Shipper says Pan Am-CSX merger will cut transit time for freight (Courtesy of the Jacksonville Business Journal) — If CSX Corp. is allowed to take over the partnership that Pan Am Railways formed with Norfolk Southern a decade ago, shippers expect to see a reduction in how long it takes freight to be hauled across the country.
What happens with that joint venture — which controls approximately 400 miles of track between western New York and Ayer, Massachusetts — was at the heart of Thursday afternoon’s hearing before the Surface Transportation Board.
The board is deciding if CSX is allowed to go through with the deal, which would see the Jacksonville-based railroad buy a network that stretches across 1,200 miles in six Northeastern states. The hearing continues Friday.
The future of the partnership, known as Pan Am Southern, led the Department of Justice to oppose the acquisition, saying it would be anti-competitive.
The shippers who spoke Thursday disagreed.
Vince Paperiello, president of transportation management company Hub Group’s intermodal operations, testified the acquisition would allow his company to reduce a day, perhaps more, on freight that is hauled eastward from Chicago to the Northeast, traversing the Pan Am Southern line.
That route prohibits double-stacking of intermodal payloads because the Hoosac Tunnel, a 19th century tunnel in western Massachusetts, does not have the clearance for it, meaning freight coming east from Chicago must stop in Albany, New York and be converted into a single-stack train.
“We have been constrained in capacity in that corridor for years,” Paperiello said. “There is a great opportunity to take trucks off the road.”
Dealing with reservations
Norfolk Southern lawyer William A. Mullins told the board the Atlanta-based company had had reservations about the acquisition when it was announced in November 2020.
“A strong and independent Pan Am Southern is important,” Mullins told the board. “No other railroad party has more to lose than (Norfolk Southern) if Pan Am Southern ceases to be a viable alternative to CSX.”
In the months since, though, Norfolk Southern and CSX entered into a settlement agreement that would see Berkshire & Eastern – a subsidiary of Genesee & Wyoming, a shortline railroad whose operational headquarters is in Jacksonville – operate the Pan Am Southern line. Also, Norfolk Southern would be given the right to operate two intermodal trains each day on the CSX-controlled rail parallel to the Pan Am Southern trackage.
The state of Vermont also reconsidered its objection to the acquisition. Late last month, Vermont reached an agreement with CSX that gave Vermont Rail Systems trackage rights on several portions of the Pan Am Railways network.
The Department of Justice did not testify before the railroad regulator Thursday afternoon, but it has previously suggested CSX divest its stake in Pan Am Southern.
CSX attorneys argued that would prolong the transaction review, perhaps with negative consequences.
“This deal turns into a pumpkin at one point in time,” Pelkey said. “Hopefully, that’s not before everything needs to fall into place.”
Investing in the network
Instead of divesting itself of the line, CSX plans to turn operation of it over to Genesee & Wyoming, which controls three short lines in Connecticut as well as the Providence & Worcester Railroad in Massachusetts.
“Pan Am Southern as operated by B&E would be independent and serve customers, just as it does today,” said Matt Walsh, executive vice president of corporate development for Genesee & Wyoming. “(Pan Am Southern) would be more independently operated than it is currently.”
Leonard Wagner, the regional senior vice president for Genesee & Wyoming Inc.’s Northern Region and president of Berkshire & Eastern, said the railroad will operate more efficiently with higher velocity. There are portions of the railroad system that are operated on pen and paper, while the newly acquired company would invest technologies to speed efficiencies — with G&W President of North American Operations Michael Miller saying Genesee & Wyoming will invest $20 million into the Berkshire & Eastern line.
Officials from CSX, Norfolk Southern and Genesee & Wyoming each testified no shippers or connecting railroads would witness a reduction in the number of connecting railroads along the Pan Am Southern line.
That’s vital for shippers.
“Having these competing options is a key benefit of this transaction,” Paperiello said. “Our business, along with our customers, will benefit from this transaction.”
Photo courtesy of railwayage.com
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