GARY | The Steel City will become one of two major U.S. hubs in
Canadian National Railway's system under the railroad's plan to purchase the
EJ&E Railway.
Canadian National CEO E. Hunter Harrison on Wednesday said Kirk Yard south of U.S. Steel
Gary Works is a "critical part" of the railroad's proposed $300 million purchase of the EJ&E, which could cut train waits in Chicago by as much as a day.
Kirk Yard will be upgraded and that will "free up capacity, land and real estate to expand our intermodal operations and projects for CN Worldwide," Harrison said.
CN Worldwide is the division that handles intermodal and other business for the railroad.
The announcement and Harrison's emphasis on Kirk Yard appears to give Gary a leg-up in the region's race to land a major intermodal rail operation. LaPorte County officials are actively courting
CSX Corp. and
Norfolk Southern Corp. for planned intermodal yards, and Hammond officials would like to site one at Gibson Yards.
Kirk Yard and CN's Memphis terminal will handle the majority of freight traffic for CN in the United States, serving as the railroad's primary U.S hubs, Harrison said. The increased traffic at Kirk Yard also will mean more jobs there.
"We think this is a win, win, win for everyone," he added in a morning conference call with analysts and reporters.
The EJ&E has 198 miles of mainline tracks running from Waukegan, Ill., to Gary, all by way of Chicago's suburbs. CN has 20,300 miles of track in eight Canadian provinces and 16 U.S. states, with 77 percent of its revenue coming from U.S. operations. Through ports in the United States and Canada, CN gives customers access to global shipping routes.
The railroads anticipate the deal closing by mid-2008, if federal regulators approve the purchase, Harrison said. Their respective boards of directors have approved the deal.
U.S. Steel Corp. will hold onto rail assets east of Buchanan Street, according to Wednesday's announcement. They will rename those the Gary Railway.
"This transaction is positive for all involved," said U.S. Steel Chief Executive Officer John P. Surma.
Gary and local transportation officials were caught off-guard by Wednesday's announcement. Those contacted early in the day were unaware of CN's agreement to purchase the EJ&E and any implications for Kirk Yard.
The office of Gary Mayor Rudy Clay received two copies of the joint company announcement on the purchase agreement, but the office had no direct contact with railroad officials, according to Gary spokeswoman LaLosa Burns.
"I think as a courtesy, if nothing else, to solicit some buy-in to a project of this magnitude would be appropriate," Burns said.
No job cuts are anticipated, though some of the EJ&E's 700 employees may have to change jobs or locations, Harrison said. The railroad's unions were being informed Wednesday of the planned purchase.
The railroad will invest $100 million for new connections and infrastructure, the company said. CN will no longer use the Indiana Harbor Belt Railway once the deal is complete.
CN spokesmen on Wednesday downplayed some of Harrison's remarks, saying decisions will be made later on the ultimate development of Kirk Yard, though they acknowledged the yard will be busier.
More detail will be available in an application for federal approval of the transaction, said CN spokesman Mark Hallman. The CN yard in Harvey now does intermodal business and could also see expanded operations after the purchase, Hallman said.
The Kirk Yard has convenient access to interstate highways, ample land and is zoned for use by industry, said John Swanson,
Northwestern Indiana Regional Planning Commission executive director.
"In reality, they would have pretty much what they need in terms of land area," Swanson said. "It's more an issue of upgrades to the site, so that could be a win-win situation."
Swanson and others said they did not have enough information to say what impact the expanded activity at Kirk Yard would have on rail congestion in Northwest Indiana. That will depend on what route CN uses to access Kirk Yard.
The main EJ&E line from Waukegan enters Indiana just east of Chicago Heights and passes through Griffith before heading north to Kirk Yard. Another line heads from there directly into Chicago by way of East Chicago and Whiting.
The EJ&E will continue to serve current industrial customers, Harrison said. Those include Mittal Steel Corp. and others.