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A burnt train car is seen after a train derailment and explosion in Lac-Mégantic, Que., on July 8, 2013, in this picture provided by the Transportation Safety Board of Canada. (HANDOUT/REUTERS)
A burnt train car is seen after a train derailment and explosion in Lac-Mégantic, Que., on July 8, 2013, in this picture provided by the Transportation Safety Board of Canada. (HANDOUT/REUTERS)

A railway’s turnaround becomes a nightmare Add to ...

Until this week, Edward Burkhardt kept a low profile among railway executives.

From his Chicago office, the rail veteran runs a small transportation empire, trying to renew short-line networks and newly privatized freight lines from Canada to Australia to the U.K.

Yet the horrific explosion and widespread destruction of the small Quebec town of Lac-Mégantic, caused by a runaway train carrying 72 cars of crude oil early Saturday morning, has suddenly put Mr. Burkhardt and his holding company, Rail World Inc., under intense glare.

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Rail World owns the Montreal, Maine and Atlantic Railway Inc., which began operation 2003 after the previous owner of small, regional lines between Montreal and Bangor, Me., went bankrupt. Mr. Burkhardt’s company already had three lumber mills in Maine, and a small rail network seemed a good fit.

But the venture quickly went sour. The financial troubles of local mills and a steep drop in lumber demand when the U.S. housing market crashed forced MM&A to look for other products to ship. One of those was crude oil.

“The business situation in Maine turned bad right from the start, with the bankruptcy and closing of two of the paper mills,” Mr. Burkhardt said in an interview Monday. The 2008 recession only exacerbated the downturn. “We had a business problem right from day one.”

The railway has recently been on the upswing, pushed partly by crude oil shipments going to Irving Oil’s refinery in Saint John, N .B., and with more trains along the mainline going through Lac-Mégantic.

“Our lumber markets were bad and all that because of the housing starts issue, and paper was no good. But we’ve seen a bit of a recovery now,” he said. “It’s not booming, but it’s better. And now, handling this crude oil, that’s been a nice additional business to have.” The privately-held company does not disclose how much of its revenue comes from petroleum shipments.

But the tragedy in Lac-Mégantic has shown that shipping oil by rail also comes with serious risks.

Whatever caused a parked MM&A train to begin rolling, driverless, toward the town in the early hours of Saturday morning, the accident has spawned scrutiny of the railway’s safety record. The Wall Street Journal reported that the company's rate of reportable incidents was 36.1 occurrences per million miles, higher than the national average was 14.6.

A closer examination of data from the U.S. Federal Railroad Administration suggests a more nuanced picture. The data show the Maine-based company has been cutting down on accidents in recent years.

Between 2006 and 2008, the railway averaged 21 incidents per year. Most of these involved employees who got hurt in the course of maintaining equipment or other work. From 2009 through 2012, the average was 7.2 incidents a year. Injuries also dropped.

The railway’s last fatality was in 2006, when a truck collided with a train. Until Lac-Mégantic.

Mr. Burkhardt had promises of assistance, but was vague on how the railway would help. “We intend to make sure that people are made whole, that we comply with our responsibilities,” he said.

“We think we have good insurance. Our insurance people are there with us.”

The railway has been streamlining its operations, including selling hundreds of kilometres of track in northern Maine to the state. The company has also pushed into automated locomotive controls and other area to gain any extra efficiencies.

“We want to be the most efficient railroad around. We’re operating a low-density network that’s going to have operating and financial challenges by definition. So you need every piece of efficiency. At the same time, you want to do this by maintaining safe operations,” Mr. Burkhardt said.

With the derailment, the company’s use of one-man crews has become a matter of public interest. The one-man crew is a practice that is common outside North America, Mr. Burkhardt said. MM&A received special permission from Transport Canada to operate in this way.

“They, frankly, put us through the mill in terms of meeting certain criteria, having procedures in place,” he said.

“I’ll just give you an example: We had to locate every location along our railroad where you could land a helicopter should that be necessary to evacuate a crew member who might become ill,” Mr. Burkhardt said. “I think actually they wanted to use us as a kind of a prototype.”

He added: “Now, at no time have we had any safety problem or anything coming out of the use of single-man crews. There’s no aspect of the incident at Mégantic whatsoever that has anything to do with that, or to infrastructure.

“If we’d had five guys on that train, I think the results would have been the same.”

Follow on Twitter: @Guy_Dixon

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