AFAIK, it can't be done. The problems with automating engineers has been discussed many times, but i don't belive a solution was ever offered.
Take heart, though...it appears that the dumb AI that drives your automated settlers also drives all of the the AIs'; to further compound the AIs' predicament, the AI that drives the cities seems to pay little or no attention to what their own engineers have been doing! (I think fixing this little problem, by itself, might make AI civs much more competitive.)
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