Railroads Call STB Merger Decision Illegal, Seek Federal Court Relief
By Michael Lear-Olimpi, Managing Editor, Logistics Online
Officials of the Canadian National Railway Co. and Burlington Northern Santa Fe Corp. haven't sat down and accepted the U.S. Surface Transportation Board's March 17 decision to halt all big rail mergers for 15 months while the board drafts guidelines on such consolidations.
The railroads, which announced in December their intention to merge, have appealed the decision with the U.S. Court of Appeals for the District of Columbia Circuit. The companies have also petitioned the board for a stay of the decision pending judicial review of it.
In testimony submitted Thursday to the surface-transportation and merchant-marine subcommittee of the U.S. Senate Commerce Committee, Canadian National President and Chief Executive Officer Paul M. Tellier stated that his company "strongly disagrees with the STB's March 17 decision" and that the ruling "exceeds the scope of the Board's statutory authority."
Tellier lambasted the board, branding its decision a ruling without precedent or authority.
"The STB's decision is not only unauthorized by Congress, it is also a de facto amendment ... of the STB's regulations, applied retroactively to prevent the filing of the CN/BNSF application and a subsequent decision on the merits by the STB," Tellier said. "The decision's illegality is compounded by its blatant unfairness."
The board held four days of hearings earlier this month on consolidation among Class 1 railroads. The hearings were convened to address problems shippers experienced after the digestion of Conrail by Norfolk Southern and CSX, and the merger of Union Pacific and Southern Pacific. But testimony focused on the pending combination of CN and BNSF.
Tellier claimed in his statement that the only clear support for a moratorium on Class 1 railroad mergers can from the railroads' competitors. In fact, others testified that a merger could aggravate rail service and reduce shipping options.
He added that the moratorium denies review of the railroads' formal merger application that would detail how the consolidation would benefit the public. Such review is guaranteed by law and Surface Transportation Board regulations, Tellier asserted, but would not happen because of the board's March 17 merger freeze. The railroads hadn't filed their formal application before the decision, but said they planned to file around March 20.
Burlington Northern Santa Fe Chairman Robert Krebs, in a written statement submitted to the committee, agreed with Tellier's claim that the Surface Transportation Board's action was illegal, and said the board shouldn't hinder the expansion of his and Tellier's company because of other railroads' failures.
Instead of helping the rail industry, Tellier said the board's decision could cost $500 million in savings that the merger would have delivered by helping companies reduce inventory-carrying and general logistics costs. The proposed CN-BNSF combination would provide shippers with better service, enhance safety and improve rail operations in general.
But senators hailed the board's decision.
"As the railroads have become larger, the mergers have become more complex and difficult,'' the Associated Press reported Senate Majority Leader Trent Lott, R-MS, as saying at the hearing. ''In the short term, it appears to me that it has drained financial resources from the railroads and ... eroded service gains and efficiencies at various points."
Linda Morgan, head of the Surface Transportation Board, defended the decision, which she said the board had the authority to make.
Even though senators praised the action, they criticized Congress for not providing the agency with better guidance.