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STB Votes in Favor of Conrail Deal

On June 8th, the Surface Transportation Board imposed a number of conditions the railways must comply with before they may take over Conrail:

  • Daily, weekly and monthly performance reports must be submitted to the STB, especially for the "common assets" classification yards so as to spot potential congestion problems before they get too serious. These reports are modelled on those required from Union Pacific, though the reports from the eastern railways will remain confidential. UP's reports are part of the STBs effort to help sort out that railway's congestion.
  • Conrail's computer systems must be able to communicate with CSXs and NS before the break-up proceeds.
  • Existing union contracts with Conrail may not be bulldozed; the two buyers must renegotiate the terms and go to arbitration if necessary. The railways had wanted to have existing contracts with CSX and NS extended to encompass Conrail workers.

The STB refrained from imposing open access on railways east of the Hudson river, as had been requested by New York Senator D'Alfonso. In response to the criticism of little competition in this region, the railways pointed out that the deal improves the situation even if it isn't perfect. Too much tinkering in a situation where there just aren't enough tracks for serious competition, may not achieve the desired goal anyway.

The new STB stipulations intensified speculation that everything will not be in place in time for the September 1st implementation date. CSX has been publicly suggesting that a delay may be necessary to avoid embarassing glitches. NS have been saying they want to stick to September 1st, but the new STB conditions may make this unrealistic. NS also says that all three railways must co-ordinate the implementation date.

As for repeating problems out West, UP adamantly maintains that their problems are due to a combination of fluke (accidents and bad weather) and overzealous downsizing (inability to cope with stresses to the system). However, popular explanations emphasize arrogance and an unwillingness to embrace the people and knowledge from Southern Pacific. This includes an underestimation of the problems inherent in making two incompatible computer systems talk to each other.

A combination of a wise STB and prudent railways should minimize the risk of western probems in the East. The requirement to have computer systems talking to one another before lift-off will ensure that one source of problems is eliminated. And both CSX and NS have taken on board numerous high-ranking Conrail officials who should be able to make sure that two decades Conrail knowledge and experience will not be lost. Conrail employees have also found new work at the CSX-NS common facilities in X, Y and Z. If there are problems, there will not be a shortage of experienced Conrail people with the authority to solve them.

A formal, written decision will be issued by the STB on June 23rd.

More articles in no particular order:
Saturday June 6th:

Railways do some last-minute manoeuvering

On June 2nd and 3rd, the STB held the final hearing on the proposed spitting of Conrail between CSX and Norfolk Southern. Agreements have been reached at the last minute with Amtrak, Cleveland and Indianapolis, but some are still against the deal.

Most seriously, a New York republican senator says that since all lines east of the Hudson river would be controlled by CSX, he wants the deal stopped. Sen. Alfonse D'Amato says he will bring a federal lawsuit against the deal if his concerns are not resolved. (Where do you want to go today, Mr D'Amato?) Still to be convinced are also Conrail unions who don't want to abandon their labour contracts and be swallowed up by their counterparts in CSX and NS.

But Amtrak is online following agreement on the Northeast Corridor. Amtrak will give CSX and Norfolk access to the NEC where Conrail currently operates, and improvements for freight will be made to the NEC.

While the final hearing was proceeding, deals were also reached with the cities of Indianapolis and Cleveland. Cleveland was bought off with 13 million dollars for noise reduction measures and landscaping, plus a promise that 40% of employees at the expanded Collinwood intermodal facility will be from Cleveland. CSX is investing $70 million in rail facilities in and around Cleveland.

The Conrail transaction has not provoked the kind of howling from other railways that UP's gobbling up of Southern Pacific provoked two years ago. To be fair, the parties opposing the UP/SP merger did not do so for fear of congestion but for fear of lack of competition.

But CSX officials say they are playing it safe. If key elements do not fall into place by the planned September 1st implementation date, CSX will let the date slip as far as 1999. Norfolk Southern says they will have to work with CSX to fix a definite date. Both railways vow not to let the embarassment in the west be repeated in the east.

The Conrail plan would restore rail competition to New York City. However the two carriers will still share key facilities in Detroit, New York and Philadelphia after the transaction. None of the corporate websites goes into this in any detail, and neither company has been able to provide more details by e-mail.

This shared responsibility brings a story comes to mind: It is a story about four people named Everybody, Somebody, Anybody, and Nobody. There was an important job to be done and Everybody was told to do it. Anybody could have done it, but Nobody did it. Somebody got angry about this, because it was Everybody's job. Everybody thought Anybody could do it, but Nobody realized that Everybody wouldn't do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have done.

Originally, CSX had wanted to buy Conrail itself in what it amusingly called a "pro-competitive merger". Only after much indignation, it was agreed that part of Conrail would go to Norfolk Southern.

At the final hearing, NS and CSX each got two and a half hours to make their case, and the following parties had six and a half hours to make theirs: federal government parties; broad shipper interests; specific shipper interests; coal interests; passenger and commuter interests; other railroads; New York/New Jersey; Chicago; Indianapolis; Ohio; other state governments; environmental and safety issues; and labor. U.S. Congressmen also had time to speak.

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