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Court won’t rush U.S. ruling on CN deal

A U.S. federal appeals court won’t impose a rush on U.S. transport regulators’ decision over Canadian National Railway’s bid for a Chicago-area shortline.

CN, since September 2007, has had a US$300 million bid pending to buy the Elgin, Joliet and Eastern Railway Co. (EJandE) from U.S. Steel.

But the seller won’t agree to allow CN to amend their agreement in a way that would allow the two firms to seal the deal if it doesn’t get approval from the U.S. Surface Transportation Board (STB) until sometime after Dec. 31 this year.

CN in August asked the STB to decide by Sept. 15 if it could change its schedule to allow a decision on the “transportation merits” of the deal by Oct. 15, thus clearing it of any federal concerns over rail competition. If the STB would approve just that aspect of the deal, CN pledged it would not put any CN trains on EJandE track until the environmental review of the deal is completed at some later date.

But the STB declined, so CN on Sept. 18 filed a petition with the U.S. Court of Appeals, District of Columbia circuit, asking the court to compel the STB to render its decision on the deal right away. CN announced on Tuesday that the court has declined the railway’s petition.

“While CN is disappointed with the court’s decision, we remain committed to the EJandE acquisition and we see no reason why the STB cannot rule on the transaction quickly to permit it to close by year-end,” CN CEO Hunter Harrison said in a release Tuesday.

The STB, he said, must decide in CN’s favour in the early part of its previously announced December 2008-February 2009 timetable for a final ruling. Harrison said the U.S. Department of Transportation, the National Industrial Transportation League and “other stakeholders” have called for a quick STB ruling to keep the transaction on the rails.

“Better quality of life”

EJandE is a Class II railroad with 198 mainline miles of track circling Chicago from Waukegan in the north through to Joliet, Ill., Gary, Ind., and South Chicago. CN expects the line to “improve the fluidity” of its operations by allowing its through traffic to bypass the city, and fill 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 EJandE lines on the outskirts of the Chicago area, CN said previously, when it still expected approval for the deal by mid-2008.

Now, Harrison said Tuesday, “if the STB chooses not to approve the transaction, it risks creating an environment that will deter similar beneficial investments in the future.”

While a number of communities along the EJandE line in Chicago’s suburbs would see more train traffic, CN said “the City of Chicago and roughly 60 communities inside the EJandE arc would benefit from reduced train traffic as a result of the transaction. That would mean a better quality of life for residents of the Chicago region, with less pollution, fewer idling trains and fewer blocked crossings.”

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