Amtrak is calling on the Surface Transportation Board (STB) to deny CN’s conditions to the Canadian Pacific-Kansas City Southern merger because they do “not satisfy the Board’s ‘operationally feasible’ requirement” and “would harm the public interest by adversely affecting the provision of passenger rail service. ...”
The STB on July 1 accepted for consideration responsive applications by CN and Norfolk Southern (NS) regarding the CP-KCS combination, which is under STB review and seeks to create North America’s first transnational freight railroad, Canadian Pacific Kansas City (CPKC).
CP and KCS on May 13, 2022, submitted a revised operating plan as ordered by STB, and CN and NS on June 9 filed amended responses, with each railroad requesting a number of conditions, including divestiture of the Springfield Line in Illinois and Missouri as well as certain trackage rights.
CN and its U.S. subsidiary Illinois Central Railroad Company (ICRR) seek, as a condition to any approval of the CP-KCS merger, approval of the sale of KCS’s line between Kansas City, Mo., and Springfield and East St. Louis, Ill., to ICRR.
“In connection with the line acquisition, ICRR also seeks acquisition of an 8.33% ownership share of Kansas City Terminal Railway Company (KCT), which would enable ICRR to operate over KCT-controlled trackage in Kansas City, and a 50% ownership interest in KCS’s International Freight Gateway terminal (IFG Terminal) south of Kansas City,” among other conditions, according to the STB.
Amtrak disputed these conditions in a July 12 filing to the STB (download below).
Amtrak wrote it “respectfully requests that the Board deny” CN’s responsive application because the Class I railroad would operate additional freight trains over:
• CN’s Homewood (Chicago), Ill., to Gilman, Ill., line (the approximately 57.6-mile Homewood-Gilman Line Segment), “on which CN has repeatedly represented to the Board that it does not have adequate capacity to accommodate even existing Amtrak and CN operations.” CN is expected to operate two additional freight trains here and on a short segment in Memphis, Tenn. Six daily Amtrak trains operate over the CN line between Chicago and Carbondale: the City of New Orleans, a long-distance train that makes a daily round-trip between Chicago and New Orleans, La., and the Illini/Saluki, state-supported trains funded primarily by the state of Illinois that provide two daily round-trips (including the one currently suspended) along the Chicago-Carbondale corridor.
• The rail line jointly owned by KCS and its affiliates and Union Pacific (UP) between East St. Louis, Ill., and Godfrey, Ill. (the approximately 28.8-mile East St. Louis-Godfrey Line Segment, which is part of the Springfield Line), “on which Amtrak trains already experience high levels of freight train interference.” CN is slated to operate 2.6 additional daily freight trains here. The East St. Louis-Godfrey Line Segment is part of Amtrak’s Chicago-to-St. Louis Corridor. Ten Amtrak trains operate here each day: four daily state-supported Lincoln Service round-trips between Chicago and St. Louis that are funded primarily by the state of Illinois; and the Texas Eagle, a long-distance train that operates a daily round-trip between Chicago, St. Louis and San Antonio, Tex., with connecting through-cars continuing to Los Angeles three days per week on Amtrak’s Sunset Limited.
Amtrak also pointed out that it operates over six additional rail lines on which there would be more freight trains and/or longer freight trains if CN’s responsive application were approved:
• An approximately 250-mile portion of CN’s Chicago-New Orleans main line, and three CN lines in Michigan, on which CN would operate longer freight trains.
• A short segment on UP in Kansas City on which CN seeks assignment of KCS’s trackage rights and would operate 1.7 additional daily trains.
• A short segment on UP in Springfield, Ill., on which CN has trackage rights and would operate two additional daily freight trains.
“CN’s responsive application makes no mention of the current performance of Amtrak trains operating over these lines,” Amtrak reported in the STB filing. “It provides no information (other than pre- and post-transaction train density and tonnage figures) that bears upon their capacity and how current rail operations, and in particular the on-time performance of Amtrak trains, would be impacted if the responsive application is approved. Although CN has committed to invest at least $250 million for capital improvements on other rail line segments on which freight traffic will increase if its responsive application is granted … , CN has no plans to make any investments to increase capacity on any of the lines over which Amtrak operates—and apparently has not even assessed whether investments are necessary.”
Amtrak argued that “[a]s the Board stated in its [July 1] decision accepting CN’s responsive application, the key issue when the Board is asked to impose conditions on approval of a railroad control transaction under 49 USC §11324(c) is whether the conditions ‘would or would not be in the public interest.’ Decision No. 20, served June 30, 2022 at p. 7. Conditions imposed by the Board on its approval of railroad mergers ‘must be operationally feasible, and produce net public benefits.’ Canadian National Ry., Grand Trunk Corp., and Grand Trunk Western R.R.-Control-Illinois Central Corp., Illinois Central R.R., Chicago, Central and Pacific R.R. and Cedar River R.R., 4 S.T.B. 122, 141 (1999). Even when the need for a condition is identified, the Board disfavors conditions that require divestitures. ‘We have often said that divestiture is an extreme remedy not to be imposed lightly[.]’ Id. at 157. Because the additional CN train operations on the Homewood-Gilman and East St. Louis-Godfrey Line segments that would result from approval of the responsive application could not be accommodated without materially worsening the on-time performance of Amtrak trains operating over those lines, the divestiture condition fails to meet the Board’s standards.”
In related developments, last month Bob Knief, President of Bartlett Grain Co., LP, a U.S. exporter of grain to Mexico, urged the STB to approve the CP-KCS merger and reject CN’s request that KCS’s Springfield Line be divested to it. Among Bartlett’s facilities is a grain facility in Jacksonville, Ill., which Bartlett spent more than $25 million in 2012 to build. The facility, which includes a 7,000-foot-long rail loop and can hold up to 100 railcars, opened in August 2013 and is located on the KCS Springfield Line. Significant further investments have been made in Jacksonville since 2013 to expand capacity, according to Bartlett.
Also, Amtrak in May asked the STB to set terms and conditions for a new operating agreement (OA) between Amtrak and CN. CN submitted its own filing also calling for a new OA, but not on the terms that Amtrak requested.
In March, Amtrak issued a 2021 Host Railroad Report Card, ranking the Class I railroads for keeping Amtrak intercity passenger trains on time. The Federal Railroad Administration’s “Metrics and Standards” rule, released in November 2020, requires Amtrak and the host freight railroads to certify Amtrak schedules, and sets an on-time performance (OTP) minimum standard of 80% for any two consecutive calendar quarters. Both CP and CN earned an “A” (CN’s Quebec operations are excluded); BNSF received a “B+”; CSX, “B”; Union Pacific, “C+”; and Norfolk Southern, “D-.” (Kansas City Southern does not currently host Amtrak service.)
Finally, in January Amtrak CEO Stephen Gardner announced “CP’s commitment to [Amtrak’s] efforts with states and others to expand Amtrak service,” and that the two railroads had reached an “agreement formalizing CP’s support of Amtrak expansion in the Midwest and the South.” He also noted at that time: “Given CP’s consistent record as an Amtrak host, we are supporting CP’s proposal to expand its network” in a merger with KCS.