(Reuters circulated the following story by Allan Dowd on August 6.)
VANCOUVER, B.C. — Canadian National plan to buy the Elgin, Joliet & Eastern Railroad hit new snag on Wednesday, when it failed to win more time to close the deal that has generated a storm of controversy in the key U.S. rail hub of Chicago.
The EJ&E purchase has been tied in a U.S. regulatory review, and Canadian National warned it is ready to go to court to get the transaction completed by the end of the year — although it cannot say yet who it will take legal action against.
“We have a variety of options,” spokeswoman Karen Phillips said.
Last month, the U.S. Surface Transportation Board rejected a request by Canadian National that it rule on the takeover by the end of the year. It said a pre-decision environmental review may not be completed until the end of January.
United States Steel Corp., which currently owns the EJ&E, has now refused to extend the deadline for closing the deal past the end of 2008 to meet the regulator’s schedule, although it is still willing to complete it before then, Canadian National said on Wednesday.
“Therefore we need a decision in this case, and we have decided to seek legal relief to allow CN to close on the transaction prior to Dec 31, 2008,” Chief Executive Hunter Harrison said in a statement.
The railway feels the regulators have already done an extensive review of the plan and can still issue a decision by the end of the year, Phillips said.
Canadian National, North America’s 5th largest railway, wants to buy the 198-mile (317-km) EJ&E line for $300 million to reroute freight trains around Chicago where they now face lengthy delays in the congested rail hub.
It argues the plan will help the entire rail industry by freeing track space within Chicago that it now shares with other freight carriers and Amtrak.
But the proposal has run into stiff opposition in some suburban Chicago communities, with complaints that the increase in train traffic will cause safety problems, delay road traffic at grade crossings and reduce property values.
Opponents of the bid held a U.S. congressional hearing in the Chicago area on Tuesday to blast the plan, but supporters who say the safety concerns are unfounded boycotted the session.
A representative of the opponents had no immediate comment on CN’s statement.
A US Steel spokeswoman said it would not comment on CN’s statement, nor whether the political dispute played a role in its decision to not extend the deadline.
The dispute is being watched in the railroad industry, where carriers fear political opposition will block industry efforts to expand capacity to meet rising demand for both freight and passenger service.