PAR Sale: What’s New in CSX’s Third Application

CSX's 01.July Amended and Supplemented Application to acquire Pan Am Systems is ~330% bigger than the original 25.February "Minor" version, and more than twice as long as the 26.April "Significant" version.

02.July.2021, Washington DC — CSX’s Amended and Supplemented Application to acquire Pan Am Systems (the holding company of the various Pan Am Railways assets) is ~330% bigger than   the original 25.February “Minor” version, and more than twice as long as the 26.April “Significant” version that were rejected by the STB (Decisions 2, 3). So, lights have been on late at 500 Water St. in Jacksonville.

CSX’s Northeast selfie, as illustrated on its dedicated new website. By including everything to east to Syracuse in the illustration, CSX is tying its current (BLUE) and prospective (GREEN, RED) New England assets to its southbound, westbound, and northbound routes. With Syracuse already serving as the New England Gateway from New York/New Jersey, and with the Massena Line still blue, CSX triangulates New England within three high-functioning, direct access container ports (Saint John NB, Montreal QC, PANYNJ) {CSX}.

The “Significant” version didn’t take Decision 2’s (25.March) rejection of the “Minor” version as seriously as the Board would have liked. But the new document is a massive, comprehensive presentation of the Proposed Transaction to “merge” with PAR. It features many new sections, and the bespoke participation of several CSX senior executives, who were absent in the previous filings. CSX CEO Jim Foote’s Verified Statement, and PA Systems’ David A. Fink  are celebrity additions, but more substantive are Chief Operating Officer Jamie Boychuk’s “sponsorship” of the expanded Operating Plan, Chief Marketing Officer Mark Wallace’s lengthy Verified Statement detailing the market circumstances and opportunities, and a V.S. from Andy Daly, Senior Director of Passenger Operations. Also much supplemental information has been added to previous statements, as well as more explanation, and visual reference material. The STB demanded, and is getting in the Amended and Supplemented Application, everything including the kitchen sink.

Amended and Supplemented Application contains the following new material, along with supporting workpapers:

