The retrofitted diesel locomotives will run along the 480-kilometre corridor between the Edmonton area and Fort McMurray, Alta.
Fuelling and maintenance are to take place in Edmonton, where a lot of oilsands crude is processed and sent to market through pipelines.
"Natural gas has a lower carbon content compared with diesel fuel, so that locomotives using natural gas — if the railway technology employing this form of energy ultimately proves viable would produce significantly fewer carbon dioxide emissions," said CN chief operating officer Keith Creel.
Energy Conversion Inc., the U.S. company that's supplying the conversion kits to CN, says the move will cut carbon dioxide emissions by 30 per cent and nitrogen oxide emissions by 70 per cent.
Natural gas is currently cheap and plentiful in North America, so there are likely cost benefits to the railway as well.
CN (TSX:CNR) is also working with Electro-Motive Diesel, WestPort Innovations Inc. (TSX:WPT) and Quebec natural gas distributor Gaz Metro on a longer-term project to make engines run on natural gas.
The group expects to test the new engines in 2013 and test the prototypes in 2014.