Canadian National's Paul M. Tellier Vows to Strengthen Ties With Short-Line Railroad Partners.

Business Editors

MONTREAL--(BUSINESS WIRE)--Oct. 24, 2000

Canadian National (NYSE:CNI)(TSE:CNR.) President and Chief Executive Officer Paul M. Tellier says CN is committed to making its connecting short-line railroads full partners in its scheduled freight service offering.

"CN's view is that the future of railroading depends on improving service," said Tellier, speaking to CN's 2000 Short-line Workshop here.

"Scheduled service is the key to making us the best in customer service and efficiency. It's the way to win back business... We must focus on integrating the service we (CN and short lines) offer together to short-line customers. We want them to gain the advantages of scheduled service."

Short-line railroads are a big part of CN's business. Just five years ago, less than five per cent of CN's business involved short lines. Today, CN connects with about 80 short lines, and nearly a quarter of its business either originates or terminates on short-line carriers.

"When that much of our business relies upon short-line service, we know we need to work together."

CN has played a leading role in the creation of Canada's short-line industry. Since 1996, when the Canada Transportation Act was enacted, CN has transferred more than 4,600 miles (7,400 kilometers) of track to short-line operators. Today, more than 30 profitable, growing railroads operate lines that CN once owned and which today work best under local management.

Tellier urged short-line operators, at a time of soaring fuel prices, to press governments to lower punitive rail fuel taxes. He also invited short-lines to work with CN to show governments that railroad deregulation has benefited the economy, shippers and the entire rail industry. The Canada Transportation Act, which largely deregulated railroads, did much to create Canada's short-line industry, and now is subject to a statutory review by a federal panel.

"The current system is delivering excellent results: lower rates, improved efficiency, and better service. But the review provides opportunities to improve the system further."

Tellier said the system should be modified to make it easier for large railroads to transfer lines to short-line railroads. Second, he said, the rail industry needs a regulatory system where the bar is set very high before parties submit rate disputes to final offer arbitration. Third, and above all, Tellier, said railroads require a system that permits them to earn their cost of capital to attract the capital the industry needs to meet customer requirements.

Tellier said forced open-access - permitting multiple operators to run over a landlord railroad - would constitute re-regulation that could set the industry back decades. He said short-line operators RailAmerica, Inc. and Cando Contracting Ltd. agree that re-regulation would put all railroads at risk - large and small.

Tellier said CN is prepared to assist short lines upgrade their rail lines to accommodate heavier freight cars when the investment is economically justified.

CN recently agreed to provide US$2.4 million to the Columbus and Greenville Railway (C&G) in Mississippi. Over the next 10 years, a major C&G shipper, Delta Western Feed Mill, Inc., will use CN to route a substantial portion of grain and grain products to its plant in Indianola, Miss.

Canadian National Railway Company 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 cities of Toronto, Buffalo, Chicago, Detroit, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.