March 18, 2011 / 3:26 PM / 6 years ago

Canada moves to improve railway service

WINNIPEG, Manitoba (Reuters) - Ottawa will move to quell complaints by western Canadian farmers about poor rail freight service by giving all shippers more clout in ensuring consistent operations, but it is taking no immediate steps to penalize railways for bad performance.

The Conservative government said on Friday it will help shippers and railways negotiate terms for service agreements -- something they don't have now -- and improve ways to resolve disputes.

Those steps, which will require the government to pass legislation giving shippers the right to the service agreements, drew support from some farm and forestry groups and opposition from Canada's biggest railway.

Ottawa's moves, which come amid rising expectations of a spring general election, are aimed at making railway transportation more efficient and reliable, said Transport Minister Rob Merrifield at a grain terminal near Winnipeg.

The country's two main railways, Canadian National and Canadian Pacific, handle most of Canada's rail freight, and have faced criticism from farmers that unpredictable service is keeping growers from fully cashing in on high grain prices.

Canadian farmers lean heavily on railways to move grain to port because distances are too vast to rely on trucks, and the western grain belt lacks a river freight system.

Canadian National Chief Executive Claude Mongeau said Canada's rail service is quite good overall and said the railway has serious concerns about the government's moves.

"We are concerned that the ... recommendations are drifting backward toward more regulation instead of encouraging the current momentum for positive change," Mongeau said.

A Canadian Pacific spokesman was unavailable for comment.

Grain Growers of Canada, an umbrella group of farmer organizations, said on Friday the government's moves were a step in the right direction. Earlier this month, the group called for Ottawa to impose penalties on railways for poor performance.

Two other farmer groups, Pulse Canada and the Canadian Special Crops Association, said Ottawa's moves will add predictability and accountability to the transportation system.

The Canadian Wheat Board expressed cautious optimism.

"The government's response is a step in the right direction, but the devil will be in the detail," said Wheat Board Chairman Allen Oberg.

Canada is the world's biggest exporter of grains such as spring wheat and malting barley, as well as the rapeseed variant canola.

The changes will also help move wood, pulp, and paper more effectively, said Avrim Lazar, chief executive of the Forest Products Association of Canada, noting that mills are often in remote regions served by a single railway.

The government, which was responding to an independent panel's three-year review of rail service, also said it will establish an industry group to tackle broad problems and draft performance measurements.

The moves come as speculation rises that the minority Conservative government, which has strong support in Western Canada, will be defeated over next week's federal budget, forcing an immediate election call.

Shares of Canadian National rose 0.5 percent to C$71.96 on Friday and Canadian Pacific edged up 0.6 percent to C$63.45 on the Toronto Stock Exchange.

Reporting by Rod Nickel; editing by Rob Wilson

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