STB Approves CN Purchase

STB Approves CN Purchase

Copyright 2004, Traffic World, Inc.

The Surface Transportation Board approved Canadian National Railway''s $380 million purchase of three U.S. railroads on several conditions, none of which address the biggest concern of one of CN''s largest customers.

Steel producer Ispat Inland, a subsidiary of Ispat International of the Netherlands, wanted the STB to condition CN''s purchase of the Duluth, Missabe, and Iron Range Railway on requiring the same level of service that the steel company received with the DM&IR.

The DM&IR is part of Great Lakes Transportation that CN purchased last year. The GLC package also includes the Bessemer and Lake Erie Railroad Co. and The Pittsburgh & Conneaut Dock Co. and Great Lakes Fleet, a lake vessel company.

However, Ispat Inland, one of the largest steel producers in the world, was denied the condition it was seeking. "We''re disappointed," said Jeffrey Moreno of the Thompson Hine law firm and attorney for the shipper. "We wanted to have the right to terminate the current contract with DM&IR if certain service terms weren''t met, as it related to equipment supply."

STB chairman Roger Nober said it was the concerns of the steel company that led the board to implement a one-year oversight of the merger - something it didn''t do when CN purchased regional carrier Wisconsin Central in 2001.

"(Ispat Inland''s) request was difficult, because we would have had to go in and open up a contract that had nothing to do with this transaction," Nober said. "That would have been a big step to take, especially since there were a lot of factors contributing to their service problems. But the two parties are talking and I''m hopeful that their issues can be addressed."

Other conditions that were imposed on the merger included requiring CN to keep all existing active gateways open; to waive its defenses regarding rate regulation on bottleneck line segments created by the transaction; to adhere to the terms of the settlement reached with Burlington Northern and Santa Fe Railway regarding potential construction of build-outs; and requiring standard New York Dock labor protections without requiring employees to move to Canada to qualify for those protections.