Thursday, September 18, 2008
CN Background Paper on EJ&E Purchase
CN-EJ&E Backgrounder
CN’s EJ&E transaction is good for Chicago
The transaction would significantly improve the fluidity of rail operations in the Chicago region, resulting in faster transit times and more reliable service for rail customers. It would enhance the competitiveness of businesses in the region that use rail service, while bringing some relief to communities that have more than their share of freight trains today.
The Chicago area is the transportation hub of North America. One-third of U.S. products shipped by rail move to, from, or through the Chicago area each year. Rail traffic in this region touches five million jobs nationwide every year, $782 billion in output and $217 billion in wages. (2005 CREATE Feasibility Study)
But it can take a freight train more than 24 hours to travel the 30 miles from Chicago’s north side to its south side (Howard Street on the north and 127th Street on the south). During the same time period, a CN freight train can travel from Chicago to New Orleans (about 900 miles).
If Chicago regional rail capacity and congestion are not addressed, studies suggest that the Chicago area will lose $2 billion in production and 17,000 jobs over the next two decades. (2005 CREATE Feasibility Study)
The transaction has more neighborhood benefits than negative impacts
The transaction would provide reciprocal environmental benefits – for every community along the EJ&E line in the suburbs of Chicago that would see increased train traffic, nearly double that number along CN lines in inner Chicago would experience a traffic decrease. That means roughly one million people would have additional trains in their communities, but more than 2.5 million would have fewer trains. In fact, roughly 60 communities inside the EJ&E arc would benefit from reduced train traffic as a result of the transaction.
CN’s EJ&E transaction will advance the objectives of CREATE
Better use of the EJ&E would provide a head start for the Chicago Region Environmental Transportation Efficiency (CREATE) Program. CN is committing $400 million of private-sector investment to create capacity on the Chicago rail network and by removing CN rail operations from downtown Chicago. The government has not provided comprehensive funding for CREATE, however. Without such funding or some other congestion-reducing initiative, increased rail congestion is expected in Chicago and the inner suburbs, with increased delays to motorists and increased train idling in these communities. Without moving trains onto the EJ&E, Chicago will continue to have high levels of rail operations in more densely-populated communities and less efficient rail operations.
CN is committed to addressing the environmental impact of the transaction
CN has already volunteered to provide reasonable mitigation for the significant adverse impact of the transaction, as measured by the sound standards used by the STB in prior cases. CN has committed roughly $40 million for such mitigation, in addition to the $300 million it would spend to acquire the EJ&E and $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.
In August, CN reached an agreement with the City of Joliet – a community along the EJ&E line – that resolves the city’s outstanding concerns related to quiet zones, operations, and communications arising from the transaction. CN continues to negotiate voluntary mitigation agreements with many other willing communities along the EJ&E, and remains an active participant in the STB’s environmental review of the transaction.
CN has undertakings with Amtrak, Metra and Gary/Chicago International Airport on infrastructure access and service matters arising from EJ&E transaction
CN has pledged to Amtrak and the STB that, after acquiring the EJ&E, it would permit the federal passenger train company to remain on approximately 11 miles of CN’s St. Charles Air Line route, following the re-routing of CN trains off that line and onto the EJ&E, until the Grand Crossing or other alternative acceptable to Amtrak is available. This preserves Amtrak’s access to Chicago’s Union Station and enables Amtrak to continue providing service to and from downstate Illinois cities such as Champaign and Carbondale. CN also agreed to cap Amtrak’s costs for maintaining this line at its current levels, indexed only for inflation in future years.
CN is having continuing discussions with Metra and, upon CN’s acquisition of control of the EJ&E lines, has committed to reaching an agreement that would permit Metra’s proposed STAR Line commuter service, should it receive government approval and funding, to jointly use enhanced EJ&E rail lines, which is Metra’s preferred option. Thus, the EJ&E transaction would not impede the STAR project. Furthermore, moving CN freight trains off its existing lines and onto the EJ&E could make it easier for Metra to expand North Central Service Line service to communities such as Wheeling, Buffalo Grove, Vernon Hills and Mundelein.
The expansion of Gary/Chicago International Airport (GCIA) can now proceed since the signing in June of a four-party preliminary memorandum of understanding (PMOU) between GCIA, EJ&E, CSX Corporation, and Norfolk Southern Corporation. The PMOU provides a comprehensive framework for relocating the nearby EJ&E line, a long unresolved matter that had been a key concern raised in opposition to the CN/EJ&E transaction. CN assisted EJ&E in the negotiations and is committed to honor the terms of the PMOU upon regulatory approval of the EJ&E acquisition and to carry out the needed line relocation.
* * *
CN and U. S. Steel, the indirect owner of the EJ&E, announced on Sept. 26, 2007, an agreement under which CN would acquire most of the EJ&E for $300 million, subject to regulatory approval by the STB. CN has committed 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. CN has also committed roughly $40 million to mitigate the impacts of increased train traffic along the EJ&E. 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 www.cn.ca/About CN
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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Contacts:
Media Investors
Karen Phillips Robert Noorigian
Vice-President Vice-President
North American Government Affairs Investor Relations
(202) 347-7196 (514) 399-0052
CN’s EJ&E transaction is good for Chicago
The transaction would significantly improve the fluidity of rail operations in the Chicago region, resulting in faster transit times and more reliable service for rail customers. It would enhance the competitiveness of businesses in the region that use rail service, while bringing some relief to communities that have more than their share of freight trains today.
