ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, November 20, 1996 TAG: 9611200072
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: GREG EDWARDS STAFF WRITER
MEMO: ***CORRECTION***
Published correction ran on November 21, 1996.
The Surface Transportation Board, successor to the Interstate
Commerce Commission, is an independent federal agency and not affiliated
with Congress. The relationship was incorrect in a story about pending
Conrail merger applications.
THE LAWMAKER SAID he was holding hearings because of the public's $7 billion investment in Conrail and the possible effects on workers.
Congress might intervene if federal regulators approve a merger involving the Philadelphia-based railroad Conrail that undermines the public interest, said Rep. Bud Shuster, R-Pa., chairman of the House Transportation and Infrastructure Committee.
"We have an obligation to protect the public interest; and I'd use whatever legitimate resources I have to do everything I could to protect the public interest," Shuster said Tuesday.
He made the remarks following a committee hearing on how the federal Surface Transportation Board will consider merger applications for Conrail from either CSX Corp. or Norfolk Southern Corp. The House board, which succeeded the Interstate Commerce Commission as overseer of rail mergers, has the power to overrule both federal anti-trust laws and state laws when it approves merger applications.
While the hearing - which drew a huge crowd on an otherwise quiet day in Congress - was under way in Washington, Norfolk Southern was losing an effort in federal court in Philadelphia to convince a judge to remove obstacles placed by CSX and Conrail to NS's hostile bid for Conrail.
CSX of Richmond and Conrail announced a friendly merger agreement Oct.15. NS of Norfolk countered with its own competing bid for the company less than two weeks later. Whichever railroad captures control of Conrail, it will still have to win approval for its proposed merger from the Surface Transportation Board.
Members of Shuster's committee quizzed an STB official on how the board would protect railroad customers, rail workers and the public as it reviews a merger application from either CSX or NS, or from both. Shuster wanted to know how the board would enforce conditions on an approved merger - such as the awarding of trackage rights to competitors.
David Konschnik, a top official with STB, said the board could go as far as to undo an approved merger if a railroad was not living up to conditions to which it agreed. He admitted that extreme step is not likely to occur, however.
Konschnik, forbidden by law from discussing the Conrail situation directly, talked about how the law applies to mergers in general and how they have been handled in the past.
In its review of a merger proposal, he said, the board must consider the effect on the adequacy of transportation generally, the interest of affected rail workers, the costs of a merger and whether a merger would hurt regional or national competition among railroads, as well as other issues.
When there are competing applications such as one from CSX and NS, the board could approve one, approve both of them or deny both, Konschnik said. Under law, the board's decision on an application is due 16 months from the date it was filed, contrary to old ICC law, which gave that now-defunct agency 31 months to act on an application. Both CSX and NS have filed notices with the government that they intend to file applications, he said.
Shuster said the hearing is the first of a series he plans on consolidations within the rail industry.
During the past two years, Union Pacific merged with Southern Pacific and Burlington Northern merged with Santa Fe, but Shuster said he was holding the hearings now because of the public's investment in Conrail and the effect the Conrail merger could have on future rail mergers.
Other concerns mentioned by Shuster included: the effect on the Railroad Retirement System of jobs lost to rail mergers and, specifically where Conrail is concerned, the effect of a merger on rail freight service and Amtrak passenger service in the Northeast.
Special legislation that Congress passed when it formed Conrail also may have to be changed, Shuster said. Among those special laws was one that required Conrail's headquarters to be based in Philadelphia.
Congress took the first steps to form Conrail from Penn Central and other bankrupt Northeastern railroads in 1973. A 1976 law created Conrail but at that time both the Chessie System, a CSX predecessor, and the Norfolk and Western Railway, which became part of Norfolk Southern, declined to buy routes into New York City that would have competed with Conrail. NS did attempt to buy the entire line before it was sold to the public in 1987.
Taxpayers invested $7 billion in Conrail and recovered less than $2 billion of that when Conrail became a shareholder-owned company, Shuster said. As far as he is concerned, the public still has more than a $5 billion investment in the company.
Shuster said that it's no secret that a significant number of his constituents are employed in Conrail locomotive and rail-car repair shops in Altoona, Pa. Those and other Conrail employees are a major concern, Shuster said.
"It would be a shame if these merger proposals result in the loss of jobs of many railroad workers only to line the coffers of a few highly placed railroad executives," Shuster said.
Shuster said he hadn't formed an opinion on whether he would like to see CSX or Norfolk Southern take over the Altoona shops and said he hadn't heard a preference for either potential buyer from his constituents.
"They [his constituents] are nervous," Shuster said. "They are concerned," he said, "about the future of rail transportation in central Pennsylvania and the future of the Altoona shops, as I am."
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