OTTAWA – The railway at the centre of the Lac-Megantic, Que., train disaster will have its operating licence suspended in Canada, a severe blow to an already crippled company.
The Canadian Transportation Agency announced Tuesday that it’s revoking the certificates of fitness for the Montreal, Maine & Atlantic Railway Ltd. and its Canadian subsidiary, Montreal, Maine & Atlantic Canada Co.
“This was not a decision made lightly.”
The arm’s length federal regulator says it made the decision after reviewing the railway’s third-party liability insurance following the fiery July 6 derailment that killed 47 people and wiped out part of downtown Lac-Megantic.
The federal agency said it contacted the company to ensure that it has topped up its insurance, following the myriad financial claims against it in the wake of the derailment.
“We have concluded that (the coverage) is not adequate, thereby we have no choice but to suspend their certificate of fitness,” agency spokeswoman Jacqueline Bannister said in an interview.
The agency said it’s not satisfied the embattled company has purchased sufficient new insurance – so the licence for the railway and its Canadian branch will be revoked as of Aug. 20.
“This was not a decision made lightly,” said Geoff Hare, chairman of the arm’s length federal regulator.
“It affects the economies of communities along the railway, employees of MMA and MMAC (Montreal, Maine & Atlantic Canada), as well as shippers who depend on rail services.
Even before the suspension announcement, MMA’s survival seemed like a longshot.
Since the derailment, several lawsuits have been filed, a criminal investigation is underway, railroad standards have been tightened, and the provincial government has demanded money from MMA for the massive cleanup efforts.
Last week, the railway was granted creditor protection in Canada and bankruptcy protection in the United States after it stated it did not have enough assets and insurance to cover the mounting costs of the disaster.
The federal agency said Tuesday that it had advised the railway that it must maintain at least the same amount of third-party liability coverage it had before the derailment.
But it said MMA’s insurance broker indicated the aggregate coverage had been cut in half since the derailment. The agency added that the railway failed to provide evidence it had additional insurance to make up the difference.
“The agency is also of the opinion that the company no longer has the financial capacity for its self-insured portion,” Bannister said.
The agency said that over the last decade, no claims by a federally regulated railway have exceeded the limits of its third-party liability insurance.
TIMELINE: Events in the Lac-Megantic disaster
In the wake of the disaster, the regulator has also announced it is planning to review the insurance coverage of federally regulated railways this fall, given the ongoing increase in shipments of crude oil and other hazardous materials.
Forty-seven people died when an MMA train slammed into Lac-Megantic, Que., and erupted into fireballs on July 6. Since then, several lawsuits have been filed, a criminal investigation is underway, rail standards have been tightened, and the provincial government has demanded money from MMA for cleanup efforts.
In its statement, the agency also said it will undertake a review this fall of insurance coverage at federally regulated railways, given the ongoing increase in shipments of crude oil and other hazardous materials.
The president of Maine-based MMA, which has resumed some of its Canadian operations since the derailment, said Tuesday that he hadn’t seen documentation about the licence suspension.
“I know nothing about it … so I can’t make any comment,” said Robert Grindrod, who was then asked whether he would be available to discuss the matter later in the day, once he had read the documents.
“Unlikely. OK, thanks. Goodbye,” he said before hanging up the phone.
An official in the office of MMA chairman Ed Burkhardt, contacted Tuesday, said he wasn’t yet aware of the licence suspension.
The local business community hopes the problem will be resolved soon, particularly in a region with an already tough economy and where some businesses have had no rail service since the derailment blocked a crucial section of tracks in downtown Lac-Megantic.
The industrial commissioner for the region around Lac-Megantic said local companies such as Tafisa, a particle-board manufacturer that employs a few hundred people, have had to spend more money by transporting their goods by truck.
“I hope that the government will operate (the railway) or that they will have different operators that can either buy or be the operator … until a permanent solution will be found,” said Michele Tardif.
“They can probably find someone to be the operator, manage the line. Someone that is more reliable than MMA.”
The chairman of the Canadian Transportation Agency said in a statement Tuesday that he’s aware MMA’s suspension affects the economies of communities along the railway, workers and shippers who depend on rail services.
“This was not a decision made lightly,” Geoff Hare said.
“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.”