CN to take legal action on EJ&E deal

Canadian National is turning to the courtroom to try and get its purchase of the Elgin, Joliet and Eastern rail line approved by the end of the year.

CN announced today it will seek "legal relief" to move the deal along after the U.S. Surface Transportation Board denied the company's request for set timetable for when a ruling on the proposed acquisition would happen.

The railway company's purchase agreement with U.S. Steel, which owns the EJ&E, called for the deal to be completed by the end of the year.

In a prepared statement, CN President and CEO E. Hunter Harrison said U.S. Steel is "prepared to cooperate" with the goal of closing the deal by the end of this year but will not agree to extend the purchase agreement's terms beyond that.

"Therefore, we need a decision in this case, and we have decided to seek legal relief to allow CN to close on the transaction prior to Dec. 31, 2008," Harrison said.

No specifics were on given on what legal action CN plans to take. The company said only that more details will be forthcoming.

U.S. Steel officials did not immediately return calls seeking comment.

In May, CN filed a formal request with the Surface Transportation Board for a final decision on the acquisition be made by Dec. 1.

But when releasing the draft of its environmental impact study, the STB indicated the final impact study will not be released until sometime between Dec. 1 and Jan. 31. A final decision would then follow shortly after that.

CN wants to buy the EJ&E for $300 million and use the line, which runs in an arc around the Chicago region, to reroute some freight traffic from lines in Chicago and inner suburbs.

Many communities along the line oppose the deal because it would bring more freight traffic. But other communities would see fewer freight trains.

CN's decision for legal action came one day after a field congressional hearing on the issue.

U.S. Reps. Melissa Bean of Barrington, Bill Foster of Geneva, Judy Biggert of Hinsdale and Don Manzullo of Ogle County hosted the hearing to discuss whether the recently released draft study sufficiently identified all local environmental and safety effects of the proposed sale. Local community leader, regional planners and local transit officials all testified.