CN petitions U.S. Court of Appeals to order final STB decision on transportation merits of proposed EJ&E acquisition



    Transportation and environmental benefits for Chicago too great to lose
    to regulatory delay

    WASHINGTON, DC, Sept. 18 /CNW Telbec/ - CN (TSX:CNR)(NYSE:  CNI) today
petitioned the United States Court of Appeals for the District of Columbia
Circuit for an expedited ruling ordering the Surface Transportation Board
(STB) to render a final decision on the transportation merits of CN's proposed
acquisition of the principal lines of the Elgin, Joliet & Eastern Railway
Company (EJ&E), to allow the transaction to close by the parties' Dec. 31,
2008, deadline.
    "Given the substantial, wide-ranging public interest benefits of our
planned acquisition of the EJ&E, we cannot permit regulatory delay to imperil
this transaction," said CN President and Chief Executive Officer E. Hunter
Harrison.
    "We are convinced - and many business and community leaders agree - that
the transaction will be good for the Chicago region as a whole. It would ease
rail congestion, which is critically important to the region's economy and its
continued role as one of America's most important transportation hubs. If
unaddressed, rail congestion threatens $2 billion of dollars of production and
17,000 jobs in the Chicago region over the next 20 years.
    "Second, the transaction would benefit the environment of the overall
Chicago region. For every community along the EJ&E line in the suburbs of
Chicago that would see increased train traffic as a result of the transaction,
nearly double that number along CN lines in inner Chicago would see decreased
rail operations. In fact, roughly 60 communities inside the EJ&E arc would
benefit from reduced train traffic as a result of the transaction. That would
mean a better quality of life for residents of the Chicago region, with less
pollution, fewer idling trains and fewer blocked crossings."
    Faced with a Dec. 31, 2008, deadline for completing its purchase of the
EJ&E, CN last month proposed a reasonable compromise to the STB that would
have allowed the agency to rule on the transportation merits of the EJ&E
acquisition while completing its environmental review of the transaction.
During this environmental review, CN proposed to maintain an "environmental
status quo" by which CN would not shift any of its trains to the EJ&E until
that review had been completed. But the agency last week denied CN's petition.
    "It is truly unfortunate that the STB rejected CN's compromise solution
given the impending deadline on our transaction," Harrison said. "The agency's
decision - and continuing uncertainty about the timing of the STB's final
decision on the transaction - leave us no option but to ask the court to
compel a final STB decision on the transportation merits of the acquisition.
We need the STB ruling soon so that we will be in a position to close the
transaction before year-end."
    CN's petition need not preclude full environmental review of the
transaction. If it is granted, that will be a choice for the agency. The STB
would have options to assure that if CN's petition is granted, the agency can
complete its environmental review of the transaction, including its
consideration of the comments of all interested parties and its imposition of
lawful mitigation before the transaction would be able to have any adverse
environmental effects.
    "The bottom line is that the benefits to Chicago's rail network and
environment from rerouting trains off congested city and inner Chicago lines
onto the underused EJ&E are too great to see this transaction derailed,"
Harrison said. "We cannot allow controversy created in some Chicago suburbs -
and the regulatory delay it has created - to jeopardize the transaction.
    "CN appreciates the concerns of suburban communities, and it continues to
make substantial efforts to address potential adverse impacts of the
acquisition. But in the end we do not believe that concerns from a small but
vocal minority of residents should take precedence over the broad public
interest and the needs of a far greater number of communities that would
benefit from the transaction.
    "The transaction is not just about CN - it's also about an efficient
Chicago rail network, a sound regional economy, and a better quality of life
for more than four million Chicago-area residents."
    The STB designated the transaction as "minor" in November 2007 because
CN's application did not pose anti-competitive issues. By statute, the STB is
required to issue a final decision on minor transactions within 180 days of
accepting an application for consideration. In its November decision, however,
the STB said it would prepare an Environmental Impact Statement (EIS) on the
transaction and that its final decision would be extended beyond the 180 days
until the completion of the EIS. The agency's Section of Environmental
Analysis began its extensive environmental review of this transaction in
December 2007.
    After 10 months of review, few competition issues have been raised, yet
the STB still has not made a final determination as to whether the transaction
passes the statutory competition test.
    Other, more complicated transactions reviewed by the STB have closed
within a time period comparable to what CN seeks here. In the case of the
$10-billion Conrail merger in 1997 - a transaction that traversed 24 states
and the District of Columbia, 10,500 miles of rail lines and 2,070 grade
crossings - the STB finalized its environmental review in 11 months and issued
a decision on the transaction two months later. By contrast, CN's $300-million
transaction involves small portions of only two states, 158 miles of rail line
and a total of 99 grade crossings.

