Calgary Alberta - CPKC has asked federal regulators to prevent Union Pacific from blocking the movement of its grain trains to the ports of Houston and Galveston via trackage rights on UP via Beaumont, Texas.
 
The Interstate Commerce Commission granted KCS "South End" rights over UP as part of its approval of UP's 1988 acquisition of the Missouri-Kansas-Texas Railroad.
 
The haulage and trackage rights agreement preserved the pre-merger options shippers had to send grain from the Upper Midwest to the Gulf Coast via Kansas City and the independent Katy.
 
KCS only sporadically used the rights over the past 35 years.
 
After obtaining the concession to operate in Mexico in 1996, KCS concentrated on cross-border grain movements it could originate, and that maximized the railway's length of haul.
 
But now the CPKC merger has prompted shipper interest in using CPKC's single-line service from the Upper Midwest to reach export markets via Houston and Galveston, CPKC says in a regulatory filing this week.
 
"UP has not reacted well to this development," CPKC said in its filing.
 
"When a major grain shipper directed a trainload of wheat to Houston via a CPKC routing, UP objected, asserting that the CP/KCS transaction extinguished KCSR's ability to use its haulage rights between Beaumont and Galveston/Houston."
 
So CPKC, through KCS, this week asked the Surface Transportation Board "to correct UP's error and reassure shippers that they can continue to explore and potentially choose the option of CP-KCSR routings to Houston and Galveston for the movement of grain from the Upper Midwest to the Gulf."
 
CPKC has asked the board for an expedited decision by 31 Aug 2023 so that grain shippers can make plans for the fall harvest season.
 
At the time of UP's acquisition, the Katy connected at Kansas City with Burlington Northern, Chicago & North Western, Soo Line (now part of CPKC), and the Chicago Missouri & Western.
 
KCS, through its South End rights, inherited the Katy's ability to haul grain received at Kansas City to Houston and Galveston.
 
But UP, in a 2 May 2023 email to CPKC, said neither grain originated on CPKC locations north or east of Kansas City, nor Class I traffic interchanged to CPKC at Kansas City are covered under the South End agreements.
 
This includes interchange between CP and CPKC at Kansas City, UP contends.
 
On 26 May 2023 UP demanded that the railroads go to arbitration over the terms of the South End agreement.
 
"UP is not obligated to move trains that CPKC originates in North Dakota under the Term Sheet," UP wrote.
 
UP wanted two questions settled through arbitration, is traffic CPKC originates in North Dakota covered under the South End agreement, and "in what amount has UP been damaged by CPKC's improper delivery of trains originating in North Dakota to UP at Beaumont in violation of the Term Sheet?"
 
Bill Stephens.