Monday, March 18, 2002 (Washington, DC) Federal Railroad Administrator Allan Rutter today announced the issuance of a new regulation designed to assure the safety of railroad operations resulting from future mergers or acquisitions. The final rule, which will be published in the Federal Register, is the culmination of a multi-year cooperative effort involving the U.S. Surface Transportation Board (STB).

“The adoption of these new rules by the Federal Railroad Administration (FRA) and STB is a clear recognition of the value the Administration places on the safety of the nation’s rail network and the effects consolidation can have on the industry,” said Administrator Rutter. “We have an obligation to do all we can to ensure the safety of merged rail operations, particularly where consolidation could have a significant impact on the thousands of rail employees nationwide and the communities in which they operate. I believe this rule accomplishes that goal.”

The rulemaking was initiated in response to FRA’s identification of systemic safety deficiencies related to large-scale railroad mergers that took place in the mid-1990’s involving the Union Pacific and Southern Pacific as well as the Burlington Northern and Atchison Topeka & Santa Fe. Subsequently, the STB, at FRA’s request, required the filing of Safety Integration Plans (SIPs) as part of the joint acquisition of Conrail by CSX Corp. and Norfolk Southern Corp., and the merger involving Canadian National and the Illinois Central.

SIPs are designed to address the safety of railroad operations during every phase of a proposed transaction. Specifically, SIPs outline in detail the actions each rail carrier plans to take to ensure the safest integration of operations, operating practices, and corporate cultures. In fact, the SIP that was filed as part of the Conrail transaction is credited with enhancing the safety of both CSX and Norfolk Southern’s new operations, particularly in the newly acquired territories in the Northeast and Midwest.

As a result of the success of SIPs, the FRA and STB in 1998 entered into a memorandum of understanding (MOU) formalizing the FRA’s role in reviewing SIPs and monitoring their implementation. The FRA and STB then agreed to codify the SIP evaluation process and published coordinated Notices of Proposed Rulemaking in December 1998.

The final rule addresses mergers, acquisitions, or consolidations of property involving all Class I railroads and in more limited cases, Class II railroads. Companies proposing such transactions will be required to submit a SIP to both the FRA and STB after which the FRA will review the document and report its findings and conclusions to the STB. While the STB is responsible for the approval or disapproval of proposed transactions, the FRA is responsible for monitoring the safe implementation of transactions approved by the STB. The STB has published a complimentary final rule of its own.