CONRAIL APPROVAL COMES WITH CONDITIONS

CONRAIL APPROVAL COMES WITH CONDITIONS

The Surface Transportation Board's vote to approve the Conrail breakup plan advanced by CSX Corp. and Norfolk Southern Corp. included nearly four dozen commercial, operational and environmental conditions.

The primary commercial building block was the 1997 settlement agreement between the applicants and the National Industrial Transportation League, which was modified to give small railroads the same rate and service terms extended to customers who were losing single-line service after the breakup.That NIT League agreement also included a requirement that NS and CSX have labor agreements and information systems in place before the actual breakup of Conrail assets.

In addition, the STB expanded the NIT League agreement to include reciprocal switching of cars by NS or CSX to current Conrail customers.

The key operational conditions were designed to monitor integration activities to assure smooth changes and avert a rerun of Union Pacific Railroad's service woes after its 1996 merger with Southern Pacific.

Operational reports will monitor issues such as labor agreements, information systems, customer service, construction/capacity improvement projects, crew scheduling and management, dispatching and on-time performance.

Reports are to be submitted weekly or monthly.

Environmental conditions included steps meant to improve safety by adding warning devices at rail-highway crossings and noise barriers.

In the commercial arena, the STB ruled that Conrail transportation contracts can be divided up by the applicants for 180 days after the breakup date.

Shippers, however, will have the option to renegotiate those deals after that time as long as those documents have clauses that block assignment to another party.

The agency rejected arguments from bulk shippers that their rates would be increased to pay off a supposed premium that NS and CSX paid to acquire Conrail.

The STB also approved specific conditions, including:

* Negotiations to allow CP Rail System to serve rail customers on the east side of the Hudson River between New York City and Albany, N.Y., areas and creation of possible freight service between New York and New Haven, Conn.

New York interests also appeared to gain from conditions requiring CSX to participate in studies of car float and tunnel projects as well as truck traffic controls.

* Rail route transfers and other steps in western New York that were meant to expand sale-related private agreements to increase competition in the Buffalo and Rochester, N.Y., area.

* Monitoring of Chicago area car switching to assure that CSX does not control all terminal railroad operations in that area.

* A requirement for CSX to negotiate with Illinois Central to resolve a dispatching dispute in Memphis.

* New trackage rights for a short-line railroad, the New England Central, in Massachusetts.

* New service routes for Ohio's largest regional carrier, the Wheeling & Lake Erie Railway, including access to Toledo and a connection with the Ann Arbor Railroad, another small carrier that had been seeking conditions.

* A ruling that Wyandot Dolomite and National Lime and Stone, two Ohio aggregates shippers, would have the same private deal worked out with another producer of stone products, Martin Marietta.

* Indianapolis Power & Light gained a new rail connection to NS and Indiana Southern, a regional carrier that the company sought as a competitive alternative to CSX.

* A statement that approval of the transaction does not give the buyers the automatic right to override labor agreements. Instead, the STB urged negotiation and arbitration to resolve any disputes that arise.