PAR SALE: Objections Pick Up Steam

DEWARE THE IDES OF MARCH. DISMISS THEM AT YOUR PERIL.

23.March, Washington, DC – Additional concerns have been filed pushing the STB to consider the CSX Application as a major transaction.  In addition to the new filings, the State of Vermont has fired another volley in response to the CSX reply issued in the state’s initial comments.

The International Brotherhood of Electrical Workers, AFL-CIO (IBEW) did not file an objection but did ask the STB to extend the comment period an additional sixty days as the growing concerns are mounting.

US Senate and Congress Weigh In

Led by Massachusetts US Senators Elizabeth Warren and Ed Markey, a statement supported by the entire MA US Congress representatives was issued calling for the transaction to be major with regards to various concerns over future commuter rail operations and a reactive instead of proactive stance on increased operations over the Wachusett Reservoir.

“In Massachusetts, this purchase will greatly affect transit activity in local communities, including impacts on the T-System in the Greater Boston area. Furthermore, there are a host of environmental effects that must also be taken into consideration when evaluating the scope of this purchase. Most notably, with the procurement of Pan-Am Railways, CSX Transportation will increase operations over the Wachusett Reservoir.”  {US Senate/House filing, 301787}

A separate filing was made by Massachusetts 1st Hampshire State Representative Lindsay N. Sabadosa, further pushing for the STB to weigh in as a major transaction.  Sabadosa weighs in on several key components of the application, including that allowing this transaction to go through with no other arrangements would give CSX ownership of 50 percent of PAS and control PAS operations via the Springfield Terminal Railway Company. PAS has been critical in combating CSX as the only class 1 railroad in New England because it gave Norfolk Southern Railway Company, a 50 percent owner of PAS, a means to compete with CSX.

A second concern voiced in this filing is over passenger rail service.  There is a feeling that CSX is only concerned about returning some pre-pandemic levels of passenger service but may not be open to increased traffic on various corridors that had been previously discussed.  And thirdly PTC was brought up as a subject of necessity on the Conn River Line, where G&W ownership would not afford that installation per the filing.

“This is a major acquisition that will have long-standing implications on the future of passenger and freight rail in Massachusetts and beyond. I ask that you classify this potential acquisition as “significant” so that the affected areas will receive the proper treatment they deserves and that you require that the application address the important issues of positive train control and labor in order to protect and expand service. Nothing about this potential acquisition is minor, and I hope to see the necessary changes to reflect the true nature of this transaction.” {Sabadosa Filing, 301794}

And finally, the State of VT/VTRANS response filed indicates that the CSX response to their previously voiced concerns fell short of answering the concerns.  According to VTRANS, the applicants’ response does not meaningfully address Vermont’s concerns that the transaction, if approved, will result in a 2-to-1 reduction in competition along the north-south Connecticut River Line. Applicants’ response falls short for two reasons: first, the voluntary agreements cited by Applicants appear primarily directed to the competitive concerns of the two Class I carriers (Norfolk Southern Railway Company (“NSR”) and CSX) regarding the east-west traffic across Massachusetts, not the north-south traffic along the Connecticut River Line.   Moreover, such agreements do not alone overcome a 2-to-1 reduction in service on the Connecticut River Line and the factors that may make such agreements acceptable do not exist here.

“Applicants continue to be tone deaf to the anticompetitive consequences of their choice of GWI to take over the regional services now operated by PAS. This is particularly concerning in view of the existing competitive balance between GWI/NECR and the State-owned lines presently operated by Vermont Rail System (“VRS”).”  {VTRANS Filing, 301784}

18.March, Washington, DC – Comments critical of the CSX Application and B&E Petition flowed in to the STB, adding up to 35 filings so far under the docket opened on 25.February, with CSX and Pittsburgh & Shawmut (division of GWI, d/b/a Berkshire & Eastern) respective filings of the CSX Application for Control and Merger of Pan Am Systems, et al, {301684.pdf}and P&S/B&E Petition of Exemption to Operate Pan Am Southern {301683.pdf}. On 02.March and 10.March, CSX filed Modification/Supplemental documents, adding vital information missing or redacted from the public version of the original Application.

