BNSF Railway, CPKC, and CSX plan to hunt broad trackage rights over a mixed Union Pacific-Norfolk Southern system, if federal regulators approve the transcontinental merger.
Notably, CPKC and CSX are focusing on the identical hall: They need entry to the Kansas Metropolis-St. Louis trackage now managed by UP or NS, arguing that the merger companions’ current repair — trackage rights for Canadian Nationwide — doesn’t restore significant competitors.
The railroads outlined their plans in Wednesday regulatory filings with the Floor Transportation Board. The filings tip their arms relating to so-called responsive functions the railroads count on to submit by a Nov. 18 deadline. Quite a few quick line railroads filed comparable requests for trackage rights and, in some circumstances, entry to native clients.
All three Class I railroads urged the STB to reject the UP-NS merger outright, saying it should hurt competitors, damage the financial system, and isn’t within the public curiosity. But when the board does approve the $85 billion deal, the railroads stated regulators ought to impose quite a few situations to mitigate potential aggressive harms.
“If the Board decides to go down the trail of permitting this merger to basically remodel the trade, then it should additionally basically remodel the trade with commensurate situations to reduce the blow to shippers and the American public,” BNSF instructed the STB. “To be clear, situations can solely mitigate a number of the hurt to competitors attributable to this merger.”
BNSF will search 824 miles of trackage rights over Norfolk Southern’s Premier Hall between Chicago and intermodal terminals in Jap Pennsylvania. The trackage rights would lengthen from Chicago to Bethlehem, Pa., together with the Chicago Line from Chicago to Cleveland; the Cleveland Line from Cleveland to Alliance, Ohio; the Fort Wayne Line from Alliance to West Pitt, Pa.; the Pittsburgh Line from West Pitt to Harrisburg, Pa.; and the Harrisburg Line to Wyomissing Jct., Pa.; plus segments of the Studying Line and the Lehigh Line east of Wyomissing.
The route is a significant intermodal lane for BNSF and NS interline service right this moment, significantly for shared buyer J.B. Hunt.
“BNSF and NS are presently aligned on working collectively to offer this intermodal service to clients. If the Board approves the proposed merger, nonetheless, UP/NS would have the flexibility and incentive to make sure that BNSF just isn’t a aggressive possibility from a pricing and repair perspective,” BNSF instructed the board. “As soon as BNSF is eradicated or restricted from that market, UP/NS will have the ability to extract increased costs from its clients. To mitigate the lack of competitors and degradation in service, BNSF anticipates submitting a responsive software looking for overhead trackage rights on sure NS traces between Chicago and japanese Pennsylvania.”
Within the Gulf Coast — residence to clusters of petrochemical vegetation and their profitable carload visitors — BNSF will request that the STB require UP to create a impartial switching or terminal railroad that will immediately serve all UP- and BNSF-rail-served services.
“Many Gulf Coast shippers are depending on the UP community with out aggressive rail options — a dependence that forces captive shippers to pay increased charges than shippers with entry to a number of carriers — and the UP/NS merger would exacerbate these harms as a result of Gulf clients ship vital volumes to japanese markets the place CSX and NS compete right this moment. Publish-merger, UP would leverage its elevated market energy — and its observe of bundling rail service to clients with a number of services throughout its community — to impose nonetheless increased charges on these captive shippers,” BNSF instructed the board.
Thus BNSF proposes a impartial service that would supply BNSF, UP, and doubtlessly different railroads equal entry to rail-served clients within the area. If permitted, this is able to have a significant influence: UP has the trade’s largest chemical franchise and the railroad serves roughly 900 clients in Houston alone.
“The impartial terminal railroad would haul, swap, or interchange visitors to UP and BNSF at close by hand-off factors. The railroad may very well be collectively owned and managed by UP and BNSF (though different railroads may take part relying on the geographic territory concerned) or be a third-party shortline operator or switching railroad,” BNSF stated.
CPKC needs trackage rights enhancements
CPKC stated it should suggest eight situations that strengthen or defend its present trackage rights over UP in Texas and on NS between Detroit and Chicago. CPKC additionally intends to hunt new working rights over UP in Louisiana and Texas. And it’ll ask for trackage rights over NS within the Kansas Metropolis-St. Louis hall and new or adjusted trackage rights over UP in Kansas Metropolis and Chicago.
CPKC’s cross-border hall throughout Texas depends on trackage rights over UP between Beaumont and Rosenberg, after which once more from Victoria to Robstown.
CPKC will ask the STB to take away varied restrictions on commodities it might deal with over the route, together with entry to native shippers and connecting quick traces. It additionally will ask the board to impose situations that will “scale back UP’s capability to impede or delay CPKC’s efforts so as to add capability wanted to assist CPKC development,” together with setting ranges of service UP should present over trackage-rights routes.
