CN disappointed in court decision on EJ&E grade separation projects

Mar 15, 2011, 16:40 ET from CN

CHICAGO, IL, March 15 /PRNewswire/ - CN (TSX: CNR)(NYSE: CNI) today expressed disappointment with the decision of the U.S. Court of Appeals for the District of Columbia Circuit in Washington, D.C. denying the company's request to reverse the Surface Transportation Board's (STB) order requiring the railroad pay for the majority of the costs associated with two highway grade separation projects.

In its Dec. 24, 2008 decision approving CN's acquisition of the principal portion of the Elgin, Joliet and Eastern Railway Company (EJ&E), the STB ordered CN to pay 67 percent of the cost for a grade separation at Ogden Avenue in Aurora, Ill., and 78.5 percent of a separation at Lincoln Highway in Lynwood, Ill.

CN argued that the STB's grade separation condition, as applied to a transaction like the EJ&E acquisition, was unjustified and beyond the STB's regulatory authority. While the Court found CN's argument "eminently reasonable," it determined that CN failed to carry the "heavy burden" necessary to overturn the condition.

Claude Mongeau, CN president and chief executive officer said: "While we are disappointed by today's court decision, we will not appeal it further, and will continue working with Illinois officials to implement the grade separations in accordance with the STB's requirements. The company's focus remains on completing the integration of the EJ&E into the CN network, a project now in its third year."

CN's appeal challenged only the single mitigation condition requiring CN to fund grade separations. CN voluntarily assumed 108 separate mitigation conditions and accepted without objection 73 additional mitigation conditions imposed by the STB. Additionally, CN has reached voluntary mitigation agreements, addressing environmental and safety issues related to the transaction, with 26 of the 33 communities along the EJ&E main line. Excluding the costs to CN of the two grade separations, the mitigation program will cost CN more than $60 million.

CN's acquisition and integration of the EJ&E will improve the efficiency of its operations in the Chicago area as well as the flow of general rail traffic through the region. This increased efficiency and fluidity is important to the Chicago region's economy and its continued role as one of America's most important transportation hubs.

Forward-Looking Statements

Certain information included in this news release constitutes "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws. CN cautions that, by their nature, these forward-looking statements involve risks, uncertainties and assumptions. The Company cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty.

Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results of performance of the Company or the rail industry to be materially different from the outlook or any future results or performance implied by such statements. Important factors that could affect the above forward-looking statements include, but are not limited to, the effects of general economic and business conditions, industry competition, inflation, currency and interest rate fluctuations, changes in fuel prices, legislative and/or regulatory developments, compliance with environmental laws and regulations, actions by regulators, various events which could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes, labor negotiations and disruptions, environmental claims, uncertainties of investigations, proceedings or other types of claims and litigation, risks and liabilities arising from derailments, 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 "Management's Discussion and Analysis" in CN's annual and interim reports, Annual Information Form and Form 40-F filed with Canadian and U.S. securities regulators, available on CN's website, 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 Canadian securities 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 maters, 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, St. Louis, and Jackson, Miss., with connections to all points in North America. For more information on CN, visit the company's website at