Railway in Lac-Mégantic disaster may get operating extension in Canada

After initially being ordered to stop its operations, the Montreal Maine and Atlantic Railway has received an extension to continue operating in Canada for more than a month, provided the company can prove it can afford insurance premiums.

Company involved in Lac-Mégantic rail disaster must prove it can afford insurance premiums

The Canadian Transportation Agency says it may allow the MM&A to continue operations in Canada until Oct. 1, 2013. (CBC)

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