Category Archives: Victim compensation

Victim compensation after oil train derailment: Big Oil cost of doing business?

Repost from DESMOG

Cost of Doing Business? Oil Companies Agree To Pay For Some of Lac-Megantic Damages, But Not to Solve the Real Problems

By Justin Mikulka, June 21, 2015 – 05:58
Image credit: Wikimedia

Although insisting the industry is not to blame, several of the oil companies involved in the fatal Lac-Megantic oil train accident in 2013 have agreed to contribute to a fund to compensate the families of the 47 victims in that accident.

The Wall Street Journal reported recently that oil companies Shell, ConocoPhillips, Marathon and Irving have all agreed to contribute to the fund to avoid future litigation, along with General Electric and the Canadian government. While the actual amounts contributed by most companies involved are not available, the total fund is reportedly at $345 million. That sounds like a lot of money but still is less than the $400 million retirement package for Exxon’s last CEO, for example.

Canadian Pacific Railway Ltd. hasn’t agreed to the settlement, according to the Bangor Daily News, which reports that the judge in the case has delayed his decision on the settlement. Canadian Pacific has asked the court to shield it from future litigation and challenged the Quebec provincial court’s jurisdiction.

It is no surprise that oil companies would prefer to pay fines of tens of millions of dollars to avoid future litigation as well as duck responsibility for the full cost of the cleanup. Rebuilding the destroyed Lac Megantic property is expected to take as long as eight years and as much as $2.7 billion.

This approach has proven successful for the oil and rail industry in the past. In 2009, when a Canadian National (CN) ethanol train derailed in Cherry Valley, Illinois resulting in a fire and the death of one woman and injury to several others, the railroad paid the surviving family members $36 million.

The National Transportation Safety Board laid some of the blame for that tragedy on the “inadequate design of the tank cars, which made them subject to damage and catastrophic loss of hazardous materials during the derailment.”

But CN just paid the $36 million and the industry kept using the same inadequate DOT-111 tank cars to move ethanol and crude oil. It was the DOT-111 tank cars that were involved in the Lac-Megantic accident four years later, and the same tank cars that the oil industry is currently fighting to keep on the rails as long as possible.

There is no question it is far more profitable for the oil and rail industries to continue to use unsafe rail tank cars and to just pay off the families of the victims or for environmental damages from oil spills after any accidents than to invest in safer tank cars.

Canadian National has had two oil train derailments already in 2015 which the company reports have cost it $40 million. However, CN still reported over $700 million in net income for just the first quarter of 2015.

Business as usual in the oil-by-rail industry is highly profitable. Which is why the oil and rail industries are fighting against any safety measures that would require investment and cut into profits.

After the faulty tank cars, the two other issues the oil industry has fought against are modernized braking systems and removing the volatile and explosive natural gas liquids from the oil itself via stabilization.

Both of these proven safety measures would cost the industry billions of dollars to implement. So they haven’t done anything. It is far more profitable to live with the consequences of some accidents and make relatively small payouts to avoid lawsuits than it is to invest in safe alternatives.

In 2013, the year of the Lac-Megantic disaster, the big five oil companies made $93 billion in profits. Fines and settlements like those resulting from oil train disasters or deadly refinery accidents are simply a cost of doing business. And for these companies, it turns out to be a very small cost when compared to the profits.

In a forum on rail safety held in Albany, NY this month, emergency first responders from three oil train accidents (Lac-Megantic, Lynchburg, Virginia and Galena, Illinois) recounted their experiences dealing with oil train fires and explosions. While offering excellent insights to the risks involved with oil-by-rail, there also was insight into how the rail companies responded once the accidents occurred.

For both the Lynchburg and Galena accidents, it was noted that the rail companies were on the scene almost immediately. And they rebuilt the tracks and got them back in operation as soon as possible because in Galena, rail downtime was costing the company $1 million an hour. When money is at stake, the rail companies jump into action.

Did the rail company jump into action the day before the Lynchburg rail accident when an inspection revealed a defect in the track in Lynchburg? No.

At the forum in Albany, Lynchburg Battalion Chief Robert Lipscomb summed up the situation nicely.

“You got to remember their business is making money. Our business is taking care of emergencies. So sometimes those two don’t line up exactly right,” Lipscomb said.

When your business is making money, it is much easier to accomplish your goals by lobbying regulators to ensure weak regulations and paying out meaningless fines when something goes wrong than to invest in safety.

The oil trains will return to Lac-Megantic in 2016, with the same inadequate tank cars and 19th century braking systems. And they will be full of unstabilized, dangerous and very profitable oil.

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    Oil companies pay into compensation fund for Quebec train crash – deny further liability

    Repost from The Hill

    Oil companies pay into compensation fund for Quebec train crash

    By Timothy Cama – 06/11/15 08:35 AM EDT
    This July 16, 2013, file photo shows firefighters and workers at the crash site of a train derailment that killed 47 people in Lac-Megantic, Quebec. A watchdog from the Justice Department is looking for transparency on dollar amounts that oil companies are paying into a fund for victims of the crash. —Ryan Remiorz/Associated Press

    Oil companies have contributed tens of millions of dollars toward a fund to compensate victims of a major 2013 oil train disaster in Quebec, Canada, that killed 47.