Big guns pummel “minor” target

“If these interconnected transactions fail to satisfy the Board’s standards for a ‘significant transaction’ … then nothing will.” {MassDOT/MBTA filing, 301761.pdf}

Vermont Rails Systems, Vermont AOT (VTrans), Massachusetts DOT/MBTA, two delegations of Massachusetts legislators, and Republic Services, one of the biggest shippers on PAS, have each individually filed similar detailed comments. The common theme is objection to the Application’s characterization of the sale of the nation’s largest Class II railroad to one of the biggest Class I’s as a Minor Transaction, distantly “related” like a once-removed second cousin to P&S’s Exemption Petition to operate PAS as a fair broker. All six objections refute the partitioning of the Application and the Petition, urging the Board to reject the Application and the Petition as incomplete in themselves, or failing that, for the Board to combine the filings as the basis for a single Significant Transaction proceeding, which will substantially expand scrutiny. In their filing, MassDOT/MBTA explains,

[Under STB rules, a] transaction not involving the control or merger of two or more Class I railroads is “significant” if it:

  1. Is of “regional . . . transportation significance;” and
  2. Fails “clearly” to demonstrate either
    1. the absence of “any anticompetitive effects,” or
    2. that any anticompetitive effects are outweighed by the public interest.

Competition killer

“… VRS’s three southern gateway access points … would fall under the exclusive control of GWI through B&E and NECR, placing five of VRS’s seven interchange points in the hands of GWI carriers … .” {VRS filing, 301756.pdf}

With its B&E subsidiary made operator of Pan Am Southern assets, G&W would hold a dominant position on New England, controlling VRS’s three southern gateways at White River Jct. VT, Bellows Falls VT, and Hoosick Jct. NY., as well as practically all Connecticut and Rhode Island traffic. {Petition, 301683.pdf}

“[(GWI subsidiary) NECR is] … VRS’s chief competitor for traffic in Vermont and … western New Hampshire. In addition, VRS and NECR compete as north-south bridge carriers… . The viability of the VRS bridge route depends upon effective service on the Conn River Line.

“As VRS’s chief competitor, NECR (through GWI and B&E) would gain unfair service and marketing advantages over VRS, due to GWI’s newfound access to route, origin-destination, customer, and rates data related to VRS-PAS interline service, none of which GWI currently has, and all of which GWI would have every incentive to leverage for its advantage.” {VRS filing}

Echoing VRS’s dire outlook on an Exemption-granted world, VTrans adds its own strenuous objection to B&E control of PAS, not only for the inescapable anticompetitive effects themselves, but also the knock-on effects to the state-owned rail system’s viability.

MassDOT calls the CSX-PAR Transaction, by itself, anticompetitive [in giving] CSX control of PAS service. For this reason, CSX has conceived of its own competition-protecting conditions in coordination with NS and G&W, culminating in the proposed B&E-PAS Transaction. However, the B&E-PAS yields competitive problems of its own …

Ignoring precedents?

VRS feels it has cause to question NECR’s devotion to competition, following the 2017 trackage rights dispute between PAS and NECR, in which “NECR sought to dramatically increase PAS’s trackage rights use fees for the Conn River Line, in a way that would have threatened competitive parity along the corridor – an effort that PAS ultimately thwarted” {VRS filing}. If GWI has forgotten about that precedent, they can’t be blamed for also seeming oblivious to PAS’s 2009 formation through a formal application, not by a petition for exemption, or the elegant logic of creating Class I competition in New England for the first time in decades.

Not enough time

These parties, along with American Train Dispatchers Association, Transportation Communications Union/IAM , and (collectively) the Brotherhood of Maintenance of Way Employes Division/IBT; Brotherhood of Railroad Signalmen; International Association of Sheet Metal, Air, Rail and Transportation Workers-Mechanical Division; and National Conference of Firemen and Oilers, 32BJ/SEIU (Allied Rail Unions), further object to the proposed schedule of proceedings, which provides for only a 60-day comment period from the Application filing, even though it was incomplete until 10.March, based on the subsequent modifications filed by the Applicant. These commenters urge the Board to extend several periods by a total of approximately two months, to allow adequate time for analysis, discovery, and comment by the many affected parties.

