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UPDATE 2-Canada didn't audit railway adequately before disaster - report

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LAC-MÉGANTIC, Quebec, Aug 19 (Reuters) - The Canadian government did not adequately audit the rail firm at the center of the Lac-Mégantic crude tanker disaster that last year killed 47 people, an independent federal agency said on Tuesday, as it called for tougher scrutiny of the rail industry.

The Transportation Safety Board of Canada, which issued its final report on what was one of North America's deadliest rail accidents, said a similar catastrophe could happen again unless more measures were taken to boost rail safety.

Train shipments of crude oil have skyrocketed in Canada and the United States in recent years as energy companies try to compensate for a lack of pipeline capacity.

The disaster occurred after a single engineer parked his train for the night on a main line uphill from the small town of Lac-Mégantic, Quebec, in July 2013. The train of oil tankers started rolling after the brakes failed and derailed, exploding in balls of fire and flattening the center of the town.

The TSB said Transport Canada, the federal transportation ministry, had failed to stamp out abuses at Montreal, Maine and Atlantic Railway Ltd (MMA), the now insolvent company that operated the train.

TSB Chair Wendy Tadros said MMA had a weak safety culture, trained its employees poorly, skimped on maintenance and did not have a functioning safety management system.

"Transport Canada knew about some of the problems at MMA, but the follow-up wasn't always there. Instead, the focus was on making sure railway companies had a safety management system, not how they were using it and whether it was effective," she said.

"Transport Canada didn't audit railways often enough and thoroughly enough to know how those companies were really managing - or not managing - risks," she told a news conference.

The report could be politically damaging for the right-leaning Conservative government, which is trailing far behind in the polls ahead of a federal election due in October 2015.

The TSB called for more thorough audits of safety management systems and said more physical defenses, such as wheel chocks or modern braking technology, were needed to prevent runaway trains.

Asked whether a similar disaster could happen again, TSB chief operating officer Jean Laporte replied: "Unfortunately, right now, there are risks that that could happen."

An official watchdog said last November that Canadian officials were not doing enough to ensure rail safety due to inadequate audits, ill-trained staff and too little focus on high-risk railroads.

Authorities in both Canada and the United States have been trying to improve the safety of transporting crude oil by rail.

"This booming industry - where unit trains were shipping more and more oil across Canada, and across the border - ran largely unchecked," said Tadros.

In April, acting on earlier TSB recommendations, the Canadian government required that older rail cars used for carrying crude oil be phased out by May 2017.

Canada's Transport Minister Lisa Raitt was due to react later on Tuesday.

(Writing by David Ljunggren in Ottawa; editing by G Crosse, Chizu Nomiyama and Jeffrey Hodgson)