Since 2008, important policy debate has been developing in the United States on risk in the transportation of dangerous goods. The Montreal, Maine & Atlantic Railway (MMA) bankruptcy protection following the Lac-Mégantic disaster last summer provides an opportune time to launch the debate here. Should government continue to act as a backstop when corporations can't pay to clean up in the wake of major disasters? And is Canada -- a global leader in resource shipment -- ensuring its safe shipment? In the wake of the disastrous recent derailments in Quebec and Alberta, these and other questions deserve a fresh look. Last month's derailments of anhydrous ammonia and crude oil in Alberta make the question urgent in the Canadian context.
The two highest risk carloads in rail transportation are chlorine gas and anhydrous ammonia. Both routinely cross the country by rail. Chlorine is primarily used as a disinfectant agent for drinking water, anhydrous ammonia as an agricultural fertilizer. Known as toxic inhalation hazards (TIH), each is necessary for modern life. Both are lethal.
TIH carriage remains so dangerous that various stakeholders have taken strong positions on whether to assume the risk. Trucking companies are reluctant to take on the risk and decline long-haul transportation services of the chemicals. With trucks about 16 times more likely to have an accident than rail, Canadians should be fearful of chemical producers moving TIH by road. Chemical shippers are happy to move TIH by rail and want no part in risk sharing.
Rail claims that it faces a number of disadvantages as the primary means of transport for the goods. For starters, its insurance coverage is limited. Rail companies can't get insurance to cover the cost of potential accidents. So, rail companies -- and their shareholders -- remain open to a "bet the company" risk in the transportation of these goods. Added to this is the legal obligation on rail companies to carry all goods presented to it for delivery. They cannot decline a request for their transportation. Under current policy, rail accidents could lead not only to the insolvency of the rail companies -- as with MMA in Lac-Mégantic -- but also to the collapse of insurance available to the rail industry.
Because of this, the U.S. is considering a pooling of risk. That is, if we consider clean drinking water and good crop yields fundamental to society in general, then a liability scheme that distributes risk among shippers is fair. Oil, banking and nuclear energy -- all deemed necessary to society in general -- are protected industries under legislated shared liability schemes.
An alternative to pooled risk legislation would be to amend the legal obligation on rail to carry all goods. In recognition that dangerous goods amount to unique cargo -- chlorine and anhydrous ammonia are not in the same category as grain or lumber -- policy should allow railway tariffs to stipulate risk assumption by TIH shippers after a set contribution by rail. Currently disallowed, this alternative would require amendment to the Canada Transportation Act.
Either alternative is better than the current state where rail attracts all risk with Canadians assuming the financial commitment in the event of failure. Either alternative would ensure that trains keep running after a shipping failure and that rail's commitment to infrastructure investment is not distracted by questions of risk assumption in dangerous goods shipment.
A separate issue is risk reduction strategies. This requires engagement by rail, shippers and regulators. A failure by one, for example, a lack of an emergency preparedness plan, could exacerbate the risk assumed by another. On Sept. 11, 2013, the Canadian Transportation Safety Board (TSB) convened a media conference warning that cars of light crude had not been properly labelled on entering Canada. Equally, it warned that despite TSB support for heavier tank cars for years, no regulation had issued. This is an issue that involves shipper and regulator oversight.
Safety and security in the transportation of dangerous goods is paramount. A comprehensive answer lies in addressing both the question of risk and risk reduction. Planning must be in place to ensure that if a release occurs, an effective emergency response and full compensation for victims are in place. Recent experiences point to both risk and risk reduction as requiring a clean look.
Blog courtesy of the Frontier Centre for Public Policy.
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