ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day. Visit the ROB Insight homepage for analysis available only to subscribers.
The oil-filled train that exploded in the middle of Lac-Mégantic, Que. instantly became the center of any discussion of rail safety, as a tragedy with such a heavy human cost inevitably must. But while the focus thus far is on the rising volume of oil being shipped by rail, the federal government's underfunding of Transport Canada – the body responsible for regulating railroad safety – also demands a place in this urgent discussion.
Rail safety incidents are statistically rare, but are often catastrophic when they happen. The Lac-Mégantic accident is reminiscent of the infamous 1979 Mississauga, Ont. incident where a train filled with dangerous chemicals derailed, resulting in an enormous explosion and more than 200,000 people evacuated from their homes. Incredibly, no one died. Fatalities aren't unheard of, however; as recently as February 2012, the derailment of a VIA Train in Burlington, Ont. killed three workers and injured 42 passengers.
A spate of such incidents in 2005 and 2006 prompted a review of the Railway Safety Act, whose report was the first in a series of official acknowledgements that the regulations around rail safety were insufficient. But it took until 2010 for the government to introduce a bill amending the act, and it died on the order paper when the 2011 election was called. Finally, a new version of the bill, which clarified the roles and responsibilities of various parties and added financial penalties for infractions, was tabled in late 2011.
Once the bill began moving swiftly through the legislative process, the Conservatives decided to celebrate this long overdue improvement in safety – by slashing Transport Canada's already-tight budget, announcing in the 2012 federal budget that the agency would have 10.7 per cent less to spend by 2014-2015. It hardly needs pointing out that the way to reform a broken regulatory environment is not to take away the regulator's funding.
The safety bill finally came into force this year, but despite Transport Minister Denis Lebel boasting in a statement about Lac-Mégantic that the new regulation "requires rail companies to create and maintain a culture of safety and will penalize rule breakers with tough new penalties," the government can't simply pass the responsibility onto industry and wash its hands of the problem. It needs to earmark resources to make sure those rules are communicated and implemented properly, and enforced consistently.
The U.S. banks' role in the financial crash showed the dangers of self-regulation; since then, government has begun to learn from its mistakes. It's not too late for the Canadian government to do the same on rail safety.