August 17, 2013 / 12:58 AM / 5 years ago

Canada lets Quebec rail disaster company operate through Oct. 1

Aug 16 (Reuters) - Canada will let the rail company whose tanker train blew up in a Quebec town last month, killing 47 people, operate through early October after the firm provided new evidence about its insurance, a government regulator said on Friday.

The July 6 crash was North America’s deadliest rail accident in two decades. It took place when a runaway train hauling tankers of crude oil derailed in the center of the little Quebec town of Lac-Megantic, and exploded in a series of giant fireballs. The town center was flattened and an estimated 1.48 million U.S. gallons (5.6 million liters) of oil were spilled.

The Canadian Transportation Agency said it will now allow Montreal, Maine and Atlantic Railway (MMA) and its Canadian subsidiary to operate through Oct. 1, because the firms had provided evidence of adequate third-party insurance.

That reversed an Aug. 13 order that would have halted the railroad’s operations from early next week. MMA must still show it has the funds to pay the self-insured portion of its operations, or the regulator will suspend its operations from Aug. 23, CTA spokeswoman Jacqueline Bannister said in an email.

MMA, which operates rail lines in Quebec and Maine, filed for bankruptcy protection in Canada and the United States last week. It said in a court filing that its insurance covered liabilities up to C$25 million ($24.2 million), while clean-up costs could exceed C$200 million ($193.6 million).

MMA also faces a series of class-action lawsuits in Quebec and in the United States on behalf of the victims, as well as a notice of claim from a firm that is unable to ship from its Lac-Megantic production facilities.

Lac-Megantic, a town of around 6,000, was developed around the railway and businesses have already expressed concern about the impact if the MMA rail link closes permanently.

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

The Canadian Transportation Agency - an independent government body that oversees railway insurance - is now planning to review the adequacy of third-party liability coverage to deal with catastrophic events, especially for smaller railways.

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