The Chicago area is the transportation hub of North America. One-third of U.S. products shipped by rail move to, from, or through the Chicago area each year. Rail traffic in this region touches five million jobs nationwide every year, $782 billion in output and $217 billion in wages. (2005 CREATE Feasibility Study)
But it can take a freight train more than 24 hours to travel the 30 miles from Chicago’s north side to its south side (Howard Street on the north and 127th Street on the south). During the same time period, a CN freight train can travel from Chicago to New Orleans (about 900 miles).
If Chicago regional rail capacity and congestion are not addressed, studies suggest that the Chicago area will lose $2 billion in production and 17,000 jobs over the next two decades. (2005 CREATE Feasibility Study)
The transaction has more neighborhood benefits than negative impacts
The transaction would provide reciprocal environmental benefits – for every community along the EJ&E line in the suburbs of Chicago that would see increased train traffic, nearly double that number along CN lines in inner Chicago would experience a traffic decrease. That means roughly one million people would have additional trains in their communities, but more than 2.5 million would have fewer trains. In fact, roughly 60 communities inside the EJ&E arc would benefit from reduced train traffic as a result of the transaction.
CN’s EJ&E transaction will advance the objectives of CREATE
Better use of the EJ&E would provide a head start for the Chicago Region Environmental Transportation Efficiency (CREATE) Program. CN is committing $400 million of private-sector investment to create capacity on the Chicago rail network and by removing CN rail operations from downtown Chicago. The government has not provided comprehensive funding for CREATE, however. Without such funding or some other congestion-reducing initiative, increased rail congestion is expected in Chicago and the inner suburbs, with increased delays to motorists and increased train idling in these communities. Without moving trains onto the EJ&E, Chicago will continue to have high levels of rail operations in more densely-populated communities and less efficient rail operations.
CN is committed to addressing the environmental impact of the transaction
CN has already volunteered to provide reasonable mitigation for the significant adverse impact of the transaction, as measured by the sound standards used by the STB in prior cases. CN has committed roughly $40 million for such mitigation, in addition to the $300 million it would spend to acquire the EJ&E and $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.
In August, CN reached an agreement with the City of Joliet – a community along the EJ&E line – that resolves the city’s outstanding concerns related to quiet zones, operations, and communications arising from the transaction. CN continues to negotiate voluntary mitigation agreements with many other willing communities along the EJ&E, and remains an active participant in the STB’s environmental review of the transaction.
CN has undertakings with Amtrak, Metra and Gary/Chicago International Airport on infrastructure access and service matters arising from EJ&E transaction
CN has pledged to Amtrak and the STB that, after acquiring the EJ&E, it would permit the federal passenger train company to remain on approximately 11 miles of CN’s St. Charles Air Line route, following the re-routing of CN trains off that line and onto the EJ&E, until the Grand Crossing or other alternative acceptable to Amtrak is available. This preserves Amtrak’s access to Chicago’s Union Station and enables Amtrak to continue providing service to and from downstate Illinois cities such as Champaign and Carbondale. CN also agreed to cap Amtrak’s costs for maintaining this line at its current levels, indexed only for inflation in future years.
CN is having continuing discussions with Metra and, upon CN’s acquisition of control of the EJ&E lines, has committed to reaching an agreement that would permit Metra’s proposed STAR Line commuter service, should it receive government approval and funding, to jointly use enhanced EJ&E rail lines, which is Metra’s preferred option. Thus, the EJ&E transaction would not impede the STAR project. Furthermore, moving CN freight trains off its existing lines and onto the EJ&E could make it easier for Metra to expand North Central Service Line service to communities such as Wheeling, Buffalo Grove, Vernon Hills and Mundelein.
The expansion of Gary/Chicago International Airport (GCIA) can now proceed since the signing in June of a four-party preliminary memorandum of understanding (PMOU) between GCIA, EJ&E, CSX Corporation, and Norfolk Southern Corporation. The PMOU provides a comprehensive framework for relocating the nearby EJ&E line, a long unresolved matter that had been a key concern raised in opposition to the CN/EJ&E transaction. CN assisted EJ&E in the negotiations and is committed to honor the terms of the PMOU upon regulatory approval of the EJ&E acquisition and to carry out the needed line relocation.
* * *
CN and U. S. Steel, the indirect owner of the EJ&E, announced on Sept. 26, 2007, an agreement under which CN would acquire most of the EJ&E for $300 million, subject to regulatory approval by the STB. CN has committed 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. CN has also committed roughly $40 million to mitigate the impacts of increased train traffic along the EJ&E. 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 www.cn.ca/About CN
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.
- 30 -
Contacts:
Media Investors
Karen Phillips Robert Noorigian
Vice-President Vice-President
North American Government Affairs Investor Relations
(202) 347-7196 (514) 399-0052
Labels: Canadian National, CN, EJ and E RR
# posted by Cal Skinner : 7:50 AM
