(The following appeared on The Montreal Gazette website on November 12.)
MONTREAL — Reeling from a setback in a U.S. court this week, Canadian National Railway Co. is still hoping to save a controversial deal to acquire almost 200 main line miles of track around Chicago.
CN yesterday urged the U.S. Surface Transportation Board to fast-track approval for the company’s $300-million (U.S.) deal to buy most of the Elgin, Joliet & Eastern Railway Co.
Montreal-based CN wants to divert freight trains from Chicago’s congested hub to the EJ&E tracks – a move that would greatly improve service, but would lead to increased traffic through suburban communities.
On Monday, a federal appeals court rejected CN’s bid to force the transportation regulator to make a decision by Dec. 1.
Canada’s largest railway said it needs an answer to close the deal with EJ&E owner Transtar Inc. by the parties’ deadline – the end of this year.
“While CN is disappointed with the court’s decision, we remain committed to the EJ&E acquisition and we see no reason why the STB cannot rule on the transaction quickly to permit it to close by yearend,” said company CEO and president E. Hunter Harrison.
A CN spokesperson said the Dec. 31 date is crucial because Pittsburgh-based Transtar – and its owner U.S. Steel – appear unwilling to extend the deadline.
“The purchase agreement provides that either party can walkaway (after Dec. 31),” said Karen Phillips, CN’s vice-president for government affairs.
Phillips couldn’t say why U.S. Steel is refusing to extend the agreement: “Anyone’s guess.”
A spokesperson for U.S. Steel and Transtar refused to comment yesterday on the deal with CN, which operates 20,421 route-miles of track in Canada and the U.S.
Both parties initially expected the deal, announced in Sept. 2007, to close by mid-2008.
In addition to the $300-million transaction price, CN would invest $100 million to improve rail infrastructure and an additional $60 million to mitigate the deal’s environmental impact, including noise pollution. For example, some of the $60 million would go toward installing equipment to reduce the trains’ need to blow their whistles, Phillips said.
But CN’s offers haven’t quelled the concerns of suburban residents west of Chicago who fear the increased traffic will lead to safety concerns and a drop in their property values.
Opposition to the deal took on a political dimension when the residents gained support from Illinois senator – and now president-elect – Barack Obama.
Despite the suburban opposition, Phillips said CN has won support from the city of Chicago because the deal would reduce congestion and pollution in the urban core.
“There are people on both sides,” she said.
During an October conference call with analysts, Harrison predicted the U.S.’s post-election climate would be propitious for the CN deal.
“I do think that given the elections, and when the elections are past, there could be a little shift in certain areas,” he said.
“I think the momentum has swung back towards a little bit in our favour from where it was at one point in time.”
CN is desperately trying to alleviate rail traffic in Chicago, where it can take up to a day for a freight train to travel 48 kilometres across the city.
“If we’re able to bypass the downtown gridlock we would have a much more fluid operation,” she said.
And if the deal fails to close?
“Hunter has always said we’ll find ways to make things work,” she said.
“He’s very creative. But we really hope we’ll find a way.”