CPKC will search new rights to function on UP trackage within the Baton Rouge, La., space to succeed in native clients. It additionally will request new rights to function over UP’s Lufkin Subdivision between Shreveport, La., and Houston. The route, CPKC says, may function a reduction valve ought to merger-related visitors will increase within the Houston terminal and between Houston and Livonia, La., create congestion on traces that CPKC and UP share east of Houston.
And, confronted with the prospect of getting NS purchase CPKC’s Dallas-area intermodal terminal in Wylie, Texas, CPKC will ask the STB to ban NS or UP from buying the terminal. NS has exercised its proper, below the CPKC-NS Meridian Speedway settlement, to amass the Wylie terminal. NS handles the lion’s share of visitors out and in of the terminal, largely to serve the Atlanta-Dallas market.
“UP’s acquisition of NS would basically alter the aggressive penalties of NS’s proposed Wylie acquisition. In contrast to NS, UP already operates two intermodal terminals within the Dallas space and UP competes immediately in opposition to CPKC for visitors between Dallas and the U.S. Midwest. UP’s acquisition of the Wylie Intermodal Terminal would subsequently place Wylie below the management of considered one of CPKC’s principal rivals,” CPKC stated.
Within the Midwest, CPKC will search trackage rights on Norfolk Southern’s former Wabash fundamental line from Mexico, Mo., to St. Louis together with associated “shut the hole” trackage rights on the Terminal Railroad Affiliation between St. Louis and East St. Louis, Unwell.
The NS Kansas Metropolis-St. Louis route is superior to CPKC’s personal circuitous line by way of Roodhouse, Unwell. “CPKC subsequently anticipates asking the Board … to require Candidates to grant CPKC trackage rights over a portion of NS’s route with a purpose to enhance the competitiveness of CPKC’s Kansas Metropolis-St. Louis route each for St. Louis-area visitors shifting to/from CPKC’s personal community and as a bridge between BNSF and CSX,” CPKC stated, noting that it additionally would love entry to native clients on the NS route.
Within the Kansas Metropolis space, CPKC will search entry to UP trackage within the terminal space to attach CPKC’s Knoche Yard with the Kansas Metropolis Terminal Railway. CPKC additionally will ask the board to guard its rights to make use of the Polo Line UP-CPKC paired monitor association between Airline Junction and Polo, Mo.
CPKC depends on Norfolk Southern trackage rights to hyperlink Detroit and Chicago. CPKC will ask the STB to strengthen these rights, together with stipulations relating to service ranges. CPKC will request that the trackage rights for the primary time would come with visitors interchanged with Conrail within the Detroit space, visitors interchanged with the Ann Arbor in Milan, Mich., and any visitors to or from new services CPKC could construct within the Detroit space.
In Chicago, CPKC will ask the board to grant entry to enter and exit its Chicago-Michigan trackage rights at CP 502 and to function between CP 502 and factors on the Indiana Harbor Belt, together with Gibson Yard. CPKC additionally will ask the STB to protect its proper to function over UP’s Techy Line, which connects CPKC’s Bensenville Yard with its fundamental line to the Twin Cities by way of Milwaukee.
CSX goals for intermodal and Midwest entry
CSX will request three main concessions: Entry to Kansas Metropolis by way of UP’s line between St. Louis and Kansas Metropolis; improved entry to japanese Pennsylvania by way of trackage rights over Norfolk Southern; and entry to a key dockside terminal on the Port of Virginia by way of trackage rights over NS and Norfolk & Portsmouth Belt Line.
“CSXT anticipates that it’s going to search situations the place CSXT is uniquely positioned to protect a part of the competitors {that a} merged UP/NS would in any other case extinguish, and the place UP/NS’s dominance could be most aggressively weaponized in opposition to competing carriers and the shippers that depend upon them,” CSX instructed the STB.
CSX famous that UP has addressed community overlap with NS within the Kansas Metropolis-St. Louis-East St. Louis hall by reaching an settlement with Canadian Nationwide, which might achieve entry to the UP route if the merger is permitted.
“But having conceded the necessity for a structural treatment, Candidates have proposed to deal with this hurt by granting rights to a service unlikely to meaningfully problem the mixed UP/NS’s aggressive dominance, not the service greatest positioned to revive the competitors within the KC-ESL [East St. Louis, Ill.] hall that will be eradicated by their merger,” CSX instructed the board. “CSXT is the one railroad that may restore the east/west competitors over this hall that the merger would destroy.”
Right this moment, CSX notes, shippers have “real alternative” within the Okay.C.-St. Louis hall, together with UP-CSX and NS-BNSF and NS-CPKC choices. “The merger eliminates that alternative by putting each traces below frequent UP/NS management, extinguishing the unbiased eastern-railroad different that presently disciplines pricing and repair throughout the hall,” CSX stated, noting that CN can’t replicate the japanese footprint of both the CSX or NS networks.
