PAS: Man in the Middle?

NS and CSX may have agreed upon an operator for the Pan Am Southern properties.

18.February – Murmurs concerning prospects for obscure branch lines, and cloaked references to a “fourth player” at the Pan Am Southern poker table indicate that, despite our doubts (see PAR Sale: The Sound of Silence; ANRP 04.Feb.2021), CSX continues forward with its purchase of PAR. The long wait for papers speaks to a desire of the parties to exercise patience before filing with the STB, in the hopes of economizing the approval process.

Map of Pan Am Southern routes
The entire PAS system comprises 436.7 track miles. Of the total, 238.3 miles are PAS-owned, and 198.4 are entitled by rights retained or granted. Main lines are:
West-East, comprising the NS Patriot Corridor (139.7 miles between Mechanicville NY and CPF 312 in Ayer MA), plus the 30.5-mile Rotterdam Branch extension between Mechanicville, splitting to Rotterdam Jct. and Mohawk Yard (See Rotterdam Cluster map). Four Ayer-area branches add 10.6 miles to the PAS network (See Ayer Cluster map). The Adams Industrial Branch adds 4.6 track miles. Yard facilities on the Patriot Corridor include Mechanicville, North Adams, East Deerfield, Gardner, and East Fitchburg (all in MA).
North-South, comprising 184.5 track miles between White River Jct. VT and New Haven CT, owned by three railroads. NECR owns 72.8 miles of the Conn River Line between WRJ and Northfield MA; PAS retains shared rights at all facilities. MBTA owns 49.7 miles of the Conn River Line between Northfield and Springfield MA; PAS retains exclusive freight rights. Amtrak owns the 62-mile Springfield Line between Springfield and New Haven CT; PAS retains overhead rights. The southern tip of the line is limited access to to Cedar Hill Yard via CSX, and the 42.9-mile Berlin-Waterbury-Derby Branch, and captive 4.5-mile Plainville-Southington Branch interchange at Berlin (See Connecticut Cluster map). Yards on the North-South line are East Deerfield, Springfield (CSX), Cedar Hill CT (CSX), and Plainfield CT.

A man in the middle

Several points of triangulation reveal an “echo” that NS and CSX have agreed upon an operator for the Pan Am Southern properties, to manage the partnership in the “shared assets” mould. We had speculated as much last October on, after catching CSX, NS, and Conrail executives riding PAR OCS-14 together:

“[It] looks like a new Shared Asset region will be added to Conrail, based on new shared interests recognized by the rivals. Speculating, it seems that CSX will acquire PAR’s share of PAS, and Conrail will operate the line and branches between Ayer and Mechanicville with equal consideration for NS and CSX … It’s that simple.” (PAR Sale: Halfway there?, ANRP 15.Oct.2020)

Since last October, NS has pushed back hard on a couple of occasions against reports of the CSX-PAR negotiations (see PAR: THE OTHER SHOE DROPS; ANRP 11.Nov.2020 and PAS: Clash of the Titans; ANRP 15.Dec.2020), but has not exercised the veto that it clearly possesses.

Thorny issues engulf the PAR sale, the prickliest being agreeable governance of the Pan Am Southern routes – most particularly the Patriot Corridor between Mechanicville NY (XO) and Ayer MA (AY). After all, the Surface Transportation Board may ask how CSX’s half-control of one regional mainline and full control of the other, would not threaten competition in every corner of New England.

What’s My Line?

Sharing assets has mostly worked out well for the two rivals, but has also been problematic. CSX and NS operate symbiotically in three locations, referee’d by three distinct “shared assets” models:

Conrail logoConrail Shared Assets is a terminal and switching railroad that only serves customers in proscribed locales as an agent of its principals, NS and CSX. Conrail operates 1202 miles of track in three disconnected regions (No Jersey, 471 mi; So Jersey/Phila, 372 mi; Detroit, 359 mi). It is the only “official” Shared Asset entity, in that neither principal holds preferential sway over any of the mileage or customers. NS owns 58% of Conrail stock, and CSX owns 42%, reflecting the overall Conrail breakup, but voting control is evenly split, assuring impartial treatment of the owners’ competing interests. Conrail exemplifies efficient movement operations in high-density urban-industrial zones. But New England’s de-industrialized cities generate little traffic, and our dispersed, handful-of-carloads shipper community demands village-to-village marketing attention, a function Conrail doesn’t possess.

Norfolk & Portsmouth Belt Line railroad is a terminal switching railroad that serves 24 customers on its 26-mi circuit at the Port of Virginia, in Norfolk. NS and CSX’s “sharing” of the line emanates not from the 1999 Conrail breakup, but devolved from consolidation actions beginning early in the 20th Century, and governed (until 2016) by agreements effected 1917. In 2018, thirty-seven percent of the port’s tonnage arrived and/or departed there by rail — more than at any other U.S. East Coast port {R. McCabe, Transport Topics, 09.Oct. 2018}. NS owns 57% of NPBL, and CSX owns 43%, and the voting control reflects the equity disparity. In 2018, CSX filed suit against NS and NPBL for abusing its control to box CSX out of the port’s Norfolk International Terminal. That action is still pending, but it does indicate that there are ways that a “shared asset” shouldn’t be structured. Also, PAS’s 437-mi criss-cross infrastructure would pose a likely insurmountable learning curve for NPBL management.

New York, Susquehanna & Western Railroad operates on >400 miles of track stretching from Syracuse NY through Binghamton to Jersey City NJ, and between Utica NY and Binghamton. NYSW works closely and competitively with NS and CSX. The two rivals also own equal ownership stakes in NYSW that amount to controlling interest, acquired in 1997. (A derivative of prior sole owner Delaware Otsego Corporation retains a minority interest.) This “shared asset” was formed before the Conrail breakup, out of a mutual interest in denying CP and CN direct access to NYC.

NYSW operates its own trains, engines, yards, crews, and markets, often in direct competition with its majority owners, and as a disinterested server of their competing demands … just the kind of third-party operator of the PAS assets that might be palatable to the STB.

NYSW also brings an active, successful marketing function to the PAS lines, where there is widely assumed to be many more potential customers than the current PAS operator, Springfield Terminal Railroad (division of PAR), was able to recruit.