After Lac-Megantic disaster, CP Rail advocates shipper insurance

Thu Apr 3, 2014 2:28pm EDT
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By Randall Palmer

OTTAWA (Reuters) - Governments should require companies shipping crude oil by rail to carry enough liability insurance to make up for shortfalls in coverage carried by railways, the president of Canada's second-largest rail operator said on Thursday.

Currently, there are no requirements in Canada for shippers of oil and other dangerous cargo to carry liability insurance against accidents, Keith Creel, president and chief operating officer of Canadian Pacific Railway Ltd, said after testifying to the House of Commons' transport committee.

The panel was examining the adequacy of Canada's transportation safety regime after a series of North American rail derailments and crashes involving shipments of crude oil, including a horrific accident last July that destroyed the center of Lac-Megantic, Quebec, killing 47 people.

The accident also exhausted the insurance of Montreal, Maine & Atlantic, the small railway responsible, which threw it into bankruptcy protection, leaving federal and provincial governments to cover the rest of the recovery costs.

"I know for a fact there are certain events that could happen that could be so catastrophic that you'd not have enough liability to protect the company," Creel said. "It would be a going-out-of-business issue for the company. We call it a bet-the-company case."

As part of its inquiry, the committee is also looking at the phasing-out of the older version of the DOT-111 tanker cars that were involved in the Lac-Megantic accident. Experts think the process could take years to complete despite the heightened risks presented by rising oil-by-rail shipments.

But Creel told the committee that railroad companies have reached the limits of the amount of liability coverage they are able to buy.

"The only other people that can buy additional insurance would be the shippers of the products. They've not been mandated to do that. It's not a regulatory requirement," Creel said. "It needs to happen. This should be a collaborative effort."   Continued...

An emergency worker stands on the site of the train wreck in Lac Megantic, July 16, 2013. REUTERS/Ryan Remiorz/Pool