(Reuters) - Canadian legislators on Monday amended a bill designed to ensure grain moves smoothly by rail by allowing the government to order railways to compensate shippers for poor service.
The government's Canadian Transportation Agency currently has authority only to arbitrate matters on which the parties mutually agree. Railways can avoid paying compensation simply by refusing to negotiate a service level agreement with shippers that includes penalties, said Jeff English, spokesman for Agriculture Minister Gerry Ritz.
The House of Commons agriculture committee approved an amendment proposed by Conservative government member of Parliament Pierre Lemieux that gives the agency authority to order compensation for expenses incurred due to railways' failure to deliver service. Service levels must be spelled out in written agreements ahead of time between shippers and railways.
The Conservative government last month introduced legislation that would allow it to set minimum levels of grain that railways must ship each year to avoid the huge crop backlogs that have hurt farmers' cash flow this winter. A record-breaking harvest and harsh winter overwhelmed Canada's two big railways, backing up the flow of grain from western elevators to ports.
A component of the legislation allows government to spell out what elements make up a service agreement between railways and shippers, ensuring they have access to agreements with mandatory penalties for violations, English said.
The amended bill now moves to the House of Commons for approval.
Canadian National Railway Co spokesman Mark Hallman said the company is disappointed with the amendment.
"On account of vocal complaints from grain companies and farm lobbies in the context of a 100-year crop, the government is hastily introducing yet another highly intrusive regulatory measure that will create more problems than it will solve," Hallman said in a statement.
A spokesman for Canadian Pacific Railway Limited said the company was reviewing the amendment and could not immediately comment. The Western Grain Elevator Association, which represents grain handlers such as Richardson International Limited and Cargill Ltd could not be reached for comment.
Other proposed amendments were defeated by the committee, including hiking minimum weekly grain volumes and increasing penalties against railways for falling short of those levels.
Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Lisa Shumaker