Railway seeks bankruptcy protection
About 100 Lac-mégantic residents to remain homeless for one year
MONTREAL The embattled railroad at the centre of the deadly Quebec train derailment has filed for bankruptcy protection in Canada and the U.S. amid a flurry of lawsuits and growing cleanup costs the company estimates will surpass $200 million.
And there was more bad news for the 100 or so residents who remain displaced by the fatal train derailment in Lac-Mégantic. At a community meeting Tuesday night, they were told it will likely take about a year before they are able to live in their homes again. About 2,000 of the city’s residents evacuated their homes in the immediate aftermath of the explosion that killed 47 people in LacMégantic on July 6.
The Montreal, Maine & Atlantic Railway initiated proceedings Wednesday for Chapter 11 bankruptcy protection in a U.S. court, while its sister firm in Canada presented a petition in Quebec Superior Court seeking relief from its creditors under the Companies’ Creditors Arrangement Act.
“It has become apparent that the obligations of both companies now exceed the value of their assets, including prospective insurance recoveries, as a direct result of the tragic derailment at LacMégantic,” Ed Burkhardt, chairman of both companies, said in a statement.
“A process under Chapter 11 and the CCAA is the best way to ensure fairness of treatment to all in these tragic circumstances.”
Documents filed in U.S. court say MMA has between $50 million and $100 million in estimated assets and between $1 million and $10 million in estimated liabilities. The bankruptcy-court filing was posted on the website of Maine’s Bangor Daily News.
In Canada, court documents filed under the CCAA by Montreal, Maine & Atlantic Canada Co. state it has just under $18 million in assets. The CCAA allows companies protection while they work out ways to avoid bankruptcy.
Robert Grindrod, president of the Maine-based railway, appeared for the filing in the Montreal courtroom, where several lawyers representing a number of interests were also present. He declined to comment on the matter when approached by a reporter.
One lawyer present in the courtroom for the CCAA filing said the judge is expected to make a decision Thursday morning whether to grant the railway’s request for creditor protection.
Attorney Jeff Orenstein is a member of a legal team that presented a motion last month to file a class-action lawsuit, on behalf of two LacMégantic residents, against MMA, Burkhardt, Grindrod, train operator Tom Harding and other individuals and companies allegedly linked to the crash.
Orenstein said that either way he will continue his legal fight for his clients.
The filings come as the company faces lawsuits and enormous cleanup costs following the fiery crash when an unattended MMA train carrying crude oil roared into Lac-Mégantic and derailed, setting off massive fireballs and destroying dozens of buildings in the community of 6,000 people. Burkhardt has blamed Harding for failing to set enough handbrakes.
The town and the Quebec government have sent legal notices to the railway, demanding that it reimburse Lac-Mégantic $7.8 million in environmental mop-up costs after millions of litres of crude oil were released into the environment.
“MMA wishes to continue to work with the Quebec Ministry of the Environment, the municipality of Lac-Mégantic, and other government authorities in the continuing environmental remediation and cleanup as long as is necessary, and will do everything within its capacity to achieve completion of such goal,” Burkhardt said.
A spokeswoman for LacMégantic Mayor Colette RoyLaroche said the municipality would not comment on Wednesday’s announcement because of ongoing legal proceedings.
Federal Transport Minister Lisa Raitt said Wednesday’s court filings don’t mean MMA is “off the hook for their responsibilities to the people of Lac-Mégantic.” She said Ottawa would work with the Quebec government to ensure the cleanup would continue. Each government has promised $60 million for emergency assistance and longerterm reconstruction help for the town.
Most Lac-Mégantic residents were able to return home in the days following the tragedy, after air-quality tests determined their neighbourhoods were safe to live in.
But for the people closest to the blast — those who either lost a house or who lived in an area contaminated with crude oil — nights have been spent in motel rooms, couch surfing and making other temporary arrangements. For families who expected to hear they could go back home, Tuesday’s community meeting came as a terrible shock.
“I wouldn’t have wanted to be in their shoes, let’s just put it that way,” said Nicolas Carette, a spokesperson for the city of Lac-Mégantic. “A lot of them thought they’d be getting good news but, sadly, that’s not what happened. Some people found out for the first time that their house could be destroyed because of contamination.”
While many of the buildings near the blast site in LacMégantic are still structurally intact, some will need to be levelled because crude oil has seeped under their foundations. About 5.7 million litres of crude came gushing from the runaway freight train into downtown the night of the derailment. But the cleanup effort was delayed by rescue operations and, later, the search for bodies amid the wreckage.
“We don’t know exactly how many homes will need to be destroyed, but obviously, for the people going through this, it’s not easy to live with that uncertainty,” Carette said.
In July, each household evacuated during the blast was given a $1,000 cheque. Just over 60 business owners affected by the derailment received $5,000 cheques as well.