Canadian Rail to Pay $68 Million to Divert Traffic

(CN) - Canada's largest railroad company must pay $68 million to ease traffic jams in the Chicago area, a federal appeals court ruled.

The D.C. Circuit unanimously upheld conditions imposed on the Canadian National Railway after its purchase of Chicago's 120-mile Elgin, Joliet & Eastern main line in 2008, which loops around the downtown area and bypasses the city's notoriously clogged freight rail system.

Canadian National paid $300 million to acquire the seldom-used EJ&E line, but has since faced opposition from local communities along the rail concerned about the possibility of traffic and environmental impacts brought on by the merger.

Following the acquisition, the Surface Transportation Board decided the Montreal-based rail company should be required to pay the majority of costs associated with building two suburban underpasses along the rail line.

Canadian National argued on appeal that the railroad regulatory board did not have the authority to impose such conditions, because the acquisition was considered a "minor merger," according to the ruling.

In its petition, Canadian National described the action against it as arbitrary and capricious, noting that when Congress limited the STB's approval authority, it also intended to curb its conditioning authority.

Before rendering its decision, the regulatory board initiated a 3,500-page environmental impact statement consisting of data from public meetings, published notices, and extensive consultations with local, state, and federal agencies, in an attempt to address the merger's impact on traffic congestion and wildlife, and the possibility of hazardous materials spills.

After the data was compiled, it was discovered that that most of the EJ&E main lines lacked bridges over its railroad tracks. From this, the board concluded that Canadian National should be responsible for $68 million in grade separation construction costs needed to circumnavigate traffic around Chicago's brimming freight system.

About 600 freight trains pass through the city's rail system every day, resulting in congestion that slows freight traffic to a halt.

Canadian National estimated that its freight trains could take up to 24 hours to move just 30 miles through the Second City's metropolitan area.

The transportation board said that although Canadian National's $300 million acquisition "is expected to provide nationwide economic benefits," it would also "impose substantial environmental costs on the local communities along the EJ&E line, [including] emergency response delays, increased vehicular traffic congestion and delays, increased noise and vibration, and increased safety issues at highway/rail at-grade crossings," according to the 45-page ruling.

The board also noted that local communities could not handle the environmental impacts of the merger without the imposed conditions.

In its ruling, the appeals court called Canadian National's counterarguments "unconvincing," noting that Congress had not made a clear intent to limit the board's conditioning authority in "minor" or "major" mergers. The court also rejected arguments that the agency took too long to compile its impact statement and that the document contained defects.

"Nor do we think the 300 or 180 day statutory deadlines emphasized by Canadian National are so short as to reveal an unambiguous congressional intent to impliedly repeal the Board's environmental conditioning authority," Judge David Tatel wrote for the three-judge panel.

"This case presents a difficult question of a statutory interpretation: in enacting the Staggers Rail Act of 1980, did Congress deprive the Surface Transportation Board of its authority to impose environmental conditions when approving the so-called minor mergers? For the reasons set forth in this opinion, we conclude that it did not and that the Board therefore retains its environmental conditioning authority. We also conclude that in approving the merger at issue in this case, the Board complied with the National Environmental Policy Act and that the environmental condition it imposed are neither arbitrary nor capricious," Tatel wrote.

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