Vermont Rail System Contests Pan Am/CSX Deal

Written by Marybeth Luczak, Executive Editor

The Vermont Rail System (VRS) has opposed CSX’s acquisition of the Pan Am System in a filing with the Surface Transportation Board.

While the CSX transaction would involve “the change of ownership and operation of more than 800 miles of railroad throughout New England, it is not the end of the story,” wrote VRS, the business name used by six short lines in New York, Vermont and New Hampshire that are controlled by Trans Rail Holding Company. In addition to Pan Am Railways (PAR), CSX would also receive a 50% membership stake in Pan Am Southern (PAS), which consists of some 425 miles of rail lines and trackage-rights agreements. (Railway Age covered CSX’s advancement of its acquisition application to STB on Feb. 26.)

PAS “has been critical to offsetting CSXT’s position as the only Class I railroad in New England by affording Norfolk Southern,” which holds the other 50% membership, “a means to compete,” VRS said in the March 16 filing. NS accesses New England via trackage rights on the former Boston & Maine Mechanicville, N.Y.-Ayer, Mass., main line, the “Patriot Corridor.”

Download VRS’s STB filing, submitted by attorney Robert A. Wimbish of Chicago-based railroad-specialty law firm Fletcher & Sippel LLC:

As part of the Pan Am System acquisition, CSX and NS reached an agreement in which both Class I railroads will retain PAS ownership, and an independent carrier—Genesee & Wyoming (G&W) subsidiary Pittsburg & Shawmut Railroad, LLC, doing business as Berkshire & Eastern Railroad (B&E)—will operate and maintain PAS, the current job of PAR subsidiary Springfield Terminal Railway.

This move, however, would “create a roughly 70-mile two-to-one corridor, eliminating competition in portions of Northern Massachusetts and Vermont and New Hampshire,” VRS wrote in the filing (see map above). G&W controls several New England carriers, including New England Central Railroad (NECR), which VRS noted “owns and operates, as a portion of a larger route, a line extending between East Northford, MA, and White River Junction, VT (the “Conn River Line”). PAS, through corporate predecessors that once owned a portion of the Conn River Line, possesses local trackage rights over the line, enabling it, like NECR, to serve customers along the route, and to interchange traffic with railroads within the VRS family at Bellows Falls, VT, and White River Junction. (VRS also interchanges with PAS at Hoosick Junction, NY.) PAS and NECR are vigorous competitors along the Conn River Line. For example, the Board less than four years ago concluded a proceeding involving a bitter trackage rights dispute between PAS and NECR, in which NECR sought to dramatically increase PAS’s trackage rights fees for use the Conn River Line in a way that would have threatened competitive parity along the corridor—an effort that PAS ultimately thwarted.”

Three VRS short lines are directly impacted: Vermont Railway, Inc. (VTR), Washington County Railroad Company (WACR), and Green Mountain Railroad Corporation (GMRR), which operate over lines owned by the state of Vermont. Together, they moved approximately 5.5 million tons of freight in 2018, and a “large, and growing share, of traffic” is interchanged with PAS at the Conn River Line interchanges and at Hoosick Junction.

“The B&E-PAS Transaction would reduce competition by placing operational and marketing control of the Conn River Line and the VRS-PAS interchange at Hoosick Junction in the hands of a single company,” VAS wrote in the filing. PAS would be under the operational control of B&E, a sister company of NECR under G&W common control, VAS pointed out. In addition, G&W “has an extensive New England presence” through a number of short line subsidiaries, and “would commit its extensive ‘marketing and commercial resources in the region’ in support of B&E.”

VRS also urged STB “to direct the B&E-PAS Transaction parties to re-present their transaction (if they believe that it can be redeemed) in the context of a joint Application for a significant transaction, along with the CSX-PAR Transaction Applicants.”

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