Potential merger partners Canadian Pacific (CP) and Kansas City Southern (KCS) on Dec. 28 submitted their safety integration plan to the Surface Transportation Board (STB) and Federal Railroad Administration (FRA) for review, meeting the STB’s procedural schedule deadline.
Before specifically addressing CPKC operations in their plan filing, the railroads emphasized their performance as a measure of merger success. “CP intends to keep learning from the best practices in its cross-border operations and to apply them to its integration with KCS and KCS’s own cross-border operations,” they wrote. “In addition, CP will bring its deep expertise related to its network and its capabilities and to the integration process. CP’s ability to deploy this institutional knowledge to facilitate the smooth integration in the acquisition context was demonstrated during its combination with DM&E in 2009 and most recently with CMQ in 2020, during which there were no material service disruptions. KCS similarly has a proven safety record and maintains strong operating practices. KCS’s ability to successfully and safely integrate was demonstrated during its combination with Tex Mex and Transportación Ferroviaria Mexicana in 2005, which, like CP’s recent acquisitions, involved no material service disruptions. Particularly because the CP/KCS combination involves two Class I railroads with mature processes, demonstrated safety performance, a history of successful integrations, and no geographic overlap, CP and KCS … have no doubt that the integration of CP and KCS will be safe and successful.”
The railroads also noted that “[w]hile integration planning has already begun, the integration process will continue over the three years following Board approval of CP control … to ensure that there will be no disruptions in safe operations or the service provided to customers.”
Following are highlights of each component of the safety integration plan:
• Corporate culture: Both CP and KCS value safety, the railroads wrote, “and this like-mindedness ensures CPKC will continue CP’s legacy as the safest Class I railroad, particularly once CPKC adopts certain of CP’s proven programs.” Among them: a coordinated, centralized safety management system; a consequence leadership program; workplace health and safety committees; a risk reduction program; and efficiency testing and manager accountabilities.
• Training: After reviewing both railroads’ training programs, CP determined they “meet or exceed applicable federal requirements,” according to the filing. CPKC “will ultimately adopt CP’s training programs, adapted to KCS best practices. CP and KCS will work together to identify a comprehensive list of differences surrounding safety and operating rules. Once the differences are appropriately assessed, a comprehensive package of rules will be developed and delivered and CPKC will adopt uniform training across the United States. Maintenance of a single training program will, in turn, enable efficient internal and external oversight, as delivery will be the same at each location across the new property.”
• Operating practices (operating rules, alcohol/drug, qualification and certification of locomotive engineers, and hours of service laws): While practices will remain separate for some period “post-control date,” the railroads explained, “CPKC will perform a comprehensive review of all operating rules and practices to determine the best fit for the combined company.”
• Motive power and equipment: “CP expects the mechanical facilities [it operates] in St. Paul and Shreveport to remain the primary U.S. locations for locomotive maintenance,” according to the filing. “Once operations are integrated post-control date and operating patterns are established, CPKC will assess the appropriateness of any changes to network repair and service locations.”
• Signal and train control: Given the complexity of signal and train control, “CP and KCS have created a team to lead planning and integration post-control date,” according to the filing. “The team is currently developing a detailed plan to integrate signal and train control design, maintenance, and construction activities, systems, and processes, including integration of the Positive Train Control (“PTC”) system by analyzing which processes, standards, and systems are the most appropriate fit for CPKC.”
• Track safety standards and bridge structures: “CPKC will transition to the [CP] Engineering Red Book [of Track & Structures Requirements] after the requisite training occurs,” according to the filing. “Similarly, CPKC will use SAM [Structures Asset Management] after it migrates all data in BIMS [Bridge Inspection Management System] and TOMS [Task Order Management System] to SAM and employees are sufficiently trained on SAM. CPKC will also use DTN [Digital Track Notebook] until the mapping of assets is complete and all employees are trained on TAM [Track Asset Management].”
• Hazardous materials: According to the filing, CP and KCS “anticipate that, following an initial transition period post-control date, KCS will adopt many of CP’s program and systems, including CP’s training programs, CP’s Integrated Contingency Planning process, and CP’s documentation system. CPKC will also incorporate KCS’s emergency response third-party contract resources into CP’s emergency response contractor network and KCS-owned emergency response assets into CP’s response network.”
