CN
TSX : CNR
NYSE : CNI

CN

August 06, 2008 10:00 ET

CN will seek legal relief to conclude its proposed EJ&E acquisition

CN remains committed to purchasing railroad arc around Chicago to ease congestion

CHICAGO, ILLINOIS--(Marketwire - Aug. 6, 2008) - CN (TSX:CNR) (NYSE:CNI) said today that it will be seeking legal relief in order to permit the company to close on its proposed acquisition of the major portion of the Elgin, Joliet & Eastern Railway Company (EJ&E). Relief will be required now that the Surface Transportation Board (STB) has declined CN's request for a fixed timetable that would conclude its regulatory review by the end of the year, and the seller, United States Steel Corporation (U. S. Steel), has informed CN that it will not extend the Stock Purchase Agreement (SPA) for the transaction beyond December 31, 2008.

"Given the significant uncertainty on the date for completion of our proceeding after issuance of the STB's time limits decision, and the fact that U. S. Steel has read the SPA to require that this transaction close by December 31, 2008, CN contacted U. S. Steel last week to formally request an extension of the deadline," said E. Hunter Harrison, President and Chief Executive Officer of CN. "U. S. Steel is prepared to cooperate with CN towards the goal of closing the transaction in 2008, but it will not agree to extend the SPA. 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 December 31, 2008."

Harrison noted that CN asked the STB in May 2008 for time limits for the STB's regulatory review and for issuance of a final decision on this transaction consistent with the terms of CN's SPA with U. S. Steel.

In response, the STB established a 60-day timetable for interested parties to submit comments on the Draft Environmental Impact Statement (DEIS). The STB's decision projected issuance of the final EIS between December 1, 2008 and January 31, 2009, with a final decision on the transaction to be served as soon as possible thereafter, pursuant to Council on Environmental Quality regulations. As a result, the STB's final decision could be served during the December 1, 2008 to March 2, 2009 time frame, with the STB's final decision becoming effective then or later. The STB also reserved the right to adjust this schedule as necessary.

CN will provide more detail in the near future on the legal relief it will be seeking to ensure that this transaction is allowed to close in the public interest. In the meantime, CN will continue to work with affected communities along the EJ&E line in an effort to reach voluntary mitigation agreements addressing environmental concerns associated with increased train traffic on the EJ&E line. CN also has been actively engaged in the environmental review process undertaken by the STB's Section of Environmental Analysis (SEA) and will be participating in the public hearings that will be conducted by SEA in communities in the region in August and September.

"The public interest calls for the STB to complete its review of the transaction and, should it be approved, to serve a decision that would allow the transaction to close by the end of the year," Harrison said. "This transaction would not simply benefit CN and its customers - this transaction is in the broader regional and national interest. A more efficient rail system benefits businesses that rely on freight rail transportation and is an important component in the competitiveness of Chicago as a critical rail hub for the United States.

"Shifting CN's trains to the underutilized EJ&E line would bring benefits for millions of residents in downtown Chicago while also streamlining rail operations. For every community along the EJ&E line that would see increased train traffic as a result of this transaction, nearly double that number along other rail lines would experience a traffic decrease. CN recognizes the concerns of the communities along the EJ&E line about increased train traffic, and we have been working for the past several months with community leaders on appropriate mitigation measures for reducing adverse impacts."

CN and U. S. Steel announced on September 26, 2007, an agreement under which CN would acquire most of the EJ&E for $300 million, subject to regulatory approval by the STB. The transaction would enable CN to re-route its trains along the EJ&E arc around the periphery of the Chicago area, generating broad public benefits by reducing rail congestion in the inner core of Chicago while significantly improving the flow of CN's rail operations in the Chicago region. The transaction would also provide a head start for the Chicago Region Environmental Transportation Efficiency Program (CREATE), with CN committing an additional $100 million for integration, new connections, and infrastructure improvements to add capacity on the EJ&E line and allow network synergies to be realized over time. This $400 million of private-sector investment, combined with the roughly $40 million that CN would expect to spend to mitigate the impacts of increased train traffic along the EJ&E line, would better utilize and enhance capacity on the Chicago-area rail network.

On November 26, 2007, the STB designated the transaction as a "minor" one because the application did not pose anti-competitive issues. Under current law, the STB is required to issue a final decision on "minor" transactions within 180 days after accepting the application for consideration. In its November decision, however, the STB also announced that it would prepare an Environmental Impact Statement (EIS) on the transaction and that issuance of a final decision would be extended beyond the 180 days until the completion of the EIS. SEA began its extensive environmental review of this transaction in December 2007.

More information on the transaction, including a map of the areas served by the EJ&E and CN, is available by clicking on the EJ&E Acquisition icon on the About CN section of its website http://www.cn.ca/about/EJE/about_EJE/en_About.shtml.

Forward-Looking Statements

This news release contains forward-looking statements. CN cautions that, by their nature, forward-looking statements involve risk, uncertainties and assumptions. In addition to the other assumptions contained in this release, the Company believes the U.S. economy is currently experiencing recessionary conditions, but assumes that it will recover within the next six to nine months, and that the global economy will grow at a moderate pace throughout this period. The Company cautions that these assumptions may not materialize. The Company's results could differ materially from those expressed or implied in such forward-looking statements. Important factors that could cause such differences include, but are not limited to, industry competition, legislative and/or regulatory developments, compliance with environmental laws and regulations, various events which could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes, the effects of adverse general economic and business conditions, inflation, currency fluctuations, changes in fuel prices, labor disruptions, environmental claims, investigations or proceedings, other types of claims and litigation, 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 CN's most recent Form 40-F filed with the United States Securities and Exchange Commission, its Annual Information Form filed with the Canadian securities regulators, and its 2007 Annual Consolidated Financial Statements and Notes thereto and Management's Discussion and Analysis (MD&A), as well as its 2008 quarterly consolidated financial statements and MD&A, 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 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 matters, 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, and Jackson, Miss., with connections to all points in North America. For more information on CN, visit the company's website at www.cn.ca.

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Contact Information

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    (202) 347-7196
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    Robert Noorigian (Investors)
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    (514) 399-0052