Edward Burkhardt thought his money-losing Montreal Maine and Atlantic Railway Inc. (MM&A) was saved when he received a call in the spring of 2012.
A U.S. oil broker was on the line requesting a quote from the Bangor-based railway for shipping North Dakota crude from Montreal to the New Brunswick border, where it would be transported by another carrier to its final destination: a refinery owned by Irving Oil.
After a “rocky” decade of watching MM&A’s losses grow with the failures or struggles of its core forest product customers, the veteran railway executive said he jumped at the offer to transport a new commodity. Within a year, the Maine-based railway was so profitable that it was able to restore wages and operating budgets slashed in 2003 after Mr. Burkardt’s holding company Rail World Inc. and a syndicate of investors acquired the Bangor-based company out of bankruptcy proceedings.
“The oil started to move and we saw some black ink for the first time,” he said during an interview in Rail World’s small office suite in Rosemont, Ill.
It was not until an MM&A train derailed and ignited a lethal fireball of oil on Lac-Mégantic on July 6 that Mr. Burkhardt, the rail industry and transport regulators from Dakota to Quebec thought to question the dangers of carrying the volatile crude. The fiery blast killed an estimated 47 people and destroyed the small town’s historic core.
Mr. Burkhardt has accepted responsibility for MM&A’s failure to set sufficient emergency brakes on the runaway train, but he argues that the unusual crude explosions that followed the Lac-Mégantic derailment are a wake-up call for the rail industry and regulators about the dangers of transporting crude oil.
“I think a lot of practices here should be re-examined,” he said.
In the same way the tragedy revealed flaws in long-standing railway practices and regulations for a recent boom in crude railway shipments, Mr. Burkhardt’s old-school expertise repairing broken railways from Wisconsin to New Zealand was poor training for the challenge of navigating a 21st century catastrophe.
Local residents and politicians were appalled that MM&A’s 75-year-old chairman waited four days after the derailment to tour the town’s burned-out core. Frustration turned to rage when the hard-boiled railroader, who began his career at 16 swinging pick axes in a Seattle track gang, showed little emotion when questioned at a curbside press conference about the deadliest rail accident in Canadian history.
“We blew it,” Mr. Burkhardt matter-of-factly told reporters, faulting a company engineer for setting insufficient emergency brakes on the parked train. Why had he waited so long to visit the grieving town? It made more sense, he explained, to stay put in his Illinois office to be “smart about how we allocate our resources.”
Before Lac-Mégantic, Mr. Burkhardt’s flinty transformation of cast-off railways into money makers won him a loyal following from institutional and individual investors. But in the traumatized Quebec town, his blunt, unvarnished style was a liability. In the absence of whispering legal and public relations advisers, he came across as an out-of-touch, or worse, uncaring executive. Overnight the admired railway repairman was a pariah.
“Deplorable” and “unacceptable” said Quebec Premier Pauline Marois shortly after his visit. Back in his Rosemont office, Mr. Burkhardt’s e-mail inbox filled up with threats and hateful messages. “Here are the pictures of the people you killed,” read one message, according to his secretary Cathy Aldana. Even Mr. Burkhardt’s lawyers were unhappy with his visit. “They didn’t like it,’ he said, because he “inferred responsibility” for the derailment.
Since he first received the “horrifying” news of the Lac-Mégantic catastrophe on the morning of July 6, Mr. Burkhardt says he has barely slept and his days are filled dealing with “grey clouds” of lawyers and “buzzards” who have descended on Rail World in the wake of the derailment.
He and his small holding company Rail World, which counts a minority stake in a Polish railway and a small Colorado line as its only assets other than MM&A, are fending off numerous lawsuits. The claims blame understaffing and poor track conditions at the struggling Maine railway for the fatal derailment. Weeks after the accident, Ottawa unveiled tighter safety standards that require freight trains to bolster staffing and safety precautions when carrying hazardous materials.
In the quiet of Rail World’s small office suite near Chicago’s O’Hare airport, the veteran railway executive is coming to grips with the reality that the Maine-based railway that he and other investors acquired for an estimated $50-million a decade ago may not survive the crisis. His co-investors in the railway include Quebec pension fund manager Caisse de dépôt et Placement and Berkshire Investments (Netherlands). Sitting in an office decorated with charcoal paintings of locomotives and miniature train cars from railways he and his backers once owned, Mr. Burkhardt sinks into his chair and mutely shakes his head when asked about MM&A’s future.
“We are reviewing a number of possible outcomes,” he said.
Quebec and the town of Lac-Mégantic have sent MM&A legal warnings to pay multimillion-dollar bills owed to contractors that have begun cleaning chemicals and crude from the town’s burned out core. Mr. Burkhardt said the company has insufficient cash and its insurer is currently “not willing to make the payment.” He said he is locked in a “stalemate” with the insurer and Quebec governments and he expects matters “will reach a head” shortly. Although he said “it is possible” that one of the railway’s creditors will take legal action that could force the company to seek bankruptcy court protection, he hopes all sides can agree to a solution to pay for the cleanup.
“Everyone,” he said, “has to get practical.”
Editor's note: Prior online and newspaper versions of this story said Berkshire Investments of Boston was an investor in Montreal, Maine and Atlantic Railway Inc. In fact, the investment was made by Berkshire Investments (Netherlands), which is not affiliated with the Boston firm. The error has been corrected.