STB confirms CPKC's grain haulage rights in dispute with UP

The Surface Transportation Board yesterday announced its decision confirming the ability of Kansas City Southern Railway Co. — now part of Canadian Pacific Kansas City — to use haulage rights originally established in 1988 to transport grain traffic over Union Pacific Railroad tracks between Beaumont, Texas, and the ports of Houston and Galveston.

The STB's decision facilitates continued competitive options for shippers moving grain through Kansas City, Missouri, to the Gulf Coast ports, STB officials said in a press release.

In 1988, the STB’s predecessor agency, the Interstate Commerce Commission, approved the merger of UP and Missouri-Kansas-Texas Railroad Co. As part of that merger, the ICC required UP to negotiate with KCSR certain haulage rights (convertible to trackage rights) over UP track between Beaumont and the Gulf ports to preserve competitive options for grain shippers, known as the South End rights. The ICC then imposed the subsequent UP-KCS agreement as a condition to the merger.

On Aug. 1, 2023, KCS (now CPKC) petitioned the STB to enforce that 1988 condition and find that KCS may continue to use the South End rights to move grain originating from north and east of Kansas City, including from points served by Canadian Pacific in North Dakota and elsewhere, to the Gulf Coast.

In its decision, the board upheld the voluntarily negotiated solution presented to and imposed by the ICC (the 1988 agreement, including the South End rights), as a condition to the UP/MKT merger. The board determined that the term “interchange” in the 1988 agreement includes the exchange of traffic between rail carriers under common control, and therefore that KCS can continue to use these rights to move traffic originating on carriers, including CP, that are now part of the CPKC corporate entity along with KCS.

“The board’s ruling today underscores our commitment to competition within the rail industry,” said STB Chairman Patrick Fuchs. “By enforcing this merger condition and affirming the continued use of these haulage rights, the board preserves routing options for agricultural shippers, helping support a strong supply chain and market access for American exports.”

STB Member Robert Primus dissented from the board's decision with a separate expression. The case docket can be viewed and downloaded here.