BUSINESS

Lac-Megantic Compensation For Victims Could Begin In Mid-2014

10/22/2013 03:35 EDT | Updated 01/23/2014 06:58 EST
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LAC-MEGANTIC, CANADA - JULY 14: Patricia Landry gets her first view of the 'red zone' crash site, on July 14, 2013 in Lac-Megantic, Quebec, Canada. A train derailed and exploded into a massive fire that flattened dozens of buildings in the town's historic district, leaving 60 people dead or missing in the early morning hours of July 6. (Photo by Ian Willms/Getty Images)
MONTREAL - Victims of last summer's deadly explosion in Lac-Megantic, Que., could begin to receive compensation by the first anniversary of the horrific rail accident, the U.S. bankruptcy trustee overseeing the now insolvent railway involved in the crash said Tuesday.

Lawsuits could lead to years of delays in wrapping up the entire case, but Robert Keach said hopes to begin distributing a $25-million derailment insurance policy, allotted for victims, by the middle of next year.

"One of my goals, to be honest, is to make sure that the victims don't have to wait eons to get their money," Robert Keach told The Canadian Press.

"I would hope that we could get something in place that was making a meaningful distribution to victims by mid-2014," the Maine-based lawyer said.

"I think that's realistic if people co-operate."

A total of 47 people were killed and much of Lac-Megantic's downtown area destroyed July 6 when a runaway belonging to the Montreal, Maine & Atlantic Railway rolled into town and derailed, with its cargo of crude oil exploding and setting fire to the area.

Keach wouldn't speculate on how much could eventually be available for victims. Additional funds could come from a second policy set up mainly for service disruptions, claims filed against other companies and proceeds from the sale of the railway.

The trustee said he doesn't want to give false hopes about a resolution to the case because the entire legal process could drag on because of legal challenges.

"For everybody in this case, the first priority is trying to create an efficient claims process and get an efficient and fair return to the victims. I think that is in the front of everybody's mind in this case."

Luc Despins, who represents Quebec victims, the municipality and the Province of Quebec, said the trustee's plans for an initial distribution of the insurance policy is a "wonderful thing."

While he said Keach's timeline is "as good as any" there's no guarantee that it will be realized.

"It will depend on a lot of things falling into place and the goodwill of a bunch of people to try and make that happen," he said from New York.

The Quebec government has committed its share of the insurance distribution to victims.

Proceeds could also come from the sale of the railway, which has been estimated at between US$50 million and US$100 million for the American assets and about $18 million for the Canadian assets.

Secured creditors and U.S. government agencies would be first in line for up to about US$40 million. Victims are next in line for the American assets. One of the big unknowns in Canada is government cleanup costs.

Keach said the railway has attracted interest from about 20 interested buyers, including three that are eyeing only a portion of the railway network operating in Canada and the United States. Officials overseeing the sale prefer that the railway system is kept intact to maximize its value.

The trustee said he expects to disclose a lead bidder by Nov. 28 to set a floor price for other bidders. A formal auction would take place in December.

He called the sales timeline realistic but wouldn't be surprised if regulatory approvals delay the closing until the first quarter of 2014.

"Once the sale is done that will start an even more complex part of the case, which is figuring out who gets what money," he said.

Meanwhile, the railway has closed a US$3-million loan that will allow it to continue operations in both countries through its sale.

The loan has allowed MMA to rehire several employees to ensure that all trains are staffed with two-person crews, regardless of cargo.

The train with 72 oil tankers was left unattended by a solo crew member who was accused by the company of failing to set enough hand brakes.

Meanwhile, the U.S. bankruptcy court has approved the creation of a victims' committee after the trustee withdrew his objections. Keach said he is satisfied by limitations imposed by the judge that prevent the committee from having the power to investigate or litigate issues unless it receives his express permission.

"I think it all worked out nicely in the end and I think the committee will be a valuable participant in the process," Keach added.

Despins welcomed the court's approval of the committee but said is waiting to see who the U.S. Justice Department appoints to that body.

"We're pleased with the result because we had asked for that relief but we'll have to see how the rest of the proceeding unfolds before we can declare victory," he said.

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