Bidness ETC - ConocoPhillips, Among Four Oil Companies, Agrees To Contribute To Quebec Oil Spill Damage

While insisting that the industry is not to blame, several oil companies agreed to contribute to the Lac-Megantic oil spill crash.

ConocoPhillips (NYSE:COP), along with Shell, Marathon and Irving, has agreed to pay part of their portion to the fund to compensate for the families of the 47 victims of the 2013 oil train accident at Lac-Megantic in the Canadian province of Quebec. The move is seen as an attempt for the oil majors and minors to avoid being dragged into litigation. The Canadian government and General Electric will also contribute their portion to the fund.

Whilst the information on the individual contributions from each stakeholder is not available, it is reported that the total amount for the fund is said to be $345 million, according to the Wall Street Journal. This seems to be a lot of money, but is still less than the $400 million retirement package that Exxon Mobil’s former CEO received.

The Canadian Pacific Railway has not yet agreed to the settlement, as the judge had to delay the decision on the settlement. Furthermore, the nation’s railway operator has asked to protect it from any litigation in future.

It is usual for oil and gas companies to pay millions of dollars as fines instead of devoting resources to challenge lawsuits filed in courts and spend countless years in getting the verdict in its favor. However, rebuilding Lac-Megantic is likely to cost as much as less than $3 billion, and take up to less than a decade for the small Quebec City to turn itself around.

The strategy has worked for the most part. In 2009, the Canadian National ethanol train derailed and collided in Cherry Hills, Illinois, causing in the death of a woman and injuring several others. The railroad organization paid the aggrieved family members around $36 million, without having to endure court battles.

Following that payment, Canadian National railway continued to use the same old inadequate DOT-111 tank cars to move its crude oil and ethanol supply to Illinois, though the US Department of Transportation stated in its report that the tragedy was a result of the inadequate design of the tank cars.

Despite suffering from two derailing this year, Canadian Pacific Railway is still able to clock in profits at around $700 million, despite the derailments costing around $40 million in damages. In all likelihood, ConocoPhillips is going to be no different when it comes to understanding the cost of doing business by going for monetary settlement instead of fixing the mess that oil major creates.

ConocoPhillips’ stock price ended the day at $63.15, a gain of less than 1% from the previous day.