Oil train insurance minimums in question
By Donna Mahoney Business Insurance 7/28/15
A little
more than two years have passed since an unattended runaway train from
the now-bankrupt Montreal, Maine & Atlantic Railway Co. derailed and
crashed, spilling oil that caught fire in Lac-Mégantic, Quebec, and
killing 47 people.
Within
the past two years over a dozen trains transporting crude oil have
derailed in North America. And while there are still no U.S. regulations
regarding minimum insurance coverages for these trains, Canada's
government in July approved the Safe and Accountable Rail Act, which
consists of a new liability and compensation program requiring the rail
industry and crude oil shippers pay for minimum levels of insurance
ranging from $25 million to $1 billion.
The
regulation also requires a supplementary shipper-financed fund that
provides compensation to victims and funds for environmental cleanup for
railway accidents involving crude oil that exceed the amount of
insurance held by the railway.
Railway safety experts say this amount of insurance is insufficient for the damage some spills could cause.
“The
railroads can get up to $1.5 billion in insurance, but that is not
enough,” said Fred Millar, and Arlington, Virginia-based oil and energy
safety consultant. The cost of the Lac-Mégantic disaster is already
estimated at $1.5 billion, according to reports.
Every
week, 49 trains with over 1 million gallons of crude oil pass through
Chicago. In Albany, New York, it's 44 trains and in Cleveland, 55,
according to U.S. crude oil shipment reports released in March.
One
of the concerns of a crude oil train derailment is the risk of the oil
catching on fire, especially in a highly populated area, Mr. Millar
said. “Most citizens have no idea of the risk imposed on them or that
railroads do not carry the amount of insurance necessary to cover a
catastrophe in a highly populated area,” he said.
The
U.S. Department of Transportation reminded railways on July 22 to obey
last year's order “to report the weekly frequency of shipments of 1
million gallons or more of Bakken crude, the routes they use and the
counties through which they pass.” Illinois, New York and Ohio have said
have not received a report from one of the railways in over a year,
according to news reports.
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