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The aftermath of the train derailment and fire in Lac-Mégantic, Que., in this photo taken on Tuesday, July 16, 2013. (Ryan Remiorz/THE CANADIAN PRESS)
The aftermath of the train derailment and fire in Lac-Mégantic, Que., in this photo taken on Tuesday, July 16, 2013. (Ryan Remiorz/THE CANADIAN PRESS)

GRANT BISHOP

After Lac-Mégantic, how should we regulate risk? Add to ...

It may be months before the Transportation Safety Board reports on the precise causes of the disaster in Lac-Mégantic. However, the discussion about the appropriate regulatory response to potential risks from a surge in oil shipments by rail should not be delayed.

I part company with Thomas Mulcair on many policy issues. But his call to scrutinize the regulation of oil transportation by rail was entirely legitimate.

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The TSB has been on record with safety concerns about the tank cars in which oil can be transported. From Statistics Canada data , shipments of fuel oils and crude petroleum by rail accelerated from 68,000 carloads in 2011 to 113,000 in 2012 and 41,000 in just the first quarter of 2013.

There were red flags about this increased volume of oil-by-rail even before the Lac-Mégantic tragedy. With the reality of increasing oil shipments passing through populated centres, the public has every right to know how the risks from these shipments are being managed on its behalf.

TSB rail safety statistics show a general decrease in accident rates and totals, suggesting an increase in overall rail safety. However, Lac-Mégantic painfully exhibits that risk involves not only the probability but the magnitude of a hazard. Buildings on fault lines can’t be designed just for earthquakes that are low on the Richter scale. Tail risks must be part of the equation.

Even without knowledge of the technical aspects of the disaster, what the tragedy immediately underscores is government’s essential function in regulating technological risks to public safety and the need for informed citizen engagement in managing such risks.

Residents of Lac-Mégantic appear to have been largely unaware of the hazard moving through their town. They could not bargain in advance to be compensated for the risks that loomed on their town’s rails. And the dead cannot benefit from whatever compensation might be paid after the fact.

Of course, hazards abound in our industrialized society and it is inevitable that many socially useful activities create potential costs that are not borne by the producer – so-called “negative externalities.”

Whatever the precision of design, an engineer knows that there remains some probability of failure. As we’ve been reminded, pipelines may fracture, rainfall may overwhelm flood controls, valves on drilling platforms may rupture, a tsunami may swamp a nuclear reactor. Trains may derail.

The probabilities of such events should not be ignored nor overstated. These are the risks of living with technology in our modern world. The task is to balance the probabilities and consequences of such hazards with the costs of mitigation. It is about trade-offs.

To require the complete elimination of all such risks would strangle the economy. But unless companies are forced to incorporate negative externalities into their decisions, a rational firm may underspend on mitigation and the level of risk will be greater than what is socially optimal.

The limited liability corporation is an effective mechanism for marshaling capital and efficiently organizing production. However, any belief that “corporate social responsibility” is an adequate substitute for rigorous regulation misapprehends the primacy of profit maximization in corporate decision-making.

Moreover, few citizens would themselves have the specialized technical knowledge to quantify the trade-offs. Citizens’ groups are at an inherent informational disadvantage relative to those who operate things day-to-day.

It then falls to government to safeguard the public interest and, with coherent standards and monitoring, to manage the trade-offs for society. This is not a costless task. Top-notch engineering expertise is pricey, and ongoing investments in scientific research are required to stay at the forefront. Since the benefits aren’t immediate and visible, fiscal pressures will always tempt the government of the day to see expenditures on technical regulation as extraneous.

Especially in the face of catastrophe, citizens have every right to ask how government is regulating particular risks on their behalf. And any government should stand prepared to honestly explain its management of those risks.

Other federal parties may deride Mr. Mulcair’s calls for scrutiny of how we are regulating rail transport of oil as mere partisan maneuvers. But such dismissals show blindness to potential risks and, worse, abdicate the urgent responsibility to ensure the public is protected.

Policy should be based on evidence and the TSB investigators are probing the precise causes of the disaster. However, while uncertainty remains about the causal chain in Lac-Mégantic, there is no excuse for regulatory paralysis in the face of a clear and present danger. The government should explain to Canadians what steps it has taken to regulate the risks on Canada’s rails.

Grant Bishop holds degrees in geological engineering, economics and law. He tweets @GRABishop

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