MM&A RAILWAY WOEFULLY UNDERINSURED

BY TOM BELL

Portland Press Herald

The Maine railroad involved in the train disaster in Quebec last month believes the environmental cleanup will cost $200 million. Moreover, the railroad faces lawsuits from the relatives of the 47 people killed in the accident and the owners of the 30 buildings that were destroyed.

The cap on Montreal, Maine & Atlantic Railway’s insurance policy is $25 million.

That’s the amount the railroad listed in court documents that the company’s Canadian subsidiary filed in Quebec Superior Court in Montreal on Wednesday.

The railroad has a second insurance policy, but that appears to cover only the railroad’s mobile equipment, such as locomotives and rail cars.

On July 6 in Lac-Megantic, Quebec, an unattended train hauling 72 tanker cars filled with crude oil rolled down a hill and derailed, setting off explosions in the center of the town.

In Quebec, and particularly in Lac-Megantic, people are furious that the railroad filed bankruptcy and carried such a small amount of insurance.

The town of Lac-Megantic paid nearly $8 million to cover the first few weeks of cleanup costs after work crews threatened to walk off the job because they feared the railroad wouldn’t pay them.

The Quebec government on Thursday registered as a guaranteed creditor in hopes of getting back money it has already spent on clean-up costs.

Federal Transport Minister Lisa Rait said in a statement that the bankruptcy “does not mean that MM&A is off the hook for their responsibilities to the people of Lac-Megantic.”

Canadian rules require operators to carry liability insurance, but those rules do not mandate a specific dollar value coverage limit. A quasi-judicial panel determines on a case-by-case basis whether a railway operator’s third-party liability insurance is adequate, according to Canadian Underwriter, a trade publication.

In the United States, it could not be immediately determined whether railroad operators have requirements for liability insurance coverage.

George Betke, who lives in Damariscotta and owns three short-line railroads, two in Oklahoma and one in New York, said he is unaware of any insurance mandate by the Federal Railroad Administration, which has oversight over the nation’s railroads.

He said the amount of insurance that railroads carry depends on the mix of cargo, terrain, exposure to grade crossings and the speed of the trains.

He said the $25 million plan carried by the Montreal, Maine & Atlantic Railway is about average for short line railroads, which travel at speeds between 10 mph and 20 mph.

He said no railroad operator could anticipate the “kind of perfect storm of bizarre circumstances that has precipitated MMA’s bankruptcy.”

Lindsay Newland Bowker, a retired environmental risk manager who lives in Stonington, said the huge expense of the cleanup in Lac-Magentic indicates that the railroad was vastly underinsured.

She said the accident should serve as a wakeup call for Maine because if a similar accident happened here, Maine would have to pay for the cleanup.

“This could be Old Orchard Beach. This could be Saco. This could be Lincoln,” she said. “This could be us, and it will be us if the state does not get off its dime and use more of its authority.”

Ted Talbot, spokesman for the Maine Department of Transportation, said the state does not know the level of liability coverage that is carried by any of the railroads operating in Maine.

Railroads are the jurisdiction of the federal government, he noted.

“We don’t have any kind of oversight over the rail industry,” he said. “Same with the trucking industry. We don’t know when they are coming. We don’t know where they are going. We don’t know what they are hauling.”

The Maine Department of Environmental Protection does have a designated clean-up fund set aside to pay for the clean-up costs of an oil spill. The fund is paid for by a 3-cent fee imposed on every barrel of petroleum that is transported through the state. However, the fund’s current value is only $2.7 million.

The fund has been cut by 60 percent since 2005 because of a sharp decrease in tariffs collected from companies that ship crude oil and legislators’ decisions to raid the fund.