After initially being ordered to stop its operations, the Montreal Maine & Atlantic Railway has received an extension to continue operations in Canada for more than a month.

Earlier this week, the Canadian Transportation Agency (CTA) pulled the MM&A's certificate of fitness and said it no longer had the authorization to operate in Canada starting on Aug. 20.

The CTA said the railway didn’t have enough third-party liability insurance, or the funds to pay for the self-insured portion, both of which are requirements to operate in Canada.

Need to know

  • MM&A has until Aug 23. to prove it can afford insurance
  • If the CTA is satisfied, the railway will operate until Oct.1, 2013
  • If the CTA is not satisfied, the railway will immediately suspend operations

However, the agency reversed its decision late Friday after receiving new information from the MM&A that suggests the company is able to cover its insurance responsibilities in the short term, Radio-Canada reports.

As a result, the CTA said it will allow the railway company to continue its operations until Oct. 1, 2013, as long as the MM&A proves by Aug. 23 that it can afford insurance premiums.

"Otherwise its permit will be immediately suspended," the CTA said in a statement.

A total of 47 people were killed in the July 6 blasts after the train carrying crude oil derailed and set off a series of explosions at the centre of Lac-Mégantic.

In light of the Lac-Mégantic disaster and the financial state MM&A found itself in its wake, the Canadian Transportation Agency is launching a consultation and review of insurance coverage requirements for all railways operating under federal regulations.

The rail company was granted creditor protection on Aug. 8 after the company said it couldn't afford the cleanup and reconstruction costs for the town. 

In its bankruptcy filings, the railway's Canadian subsidiary said it only had $25 million in insurance coverage, while estimating the environmental cleanup alone will exceed $200 million. The railway and its Canadian counterpart, Montreal, Maine & Atlantic Canada Co., also cited debts to more than 200 creditors following the disaster.

A company attorney has said he expects executives to explore putting the rail company up for sale within weeks.      

Montreal, Maine & Atlantic also faces a series of class-action lawsuits on behalf of the victims.

With files from the Associated Press