CN Comments on Court Decision on EJ&E Grade Separation Projects

CN 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 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, 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.