(Corrects date in fourth paragraph and time period in fifth paragraph)
July 21 (Reuters) - A blinding flash of orange light jarred Weyauwega residents awake before dawn on March 4, 1996. An 81-car freight train had been barreling toward the farm town in central Wisconsin when it jumped a broken rail. The train's propane and petroleum cargo had caught fire and exploded.
Gerald Poltrock II, a rookie local police officer, thought it was a prank when the dispatcher called to say the city "blew up."
It was no joke. When he arrived at the Mill Street railroad crossing, Poltrock recalled, the scene was "mass chaos." Thirty-five rail cars were piled up like toys and firefighters were battling a roaring blaze. No one was seriously injured or killed but the inferno burned for 16 days and the entire town had to be evacuated.
Seventeen years later, another North American railway disaster has brought back memories of Weyauwega. On July 6, a runaway freight train with 72 cars of crude oil derailed in Lac-Megantic, Quebec. A fireball leveled the center of the picturesque lakeside town and killed about 50 people.
More than two weeks later, emergency crew are still digging through the charred rubble to find bodies, police are investigating to see if there was criminal negligence, and Canadian regulators are probing the railroad's safety practices.
In both disasters, the railroads involved were headed by Edward A. Burkhardt, a veteran industry entrepreneur credited with helping to lead a renaissance in U.S. regional and local freight railroads in the 1980s and 1990s.
There are clear differences between the two cases; for instance, the Wisconsin Central Ltd train that jumped the track in Weyauwega was operated by a two-man crew, while the Montreal, Maine & Atlantic Railway Corp (MMA) train that derailed in Lac-Megantic had a sole engineer who was not on board.
Still, a review of the U.S. federal investigation into the Weyauwega derailment offers clues on the kinds of questions that MMA is likely to face from transportation safety regulators, according to rail industry executives, transportation investigators and experts.
Burkhardt, who is about to turn 75, stands by MMA's safety record and noted the company had no serious derailments before Lac-Megantic. "I have never been involved with anything remotely approaching this in my whole life," he said.
With a career spanning more than five decades, Burkhardt specializes in piecing together small, aging or financially troubled rail lines. He cuts costs by trimming staff, pays for infrastructure repairs, and creates mid-size railroads that can run on thinner margins than larger competitors, according to union officials, regulators, former employees and business partners.
Like other regional railroad operators, Burkhardt has to strike a balance between ramping up traffic on rail lines to boost profits - and keeping up with maintenance and other costs to safely handle increased traffic volumes.
Henry Posner III was a partner of Burkhardt's in a railroad venture in Estonia in 2001 through 2007. He said Burkhardt kept a close eye on rail safety, and often began board meetings each month with discussions about how to improve safety measures.
Posner said they significantly reduced the number of personal injuries caused by the railroad over five years, adding, "It was the number one priority of Ed's and the shareholders."
Critics contend that not all of Burkhardt's rail lines were always well maintained, pointing to the Weyauwega crash as an example. U.S. National Transportation Safety Board investigators said the cause of that derailment was a broken switch-point rail that they said was not properly maintained by Wisconsin Central.
According to an NTSB report filed in August 1997, the broken rail should have been caught by Wisconsin Central's track inspectors during federally mandated monthly inspections.
"The switch point rail broke due to an undetected bolt hole crack that progressed from improper maintenance because Wisconsin Central management did not ensure that the two employees responsible for inspecting the track structure were properly trained," the NTSB report said. It did not specify any individuals by name.
Former Wisconsin Railroad Commissioner Rodney Kreunen, who investigated the accident, said the company had been using decades-old tracks that were designed for lighter-weight trains. Wisconsin Central had improved some weak spots on the line, but had not modernized the whole system, he said.
"They knew they were going to have to rebuild the railroad at some time," Kreunen said. "They really ramped up that business and started putting so much traffic over it that it went beyond (the rail's) capacity," he added.
Burkhardt disagreed with that assessment.
Wisconsin Central "was completely rebuilt under my management," said Burkhardt, who was the company's chairman, chief executive and president at the time of the accident.
"There were several years where capital budget, as a percentage of its revenues, was the highest of any North American railroad," he said, without giving figures.
In February 1997, following the accident, Wisconsin Central agreed to federal safety inspection directives to roll out widespread improvements to its tracks, railroad cars and locomotives. For example, it agreed to spend at least 30 percent more on track improvements.
