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MM&A, which filed for creditor protection this week.Peter Power/The Globe and Mail

A federal agency has ordered the railway whose train crashed in Lac-Mégantic, Que. last month to cease its Canadian operations, citing the company's lack of money or insurance to cover the damages from another crash.

The Canadian Transportation Agency ruled on Tuesday that the Montreal, Maine & Atlantic Railroad was no longer capable of providing the self-insurance to continue operating on its network.

MM&A was granted creditor protection last Thursday after the railroad said it couldn't afford the clean up and reconstruction of the small Quebec town, devastated by the derailment of an oil train on July 6.

In court documents filed for creditor protection, the railroad demonstrated that its insurance policy covered MM&A for third-party liabilities of up to $25-million. The minimum environmental cleanup cost in Lac-Mégantic has been estimated at $200-million.

With MM&A facing a growing bill in the Quebec town in addition to the threat of two large lawsuits, the railroad's financial resources were found to be insufficient by the Canadian Transportation Agency and no new insurance was purchased to cover future damages.

In a statement, the federal agency said that the railroad failed to demonstrate that it had "restored [its] insurance level to what existed prior to the Lac-Mégantic derailment."

An estimated 47 people were killed when an MM&A oil train jumped the tracks in the centre of Lac-Mégantic on July 6. One-third of the village was evacuated and the downtown area burned for several days.

MM&A's insurance coverage was approved by the Canadian Transportation Agency when the railroad first began to operate in Canada in 2002. The company has provided the CTA with certificates of insurance every following year, including in 2013.

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