crew size, tank car design, and insurance requirements,” Michaud, D-Maine, said in a statement Tuesday.

“This decision by Canada to suspend the railroad’s operating license is concerning given its impact on the ability of our businesses to ship Maine products to market,” Michaud added. “I’ve been closely monitoring the situation, and I’ve offered [Maine state officials] whatever assistance they may need moving forward.”

The federal government’s largest role players are the Federal Railroad Administration and the Surface Transportation Board. In words echoing Maine Gov. Paul LePage and state transportation officials, Michaud said he will work with them and state authorities to ensure that state towns and businesses that use MMA’s rail lines are not neglected.

“Having access to rail is critical to our economy, and the needs of our shippers must remain a priority throughout this process,” Michaud said.

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

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 Tuesday.

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

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