PAS: Alternative Operator Steps Forward

(MAPS TO COME – Ed.)

22.March, Washington DC – M4 Capital Group, which “[specializes] in the rail asset and infrastructure financing and investment” {LinkedIn}, has filed an “ALTERNATIVE PURCHASE AND OPERATION PLAN” to acquire the Conn River Line, and operate it as the Connecticut River Railroad. M4’s filing seizes upon the many expressed concerns about the potential anticompetitive effects of a GWI-operated Pan Am Southern (as distinct from the other Pan Am “Eastern” assets operated as Pan Am Railways).

An initial flurry of objections on the basis of anticompetitive concerns was filed the week of 14.March (see PAR SALE: Objections Pick Up Steam), and others have posted this week in response to the APPLICATION, and to CSX’s 18.March REPLY (see CSX: The Empire Writes Back).

Still clear as mud

Despite responses from CSX, GWI/B&E), and NS affirming the “clearly pro-competitive” character of the AGREEMENT/PEITITION, a growing number of voices, including the entire Massachusetts Congressional Delegation (301787.pdf), continue to express significant concerns about the proposed Transaction. Applicants’ and Petitioners’ assertions that competition will not be harmed by virtue of unspecific and unverifiable actions they will voluntarily take, have not convinced many that the 2-to-1 reduction in competitive service is a good idea.

The anticompetitiveness Objectors have all asked the Board to either reject the Application, or reclassify it as a “significant” transaction. Only M4’s ALTERNATIVE attempts to break the logjam, and allow the Transaction to proceed more-or-less as proposed. Many stakeholders, including some of the Objectors, have stated that apart from the PAS-VRS sticking point, they support CSX acquiring Pan Am Systems.

Daniel M. Bigda, M4 Capital Group Senior Partner, writes that the ALTERNATIVE “… is based on many years of having worked with the [region’s] railroads … .” Bigda adds that, “The proposed [Transaction] is a brilliant move and shows the forward thinking of the CSX Railroad and its people to extend its reach northeast to the upper New England region and into eastern Canada. The STB should allow this part of the [APPLICATION].”

Nonetheless, M4 subscribes to the anticompetitive concerns relating to PAS as it the Transaction is currently presented: That GWI/B&E will gain full control of the shared Conn River line Between White River Jct. VT and Springfield MA, and that shippers will lose their existing effective choice between two carriers.

What everyone is afraid of

The redundant north-south rail lines extend from White River Junction, VT, through Claremont and Walpole, NH, back into Vermont and south to Greenfield and Springfield, MA as well as various branch lines in CT. The traffic that runs on these lines could easily be routed across one or two of the three lines that the B&E and other owned G&W properties will operate – thus, potentially leaving out a rail line that might be significant for another railroads or business’s survival.

GWI owns significant rail lines already in the New England area: The P&W (Providence & Worcester RR) which is all eastern Connecticut’s and Rhode Island’s freight rail lines; NECR (New England Central RR) running from St. Albans VT through New London CT; and CSOR (Connecticut Southern RR) which also operates on the Conn River Lines that GWI/B&E is petitioning to operate on behalf of PAS. As the APPLICATION stands, the Conn River line will solely be controlled by GWI railroads. Shippers may appreciate the convenience of single family billing and relationships, which VRS cannot emulate.

Connecticut shippers would suffer the most adverse affects, by having only GWI to work with. With the exception to the Housatonic Railroad in northwestern Connecticut, there would be no competition. As of right now, PAS is the only alternative railroad and Pan Am already shares the Conn River rail line with GWI’s CSRR between Springfield MA and  New Haven CT.

New railroad proposed

M4 Capital’s proposal to establish the Connecticut River Railroad (or the “Conn River” for short), between White River Jct. and New Haven. The ALTERNATIVE asserts that, “… this is the best scenario for rail shippers, employees and all involved. CSX gets to Canada (via Pan Am Railways) as proposed, and the rail lines in Central Massachusetts, Connecticut, and Vermont preserve competition for the shippers.”

Two ways to skin the cat

The ALTERNATIVE actually presents two proposals to retain competition on the north-south Conn River line. The first involves M4 Capital “and its financiers” establishing Conn River Railroad ownership between WRJ and Springfield and on the , with rights on CSOR between Springfield and New Haven[and associated properties including the Derby line in CT, and East Deerfield Rail Yard, and] the resources to provide competition. Ownership of East Deerfield Yard would be vital for Conn River Railroad to properly serve the lines and maintain equipment.  M4 claims that their control would also preserve jobs at the Deerfield Railyard, which are at risk under the proposed Transaction.

A secondary alternative proposed gives the NECR have trackage rights and the marketing ability down the Conn River Rail Line from Northfield, MA to New Haven, CT to ensure competition is promoted with this current filing. In this iteration of the alternative the NECR would receive the ownership and the operation of all the Deerfield Rail Yards with rights east to Millers Falls and the interchange there.

The second version is to give G&W a link between their NECR and CSO properties that they would have been able to utilize under the proposed B&E operation of PAS.