Washington District of Columbia USA - CN's request to condition approval of the Canadian Pacific-Kansas City Southern (CPKC) merger on the sale of KCS's Springfield Line to CN has been denied by the Surface Transportation Board (STB), which on 23 Mar 2023 provided notice that its Office of Environmental Analysis has terminated the review of the proposed divestiture.
 
In its 15 Mar 2023 decision to approve CP's acquisition of KCS to form CPKC, North America's first transnational railroad, STB said it "addressed the amended responsive application filed by Canadian National Railway Company (CN) and its United States rail carrier affiliate, Illinois Central Railroad Company (ICCR) (collectively, CN) in Docket No. FD 36500 (Sub-No. 1).
 
The Board denied CN's request that the Board order the sale of the KCS rail line between Kansas City, Missouri, and Springfield and East St. Louis, Illinois, (Springfield Line) to CN (Proposed Divestiture) and terminated the ongoing associated environmental review."
 
CN filed its responsive application seeking the sale on 28 Feb 2022, and an amended responsive application on 9 Jun 2022.
 
CN claimed that the Springfield Line "is a direct competitive alternative to CP's route from Kansas City to Chicago, and beyond to Detroit and eastern Canada," and that CN's control of the line would represent "a major opportunity to improve transportation options, promote rail-to-rail competition, and take many of thousands of long-haul trucks off the road annually through increased rail-to-truck competition."
 
The STB reported in its 15 Mar 2023 merger-approval decision that "under the pre-2001 merger policy, the Board will not impose conditions unless it finds, among other things, that the consolidation may produce effects harmful to the public interest and that the narrowly tailored conditions will mitigate or eliminate the harmful effects."
 
The STB also said it is "disinclined to impose conditions that would broadly restructure the competitive balance among railroads with unpredictable effects," and "there is no indication that the merger will create harmful effects that would be remedied by the proposed divestiture of the Springfield Line."
 
According to the STB, the "record does not support a finding that the merger will create competitive harms related to the Springfield Line, or that the merged CPKC will downgrade the line.
 
In addition, the proposed divestiture is not needed to remedy alleged community and capacity-related harms to the Chicago area.
 
Given the Board's conclusion regarding the absence of any transaction-related harms related to the Springfield Line, the Board does not need to examine claims regarding the benefits of the proposed Springfield divestiture transaction, such as CN's claims regarding truck diversion.
 
The Board will therefore deny CN's responsive application, as well as the alternative request for trackage rights in CN's final brief."
 
In its analysis, STB pointed out that:
 
Providing CN access to "new routings would certainly bolster CN's own competitive posture and would also serve CN's interests by weakening the competing CPKC system.
 
But while the Board has authority to order divestiture or trackage rights to remedy competitive harms from a merger, including specific authority to address parallel lines, neither divestiture nor trackage rights conditions are warranted here because CN has not demonstrated a competitive harm to be remedied.
 
As Applicants CP and KCS point out, in addition to CP's route between Kansas City and Chicago, BNSF, UP Union Pacific, and NS Norfolk Southern, all have single-line routes between those points, and there are competitive options for the routes extending beyond those points."
 
"CN's claims that the Springfield Line would be underutilized or downgraded post Transaction also do not warrant imposition of a condition requiring divestiture or providing trackage rights.
 
Applicants state that the Springfield Line will be an important part of their post Transaction network serving local customers, including large grain customers, and providing CPKC with access to St. Louis.
 
Applicants explain that they expect both organic growth and transaction-related growth on the Springfield Line.
 
They describe opportunities to grow traffic and attract new customers by linking the former CP network with St. Louis and opportunities to develop new routing options by working with smaller railroads.
 
Applicants state that the Springfield Line will allow CPKC to offer existing Springfield Line customers single-line service to the upper Midwest and Canada, a service which those customers have indicated will afford them new business opportunities."
 
While the Coalition to Stop CPKC "expresses its support for the proposed divestiture to potentially mitigate impacts to Chicago-area communities, and CN argues that divestiture could alleviate community concerns as well as impacts on Metra and Chicago-area capacity," the STB "finds that no significant harms to Chicago-area communities will result from the transaction."
 
The STB noted, however, that it is "imposing mitigation volunteered by Applicants with additional narrowly tailored requirements, including environmental mitigation for Chicago-area communities.
 
Therefore, there is no need to impose any further condition related to the Springfield Line to address the Chicago-area issues raised by CN and the Coalition."
 
Author unknown.