Who’s liable for the Lac-Mégantic disaster?

Who’s liable for the Lac-Mégantic disaster?

Source: http://www.montrealgazette.com, September 9, 2013
By: Adam Kovac and Riley Sparks

It came from the Bakken shale fields of North Dakota destined for the Irving refinery in Saint John, N.B., but the trainload full of light crude oil that crashed and exploded in Lac-Mégantic on July 6 changed hands many times along its circuitous route.

Now the chain of possession of the incendiary oil is becoming a central issue as liability is assessed and apportioned in the wake of the devastating derailment.

As the investigations proceed beyond the physical search for clues, the first litigation is getting under way.

A lawsuit filed in the U.S. on behalf of residents of the town names a railway company and several corporations involved in the oil industry. A separate effort to mount a class-action lawsuit by two Lac-Mégantic residents filed in Sherbrooke excludes those oil companies, but includes the refinery in New Brunswick that would have received the oil. Many of these entities have refused to comment, citing the litigation that already exists, and the further lawsuits that may follow.

The courts will likely take years to determine who is at fault, a process that was complicated last week when Montreal, Maine & Atlantic entered bankruptcy protection.

An examination of the route that the ill-fated train travelled shows figuring out who is responsible for what is a complex question, involving tanker cars, chemical compositions of oil, contracts and subcontracts and a town that worries about the environmental damage to its soil and water, even as they bury their dead.

World Fuel/Western Petroleum/Dakota Plains

On July 29, as costs relating to the environmental cleanup of Lac-Mégantic ballooned to $4 million — a figure that was later adjusted to $7.7 million — Quebec’s Environment Minister Yves-François Blanchet assured taxpayers they would not be footing the bill. He issued an order that three companies would have to pay. One of them was the railroad, Montreal, Maine & Atlantic, who had owned the ill-fated train. The others, World Fuel Services and its subsidiary, Western Petroleum Company, are companies that perform various services related to the oil industry, including transportation logistics.

Under the Quebec Environment Quality Act, the owners of hazardous materials are liable for cleanup costs in the event of a spill. According to McGill University law professor Richard Janda, though World Fuel has denied any responsibility for the derailment, they are still liable for environmental cleanup, even if that is the case.

“The basis upon which the responsibility for cleanup costs is being attributed to them is that they are owners and that’s the beginning and end of it,” he said. “It doesn’t matter how what you own got there, the fact that you own it is enough to make you responsible for cleanup costs.”

The Environment Quality Act does not cover things like loss of life or suffering, which is expected to be the source of large punitive damages should any lawsuits succeed. World Fuel, along with several corporate partners, was sued along with MMA and its parent company Rail World in Illinois by several Lac-Mégantic families on Aug. 2.
“That would be invoking the civil code, which would be a long-shot,” said Laval University professor Daniel Gardner, an expert on liability law. “Under the usual court rules, of course, it would be MMA, who was the transporter and completely independent of the oil, who would be responsible.”

However, in a quarterly financial statement issued on July 31, World Fuel ceded it was the company responsible for the use of the DOT-111A tanker cars, having leased from a “third-party supplier.” The DOT-111A model has come under fire for its propensity to leak after derailments. In October 2011, a ruling by the North American Tank Car Committee stated future cars would need to be made with greater safety precautions built in, but those adjustments were not made retroactive. About half of the 240,000 DOT-111 cars still on tracks do not have the upgraded safety features.

According to Janda, the failure to take into account the potential danger posed by outdated tanker cars could imply liability on World Fuel’s part.

“If you know you have something that is particularly prone to explosion … and if they weren’t taking adequate precautions in the way they transported what they owned, they have a part of responsibility, it seems to me,” he said.

However, Gardner pointed out this tanker model was permitted under federal law.

“Where is the fault when you follow the law?” he said. “That’s what’s difficult, even though they followed the federal regulations, it’s not to say they won’t be held to account.”

Questions still remain about what exactly was in the tankers. While most accounts have listed it as light crude from the Bakken oilfields of North Dakota, both MMA chairperson Ed Burkhardt and the Transportation Safety Board of Canada have cast doubt on this classification. The Transportation Safety Board has said the characteristics of the fire and explosion were “abnormal.” If tests prove the oil aboard was more prone to fire or explosion than what would normally be expected by the companies transporting them, World Fuel could be held responsible for not taking further precautions.

“If there is something about the composition of the oil, something about the mix, if you will, of that oil, particularly if it had anything to do with stabilizing the oil for transport purposes, you might be able to find some contribution on the part of the fuel companies to the overall loss here,” Janda said.

World Fuel has denied any responsibility for the derailment. In the quarterly statement, the company referred to the provincial order to pay for environmental cleanup, stating: “We have submitted an initial response to this order raising numerous objections to the order.”

In that same financial report, World Fuel said it is expecting further legal action, and anticipates if held liable, there is “no assurance that our insurance will be adequate to cover any liabilities that may be incurred as a result of this incident.”

World Fuel did not respond to repeated requests for comment for this article.

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