The Surface Transportation Board (STB) on Oct. 17 issued two separate decisions approving, with conditions, Canadian Pacific Kansas City’s (CPKC) request to acquire from Genesee & Wyoming Class III Meridian & Bigbee Railroad (MNBR) and to operate some 50.4 miles of rail line between Meridian, Miss., and Myrtlewood, Ala. (Western Line); and CSX Transportation’s request to acquire and operate the MNBR rail line that runs 93.7 miles between Burkville and Myrtlewood, Ala. (Eastern Line). MNBR will continue to provide local service to customers between Meridian and Myrtlewood.
The Class I railroads on Oct. 6, 2023, filed separate applications seeking STB approval for their transactions. They sought to acquire these segments to create a direct interchange between them in Myrtlewood, eliminating the need for MNBR to serve as an intermediary carrier, and a freight corridor linking Mexico, Texas and the U.S. Southeast. The STB accepted the applications Nov. 6, 2023, determining the transactions to be minor and subject to an Environmental Assessment (EA). The draft EA was issued March 18, 2024, and the final EA was completed May 3, 2024.
On the Western Line, MNBR currently interchanges with CPKC and Norfolk Southern (NSR) at Meridian; on the Eastern Line, MNBR currently interchanges with Genesee & Wyoming’s Alabama & Gulf Coast Railway LLC (AGR) at Linden, Ala., and with NSR at Selma, Ala. MNBR also interchanges with CSXT at Montgomery.
“We thank the Surface Transportation Board members for their careful consideration of this vision to create a new Class I corridor providing more efficient service for existing CPKC and CSX traffic, while introducing new competitive shipping options between Mexico, Texas and the U.S. Southeast for our customers,” said Keith Creel, CPKC President and CEO. “With this new east-west Class I route, we are creating competition, providing a service that will take more trucks off the road, and growing rail transportation by expanding markets across the southern U.S., from Dallas to Atlanta and beyond.”
“This new interchange with CPKC highlights our ongoing efforts to provide sustainable rail solutions and service excellence for our customers,” said Joe Hinrichs, President and CEO of CSX. “Once complete, the interchange will help drive long-term business growth allowing customers to have greater connectivity and efficiency to reach key markets in Texas, Mexico, and the U.S. Southeast—all while providing safe and reliable service.”
“This transaction is a win for customers, who benefit from a new Class I connection in the growing Southeast U.S. and uninterrupted short line service from MNBR between Myrtlewood, Ala., and Meridian, Miss.,” Genesee & Wyoming CEO Michael Miller said.
In its Oct. 17, 2024, decision regarding the CSX transaction (download below), the STB reported that “[a]fter considering the application and the full record in this proceeding, the Board finds that CSXT’s acquisition of the Eastern Line—either standing alone or when considered in conjunction with CPKC’s proposed acquisition of the Western Line—would not likely cause a substantial lessening of competition, the creation of a monopoly, or restraint of trade in freight surface transportation in any region of the United States.” It noted that even if the transaction “were to result in some limited anticompetitive effects, those effects would be outweighed by the public interest in meeting significant transportation needs.”
Additionally, the STB said that “[w]hile CSXT expects some traffic that currently does not move between CSXT and CPKC over the Montgomery-Meridian route to shift to that route post-Transaction, the record does not support a finding that these potential diversions would cause adverse competitive impacts.” CSXT, the Board reported, anticipates that some existing traffic currently moving between CSXT and CPKC through interchange operations at New Orleans, La., East St. Louis, Mo., and Brookwood, Ala., would shift following the transaction “to the shorter, more efficient route through Myrtlewood,” and such diversions would “simply shift existing CSXT-CPKC traffic currently moving through existing gateways to the new, more efficient CSXT-CPKC Myrtlewood gateway and thus would not adversely affect competition.” According to the STB, “CSXT also states that if the CPKC Transaction goes forward, it anticipates that a relatively small amount of certain traffic currently moving between CSXT-served points in the Southeastern United States and CPKC-served points in Mexico, would be diverted through the new Myrtlewood gateway.” CSXT currently interchanges this traffic with a bridge carrier in New Orleans. Post-transaction, the STB said, “the Myrtlewood routing would provide customers with an alternative that would require fewer handling events and avoid the congested New Orleans gateway, offering a reduction of both transit time and cost.”
According to the STB, CSXT and CPKC plan to make “significant investments” in the Eastern and Western lines, respectively. “These investments would improve safety, reliability, and speeds between Montgomery and Meridian, thereby improving service for existing traffic,” the STB reported. “The Transaction would also create a direct east-west Class I rail connection between CSXT and CPKC at Myrtlewood rather than using MNBR as an intermediate carrier for overhead traffic moving between Montgomery and Meridian. The elimination of MNBR as an intermediate carrier would result in more efficient movement of existing overhead traffic between Montgomery and Meridian.”
