(The following story by Ian Putzger appeared on the Cargo News Asia website on June 10.)
TORONTO — Canadian National (CN) is getting a hand from unexpected quarters. It is not often that rail giants come out in support of expansion moves of their rivals, but Union Pacific (UP) and Norfolk Southern (NS) feel that it is in their own interest that the US Surface Transportation Board does not bar a takeover by CN of a regional carrier in the Chicago area.
UP and NS have declared that the STB’s review of CN’s planned takeover of Elgin, Joliet & Eastern Railway will set a precedent for rail industry growth vis-a-vis opposition from local interest groups.
CN announced last September that it would acquire the local rail outfit for US$300 million, which operates a small line along the outskirts of Chicago. The planned takeover is facing stiff opposition from local residents groups. Altogether some 30 suburbs have joined hands to fight CN’s access to the 198 miles of EJ&E mainline rail track in the area, which forms a semicircle around Chicago from the north through the west to the south of the city.
The STB has started the environmental review process to assess the impact of the takeover. A spokesman for CN said that the guidelines for the review contain no elements that would preclude a final environmental assessment to be concluded by the end of this year, which should clear the way for a final ruling by the STB in the first quarter of 2009.
He said that it was premature at this stage to comment on a timetable for steps to be taken by CN if the STB rules in favour of the takeover. It is no secret that CN wants to push trains from central Chicago to the EJ&E tracks.
At the announcement of the takeover agreement last September, CN president and chief executive officer Hunter Harrison said that the deal would “improve rail operations on the CN system and the rest of the Chicago rail network by moving CN trains out of the urban core to the EJ&E lines on the outskirts of the Chicago metropolitan area”.
CN has revealed that it intends to invest about $100 million for integration, new connections and infrastructure improvements to add capacity to the EJ&E line.
Congestion in the Chicago area has been a huge bugbear for rail companies and their customers and prompted UP and NS to make submissions to the STB that stress the importance of its ruling.
“The need for rail improvements is particularly acute in the Chicago area,” NS said in its submission, adding that the STB should “consider the important national need for rail capacity growth when weighing the environmental impacts of proposed rail transactions and potentially costly mitigation measures”.
According to CN, moving a train across Chicago through the downtown core takes as much as 33 hours – the same time as the train needs for the journey from Winnipeg to Chicago.
UP commented that the STB ruling would have major implications for the industry beyond Chicago. The board’s decision would determine whether rail operators would be able to add capacity to meet demand or whether such projects could be impaired by local interests.