    CN-EJ&E BACKGROUNDER

    CN's EJ&E transaction is good for Chicago

    The transaction would significantly improve the fluidity of rail
operations in the Chicago region, resulting in faster transit times and more
reliable service for rail customers. It would enhance the competitiveness of
businesses in the region that use rail service, while bringing some relief to
communities that have more than their share of freight trains today.
    The Chicago area is the transportation hub of North America. One-third of
U.S. products shipped by rail move to, from, or through the Chicago area each
year. Rail traffic in this region touches five million jobs nationwide every
year, $782 billion in output and $217 billion in wages. (2005 CREATE
Feasibility Study)
    But it can take a freight train more than 24 hours to travel the 30 miles
from Chicago's north side to its south side (Howard Street on the north and
127th Street on the south). During the same time period, a CN freight train
can travel from Chicago to New Orleans (about 900 miles).
    If Chicago regional rail capacity and congestion are not addressed,
studies suggest that the Chicago area will lose $2 billion in production and
17,000 jobs over the next two decades. (2005 CREATE Feasibility Study)

    The transaction has more neighborhood benefits than negative impacts

    The transaction would provide reciprocal environmental benefits - for
every community along the EJ&E line in the suburbs of Chicago that would see
increased train traffic, nearly double that number along CN lines in inner
Chicago would experience a traffic decrease. That means roughly one million
people would have additional trains in their communities, but more than
2.5 million would have fewer trains. In fact, roughly 60 communities inside
the EJ&E arc would benefit from reduced train traffic as a result of the
transaction.

    CN's EJ&E transaction will advance the objectives of CREATE

    Better use of the EJ&E would provide a head start for the Chicago Region
Environmental Transportation Efficiency (CREATE) Program. CN is committing
$400 million of private-sector investment to create capacity on the Chicago
rail network and by removing CN rail operations from downtown Chicago. The
government has not provided comprehensive funding for CREATE, however. Without
such funding or some other congestion-reducing initiative, increased rail
congestion is expected in Chicago and the inner suburbs, with increased delays
to motorists and increased train idling in these communities. Without moving
trains onto the EJ&E, Chicago will continue to have high levels of rail
operations in more densely-populated communities and less efficient rail
operations.

    CN is committed to addressing the environmental impact of the transaction

    CN has already volunteered to provide reasonable mitigation for the
significant adverse impact of the transaction, as measured by the sound
standards used by the STB in prior cases. CN has committed roughly $40 million
for such mitigation, in addition to the $300 million it would spend to acquire
the EJ&E and $100 million for integration, new connections and infrastructure
improvements to add capacity on the EJ&E line and allow network synergies to
be realized over time.
    In August, CN reached an agreement with the City of Joliet - a community
along the EJ&E line - that resolves the city's outstanding concerns related to
quiet zones, operations, and communications arising from the transaction. CN
continues to negotiate voluntary mitigation agreements with many other willing
communities along the EJ&E, and remains an active participant in the STB's
environmental review of the transaction.

    CN has undertakings with Amtrak, Metra and Gary/Chicago International
    Airport on infrastructure access and service matters arising from EJ&E
    transaction

