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Ottawa hails new rail shipping regulations, says farmers to benefit

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SASKATOON - The federal government hopes new rail transportation rules will speed up deliveries of grain and harvest some goodwill with farmers hard-hit by a shipping bottleneck.

The Fair Rail for Grain Farmers Act includes measures that set minimum grain volumes that Canadian National (TSX:CNR) and Canadian Pacific (TSX:CP) must meet from Aug. 3 to Nov. 29.

The railways are also to provide more information about grain shipments to allow for better monitoring.

There are also provisions to more clearly define service level agreements that can be arbitrated by the Canadian Transportation Agency.

The legislation, effective Friday, was passed last spring after a rail bottleneck left huge amounts of grain from a record crop sitting in bins across Western Canada, causing producers financial hardship.

At one point, Ottawa ordered rail companies to double the amount of grain they were moving each week to a minimum of one million tonnes or they could face fines of up to $100,000 a day.

"The regulations passed today are intended to maximize the amount of grain moved by rail before the winter season and allow the government to reassess the situation later in the fall, with the longer-term goal of returning carryover stocks to normal levels by the end of July 2015," Agriculture Minister Gerry Ritz said in a release.

"Today's regulations are the latest step in our ongoing efforts to create a rail supply chain that farmers and all shippers can depend on as they grow the Canadian economy."

CN President Claude Mongeau said the new law isn't necessary and could hurt the rail sector.

He said the railways did a reasonably good job last fall and this year of dealing with a record grain crop. The supply chain is now operating normally and is ready to deal with the next grain harvest, he added.

"As there are no structural problems to fix, there is no need for such burdensome and ill-advised regulatory intervention," he said in a release.

"The government’s approach can only stifle supply chain collaboration and may ultimately undermine investment in the rail sector."

CP President Hunter Harrison was also unhappy with the new rules.

"Today's disappointing announcement by the Government of Canada is very unfortunate and clearly demonstrates that despite the facts, this government has not listened," Harrison said.

"Issues relating to the transportation of grain will not be solved in Ottawa but by the joint collaboration of all partners in the supply chain."

Transport Minister Lisa Raitt said the regulations will help avoid a repeat of the grain bottleneck.

"Our government has made tough decisions for the benefit of our producers and to maintain Canada's good reputation as a global supplier," she said in a release.

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