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9/25/2008



Rail News: Rail Industry Trends

House transportation committee passes bill targeting STB's merger/acquisition review process


Yesterday, the House Transportation and Infrastructure Committee approved the Taking Responsible Action for Community Safety, or TRACS, Act (H.R. 6707), which would require the Surface Transportation Board (STB) to consider rail expansion projects' effects on local communities. The bill now goes before the full House for a vote.

Introduced by Rep. James Oberstar (D-Minn.) and 20 other representatives in August, the TRACS Act would give the STB authority over any transaction involving at least one Class I and mandate that the board consider all safety and environmental effects, including public, grade crossing and hazardous materials transportation safety; emergency response time; noise; and impacts on intercity passenger and commuter rail. If the adverse effects outweigh proposed benefits, the STB would be required to mitigate the effects or reject the transaction.

The board currently oversees any proposed merger or transfer of control of two major railroads to analyze potential anti-competitive and worker safety issues.

The bill targets Canadian National Railway Co.'s proposed acquisition of a major portion of the Elgin, Joliet & Eastern Railway Co.'s Chicago-area line, a deal opposed by many communities surrounding the Windy City.

"Congress may have a lot on its plate right now, but this issue is far too important to let it fall by the wayside," said Rep. Judy Biggert (R-Ill.), one of the bill's co-sponsors, in a prepared statement. "The safety, quality of life and tax dollars of suburban residents shouldn't have to be sacrificed to advance CN's corporate interests."

However, the STB's process for considering environmental impacts — both positive and negative — of proposed rail mergers needs to be structured and balanced, something the bill won't necessarily institute, CN officials believe. H.R. 6707 would require that the new merger review process be applied to the CN-EJ&E deal retroactively.

"The review process for CN's proposed acquisition of portions of the EJ&E railway has been far more concerned about negative impacts, compared to the positive benefits for many Chicago neighborhoods and suburbs," said CN Vice President of North American Government Affairs Karen Phillips in a statement. "In addition, the review process must provide more predictability and early confirmation of minor transactions so that all parties can work toward reasonable mitigation.

Rep. John Mica (R-Fla.), the House's ranking Republican, doesn't oppose H.R. 6707, but believes the bill could make it more difficult for railroads to obtain STB approval to merge with or acquire other railroads.

"I am concerned that the bill requires a more extensive environmental review process than is currently in place, and may provide additional opportunities for litigation," he said in a statement.

Rep. Bill Shuster (R-Pa.), who opposes the bill, also believes H.R. 6707 will have a "chilling effect" on rail mergers.

"I am concerned that altering the Surface Transportation Board's merger and acquisition review process could have the unintended consequence of hampering the growth of our nation's railroad industry," he said. "Mergers and acquisitions are an important part of the railroad industry's growth because they allow railroads to invest in underutilized trackage. I am [also] concerned that we could be raising the bar on environmental review to an impossible level."

Shuster stressed that it should be the STB's job — and not Congress' — to determine whether the CN-EJ&E transaction moves forward.


Contact Progressive Railroading editorial staff.

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