THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, October 22, 1996 TAG: 9610220236
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: STAFF AND WIRE REPORT
LENGTH: 70 lines
News of the proposed merger of CSX Corp. and Conrail Inc. is just a week old and it's already drawing congressional attention.
A House of Representatives committee will hold hearings starting next month on the $8.4 billion merger's competitive consequences.
The hearings were called by Rep. Bud Shuster, R-Pa., whose district includes key Conrail facilities. The House Transportation and Infrastructure Committee will hold the first of several hearings Nov. 19.
The hearings will also look at the legislative favors Conrail was granted when it was created by Congress in 1976 from the remains of several bankrupted railroads.
``This merger may raise unique questions, given that the U.S. government created Conrail in response to a transportation emergency caused by the bankruptcy of the Penn Central,'' Shuster said.
He added: ``This is the latest in a series of mergers which has significantly increased concentration in the rail industry. We must be certain that on balance this merger will enhance competition, improve transportation services and protect the rights of employees.''
The Union Pacific and Southern Pacific merged earlier this year; Burlington Northern and the Atchison, Topeka and the Santa Fe merged in late 1995.
Last week's proposal would combine CSX, which has extensive lines in the Southeast and Midwest, with Conrail, which dominates the Northeast and has good connections in the Midwest.
The resulting carrier's sales of $8.5 billion would represent 70 percent of Eastern rail revenue. Norfolk Southern Corp. moves virtually all other rail traffic east of the Mississippi River.
Conrail enjoys a near monopoly in lucrative Northeast markets such as New York and Boston.
Shuster's statement announcing the hearing noted that in its 1976 creation Conrail was granted some privileges, including expedited procedures to abandon unneeded track and a provision that allows Conrail freight service to continue if there is a commuter railroad strike on Conrail routes. No other railroad enjoys that privilege.
Early reaction from Norfolk Southern, and customer and employee groups indicates the merger will be controversial.
Norfolk Southern is reviewing its options and likely will take some action to preserve and enhance its franchise.
The Norfolk-based railroad declined to comment on the planned hearings.
Shuster ``is a key player in the Northeast,'' said Magda Ratajski, Norfolk Southern's vice president of corporate communications. ``He is one of the most important public servants in the nation dealing with this issue and transportation in general.''
The most recent major merger, the Union Pacific-Southern Pacific consolidation, sparked a hearing before a House Agriculture subcommittee.
Shuster's committee also will consider ``a recent legislative proposal'' to assure that two or more major carriers provide service over Conrail lines after a merger of that carrier with another railroad, he said.
That ``informal proposal'' was circulated on Capitol Hill late in 1995 during debate over the Interstate Commerce Commission Termination Act. Nothing came of the idea at that time.
Shuster's central Pennsylvania district includes Conrail's freight car shops at Hollidaysburg and a locomotive shop. Conrail's east-west mainline between Pittsburgh and Philadelphia bisects the district, carrying 60 to 70 freight trains daily.
The underused Hollidaysburg shops have been the target of restructuring efforts, including a failed venture to bring an Oregon rail supplier into the facility. MEMO: The Journal of Commerce and staff writer Christopher Dinsmore
contributed to this report. ILLUSTRATION: [Color Photo] by CNB