(Dow Jones circulated the following on February 27.)
CHICAGO — Canadian National Railway Co. (CNR.T) has ruled out involving other railroads in its planned acquisition of a small Chicago-area operator, despite concerns it could hinder broader efforts to ease chronic congestion around the busiest U.S. transportation hub.
CN last year agreed to pay $300 million for the Elgin, Joliet and Eastern Railway Company, or EJ&E, allowing more of its freight trains to run around Chicago. Booming rail volumes have exacerbated the bottleneck created by the city’s aging rail infrastructure, with average freight train speeds falling to 9 miles per hour.
The environmental impact of the proposed deal, which would take three years to implement, is being examined by the U.S. Surface Transportation Board. The deal has also raised concerns from residents near the EJ&E tracks, while rival rail operators have suggested it could disrupt Create, a $1.5 billion program to upgrade railroad infrastructure in the region.
Jim Kveradas, CN’s director for corporate development, said at an industry meeting in Chicago Wednesday that there were no plans to open up the EJ&E deal to other operators, though it would allow them to continue running some trains on the tracks and remain a partner in Create.
While there have been numerous efforts for more than a century to build a rail loop around Chicago, EJ&E is the only established alternative to running trains through the city. Industry experts said at the meeting that a number of other operators had reviewed the business in recent years.
“We don’t think they were as motivated as us,” said Kveradas, noting there had been no competitive auction for the business and, to date, no requests from rivals for it to be shared as an industry utility.
Kveradas acknowledged concerns among residents that it would increase rail traffic on the EJ&E, which it said was underutilized by its current owner, United States Steel Corp. (X). However, he said rerouting CN traffic would also ease congestion across the Chicago system, while providing a competitive advantage for the company by allowing it to bypass the city.