* Ruling cuts rates, allows routing over two railways

* CPR shares fall on weaker than expected contract price

* Teck says decision has long-term implications (Updates, adds background. In U.S. dollars, unless noted)

TORONTO, July 6 (Reuters) - A ruling in a rate dispute between Canadian coal producer Teck Resources Ltd (TCKb.TO: Quote, Profile, Research) and Canadian Pacific Railway Ltd (CP.TO: Quote, Profile, Research) will cut the miner's shipping costs and sent the railway's shares down nearly 7 percent on Monday.

The arbitrator's decision, which covers coking coal shipped from April 8 of this year to April 7, 2010, will also allow Teck to switch some of the export-bound traffic from CP to rival Canadian National Railway (CNR.TO: Quote, Profile, Research) midway through its journey to lower shipping costs.

"This has long-term implications," Teck spokesman Greg Waller said.

The decision cuts Teck's freight rates, drops a provision that pegged shipping rates to the price of coal, and ends CPR's status as the only railway with a contract to haul coal from the five mines in southeastern British Columbia to the ports near Vancouver, officials said.

Teck expects average transportation costs, including rail and port costs, to be in the range of $33 to $35 per tonne for the 2009 calendar year, compared with its earlier forecast of $35 to $37 per tonne, saving it about $70 million.

Waller said the decision could also send a message to port operator Westshore Terminals (WTE_u.TO: Quote, Profile, Research), whose contract with Teck comes up for renewal next year, and whose current contract also links coal prices to the fees it charges Teck.