Canada says won't tell railways where to ship grain for now

By Randall Palmer and David Ljunggren

OTTAWA, March 25 (Reuters) - The Canadian government will not, for now, start telling railways where to ship farmers' grain but it will decide within days whether to extend its requirements on how much grain they must haul, Transport Minister Lisa Raitt said on Wednesday.

In an interview in her parliamentary office, Raitt said farmers and shippers have questioned whether the government's grain-shipment minimums are still required and whether Ottawa should tell the country's two dominant railways, Canadian National Railway Co and Canadian Pacific Railway Ltd , on which corridors grain should be shipped.

Grain handlers and farmers say the railways have focused on the quickest turnaround corridors, notably Vancouver on the West Coast and the Great Lakes port of Thunder Bay, while ignoring shipments to the United States.

"I am not looking at the question of corridors at the moment," Raitt said.

The mandatory minimum shipments, put in place to ensure crops from the record 2013 harvest got to market, expire on March 28. Raitt said she takes farmers' concerns seriously, but also noted Canada's grain backlog was "coming back to equilibrium".

The government is also looking at whether to remove a cap on how much revenue the railways can earn from shipping grain. The railways say that limiting their income from shipping grain reduces their incentive to haul it.

Raitt said she is sure former International Trade Minister David Emerson will deal with this issue in his government-mandated review of the Canada Transportation Act. Emerson's report is due in December.

She said she did not lean one way or the other on the revenue cap, but added: "Look, I'm a market girl. There's no question that I fully believe in market forces."

She called "ridiculous" CP Rail's refusal to pay government fines for not meeting the minimum grain shipments. CP Chief Executive Hunter Harrison said this month the railway would contest the C$50,000 ($40,000) in fines in court on principle.

"Well my principle is we said we would make sure that a certain minimum amount of grain is moving, and we expect it to be moved," Raitt said. "Eventually they should pay the fine."

($1=$1.25 Canadian) (Additional reporting by Allison Martell in Toronto; Editing by Jeffrey Hodgson; and Peter Galloway)