(Reuters circulated the following on September 9.)
VANCOUVER, B.C. — Canadian National Railway is weighing its next step after being rebuffed in the latest regulatory ruling on its planned purchase of the Chicago area’s Elgin, Joliet & Eastern Railway Co.
The U.S. Surface Transportation Board on Monday rejected CN’s request that regulators rule on the transportation merits of the deal before completion of an environmental review that has become mired in a heated U.S. political debate.
Canadian National, which has warned it may take the issue to court, is still reviewing the board’s decision and has not decided on its next move, a spokesman said on Tuesday.
The railway agreed last year to buy the EJ&E from United States Steel Corp. for C$300 million ($280 million) and had expected the deal and regulatory approval would be wrapped up by mid 2008.
Canadian National requested the expedited process last month after US Steel refused to extend the sales agreement past the end of the year, even though the environmental ruling is not expected to be completed until early next year.
Canadian National had proposed it be allowed to buy the EJ&E, but not make any operational changes on the 198-mile line it until the environmental review and a ruling on mitigation requirements were completed.
The deal has drawn intense opposition in the wealthy suburbs west of Chicago, where residents complain increased train traffic will hurt property values and create safety problems at highway crossings.
Canadian National, which is North America’s fifth-largest railway, wants to use the EJ&E’s mainline to allow its freight trains to bypass Chicago, an important but congested hub for the US rail industry.
The Surface Transportation Board said Canadian National’s request made the assumption that the regulators would not, or could not, turn down the deal on environmental grounds.
The regulators also complained that Canadian National’s promise to maintain the status quo for the EJ&E’s operations until the environmental review was completed would be difficult to monitor.
A coalition of communities opposed to the deal praised the board’s decision, saying it would allow the public’s opposition to be heard.
The fight is being closely watched by the rail industry, which is under pressure to increase capacity for economic and environmental reasons but worried projects designed to do that will rejected because of local political concerns.