CSX stated it might search a 50% divestiture and dispatching management of UP’s line between East St. Louis, Unwell., and Kansas Metropolis, together with Neff Yard in Kansas Metropolis. “With a direct possession curiosity within the Kansas Metropolis Line, CSXT can construct a whole enterprise connecting Kansas Metropolis with its complete japanese community by way of the East St. Louis gateway, restoring exactly the choice Kansas Metropolis service that the merger would remove,” CSX stated.
Within the East, CSX stated the granting of trackage rights over Norfolk Southern would assist it function a counterweight to the NS intermodal dominance within the space that’s inside a one-day drive of a 3rd of the U.S. inhabitants.
“To make sure that shippers west of the Mississippi proceed to profit from aggressive choices, CSXT anticipates that it’s going to search trackage rights on NS from Chambersburg by way of Harrisburg and Allentown to Manville, [N.J.]. These rights would allow CSXT to entry an unbiased terminal in Bethlehem, Pa., to protect interline optionality,” CSX instructed the board.
Particularly, CSX will request trackage rights over the NS Lurgan Department between Chambersburg, Pa., and Harrisburg; the NS Harrisburg Line between Harrisburg and Wyomissing Junction; the NS Studying Line between Wyomissing Junction and Bethlehem; the NS Lehigh Line between Wyomissing Junction and Allentown Yard and Bethlehem; and the NS Lehigh Line from Bethlehem throughout New Jersey to Manville Yard.
In Virginia, NS is the one Class I railroad with entry to the Port of Virginia’s Norfolk Intermodal Terminal. CSX has for years sought direct rail entry to the terminal by way of federal courts and the STB.
“Right this moment, NS strikes visitors for interchange at gateways with UP, BNSF, and CPKC, whose transcontinental visitors strikes by way of NIT. NS presently has no systematic incentive to foreclose any of them from environment friendly interline entry. The merger would remove that neutrality completely.” CSX instructed the board. “Publish-transaction, a mixed UP/NS would have each the flexibility and incentive to use NS’s unique on-dock rail entry to NIT — and its management of the one line out there to any competing service — to steer transcontinental visitors onto UP’s community and away from BNSF and CPKC.”
CSX stated it probably would request trackage rights over NPBL and NS traces within the Norfolk space to succeed in the terminal.
CN, in its personal submitting, detailed the settlement with Union Pacific for entry to the railroads’ route from the St. Louis space to Kansas Metropolis. CN requested the STB to make the deal a situation of its approval of the merger.
CN stated it anticipates buying connecting trackage rights over the TRRA in a separating submitting. And CN stated it might search entry to vitality clients on UP in Hillsboro and Carlinville, Unwell., in addition to Des Moines and Avon, Iowa, by way of haulage or trackage rights.
The associated offers, CN stated, are within the public curiosity and protect competitors.
NS defends merger
Trains has requested UP and NS to touch upon the rival railroads’ filings.
“We’ll tackle the problems raised within the document,” Norfolk Southern stated in an announcement. “The information are clear: this merger will ship substantial, measurable advantages — shifting an estimated 2.1 million truckloads from street to rail yearly, saving shippers $3.5 billion that may be handed on to shoppers, and creating roughly 1,200 new union jobs. We’ve got bolstered these advantages with unprecedented voluntary commitments that present strong protections and assure vital public advantages.”
UP stated that the filings present different railroads are afraid of competitors. “Our opponents are afraid to compete; as an alternative, they’re exploiting the continuing to advance their very own industrial pursuits slightly than make investments their capital to boost service. Their calls for don’t strengthen America’s provide chain nor assist shoppers,” the railroad stated.
Filings are in line with prior mergers
The Class I railroad filings are in line with prior mergers, as railroads search to guard themselves from potential aggressive impacts from a brand new bigger rival.
Within the 1996 Union Pacific-Southern Pacific merger, for instance, Conrail sought to amass SP’s japanese community, together with trackage from the Gulf Coast to St. Louis. Regulators rejected Conrail’s bid.
Within the Conrail break up, CN sought to cobble collectively a Montreal-New Jersey route by proposing to amass Conrail’s Montreal Secondary to Syracuse, N.Y., and quick line New York, Susquehanna & Western from Syracuse to New Jersey. NS and CSX finally reached a haulage rights deal that happy CN’s considerations, and CN dropped its request to amass the trackage.
Extra just lately, as a part of the Canadian Pacific-Kansas Metropolis Southern merger overview, CN sought a compelled divestiture of the KCS route linking Springfield, Unwell., with Kansas Metropolis, which might have given CN entry to Kansas Metropolis. Regulators rejected that request as a part of their 2023 approval of the CP-KCS merger.
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