Off the rails
MM&A loses licence after Lac-mégantic tragedy,
MONTREAL— The bills for deadly LacMégantic train explosion continue to mount, but the cash-strapped rail company responsible for cleanup costs and compensation has lost its primary means of raising money. Montreal, Maine & Atlantic Railway learned Tuesday morning that it had been stripped of its licence to operate in Canada and must cease all operations by Aug. 20 after a monthlong review by the Canadian Transportation Agency determined the company is no longer able to acquire enough insurance to run its trains. The decision is the latest blow to a battered American rail carrier that has been villainized in the wake of a July 6 derailment and explosion that killed an estimated 47 people and razed a large section of downtown Lac-Mégantic, Que. With an estimated cleanup cost of more than $200 million, numerous lawsuits being filed on behalf of victims families, homeowners and affected businesses, MM&A filed for bankruptcy protection last week in both Canadian and U.S. Courts saying the potential costs of the accident far exceed the almost $18 million it has in assets and a $25-million insurance policy. In court documents, the company said it was seeking protection from at least seven potential creditors and proposed a plan that would have seen “the partial and temporary resumption of services to customers” in order to continue making money and pay its bills and potential lawsuit judgments. No one from MM&A responded Tuesday to an interview request and a representative of the firm appointed by the court to oversee the rail company’s creditor repayment was similarly unavailable. The transportation agency’s decision to revoke MM&A’s certificate of fitness, though based narrowly on the company’s inability to acquire sufficient insurance, will have widespread effects.
Agency chief executive Geoff Hare acknowledged in a statement that it would affect many companies who rely on train service to bring in raw materials or send finished products to market, as well as the remaining Canadian employees of the rail company who have not yet been laid off but who will most certainly be looking for work in the coming days.
What it will not affect is the classaction suit filed on behalf of those who lost family, businesses and income in the accident, said Montreal lawyer Jeff Orenstein.
“This is exactly what we expected,” he said.
It is also the reason behind a decision to name other firms as defendants in the suit, including MM&A’s parent company, Rail World, Dakota Plains Holdings, which extracted the oil, and Irving Oil, which was set to refine the light crude that was contained in the tanker cars.
“These companies do have resources. They haven’t filed for creditor protection,” Orenstein said.
Tuesday’s news came as no great shock either in Lac-Mégantic, which along with the Quebec government has already had to pay out millions for the company’s cleanup bills since the outset of the disaster.
“This news was foreseeable, so there’s no surprise,” said Nicolas Carette, a spokesman for Mayor Colette Roy-Laroche. “But we are conscious of the need to have a rail network that is efficient and safe to service our industries and we hope a solution will be found quickly.”
One of the most affected companies is Tafisa Canada, which produces particle board for Ikea products and is the town’s largest employer. Thirty per cent of its goods are dependent on rail service and the company has had to set up a more expensive trucking network to get its goods to functioning rail lines and then on to markets in western Canada and the U.S., said president Louis Brassard.
The transportation agency’s decision was the result of a review of MM&A’s financial statements going back to 2009.