Train - hazardous cargo "accident"

[crazyal]

Right, but most cars arent hauling thousands of gallons of flammable crude! There is an order of magnitude difference in what can happen in a car accident vs a train accident.

Whats the worst case scenario for a car accident? Hitting a truck carrying a trailer of propane? Even if it burst into flames and exploded the toll would be much less than the QC disaster.

If anything trains need higher coverage than regular commercial carriers due to the volume of materials that can be involved in a single incident. Im thinking "oil tanker" levels, although IIRC they arent even that high, although I think new legislation has addressed some of that.

Now there is talk that much of the area is so contaminated with hydrocarbons that it may be uninhabitable, talk about insult to injury, its the centre of town!

These companies are driving right though these insurance and regulation loopholes. Being able to declare bankruptcy and walk away from this sticking Canadians and the local community with the bill is criminal. Plus nothing is stopping them from starting up a new subsidiary to run this very same route in the future free from all the liabilities of this disaster.

The system is broken. Where is all this supposed director's liability that these new enviromental/workers comp rules were supposed to create to make management responsible when stuff like this happens?

But a car could easily derail a train hauling crude oil. Until Lac Megantic the thought process was that crude oil doesn't explode. Right now the investigators are trying to figure out what might be different about that crude, if there were any other chemicals mixed in (used for hydrofracking), or if there was a rail car with something other than crude in it. So knowing that crude oil doesn't explode why would you have insurance that would cover the cost of an explosion that would level a town.

Right now the laywers are trying desperately to find someone with deep pockets to sue. With MM&A filing for bankruptcy it's going to make filing in Chicago very hard. I suspect that World Fuel Services will be at the top of the list because they are in Florida yet all they did is the logistics of connecting getting the oil from one location to another, CN was hired to haul the crude to MM&A then MM&A to Irving. Since CN is HQ in Montreal and is owned by the government I'm sure they will be hard to get into a US court. Irving oil I'm sure will get dragged in but they didn't own the oil, the oil was being sent to them to be refined but it wasn't owned by them. They are also a Canadian based company. It's going to be hard to convince a US court that the suit belongs in the US now that MAR is going under.

 

[crazyal]

This isn't 1850, or even 1950. The science, data, and supercomputers are available to assess risk. Any quant on Wall Street is more than capable of running the numbers. I suspect that MMA was not even adequately covered to deal with the clean up of a mid-sized oil spill, let alone causing fatalities. The dreamer in me would like to see these modern day data resources used for something other than helping a .1%'er move more billions off-shore.

Agreed, insurance is about odds. Supercat(astrophe) coverage is out there, that's where Berkshire used to (maybe still does) play quite a bit. To answer your first question - apparently nobody. I don't know the acual #'s, but I'm willing to bet a good chunk of money that an actuary would tell me that the odds of having a major accident by ramping up a huge amount of oil shipments, on rickety tracks, with old equipment are way higher than me picking off a Veyron, or a gas station.

I hadn't read where the rail cars where filled, but could be, as Bakken extends north of the 49'th. I'm sure you remember the last round of US bank bailouts. I see some similarities..... an industry that has convinced the govt "Keep your hands off us, we'll self regulate, we know what we are doing"..... then when the brown stuff hits the fan, that position falls apart pretty quickly. Part of the charade I refer to.

Unfortunately, in this game of optimizing profit while minimiziing expenses, many people died.

I believe people and corporations (apparently the same thing, legally, at least when it's convenient) should be responsible for their actions, or lack thereof.

Companies either need to carry adequate insurance, or post bonds to the equivalent amount. Ante up, or don't play.

The trial needs to take place wherever the plaintiffs will receive the maximum settlement. The direct immediate reason is they deserve at least that, for the lives lost. The broader reason is that corporations won't really pay any attention to these issues until the cost of ignoring safety/maintenance/adequate staffing is exceeded by the court awards.

Rgds, D.

