CSX: The Empire Writes Back

18.March, Washington DC – CSX (“Applicants”) responded swiftly to the slew of objections filed with the STB last week by heavyweight stakeholders (see PAR SALE: Objections Pick Up Steam). APPLICANTS’ RESPONSE TO INITIAL COMMENTS {STB 301772.pdf} avoids the strident tone of some objectors’ criticisms. It does assuage the one near-universal complaint that the proposed schedule is too short, but may not as effectively deflect the most problematic accusation that the Transaction’s dependence on GWI’s Berkshire & Eastern railroad will harm competition in Vermont. The Board’s view on that matter will strongly color its first action, expected by 29.March, to accept the Transaction as a “minor” one, or ask the Applicants to refile it as “significant.”

Related article: B&E/P&S/GWI: Orange is the New Blue

Objections filed by parties fall into four general categories, from most-commonly cited to least:

  1. That the 30-day comment period is not enough time for stakeholders to evaluate the effects of the complex Transaction and comment;
  2. the APPLICATION is incomplete and void unless combined with B&E PETITION to be presented together rightly  as a single “significant” transaction;
  3. the designation of B&E to operate the Pan Am Southern system will impose a competitive disadvantage to connecting shortlines and reduce shippers’ access to competitive service; and
  4. CSX has not engaged in meaningful discussions with affected parties.

To the first objection, the RESPONSE deftly asks the Board simply to double the comment period to 60 days, and thus in one move ameliorates the several unions, two Massachusetts legislative delegations, and influential customer Republic Services, all of whose objections boiled down to wanting more time to comment.

To the second and third, the RESPONSE argument rests unsettlingly on three elements:

  1. Belittling the objections as, “beside the point,” “misguided,” “irrelevant,”
  2. Repeating suppositions made in the Application, such as, “… an efficient, end-to-end extension of CSXT’s network into New England that raises no competitive issues,” “… it clearly will not have any anticompetitive harm and clearly advances the public interest …” (emphasis as in original – Ed.), “Neither the public interest, the STB, nor any of the commenting parties’ legitimate interests in maintaining competition would [benefit by] a re-classification that ignores its overwhelmingly pro-competitive nature.”
  3. Precedents that don’t strongly support the argument, such as,
    Only one recent transaction filed as a “minor” transaction was reclassified by the STB as a “significant” transaction … because the STB could not tell from the applicants’ economist statement whether there might be competitive effects not adequately investigated by the applicants. 

To the fourth objection, leveled with great umbrage in MassDOT/MBTA’s filing, the RESPONSE explicates CSX’s own belief that is has endeavored to meet with stakeholders and address, or at least acknowledge their particular issues. MassDOT/MBTA presented a sweeping list of demands to CSX in a letter dated 14.January. CSX’s response of 26.February, sent after what must have been weeks of little sleep preparing their 25. Feb STB filing, CSX expressed substantive assurances or desire for near-future dialogue to each demand. MassDOT/MBTA’s complaint also doesn’t square with widespread stakeholder characterization of CSX making a considerable good-faith effort to engage with stakeholders. Testament to that effort includes numerous letters of support, and even a tip of the hat from VRS in its NOTICE OF INTENT TO PARTICIPATE: “VRS is pleased that CSX, in particular, has expressed interest in resolving the anticompetitive impacts of the B&E – PAS Transaction.”

In offering in the RESPONSE to extend the comment period to 60 days, CSX responds cannily and practically to the most widely shared objection to its APPLICATION. But its defenses against reclassification of the transaction and competition concerns are not as well-played. Throughout the RESPONSE, CSX implies that those things don’t matter anyway, since the public good will be greatly enhanced by more efficient, reliable, integrated rail service. Considering who they will be replacing, that might be the easiest part of this whole thing.