[Congressional Record Volume 144, Number 106 (Friday, July 31, 1998)]
[Senate]
[Pages S9550-S9552]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    SURFACE TRANPORTATION BOARD AND THE CONRAIL ACQUISITION DECISION

  Mr. HOLLINGS. Mr. President, I rise today to commend the Surface 
Transportation Board (Board) for its recent actions approving the 
application of CSX and Norfolk Southern to acquire Conrail. As the 
Board's 424-page written decision of July 23, 1998, explains in great 
detail, this merger transaction as approved will bring railroad 
competition into the East like no merger has ever done before, and it 
will provide the opportunity for economic growth and more jobs both on 
and off the rail system throughout the Northeast and the South, 
including my state of South Carolina. I appreciate the way in which the 
Board acted in this proceeding in the public interest, promoting more 
competition while preserving the strength of the transaction as 
proposed.
  The Board is the independent economic regulatory agency that oversees 
the nation's rail transportation industry. Under the leadership of 
Linda Morgan, the Board's Chairman, who was with us on the Commerce 
Committee for many years, the Board, with its staff of 135, puts out 
more work than much larger agencies, issuing well-reasoned, thoughtful, 
and balanced decisions in tough, contentious cases. In particular I 
would like to commend the efforts of Linda Morgan, the Chairman of the 
Surface Transportation Board. Prior to assuming the Chairmanship, Linda 
worked for the Senate Commerce Committee. Her tireless efforts were 
integral in completing difficult work in a relatively small time frame. 
When we eliminated the Interstate Commerce Commission, I think that we 
underestimated the degree of work and the complexity of issues that 
continue to be brought before the Board, and in hindsight I believe 
that we cut personnel too deeply. The Board has recently issued 
decisions dealing with the rail service emergency in the West; several 
difficult rail rate cases; matters involving Amtrak; and proceedings 
initiated at the request of Senator McCain and Senator Hutchison to 
review the status of access and competition in the railroad industry. 
In each of these matters, it has taken on hard issues and has resolved 
them fairly and competently.
  The CSX/Norfolk Southern/Conrail proceeding is the most recent 
example of the Board's ability to address difficult issues with broad 
ramifications and reach a result under the law that promotes the public 
interest by best addressing the needs of all concerned. In that case, 
the Board was presented with a merger proposal that was inherently 
procompetitive. The railroads themselves brought to the Board a 
transaction that overall would create two strong, balanced competitors 
in the East with the ability to provide improved and more competitive 
rail service opportunities throughout the Northeast and the South. The 
transaction contemplates substantial investment in railroad 
infrastructure, which we desperately need to accommodate the Nation's 
expanding economy, and it is expected that, over time, the merger 
should produce over $1 billion annually in quantifiable public benefits 
and numerous other benefits.
  Although the overall competitive and other benefits of the merger 
proposal, which were reflected in several negotiated settlements, were 
well recognized, various interests wanted the Board to impose 
conditions to address environmental and safety issues or to

[[Page S9551]]

modify the competitive balance reflected in the original proposal. It 
was in addressing these requests that the Board represented the public 
the best. The Board encouraged CSX and Norfolk Southern to work further 
with the various rail users and other interested parties and see if 
they could resolve the remaining issues themselves. As a result of this 
process, many settlements were reached, which undoubtedly produced 
resolutions better than the Government could have directed from 
Washington, D.C. Where settlements could not be reached, however, the 
Board acted responsibly and fairly. After two long days of oral 
argument, it issued a decision that smartly balanced the competing 
interests and imposed various conditions to mitigate environmental 
impacts; to preserve and improve the competitive posture of affected 
shippers and regions without upsetting the integrity of the 
procompetitive merger transaction that the railroads originally 
presented; to promote balanced regional economic development by 
assuring that smaller railroads that provide essential services will be 
viable and will continue to be able to compete; to recognize the 
legitimate interests of rail employees; and to promote a safe and 
smooth transition to a more competitive and efficient rail system in 
the East.
  The Board's action on this merger application will preserve and 
promote competition throughout the Nation; will ensure an improved 
transportation network that will connect the North and the South in 
historic ways; and will provide that, overall, shippers will be better 
off after the merger than they were before, and that none will have 
fewer service options than they had before. I congratulate the Board on 
its action in this matter, and on its other significant work since its 
creation in 1996.
  On Wednesday, July 29, the Commerce Committee overwhelmingly approved 
a one-year reauthorization of the Board, which I joined Chairman McCain 
in sponsoring. I want to reemphasize here today my commitment to seeing 
that the Board will be in business for a long time and will be given 
the resources that it needs to continue its vital work.
  At this point, I ask unanimous consent that the full text of the 
commenting opinion by Chairman Morgan, included in the Board's decision 
in the Conrail matter, be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             Commenting Opinion by Chairman Linda J. Morgan

