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Report On Business Grain shipping shortfall fine rankles Canadian Pacific Railway

Rail cars loaded with canadian wheat travel through the Rocky Mountains on the Canadian Pacific railway line near Banff, Alberta, October 6, 2011.

Todd Korol/Reuters

Canadian Pacific Railway Ltd. says it will appeal a $50,000 fine levied by the federal government for failing to meet the weekly minimum grain shipping volumes.

The Calgary-based railway said a Labour Day shutdown at the Port of Vancouver delayed the unloading of grain railcars and caused it to ship less grain than required by the federal government.

"It was a glitch in the supply chain and CP shouldn't bear the burden of every component in what is a nationwide supply chain," said Martin Cej, a CP spokesman. "CP has been a long-time advocate for 24/7 service, but for it to work through the entire supply chain, all the links in the supply chain must also work on a 24/7 basis, and currently that is not the case."

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CP and Canadian National Railway Co. missed the minimum grain volumes in the second week of September, and CN fell short in the final week of July, said Ashley Kelahear, a spokeswoman for Transport Minister Lisa Raitt.

Montreal-based CN said it will pay its $100,000 fine and "move on." CP said it will appeal to the Transportation Appeal Tribunal of Canada, and is refusing to pay the fine.

Both railways have been under government orders since the spring to move a set weekly amount of wheat, canola and other crops grown by western Canadian farmers, whose record harvest in 2013 preceded a harsh winter the railways blamed for slow shipments. The grain industry said cost-cutting at railways and a focus on more lucrative and fast-growing lines of business such as crude oil left them with a backlog of crop and cash problems.

The railways say the cold winter of 2013-14 caused unavoidable delays, and the regulations that followed were unfair. Until recently, the two companies were required to each move 536,250 tonnes of grain a week or face a fine of $100,000. (The minimum volumes were recently reduced in light of the smaller 2014 harvest.)

For companies that generate billions of dollars in revenues and make record profits, the amount is relatively tiny. CN's 2014 sales were $12-billion, while CP's were $6.6-billion, according to Bloomberg estimates, including almost $1-billion from hauling Canadian grain.

However small, the fines accompany new regulations imposed on the railways in 2014 after complaints to Ottawa from farmers and grain companies about poor rail service.

The new rules include widening the area in which railways must open their networks to rivals, a move meant to offer commodities shippers greater choice of rail companies.

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The fines laid against the railways are smaller than the $100,000 "per occurrence" set out in the regulations introduced last year, a sign the government might believe supply chain constraints contributed to the lower volumes moved by rail.

"CN is heartened that the Transport Canada enforcement officer's investigation appropriately took into account factors beyond CN's control, and also reflected the important role that others play in the grain supply chain," Mark Hallman, a CN spokesman, said in an e-mailed statement.

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