Economy-Finance

CN Rail weighing next step after EJ&E ruling

VANCOUVER, British Columbia, Sept 9 (Reuters) – CanadianNational Railway (CNR.TO: Quote, Profile, Research, Stock Buzz) is weighing its next step after beingrebuffed in the latest regulatory ruling on its plannedpurchase of the Chicago area’s Elgin, Joliet & Eastern RailwayCo.

The U.S. Surface Transportation Board on Monday rejectedCN’s request that regulators rule on the transportation meritsof the deal before completion of an environmental review thathas become mired in a heated U.S. political debate.

Canadian National, which has warned it may take the issueto court, is still reviewing the board’s decision and has notdecided on its next move, a spokesman said on Tuesday.

The railway agreed last year to buy the EJ&E from UnitedStates Steel Corp (X.N: Quote, Profile, Research, Stock Buzz) for C$300 million ($280 million) andhad expected the deal and regulatory approval would be wrappedup by mid 2008.

Canadian National requested the expedited process lastmonth after US Steel refused to extend the sales agreement pastthe end of the year, even though the environmental ruling isnot expected to be completed until early next year.

Canadian National had proposed it be allowed to buy theEJ&E, but not make any operational changes on the 198-mile lineit until the environmental review and a ruling on mitigationrequirements were completed.

The deal has drawn intense opposition in the wealthysuburbs west of Chicago, where residents complain increasedtrain traffic will hurt property values and create safetyproblems at highway crossings.

Canadian National, which is North America’s fifth-largestrailway, wants to use the EJ&E’s mainline to allow its freighttrains to bypass Chicago, an important but congested hub forthe US rail industry.

The Surface Transportation Board said Canadian National’srequest made the assumption that the regulators would not, orcould not, turn down the deal on environmental grounds.