Dakota holdings is the company that extracted the oil. I've heard that Dakota Holdings is owned by World Fuels but I've also heard that the two companies just own a joint venture in a filling depot in North dakota where the cars were filled. Dakota is saying that they just own the land the depot is on while their company statement makes it sound like they are more involved. I also read that the oil was filled in a depot in Canada (don't remember were though). It's not clear who actually leased the rail cars or transported them. I have seen statements from World fuels saying that CN handled it but I have also seen reports that CP shipped it to MM&A. I have seen lots of reports that World Fuels leased the rail cars but I have also read that World Fuels just acts as a middle man, they do the logistics of getting everyone needed together to get the oil to the refinery. They say they take a cut but don't actually own the oil. I have seen it reported that some of the leased rail cars were made before the updated standards while others were made after. I have seen reports saying that leases for rail cars usually last 3 to 5 years and the newer standards used when building these rail cars were only started in late 2011/ early 2012 and their use in shipping crude was optional. Since there are so many of the older standard cars being used today it's most likely most involved were the older design.

Some people are reporting that Bakken crude has a high amount of Hydrogen Sulfide yet other reports question this. I have heard that there could have been chemicals used in the fracking process that could have caused an explosion yet this seams unlikely as it's unlikely that any company would use anything that could explode under pressure to open up cracks in rocks. I have heard that a propane tank was the initial source of the explosion. It's been reported that it could have been a transport truck or a stationary tank.

The industry points to several large derailments of crude oil that didn't explode or even catch fire. In fact before Lac Megantic the biggest fear from transporting crude by rail was the impact of a spill, both to the environment and humans. The insurance requirements were based on these accidents, not one that very few people could have foreseen. Since we still don't know the exact cause it's hard to say what any new insurance requirement should be. The updated rail car design came about to prevent spills, not prevent fires or explosions. In fact the design is now in question as these cars become pressure vessels when heated. Once the pressure reaches a point the container bursts and turns the crude into a vapor. That's was the source of the secondary explosions. All flammable storage cabinets are designed not to allow pressure to build up.

 

[3930dave]

Thanks for the detailed data Al.

Given the amount of oil being (still) shipped, it's sad to see what is still TBD re. the oil composition. Makes me wonder about their process controls.

Good to see that this "self-regulating" industry is "on top" of what is going on.

And.... let me guess, Bakken shipments are still rolling as we speak.....

Standard corporate bureaucratic obfuscation.... nobody's responsible, nor remembers anything.... a shopping mall collapse in Northern Ontario being another recent example of this behaviour.

Your recent posts can be viewed as a detailed case for using pipelines. They can leak, but are easier to monitor than rail cars, and I haven't heard of one rolling away.

Rgds, D.

 

[Scooby074]

Looks like Irving will likely make a play for at least some of MMA's assets

J.D. Irving eyeing railway involved in Lac-Mégantic crash - Business - CBC News

Business as usual

 

[sparc]

Right, but most cars arent hauling thousands of gallons of flammable crude! There is an order of magnitude difference in what can happen in a car accident vs a train accident.

In actuality many of them carry materials that are worse than crude. Ethylene being one which is moved through towns every day and most never know it.

 

[Scooby074]

In actuality many of them carry materials that are worse than crude. Ethylene being one which is moved through towns every day and most never know it.

Or chlorine.

Or Sulfuric acid.

Or cyanide.

Lots of dangerous commodities travel by rail in bulk..

Point is safety shouldn't be taken for granted and insurance MUST be suitable for the worst case scenario for the cargoes involved. Its come out that MMA only had $25 million in insurance! Thats should not even be in the ballpark for a company regularly handling hazardous goods. And they were allowed to run with that amount:confused2:! A mere spill and cleanup without an explosion and fire like what happened could eat up $25million without much effort.

 

[kiotiken]

Or chlorine.

Or Sulfuric acid.

Or cyanide.

Lots of dangerous commodities travel by rail in bulk..

Point is safety shouldn't be taken for granted and insurance MUST be suitable for the worst case scenario for the cargoes involved. Its come out that MMA only had $25 million in insurance! Thats should not even be in the ballpark for a company regularly handling hazardous goods. And they were allowed to run with that amount:confused2:! A mere spill and cleanup without an explosion and fire like what happened could eat up $25million without much effort.

What IS the right amount of insurance? Before this, the worst most people would have imagined happening to train loaded with crude oil is a major spill. I'm not saying $25 million is enough, but without the benefit of hindsight, should they have had $50 million, $100 million etc? The reality is, $1 billion wouldn't be enough to cover all claims in this accident, and a few months ago, nobody would have thought that was a reasonable level to have to carry.

