CN petitions U.S. Court of Appeals to order final STB decision on transportation merits of proposed EJ&E acquisition

WASHINGTON, DISTRICT OF COLUMBIA, Sep 18 (MARKET WIRE)
--
CN (TSX: CNR)(NYSE: CNI) today petitioned the United States Court of
Appeals for the District of Columbia Circuit for an expedited ruling
ordering the Surface Transportation Board (STB) to render a final
decision on the transportation merits of CN's proposed acquisition of the
principal lines of the Elgin, Joliet & Eastern Railway Company (EJ&E), to
allow the transaction to close by the parties' Dec. 31, 2008, deadline.

"Given the substantial, wide-ranging public interest benefits of our
planned acquisition of the EJ&E, we cannot permit regulatory delay to
imperil this transaction," said CN President and Chief Executive Officer
E. Hunter Harrison.

"We are convinced - and many business and community leaders agree - that
the transaction will be good for the Chicago region as a whole. It would
ease rail congestion, which is critically important to the region's
economy and its continued role as one of America's most important
transportation hubs. If unaddressed, rail congestion threatens $2 billion
of dollars of production and 17,000 jobs in the Chicago region over the
next 20 years.

"Second, the transaction would benefit the environment of the overall
Chicago region. For every community along the EJ&E line in the suburbs of
Chicago that would see increased train traffic as a result of the
transaction, nearly double that number along CN lines in inner Chicago
would see decreased rail operations. In fact, roughly 60 communities
inside the EJ&E arc would benefit from reduced train traffic as a result
of the transaction. That would mean a better quality of life for
residents of the Chicago region, with less pollution, fewer idling trains
and fewer blocked crossings."

Faced with a Dec. 31, 2008, deadline for completing its purchase of the
EJ&E, CN last month proposed a reasonable compromise to the STB that
would have allowed the agency to rule on the transportation merits of the
EJ&E acquisition while completing its environmental review of the
transaction. During this environmental review, CN proposed to maintain an
"environmental status quo" by which CN would not shift any of its trains
to the EJ&E until that review had been completed. But the agency last
week denied CN's petition.

"It is truly unfortunate that the STB rejected CN's compromise solution
given the impending deadline on our transaction," Harrison said. "The
agency's decision - and continuing uncertainty about the timing of the
STB's final decision on the transaction - leave us no option but to ask
the court to compel a final STB decision on the transportation merits of
the acquisition. We need the STB ruling soon so that we will be in a
position to close the transaction before year-end."

CN's petition need not preclude full environmental review of the
transaction. If it is granted, that will be a choice for the agency. The
STB would have options to assure that if CN's petition is granted, the
agency can complete its environmental review of the transaction,
including its consideration of the comments of all interested parties and
its imposition of lawful mitigation before the transaction would be able
to have any adverse environmental effects.

"The bottom line is that the benefits to Chicago's rail network and
environment from rerouting trains off congested city and inner Chicago
lines onto the underused EJ&E are too great to see this transaction
derailed," Harrison said. "We cannot allow controversy created in some
Chicago suburbs - and the regulatory delay it has created - to jeopardize
the transaction.

"CN appreciates the concerns of suburban communities, and it continues to
make substantial efforts to address potential adverse impacts of the
acquisition. But in the end we do not believe that concerns from a small
but vocal minority of residents should take precedence over the broad
public interest and the needs of a far greater number of communities that
would benefit from the transaction.

"The transaction is not just about CN - it's also about an efficient
Chicago rail network, a sound regional economy, and a better quality of
life for more than four million Chicago-area residents."

The STB designated the transaction as "minor" in November 2007 because
CN's application did not pose anti-competitive issues. By statute, the
STB is required to issue a final decision on minor transactions within
180 days of accepting an application for consideration. In its November
decision, however, the STB said it would prepare an Environmental Impact
Statement (EIS) on the transaction and that its final decision would be
extended beyond the 180 days until the completion of the EIS. The
agency's Section of Environmental Analysis began its extensive
environmental review of this transaction in December 2007.

After 10 months of review, few competition issues have been raised, yet
the STB still has not made a final determination as to whether the
transaction passes the statutory competition test.

Other, more complicated transactions reviewed by the STB have closed
within a time period comparable to what CN seeks here. In the case of the
$10-billion Conrail merger in 1997 - a transaction that traversed 24
states and the District of Columbia, 10,500 miles of rail lines and 2,070
grade crossings - the STB finalized its environmental review in 11 months
and issued a decision on the transaction two months later. By contrast,
CN's $300-million transaction involves small portions of only two states,
158 miles of rail line and a total of 99 grade crossings.

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
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.

www.cn.ca

Contacts:
CN
Karen Phillips (Media)
Vice-President
North American Government Affairs
(202) 347-7196

CN
Robert Noorigian (Investment Community)
Vice-President
Investor Relations
(514) 399-0052

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