04/09/2014 01:55 EDT | Updated 06/09/2014 05:59 EDT

Expectations for moving bumper crop were unrealistic: CN president

WINNIPEG - The president of Canadian National Railway is criticizing the federal government for over-regulating railways based on an unusually cold winter and a bumper grain crop.

Claude Mongeau told the Winnipeg Chamber of Commerce that, under the circumstances, it was unrealistic to expect anyone to move the record harvest in just a few months. Rail companies alone can't bear sole responsibility for the transportation bottleneck that has left farmers' bins overflowing, he said.

CN (TSX:CNR) moved a record number of cars before the "wicked winter that put us on our knees," Mongeau said Wednesday.

"I'm sorry that winter was so hard. I'm sorry that we failed our customers — all of them, not just grain — not being able to meet all of their demands, all of the time," he said. "But I don't control the weather."

Western Canadian farmers harvested a record 76 million tonnes of grain last year — 50 per cent higher than average — but much of it hasn't moved.

Rail companies have said the frigid weather forced them to use shorter cars to ensure brakes could be used safely, but that cut down on their capacity. Mongeau also said grain elevator companies didn't act quickly enough in August to move "a huge crop that was maturing in their own backyard."

Last month, Ottawa ordered rail companies to double the amount of grain they move each week to a minimum of one million tonnes and using 11,000 cars. If they don't meet the requirement, they could face fines of up to $100,000 a day.

The Conservatives are also expected to pass legislation by the end of the week that would further regulate the railways. The legislation allows the Canadian Grain Commission to decide how much a grain company will pay to a farmer if the company doesn't meet delivery dates set out in a contract.

It also increases what are called inter-switching limits in Alberta, Manitoba and Saskatchewan which the federal government says would allow more service by more rail companies. Mongeau said that will just open the market to U.S. companies and take jobs away from Canadians.

"This is bad policy," Mongeau said. "This is bad, bad policy made in the heat of the moment to punish the railroads for not moving a 100-year crop in a difficult winter. That's the mess we're in."

If Ottawa is going to regulate rail companies, it should also regulate grain elevators and put limits on the number of orders grain companies can place, he suggested.

"We're going to have to level the playing field."

But some Prairie farmers say the regulation of rail companies was a long time coming. Doug Chorney, head of Keystone Agricultural Producers, said the railways have never made moving grain a priority. He pointed out that when the railways had a chance to sign voluntary service agreements with shippers last year, they declined.

"What they demonstrated is they do need to be regulated," he said. "What we've seen this winter for performance is unacceptable and government had to intervene."

Still others are calling for even greater intervention.

The Saskatchewan government has said it would like to see stiffer penalties imposed on rail companies going forward, with the proceeds going to farmers instead of federal coffers. Manitoba Premier Greg Selinger also said federal legislation needs to be tougher.

"We think there have to be serious penalties if they're not making grain a top priority," Selinger said. "When this part of Canada opened up, the railway companies were the key to allowing this part of Canada to be the bread basket of the world.

"They still have that obligation."

Note to readers: This is a corrected story. An earlier version misspelled Mongeau's last name.