The transaction would also provide benefits for traffic that does not currently move through Myrtlewood, the STB said. While, the STB noted that the “condition of the Eastern and Western Lines and use of MNBR as an intermediate carrier makes a CSXT-CPKC route through Myrtlewood a non-viable option for a significant amount of traffic despite it being the most direct route,” the creation of a direct CSXT-CPKC interchange and the improvements to the Eastern and Western Lines would allow CSXT “to divert traffic currently moving between CSXT and CPKC from longer, less efficient routes through existing gateways—including New Orleans, La., Brookwood, Ala., and East St. Louis, Mo.—to the new Myrtlewood gateway. These diversions would significantly reduce transit distances and/or times in many cases. For example, moving traffic between Montgomery and Shreveport, La., through the new Myrtlewood gateway would shorten such movements by over 150 miles compared to the current route through the New Orleans gateway. Similarly, moving traffic between Cincinnati, Ohio, and Shreveport through the new Myrtlewood gateway would shorten such movements by approximately 150 miles compared to the current route through the East St. Louis gateway.”
According to the STB, the transaction could also benefit future shippers that locate on CSXT’s network. “For example, new automobile plants are planned to be built in the Southeastern United States with access to CSXT’s network,” the Board reported. “The creation of a reliable, Class I freight corridor through Myrtlewood would provide these shippers with an efficient rail option for movement to and from the Southwestern United States and Mexico via Myrtlewood. The existence of the direct CSXT-CPKC connection in Myrtlewood would also increase opportunities for new shippers that require efficient east-west rail service to locate in the region.”
Additionally, the creation of this direct connection between CSXT and CPKC at Myrtlewood would provide public benefits by creating redundancy in CSXT’s network, according to the STB. This redundancy, it said, “would allow CSXT to reroute east-west traffic that would normally move through other gateways that may be experiencing problems (e.g., when the New Orleans gateway is experiencing weather-related disruptions).”
The STB ordered that the CSXT transaction “is subject to the employee protective conditions”; that it adopts certain environmental mitigation measures and imposes them as conditions; that CSXT “is required to adhere to its representation that it maintain the Selma gateway open on commercially reasonable terms … and for the one shipper located on the Eastern Line that currently moves traffic to NSR at Selma, CSXT is required to provide access to NSR at Selma at MNBR’s existing rate for five years, subject to reasonable cost escalation”; that CSXT “is required to adhere to any and all of the representations it made on the record during the course of this proceeding, whether or not such representations are specifically referenced in this decision”; that “[a]ny condition requested by any party in this proceeding that has not been specifically approved in this decision is denied”; that the “Board exempts from the prior approval requirements of 49 U.S.C. § 10903 the discontinuance of overhead trackage rights by MNBR, subject to the employee protective conditions”; and that AGR’s “verified notice of exemption to acquire overhead trackage rights is approved, subject to the employee protective conditions.”
In its Oct. 17, 2024, decision regarding the CPKC transaction (download below), the STB reported finding the “acquisition of the Western Line—even when considered in light of CSXT’s proposed acquisition of the Eastern Line—would not likely cause a substantial lessening of competition, the creation of a monopoly, or restraint of trade in freight surface transportation in any region of the United States.” It noted that “[e]ven if the Transaction were to result in some limited anticompetitive effects, those effects would be outweighed by the public interest in meeting significant transportation needs.” According to the STB, “[n]othing in the record indicates that the Transaction would reduce competitive rail alternatives for customers located on the Western Line,” and service on that line post-Transaction “would remain largely the same as it is today.”
“Based on the record before the Board, the Transaction would result in more efficient rail service and increase the competitive options available to shippers,” the STB wrote in its decision. “Applicants state that they intend to create a ‘premium train service,’ with direct interchange with CSXT at Myrtlewood, that would provide a new competitive routing option for intermodal, automotive, and other shippers … According to Applicants, the Myrtlewood routing would provide a shorter, more efficient route than the existing CPKC-CSXT routes … Applicants state that CPKC and CSXT today do not have an efficient direct connection in the Southeast … For instance, most non-automotive traffic moving between CPKC-served points in Mexico and the Southwestern United States and CSXT-served points in the Southeast follows a circuitous route, via Shreveport, then south to a connection at New Orleans … Post-Transaction, CPKC could route traffic directly from Shreveport, due east, to interchange with CSXT at Myrtlewood … This route would be 158 miles shorter, would eliminate the need for an intermediate switch carrier at New Orleans (which is often congested and subject to weather disruptions), and could reduce transit time by at least 24 to 48 hours … Shippers of cross-border automotive traffic could also access a new, direct route … Currently, this traffic is interchanged with UP [Union Pacific] at Laredo and delivered to CSXT at either New Orleans, Memphis, or East St. Louis … Post-Transaction, this traffic could be interchanged directly at Myrtlewood, eliminating the need for a bridge carrier.”
These route-mile reductions, the STB reported, “could put new markets within reach for shippers” and “by reducing the number of carriers in a move, the number of operational events (e.g., car handlings and power changes) would also decrease.” Together these changes “would reduce the risk of delay in transit,” the STB said. “The new routing would also provide an alternative option for intermodal and automotive shippers currently utilizing other carriers … According to Applicants, the Myrtlewood routing would provide a new alternative for imported finished automotive traffic that currently moves by ocean vessel from Mexico to the Southeastern United States or by truck between Florida ports and Dallas … These potential highway-to-rail diversions would reduce highway congestion and fuel consumption … Shippers would also benefit from improved service post-Transaction … [B]ecause MNBR would no longer handle CSXT-bound traffic in haulage for CPKC, fewer cars would be switched at Meridian, thereby streamlining operations at the terminal … CPKC also intends to coordinate interchange with CSXT to minimize dwell and plans to operate using run-through power.”