    
    - CN has pledged to Amtrak and the STB that, after acquiring the EJ&E, it
      would permit the federal passenger train company to remain on
      approximately 11 miles of CN's St. Charles Air Line route, following
      the re-routing of CN trains off that line and onto the EJ&E, until the
      Grand Crossing or other alternative acceptable to Amtrak is available.
      This preserves Amtrak's access to Chicago's Union Station and enables
      Amtrak to continue providing service to and from downstate Illinois
      cities such as Champaign and Carbondale. CN also agreed to cap Amtrak's
      costs for maintaining this line at its current levels, indexed only for
      inflation in future years.
    - CN is having continuing discussions with Metra and, upon CN's
      acquisition of control of the EJ&E lines, has committed to reaching an
      agreement that would permit Metra's proposed STAR Line commuter
      service, should it receive government approval and funding, to jointly
      use enhanced EJ&E rail lines, which is Metra's preferred option. Thus,
      the EJ&E transaction would not impede the STAR project. Furthermore,
      moving CN freight trains off its existing lines and onto the EJ&E could
      make it easier for Metra to expand North Central Service Line service
      to communities such as Wheeling, Buffalo Grove, Vernon Hills and
      Mundelein.
    - The expansion of Gary/Chicago International Airport (GCIA) can now
      proceed since the signing in June of a four-party preliminary
      memorandum of understanding (PMOU) between GCIA, EJ&E, CSX Corporation,
      and Norfolk Southern Corporation. The PMOU provides a comprehensive
      framework for relocating the nearby EJ&E line, a long unresolved matter
      that had been a key concern raised in opposition to the CN/EJ&E
      transaction. CN assisted EJ&E in the negotiations and is committed to
      honor the terms of the PMOU upon regulatory approval of the EJ&E
      acquisition and to carry out the needed line relocation.
    

    CN and U. S. Steel, the indirect owner of the EJ&E, announced on
Sept. 26, 2007, an agreement under which CN would acquire most of the EJ&E for
$300 million, subject to regulatory approval by the STB. CN has committed an
additional $100 million for integration, new connections and infrastructure
improvements to add capacity on the EJ&E line and allow network synergies to
be realized over time. CN has also committed roughly $40 million to mitigate
the impacts of increased train traffic along the EJ&E. More information on the
transaction, including a map of the areas served by the EJ&E and CN, is
available by clicking on the EJ&E Acquisition icon on the About CN section of
its website http://www.cn.ca/about/EJE/about_EJE/en_About.shtml

    Forward-Looking Statements

    This news release contains forward-looking statements. CN cautions that,
by their nature, forward-looking statements involve risk, uncertainties and
assumptions. In addition to the other assumptions contained in this release,
the Company believes the U.S. economy is currently experiencing recessionary
conditions, but assumes that it will recover within the next six to nine
months, and that the global economy will grow at a moderate pace throughout
this period. The Company cautions that these assumptions may not materialize.
The Company's results could differ materially from those expressed or implied
in such forward-looking statements. Important factors that could cause such
differences include, but are not limited to, industry competition, legislative
and/or regulatory developments, compliance with environmental laws and
regulations, various events which could disrupt operations, including natural
events such as severe weather, droughts, floods and earthquakes, the effects
of adverse general economic and business conditions, inflation, currency
fluctuations, changes in fuel prices, labor disruptions, environmental claims,
investigations or proceedings, other types of claims and litigation, and other
risks detailed from time to time in reports filed by CN with securities
regulators in Canada and the United States. Reference should be made to CN's
most recent Form 40-F filed with the United States Securities and Exchange
Commission, its Annual Information Form filed with the Canadian securities
regulators, and its 2007 Annual Consolidated Financial Statements and Notes
thereto and Management's Discussion and Analysis (MD&A), as well as its 2008
quarterly consolidated financial statements and MD&A, for a summary of major
risks.
    CN assumes no obligation to update or revise forward-looking statements
to reflect future events, changes in circumstances, or changes in beliefs,
unless required by applicable laws. In the event CN does update any
forward-looking statement, no inference should be made that CN will make
additional updates with respect to that statement, related matters, or any
other forward-looking statement.

    CN - Canadian National Railway Company and its operating railway
subsidiaries - spans Canada and mid-America, from the Atlantic and Pacific
oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert,
B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key
metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth,
Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, and
Jackson, Miss., with connections to all points in North America. For more
information on CN, visit the company's website at www.cn.ca.




For further information:

For further information: Karen Phillips (Media), Vice-President, North
American, Government Affairsk, CN, (202) 347-7196; Robert Noorigian
(Investment Community), Vice-President, Investor Relations, CN, (514)
399-0052


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