Trains News Wire continues our review of the top stories of 2022. We’ll count down the Top 10 stories of the year, as voted on by Trains editors, columnists, and correspondents, beginning Dec. 26. As a prelude, we’ll be looking at major stories that didn’t make that list. Today: The freight rail industry.
How the mighty have fallen.
A year ago, the battle between Canadian Pacific and Canadian National for ownership of Kansas City Southern was the top News Wire story of 2021. This year, the ongoing developments in the CP-KCS merger didn’t even make the News Wire Top 10 list.
It came close, however, finishing 11th in our balloting. And there was certainly enough going on as the two railroads move toward what could be the last merger of Class I railroads that it deserves further review, along with the pending BNSF takeover of Montana Rail Link, CSX’s completion of its purchase of Pan Am Railways, and CEO changes at three Class I roads.
CP-KCS: Ask and see what you receive
The regulatory process involved in merging KCS covered most of 2022, with other railroads, lineside communities, and other interested parties weighing in with regulators — generally to ask for conditions to be imposed if the Surface Transportation Board does, as expected, approve the deal. A decision is expected sometime in January.
Spurned KCS suitor Canadian National raised objections to the deal at every turn, claiming the CP-KCS merger application was based on fatally flawed data, would hurt competition, and could lead to rail network meltdowns in Chicago, Houston and elsewhere. CN also said it should receive the KCS Springfield Line, connecting that Illinois city to St. Louis and Kansas City, to create a route to Chicago, Detroit, Toronto, and Montreal to compete with the merged company, CPKC [see “Canadian National warns regulators …,” Sept. 29, 2022]. Relatively late in the game, it offered a milder alternative of trackage rights [see “CN would accept trackage rights …,” News Wire, Oct. 24, 2022].
The other Class I railroads had their own requests for conditions. BNSF and UP want CPKC to be prevented from increasing traffic in the Houston area until it identifies, funds, and completes projects to increase capacity, and want guarantees protecting interchange at the important Laredo, Texas, gateway [see “UP, BNSF say CP-KCS traffic will melt down Houston terminal,” News Wire, Sept. 30, 2022]. Norfolk Southern and CSX both raised questions about the current KCS-NS Meridian Speedway venture, with NS concerned the merger might hurt the operation and CSX wanting access to the Speedway route [see “STB gets an earful …,” News Wire, Oct. 3, 2022].
Others seeking conditions or raising objections include Chicago commuter operator Metra, which wants a host of infrastructure improvements and other conditions to avoid service disruptions, and a group of Chicago suburbs who have sought to block the deal entirely over traffic increases that CP and KCS estimate will go from three to eight freight trains a day, but the suburban group, the Coalition to Stop CPKC, has estimated could be as many as 14 trains. Failing a complete halt to the merger, that group originally sought more than $9 billion to mitigate the impact of the deal, but eventually scaled that back to $400 million [see “CP and KCS tout and defend …,” News Wire, Sept. 28, 2022].
Reclaiming the Link
Montana Rail Link announced in January that it had agreed to early termination of its lease of BNSF lines in Montana, Idaho, and Washington, allowing BNSF to regain control of the former Northern Pacific track that predecessor Burlington Northern had leased to MRL in 1987 [see “BNSF needed to end …,” Jan. 21, 2022]. BNSF may have paid as much as $2 billion to buy out the lease, which was not set to expire until 2047 [see “BNSF Railway paid around $2 billion …,” News Wire, March 3, 2022].
A timeline for the BNSF takeover was contingent on BNSF reaching agreement with MRL’s unions; with that completed, MRL began the regulatory process in November, asking the STB for permission to discontinue service. A board decision is expected in 2023’s second quarter [see “Montana Rail line seeks regulator permission …,” Nov. 21, 2022]
CSX completes Pan Am deal
Regulators approved CSX Transportation’s acquisition of New England regional Pan Am Railways in April, with CSX taking over operation of the 1,700-mile road in June. CSX had announced its intent to purchase Pan Am in November 2020 [see “CSX to acquire …,” News Wire, Nov. 30, 2020]. After approving the deal, STB Chairman Martin J. Oberman said he looked forward to “improvements in the rail network with respect to reliable service and competitive transportation options in New England and beyond.”
CSX had pledged to spend more than $100 million to upgrade Pan Am’s infrastructure and aging locomotive fleet over the first three years of ownership [see “Regulators approve CSX Transportation’s acquisition …,” News Wire, April 14, 2022].
New faces at the top
Three Class I railroad welcomed new CEOs in 2022. The changes began in February, when former Canadian Pacific executive Tracy Robinson was named Canadian National CEO. That was followed by Alan Shaw’s ascension to the top spot at Norfolk Southern, effective in May but announced the previous December; and the selection of former Ford Motor Co. executive Joe Hinrichs as CSX CEO in September. The selection of Hinrichs generated the most discussion, because hiring a CEO from outside the rail industry is a relatively rare move [see “Shippers, railroads, and analyst praise CSX’s selection …,” News Wire, Sept. 22, 2022.]
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