U.S. judge OKs $446 million settlement for victims of Lac-Mgantic disaster

PORTLAND, Maine – A U.S. bankruptcy judge has approved a $446-million Cdn settlement fund for victims of the fiery Lac-Megantic oil-train derailment in Quebec, clearing the way for payments to victims by year’s end.

Judge Peter Cary in Portland, Maine, announced his decision Friday after Canadian Pacific (TSX:CP) dropped its objection to the settlement plan and after a Canadian judge gave conditional approval Thursday. He praised attorneys for working together to get a substantial agreement in place as quickly as possible.

The settlement was the result of negotiations with about two dozen companies.

Barring any surprises, payments could be made to victims of the disaster by year’s end, said Robert Keach, the bankruptcy trustee. About $110 million Cdn is being set aside to settle wrongful death claims.

Related: Federal investigator discusses Lac-Mégantic at Engineering Insurance Conference

“We don’t pretend to suggest that we made up for everything that happened,” said Keach. “But within the limits of the civil system, this is substantial compensation for the victims and they deserve it.”

A runaway train with 72 oil tankers derailed on July 6, 2013, in Lac-Megantic, setting off powerful explosions and causing fires that wiped out much of the downtown. Forty-seven people were killed.

Robert Bellefleur, a member of a Lac-Megantic-based coalition that promotes rail safety, welcomed the judge’s approval.

“It’s good news for people who were hit hard, who lost loved ones, homes, businesses,” said Bellefleur, who knew about 25 of the victims, including his cousin’s son, his daughter’s two babysitters and his contractor.

Related: Canadian Pacific challenging responsibility in Lac-Mégantic disaster in court

“It’s very good news. It doesn’t replace lives. It will provide comfort and maybe enable people to get back on their feet and live a more normal life, but without ever forgetting what happened.”

But Bellefleur said the state of the rail track in Lac-Megantic, which he called a determining factor in the tragedy, has not been addressed.

The disaster led to greater regulatory scrutiny of the use of trains to transport crude oil amid a production surge thanks to new technologies including hydraulic fracturing.

On Friday, the judge described the devastation from the fires as “vast and complete.”

“My thoughts and good wishes go to the good town of Lac-Megantic and the victims’ families,” Cary said after announcing he would sign the settlement.

After the fires were doused, the train’s operator, Maine-based Montreal, Maine and Atlantic, filed for bankruptcy. The settlement fund is tied to those bankruptcy proceedings in the United States and Canada.

Related: Canadian Pacific ready to drop appeal in Lac-Mégantic case for legal protection

The fund of $446 million Cdn was the product of negotiations with about two dozen companies with potential liability. In addition to settling wrongful death claims, money will be used to compensate government entities and others for destruction and environmental damage.

Canadian Pacific owned the track where the crude oil shipment originated and contended it bore no responsibility, since the train that derailed had a Montreal, Maine and Atlantic locomotive and crew and was operating on MMA rail.

But Keach argued Canadian Pacific bears some responsibility for failing to properly classify the Bakken region crude oil, which was as volatile as gasoline.

Canadian Pacific isn’t contributing to the settlement fund, and the railroad had contended the plan would have hampered its ability to defend itself from lawsuits, because the agreement provided legal immunity only to companies that do contribute.

But the altered amendment calls for a “judgment reduction provision” that would take into account the full settlement paid by others if Canadian Pacific is ordered to pay damages in the future.

“Although CP was not at fault in the derailment, we have been working with the trustee for a solution that protects CP interests and allows payments to be made to victims as soon as possible,” said Canadian Pacific spokesman Martin Cej.