       Our job in assessing rail mergers is to balance a variety 
     of factors and issue a decision that advances the public 
     interest. The decision we are issuing today, which approves 
     with conditions the Conrail merger application, will advance 
     the public interest in many important ways. The application 
     promotes competition, and our decision applies the authority 
     of the Board to enhance competition even further.
       The Strength of the Merger Application. The merger 
     application we are approving today, as enhanced by the many 
     conditions we are imposing, will result in a procompetitive 
     restructuring of railroad service throughout much of the 
     Eastern United States. When the hard work is done, and this 
     complex transaction is fully consummated, both CSX and NS 
     will provide vigorous, balanced, and sustainable competition, 
     each over approximately 20,000 miles of rail line in the 
     East.
       Most notably, CSX and NS are prepared to aggressively 
     compete with each other in many important markets where 
     Conrail now faces limited or no competition from other major 
     railroads. Shippers will benefit from new head-to-head rail 
     competition within shared assets areas and joint access 
     areas. And this merger will enhance competition for many 
     localities outside of these areas as well. In Buffalo, for 
     example, while not every shipper will have direct service by 
     two carriers, the transaction will create a two-carrier 
     presence that will benefit shippers; and CSX's activities in 
     the New York City area will face more competitive discipline 
     than Conrail's do now, from the nearby presence of the New 
     Jersey shared assets area. Finally, this transaction will 
     enable both CSX and NS to compete more effectively with motor 
     carrier service, which is a dominant mode of freight 
     transportation throughout the East.
       In short, shippers throughout the East will have more 
     transportation options than they have had in decades. And 
     they will have more competitive service, at reasonable rates, 
     than they have ever had before.
       Additionally, the transaction, when it is fully in place, 
     will have a broad positive economic effect. It will produce 
     an impressive $1 billion annually in quantifiable public 
     benefits and numerous other benefits. The capital that will 
     be invested in expanded rail infrastructure will benefit all 
     shippers, not just those that are served by the applicants, 
     and it will create new jobs both on and off of the rail 
     system. The support of more than 2,200 shippers from a broad 
     spectrum of commodity groups, 350 public officials, 80 
     railroads, many state and local government interests 
     throughout the East, and various rail labor employees attests 
     to the overall strength of the proposal.
       This merger will promote competitive balance throughout an 
     entire region of the country. And it will create a strong 
     rail network in the East that can handle the transportation 
     needs of an expanding economy and advance important economic 
     growth and development in the region. These benefits clearly 
     and significantly advance the public interest.
       Preservation of the Fundamental Integrity of the 
     Transaction. Our decision, while imposing important 
     additional procompetitive conditions, recognizes the 
     operational and competitive integrity of the proposal and the 
     importance of preserving and promoting privately negotiated 
     agreements. Government should not be in the business of 
     fundamentally restructuring private-sector initiatives that 
     are inherently sound, and the conditions that we are imposing 
     add value, but not in a way that undermines the transaction 
     itself. They reflect a respect for the carefully crafted 
     structural soundness of the merger proposal, including its 
     shared assets and joint access areas, and for the numerous 
     settlement agreements that we encouraged and that the 
     applicants and the other parties have worked hard to reach--
     agreements like the National Industrial Transportation League 
     (NITL) settlement, the United Transportation Union (UTU) and 
     Brotherhood of Locomotive Engineers settlements, the 
     Cleveland area environmental settlements, and so many more. 
     These private-sector agreements have clearly added value to 
     the transaction that was initially proposed, from a 
     competitive perspective and in other ways, and the parties 
     are to be commended for furthering the public interest in 
     this way. There is a strong public interest in encouraging 
     private parties to negotiate procompetitive transactions such 
     as this one, and government action that discourages such 
     private-sector initiative is not in the public interest.
       The Procompetitive Use of the Board's Authority. While our 
     decision preserves the strength and integrity of the 
     proposal, it also applies the Board's authority fully and 
     reasonably to further promote competition to the benefit of 
     many geographic regions. The additional conditions, which go 
     beyond the already regionally procompetitive effect of the 
     original transaction and the further procompetitive effect of 
     the many settlements, enhance the railroad alternatives for 
     areas in New York State and New England that had lost carrier 
     options through the creation of Conrail.
       Our decision also applies the Board's authority to further 
     enhance the positions of many users. Our decision imposes the 
     NITL settlement and expands in a logical way the 
     procompetitive aspects of that settlement. By giving shippers 
     the opportunity to exercise any antiassignment clauses or 
     other similar provisions in their existing contracts after 6 
     months following the division of Conrail's assets, our 
     decision preserves the operational integrity of the 
     transaction, but still gives those shippers, including many 
     chemical, coal, and intermodal shippers, the opportunity to 
     use the contract terms they have bargained for to take 
     advantage of their new competitive options sooner rather than 
     later. By preserving the settlements of many railroads and 
     shippers such as coal and utility shippers, while imposing 
     conditions to assist others such as aggregates shippers, and 
     smaller railroads that provide important services, our 
     decision ensures that, overall, shippers will be better off 
     after the merger than they were before, and that none will 
     have less service than they had before.
       In this regard, our decision recognizes the important role 
     of smaller railroads in providing essential and competitive 
     services in various regions affected by this transaction. By 
     assuring that smaller railroads that provide essential 
     services in such areas as the Ohio region and New England 
     will remain viable and will continue to be able to compete, 
     the conditions promote important competitive options and 
     further regional economic development.
       Operational and Implementation Success. Our decision, with 
     its significant operational reporting and monitoring, 
     recognizes the operational challenges that the transaction 
     presents. Its monitoring elements will provide the Board with 
     the tools to further a smooth implementation of the merger in 
     a way that utilizes the Conrail Transaction Council and the 
     Labor Task Forces and does not unduly burden the parties. And 
     it appropriately focuses on specific areas of concern, such 
     as the shared assets areas and the Chicago gateway. Having 
     been given the personal commitment of the Chief Executive 
     Officers of both applicant railroads to make the merger work, 
     I am confident that this merger will be implemented smoothly 
     and will result in overall service improvements in relatively 
     short order. The conditions we are imposing, however, will 
     make sure that we are on top of the situation in case it does 
     not.
       Protection of the Environment. Our decision appropriately 
     protects the environment. The transaction has many 
     environmental benefits, including the anticipated removal

