Canadian National Railway the company know by Sept. 15 that it will wants the Surface Transporta- embrace this schedule. tion Board to split its regula- If the STB agrees to the two-track tory process by clearing CN’s approach, and then approves the deal, planned purchase of a Chicago- CN said the board can “condition its area regional carrier by Oct. 15 approval on preserving the environmen-while leaving thorny environmental miti- tal status quo” pending the outcome of gation issues for later. the impact review. In other words, CN
The company warned if the board does says it could complete the deal with U.S. not quickly agree with this split-schedule Steel but make no operational changes proposal, and act by that date, CN will until regulators decide what mitigation soon take the issue to a U.S. appeals court they will require.
to force action. A mid-October approval decision by
CN says its deal to buy Elgin, Joliet and Eastern Railway around Chicago for $300 million must close by year’s end because EJ&E parent United States Steel won’t extend a contractual deadline to wrap up their transaction by then.
They first announced their deal 11 months ago, and CN filed its STB application Oct. 30, 2007.
The STB’s full-bore environmental impact review, however, has left regulators expecting to finally rule on the deal sometime in early 2009. The normal board process is to impose any environmental relief measures at the time it approves a transaction.
To get things moving faster, CN said it asked the STB to rule quickly on the “transportation merits” of the acquisition so it can close the deal on time, and let
the regulatory board could take effect Nov. 14, leaving CN and U.S. Steel time to wrap up the details before the purchase offer would expire. With this plan “CN hopes to avoid judicial intervention,” it told the STB in an Aug. 14 filing.
CN wants to buy EJ&E, sink another $100 million into track upgrades and shift its heavy and growing volume of cross-continental traffic from congested downtown Chicago lines onto the short line’s track running in a westward semicircle through area suburbs.
Some of those towns, though, are putting up a sharp fight against the big increase in train traffic CN would bring, and they say CN’s plans to spend up to $40 million to mitigate the impact will not offset the disruptions they face.
At least one STB member might agree. Commissioner W. Douglas But-trey wrote last month that “it is hard for me to imagine how even the most far-reaching mitigation measures would be enough.”
E. Hunter Harrison, CN’s president and CEO, said its EJ&E deal “has far-reaching economic and transportation benefits” and enjoys “significant support from a broad array of shippers.”
He also said CN is “well aware of the concerns raised by communities along the EJ&E line,” so it offered a plan to address both the impending purchase deadline and the long-term impact remedies.
Industry observers believe it could ease chronic congestion through Chicago, the continent’s prime rail hub. CN also looks to a bypass around central Chicago to shave many hours off its intermodal trains coming into the U.S. heartland from the ports of Vancouver and Prince Rupert, helping it compete with container hauls from U.S. West Coast ports.
An STB staff-prepared draft environmental impact statement appears to show the effect on area communities can be largely offset. CN cites that as proof the deal can work but criticizes some cost-raising aspects of the report.
The proposal to split the regulatory timetable into two parts could stave off a court fight, and CN said this new plan also means it would risk sealing the EJ&E purchase “with no assurances as to any environmental conditions that the board might impose after the closing.”
The timing has been an issue for months; CN formally asked the STB in May to set a faster schedule. CN, citing U.S. Supreme Court precedent, maintains the board should be under a hard time limit from Congress to rule on such transactions.
So while CN offered carrots to regulators, it also waved a stick. If the board does not respond by Sept. 15, it said, “CN will be prepared to petition the U.S. Court of Appeals for the District of Columbia Circuit immediately thereafter to compel the STB” to act in time.
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