Monday, February 23, 1998 (Washington, DC)

The U.S. Department of Transportation today submitted its final brief to the Surface Transportation Board (STB) addressing the proposed acquisition of Conrail by CSX Transportation, Inc. (CSXT), and Norfolk Southern Railroad (NS), urging that the transaction only be approved subject to specific conditions to ensure safety and service reliability.

CSXT and NS, on June 23, 1997, sought approval from the STB to acquire Conrail and its assets. In an unprecedented arrangement, CSXT, NS and Conrail agree as part of this transaction to operate in so-called shared assets areas in northern New Jersey, southern New Jersey (including Philadelphia) and Detroit.

The Department of Transportation finds the acquisition of Conrail would extend competition, increase efficiency and enhance productivity, but supports approval by the STB only if steps are taken to maintain continued reliable rail freight and passenger service in the eastern United States and to mitigate adverse effects on competition, certain communities, and the environment. According to the department, the pending transaction warrants approval by the STB only if appropriate conditions are imposed to mitigate threatened public harm. Where necessary, conditions required to facilitate continued competition must be imposed and potential harm to communities and the environment likewise must be mitigated.

The department’s primary concern is to ensure that the transaction, if approved, will be implemented in a safe manner. The Federal Railroad Administration has been working closely with CSXT and NS to prepare and review the Safety Implementation Plans (SIP’s) that, at the department’s urging, have been required by the STB, and to secure detailed commitments of the resources and steps necessary to implement the SIPs properly.

"In keeping with President Clinton’s commitment to transportation safety, fair competition and environmental quality, the department has scrutinized all aspects of this transaction and is confident that with the conditions and oversight we have recommended, it is consistent with the public interest," said Secretary Slater. "As this transaction will change the face of east coast rail transportation, it is critical that we put safety first."

The department’s final brief details the following other areas of the transaction:

Competition. The pending transaction holds the prospects of expanding intramodal competition to an extent not seen before in rail consolidation proceedings. It poses relatively few competitive difficulties, although those that have been identified (such as a reduction in rail access from two carriers to one) must be addressed.

Community Impacts. The transaction is likely to significantly increase the number of trains through some communities in Ohio and Indiana. The larger Cleveland area will be particularly affected. The department continues to urge the STB to do all that it can to encourage CSXT and NS and the affected communities to reach mutually satisfactory mitigation measures that will not create service disruptions.

The brief also points out that areas of New York State east of the Hudson River merit additional attention from the STB because the transaction may result in 1,000 additional trucks crossing the George Washington Bridge daily. Mitigating that potential adverse environmental effect provides an opportunity to serve the important public policy goal of providing better rail service to that part of New York State.

Service Disruptions. The Department of Transportation is concerned that service disruptions similar to the ones that occurred in the western United States following the Union Pacific-Southern Pacific merger be avoided. The detailed systematic planning done for the SIP’s provides a solid foundation for optimism that service disruptions will not occur, but the department urges the STB to retain jurisdiction as a precautionary measure.

Rail Passenger Operations. The department supports a five-year oversight by the STB to assess the impact on rail passenger service, both intercity and commuter operations, specifically in the northeastern United States.

Shared Asset Areas. The establishment of the shared assets areas holds the potential for very real benefits for shippers and the nation’s economy. Introducing rail competition and extending single-line service through much of the eastern United States strongly suggests that lower rates and improved service should result. To assure uninterrupted service throughout the nation’s rail system, the department urges the STB to retain jurisdiction over operations in the shared assets areas for a period of five years.

The department states that the best resolution to the problems presented in the proceeding before the STB is likely to be found in agreements between those directly affected. The department urges the STB to stimulate further discussions among CSXT and NS, relevant communities, passenger rail operators, and shippers.

Copies of the Department of Transportation’s brief submitted to the Surface Transportation Board are available at http://www.dot.gov/affairs/crbrief.htm .