CP, KCS to STB: CPKC must be approved “bindingly in the public interest, without conditions”

written by

William C. Fantonou, Editor-in-Chief

KCS and CP locomotives at the top of West Row at Continental Divide in Crowsnest Pass, Alberta. Photo by David Dauphin

Document exceeds 4,300 pages: Canadian Pacific and Kansas City Southern Surface Transportation Board File on Merger: “Applicants’ Response to Comments and Requests for Conditions, Opposition to Responsible Applications, and Cassation in Support of Application.”

The entire deposit can be accessed from the STB website. Registration ID is 304973. Here is a summary of the points made by the CP and KCS in response to the numerous comments and requests for conditions that various parties have so far made to the STB:

“As we have made clear in the application, the evidence and the argument presented herein, the application is convincingly in the public interest and must be approved without conditions beyond those that embody the obligations made by applicants…and the KCS is fulfilled,” the merger partners say in their introduction. “The deal is supported by hundreds of shippers, short lines, commuter rail interests, labor organizations, etc. Neither the shipper union nor the shipper asks to decline the transaction. The Federal Railroad Administration endorses the applicant safety implementation plan. Amtrak and other commuter rail interests support the deal. Amtrak asserts On ‘CP’s excellent track record as a host railroad for Amtrak and CP’s commitments to Amtrak’s efforts with states and others as detailed in the agreement reached between Amtrak and CP, believes the CP/KCS deal promises significant public benefits to the US rail network.’ The opposition comes primarily from the five Class 1 railroads. The protection that Class 1 railroads seek is in itself evidence that they see the CP/KCS transaction injecting new competition into the North American rail network.”

point by point

• “The transaction will lead to significant public benefits. There is no merit to the claims of Tier 1 competitors that the CPKC will not provide new and valuable competitive options. Criticism of the Tier 1 of CPKC traffic estimates misses the key point that the stronger competition that comes with transaction is what really matters.” [Our] Estimates of the traffic that CPKC will attract are reasonable and sound [and] Validated by transaction-intensive shipper support and real-world developments. The prior synergies estimates of the highly conservative agreement for the KCS Board of Directors do not undermine the expected benefits for applicants. There is no risk to CPKC’s financial viability and continued investment, no matter how much new traffic is drawn into the CPKC system, or at what rates. The first category criticism of operating efficiencies resulting from the transaction is invalid. CN’s ongoing criticism of the operating plan lacks merit and has nothing to do with the board’s assessment of the effects of the deal.

• “There is no basis for concern about ‘vertical’ competition. The Board has extensive experience with sweeping mergers and the net benefits they have brought. Commentators provide no economic or other education that calls into question the Board’s consistent precedents and factual conclusions. The KCS has not used its control of the Tex Mex and KCSM to block UP or BNSF routes through the Laredo portal, as well as CPKC The same forces that ensured no foreclosures will apply here after KCS/Tex Mex and other situations. [Our] Liabilities – enforced as appropriate by shippers – are the tried and true way to address concerns about a vertical foreclosure. The rate-setting mechanism proposed by the UP and BNSF is unnecessary and will certainly be anti-competitive. The shipper group’s desires for “open access” and other reorganization actions are not related to the merger. Some of the requests regarding “gates” and “chokes” represent an improper effort to reconsider the Board’s throttling rate rules. Requests for “reciprocal access to exchange” are not similarly tied to this transaction

• “The transaction will not lead to an interruption of service. Additional terms of service would overburden CPKC competition for no good reason.

• “Key features of the deal will prevent the growth of CPKC traffic from the massive rail capacity. The deal will not cause disruption to Lines KCS stocks with UP and BNSF in Texas. Both UP and BNSF proceed from the mistaken assumption that CPKC needs their permission to use joint tracking. To compete against them Facts indicate that potential new CPKC trains will not exceed capacity on UP/BNSF tracking rights sectors in Texas There will be no shortage of production capacity at the Houston Terminal Complex There is sufficient capacity on UP-owned lines between Houston and Beaumont Concerns about The Neches River Bridge in Beaumont is unexplained Sufficient capacity exists on the UP-owned lines between Victoria and Robstown UP and BNSF are demanding that the CPKC fund 100% of any overpriced and inadequate new infrastructure There will be sufficient capacity for traffic that the CPKC hopes to Attract her elsewhere on her network.

