(Canadian National)
WASHINGTON — The Surface Transportation Board on Thursday said it would not reconsider the conditions it placed on Canadian National’s proposed acquisition of CSX Transportation’s Massena Line linking the Syracuse, N.Y., area with Montreal.
The railroads previously said they would scuttle the deal if the board did not reconsider a condition that would permit CN to one day negotiate interchange agreements with short lines in Syracuse.
CN announced its interest in acquiring the line and asked the STB for approval in October 2019 [see “Canadian National seeks regulatory approval for acquisition of CSX line …,” Trains News Wire, Oct. 14, 2019]. The STB approved CN’s acquisition of the line through its Bessemer & Lake Erie subsidiary in April 2020. But the board ordered CSX and CN to eliminate a provision in the sale agreement that would bar CN from ever negotiating direct interchange with the Finger Lakes Railway and the New York, Susquehanna & Western in the Syracuse area. [See “Regulators approve CN purchase …,” News Wire, April 7, 2020.]
The board twice extended the deadline for the railroads to submit a revised purchase and sale agreement. The railroads told the board they were unable to come to terms and asked regulators to reconsider.
“Under present circumstances, it regrettably appears that the parties will be unable to proceed with the transaction” unless the board reconsiders the interchange provision, the railroads wrote in a joint letter to federal regulators last May.
A CSX spokeswoman says the railroad is reviewing the decision, which was issued late Thursday afternoon, and is considering its response. CN declined to comment, noting that officials were reviewing the decision.
The STB said that the interchange restriction posed “serious competitive concerns” and that there were no reasons why it should reconsider its decision or the condition it imposed.
Regulators also found no merit in the railroads’ contention that the board erred in imposing a condition designed to protect B&LE, “a ‘sophisticated buyer’ capable of evaluating the commercial impacts of the transaction.”
“The condition was not designed only to protect B&LE, but rather, was meant to protect the public interest in a competitive rail system,” the board wrote. “B&LE’s agreeing to a provision that the board has deemed anticompetitive does not remove the board’s authority to address the anticompetitive impacts of a transaction by ensuring a carrier’s ability to seek access or interchange with nearby carriers, consistent with the board’s statutory objectives.”
The prohibition on direct interchange, the board said, would limit rail competition and reduce the benefits of the line sale.
The board’s decision was split 3 to 2, with members Patrick Fuchs and Michelle Schulz dissenting.
In a lengthy dissent, Fuchs wrote that the board ignored the fact that CN and the Finger Lakes Railway can’t directly interchange today. “The majority’s erroneous attempt to perfect the transaction has delayed and jeopardized meaningful network improvements and may well discourage similar improvements in the future,” he wrote.
