Further developments on the Lac Megantic rail line

[Jan van Eck + 7,558]

As this is September 11th, the Day of Disaster, I reach back into history and would review developments on the rail line through the sleepy resort town of Lac Megantic, Quebec.  The rail line was originally built by the Canadian Pacific Railroad  ["CP"] as a direct connection between Montreal and the Atlantic seaport city of St. John, New Brunswick.  Later it was connected to the Maine seaport of Searsport; both cities are ice-ree in winter, a big advantage over Montreal Port.  Eventually, the CP decided to get out of hauling freight to the Atlantic Provinces and effectively abandoned that to its larger rival, the Canadian nation ["CN"}, which I recall was a Crown Corporation owned by the Federal Govt of Canada  (and thus will very deep pockets).  The CN ran to the Northeast out of Montreal, up to Quebec City, then around the top of Maine and down through two trackage routes into Halifax: one being along the coast of the Gulf of St. Lawrence, known as the Gaspe Route, and the other through the New Brunswick cities of Frederickton and Moncton (where CN had ha big repair shop), and on to Halifx Harbor, Nova Scotia.  A branch line ran into the port of St John, New Brunswick. 

The CP thus sold off its competing direct route from Montreal to St. John, which went through various owners, including the Iron Road Railway (went backrupt), eventually became the Montreal Maine and Atlantic RR Co  ("MMA"), owned by a chum of mine from Yale.  The line continued to suffer losses and in an effort to stave off its own bankruptcy started picking up oil-train fraight from the CP into the Irving Oil refinery  (a big refinery, I think around 330,000 bbl/d).  The refinery exports lost of refined product including incidentally propane gas into New England as well as its markets in Atlantic Candad, under the Irving Oil Co. name.  The Irving family effectively owns New Brunswick, including vast timber holdings and construction lumber exports into the USA. 

To cut costs, those unit trains (run with four wheesing old die$sels up front) were 88-cars, a full mile in length, with only one person - the engineer, who doubled as the conductor.  It was Ffriday night at midnight when the fated oil train pulled up on the bluff outside town; the engineer, divorced and living at home with his mother, left the train unattended and took a taxi into town, and I presume was looking for a woman, either paid or volunteer. The lead locomotive was left running at idle to keep the air-brake pressure up.  The old engine had a blown piston, so crankcase oil would suck up into the combustion chamber, ignite, and blow out the stack in fire-sparks.  That brought on the local volunteer fire dept, who shut the engine off.  The air pressure bled off, the brakes on the train released, it rolled down into the town, derailed at speed, crashed into a nightclub with live music, ignited, and incinerated the 47 people inside listening to music and enjoying a drink. 

From this fiasco oil-by-rail  ("OBR") stopped, and Irving took their unit-train oil via the US CSX line at the Port of Albany, had it loaded into 60,000-ton class tankers, and steamed up via the Gulf of Maine to the refinery.  No OBR went via the CN trackage, as that was fully booked with dry freight running into Halifax. 

The MMA went into two parallel bankruptcies, one in the USA, one in Canada, and the hedge fund "Fortress Investments" bought the assets for about $15 million, a bargain for a short-line with over 400 miles of track. The hedge fund is somehow interconnected with the Genesse & Wyiming RR, which despite its name is actually out of Darien, Connecticut, run by New Yorkers and Wall Street money; they play monopoly cards with rail properties, owning, buying, selling, and trading railroads  (now the count is over !00).  The old MMA is re-branded the Central Maine and Quebec RR  ["CMQ'].

In the latest turn of this saga, the CMQ has just been sold (June 2020) back to the CP, presumably at a hefty profit.  I don't know the number, b ut would be surprised if it was less than $50 million. This is what hedge funds do: they buy assets cheap, hold for a few years, gamble on changing economic patteRns, and then sell for a huge profit.  It is how hedge funds amass capital gains. 

The CP is investing another $90 million in trackage upgrades in order to provide clients with 24-hour ship speed from Montreal to Searsport.  Will they also go back to OBR/  My guess is that they will.  Meanwhile, the Province of Quebec govt is building a loop-around track around Lac megantic, so the next OBR crash will go burn outside the city.  Oh, well.