New liability, insurance rules for railways

YorkRegion.com
Feb. 20, 2015
Bruce Cheadle

The federal government says it will beef up rail safety inspections, demand higher insurance liability from small carriers and create a disaster relief fund paid for by oil producers — the latest response to 2013's deadly oil-by-rail tragedy in Lac-Megantic, Que.

"With this legislation, any railway or any company that ships crude oil will share in accountability for clean-up and compensation costs in event of an accident," Transport Minister Lisa Raitt announced Friday.

"The actions today will also help the government better enforce and respond to safety issues."

The new legislation will set minimum insurance levels for freight operators. Canada's two largest railways — CN and Canadian Pacific — already meet or exceed the top $1-billion liability threshold, while smaller carriers will have two years to meet lower liability limits of $25 million, $100 million or $250 million, depending on the type and volume of dangerous goods they ship.

The government is also creating a new $250-million compensation fund, to be financed with levies from oil shippers over the next five years.

A spokesman for the Canadian Association of Petroleum Producers said the new levy amounts to 25 cents per barrel of oil shipped by rail.

Rail companies may be required to share operational safety information with municipalities under the new regulations.

And Transport Canada rail safety inspectors will step up inspections, said Raitt, while being given the power to order rail companies to act when potential safety concerns are discovered. Currently companies can only be ordered to act on an immediate safety threat.

"One of the key pieces, quite frankly, is this (new) ministerial order," said Raitt.

The moves are just the latest regulatory effort to get ahead of a booming oil-by-rail revolution that continues to create disastrous flash points.

The Canadian Association of Petroleum Producers estimates the rail industry will move 700,000 barrels of Western Canadian oil each day by 2016, up from less than 300,000 barrels in all of 2009.

Earlier this week in West Virginia a train carrying over 11 million litres of crude derailed in an explosion of fireballs, forcing the evacuation of hundreds of families.

Every such incident causes flashbacks to July 2013, when a crude-laden freight train derailed in the heart of Lac-Megantic, killing 47 people and incinerating the downtown core.

Despite years of official reports warning of rail safety deficiencies before that crash, Raitt said it's unfair to suggest the government only took action after a deadly disaster occurred.

"What we're focusing on here is a response to a phenomenon that happened very recently — and that's this incredible increase in the movement of oil by rail. That was not anticipated. That was not the case in 2009."

The rail company responsible for leaving the running, unmanned train on the main line at grade above Lac-Megantic had been given federal dispensation to have only a single crew member, and was carrying insurance for just $25 million.

The Montreal, Maine & Atlantic Railway went bankrupt following the crash. The Quebec government says it has spent $200 million to date for 90 per cent of the cleanup and ongoing decontamination effort.

That doesn't cover rebuilding expenses, including infrastructure, which Lac-Megantic's mayor has estimated could reach $2 billion.

A US$200-million legal settlement was announced last month, with more than half the money going to various levels of government.

In the meantime, gaps in the rail safety system continue to be plugged.

"We will be totally satisfied when there will be no more trains going through the city of Lac-Megantic," acting mayor Richard Michaud told The Canadian Press on Friday.

"Then, we will be able to say that we are totally satisfied. Until then, we'll listen, it is always a little step, always an amelioration. We realize that and we're happy about it."