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Oil train insurance minimums in question

Oil train insurance minimums in question

A little more than two years have passed since an unattended runaway train from the now-bankrupt Montreal, Maine & Atlantic Railway Ltd. 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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