CN (Canadian National Railroad)

The Canadian National Railroad or Canadian National Railway (CN) is the largest rail network in Canada and the only transcontinental network in North America. In Canada, the CN network encompasses 12,900 route miles in eight Canadian provinces, including the nation's five major ports--Vancouver and Prince Rupert, British Columbia, on the Pacific; the key Great Lakes port of Thunder Bay, Ontario; and Montreal and Halifax, Nova Scotia, on the Atlantic. The U.S. network comprises 6,400 route miles in 16 states, connecting the Canadian network to the U.S. Midwest (including Chicago) down to the Gulf of Mexico and the ports of Mobile, Alabama, and New Orleans.

Internationally, the company has access to Mexico and the U.S. Southwest through a marketing alliance with the Kansas City Southern Railway Company, with the two networks interconnecting in Jackson, Mississippi. CN also holds interests in two overseas railways: 42.5 percent of English, Welsh & Scottish Railway Holdings Limited of Great Britain and 33 percent of Australian Transport Network Limited.

The freight transported over CN rails includes petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, and automotive products. CN has access to over 13 coal mines and 7 petroleum coke upgraders in Canada and the U.S., and ships coal and pet coke throughout North America and to Asia and Europe.

Support for the American Legislative Exchange Council
CN was a "Trustee" level sponsor of 2011 American Legislative Exchange Council Annual Conference, which in 2010, equated to $5,000. CN was also a sponsor of the Louisiana Welcome Reception at the 2011 ALEC Annual Meeting. In October 2013, Jim Kvedaras, Director of U.S. Government Affairs at CN, was listed as the Private Sector Chair of the Transportation and Infrastructure Subcommittee of ALEC's Commerce, Insurance and Economic Development Task Force.

History
With the discovery of commercially profitable coal deposits in the Brazeau-Bighorn area in Canada, coal prospector Martin Nordegg received a charter in 1908 to build the Alberta and Brazeau River Railway Company. Nordegg turned to the Canadian Northern Railway to build the line. CN was formed in the post-World War I era through the integration and nationalization of two of Canada's largest railroads, Canadian Northern and Grand Trunk, the basis of Canada's largest transportation conglomerate. After 78 years as a Crown corporation, CN was privatized through an initial public offering (IPO) on November 28, 1995. This was the largest privatization in Canadian history, raising Canadian (CAD) $2.26 billion for the government of Canada.

In the 1990s the growth of free trade agreements and expansion of trade encouraged CN to expand its railway, including the 1999 acquisition of Illinois Central Corporation, a proposed merger with Burlington Northern Santa Fe Corporation in 2000, the acquisitions of Wisconsin Central Transportation Corporation in 2001, and the rail and marine holdings of Great Lakes Transportation LLC and BC Rail Ltd. in 2004.

1990s: NAFTA and Mergers
In the 1990s Canadian National moved into the increased north-south freight traffic created by the 1994 North American Free Trade Agreement (NAFTA), including industrial products, automobiles, and commodities. CN President and CEO Paul M. Tellier told Barron's in 1999, "We want to be the NAFTA railroad." To that end, he engineered the $2.4 billion acquisition of Illinois Central Corporation (IC), the first land grant railroad in the United States (1851), completed in July 1999. By 1999 it had grown into a 3,450-mile railroad, with trackage extended south from Chicago to New Orleans and enlarging CN's system from Vancouver to Halifax and reaching into the United States as far as Chicago. Combined, the two systems totaled 18,700 miles--the fifth largest in North America--and comprised the only railway on the continent connecting the three coasts of the Atlantic, Pacific, and the Gulf of Mexico.

"In April 1998, after the merger had been announced but well before its completion, CN and IC entered into a deal that extended the reach of the combined system to the U.S. Southwest and into Mexico. The two companies reached a marketing alliance with the Kansas City Southern Railway Company (KCSR) through which CN could offer its customers coordinated interline train service throughout the three networks. The KCSR system ranged from Springfield, Illinois, where it could interchange with CN/IC, through Kansas City and Tulsa, Oklahoma, and then into the south, where another major interchange was established in Jackson, Mississippi. KCSR track also ranged west into Texas, including both Dallas and Houston, and the alliance also offered shippers access to Mexico's largest rail system, Transportacion Ferroviaria Mexicana, S.A. de C.V. (Grupo TFM), which was in a separate alliance with KCSR."

"Following the acquisition of IC, Tellier remained president and CEO of CN, but he ceded control of day-to-day operations of the railroad to the former head of Illinois Central, E. Hunter Harrison, who was named executive vice-president and chief operating officer. Unlike Tellier, Harrison was a veteran railroad man, having entered the industry in 1964 as a carman/oiler. He was given much of the credit for making IC such an efficiently run railroad, particularly by implementing 'scheduled railroading,' whereby freight trains were operated on a more precise schedule than had been typical. Under Harrison, CN too would become a scheduled railway, enabling it to considerably increase its usage of locomotives, freight cars, and train crews."

