Railway in Quebec disaster allowed to operate till Oct 1

TORONTO (REUTERS) - The rail company whose oil tanker train blew up in a Quebec town last month, killing 47 people, will be allowed to continue operating through Oct 1, 2013, after providing insurance documentation demanded by Canadian authorities.

The Canadian Transportation Agency (CTA) said on Friday it would let Montreal, Maine and Atlantic Railway (MMA) and its Canadian subsidiary keep trains moving for now. Earlier this month it had ordered MMA to cease operations, saying the railway lacked adequate insurance.

On July 6, a runaway MMA train hauling tankers of crude oil derailed in the center of the little Quebec town of Lac-Megantic, and exploded in giant fireballs in what was North America's deadliest rail accident in two decades.

The centre of Lac-Megantic was flattened and an estimated 1.5 million 5.6 million litres of oil were spilled.

The CTA ordered the railway on Aug 13 to halt operations as of Aug 20 because it did not have adequate insurance. The insurance that MMA had in force in July will not come close to meeting the costs of cleanup and restoration after the Lac-Megantic crash.

Last Friday, the CTA reversed that order, allowing MMA to operate through Oct 1 after the railway provided evidence of adequate third-party insurance. However, MMA still had to show by Aug 23 it had sufficient funds to cover the C$250,000 ($305,000) self-insured portion of its operations, or it would be shut down.

The CTA said on Friday that MMA had done that.

MMA, which operates rail lines in Quebec and Maine, filed for bankruptcy protection in Canada and the United States (US) earlier this month. It said in a court filing that its insurance covered liabilities up to C$25 million, while clean-up costs after the crash could exceed C$200 million.

MMA also faces a series of class-action lawsuits in Quebec and in the United States on behalf of the victims, as well as a notice of claim from a company that is unable to ship from its Lac-Megantic production facilities.

Lac-Megantic, a town of around 6,000, was developed around the railway and businesses have already expressed concern about the impact if the MMA rail link closes permanently.

Under Canadian federal regulations, there is no set minimum or maximum amount of insurance coverage required for railway operators. Coverage is based on a risk assessment carried out by the insurance company and the railway company.

The CTA - an independent government regulator - is now planning to review the adequacy of third-party liability coverage to deal with catastrophic events, especially for smaller railways.

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