Canada bill imposes penalties for rail service failure

Tue Dec 11, 2012 3:54pm EST
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By Rod Nickel

WINNIPEG, Manitoba (Reuters) - Long-awaited federal legislation unveiled on Tuesday would force Canadian railways to reach service agreements with shippers that request them and could impose penalties on the railways if they fail to meet their obligations.

The bill, unveiled by Transport Minister Denis Lebel and Agriculture Minister Gerry Ritz at a press conference in Winnipeg, seeks to address complaints by grain handlers, miners and shippers of commercial goods, which want better service from the country's big railroads: Canadian National Railway Co and Canadian Pacific Railway Ltd.

Under the legislation, the railways will be obligated to respond within 30 days of a shipper requesting a service contract. If an agreement cannot be reached through commercial negotiations, arbitration would be available to a shipper to establish terms of service.

"There is an imbalance in the shipper-railway relationship," Lebel said at a news conference attended by shipping groups, but not railways. "(A government-appointed panel) recommended the use of service agreements as a tool to enhance clarity and predictability and reliability on rail service."

Lebel, however, said that rail service has improved recently.

The new provisions provide incentives to shippers and the railways to negotiate commercially, and give the Canadian Transportation Agency the power to issue a fine of up to C$100,000 ($101,000) for each violation of an arbitrated service level agreement.

CN Chief Executive Claude Mongeau said there is no evidence that there are systemic problems in moving freight by rail in Canada that warrant the government's move, which he said goes against the gradual deregulation of the system over the past 20 years.

In the past few years, shippers and railroads have collaborated to make improvements to the system, but that co-operation and innovation are now in jeopardy, he said.   Continued...