* Union, company must give 72 hours' notice of strike, lockout
* Talks with government mediators continue
* Work rules at issue, union says
By Susan Taylor
TORONTO, Oct 28 (Reuters) - Canadian National Railway Co , the country's largest railroad, said on Monday it is still talking with the union representing about 3,300 conductors and other workers and expects the two sides will be able to avoid a strike.
A strike or lockout would disrupt a crucial network for moving goods as diverse as cars and crude oil. Negotiations with government-appointed mediators resumed on Oct. 21 after efforts with conciliators to reach an agreement failed.
The union and company will be in a legal position for a strike or lockout at 1 minute after midnight on Tuesday. But both parties must give 72 hours' notice before a strike or lockout can start, so a work stoppage would not be immediate.
The Teamsters Canada Rail Conference union, which represents conductors, trainmen, yardmen and traffic coordinators, has said talks stalled on CN demands for concessions that would force members to work longer hours with less rest time between trips. CN has said none of its proposals would compromise worker health or safety.
"CN remains optimistic that it can negotiate a settlement with the (Teamsters) to avoid labor disruption in Canada," railway spokesman Mark Hallman told Reuters.
He would not comment on whether CN, which reported larger-than-expected quarterly profit last week, is preparing a contingency plan in the event of a strike or lockout.
Union spokesman Roland Hackl, a member of the bargaining team, said both parties have agreed not to speak publicly about negotiations.
"No action can take place on either part unless 72 hours' notice is served to the other and there has been no notice. That's about all I can tell you right now, we're still working," said Hackl, who said previously he was hopeful that a deal would be reached last week.
Any service disruption would be particularly problematic for Canadian farmers, who must move a record grain and oilseeds harvest to market.
The Grain Growers of Canada asked the minister of labor in an Oct. 25 letter to take "early action to head off this work stoppage" and "swift and decisive" action in the event of a strike.
The Canadian government has intervened several times in recent years to force striking rail and airline workers back to work. Last May, it used legislation to end a strike at Canadian Pacific Railway Ltd, CN's smaller rival.
The contract dispute follows a recent CN derailment that renewed public concern over the safety of rail transport for fuel and other hazardous materials.
CN's mainline through Alberta was blocked for several days last week after 13 cars on a mixed-freight train derailed. One car containing highly flammable propane exploded and three others burst into flames.
There were no injuries, but the accident came just months after 47 people died when a crude oil train derailed and exploded in Lac-Megantic, Quebec.