A shipper’s concernsRepublic Services logo

The objections filed by states, public agencies, unions, and legislators are not unexpected, though the vehemence of their published protestations is surprising. Those entities have considerable clout, but perhaps the objections of Republic Services are the most weighty, coming as they do from “one of the largest individual shippers on the current PAR system.”

“It makes no sense; [CSX] cannot predicate a substantial bulk of their primary case on the B&E/PAS operational arrangement, but then divorce the two transactions when it comes to consummation.” {Republic filing 301764.pdf}

In asserting that the transaction be classified as Significant, Republic cites one matter that is anything but minor:

As a particular example that concerns Republic, [a section of the] Agreement, entitled “Ayer Switching District,” refers to a so-called “Rotterdam commitment,” pursuant to which CSXT will, for [an uncertain period] route certain Ayer traffic via … Rotterdam Junction [NY] and the PAS Patriot Corridor across northern Massachusetts. This will evidently affect significant volumes of Republic traffic that currently move from Ayer to CSXT at Barbers Station [MA] and then via CSXT’s B&A main line across central Massachusetts. The result of this obscure but – to Republic – incredibly important traffic diversion may be to increase transit times for Republic’s traffic from Ayer MA to [Selkirk NY] by several days. Yet [there is no] reference to this aspect [in the Application]. To the contrary, CSXT offers assurances that “the only significant operating change involves the diversion of one NSR intermodal train pair from PAS lines to CSXT’s roughly parallel lines . . . .”  This is a demonstrable understatement, and is but a single example of many …

The presumption of obscure pitfalls for shippers inspires Republic to join the universal call for the Board to at least extend the “60-day [comment] period, … [which] is plainly inadequate under all circumstances.”

Jobs

“Frankly, the Allied Rail Unions are at a loss to understand how P&S/B&E plans to operate the same lines with the same, or hopefully more, traffic with only 75% of the current work force.” {Allied Rail Unions}

The Application and Petition got a Mulligan for redacting their projections about the transactions’ impact on the incumbent workforce. The 02.March Modification/Supplement presented the information, and it wasn’t pretty, with many union workers to be cut, and the remainder losing their seniority and job security. The Massachusetts Delegation letter sounded the alarm: “[The] acquisition [would] impact upwards of 500 employees with no guarantee of employment after the acquisition is completed. The future of these employees’ livelihoods would be at the sole discretion of CSX” {MA legislative delegation filing, 301766.pdf}.

A Wachusett T Party Brewing

“The Applicants were … dismissive of MWRA’s interest in accident and hazardous materials release prevention measures … [reflecting] an alarming inattention … and an alarming disregard for [public] health and safety …” {MassDOT/MBTA filing, 301761.pdf}

In addition to its disdain for the notion of a Minor Transaction, MassDOT/MBTA objects to several elements of the Application and Petition on the basis of their inadequate consideration of the Massachusetts public interest.

Rail lines through the Wachusett Reservoir watershed
Pan Am’s Worcester – Ayer line traverses the Wachusett Reservoir, a vital resource for Boston-area residents, managed by the Massachusetts Water Resource Authority. Under the “Wachusett-Plus” agreement between MBTA has held, but not yet exercised an option to acquire the line. {MWRA}

“[Neither] the Applicants nor those engaged in so-called “related” transactions in this proceeding’s sub-dockets have engaged the Commonwealth in meaningful, or satisfactory, discussions … . Most dismaying is the lack of … protective measures for the … Wachusett Reservoir, … critical to over 3 million residents of the greater Boston area.

“[Lines] will see increased freight volumes, including NS trackage rights trains … proportionately [increasing] the risk of a derailment or other accident that could release toxic or other harmful substances into the reservoir.

“Catastrophic accident prevention is not the only blind spot for CSX. MassDOT and MBTA own several of the lines that are involved in these transactions … [they] would host new freight service operators under the events. … and not, at this point, with MassDOT’s or MBTA’s concurrence. MBTA is particularly concerned about [freight interference with] its services and routes from Boston – (1) north to Haverhill, MA; (2) northwest to Lowell MA; (3) west to Fitchburg, MA; and (4) southwest to Worcester, MA. MBTA [is concerned that] changes could overwhelm the MBTA route between Ayer and CPF Willow [which is] central to CSXT’s proposed north-south related freight traffic flows.”

The Board is expected to accept or reject the Application by 26.March.