CSX/CN: Both Ask STB To Withdraw Massena Sale Condition

CSX and CN File Separate Petitions With STB, Asking Board to Save Massena Deal by Removing the Interchange Condition Imposed on the Sale's Approval.

05.June, Washington DC — CSXT and CN submitted separate Petitions for Reconsideration of the STB’s 06.April conditional decision on the sale of the CSX’s Massena Lines to CN subsidiary Bessemer & Lake Erie Railroad. The Petitions request the Board to remove the condition relating to Section 5.14(b) of the P&S. In May, CN and CSX jointly announced that they were unable to modify their agreement to suit the Board’s condition.

The CSXT Petition notes that, in its 06.April decision, “The Board did not find any evidence of current competitive harm from such an end-to-end line sale…” and that the Board “recognized the public benefits that would result from the sale.” The Petition asserts that based on those findings, 49 U.S.C. 11324(d) mandates Board approval of the sale as agreed between the parties. Based on this analysis, the Board should have approved the line sale without the condition relating to Sn. 5.14(b).

They’ve got a point

“[The] Condition … is inconsistent with both the law and policy … [in that] the mere possibility of unknown and unidentifiable future competitive impacts does not justify withholding approval of a transaction that will bring concrete and immediate benefits … It would be material error for the Board to withhold approval of the Massena Line sale based only on such speculative future effects.

“[Perhaps] the Board intended to instruct the parties to see if they could reach an agreement on changes to Section 5.14(b) … [It] is now clear ( since the May joint announcement suspending negotiations – Ed. ) that the transaction will not proceed without removal of the Condition.

“As CSXT and CN/B&LE pointed out in their prior comments, the restrictions in that PSA provision only apply to “Buyer” (B&LE and CNR). Section 5.14(b) does not preclude a direct connection between B&LE and shortline railroads in the Syracuse area; it only precludes Buyer from seeking such a connection. If market conditions lead shippers or other railroads to desire a direct connection with B&LE in the future, nothing in Sn 5.14(b) prevents them from pursuing such a connection.”

The CSX Petition further asserts: “[The Board’s] Condition is premised on protecting a sophisticated buyer, B&LE, from voluntarily negotiating away its own rights … But [according to the statute] the Board … should focus on potential harms to competition, not harm to particular competitors.

CN won’t concede, but wants the sale

B&LE’s filing states that the parties have been unable to agree on a proposed response to the Board’s Condition, and the Transaction is in jeopardy unless the Condition is removed, and that work toward integrating the Massena Lines into the CN system has halted. Likewise, B&LE’s proactive efforts to hire employees and work with Rail Labor have ceased.

“B&LE/CNR agreed to Sn 5.14(b) because absent doing so, they would have no Transaction at all.”

Beyond the labor protection requested by the parties and imposed by the Board, the Transaction as structured by the parties would have additional benefits for CSXT employees on the U.S. Massena Lines.

At this point, unless the STB reverses its position on the condition, the transaction will be negated and CSXT will continue to hold ownership and operations of the Massena Lines. {STB Docket No. FD 36347}