(The following story by Scott Deveau appeared on the Financial Post website on November 20.)
OTTAWA — The head of Canadian National Railway Co. says he’s confident federal regulators will approve his company’s proposed acquisition of Chicago’s Elgin, Joliet & Eastern Railway Co. by the year-end, despite protests from local officials including the U.S. Senator for Illinois and now the president-elect, Barack Obama.
“I think everything is on the table now and I’m very optimistic,” Hunter Harrison, CN chief executive, said in an interview in his Montreal office this week. “I think there’s little, if any, doubt that we’re going to get a positive decision in early December.”
CN agreed to buy the regional railway last September for US$300-million in an effort to divert some of its freight traffic out of Chicago’s congested downtown core and out along the EJ&E lines in the suburbs.
But the deal has come up against stiff opposition from grassroot groups and local politicians, leading to a lengthier environmental review than was expected and leaving the deal in legal limbo for more than a year now.
The U.S. Surface Transportation Board actually has until the end of February to submit its final draft of its environmental review before rendering its final decision soon thereafter. But Mr. Harrison said after a hearing in Washington this week, he is confident a decision will be made in the coming weeks. If the mitigation measures proposed in the assessment are “within the boundaries of reason,” then the deal could be closed very soon, he added.
Typically, the federal government will cover between 80% and 85% of the costs associated with building viaducts, overpasses, and other mitigation measures, with the state and the railway splitting the remainder, he noted. If the STB’s recommendation are too far away from that tradition, “then we’re going to be in the courts,” Mr. Harrison said.
Over the past year, thousands have leant their voice in opposition to the deal, including Mr. Obama. In a letter addressed to Karen Darch, one of the leaders in the fight against the deal, in April Mr. Obama said he opposed the deal as it was proposed.
But the president-elect has been largely silent since. Mr. Harrison noted that while having the future president of United States on side certainly adds credence to the opposition’s cause, it will do very little change the outcome. “With due respect, the president-elect doesn’t have standing in making this decision,” he said.
In addition, CN was told by members of Mr. Obama’s staff that the letter was never meant to be interpreted as a public pronouncement on the transaction, Mr. Harrison said. A spokesman for Mr. Obama’s transition team declined to comment on the letter or the deal on Thursday.
“Don’t you think that if president-elect Obama was against the transaction, he would have done a lot more than write one letter to one community?” Mr. Harrison said. “I’ve never heard him make a public statement, or in the press, other than saying what was in one letter to one community that it was suggested to us by staffers was suppose to be a private response and wasn’t to be published as a position.”
Ms. Darch, however, said there was no question in her mind that Mr. Obama’s letter indicated he was on side. “There was certainly never any indication it was anything but,” she said.