Canadian National Railway said it will seek “legal relief” to spur a slow-moving Surface Transportation Board to approve its plans to purchase a Chicago-area short line.
The railroad claimed a victory of sorts in the agency’s draft environmental impact statement on CN’s plan to buy the ELgina short line around Chicago. But CN said the board adopted a review timetable that could prevent it from buying the EJ&E from United States Steel. That $300 million deal has a year-end deadline sale, CN said, and U.S. Steel will not extend it.
The STB’s schedule could push a final approval decision into early 2009.
The railroad was vague about the specific action it will take, saying it “will provide more detail in the near future on the legal relief it will be seeking.”
E. Hunter Harrison, CN’s president and CEO, said getting the deal done “is in the broader regional and national interest.” He said getting CN’s freight trains out of congested downtown Chicago and putting them on the little-used EJ&E arc route would streamline overall rail operations in that area besides helping CN’s system.
Some suburbs have mounted a stout resistance to CN’s plans to sharply boost train traffic through their communities, but Harrison said many more people in the region would see less rail traffic as a result.
CN embraced the STB’s draft impact report’s main conclusions, while criticizing some of its judgments. “The DEIS confirms our view that the environmental impacts of the transaction can be reasonably mitigated,” said Harrison. “CN stands ready to continue to negotiate with affected communities and reach voluntary mitigation agreements.” However, Harrison also said parts of the report point toward “ mitigation which may be unreasonable or beyond the STB’s authority.”
The STB’s Section on Environmental Analysis identified 15 roadway-rail cross-
ings that could need “grade separations” — construction projects in which roads or train tracks are raised or lowered so that the other traffic can move through uninterrupted — because the extra trains would worsen traffic jams on local roads.
The SEA also said 11 emergency service providers in the region served by EJ&E tracks could be “substantially affected” by CN’s rail traffic plans, and said some emergency facilities might need to be relocated.
The three-person board may find it hard to reach a final agreement. STB Commissioner W. Douglas Buttrey said in a comment that the effects and mitiga-
tion costs of CN’s increased traffic in the suburbs along the EJ&E “appear to be incredibly high.”
The three board members toured the area this summer to see for themselves.
“Based on what I see now on the record, and what I saw when I recently visited the affected communities,” Buttrey wrote, “it is hard for me to imagine how even the most far-reaching mitigation measures would be enough to offset or balance the environmental detriments that would flow from this proposal.”
Besides the purchase price, CN plans to spend another $100 million to upgrade the EJ&E system. It has already said it would spend $40 million more “on a range of reasonable environmental mitigation measures,” but has warned it might walk away if the mitigation costs rise too far.
BY JOHN D. BOYD
Rails Enjoy Rate-Fueled Profit Gains
The top U.S. railroads expanded freight profits by double digits in the second quarter even as most saw traffic weaken, with bottom lines swelled by rate hikes, growing fuel surcharges and some added efficiency.
Union Pacific, the largest U.S. carrier by revenue, had a 19 percent profit jump to $531 million on $4.6 billion in receipts.
That was a testament to the “the resiliency of our network,” said Chairman, President and CEO James R. Young, after some of UP’s Midwest operations were drowned out of service for weeks by heavy floods that centered on tracks in Iowa.
UP’s volume slid 3 percent, but revenue per railcar load rose 16 percent to an all-time high of $1,835. Efficiencies included a trimmer workforce plus faster train speeds and terminal turnarounds, but analysts noted large fuel surcharges and 6 percent rate hikes.
Rival BNSF said its net profit would have grown but for a $175 million charge against earnings for environmental cleanup in Montana. The profit fell 19 percent to $350 million while freight revenue rose 16 percent to $4.35 billion.
BNSF’s volume fell 2. 8 percent, although the revenue ton-miles edged higher. Average revenue per unit hauled increased 19. 7 percent to $1,733.
Profit for the smallest of the Class I railroads, Kansas City Southern, soared 83 percent to $55.4 million. Both total revenue and revenue per unit rose 13. 8 percent, as sales hit a quarterly record $486 million and unit receipts reached $1,014. The company credited “strong pricing,” fuel fees and pickup in some business including intermodal loads from KCS’ new terminal at the Lazaro Cardenas port in Mexico. Total volume rose 1.1 percent.
Norfolk Southern had a 15 percent net gain to a record $453 million for the April-June period, although traffic slid 2 percent. Rail operating revenue rose 16 percent to $2.77 billion, and a combination of pricing, fees and improved freight mix boosted average unit revenue 19 percent.
Earlier, CSX reported an 18 percent increase in average revenue that pushed net income up 19 percent to $385 million, as receipts rose 15 percent to $2.91 billion. That growth came as volume fell 3 percent and some efficiency measures weakened.
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