CNR Canadian National Railway Company

CN (TSX: CNR) (NYSE: CNI) said today that it has asked the Surface Transportation Board (STB) to take a new approach to CN's proposed acquisition of the major portion of the Elgin, Joliet & Eastern Railway Company (EJ&E). CN has asked the Board to issue a final decision on the transportation merits of the transaction in time to permit the transaction to close before year-end, but to preserve the environmental status quo pending further STB action on the environmental issues posed by the transaction. The new approach would assure adequate protection of the environment for communities along the EJ&E. At the same time, it would avoid the risk to the broader public interest in improved rail transportation posed by regulatory delays that threaten termination of the transaction.

CN's petition requests that the STB decide by September 15, 2008 whether it will modify its procedural schedule to provide for a final decision by October 15, 2008 on the transportation merits of the proposed EJ&E acquisition. Under law, that decision would be based on whether the Board has found adverse competitive impacts that are both "likely" and "substantial." CN is also asking the Board, if it decides to approve the transaction in October, to condition its approval on preserving the environmental status quo until the Board's Section of Environmental Analysis (SEA) has completed its environmental review of the transaction. CN contends that, so long as the environment is not affected by the transaction during environmental review, the law requires the Board to approve the transaction on its competitive merits. Once the STB's environmental review is completed, the Board would be expected to issue a decision governing any change in the environmental status quo.

"This transaction has far-reaching economic and transportation benefits to the Chicago region, the Midwest, and the nation as well as for CN and its customers," said E. Hunter Harrison, President and Chief Executive Officer of CN. "This transaction enjoys significant support from a broad array of shippers and the range of other parties who have a stake in making sure that the serious rail congestion issues plaguing Chicago are being addressed by sound transportation initiatives such as the acquisition by CN of the EJ&E.

"At the same time, we are well aware of the concerns raised by communities along the EJ&E line about the environmental impacts of increased train traffic. We are asking the STB to set a schedule providing for a decision on the merits which, if favorable to CN, would allow us to close on this transaction before the end of this year, but would not cause any adverse environmental impacts before the Board completes its environmental review and develops a full record on which to base the environmental mitigation that it may impose on the transaction."

CN is entitled to and requires this relief because the STB declined CN's request for a fixed timetable that would conclude its regulatory and environmental review by the end of the year and, despite CN's continuing best efforts, a substantial risk remains that EJ&E, which is an indirect subsidiary of United States Steel Corporation (U. S. Steel), would terminate the proposed transaction if it is not closed before year-end. U. S. Steel has recently declined CN's request for a modification of the Stock Purchase Agreement (SPA) or other action that would assure that the transaction could still be closed if approved after December 31, 2008. That decision has highlighted the risk that the transaction would be terminated before it was reviewed by the STB. As a result, CN is seeking relief to allow this important transaction to close prior to the end of 2008.

"CN is prepared to take the positive step of closing this transaction before year-end in a way that provides the STB with additional time to complete its environmental review by early 2009," Harrison said. "We are hopeful that the final EIS will conform to the view that this transaction is clearly beneficial to the environment of the broader Chicago region and that the legitimate impacts on affected communities are not novel and can all be reasonably mitigated in accordance with sound STB precedents and the long-established public policy framework governing railroad transactions throughout the United States.

"The chief concerns raised by opponents of this transaction are the impacts of train traffic that will be diverted from CN lines in Chicago onto the EJ&E," Harrison said. "Our proposal would ensure that the STB has sufficient time to review those matters fully before it authorizes any diversion of traffic. The action we are requesting would not interfere in any way with SEA's environmental review process and we are seeking to protect the interests of all parties. At the same time, we would be moving one step closer to meaningful rail congestion relief and rail efficiency enhancements in the Chicago region.

"We have consistently stated that we understand and are willing to address the concerns of communities that will experience train traffic increases as a result of this transaction," Harrison said. CN has been actively engaged in the SEA's environmental review process and will participate in the SEA's public hearings in August and September in communities in the region. CN also will continue to work with affected communities along the EJ&E line in an effort to reach voluntary mitigation agreements addressing reasonable environmental concerns associated with increased train traffic on the EJ&E.

CN's petition notes that if the Board does not act by September 15, 2008, CN will be prepared to petition the U.S. Court of Appeals for the District of Columbia Circuit immediately thereafter to compel the STB to issue a final decision that would permit CN to close the transaction by December 31, 2008. By requesting an STB decision by September 15 solely on the question of whether the STB will agree to issue a final decision on the transportation merits by October 15, 2008, CN hopes to avoid the need for judicial intervention.

CN and U. S. Steel announced on September 26, 2007, an agreement under which CN would acquire most of the EJ&E for $300 million, subject to regulatory approval by the STB. The transaction would enable CN to re-route its trains along the EJ&E arc around the periphery of the Chicago area, reducing rail congestion in the inner core of Chicago while significantly improving the flow of CN's rail operations in the Chicago region. 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. This $400 million of private-sector investment, combined with the roughly $40 million that CN would expect to spend to mitigate the impacts of increased train traffic along the EJ&E line, would better utilize and enhance capacity on the Chicago-area rail network.

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.

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Contacts: CN Jim Kvedaras (Media) Senior Manager U.S. Public & Government Affairs (708) 332-3508 CN Robert Noorigian (Investors) Vice-President Investor Relations (514) 399-0052