Before Blast, Hauling Oil Revived a Tiny Railroad

On the other end are the little guys like Edward A. Burkhardt, the chief executive and majority owner of Rail World Inc. That is the company whose runaway train of oil tankers exploded last week in the town of Lac Mégantic, Quebec, killing 28, leaving 22 people missing and presumed dead, and the vacation town’s core incinerated.

The Montreal, Maine and Atlantic Railway runs on 510 miles of track, including a former section of the Canadian Pacific Railway that runs through Lac Mégantic. As large railways in Canada and the United States have divested themselves of low traffic routes, small players like Mr. Burkhardt have swept in with the hope that they can be turn the lines into profit makers.

Mr. Burkhardt, an American who turns 75 this month, bought the rail lines that form the Montreal, Maine and Atlantic Railway in 2003 after a long career running railroads in the United States. The 21 locomotives that make up the railway’s secondhand fleet provide a colorful cavalcade with many showing the faded paint schemes from previous owners.

Rail World also owns the 13-mile San Luis Central Railroad in Colorado, where it mostly hauls potatoes and grain. It runs trains in Estonia and owns two small railways in Poland, which rely on secondhand Moroccan locomotives built in the 1970s. One of the railways is based in Oswiecim, better known by its World War II German name of Auschwitz.

Mr. Burkhardt did not respond to requests for an interview. Calls to the head office in Rosemont, Ill., are met with this recorded message: “Hello, you’ve reached the offices for Rail World and the New Zealand Consulate.”

The incongruous combination is the legacy of Mr. Burkhardt’s global ambitions and dates to when he helped privatize New Zealand’s national rail network.

Mr. Burkhardt began his career with the Chicago and North Western Railway, a large carrier that eventually disappeared through mergers. But it was the purchase of a network of tracks from Canadian Pacific to form the Wisconsin Central in 1987 that made him something of a legend in the railroad business. He was a man who, as a cover headline on Trains magazine put it in 2007, ran railroads that “defied adversity.”

The Wisconsin Central, by several accounts, became a success by offering customers better service than Canadian Pacific. But Mr. Burkhardt had global ambitions, which included the privatization in New Zealand and running several freight lines in Britain. Shareholders thought he had overreached and he was eventually ousted in 1999.

With Rail World, founded that year, Mr. Burkhardt made an unsuccessful effort to buy back the Wisconsin Central.

Then Mr. Burkhardt landed the bankrupt Bangor and Aroostook Railroad in 2003, renaming it the Montreal, Maine and Atlantic Railway. It was not an obvious prize. A combination of a long established railroad in Maine and pieces of former Canadian Pacific lines in Quebec, the Bangor and Aroostook’s primary business had once been shipping potatoes in distinctive red, white and blue freight cars emblazoned with the words “State of Maine Products.”

But the forestry and paper-related industries that remained along the M.M.& A.’s tracks were in decline. In 2010, Mr. Burkhardt sold 223 miles of track he had threatened to close down to the state of Maine for $20 million.

The rail business was not great, but the Bakken oil fields in North Dakota changed all that. Just over a year ago, Irving Oil contracted with the M.M.& A. to carry Bakken crude to its refinery in Saint John, New Brunswick. That deal revived the railway.

The train that devastated Lac Mégantic, now known in Quebec as the “ghost train,” started out in the Bakken oil fields. It was loaded with crude oil that then traveled across the Continent on Canadian Pacific rails to Montreal, the line’s Eastern terminus.

Mr. Burkhardt’s M.M.& A. took it from there.

Despite the oil deal, the railroad is not a financial success. The Caisse de dépôt et placement du Québec, the province’s pension fund, invested $7 million for a 12.8 percent stake in 2003. This week it disclosed that even before the disaster, that investment had been written down to a token $1,000 value.

What happened in the village of 6,000 last week is not yet clear to accident investigators. Mr. Burkhardt initially blamed “tampering” with the train’s locomotives for the derailment before pointing a finger at volunteer firefighters who put out a fire in one of the locomotives.

As residents of Lac Mégantic jeered in the background during the news conference on Wednesday, Mr. Burkhardt shifted blame again, this time to the engineer who parked the train for the night uphill from the village. Although the railway is not involved in the investigation and he offered little detail, Mr. Burkhardt said he thought the engineer had ignored safety laws and did not properly secure the train’s hand brakes.

