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STB blesses CN's EJ&E acquisition; Class I questions board-imposed conditions


Canadian National Railway Co. got an early Christmas gift from the Surface Transportation Board (STB) last week. But it wasn’t exactly the gift CN expected.

On Dec. 24, the board announced it unanimously approved the Class I’s application to acquire control of a major portion of the Elgin, Joliet & Eastern Railway Co. (EJ&E), subject to certain conditions, including environmental mitigations and a five-year oversight period requiring quarterly reports. The mitigations include the construction of two grade separations (to be funded 67 percent and 78.5 percent by CN), the installation of cameras to monitor grade crossings to assist emergency responders, school and pedestrian safety measures, and noise reduction measures. CN also must comply with labor protections.

Although the Class I is pleased the STB met its wishes by issuing a final decision on the transaction by year’s end so the railroad could meet an acquisition deal deadline with EJ&E owner U.S. Steel Corp., the railroad questions the inclusion of some conditions and plans to carefully review the decision, CN officials said in a prepared statement.

“We are pleased that the board has recognized the public-interest benefits of the transaction — the critical need for rail-congestion relief in the Chicago region — while mitigating the rail acquisition's impact on certain communities situated on the EJ&E,” said CN President and Chief Executive Officer E. Hunter Harrison. “[But] 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."

STB members believe the conditions are warranted based on a long and detailed environmental review and more than 9,500 public comments received on the draft environmental report. After considering the transaction’s transportation-related aspects and environmental impacts, they determined the acquisition would not result in a “substantial lessening of competition, the creation of a monopoly or a restraint of trade in freight surface transportation in any region of the United States.”

"Approval of this important railroad merger, with the conditions we have imposed, marks a significant step forward in our nation's efforts to alleviate rail and highway congestion,” said STB Chairman Charles Nottingham. “I am pleased that the board … after an unprecedented public involvement process, [agreed] to grant the relief that this merger will provide to the many Chicago neighborhoods that have been disproportionately burdened for many decades with severe rail traffic-related roadway congestion."

The STB's decision takes effect on Jan. 23. CN expects to close the transaction — under which it will acquire most of the EJ&E from U.S. Steel for $300 million — shortly afterwards.

Contact Progressive Railroading editorial staff.

More News from 12/29/2008