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Last week, Canadian National Railway Co. announced it would seek legal action to close on the proposed Elgin, Joliet & Eastern Railway Co. (EJ&E) acquisition by year's end because the Surface Transportation Board (STB) rejected the railroad's request for a fixed regulatory review timetable. Now, the Class I has petitioned the board to issue a final decision on the acquisition's transportation merits to permit the transaction to close by year end, but preserve the "environmental status quo" pending further environmental review.

"The new approach would assure adequate protection of the environment for communities along the EJ&E [and], at the same time, would avoid the risk to the broader public interest in improved rail transportation posed by regulatory delays that threaten termination of the transaction," CN officials said in a prepared statement. Many communities along the line CN would acquire oppose the acquisition because of train traffic and environmental concerns.

In the petition, the railroad requests that the STB decide by Sept. 15 whether to modify its procedural schedule to allow for a final decision on the transaction's transportation merits by Oct. 15. If the board does not act by Sept. 15, the Class I plans to petition the U.S. Court of Appeals for the District of Columbia Circuit to "compel the STB to issue a final decision that would permit CN to close the transaction by Dec. 31," CN said.

The Class I also asked the STB that, if it issues a decision on the acquisition's transportation merits, the decision be conditional on preserving the environmental status quo until the board's Section of Environmental Analysis (SEA) completes an environmental review. As long as the environment is not affected by the transaction during the environmental review, the law requires the STB to approve the transaction on its competitive merits, CN officials contend. After the environmental review is completed, the board would be expected to issue a decision governing any change in the environmental status quo.

"This transaction enjoys significant support from a broad array of shippers and the range of other parties who have a stake in making sure that the serious rail congestion issues plaguing Chicago are being addressed by sound transportation initiatives, such as the [EJ&E] acquisition," said CN President and Chief Executive Officer E. Hunter Harrison in a prepared statement. "At the same time, we are well aware of the concerns raised by communities along the EJ&E line about the environmental impacts of increased train traffic."

There is a "substantial risk" that EJ&E parent U.S. Steel Corp. could terminate the transaction if it's not closed by year's end, CN said. In September 2007, CN reached a deal with U.S. Steel to acquire a major portion of the EJ&E for $300 million. U.S. Steel recently declined the Class I's request for a modification of a stock purchase agreement or other action that would ensure the transaction could still be closed if it's approved after Dec. 31.

"The action we are requesting would not interfere in any way with SEA's environmental review process and we are seeking to protect the interests of all parties," said Harrison.