  1. Verified Statement of James M. Foote (Exhibit 22-A): Mr. Foote, CSXT’s President and Chief Executive Officer, submits a Verified Statement describing the substantial benefits to shippers and local communities to be realized by the proposed integration of the regional PAR System into the CSXT national rail network.
  2. Verified Statement of David A. Fink (Exhibit 22-B): Mr. Fink, President of Pan Am Systems, Inc., explains why Pan Am believes that the acquisition of Pan Am by CSXT will provide significant benefits for New England shippers and rail passengers as well as the national freight network overall.
  3. Verified Statement of Sean Pelkey (Exhibit 22-C): Mr. Pelkey, CSXT’s Vice President and Acting Chief Financial Officer, supplements his previously submitted Verified Statement to provide an overview of the Proposed Transaction that accounts for the new evidence and testimony submitted in the Amended and Supplemented Application.
  4. Verified Statement of Mark K. Wallace (Exhibit 22-D): Mr. Wallace, CSXT’s Executive Vice President, submits a marketing plan that discusses, among other things, CSXT’s expectations for marketing the primary commodities handled by the PAR System, the expected impact of the Proposed Transaction on traffic flows, intermodal competition and modal share, and CSXT’s  plans for attracting new business in the future that is currently handled by trucks. Mr. Wallace also discusses the impact of the transaction on access to regional ports, including the Port of Saint John.
  5. Verified Statement of Dr. David Reishus (Exhibit 22-E): Dr. Reishus’s Amended and Supplemented Verified Statement substantially expands upon his previously submitted Verified Statement to explain in more detail his conclusions that the Proposed Transaction will have no adverse impact on competition and instead will provide substantial public benefits. Dr. Reishus also addresses the following issues identified by the Board in Decision No. 3 regarding the analysis of the relevant markets and competitive effects of the Proposed Transaction:
    • greater specificity regarding New England transportation markets, including estimated market share by mode and carrier;
    • the size of New England rail markets;
    • evidence regarding city pairs, interregional movements, movements through a point, and other related factors;
    • traffic flows in the market;
    • evidence regarding the amount of traffic moved by the PAR System and PAS broken out by commodity, including lists of commodities carried by Applicants based on volume, comparing lists to identify commodities where there is overlap between CSXT and PAR System/PAS;
    • description of how commodity-level traffic from each carrier relates to the broader transportation market for these commodities in the New England region;
    • expanded analysis of PAR System/PAS interchange traffic, including underlying data;
    • further detail regarding impacts of the transaction on inter- and intramodal competition;
    • additional detail on the impacts of the transaction on the rail transportation market in New England, particularly for customers on the PAR System and PAS;
    • changes in concentration likely to result from the transaction;
    • Additional information on NSR intermodal diversion from PAS “northern route” to CSXT “southern route” and diversion of certain CSXT traffic from southern route to northern route;
    • more detailed information on how the transactions would affect the major commodity groups on the PAR System and PAS;
    • additional explanation on what the state of inter- and intramodal competition would be following the transactions, including carriers that would compete with the consolidated company’s expanded offering;
    • description of methodology used to identify 2-to-1 shippers and stations, and list all of the freight stations (by Standard Point Location Code) that are served by both CSXT and PAR Systems or PAS, or by PAS and NECR, and identify the commodities and volumes shipped;
    • expanded analysis of Knowledge Corridor competition between B&E (operating on behalf of PAS) and NECR between East Northfield, MA and White River Junction, VT; and
    • expanded discussion of potential service overlap between CSXT and PAS at Springfield and from Springfield to New Haven.
  6. Verified Statement of Dr. William F. Huneke (Exhibit 22-F): Dr. Huneke has also  supplemented his Verified Statement to expand upon and provide further support for his discussion of the ways in which the Proposed Transaction will enhance competition in the New England region, including an expanded discussion of the benefits and effects of lifting the Springfield Terminal/PAR System trackage rights volume cap over the PAS Island Line, the competitive benefits of expected investment in Ayer Yard, the enhancement of competition that will result from the diversion of NSR intermodal trains from the “northern route” to the “southern route,” and PAS’s viability as an independent rail carrier and the benefits of B&E’s operation of PAS.
  7. Operating Plan, Verified by Jamie Boychuck (Exhibit 13): Mr. Boychuk, CSXT’s Executive Vice President of Operations, has sponsored and verified the supplemented Operating Plan. Mr. Boychuk prepared the supplemented Operating Plan based on his review of the conclusions and growth forecasts set forth in the Market Analysis and related impact analyses listed above. As Mr. Boychuk explains, the Proposed Transaction will allow CSXT to bring its successful customer-centered operating model to New England to improve efficiency and reliability of rail service. Mr. Boychuck further explains that CSXT does not expect to make substantial changes to existing traffic flows or train movements in the near term and that CSX further expects that the CSXT, PAR System, and PAS Network will accommodate the minimal forecasted traffic growth in existing train service. Additionally, the supplemented Operating Plan addresses the following issues identified by the Board in Decision No. 3:
    • the amount of traffic that would benefit from single-line CSXT service and the benefits that will result from such single-line service;
    • information regarding service to Granite Shore Power’s Merrimack Generation Station and other as-needed service;
    • additional detail on the benefits of B&E taking over Springfield Terminal’s role as contract operator of PAS;
    • potential changes at PAS’s East Deerfield yard;
    • further explanation and data concerning the impact of the NSR Settlement Agreement on Ayer Yard traffic;
    • the benefits of CSXT’s capital investment in the PAR System;
    • the benefits of transitioning the Springfield Terminal locomotive fleet to the CSXT locomotive fleet.
  8. Verified Statement of Andy Daly (Exhibit 13-C): Mr. Daly, CSXT’s Senior Director of Passenger Operations, has prepared a Verified Statement that serves as an addendum to the Operating Plan, focusing on impacts to passenger rail resulting from the Proposed Transaction and Related Transactions. Mr. Daly prepared his Verified Statement based on his review of the conclusions and growth forecasts set forth in the Operating Plan, the Market Analysis, and the related impact analyses listed above. Mr. Daly concludes that passenger service on the lines at issue in this proceeding will benefit from the more consistent and reliable networks that will result from the
  9. Proposed Transaction and the Related Transaction, and that the transactions will cause no negative impacts on passenger rail services. Mr. Daly also presents evidence regarding expected impacts on specific passenger rail services.
  10. Market Analyses (Exhibit 12): The supplemented Market Analysis summarizes the impact analyses contained in the supporting verified statements identified above, describing the impacts of the proposed transaction on inter-and intramodal competition with respect to freight surface transportation in the regions affected and on the provision of essential services by applicants and other carriers.
  11. Density Charts (Exhibit 14): The density charts have been supplemented to list segment miles and to reflect the conclusions and growth forecasts through 2024 set forth in the Operating Plan, the Market Analysis, and the related impact analyses listed above.
  12. Environmental Matters (Exhibit 4): The Environmental Matters exhibit has been supplemented based on the conclusions and growth forecasts through 2024 set forth in the Operating Plan, the Market Analysis, and the related impact analyses listed above. The exhibit also includes further explanation and data, including the total amount of yard activity in the Ayer Switching District, regarding a possible change in yard traffic at Ayer Yard resulting from the NSR Settlement Agreement and the Ayer Operations Protocols agreed to by CSXT and NSR.
  13. Corporate Matters (Application, Exhibit 11, and Exhibit 11-A): The Corporate Charts in Exhibit 11 have been supplemented to fully indicate all relationships between applicant carriers and all affiliates and subsidiaries and also companies controlling applicant carriers directly, indirectly or through another entity. Moreover, the charts include a statement indicating whether each company is a noncarrier or a carrier, and identify every officer and/or director of that company who is also an officer and/or director of any other company that is part of a different corporate family that includes a rail carrier. The relevant portions of the Application have been supplemented, including through a new Exhibit 11-A, to fully submit the corporate information specified in paragraphs (b)(3), (b)(6), (b)(7), and (b)(8) of 49 C.F.R. 1180.6.