September 10, 2008 / 6:26 PM / 9 years ago

CN will go to court over stalled railway deal

VANCOUVER, British Columbia (Reuters) - Canadian National Railway will ask a U.S. court to force regulators to rule quickly on its planned purchase of the Elgin, Joliet & Eastern Railroad, an executive said on Wednesday.

<p>Trains shunt cars at the CN Intermodal yard in Brampton in this February 23, 2007 file photo. CN will ask a U.S. court to force regulators to rule quickly on its planned purchase of the Elgin, Joliet &amp; Eastern Railroad, an executive said on Wednesday. REUTERS/J.P. Moczulski</p>

The Surface Transportation Board designated the deal to be a “minor transaction” in November 2007 and CN wants a judge to order the regulators to follow the timetable they agreed to in making that ruling, Vice President Jim Foote said.

The regulators have said they may not make a decision until next year, but minor transactions are supposed to be ruled on within six months, Foote told analysts at an RBC Capital Markets conference in Toronto.

“We think the law is very clear... We’re going to go to district court in Washington, DC, and ask a judge to tell the STB commissioners that’s what the law says and do it,” Foote said.

The move to court comes after the board’s rejection on Monday of Canadian National’s bid to be allowed to purchase the Chicago-area EJ&E by the end of the year, and before a lengthy environmental review is completed.

Canadian National offered to make no changes to the EJ&E’s operations until the environmental review was complete.

CN is under pressure to get the deal wrapped up by the end of the year because that’s when tentative agreement to buy the line from United States Steel Corp for $300 million expires and US Steel has refused to extend the deadline.

Canadian National wants to buy the 198-mile line to route freight trains around Chicago where they now face lengthy delays in the congested rail hub.

The plan has run into opposition in wealthy communities the EJ&E runs through west of Chicago, with critics saying the increased train traffic will cause safety problems at highway grade crossings.

The opponents want the STB to either block the deal or use the environmental review process to require Canadian National to pay millions of dollars in mitigation costs.

CN denies the safety allegations, but Foote said the opponent’s financial resources have helped them gain political support. U.S. presidential candidate Barack Obama of Illinois is among the politicians who have criticized the deal.

Foote said the political heat may also be part of the reason that US Steel refused to extend the sales agreement, but that CN remained hopeful it can get the deal completed by the end of the year.

Reporting Allan Dowd, Editing by Frank McGurty

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