Newspaper article The Canadian Press

Railways and Crude Shippers Weigh in on Changes to Liability Rules

Newspaper article The Canadian Press

Railways and Crude Shippers Weigh in on Changes to Liability Rules

Article excerpt

Rail, oil firms weigh in on liability rules

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CALGARY - Railway operators and the petroleum industry have weighed in on how they think the risks of shipping dangerous goods by rail ought to be divvied up -- and it's clear the two aren't on the same page.

Rail carriers aren't happy with the status quo, in which they're legally required to move whatever customers want shipped, but are entirely on the hook if something goes wrong. The energy players, on the other hand, are generally satisfied with how the current system works, although they say changes are needed to how small rail lines are insured.

Transport Canada and the Canadian Transportation Agency, an independent regulator, have been reviewing liability rules in light of last summer's fiery crash in Lac Megantic, Que., which killed 47 people and incinerated much of the town's centre.

In a joint submission, the Canadian Association of Petroleum Producers (CAPP) and Canadian Fuels Association (CFA) say the current framework is "fundamentally sound."

But they say the Lac Megantic tragedy demonstrated that some gaps need to be filled to ensure smaller railways -- like Montreal Maine & Atlantic, the one involved in last summer's disaster -- can cover their costs in the event of a catastrophe.

According to a Transport Canada discussion paper laying out the parameters of its review, small railways usually carry between $5 and $50 million in third-party liability coverage. Larger counterparts like Canadian Pacific and Canadian National normally have coverage of up to $1.5 billion.

The cleanup costs alone in Lac Megantic have been estimated at about $200 million. MM&A, which has gone bankrupt, 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 says.

CAPP and CFA want to see a "hybrid" model that draws from current marine and pipeline liability regimes, both of which Ottawa has beefed up over the past week.

For small players unable to afford the same insurance as their larger counterparts, the petroleum industry is proposing a pooled, or collective approach similar to the marine model.

For large carriers, CAPP and CFA like the status quo, in which railways are responsible for their own insurance, as pipeline operators are.

"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," CAPP and CFA say in their submission to Transport Canada.

But the Railway Association of Canada, writing to the CTA on behalf of local and regional railways, said the rules must change. …

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