• Dispatching operations: During the early stages of integration, the filing noted, “the former CP and KCS territories will continue operating separately according to their established train control systems. However, CP plans to migrate the Minneapolis, MN OC [Operations Center] to Kansas City, and to integrate CP’s OC with KCS’s at the appropriate time post-control date. While relocation of employees is under way, the move will focus on maintaining safe operational practices in Minneapolis, MN, including the use of qualified train dispatchers to fill vacancies that may result from employee relocation.” Regarding train control systems, CPKC will evaluate each one, “focusing on operating rule requirements, operational safeguards, efficiencies, and the ability to accommodate the needs of customers and the newly merged company.”
• Highway/rail grade crossing systems: CP and KCS have similar established practices and programs for managing and improving grade crossing safety, according to the filing, and CPKC will adopt the best practices of both.
• Personnel staffing: “CP anticipates that KCS’s Kansas City headquarters will become the U.S. headquarters for the combined railroad, creating net-positive impacts on employment there, and that CP’s Minneapolis, MN headquarters will eventually close,” the railroads reported. “CPKC will ensure that all personnel receive the requisite training and recertification required to prevent any adverse impacts on safety and personnel.”
• Capital investment. The railroads noted in their filing that “CPKC will spend more than $275 million to upgrade the main lines between Louisiana and Minnesota by adding double track, adding and lengthening sidings, and installing Centralized Traffic Control (“CTC”) to enable increased capacity, service reliability, and safety.”
• Information systems compatibility: “Because of the importance of information systems to the safety of a railroad, the overall goal while integrating CP and KCS information technology is to minimize train network disruption by having operations that focus on providing a safe working environment,” according to the filing. “This goal will be made easier by the fact that the CP/KCS combination is ‘end-to-end’ and lacks geographical overlaps.” The railroads reported that “[o]ver time, CPKC will migrate operations across both networks to a single set of platforms, choosing the best options based on the following factors: technological capabilities, ability to meet current and future needs of the CPKC network, and the ease with which a platform can accommodate a seamless transition.”
In sum, “CP is committed to using the period before and after the control date to assess and understand each company’s practices and plan a successful integration while both CP and KCS continue to operate safely,” the railroads wrote in their filing. “But because the CP/KCS combination is ‘end-to-end,’ CP anticipates fewer issues than combinations where overlaps and rationalization were key motivators for the transaction. For these reasons and as described in the SIP [safety integration plan], CP does not anticipate any adverse impact to safety as a result of the combination. In fact, as described in various sections throughout the SIP, it is expected that safety will be improved through investment, growth, enhanced use of technology, strengthened processes, and an even greater focus on employees.”
STB Procedural Schedule:
October 29, 2021: Application filed.
November 26, 2021: Board notice of acceptance of Application to be published in the Federal Register.
December 13, 2021: Notices of intent to participate in this proceeding due.
December 28, 2021: Proposed Safety Integration Plan (SIP) to be filed with STB’s Office of Environmental Analysis (OEA) and the Federal Railroad Administration (FRA).
January 12, 2022: Descriptions of anticipated responsive, including inconsistent, applications due. Petitions for waiver or clarification with respect to such applications due.
February 22, 2022: Responsive environmental information and environmental verified statements for responsive, including inconsistent, applicants due.
February 28, 2022: Comments, protests, requests for conditions, and any other evidence and argument in opposition to the Application due. This includes any comments from the U.S. Department of Justice (DOJ) and U.S. Department of Transportation (USDOT). Responsive, including inconsistent, applications due.
March 30, 2022: Notice of acceptance of responsive, including inconsistent, applications, if any, published in the Federal Register.
April 22, 2022: Responses to comments, protests, requests for conditions, and other opposition due, including to DOJ and USDOT filings. Rebuttal in support of the Application due. Responses to responsive, including inconsistent, applications due.
May 23, 2022: Rebuttals in support of responsive, including inconsistent, applications due.
July 1, 2022: Final briefs due. (Note: “The Board will also determine the page limits for final briefs in a later decision after the record has been more fully developed.”)
TBD: Public hearing (if necessary). (Note: “The Board will decide whether to conduct a public hearing in a later decision after the record has been more fully developed.”)
TBD: Service date of final decision. (Note: “49 U.S.C. § 11325(b)(3) provides that the Board must issue its final decision within 90 days of the close of the evidentiary record and that evidentiary proceedings be completed within one year of the date of publication of this notice in the Federal Register. However, under NEPA, the Board may not issue a final decision until after the required environmental review is complete. In the event the EIS process is not able to be concluded in sufficient time for the Board to meet the 90-day provision set forth in § 11325(b)(3), the Board will issue a final decision as soon as possible after that process is complete.”)