[[Page S9552]]

     of over 1 million truck trips a year from our Nation's 
     highways. At the same time, the proposal raised environmental 
     concerns. In response, for the first time ever in a merger, 
     the Board issued a full environmental impact statement. We 
     also have encouraged the railroads and local communities to 
     meet and attempt to address issues privately, and several 
     have been able to successfully resolve their concerns. In 
     Cleveland, for example, a key traffic center for this merger, 
     the parties, after months of discussion, have reached 
     mutually acceptable agreements that preserve the operational 
     integrity of the transaction while addressing important 
     community life concerns. I am pleased that we are able to 
     give effect to win-win settlements such as this one, and 
     others in the area surrounding Cleveland and in so many other 
     places. At the same time, for the communities that could not 
     reach agreement with the carriers, our decision does provide 
     necessary and appropriate conditions pertaining to grade-
     crossing safety, hazardous materials, traffic delay and 
     noise, among others. And, with the recommended mitigation 
     that the applicants have agreed to carry out, the transaction 
     will not have, and cannot be viewed as having, a 
     disproportionately high and adverse impact on minority and 
     low-income areas.
       The Promotion of Safety. Our decision clearly promotes 
     safety. More than half of the environmental conditions 
     involve safety. For the first time ever in a merger, the 
     applicants were required to submit safety integration plans. 
     And, as part of the merger implementation oversight, the 
     implementation of these plans will be carefully monitored 
     through a memorandum of understanding between the Board and 
     the Department of Transportation, which clearly represents a 
     cooperative governmental initiative in the public interest.
       Recognition of Employee Interests. As previously discussed, 
     the proposal before us will mean more jobs overall in the 
     long run. And, by adopting the UTU proposal in mandating the 
     creation of Labor Task Forces to focus on issues such as 
     safety and operations, our decision will help promote safety 
     and quality of life for employees. Also, our decision 
     provides the protections of New York Dock, and it reaffirms 
     the negotiation and arbitration process as the proper way to 
     resolve important issues relating to employee rights. Thus, 
     the Board has made clear in its decision, as requested by 
     rail labor, that the Board's approval of the application does 
     not indicate approval or disapproval of any of the involved 
     CBA overrides that the applicants have argued are necessary.
       Overall Benefits. The package we are approving should 
     clearly promote the public interest. The original 
     transaction, with its subsequently negotiated agreements, and 
     with the conditions we are imposing, will provide many 
     benefits to many people. The extensive oversight and 
     monitoring will help us to ensure that these benefits will 
     materialize, and the private mechanisms in place for 
     oversight will provide a vehicle by which the important and 
     constructive private-sector dialogue, initiated prior to the 
     Board's decision today among the applicants, other railroads, 
     shippers, employees, and affected communities, can continue.
       Our decision promotes private-sector initiatives that are 
     in the public interest and represents good, common sense 
     government. It provides a resolution that is best for the 
     national interest at large, and for the East in particular. 
     Approval of this merger as conditioned is an historic moment 
     for the Board, for transportation, and for the Nation as a 
     whole.

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