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CN’s U. S. short line bid approved

Canadian National’s (CN) bid to streamline its U. S. traffic by buying a Chicago-area short line has won last-minute approval from U. S. federal regulators.CN,

since September 2007, has had a US$300 million bid pending to buy the Elgin, Joliet and Eastern Railway Co. (EJ&E) from U. S. Steel.

But the deal has been subject to a year-end deadline, as U. S. Steel reportedly wouldn’t agree to allow CN to amend its deal in a way that would allow the two firms to close the sale, if the deal didn’t get Surface Transportation Board (STB) approval until sometime after Dec. 31 this year.

EJ&E is a Class II railroad with 198 main line miles of track circling Chicago from Waukegan in the north through to Joliet, Ill., Gary, Ind., and South Chicago.CNexpects the line to “improve the fluidity” of its operations by allowing through traffic to bypass the city, and fill the “missing link” between CN’s rail networks.

That, in turn, would improve operations on CN’s system by moving CN trains out of the urban core to EJ&E lines on the outskirts of the Chicago area, CN said previously – when it had still expected approval for the deal by mid-2008.

Since then, CN has been working out agreements along the line to soften the effects of increased rail traffic. The company on Dec. 23 signed a mitigation agreement with the village of Mokena, Ill., east of Joliet, bringing its total to 10 such agreements with communities in Illinois and Indiana.

But STB approval, which CN announced Dec. 24 in a release, comes with conditions beyond what the Canadian railway was expecting to have to meet.

“While we are pleased that the STB has approved the transaction, we are nonetheless disappointed that the STB has mandated significant additional mitigation beyond the recommendations provided in the final environmental impact statement issued by the STB’s section of environmental analysis with respect to the grade crossings in Lynwood and Aurora,” CN CEO Hunter Harrison said in the release. “We are carefully reviewing the STB’s decision.”

CN said Dec. 24 that the STB’s decision will take effect Jan. 23, and the company “expects to be in a position to close on the transaction shortly thereafter.”

CN on Dec. 23 estimated its total mitigation program for the EJ&E deal will cost the company over US$60 million, not counting US$20 million in consulting fees for the regulator’s environmental review of the deal and US$100 million in other proposed improvements to the line.

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