Rail operators and crude shippers continue to debate changes to liability rules for transporting volatile crude goods.
Transport Canada and the independent regulator, Canadian Transportation Agency, have been reviewing current liability rules, which a number of transport groups have recommended should be changed.
In 2013, an oil train exploded in Lac Megantic, Quebec, resulting in 47 deaths and serious damage to much of the town center.
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The Canadian Association of Petroleum Producers (CAPP) and Canadian Fuels Association (CFA) made a joint statement following the incident, saying that although the current liability framework is "fundamentally sound," the tragic accident demonstrated that small rail companies involved in such catastrophes are at a disadvantage due to their limited coverage.
Transport Canada has been reviewing rail liability rules since the tragic incident. It has published a paper in which it noted small railways usually carry between $5 and $50 million in third-party liability coverage, while their larger counterparts typically have coverage of up to $1.5 billion.
The Canadian Press reported the resulting cleanup costs in Lac-Megantic alone have been pegged at about $200 million. Montreal Maine and Atlantic Railway (MM&A), the currently-bankrupt rail company that operated the tank cars that exploded in the incident, only had insurance coverage of just $25 million.
"The scope of the rail disaster in Lac-Megantic and the amount of liability insurance carried by Montreal, Maine and Atlantic Railway have highlighted weaknesses in the current liability and compensation regime," Transport Canada said in its paper.
Both CAPP and CFA want current liability rules to take cues from the “hybrid” models the marine and pipeline regimes employ. The groups also want railways to stay responsible for their own insurance.
"Preferably, railways should be given the right to decline carrying dangerous goods," the Railway Association of Canada recommended in a letter to the CTA. "Alternatively, railways should not be the only party held responsible for the movement of dangerous goods in Canada. This responsibility should be shared by producers and carriers."
On the other hand, the petroleum industry is proposing a pooled or collective approach similar to the marine model, which could provide adequate coverage to even the smallest of rail operators.
"The petroleum industry is of the view that the rail liability and compensation regime should be guided by key principles that are already in place such as 'polluter pays' and railway accountability," a joint submission by the CAPP and CFA to Transport Canada read.
Canadian Pacific Railway (CP) also submitted its recommendation to the CTA, asking for the federal government to require shippers to have "appropriate insurance coverage".
"Catastrophic incidents can arise without fault or negligence on the part of the railway and there is no accountability in the existing Railway Third Party Liability Insurance Regulations for those who create, own, and put high risk products into the supply chain," the rail company said in its submission. CP also identified the "common carrier obligation" as something that restricts the company’s ability to manage risk.
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