According to the STB, “Applicants are also planning an extensive track maintenance and rehabilitation program to improve the track.” CPKC intends to invest approximately $46 million to upgrade the infrastructure of the Western Line to Class I railroad standards and approximately $9 million on bridge repair and improvements, “elevating the Western Line from a lower-density line to a competitive east-west corridor that can support operations at a sustained maximum speed of 25 miles per hour,” the STB said. “CPKC also intends to embark on a multi-year bridge rehabilitation program, which it estimates would cost over $100 million.”
The STB ordered that the CPKC transaction “is subject to the employee protective conditions”; that the Board adopts certain environmental mitigation measures and imposes them as conditions; that “Applicants are required to adhere to any and all of the representations they made on the record during the course of this proceeding, whether or not such representations are specifically referenced in this decision”; that “[a]ny condition requested by any party in this proceeding that has not been specifically approved in this decision is denied”; that “CSXT’s verified notice of exemption to acquire overhead trackage rights is approved, subject to the employee protective conditions”; that “AGR’s verified notice of exemption to acquire overhead trackage rights is approved, subject to the employee protective conditions”: that the Board “exempts from the prior approval requirements of 49 U.S.C. § 10903 the discontinuance of overhead trackage rights by CSXT, subject to the employee protective conditions”: and that “NSR’s motion to terminate its participation in this proceeding and withdraw its filings is granted.”
Petitions for reconsideration of both STB decisions and/or requests for stay must be filed by Nov. 6, 2024, according to the Board, which noted that its decisions will be effective Nov. 16, 2024.
The four Board Members—Patrick Fuchs, Karen Hedlund, Robert Primus, and Michelle Schultz—concurred with both decisions. Fuchs and Schultz also provided separate expressions. Fuchs’ expression was nearly identical in both decision filings; similarly, Schultz’s expression was nearly identical in both decision filings.
“The Board was required, by law, to issue a final decision on this application months ago,” Fuchs said in his concurring expression. “The statute not only sets a deadline but gives a clear, specific command: the Board ‘shall approve’ an application ‘unless’ it finds the transaction results in likely substantial anticompetitive effects and the anticompetitive effects outweigh the public interest in meeting significant transportation needs … Based on CSXT’s submission [or the Applicants’ submission], the Board does not find the transaction results in any anticompetitive effect that would permit it to withhold approval. No party to this proceeding opposes approval. Yet the Board fails to comply with a law that Congress enacted precisely to discipline the overly long and inefficiently scoped reviews that plagued the agency and industry for years … With great respect for my colleagues’ priorities and perspectives, I hope the Board can correct and prevent this type of lapse going forward.”
The STB, Fuchs wrote, “must not delay capital investments and operational improvements, undermine agency compliance and enforcement efforts, and create undue uncertainty for shippers, railroads, and the broader public.” He also said that the Board “cannot offer an excuse” for the delay. “In recent months, the agency has issued many decisions in matters without statutory deadlines—declaratory orders, hearing orders, and other discretionary decisions—ahead of this mandatory action,” he pointed out. “Moreover, for at least a half year, the Board has had all the evidence and argument it needed to decide this straightforward case, and the agency has had ample opportunity to resolve any controversy with prompt, clear action and supporting reasoning Against this backdrop, I share Member Schultz’s concern regarding the imposition of a non-specific representations condition … because such an action introduces unnecessary confusion without any articulated practical benefit. Nonetheless, I will vote to approve the application and conditions because I am concerned that—if the Board were to split two-to-two on a condition—a questionable legal theory might be advanced that an even split on any single condition would defeat the application … [G]oing forward, the agency should follow best practices and impose any appropriate conditions with greater clarity and specificity, and it must conclude its reviews in a timely manner.”
Shultz in her expression explained that the Board “should strive for clarity” in its decisions, as it “is tasked with making decisions that have significant effects on businesses in this country, and when we order a regulated entity to do something, it should be clear what we are ordering and why we are ordering it.” She pointed out in her expression published in CSXT decision that the “Board’s vague condition holding CSXT to its representations in this proceeding fails on both counts. Preliminarily, I note that although CSXT ‘does not oppose the Board imposing as a condition to its approval of the CSXT Transaction the requirement that CSXT adhere to the representations that it has made in the course of this proceeding,’ … that does not mean that CSXT has ‘indicated its agreement’ with such a condition … Where CSXT agreed to a condition, or affirmatively requested a condition, it did so clearly … Without such an affirmative request or agreement from an applicant, the Board’s authority to impose conditions is restricted—CSXT’s lack of opposition to the Board’s exercise of its conditioning authority does not absolve the Board from following statutory authority and finding that the exercise of its conditioning authority is required.”
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