June 27, 2008 15:31 ET

Agreement on Gary/Chicago International Airport expansion smoothes way in Indiana for CN's EJ&E acquisition

CHICAGO, ILLINOIS--(Marketwire - June 27, 2008) - CN (TSX:CNR) (NYSE:CNI) said today a four-party preliminary memorandum of understanding (PMOU) on the rail line relocation required for the expansion of Gary/Chicago International Airport (GCIA) should resolve a key concern that had been raised in opposition to CN's proposed acquisition of the principal lines of the Elgin, Joliet & Eastern Railway Company (EJ&E).

GCIA, EJ&E, CSX Corporation, and Norfolk Southern Corporation (NS) signed the PMOU, which was announced earlier today. CN, while not a signatory to the PMOU, is committed to honor its terms upon regulatory approval of its EJ&E acquisition by the Surface Transportation Board (STB) and its assumption of control of the EJ&E lines.

"CN welcomes this agreement and salutes key stakeholders for working cooperatively to resolve engineering issues related to GCIA's expansion," said E. Hunter Harrison, CN president and chief executive officer. "The end result will also ensure a fluid, effective rail network in Northwest Indiana. This is important to CN and to the region's economy.

"CN is particularly pleased that this agreement should mean the STB need not invest additional time and resources in examining concerns that had been raised by GCIA and others about the potential impact of our proposed purchase of the EJ&E on the GCIA's operations and expansion plans. We hope that resolving these issues, including concerns that the STB's Section of Environmental Analysis had indicated it would review as part of its environmental assessment, will help to expedite the STB's overall review of our transaction," Harrison said.

The joint agreement as it affects CN's EJ&E transaction calls for:

- Relocating the EJ&E line;

- Building a bridge over the existing NS Gary Branch to assure EJ&E continued access to primary customers, and

- Constructing a grade separation at Industrial Highway prior to relocating EJ&E operations.

"The joint agreement will give Northwest Indiana the rail and air transportation systems needed to support the region's economic vitality and to better serve the businesses that can bring good-paying jobs to the area," Harrison said.

"CN has a strong commitment to Northwest Indiana," Harrison said. "In addition, today's progress supports CN's planned investment in Kirk Yard, as part of its EJ&E acquisition. Our transaction could bring millions of dollars of private investment and employment growth potential to Gary, so Kirk Yard can once again thrive as a railcar-sorting hub."

Each year, CN spends roughly $20 million in Indiana and pays taxes of nearly $2.4 million. CN has roughly 250 employees who live in the state with a payroll of nearly $16 million.

CN plans to acquire the principal lines of the EJ&E for US$300 million and to spend an additional US$100 million to upgrade the EJ&E and construct new connections to improve the efficiency of its operations. The transaction would significantly reduce rail congestion in the urban core of Chicago and add much needed capacity to the U.S. rail network. CN is prepared to invest up to US$40-million in various mitigation measures.

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 may currently be in a mild recession but that it will gradually recover in the second half of 2008 and that the global economy will grow at a moderate pace throughout the year. The Company cautions that these, as well as its other assumptions stated above, 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, its 2007 Annual Consolidated Financial Statements and Notes thereto and Management's Discussion and Analysis (MD&A), as well as its 2008 unaudited interim 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, St. Louis, and Jackson, Miss., with connections to all points in North America. For more information on CN, visit the company's website at

Contact Information

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    Senior Manager,
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    (708) 332-3508
    Robert Noorigian (Investment Community)
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    (514) 399-0052