U.S. Transportation Department (DOT) regulators are concerned most freight railroad insurance policies are barely sufficient to cover even average oil train accidents, Politico reports.
In an analysis published in early August, DOT reported most large railroads are insured at about $25 million for accidents, with others insuring up to $50 million for certain hazardous cargo. The average oil train spill costs $25 million to mitigate.
It’s different for more extreme cases, such as last year’s oil train derailment in Lac-Mégantic, Quebec, that killed 47 people. Montreal, Maine & Atlantic Railway, the company responsible for the accident, declared bankruptcy partly because its $25 million policy wasn’t sufficient. The total environmental cleanup alone could end up costing between $200 million and $500 million based on early estimates. And it will be taxpayers that cover most of it.
The department’s new proposals to bolster oil train safety do not include specific provisions for insurance.
If you are wondering about pipeline accident insurance, a report in the Vancouver Observer says the National Energy Board included in its conditions for Enbridge that the company must set aside a total of $950 million to cover damage costs in the event of an pipeline accident, if the pipeline is approved.
$1 billion has become a benchmark of sorts for insurance coverage, larger incidents such as the BP spill can reach $20 billion just for direct cleanup. Economist and former Insurance Corporation of British Columbia CEO Robyn Allan said in a report the funds available for major spills have proven “woefully insufficient”.