Early 2000s: Failed BNSF Merger, Several More Acquisitions
The impact of the IC deal was immediately felt as CN posted record profits. Canadian National then agreed to combine its rail systems with those of Burlington Northern Santa Fe Corporation (BNSF). The $6 billion deal would have created a new holding company called North American Railways Inc. and the largest railroad on the continent with a network covering more than 50,000 route miles. In March 2000, however, the U.S. regulatory authority the Surface Transportation Board (STB), issued a 15-month moratorium on rail mergers, concerned that the CN-BNSF merger could create a monopolization of just two transcontinental railways. A U.S. Court of Appeals upheld the moratorium in July, and CN and BNSF called off the merger.

Instead, Tellier completed the acquisition of Wisconsin Central Transportation Corporation (WCTC) in October 2001 for about $800 million in cash plus the assumption of $400 million in debt, adding 2,150 miles of track, the key addition being a stretch of track running between Chicago and the twin port cities of Duluth, Minnesota/Superior, Wisconsin, that enabled CN to secure a main link between western Canada and the U.S. Midwest. CN also inherited WCTC's interests in several overseas railroads, including 42.5 percent of English, Welsh & Scottish Railway Holdings Limited of Great Britain and 33 percent of Australian Transport Network Limited.

In November 2002 CN slashed its workforce by 5 percent, or 1,146 jobs. In May 2004 CN acquired the rail and marine holdings of Great Lakes Transportation LLC (GLT) for $395 million, a group of rail and water carriers that catered particularly to the needs of the steel industry. It included the 200-plus-mile Duluth, Missabe, and Iron Range Railway Company, an iron ore carrier; the Bessemer & Lake Erie Railroad Company, a transporter of coal, iron ore, and limestone between the port of Conneaut, Ohio, and steel mills in Pittsburgh; and Great Lakes Fleet Inc., a firm that owned and operated eight vessels carrying bulk commodities on the Great Lakes. In July 2004 CN finalized its purchase of BC Rail Ltd. from the government of British Columbia for CAD 1 billion.

CN and Coal
CN has access to over 13 coal mines and 7 petroleum coke upgraders in Canada and the U.S., including thermal or metallurgical coal, petroleum coke, or metallurgical and foundry cokes. CN ships coal and pet coke throughout North America and to Asia and Europe.

On its website CN argues that it has:


 * direct access to petroleum coke facilities in Canada and the U.S.
 * shipping of thermal coal to energy utility plants from the Illinois basin
 * shipping throughout lake Erie, Michigan and Superior via the Great Lakes Fleet from Thunder Bay, Conneaut and Chicago
 * Ohio river access to utility power plants at Mound City, IL, Jessup and Calvert City, KY
 * Mississippi river access at East St Louis, IL
 * blending, storage and transloading services throughout Canada and the U.S.
 * an extensive rail network that spans three coasts and agreements with the U.S. railroads that extends our reach to your customer's plants

CN's website also says CN has an extensive international transport system:

"If you are shipping overseas to producers in Japan, Korea, India, and China, we go directly to export terminals on the Pacific Coast:


 * Ridley –  Prince Rupert - the closest port to Asia and the only bulk export terminal that unloads unit trains as well as smaller blocks of railcars
 * Westshore – Greater Vancouver
 * Neptune – North Vancouver
 * CN's gulf terminal – IC RailMarine Terminal on the lower Mississippi river – exporting through the gulf ports with state-of-the-art equipment, storage  and blending facilities.  You get direct transfer between rail, ship and barge."

CN sells assets to the Cline Group and Foresight Energy
In June 2011, Canadian National Railway said it will sell assets of its indirect subsidiary, IC RailMarine Terminal Co, for $73 million to an affiliate of Foresight Energy and the Cline Group. CN also said it had entered a related 10-year coal transportation agreement with another affiliate of Foresight and Cline - Savatran LLC - to increase its participation in the growing export of Illinois Basin coal.

Foresight Energy has about 3 billion tons of coal reserves and coal production from four mining complexes in Illinois. The IC RailMarine terminal, which is located on the east bank of the Mississippi River at Convent, Louisiana, stores and transfers bulk commodities and liquids globally between rail, ship and barge. Foresight said it will double the capacity of the terminal to 8 million tons of export coal per year, with the potential for an additional expansion of 8 million tons

CN said it will enter the rail transportation agreement with Savatran LLC after the terminal deal closes. The coal transportation agreement entails hauling of coal from four Illinois mines to the Convent transfer facility. Under the terms of the deal, Savatran will ship a minimum annual volume of coal via CN.

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