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3/25/2002



Rail News: Rail Industry Trends

STB issues rulings on BNSF's UP/SP merger-related trackage-right disputes


Surface Transportation Board March 21 issued two decisions addressing trackage-rights disputes by Burlington Northern Santa Fe in connection with Union Pacific Railroad's 1996 Southern Pacific Railroad merger.
In its first decision, the board declined to adopt a generic standard for all build-in/build-out situations, under which a line is built from an existing line to a facility or a line is constructed out from a facility to an existing line.
STB noted that standards proposed by BNSF and UP appeared to provide undue leverage to the party proposing the standard. Board officials believe BNSF's standard could affect UP's ability to conduct its own operations on trackage-rights lines and, in certain instances, compel UP to subsidize BNSF's build-in/build-out operations; UP's standard could limit the underlying competition-preserving purpose of the build-in/build-out condition and, in certain instances, prevent BNSF from replicating its pre-merger competitive posture.
STB directed BNSF and UP to resume negotiations on various issues arising from implementation of the build-in/build-out condition, and try to minimize operating inconvenience to UP while ensuring that BNSF can provide competitive service.
In its second decision, the board addressed BNSF's dispute over the mechanism used to adjust fees applicable to trackage rights it received in the UP-SP merger.
BNSF disputes both a so-called "acquisition premium"— the excess price paid to acquire SP rail over the pre-acquisition book value of such carriers — and the costs of certain capacity improvements undertaken by UP on trackage-rights lines.
STB concluded that, although BNSF hasn't shown that disputed items should be excluded from calculations required to create the adjustment factor, BNSF should be given further opportunity to demonstrate that the disputed items should be omitted from such calculations.


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