• “The deal will not negatively impact Metra’s passenger services and will not increase freight traffic on lines shared with Metra. Metra also misunderstands the effects of the deal because its expert RTC model is fundamentally flawed. The MD-W West Bensenville Yard line has a large capacity to accommodate eight Additional daily freight trains Developments independent of the deal will improve the performance of Metra trains on shared lines with CP, which values ​​its partnership with Metra and regrets that Metra’s comments mischaracterized Metra’s strong performance on shared lines with CP Metra has consistently performed well on CP lines CP leadership is committed to supporting Metra operations, consistent with its contractual obligations None of Metra’s complaints about CP are related to the transaction Most of the pre-transaction Metra dispatch concerns relate to operations that will not be affected by the transaction Dispatch of Metra trains on the “wrong track” is common before Transaction carried out in vain Pre-transaction issues have no bearing on this action Metra’s complaints about PTC implementation issues are irrelevant and unfair. [We] We are committed to assuring Metra and its passengers that the transaction will not affect passenger service on Metra. Metra’s requests to force a transmission change to Metra would nullify CP’s contractual rights and undermine rather than improve handling of Metra trains. Metra has long sought transmission control on the MD-W and MD-N lines; Council precedents strongly disapprove of forced shifts in transmission. Transferring transmission control to the Metra may cause more problems than it solves. Metra’s request to change the compensation terms for the CP/Metra agreement is exaggerated. The demands of hundreds of millions in new infrastructure are either massively exaggerated or already in progress. Metra’s request for a binding standard and process for changing the schedule and incorrectly new trains seeks to improve its contractual rights. The control conditions required in Metra are not appropriate and unnecessary.

• “Board should reject CN’s proposed ‘inconsistent’ purchase of Springfield/East St. Louis Line. CN’s gambit is another round in CN’s efforts to disrupt or delay CP/KCS transaction. No competitive damage to be addressed. No Springfield divestiture /East St.Louis Line would harm, not enhance, the public interest.If CN is right about the “truck diversion” potential of joint investments in Springfield Line, divestiture would not be necessary to achieve it.If the Board concludes that remediation is required, it should not Orders to sell the line, not to mention CN as the buyer.

• “The exemption requested by Norfolk Southern is based on a misreading of the operating plan and would unduly change the pre-existing contractual rights of NS’s commercial advantage. CPKC will be very excited to continue to reap the fruits of the successful joint venture Meridian Speedway LLC. The facts contrast with NS’s concerns about the effects of the service. Wylie Intermodal Station has great support capacity [our] Expected increases in traffic. NS’s proposed emergency tracking rights make no sense as a “cure” for potential service concerns. NS’s request for emergency tracking rights will incorrectly transfer to NS commercial rights that NS did not negotiate or pay for in 2006.

• “The Board of Directors should reject the exemption requested by CSX. CSX’s arguments about Meridian Speedway are unrelated to the transaction and should be ignored. The CPKC will be keen to maintain or explore effective interface relationships with CSX across all available portals, and there is no need for relief that protects CSX.”

• “BNSF’s covert threats to claim future tracking rights that it chose not to pursue in this action should be dismissed. BNSF’s desire for Board intervention to support its pursuit of a future Mexican concession is not tied to the merger and would improperly engage the Board in Mexican affairs. The proposed rights of BNSF between Dallas and Shreveport would grant commercial rights that BNSF had chosen not to acquire.The proposed rights for BNSF between Savannah, Illinois, and Clinton, Iowa would grant the commercial rights previously sought by BNSF.

• “The Board of Directors must not agree to Union Pacific’s request for terms granting involuntary access to the new, self-financed KCS bridge in Laredo.

• “Alliance [to Stop CPKC] Communities are demanding mitigation measures that are disproportionate to the potential impacts on the community. Hennepin County concerns fail for similar reasons. The terms required of the Sierra Club have nothing to do with the deal, which is expected to cut greenhouse gas emissions.

• “Concerns about CP tariff provisions applicable to dangerous shipments are not competitive or transactional issues and should be dismissed. Concerns by some wheat growers associations about potential competition from Canadian grain suppliers reflect more competition, not less… the concerns that have been made recently by Some Federal Naval Commissioners regarding diversions to Canadian ports are not meriting.”

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