    Companies like Royal Dutch Shell PLC, Marathon Oil Corp., ConocoPhillips Co. and Irving Oil Ltd. have paid into the $345 million fund, though they deny responsibility for the events on the train transporting their products, The Wall Street Journal reports.

    If courts in the United States and Canada approve the oil companies’ role in the fund, the companies will be shielded from liability for any negligence they had involving the disaster in Lac-Megantic, including for failing to test the oil’s vulnerability.

    The Montreal, Maine & Atlantic Railway Ltd., which ran the train that derailed and exploded, filed for bankruptcy shortly after the incident.

    But its court-appointed trustee said the oil companies knew that the oil was volatile and dangerous.

    The oil companies have responded that their responsibility ended when they extracted the oil.

    Most of the companies that contributed to the fund declined to comment to The Wall Street Journal. Marathon Oil told the newspaper that its contribution is not an acknowledgment of liability.

    The Quebec disaster led officials in both Canada and the United States to pay new attention to the use of oil trains, which has increased dramatically in recent years along with oil production in places like the Bakken shale region.

    It has resulted in rules in both countries that will ban the use of the oldest tank cars for oil in the coming years, as well as speed restrictions and other operational regulations.

    Some Democratic lawmakers, led by Sen. Maria Cantwell (D-Wash.), have pushed for regulations limiting oil volatility in rail transport.

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      The legal quagmire of Lac-Mégantic

      Repost from The Montreal Gazette

      Plans are finally taking shape for financial compensation of derailment victims

      By Monique Beaudin, Gazette environment reporter April 20, 2014
      The legal quagmire of Lac-Mégantic
      The light fades over the Appalachian Mountains in Lac-Mégantic a couple of weeks after the train derailment in July 2013. Eight months later, plans for compensation are coming together. Photograph by: Allen McInnis , Montreal Gazette

      Nine months after a runaway oil train derailed in Lac-Mégantic, killing 47 people and destroying a large chunk of the town, a plan for financially compensating disaster victims is taking shape.

      Judges in Quebec and Maine have approved a joint cross-border process for victims of the accident to file claims against Montreal, Maine and Atlantic Railway and its Canadian operations, Montreal, Maine and Atlantic Canada. The two companies have been under bankruptcy protection since August.

      Thousands of claims related to the derailment are expected to be filed against MMA. Public information meetings on the financial-claims process are to begin in Lac-Mégantic next week. Claims must be filed by the middle of June.

      People who lost family members, homes and businesses have turned to Canadian and American courts for financial compensation, but the process has been slow. The estates of several of the 47 people killed on July 6 have filed wrongful-death lawsuits in the U.S. Lawyers have also begun proceedings to bring a class action in Quebec. Quebec has already ordered six companies to clean up and decontaminate the town, a move that is facing a legal challenge.

      The American lawyer overseeing MMA’s U.S. bankruptcy proceedings himself admits figuring out how victims will be compensated is “quite complicated”.

      One of the biggest questions is who has the money to pay for the accident — compensating victims and secured creditors, covering cleanup costs and paying damages that several companies are claiming as a result of the derailment.

      MMA was sold in January to New York-based Railway Acquisitions Holdings, for $14.25 million, less than what it owes its secured creditors.

      That leaves a $25-million insurance policy and the possibility of a settlement fund composed of contributions from several companies targeted by legal action after the accident, said Robert Keach, MMA’s U.S. Chapter 11 trustee.

      Another possible source of financial compensation for victims could come from a lawsuit Keach filed against World Fuel Services, Western Petroleum and Petroleum Transport Solutions, the companies that arranged for the shipment of the crude oil on the train. Keach argued they were to blame for the accident since the oil had been mislabelled as being less volatile than it actually was.

      New York-based lawyer Luc Despins is counsel to a victims’ committee made up of residents, the town of Lac-Mégantic and the Quebec government. The committee represents victims’ interests in MMA’s American bankruptcy proceedings, offering input on issues like the compensation process, he said.

      Despins said the committee’s goal is to get as much money as possible to the Lac-Mégantic victims as quickly as possible. But, he cautioned, not all claims filed may be accepted.

      “If someone agrees their house was worth $600,000 and they got the full $600,000 from their insurance company, and that’s their only claim, they should not be recovering twice, this is not a lottery,” he said. “They may have other claims, but as far as the house I gave as an example is concerned, they can’t recover twice.” The courts will decide who has a valid claim, Despins said.

      LOGISTICS: WHAT’S NEXT FOR VICTIMS OF THE DISASTER

      Victims of the accident have until June 13 at 5 p.m. to file a proof of claim against Montreal, Maine and Atlantic.

