Railway Age: Short Line and Regional Marketing Advocate
July 1998


am reminded of the Jewish Mother in the 50s musical "Bye Bye Birdie" who said she suffered from a "condition." The line was, "And if there's one thing medical science can't cure, it's a condition."

"Conditions" literally pepper the STB decision on the Conrail transaction. Are they a cure or a curse? There are 45 of them covering everything from the NIT League settlement agreement to the imposition of "New York Dock" labor provisions. The good news is that shortlines figure in eleven of the conditions, with ten shortlines named and two or three more inferred by the wording of individual conditions. (If you haven't already found it, the full list of conditions is available at the STB website, http://www.stb.dot.gov/NewItems.htm.)

CSX and NS
have devised many
settlement options
that should enhance
relationships with
connecting short lines.

Speaking for the American Short Line and Regional Railroad Association, VP Alice Saylor told me, "We are pleased with the careful concern showed by the Board for the issues brought by the smaller railroads. We are also gratified that the smaller railroads were included in the Board's remarks with respect to the NIT League's settlement agreement. The Association looks forward toward a successful implementation of the Board's decision and the conditions recommended to it."

It is clear that the shortline managers who did their homework, were not greedy, and stayed the course were rewarded for their efforts. It is also clear that NS and CSX addressed many of the shortline issues up front with lots of the intents to file issued last August never making it to the commission. Yet several high-profile filings which made it though the process did wind up as imposed conditions benefiting shortlines.

One was the Livonia Avon & Lakeville (LAL) request for elimination of a paper barrier between it and the Rochester & Southern. The issue was that both roads came into the same under-utilized Conrail Yard yet Conrail's prohibition of interchange would be perpetuated. The LAL brought a cogent argument and the STB found for the shortline.

Another awarded New England Central, a RailTex property, the right to "connect the dots" with its corporate sister line, the Connecticut Southern, via trackage rights over Conrail's old Boston & Albany line for the 15 between Palmer and Springfield, Massachusetts. Another RailTex property, the Indiana Southern, won the right to serve Indianapolis Power & Light with coal from origins on its line in the southwest corner of that state. Wheeling & Lake Erie gets access to regional carriers Ann Arbor and Indiana & Ohio (CN's former DT&I, now owned by the I&O unit of RailTex).

In other instances, notably Providence & Worcester and Housatonic Railroad, the class 1s are instructed simply to do what they said they'd do on behalf of the regional carriers. According to the STB the conditions are designed to "preserve and promote" the many privately negotiated agreements and do not attempt to restructure basically sound private initiatives. Moreover, conditions imposed by the Board will require five years of oversight and operational monitoring.

There was literally something for everybody in the draft decision. The two-to-one remedies in the NIT League settlement agreement will "apply to and benefit class III carriers at their option." Shipper contracts in force at "Day One," (the actual split date) will remain in effect for six months, longer if shippers desire. In its closing statement the Board said, "by giving shippers the option to be released from their contracts after six months [they can] take advantage of their new competitive positions sooner rather than later."

The implication for shortlines is that those affected by 2:1 and 1:2 situations may be able to offer their own customers new routing options. In this context, recall the Board already has paper barriers, car supply, and alternative routings under its Ex Parte 575 microscope. Thus the alert shortline manger may be able to provide other shipper options and build the revenue base in the process.

When is Day One? Norfolk Southern has been working with a hypothetical split date of September 1, 1998. CSX is leaning toward 4Q98. The decision allows the acquiring lines access to Conrail shipper info before Day One, so for the next 12 weeks or so NS and CSX will be busily forming shipper and shortline strategies.

Both CSX and NS have devised an array of shortline settlement options with the end game of enhancing the shortline relationship; it's up to the individual lines to make their druthers known to their new class 1 partners. This may be the last chance for a long time to get revenues up to the point where they can support significant capex programs like infrastructure enhancements for 286,000 lb. axle loads and building car fleets. Deprescribed car hire rates, zonal pricing, and interchange rules all have to be addressed. And it all must be done between now and Day One.

Maybe modern medical science can't cure a condition, but it sure looks like conditions imposed by the STB have the potential to cure a lot of ills in shortlinedom. All parties must take their medicine.

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