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The Railroad Week in Review 8/30/97
featuring: The Breakup of Conrail

Ready reference: homepages for Conrail | CSX | Norfolk Southern

The FRA is now coming down on Union Pacific with unprecedented force. Partly as a result of three recent accidents involving seven fatalities, an FRA spokesman has confirmed that between 50 and 60 federal inspectors were dispatched this week to examine every aspect of the company's operation. For 36,000 miles of railroad, that's a lot of looking. Union Pacific says bring 'em on for "we have nothing to hide." Shortliners please drop a note to if you've seen any significant FRA activity increase in your area.

Reports from UP/SP are that initial findings point to fatigue. said FRA's Jolene Molitoris, "You have people who are working 7 days a week, 12-plus hours a day with no time off. When you are that tired it makes top performance and safety assurance impossible,'' she said. Molitoris met with Union Pacific President Jerry Davis, who said the company plans to hire 1,500 new workers by the year's end to help ease the heavy workload.

Another possible cause is lack of attention to detail and simply following the Book of Rules. The FRA maintains dispatcher errors showed a basic misunderstanding of railroad rules. As an example, inspectors cited a situation in which a dispatcher talked a train through moves against the current of traffic, a violation of federal and company rules that require written approval for such a movement.

And if that weren't enough, reports in the newswires and WSJ tell of shippers being fairly unhappy with service since the SP merger. In a lengthy piece by Danny Machalaba, the WSJ reports that Houston area shippers particularly have been plagued by delayed pickup and delivery and erratic transit times. Some are resorting to truck to fill in missing inventory, others are slowing production lines. What's got to be even more frustrating is that these very shippers are the ones who warned about this possible outcome in pre-merger hearings.

Informed sources tell me the cause of the Rockville Bridge accident may have been forces induced on the bridge by the super-elevated high-speed curve they built in on track three when they reduced the bridge from four tracks to three may have been causing it to lose strength all along. The back wall at the Rockville side was bulging, and work was supposed to begin on 8/25 to stabilize it. Reports a witness, "Parapets are the damage item. Ballast and upper parapets did fall in. Arches are OK."

Canadian Pacific has sent the STB a summary of the response that its St Lawrence & Hudson (SLH) Railway (essentially the former D&H)will make in October regarding the proposed acquisition of Conrail by NS and CSX. Three areas of relief will be sought. First is access through reciprocal switching rights at non-discriminatory rates to the North Jersey area including the Port of New York/New Jersey, South Jersey/Philadelphia, Buffalo/Niagara Frontier and the Baltimore terminal areas. Second is elimination of certain restrictions on D&H's existing trackage rights over Conrail lines that arose out of the formation of Conrail. Last is trackage rights at non-discriminatory rates from Albany to New York and Long Island along the east side of the Hudson river and to New Jersey along the West Shore route.

The letter notes that CP acquired the then bankrupt D&H in 1991, and since then has committed substantial resources in an effort to make D&H a viable competitive force. It goes on to say the proposed transaction will threaten the ability of today's SLH to continue to provide competitive and essential services. The result will be fewer competitive options available to shippers and the public generally. Said CP President and CEO Rob Ritchie, "Although CP is engaged in fruitful discussions with both Norfolk Southern and CSX, substantial issues remain to be resolved."

Also this week, Canadian National said it had signed a key three-item agreement with CSX. The accord allows CN and CSX to quote through rates for new business moving between certain points on each carrier's network and creates new competitive arrangements in Buffalo. In the Chicago are, revised operating arrangements will cut transit times for CSX intermodal trains by allowing them to operate over segments of CN track. The view from here is that this deal looks a lot like the NS-CP arrangement regarding NY, Phila, and Michigan.

In a separate filing with the STB, CN is pressing for permanent, unrestricted trackage rights between Detroit and Toledo on a current Conrail line and multiple arrangements to avoid congestion elsewhere in the Detroit area. CN also seeks to build a connection that would allow joint CSX-CN service on a direct route into a power plant at Trenton, Mich., and wants improved access to Chicago's Gibson Yard. In Buffalo, CN asked the board for trackage rights to preserve a direct connection between NS and CN.

A shareholder letter from Providence & Worcester President Orville Harrold announces that a new agreement has been reached with CSX regarding P&W operations between New Haven CT and Fresh Pond Jct. in Queens. The letter says, in part, "operations in this territory are now limited to the movement of construction aggregate. The agreement enables P&W to market the line with CSX for all general merchandise and intermodal traffic between the P&W's system and Long Island."

It surely looks like NS and CSX are making every attempt to nip complaints in the bud before they become STB issues. However, judging from the notices received at the STB so far, it surely seems that many players are looking more for improvements in their situations rather than remedies and mitigation for competitive injury. The risk these applicants are taking is that, if the STB rules on their issues at all, it may not rule in favor of the applicant. The coal cases reported here in the last couple of weeks have followed that tone, and Chairman Morgan has said herself that she expects the carriers to work out their differences before coming to Washington. Supplicante emptor.

The latest news from Genesee & Wyoming is that second quarter revenues were up 23.5% over last year and net income was up 38.4% on a seven percent increase in carloadings. Operating revenues for the first half reached a record $47.6 million, a 33.6% increase over last year. Net income hit 4.3 million, up 70.1% on a 22% increase in carloads. The 1997 periods reflect activity of all the 1996 acquisitions: Illinois Midland, Pittsburg & Shawmut, and RailLink. So far this year, G&W has signed a 20-year lease with CP for a 180-mile line in central Ontario and added 92 miles to one of the Oregon properties, and gained a toe-hold in Australia (see below). G&W also named Charlie Marshall, formerly of Conrail, to its Board of Directors.

On the west coast, a release from BNSF tells us the Arizona & California group has purchased 79 miles of branch line track northwest of Centralia, Wash. Dubbed the Puget Sound & Pacific Railroad, it will operate as a division of the Arizona & California based in Parker, AZ. Puget Sound & Pacific also assumes operating rights over the 48-mile U.S. Navy line north of Shelton. The company has established its operating headquarters for the new railroad at Elma, Wash., 27 miles west of Olympia.

In overseas action, both Wisconsin Central and Genesee & Wyoming have signed arrangements in Australia. WC is leading a consortium which has agreed to acquire the stock of Tasrail (TAS) from the Australian government for about $16.5 million. And while the Wisconsinites were taming the Tasmanian devils, Genesee & Wyoming struck a deal to purchase the SA Rail freight and maintenance businesses of Australian National Railway. For the record, SA Rail provides intrastate freight services in South Australia, interstate haulage of contract rail freight, rolling stock rental and maintenance, and intrastate track maintenance.

From The Department of Now for Something Different, courtesy of JOC, comes word that 14 people were killed and 42 injured in Tanzania when a truck carrying passengers plowed into a herd of cattle, the semi-official Daily News said on Tuesday. District police said the truck was traveling at a high speed when the accident happened in Mbeya region, southwest Tanzania, on Monday. And you think you have it tough?

--Roy Blanchard

Ready reference: homepages for Conrail | CSX | Norfolk Southern

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