 

[3930dave]

What IS the right amount of insurance? Before this, the worst most people would have imagined happening to train loaded with crude oil is a major spill. I'm not saying $25 million is enough, but without the benefit of hindsight, should they have had $50 million, $100 million etc? The reality is, $1 billion wouldn't be enough to cover all claims in this accident, and a few months ago, nobody would have thought that was a reasonable level to have to carry.

Nobody is saying that actuarial science is easy.

That said, if you've ever talked with anybody familiar with environmental cleanup activities, it is readily apparent that the coverage was ridiculously low.

But that is just a symptom of the real problem.

In this CorporateGovernment game of Self-Regulation, effectively, there is no accountability. Obviously government "oversight" is just window dressing. Ex. - The report on the train that ran away not long before Megantic contained "Recommendations", that likely never even got read.

If MMA is allowed to blow away, and no executives are held accountable (Jail time + major financial losses), what's to stop Burkhard (sp?) or another similar weasel CEO from playing exactly the same game next time ?

Inadequate insurance is just the tip of the iceberg, in terms of what is wrong here.

BTW Ken, do you have any connection to this case, privately or in a government capacity ?

Rgds, D.

 

[Cub 7274]

The problem is they are a Shortline RR carrying cargo for the big RR's on track they dont want to maintain.
If this would have been CN or CSX or NS they would have moved in cleaned up,paid up and moved on but this Shortline got caught in the worst scenario and now are done and its affecting a lot of industry and a lot of people

 

[kiotiken]

Nobody is saying that actuarial science is easy.

That said, if you've ever talked with anybody familiar with environmental cleanup activities, it is readily apparent that the coverage was ridiculously low.

But that is just a symptom of the real problem.

In this CorporateGovernment game of Self-Regulation, effectively, there is no accountability. Obviously government "oversight" is just window dressing. Ex. - The report on the train that ran away not long before Megantic contained "Recommendations", that likely never even got read.

If MMA is allowed to blow away, and no executives are held accountable (Jail time + major financial losses), what's to stop Burkhard (sp?) or another similar weasel CEO from playing exactly the same game next time ?

Inadequate insurance is just the tip of the iceberg, in terms of what is wrong here.

BTW Ken, do you have any connection to this case, privately or in a government capacity ?

Rgds, D.

LOL, nope, I sit is a little cubical writing computer code all day long, no connection to any railway except as an investor in one of the other big ones. I think the entire thing is tragic and I think things need to change for the entire industry given what happened, but if you look to the time before this case, with respect to insurance, how much was realistic for the railway to carry? The worst case that anybody would have considered is a spill of the entire cargo in a sensitive or populated area, possibly involving a few deaths. Was $25 million enough for that, probably not, but should they have had to carry 5 billion in case a train exploded in downtown Toronto? (OK, I know they don't run trains there, but other companies do)

People should be held accountable for regulations that were not followed and corners that were cut. Regulations will change as a result and new safety measures will be put into place. The industry will become safer as a result of this accident, just as the airline industry becomes safer with every incident. It's a terrible tragedy, I hope everybody is safer as a result, that's the very least that can come out of this. But with respect to INSURANCE, I don't think any company would be adequately covered for this incident and I don't think you could ever expect them to carry that amount of insurance.

 

[3930dave]

LOL, nope, I sit is a little cubical writing computer code all day long, no connection to any railway except as an investor in one of the other big ones. I think the entire thing is tragic and I think things need to change for the entire industry given what happened, but if you look to the time before this case, with respect to insurance, how much was realistic for the railway to carry? The worst case that anybody would have considered is a spill of the entire cargo in a sensitive or populated area, possibly involving a few deaths. Was $25 million enough for that, probably not, but should they have had to carry 5 billion in case a train exploded in downtown Toronto? (OK, I know they don't run trains there, but other companies do)

People should be held accountable for regulations that were not followed and corners that were cut. Regulations will change as a result and new safety measures will be put into place. The industry will become safer as a result of this accident, just as the airline industry becomes safer with every incident. It's a terrible tragedy, I hope everybody is safer as a result, that's the very least that can come out of this. But with respect to INSURANCE, I don't think any company would be adequately covered for this incident and I don't think you could ever expect them to carry that amount of insurance.

