CN requests STB approval for revised procedural schedule and new approach to EJ&E acquisition



    CN seeks to close deal by year's end but would run no new trains,
    preserve environmental status quo, and protect all interests pending STB
    environmental review

    CHICAGO, IL, Aug. 15 /CNW Telbec/ - CN (TSX:CNR) (NYSE:  CNI) said today
that it has asked the Surface Transportation Board (STB) to take a new
approach to CN's proposed acquisition of the major portion of the Elgin,
Joliet & Eastern Railway Company (EJ&E). CN has asked the Board to issue a
final decision on the transportation merits of the transaction in time to
permit the transaction to close before year-end, but to preserve the
environmental status quo pending further STB action on the environmental
issues posed by the transaction. The new approach would assure adequate
protection of the environment for communities along the EJ&E. At the same
time, it would avoid the risk to the broader public interest in improved rail
transportation posed by regulatory delays that threaten termination of the
transaction.
    CN's petition requests that the STB decide by September 15, 2008 whether
it will modify its procedural schedule to provide for a final decision by
October 15, 2008 on the transportation merits of the proposed EJ&E
acquisition. Under law, that decision would be based on whether the Board has
found adverse competitive impacts that are both "likely" and "substantial." CN
is also asking the Board, if it decides to approve the transaction in October,
to condition its approval on preserving the environmental status quo until the
Board's Section of Environmental Analysis (SEA) has completed its
environmental review of the transaction. CN contends that, so long as the
environment is not affected by the transaction during environmental review,
the law requires the Board to approve the transaction on its competitive
merits. Once the STB's environmental review is completed, the Board would be
expected to issue a decision governing any change in the environmental status
quo.
    "This transaction has far-reaching economic and transportation benefits
to the Chicago region, the Midwest, and the nation as well as for CN and its
customers," said E. Hunter Harrison, President and Chief Executive Officer of
CN. "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 acquisition by CN of the EJ&E.
    "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. We are asking the STB to set a schedule providing for a
decision on the merits which, if favorable to CN, would allow us to close on
this transaction before the end of this year, but would not cause any adverse
environmental impacts before the Board completes its environmental review and
develops a full record on which to base the environmental mitigation that it
may impose on the transaction."
    CN is entitled to and requires this relief because the STB declined CN's
request for a fixed timetable that would conclude its regulatory and
environmental review by the end of the year and, despite CN's continuing best
efforts, a substantial risk remains that EJ&E, which is an indirect subsidiary
of United States Steel Corporation (U. S. Steel), would terminate the proposed
transaction if it is not closed before year-end. U. S. Steel has recently
declined CN's request for a modification of the Stock Purchase Agreement (SPA)
or other action that would assure that the transaction could still be closed
if approved after December 31, 2008. That decision has highlighted the risk
that the transaction would be terminated before it was reviewed by the STB. As
a result, CN is seeking relief to allow this important transaction to close
prior to the end of 2008.
    "CN is prepared to take the positive step of closing this transaction
before year-end in a way that provides the STB with additional time to
complete its environmental review by early 2009," Harrison said. "We are
hopeful that the final EIS will conform to the view that this transaction is
clearly beneficial to the environment of the broader Chicago region and that
the legitimate impacts on affected communities are not novel and can all be
reasonably mitigated in accordance with sound STB precedents and the
long-established public policy framework governing railroad transactions
throughout the United States.
    "The chief concerns raised by opponents of this transaction are the
impacts of train traffic that will be diverted from CN lines in Chicago onto
the EJ&E," Harrison said. "Our proposal would ensure that the STB has
sufficient time to review those matters fully before it authorizes any
diversion of traffic. 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. At the same time, we would be moving one step closer
to meaningful rail congestion relief and rail efficiency enhancements in the
Chicago region.
    "We have consistently stated that we understand and are willing to
address the concerns of communities that will experience train traffic
increases as a result of this transaction," Harrison said. CN has been
actively engaged in the SEA's environmental review process and will
participate in the SEA's public hearings in August and September in
communities in the region. CN also will continue to work with affected
communities along the EJ&E line in an effort to reach voluntary mitigation
agreements addressing reasonable environmental concerns associated with
increased train traffic on the EJ&E.
    CN's petition notes that if the Board does not act by September 15, 2008,
CN will be prepared to petition the U.S. Court of Appeals for the District of
Columbia Circuit immediately thereafter to compel the STB to issue a final
decision that would permit CN to close the transaction by December 31, 2008.
By requesting an STB decision by September 15 solely on the question of
whether the STB will agree to issue a final decision on the transportation
merits by October 15, 2008, CN hopes to avoid the need for judicial
intervention.
    CN and U. S. Steel announced on September 26, 2007, an agreement under
which CN would acquire most of the EJ&E for $300 million, subject to
regulatory approval by the STB. The transaction would enable CN to re-route
its trains along the EJ&E arc around the periphery of the Chicago area,
reducing rail congestion in the inner core of Chicago while significantly
improving the flow of CN's rail operations in the Chicago region. 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. This $400 million of private-sector
investment, combined with the roughly $40 million that CN would expect to
spend to mitigate the impacts of increased train traffic along the EJ&E line,
would better utilize and enhance capacity on the Chicago-area rail network.
    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: Jim Kvedaras (Media), Senior Manager, U.S.
Public & Government Affairs, CN, (708) 332-3508; Robert Noorigian (Investors),
Vice-President, Investor Relations, CN, (514) 399-0052


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