July 26, 2008 / 1:51 AM / in 9 years

Mixed ruling for CN Rail on Chicago purchase

VANCOUVER, British Columbia (Reuters) - U.S. regulators on Friday rejected a call by Canadian National Railway CNR.TO for a ruling by the end of the year on its purchase of the Elgin, Joliet & Eastern Railroad, but agreed to limit on how long the review will continue.

<p>Trains shunt cars at the CN Intermodal yard in Brampton, February 23, 2007. REUTERS/J.P. Moczulski</p>

The Surface Transportation Board ruled the environmental impact review of CN’s planned purchase of the Chicago-area rail line will be completed between early December and the end of January, and it will issue a final decision “as soon as possible” after that.

The unanimous ruling rejected calls by opponents for an extended review comment process, but one board member included a warning in the decision about the deal’s impact on some communities along the EJ&E’s tracks.

The STB issued its decision on scheduling along with a lengthy draft environmental impact statement.

Canadian National had warned it needed a decision on the deal by the end of the year or the EJ&E’s current owner, United States Steel Corp. X.N, would cancel the $300 million agreement. The deal had been expected to close in mid-2008 when it was announced last September.

Canadian National said it was studying the board’s decision, but was pleased it had agreed to limit the comment period during the review to 60 days.

The terms of the draft environmental impact statement “conform to our view that the environmental issues raised in this proceeding are not unusual and can be reasonably mitigated,” the railway said.

Montreal-headquartered Canadian National wants to use the 198-mile EJ&E to reroute freight trains around Chicago, where they now face lengthy delays in the congested U.S. rail hub.

But the purchase has run into vocal opposition in the city’s western suburbs from residents worried that increased train traffic on the EJ&E’s tracks will slow down cars at highway grade crossings and cause safety problems.

Karen Darch, village president of Barrington, Illinois, was disappointed the board rejected calls for a 120-day or longer comment period, but pleased it had allowed 15 days more than CN requested.

STB commissioner W. Douglass Buttrey, while agreeing with the two other panel members, hinted in a separate statement he was worried some communities would bear an unfair “heavy burden” in efforts to ease congestion in the key U.S rail hub.

Opponents of CN’s purchase cited Buttrey’s statement in a press release saying they were studying the ruling.

Canadian National has called the safety concerns baseless and accused opponents of having “not in my backyard syndrome” about a railroad that was built before many of the communities around it were founded.

Chief Executive Hunter Harrison said on Monday that, while CN was cautiously optimistic the deal would go through, it was willing to look at other options if regulators delayed the process for too long or required costly mitigation efforts.

Reporting Allan Dowd, editing by Rob Wilson

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