Just checking Ken. Given how little non-government employment there is in Ottawa, you could have been in one of the transport departments.

"Tiresome" isn't the right word, but I'll stick with that to be polite. Companies are allowed to profit as they see fit, and when the brown stuff hits the fan, taxpayers are stuck paying. A big factor in CorporateGovernment is making your problem somebody elses. Why aren't the major rail lines running this short line ? - it doesn't hit their profit metrics. So our government allows a 3'rd rate company to run it, with attendant consequences.

As I've stated earlier, our federal transport departments either need to get in the game, and actually REGULATE and POLICE this industry, or they should be disbanded entirely.

Writing code, you may not have to carry professional insurance personally. Check with any consulting engineer, and they'll tell you (scaled from what they individually have to carry) that $25 MM was a farce.

To be clear, I respect that you hold a differing opinion, my issue is not with you personally.

Disgusted is not an adequate word to describe how I feel that this was ALLOWED to happen, solely in the name of profit.

Rgds, D.

 

[kiotiken]

Just checking Ken. Given how little non-government employment there is in Ottawa, you could have been in one of the transport departments.

"Tiresome" isn't the right word, but I'll stick with that to be polite. Companies are allowed to profit as they see fit, and when the brown stuff hits the fan, taxpayers are stuck paying. A big factor in CorporateGovernment is making your problem somebody elses. Why aren't the major rail lines running this short line ? - it doesn't hit their profit metrics. So our government allows a 3'rd rate company to run it, with attendant consequences.

As I've stated earlier, our federal transport departments either need to get in the game, and actually REGULATE and POLICE this industry, or they should be disbanded entirely.

Writing code, you may not have to carry professional insurance personally. Check with any consulting engineer, and they'll tell you (scaled from what they individually have to carry) that $25 MM was a farce.

To be clear, I respect that you hold a differing opinion, my issue is not with you personally.

Disgusted is not an adequate word to describe how I feel that this was ALLOWED to happen, solely in the name of profit.

Rgds, D.

Dave,
Ottawa is also know as Silicone Valley north, and although the glory days are behind us, there is still a lot of innovation and employment in the high tech sector here, not to mention many other industries. I'll give you there's a fair bit of govt. work as well.

I disagree that the govt. should mandate that one of the other large railways should be forced to run a undesirable line. I think the government is only there to provide adequate regulations and a level playing field for as many companies as possible and create as much competition as possible. If regulations are met and consistent for all players, I don't see an issue with one company subing work out to another.

As an independent consultant, I have had to carry errors & omissions insurance, but not in my current engagement, so I no longer do. At the time, it was about $2000 / yr, a cost that I immediately and directly passed on to my client by raising my per diem rate. I was covered for a million or two (it was a few years ago and I don't remember anymore), but the amount was dictated by my client. Had I made a mistake that caused my client damages, the damages would have been 1) far lower than the amount of my coverage (the most likely) or 2) Many, many, many multiples of the amount of coverage I held (highly unlikely and unimaginable, but technically possible as I deal with highly classified and confidential information). The point is, you need to carry an adequate level of insurance for all conceivable situations, but the fact is, you can never have enough for ALL situations. None of the larger railways would have enough coverage for this accident and I disagree, they wouldn't be able to just pay and keep going, business as usual.

 

[3930dave]

Ken, respectfully, I think your concept of "adequate regulation" and mine are a little different.

The point that you don't seem to understand, or at least acknowledge, is that the "regulations" don't exist.

I've requoted below some of what I posted in #131. If all that happens is "suggestions" are made, with zero consequences levied for non-compliance, this facade is nothing more than window dressing.

Human nature 101. If all that happened is that police could "suggest" that you obey the speed limit when driving your car, how many poeple would ?

Rgds, D.


MONTREAL - A report into a runaway train incident, similar to what happened in Lac-Megantic, Que., warned of unclear rules governing train braking on steep grades along Canadian freight lines.

The Transportation Safety Board (TSB) report was issued seven months before a crude-oil train barrelled down a slope and exploded in Lac-Megantic, killing 50 people and flattening the centre of town.

Eighteen months earlier, in December 2011, an iron ore train had gone out of control on a slope in Doree, Que., near the Labrador border.

The 112-car freight train reached speeds of 101 km/h, coming to rest only when the track levelled out.

