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Reaction on STB Michigan decision

 The wisdom, or lack of it, in a recent Surface Transportation Board ruling about Michigan rail service is worth consideration. This is from the CNN report.

Federal Board’s Decision Shortchanges Michigan Rail Shippers and Passengers, Norfolk Southern Says

PR Newswire

NORFOLK, Va., Dec. 12 /PRNewswire-FirstCall/ — Norfolk Southern Railway Company said that the Surface Transportation Board’s (STB) Dec. 10, 2007, denial of regulatory approval for an innovative joint venture involving freight and passenger rail service over 384 route miles in Michigan and Indiana represents a lost opportunity for the region’s shippers, passengers and communities.

Norfolk Southern and Watco Companies had planned jointly to form a new regional railroad, Michigan Central Railway, to preserve and grow freight service in the region. Amtrak passenger lines would have benefited from an extended agreement ensuring continued maintenance and investment levels on the rail lines between Ypsilanti and Kalamazoo, Mich.

The transaction was supported by rail freight customers, Amtrak, short line railroads and a number of state and local officials.

Under the transaction, Norfolk Southern would have contributed to Michigan Central most of its rail line segments and trackage rights in Michigan west of Ypsilanti. Those lines carry rail freight service, as well as much of Michigan’s Amtrak passenger service. Watco would have contributed several million dollars in cash and locomotives. The new, independently operated Michigan Central planned to employ up to 118 people and concentrate on reinvesting its revenues in track and infrastructure.

“It is a sad day for rail transportation in Michigan,” said Wick Moorman, Norfolk Southern’s chief executive officer. “The proposal was a creative, farsighted response to the long-term trend of shrinking rail volumes in the region. It was designed to spur infrastructure investment and leverage the talents of an experienced short line operator – all to the benefit of the state, its freight rail customers and rail passenger service.”

The STB action ends Watco’s planned investment in the lines and terminates the proposed Amtrak agreement that would have guaranteed $23 million in maintenance and infrastructure improvements on the main passenger routes. Norfolk Southern said it will continue to look for options for the lines. However, because the current traffic on certain rail segments does not justify additional investment by Norfolk Southern, some areas may see curtailment of service.

Norfolk Southern Corporation is one of the nation’s premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 21,000 route miles in 22 states and the District of Columbia, serving every major container port in the eastern United States and providing superior connections to western rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is North America’s largest rail carrier of metals and automotive products.

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Filed under: Amtrak, Passenger Rail Transportatio Policy, Regional USA Passenger Rail

One Response

  1. Nathanael Nerode says:

    This was a fictional or sham transaction; Norfolk Southern would have had total control over Michigan Central, but was pretending not to.

    It appeared very likely that Norfolk Southern would use the transaction as a scheme to fire its own employees and rehire them at lower rates via Michigan Central. The was the STB’s deciding factor.

    In fact, if Norfolk Southern had simply admitted that it was retaining control, and applied to the STB under *those* provisions (which require continuity of employees to be maintained) rather than the provisions for transferring to an unrelated entity, it almost certainly would have passed muster. Since they refused to resubmit under those terms, clearly the entire proposed transaction *was* a sham.

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