Agreement reached on CSX railroad merger impacts on Vermont

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Agreement reached on CSX railroad merger impacts on Vermont

Sun, 01/16/2022 - 3:01pm -- tim

by C.B. Hall, Vermont Business Magazine Burlington-based Vermont Rail System (VRS), the Vermont Agency of Transportation (AOT) and CSX Transportation, one of the nation's largest railroads, have reached an agreement on terms of a pending merger between CSX and Pan Am Railways (PAR). On the basis of the agreement, both AOT and VRS will withdraw objections to the proposed consolidation if the federal Surface Transportation Board, which has the final say over the matter, incorporates the agreement's terms as conditions to its approval of the merger.

Objections to the proposal have focused on the so-called Connecticut River Line between White River Junction and Massachusetts. That rail line is owned by the New England Central Railroad, a subsidiary of Genesee & Western, Inc. (GWI), which owns or holds an interest in more than a hundred railroads worldwide. The route is also used by Amtrak's Vermonter train.

PAR runs trains on the line by virtue of an access agreement with NECR, which also operates its own trains on the route. PAR and the Norfolk Southern Railway each hold a 50% interest in the operation, which owns certain other rail routes in New England, and is known as Pan Am Southern (PAS). Under the merger proposal, CSX would acquire PAR's  interest in PAS, which would then contract with another GWI subsidiary to operate PAS. The CSX-PAR merger would thus reduce the number of freight carriers operating on the line from the current two, GWI and PAS, to one, GWI.

The CSX-PAR proposal has raised concerns at AOT and VRS, which operates on over 300 miles of track. The state owns most of those tracks, including the line that feeds into the Connecticut River Line at Bellows Falls, where VRS exchanges freight with both PAS and GWI. The merger could thus diminish the benefits to VRS of competition on the key connecting route by eliminating one of the two entities operating on it. 

Under the agreement, filed with STB on December 29, VRS will have the right to run its own trains on the line between White River Junction and Bellows Falls, and limited rights to run trains between Bellows Falls and an East Deerfield, Massachusetts, railyard, on an east-west line in which the merger will give CSX a 50% interest.

"We're glad that we were able to have constructive discussions and reach this agreement," VRS president Selden Houghton said.

"The agreement ensures that VRS will have continued access to the national rail network and existing markets, on commercially reasonable terms," Chris Parker, executive director of the Vermont Rail Action Network advocacy group, told VBM. He added that the agreement's assurance of continued smooth connections between the national network and VRS - and thus VRS customers - will keep many shipments away from the more carbon-intensive alternative of truck transport.

Not a done deal yet

The agreement appears also to have satisfied AOT. In an email,Trini Brassard, assistant director of the agency's Policy, Planning and Intermodal Development Division, wrote that AOT would participate in the STB proceedings "if we still had a concern or issue that the Agency wanted the board to decide, or if the Agency were supporting the purchase and wanted to be sure the board knew it was important to us." Neither of these being the case,AOT is now assuming a neutral position.

"The case will continue to go through the STB process, and we will continue to monitor it,” Brassard wrote.

Focusing as it does on the movement of freight, the agreement represents only part of the equation. It does however provide that the addition of VRS trains will not adversely affect Amtrak's Vermonter, which uses the section of the the Connecticut River Line in question. In particular, the document states that "NECR will give priority to intercity rail passenger trains of Amtrak." The federal statute that established Amtrak more than half a century ago mandates that priority so as to keep passenger traffic moving according to its timetables.

But in a strongly worded January 3 filing, Amtrak pressed STB to enforce seven specific requirements that CSX would have to meet as conditions to the merger. To the surprise of some observers, CSX agreed to meet all of those requirements except one, on which discussions are continuing. 

The issues did not specifically directly concern Vermont, and Parker felt that the merger's direct impacts on the Vermonter will be insignificant, "except that we all benefit from a stronger network" - a goal that CSX's concessions will further, in the context of the Biden Administration's pro-passenger rail policies.

STB will weigh the submissions from all the concerned parties, and will probably issue its decision on the merger this spring. The December 29 agreement appears likely to simplify the federal board's consideration, and to ensure the continuance of VRS's connections to the national network, but Parker wondered if caveats attached to the merger's approval might push CSX to drop the deal.

"Right now I expect the merger to be approved, but it is clear that the board is considering imposing conditions," he stated. "The question is, How far will STB go and how will CSX respond?"