Mr. Burkhardt’s prolonged absence from the disaster scene had been widely condemned by politicians and residents. As he was driven to the village, the cable news channel of the Canadian Broadcasting Corporation updated viewers about Mr. Burkhardt’s travel progress on the roughly two-hour drive. The news conference opened with him lecturing reporters about their manners.

As the news conference began to fall apart on Wednesday, and before he was whisked away from reporters by police for several hours of questioning, Mr. Burkhardt was asked if his tiny railroad’s giant disaster would be its financial ruin. Smiling, he said, “Everyone in the world that has a business of any size has occasions when they think they might go bankrupt.”

Mr. Burkhardt mixed his “abject apology” with jokes. When pressed repeatedly by a reporter about his personal worth in the wake of the accident, he eventually said, “A whole lot less than I was Saturday.”

Laos May Bear Cost of a Chinese Railroad

The Chinese-financed railway is to snake its way through dozens of tunnels and bridges, eventually linking southern China to Bangkok, the capital of Thailand, and then on to the Bay of Bengal in Myanmar, significantly expanding China’s already enormous trade with Southeast Asia.

But Mr. Wang may have to wait a little longer to make his fortune from all the Chinese expected to descend on this obscure corner of Laos about 50 miles from the nearest border with China. Even though the project has run into some serious objections from international development organizations, most experts expect it to go ahead anyway. That is because China considers it vital to its strategy of pulling Southeast Asia closely into its orbit and providing Beijing with another route to transport oil from the Middle East.

The crucial connection would run through Oudom Xai between Kunming, the capital of China’s southern province of Yunnan, and the Laotian capital, Vientiane.

“China wants a fast-speed rail — Kunming to Vientiane,” George Yeo, a former foreign minister of Singapore, said in a recent speech to the Association of Southeast Asian Nations Business Club in Bangkok.

Mr. Yeo, chairman of Kerry Logistics Network, a major Asian freight and distribution company, is considered one of the best-informed experts on the expansion of new Asia trading routes. “The big objective is Bangkok,” he said. “It’s a huge market, lots of opportunities. From there, Bangkok to Dawei in Myanmar — that will enable China to bypass the Malacca Straits,” a potential choke point between the Indian Ocean and China’s east coast.

But China is not particularly interested in sharing much of the wealth the railroad would generate. Most of the benefits, critics say, would flow to China while most of the costs would be borne by the host nation. The price tag of the $7 billion, 260-mile rail project, which Laos will borrow from China, is nearly equal to the tiny $8 billion in annual economic activity in Laos, which lacks even a rudimentary railroad and whose rutted road system is largely a leftover from the French colonial era.

In mid-November, when Prime Minister Wen Jiabao of China visited Vientiane for a summit meeting of European and Asian leaders, he was expected to attend a groundbreaking for the railroad. The ceremony did not take place.

An assessment of the rail project by a consultant for the United Nations Development Program said the terms of the financing offered by China’s Export-Import Bank were so onerous they put Laos’s “macroeconomic stability in danger.” At the same time, the construction through northern Laos would turn the countryside into “a waste dump,” the consultant’s report said. “An expensive mistake” if signed under the terms on offer, the report concluded.

As collateral for the loan, Laos was bound to provide China with minerals, including potash and copper.

Other international donors echoed the findings. “Partners, including the Asian Development Bank and the World Bank, expressed concern, and the International Monetary Fund was here and said, ‘You have to be very careful,’ ” said an Asian diplomat briefed on the reservations expressed to the Laotian government.

Nonetheless, the National Assembly has approved the project as the nation’s part in the much broader trans-Asian rail agreement signed by nearly 20 Asian countries in 2006. While the workings of the Communist Party that runs Laos are extremely opaque, diplomats here said, the project is most strongly backed by the pro-China deputy prime minister, Somsavat Lengsavad. Efforts to interview Mr. Somsavat were unsuccessful.

China’s exploding trade with Southeast Asia reached nearly $370 billion in 2011, double that of the United States in the same year. By 2015, when the Southeast Asian countries aim to have completed an economic community, China projects that its trade with the region will equal about $500 billion.

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