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CN completes Chicago-area shortline deal

Canadian National’s (CN) plans to streamline its U.S. traffic are underway with the completion of its bid to buy the Elgin, Joliet and Eastern Railway Co., a Chicago-area shortline, from U.S. Steel.

The deal, worth US$300 million for the shortline’s assets alone, is expected to allow CN to “improve the fluidity” of its operations by allowing its through traffic to bypass Chicago and connect the “missing link” between CN’s eastern, western and southern rail networks.

That, in turn, would improve operations on the CN system and the rest of the Chicago rail network by moving CN trains out of the urban core to lines on the outskirts of the Chicago area.

EJandE operates over 198 main line miles of track encircling Chicago, from Waukegan, Ill., on the north, to Joliet, Ill., on the west, to Gary, Ind., on the southeast, and then to South Chicago.

CN CEO Hunter Harrison, announcing the deal’s completion in a release Sunday, said CN “remains fully committed to mitigating the environmental impacts of the acquisition on communities along the EJandE, as demonstrated by CN’s comprehensive voluntary mitigation plan.”

That plan, CN said Sunday, was adopted by the U.S. Surface Transportation Board (STB) in its mitigation requirements for its approval of the deal. CN also struck separate mitigation agreements with 10 Illinois and Indiana communities.

CN said it has also pledged to the STB that it will hire a community liaison officer for municipalities along the EJandE that will be affected by its acquisition of the shortline.

CN in late December 2008 estimated its total mitigation program for the EJandE deal would cost CN over US$60 million, not counting US$20 million in consulting fees for the regulator’s environmental review of the deal and US$100 million in other proposed improvements to the line.

CN’s bid for the shortline had been pending since September 2007, when it expected to close a deal by mid-2008. Since then, however, the deal has been held up pending STB approval, which the U.S. regulator granted at the end of December.

That approval came in the proverbial nick of time for CN, as U.S. Steel reportedly wouldn’t agree to allow CN to make changes to the deal in a way that would allow the two firms to close the sale if it didn’t get STB approval until sometime after Dec. 31, 2008.

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