The company also underwrote repair costs to the town, voluntarily paid Weyauwega residents $50 for each day they were dislocated, and donated hundreds of thousands of dollars to non-profit groups in the area. More than 20 families and several businesses sued the company, which settled for an undisclosed sum.
Wisconsin Central estimated the total cost of the derailment at around $28 million, according to regulatory filings.
The derailment had other repercussions on the company's operations. For example, it drew Wisconsin state lawmakers' and federal regulators' attention to the railroad's deployment of one-person crews on some of its lines, even though the Weyauwega train was operated by two people.
Later in 1997, the company suffered another derailment. This time, the two-person operated train crashed through a factory wall in Fond du Lac, Wisconsin, and killed a worker.
The death increased pressure on Wisconsin Central from lawmakers and regulators to improve its safety practices, including its use of one-person crews on other rail lines. In February 1998, Wisconsin Central agreed to limit the use of one-person and remote control trains on its 3,000 mile network.
Burkhardt had been among the first U.S. railroad operators to advocate for one-person crews - a practice that has now come under new scrutiny as the Lac-Megantic runaway train was staffed by one engineer.
Kevin Moore, chairman of a local chapter of the Brotherhood of Locomotive Engineers and Trainmen union, representing MMA workers in Maine, said Burkhardt had shared his opinion of single-person crews with him several times, including during contract negotiations.
"He thinks when you have two people in the cabin, the second person could be a distraction," said Moore. "I've never seen that. The second person has always been a benefit, not a distraction."
Burkhardt said one-person train operations are safe, efficient and "the norm in much of the world," citing New Zealand, Australia, Britain and Poland as examples.
"I am interested in improving staff productivity, but not by compromising safety," he said in an email to Reuters.
In Canada, only two railroad companies are authorized to run one-person train crews: MMA and the Quebec North Shore and Labrador Railway. The vast majority of U.S. rail companies do not use one-person crews, the Federal Railroad Administration said, calling the practice "very rare."
In almost every case, the agency said, "an engineer operates and a conductor manages a train, calling out signals and keeping inventory of its cargo." The agency, however, said it does not have specific rules about crew size.
There is no public data that compares the safety record of one-person trains with those operated by more people. The FRA does not differentiate between size of train crews in its accident or incident data reporting.
MMA accounted for 11 out of 7,565 accidents reported by U.S. railroads from 2009 through 2012, according to the Federal Railroad Administration. The company reported more accidents than 93 percent of the 288 small rail lines (with fewer than 400,000 employee hours per year) that had accidents in that period.
Experts cautioned not to read too much into the data, as it does not reflect the severity of the accidents. Before Lac-Megantic, MMA reported only one fatality between 2003 and 2012, a period when there were 8,029 total railway-related deaths.
The railroad was formed in January 2003 after Burkhardt's Rail World Inc acquired the assets of the bankrupt Bangor & Aroostook Railroad to build the base of a regional line to deliver paper goods, construction materials and energy products. (Rail World is an investment and management company that Burkhardt formed after leaving Wisconsin Central in 1999.)
Within hours of purchasing the railroad, one of its largest paper customers, accounting for 25 percent of the business, filed for bankruptcy, according to company documents. Weeks later, the new MMA management cut salaries by 25 percent, reduced payroll from 350 to about 275, and shelved plans to spend $20 million on infrastructure improvements.
"We must be thrifty and use our resources well," Robert C. Grindrod, then president of MMA, wrote in a January 2003 letter to employees. "Mr. Burkhardt and I both want you to know that the salary reductions and other steps outlined above will be removed as soon as traffic levels return to more normal levels."
The company, however, has continued to shrink. It was hit hard by the last recession and the collapse of the U.S. housing market. MMA employs about 170 people today.
Burkhardt visited Lac-Megantic a few days after the disaster, as he did Weyauwega following the derailment there.
"These are terrible things to occur, events I take very seriously and personally," Burkhardt said. "I have worked diligently to improve safety performance, and when one fails it is a personal failure." (Reporting by Karl Plume in Weyauwega, Wisconsin, P.J. Huffstutter in Chicago and Ernest Scheyder in New York; Additional reporting by Nick Carey in Madison, Wisconsin; Editing by Tiffany Wu and David Greising; Desking by Martin Howell)