Canada Senate Urges Minimum Insurance Levels for Railways

By David Ljunggren | August 24, 2013

Canada should force railways to take out enough insurance to ensure they can cover damage caused by major incidents, the Canadian Senate said on Thursday in a report issued after last month’s train disaster in Quebec, which killed 47 people.

The recommendation was one of 13 in a report by the Senate’s energy, environment and natural resources committee on transporting oil and gas by pipeline, rail and tanker. The Senate is Canada’s unelected upper house of Parliament.

A train operated by Montreal, Maine and Atlantic Railway (MMA) derailed and blew up in the Quebec town of Lac-Megantic on July 6, killing 47 and destroying the town’s downtown.

Canada moved to shut down MMA last week, saying it did not have enough insurance to pay for the cleanup costs. But it has since said it will let the railway operate through early October.

The report said the federal transport ministry should “apply appropriate minimum liability coverage thresholds” to ensure rail companies can cover damage caused by a major incident.

MMA, which has filed for bankruptcy, said it has third party liability insurance of C$25 million ($23.8 million). It says the Lac-Megantic cleanup operation could cost more than C$200 million.

Under federal regulations in Canada, there is no set minimum or maximum amount of insurance coverage required for rail operators. Coverage is based on a risk assessment carried out by the insurance company and the railway.

“If they can’t afford to actually have the correct amount of liability then they shouldn’t probably be in the business,” committee Chairman Richard Neufeld told a news conference.

A spokeswoman for federal Transport Minister Lisa Raitt said Raitt needs time to look at the report and consider its recommendations.

The Senate, which started work on its report well before the fatal crash, also called on the transport ministry to work with the U.S. Department of Transportation to review the use of DOT-111 oil tanker cars, which were involved in the Lac-Megantic disaster.

The cars are known to be vulnerable to leaks and deadly blasts.

Canada is the largest single exporter of energy to the United States and shipments of oil by train in Canada have soared in the last two years as energy companies turn to rail to help overcome a lack of sufficient pipeline capacity.

The Senate committee called on the government to launch a review of railway regulations, standards and industry practices.

Critics, pointing to the Quebec disaster and a series of recent pipeline spills in Canada and the United States, complain that neither rail nor pipelines are reliable enough. They also say pipeline companies do not always reveal quickly that a spill has occurred.

The committee urged the creation of a website with “detailed information on spills and incidents for pipelines, tankers and rail cars, such as the types of product released and, as soon as possible, the cause of the incident”.

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