CP Rail ordered to work with MM&A
Business must go on, federal agency says
TORONTO Canadian Pacific Railway Ltd. said Thursday it has been ordered by federal regulators to continue to do business with Montreal, Maine & Atlantic Railway, despite concerns its embattled former partner is no longer fit to operate in the country.
The move comes after the Canadian Transportation Agency served notice earlier this month that it intends to suspend MM&A’s licence over concerns it lacks sufficient insurance coverage.
“While we disagree with this order, we have taken immediate steps to comply,” said Hunter Harrison, CP chief executive, responding to the order. “The CTA, as federal regulator, has satisfied itself that MM&A is fit to operate and has adequate insurance to do so. We will review our legal options.”
The CTA is just the latest government agency to try to force the hand of CP in the aftermath of the Lac-Mégantic disaster, in which 47 people are believed to have perished after a runaway MM&A crude-oil train derailed in the heart of the Quebec town on July 6.
The Quebec government has also ordered CP to help with the cleanup costs associated with the disaster because CP had subcontracted MM&A to help move the crude contained in the derailment from North Dakota to New Brunswick.
The latest issue revolves around a portion of CP’s tracks that MM&A uses to transfer goods onto the lines of Canadian National Railway Co. at the Saint-Jean-surRichelieu interchange point.
Federally regulated railways, like CP, are required to accommodate the transfer of rail traffic between themselves and others, said Jacqueline Bannister, a CTA spokeswoman, in an email.
“While commercial agreements are usually negotiated between the railways, the law stipulates that the agency shall investigate a complaint that a railway company is not fulfilling its service obligations and may order the company to fulfil its obligations,” she said.
That is what the CTA said its decision Thursday was based upon after MM&A filed a complaint this week with the agency saying CP was no longer allowing it to move its goods across its tracks. Without access to those lines, MM&A argued it is unable to reach “most, if not all customers” it currently services using CN’s lines.
But CP raised concerns about MM&A’s ability to safely handle hazardous substances in a letter to the CTA this week obtained by the Financial Post. Those concerns included whether MM&A had adequate insurance to operate.
The CTA issued an order on Aug. 13 to suspend MM&A’s licence to operate after the railway failed to provide documentation to prove it had adequate third-party liability insurance and the funds to cover the self-insured portion of its coverage that is required to operate in the country. It also issued an embargo on other railways doing business with MM&A at that point, including CP and CN.
The CTA originally ordered MM&A to halt its operations as of Aug. 20 for failing to do so, but extended that order last Friday to Oct. 1 at MM&A’s request. The agency said the extension was granted because MM&A had shown that it had sufficient third-party coverage through to Oct. 1.
But the CTA order was conditional on MM&A, which has filed for creditor protection in the U.S. and Canada, proving by 5 p.m. Friday it had sufficient funds to cover the $250,000 self-insured portion of coverage as well.
The railway has submitted a motion to the Quebec Superior Court, which is expected to be heard Friday morning. If granted, that would allow it to secure those funds and continue to operate until Oct. 1.
The CTA also lifted the embargo for doing business with MM&A Friday, with which CN complied. CP only followed suit Thursday after the CTA order.