Taxpayers on the hook for Lac Mégantic damage: expect the same for pipelines, says economist
Economist and former ICBC CEO Robyn Allan says the situation of Lac-Mégantic, in which the rail company responsible for the crash was unable to pay for damage costs, is sadly all too common.
Montreal, Maine & Atlantic lost its license to operate in Canada on Tuesday after the Lac-Mégantic, Québec explosion that killed 47 people and left the Canadian government to pay $60 million since the rail company itself didn't have enough to pay.
While Democratic Rep. Mike Michaud (who is running for governor in Maine) told Railway Age that he finds Canada's decision "concerning" for the future of his state's businesses, it opened up many questions around oil transportation and liability in the event of a disaster.
In total, the damage caused by the Lac-Mégantic crude train explosion is expected to cost a minimum of $200 million. MM&A's Canadian subsidiary had nowhere even close to that amount: it carries $25 million in insurance, and just $18 million in assets. By default, the federal government, Quebec's provincial government (and now, possibly Canadian Pacific Railway) are left to cover whatever MM&A can't afford.
Public "left on the hook"
It was a major breakthrough, as such a condition was never required before -- companies tended to have the same kind of umbrella insurance policies for pipelines. So if Enbridge were to have a leak in both Northern Gateway and 9B, and the company's insurance couldn't cover both, then it would have been unclear which pipeline Enbridge would pay for damages.
"Clearly, the NEB sees now that Northern Gateway would have to have its own protection," Allan said. She noted that Canadians should be examining not just Enbridge, but every energy company's liability structure, to see whether the public is adequately protected.
As for a pipeline expansion like Kinder Morgan's Trans Mountain, Vancouver is pushing for liability to be expanded beyond the current maximum of $1.3 billion for marine spills. Even though $1 billion has become something of a benchmark for insurance, larger incidents such as the BP spill can reach $20 billion just for direct cleanup. Allan's study submitted to the Tanker Safety Expert Panel proposes that under the current regime, the funds available for major spills have proven "woefully insufficient".