CPKC, CSXT Advance Mexico-Texas-U.S. Southeast Corridor Plan (UPDATED)

This map shows the lines of Genesee & Wyoming-owned Meridian & Bigbee Railroad (MNBR) in relation to other rail lines in the territory and the principal geographic points in the region traversed. (Map Courtesy of CPKC)

Canadian Pacific Kansas City (CPKC) and CSX Transportation are seeking Surface Transportation Board (STB) approval to establish a new interchange connection in Alabama and freight corridor linking Mexico, Texas and the U.S. Southeast. The STB on Nov. 3 accepted for consideration their applications.

CPKC on Oct. 6 filed a minor application on behalf of itself and its wholly owned subsidiary Kansas City Southern Railway Company (KCS) to acquire from Genesee & Wyoming-owned Class III Meridian & Bigbee Railroad, L.L.C. (MNBR) approximately 50.4 route-miles of rail line between Meridian, Miss., and Myrtlewood, Ala., which it is calling the Western Line.

“KCS is acquiring the Western Line in order to establish a direct, efficient interchange with CSXT at Myrtlewood, creating a new east-west Class I freight rail corridor linking CPKC-served markets in Mexico and the Southwestern United States with CSXT-served markets in the Southeastern United States and beyond,” CPKC told the STB in its filing. The new freight rail corridor, it said, will provide a “shorter and more efficient route for existing CPKC-CSXT traffic and will provide a new, highly attractive option for new customers, thereby enhancing competition.”

CPKC reported that the proposed transaction satisfies the criteria for approval under 49 U.S.C. § 11324(d)—“i.e., it is not likely to substantially lessen competition, create a monopoly, or restrain trade in freight surface transportation in any region of the United States.” It involves an entirely end-to-end acquisition and MNBR will retain exclusive trackage rights over the Western Line to provide local service and some overhead service without any restriction on interchange, CPKC explained. Existing Western Line shippers “will continue to enjoy the same rail service and options that they receive today, while shippers in CSXT-served and CPKC-served markets will benefit from the establishment of fast, reliable, and environmentally friendly premium rail service over the new Class I east-west freight rail corridor,” according to the railroad.

CPKC told the STB that the transaction “builds, and is contingent, on CSXT retaking possession of its line east of Myrtlewood and resuming operations between Myrtlewood and Burkville, Ala.,” which it called the Eastern Line. Currently, MNBR operates the Eastern Line pursuant to a lease that is scheduled to expire in November 2023, according to CPKC. By CSXT retaking possession of, investment in, and resumption of operations on the Eastern Line, it will be able to interchange efficiently with CPKC, MNBR, and Alabama & Gulf Coast Railway LLC (AGR), another G&W railroad, at Myrtlewood and to provide premium service over the Eastern Line, CPKC said.

CSXT on Oct. 6 also filed a minor application with the STB to retake possession and operate the Eastern Line (download below).

The Eastern Line, it said, comprises two segments totaling approximately 93.68 miles: extending from milepost XXB 189.00 near Burkeville, to milepost XXB 222.00 at Western Junction, a distance of about 30.22 miles; and extending from a connection with the first segment at Western Junction, milepost OOR 716.25 to milepost ORS 779.71 near Myrtlewood, a distance of about 63.46 miles. According to CSXT, the Eastern Line includes Selma Yard, at Selma, and 12 stations (Myrtlewood, Linden, Thomaston, Safford, Orville, Beloit, Selma, Industrial Lead, Tyler, Benton, Whitehall, Burkeville). The railroad noted it is “merely replacing MNBR, an end-to-end extension” and will not close any routes. CSXT added that “following upgrade of the Eastern Line, CSXT ‘would be able to provide shippers with more efficient, competitive service. The proposed transaction would enhance [CSXT’s] ability to compete not only with other railroads, but also with freight that currently moves via other modes of transportation, such as long and short haul trucking companies.’”

MNBR currently operates approximately 168 miles of single track main line between Meridian and Montgomery, and owns the approximately 50.4 route miles of track between Meridian and Myrtlewood. MNBR leases from CSXT the land underlying its approximately 107-mile rail line between Myrtlewood and Burkville. MNBR operates the approximately 10 miles between Burkville and Montgomery via incidental overhead trackage rights over CSXT. At Meridian, MNBR interchanges with CPKC and Norfolk Southern. At Myrtlewood, MNBR interchanges with AGR. On the Eastern Line, MNBR interchanges with NS at Selma and CSXT at Montgomery. As a result of CSXT’s transaction, MNBR will interchange with AGR and CSXT at Myrtlewood.

CPKC announced the new joint service agreement with CSX and involving G&W during its Investor Day on June 28. Terms of the transactions were not disclosed at that time.

“This strategic acquisition will bring more shipping options to intermodal, automotive and other customers by providing a new, efficient corridor connecting expanding markets in Mexico, Texas and the U.S. Southeast,” CPKC President and CEO Keith Creel said in June. “With this new east-west connection taking advantage of each railway’s routes and service, we can extend our reach converting more freight traffic to rail and off our highways.”