The TSB blamed faulty air brakes and suggested a minimum number of brakes that should be applied on each car to secure a train parked on steep inclines.

Without specific instructions that take into consideration local conditions, there is a risk of underestimating the number of hand brakes required to secure a train on a steep grade and preventing it from running away, the TSB said.

 

[kiotiken]

Ken, respectfully, I think your concept of "adequate regulation" and mine are a little different.

Dave, our concepts of adequate regulations are very similar. I don't suggest our current regulations are adequate (or even enforced) and I know there are big changes to come. I was simply picking up on the insurance angle and the comment that they never should have been able to operate with only $25 million in coverage. Again, I don't fully disagree, I'm just pointing out that you couldn't have stipulated enough coverage in the regulations to cover this accident. This company is now liquidating and dispersing the proceeds to its creditors. Unfortunately, the victims will not see as much of it as they should since they'll be near the end of the creditor line, but there's likely little anybody can do about that. They'll max out the insurance they have and sell the company and it's assets and I don't think it would have been any different if they were forced to carry 10X the amount of coverage.

 

[hogheadCTD]

Most railroads are self insured.

 

[crazyal]

At best Canada will takeover the line and search for a company to take it over. Given its profit (or lack of profit) I think it'll be difficult. But Canada has a major interest in keeping the tracks open and business flowing. At one point in time CN was a public company so anything is possible.

 

[3930dave]

Dave, our concepts of adequate regulations are very similar. I don't suggest our current regulations are adequate (or even enforced) and I know there are big changes to come. I was simply picking up on the insurance angle and the comment that they never should have been able to operate with only $25 million in coverage. Again, I don't fully disagree, I'm just pointing out that you couldn't have stipulated enough coverage in the regulations to cover this accident. This company is now liquidating and dispersing the proceeds to its creditors. Unfortunately, the victims will not see as much of it as they should since they'll be near the end of the creditor line, but there's likely little anybody can do about that. They'll max out the insurance they have and sell the company and it's assets and I don't think it would have been any different if they were forced to carry 10X the amount of coverage.

Thanks for the clarification Ken - turns out we are a bit closer in thinking styles than my earlier interpretation of your comments concluded.

It would be interesting to do a simple basic calculation - just the value of the oil itself in a typical train load of crude. I don't know the capacities involved, or I'd just calculate it - won't be surprised if that alone exceeds $25 MM.

Rgds, D.

 

[3930dave]

Most railroads are self insured.

I would have guessed that with the major RRs. Effectively, MMA was allowed to do the same - my BP is high enough today on this subject already.... 'nuff said.

I don't care who owns what, I don't want shoddy equipment transporting dangerous goods down rickety tracks in Canada. If that means shutting the line down, so be it.

Ontario spends a lot of money on Inspection and Enforcement of Commercial trucks, as we should.

Why do the railways get a free pass ?

Rgds, D.

 

[3930dave]

The problem is they are a Shortline RR carrying cargo for the big RR's on track they dont want to maintain.
If this would have been CN or CSX or NS they would have moved in cleaned up,paid up and moved on but this Shortline got caught in the worst scenario and now are done and its affecting a lot of industry and a lot of people

Aside from the direct victims and their survivors in the town, the other people I feel sorry for are the workers at MMA, and related upstream/downstream (meaning workflow) companies.

Employess need paycheques, and most don't sign on to do shoddy work with ill-maintained equipment, in an under-staffed environment. But, the peasants like us, and the voting public for that matter, don't really have much say in how this actually plays out.

Mostly, what does or does not happen gets determined on Bay or Wall Street.

Rgds, D.

 

[dave1949]

At best Canada will takeover the line and search for a company to take it over. Given its profit (or lack of profit) I think it'll be difficult. But Canada has a major interest in keeping the tracks open and business flowing. At one point in time CN was a public company so anything is possible.

The state of Maine may also do something to support that section of rail in Maine. If that section ends up with no operator, it hurts several paper and wood products plants here too. Several years ago the state purchased a section of rail going up into Aroostook County to keep it operational.

The chipboard plant in Lac Megantic, (Tafisa, a subsidiary of a huge, global wood products company based in Portugal) is supposed to be one of the largest in North America. They have been short-haul trucking their products to other rail heads since the accident, but say they cannot be competitive that way.