Crews work in the area of the derailed tanker cars in Lac-Mégantic, Que., on July 14, 2013.PETER POWER/The Globe and Mail
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As work crews continue to remove rubble and spilled oil from downtown Lac-Mégantic, there are growing questions about who will foot the final clean-up bill if Montreal, Maine & Atlantic is unable to pay.
Update: MM&A announced Wednesday it has filed for bankruptcy protection.
The railway company whose train crashed into the small tourist town last month has conceded that it does not have the money to pay for the work itself, and its insurers have not yet stepped in to cover the costs. For now, at least, that has left the municipality of Lac-Mégantic with the task of paying ongoing clean-up bills to ensure the work continues.
While the federal government has committed $60-million to help with reconstruction and aid in the small tourist town, there is no formal program at the federal level to help cover the costs of managing the massive rail disaster.
That's because Ottawa's primary disaster relief funding tool, the Disaster Financial Assistance Arrangements, is only designed to cover natural disasters. Under the terms of the program, provinces can be reimbursed for up to 90 per cent of eligible expenses, depending on how much they spend. Though it could take years for payments to be made, Alberta should eventually be reimbursed for a significant portion of its spending on dealing with the flooding that took place in that province earlier this year.
Conversely, Quebec will have to rely on ad-hoc federal funding – and on the companies connected to the fatal derailment – to help cover the cost of managing the disaster in Lac-Mégantic. Both the province and the federal government have committed $60-million to help manage the disaster so far.
A spokeswoman for the federal public safety department said $25-million worth of the federal funding package is targeted to immediate response and recovery needs, including rescue and evacuation costs, short-term security measures and the removal of hazardous material and damaged structures.
The Quebec government has insisted that taxpayers will not be forced to pay for the clean-up in the long term and issued an order last week demanding that the U.S.-based railway and the two companies that owned the fuel pay for the work immediately.
But Montreal, Maine & Atlantic chairman Ed Burkhardt told The Globe and Mail that the company does not have the cash to cover the clean-up bills itself, and Miami-based World Fuel Services Corp., whose subsidiary owned the oil the train was carrying, has disputed the provincial government order.
MD-UN, the co-ordinating company responsible for the on-site work, has so far billed MM&A for about $8-million – a cost that is widely expected to balloon before the work has been completed. When the company did not pay, Lac-Mégantic covered the costs.
MM&A has pointed the finger at its insurers, suggesting they are responsible for the delay in payments. But a recent earnings call by XL Group PLC, the only company that has publicly acknowledged that it provides insurance to MM&A, indicated that many shortline railway companies are only insured up to about $32-million – an amount that, if provided, may not be adequate to cover the long-term clean-up requirements.
Kim Mackrael is a parliamentary reporter in Ottawa. She wrote this from Lac-Mégantic, Que.