“CSX is excited to establish this new interchange connection with CPKC, which provides shippers with a compelling transportation option with access to markets in Texas and Mexico as well as into the heart of the thriving and dynamic U.S. Southeast,” said CSX President and CEO Joe Hinrichs in June. “This new service is a demonstration of our commitment to creating product offerings for shippers that help them leverage the efficiency and sustainability advantages of rail to drive growth.”

“We are pleased to have entered into agreements with CSX and CPKC that will enable MNBR to continue providing customers with outstanding short line service from Linden, Ala., to Meridian, while enabling our Class I partners to create a new connection into the Southeast U.S.,” said Jack Hellmann in June, who was then G&W CEO and is now Executive Chairman of the short line holding company’s North American and UK/Europe Boards of Directors. “At the same time, we have enhanced several agreements related to other G&W short line railroads and are collaborating on the expansion of our service to Alberta and the Alberta Industrial Heartland in conjunction with CPKC.”

Voices of Support

Mississippi Gov. Tate Reeves and Mississippi State Sen. Jenifer B. Branning are among the project supporters, who, through CPKC, submitted letters to the STB.

“The proposed acquisition will directly link two Class I railroads—CPKC and CSX—resulting in more competitive options for intermodal, automotive and other shippers between markets in the southeast United States and markets in the southwest United States and Mexico,” Gov. Reeves wrote. “At the same time, the proposed acquisition will allow the MNBR to continue serving its existing short line customers on the acquired line in Alabama and Mississippi. CPKC’s ownership of the line will generate investment in the line which, in turn, will promote the safe, reliable and efficient movement of goods, as well as enhance economic development along the newly formed Class I rail corridor. In view of these many benefits, I urge the Surface Transportation Board to approve CPKC’s proposed acquisition expeditiously.”

Sen. Branning, a Republican, told the STB: “As chairman of the Senate Highways and Transportation Committee, I understand the connection between rail and jobs. Mississippi’s employers are currently served by a strong network of Class I and short line railroads. Strengthening Mississippi’s rail infrastructure is a vital piece of our continued economic development strategy. By directly linking two Class I railroads—CPKC and CSX—this acquisition will create more competitive options in Mississippi for intermodal, automotive, and other shippers to markets in the southeast United States and markets in the southwest United States and Mexico.”

STB Action

The STB in a Nov. 3 decision (download below) reported it is accepting CPKC’s application and related filings for consideration. “The Board finds that the Application is complete and that the Proposed Transaction is a minor transaction based upon the preliminary determination that the Proposed Transaction’s anticipated contribution to the public interest in meeting significant transportation needs clearly outweighs any potential anticompetitive effects,” the agency wrote. “The Board makes this preliminary determination based solely on the evidence presented in the Application. The Board emphasizes that this is not a final determination and may be revisited or rebutted by subsequent filings and evidence submitted into the record for this proceeding. The Board also adopts a procedural schedule for consideration of the Application and directs Applicants to file certain supplemental information [by Nov. 20, 2023]. Finally, an Environmental Assessment (EA) will be prepared to comply with the Board’s obligations under the National Environmental Policy Act, 42 U.S.C. 4321-4370m-11 (NEPA), and related environmental laws.”

In a supplementary filing, CPKC must “describe in detail the scope of ‘KCSR’s 2004 commitment not to close the Laredo gateway,’ the intersection between the 2004 commitment and the conditions imposed in CPKC Approval Decision, FD 36500 et al., and the commitment’s potential implications on the Board’s final analysis of the competitive effects of the Proposed Transaction,” according to the STB. Additionally, it must “provide a list of all origination/destination areas, including gateways, for the projected diverted and new traffic; identify any interchange partners participating in current movements of this traffic as well as projected diverted and new movements (if applicable); and provide the associated volumes by origination/destination areas for projected diverted and new traffic,“ among other operational information.

In a separate Nov. 3 decision (download below), the STB similarly accepted CSXT’s application and related filings. CSXT must also file certain supplemental information, such as a “list of all origination/destination areas, including gateways, for the projected diverted and new traffic; identify any interchange partners participating in current movements of this traffic as well as projected diverted and new movements (if applicable); and provide the associated volumes by origination/destination areas for projected diverted and new traffic,” among other operational data, according to the STB.

STB Members Patrick Fuchs and Michelle Shultz added in a concurring statement in both decisions that they would not order the applicants “to submit this extensive amount of supplemental information at this stage in the proceeding. While the Board has the authority to require the filing of supplemental information, the better course here would have been to assess whether any supplemental information is necessary after full analysis of all comments and requests for conditions and again after responses to those comments and requests, when the Board would benefit from the full views of shippers, railroads, and the broader public.”

According to the STB, any person who wishes to participate in this proceeding as a party of record must file, no later than Nov. 27, 2023, a notice of intent to participate. All comments, protests, requests for
conditions, and any other evidence and argument in opposition to the application and related filings, including filings by the U.S. Department of Justice and the U.S. Department of Transportation, must be filed by Dec. 11, 2023. Responses to comments, protests, requests for conditions, other opposition, and rebuttal in support of the application must be filed by Jan. 8, 2024. A final decision in this matter will be
served no later than 45 days after the date on which the evidentiary proceedings conclude, subject to the completion of environmental review, according to the STB.