CP to acquire railway with tracks involved in Lac-Mégantic disaster

Canadian Pacific Railway Ltd. has entered into a $130-million (U.S.) deal to acquire the Central Maine and Quebec Railway, which operates the tracks at the centre of the Lac-Mégantic disaster in 2013.

CP Rail and Fortress Transportation and Infrastructure Investors LLC, a New York investment firm, announced a definitive agreement for 774 kilometres of track that provides access to ports in Searsport, Maine, and Saint John, N.B.

The rail line encompasses the tracks that saw a runaway train hauling tanker cars loaded with volatile crude oil break loose and barrel into Lac-Megantic on July 6, 2013, where it derailed and exploded into a massive ball of fire that consumed much of the downtown core, killing 47 people.

The line remains under scrutiny, with Transport Canada recently flagging more than 250 defects on the tracks.

In September, a group of LacMégantic residents sought an injunction to block the shipment of dangerous goods in the area pending repairs. A coalition of municipalities has also called on the federal and provincial governments to take further steps toward track safety.

Transport Canada says the railroad operator has notified it that the problems have been fixed. Nonetheless, the Transportation Safety Board of Canada announced a derailment last weekend in West Bolton, Que. It said no there were no injuries or dangerous goods released.

The railway, which mainly transports forest products as well as chemicals and fertilizer through Quebec and Maine, will expand CP Rail’s reach in Eastern Canada via new ports.

“Travelling from Montreal to the Atlantic Coast provides an appealingly shorter path through Maine, increasing the competitiveness of that route versus peers,” analyst Walter Spracklin Walter of RBC Dominion Securities said in an investor note.

The railway generates about $40 million in revenue per year, “so the near-term impact to CP is not particularly material,” said National Bank of Canada analyst Cameron Doerksen.

Longer-term opportunities reside at the Saint John port — the largest by volume in Atlantic Canada — where a large potash export terminal, nearby Irving Oil refinery and ongoing container facilities expansion could open the gates to more CP freight.

CP Rail chief executive Keith Creel highlighted “more dots on the map” thanks to Wednesday’s purchase, made after a competitive bidding process.