      Public information meetings on the claims process are to be held in Lac-Mégantic between April 22 and May 5, and assistance will be provided to help people complete the claims forms, according to an order issued by Quebec Superior Court. Victims who do not file a claims form by June 13 will not be permitted to participate in the Canadian or U.S. bankruptcy proceedings or receive any payment made available in those proceedings.

      Claims forms and information about the claims process are posted on the website of Montreal-based Richter Advisory Group, the company’s Canadian bankruptcy monitor, at www.richter.ca under “Insolvency Cases” or  http://bit.ly/mmamonitor.

      LEGAL ACTIONS INVOLVING VICTIMS OF LAC-MÉGANTIC

      A request has been filed to approve a class-action lawsuit in Quebec against MMA, World Fuel services, Irving Oil, Canadian Pacific, the federal government and others. More than 1,550 people have registered with the class action so far.

      A committee of three Lac-Mégantic residents, a representative of the Quebec government and the town of Lac-Mégantic represents victims’ interests in MMA’s U.S. bankruptcy proceedings.

      The estates of 19 people killed in the Lac-Mégantic train derailment filed wrongful-death lawsuits in Illinois, naming several defendants, including MMA, company chairman Edward Burkhardt, MMA’s parent company Rail World, and World Fuel Services, which arranged for the transportation of the crude oil on the train. All except two of those lawsuits have been withdrawn while American courts decide where they will be heard. A law firm representing the estates says it plans to appeal a recent decision from a U.S. federal judge ordering the cases transferred to Maine, where MMA’s bankruptcy proceedings are being held. One of the issues at play is the amount of money that could be awarded as damages. Illinois has no cap on such payments, while Maine limits them to $500,000 in wrongful-death cases.

      POSSIBLE SOURCES OF FINANCIAL COMPENSATION

      A $25-million insurance policy MMA has with XL Insurance. Many people and companies are interested in the insurance policy. They include:

      – Victims of the Lac-Mégantic derailment, such as the families of people killed in the accident, those who were injured or those who suffered losses to their businesses or homes.

      – CIT Group, a company that owned some of the locomotives and tank cars involved in the accident. CIT has said it plans to settle any claims against it from wrongful-death lawsuits tied to the derailment with the XL insurance policy.

      – MMA chairman Edward Burkhardt, who has been named in several legal actions linked to the derailment, argued in U.S. bankruptcy court that he is covered by the policy.

      Settlements from legal action taken by MMA’s bankruptcy trustee against World Fuel Services.

      The creation of a settlement fund made up of financial contributions from companies that may be liable for the accident.

      TIMELINE OF THE LEGAL FALLOUT

      July 6, 2013: A 72-car oil train pulled by five locomotives unexpectedly rolls down railway tracks into the town of Lac-Mégantic. Most of the cars derail, leading to explosions and a fire that kills 47 people and destroys much of the downtown core. Nearly 6 million litres of crude oil spill in the accident.

      July 15, 2013: Lac-Mégantic lawyer Daniel Larochelle and two other law firms file a request in Quebec Court to begin class action proceedings against MMA and 14 other companies and individuals.

      July 22, 2013: Annick Roy files a wrongful-death lawsuit in Illinois court on behalf of the estate of Jean-Guy Veilleux and their daughter. Veilleux was killed July 6.

      Aug. 7, 2013: MMA files for bankruptcy protection in Canada and the U.S.

      Aug. 14, 2013: A total of 19 wrongful-death cases have been filed in Illinois court.

      Aug. 22, 2013: The Quebec government announces the creation of a victims’ committee to represent Lac-Mégantic residents, the government and the town in the U.S. bankruptcy proceedings.

      Jan 23, 2014: Bankruptcy judges in Canada and the U.S. approve the sale of MMA to Railway Acquisitions Holdings of New York for $14.25 million U.S.

      Feb. 12, 2014: Lawyers for the proposed Quebec class action add Transport Canada to the list of more than 50 organizations and people it plans to sue.

      Feb. 26, 2014: A joint Canada-U.S. bankruptcy meeting between creditors tries to speed up the pace of the claims process.

      April 2014: The MMA sale to RAH is expected to be finalized.

      June 13, 2014: This is the proposed deadline for victims and creditors to file claims against MMA in the Canadian and U.S. bankruptcy proceedings.

      WHAT’S HAPPENING WITH MONTREAL, MAINE AND ATLANTIC

      The railway company whose runaway oil train derailed in Lac-Mégantic on July 6, 2013. It is in the process of being sold to Railway Acquisition Holdings, a New York City -based company, for $14.25 million U.S. RAH plans to change the name of the company to Central Maine and Quebec Railway, and offer rail service on MMA’s 800 kilometres of tracks in the two countries.

      RAH is acquiring two companies:

      Montreal, Maine and Atlantic Railway

      • Parent company of Montreal, Maine and Atlantic Canada.
      • Operates a shortline railroad in Vermont and Maine.
      • Under Chapter 11 bankruptcy protection since August.

      Montreal, Maine and Atlantic Canada

      • Railway operating in Quebec.
      • Under bankruptcy protection since August.
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