• KCS/CP Merger Discussion

  • Discussion related to the past and present operations of Kansas City Southern Lines, including affiliates Texas Mexican Railway, Grupo Transportation Ferroviaria Mexicana (TFM), and Panama Canal Railway Co. Official web site can be found here: KCSOUTHERN.COM.
Discussion related to the past and present operations of Kansas City Southern Lines, including affiliates Texas Mexican Railway, Grupo Transportation Ferroviaria Mexicana (TFM), and Panama Canal Railway Co. Official web site can be found here: KCSOUTHERN.COM.

Moderator: GOLDEN-ARM

  by Gilbert B Norman

Wall Street Journal
A federal regulator has approved with conditions a merger between Canadian Pacific Railway Ltd. and Kansas City Southern, a $28 billion deal that created the first freight rail network linking Canada, the U.S. and Mexico.

“The transaction meets the public interest test for approval,” said a Wednesday decision from the Surface Transportation Board, the economic regulator primarily overseeing freight railroads.
  by Gilbert B Norman
Here is what The Journal's report notes regarding "with conditions":
The conditions that the STB is imposing include ones meant to retain shippers’ competitive options. CPKC would have to keep gateways, or connection points between the merged railroad and other railroads, open on reasonable terms, said the regulator. Upon customers’ request, CPKC will also have to justify rate increases related to the gateway obligation.
There is no mention regarding CN access to KC over the GM&O Springfield-KC line that KCS previously acquired from CN; the "condition" to keep gateways, i.e. physical connections and rate making, seems rather "boilerplate" to me.

So far as the Chicago area communities? "Sorry 'bout that". The railroad lines in question, my MILW, was there first and the communities built up around it.
  by Gilbert B Norman
JayBee wrote: Wed Mar 15, 2023 12:08 am A decision by the STB on the CP - KCS merger is to be announced today at 11am EDT. It will be livestreamed on the STB YouTube channel. https://www.youtube.com/@surfacetransportationboard8768
Now in progress

  by JayBee
Gilbert B Norman wrote: Wed Mar 15, 2023 10:03 am Here is what The Journal's report notes regarding "with conditions":

There is no mention regarding CN access to KC over the GM&O Springfield-KC line that KCS previously acquired from CN; the "condition" to keep gateways, i.e. physical connections and rate making, seems rather "boilerplate" to me.
The Board denied CN's request for access to Kansas City.

The written decision is available on the STB website with all the oversight conditions and the Board's reasoning on all matters including Metra dispatching and Houston congestion issues.
  by Gilbert B Norman
On WBBM 780/105.9 "Noon Business Hour" today, the merger approval was the lead story (not the banking crisis and the resulting stock market meltdown), but it seems that the show's guest, a Transportation Professor at DePaul, wanted to "make it all about METRA" and how the communities will be adversely affected by more frequent and longer trains.
  by John_Perkowski
The remaining question is will CN go to US District Court to get changes or annulment?
  by Gilbert B Norman
Likely, Colonel

I've been following industry affairs long enough to know that a major merger such as this, especially with an adversely affected party ("hey, we wanted it too"), they will find a judge who'd like a bit of free publicity. But in the end, it will be for naught.

Sure, CN would like to access the KC Gateway, but with four of the now six major North American systems serving KC, "no competition" is a mighty weak leg to stand on.
  by justalurker66
The decision can be read online:
https://dcms-external.s3.amazonaws.com/ ... /51549.pdf

"The Board will not impose the conditions sought by the carriers."

On Metra (references omitted from quote):
"The Board finds that the Transaction is unlikely to cause harm to Metra’s commuter rail service or Chicago-area communities. See infra Applicable Standards section (explaining that, in evaluating a major railroad consolidation, the Board balances benefits of the merger against harm to the public interest and will impose conditions if necessary to reduce or eliminate a mergerrelated harm). As an initial matter, the Board finds Metra’s RTC model unpersuasive. Metra’s RTC simulations are based on inputs provided by its experts, including track and structure data. However, even in the most updated version of Metra’s RTC model accepted into the record, Metra’s experts omitted material infrastructure from the RTC model, including signals, double crossovers on the Watertown Subdivision, and the Bensenville Yard reconfiguration enhancements in the future case simulation. These infrastructure omissions increased the predicted degree of freight-train interference with commuter rail operations in the RTC model and prevented the model from accurately simulating operations. Moreover, Metra modeled CP freight trains using actual train data from April 2021, rather than using scheduled departure times and allowing RTC’s logic to dispatch trains. This forced the modeled trains to depart at specific times, preventing the RTC model from “capturing the randomness of real-world operating events.” Given the combined impact of these two modeling shortcomings on the reliability of the model’s output, the Board will not rely on Metra’s RTC model to assess the impacts of the Transaction or require Applicants to adopt Metra’s RTC model."

"For the reasons addressed above, the Board finds that many of Metra’s concerns relate to preexisting issues, and Metra and the Coalition have not shown that the Transaction will harm Metra’s commuter rail service or Chicago-area communities. Therefore, at this time, the Board will not impose the requested conditions concerning the Metra Lines." . . . "Thus, the Board will not use its conditioning power here to impose conditions concerning the Metra Lines that are designed to ameliorate preexisting issues or improve Metra’s contractual position."

(In other words, the STB does not believe the merger will make the situation with Metra in Chicago worse and they will not use merger conditions to fix problems not related to the merger.)

CPKC has agreed to be responsive to Metra's complaints (if valid and filed with Metra) and the board is requiring additional metrics to monitor for potential problems during an oversight period.
  by lensovet
The oversight period for the curious appears to be seven years, if I'm reading pp. 155-6 correctly.
Last edited by lensovet on Wed Mar 15, 2023 11:41 pm, edited 1 time in total.
  by lensovet
However, looking at pages 117-119, there are reporting and dispute resolution requirements that are imposed in case Metra's service is degraded as a result of CPKCS traffic/dispatching decisions. These requirements are stronger than what CP proposed.

Amtrak settlement conditions are also incorporated.
  by Gilbert B Norman
I can feel now that my "second career" of eleven years (first was USAF, third CPA in private practice) with the MILW was not for naught and, at least what counts of it, has now become an integral part of a major North American rail system.

Nothing spontaneous whatever; well-choreographed, but nowhere in the classical repertory is there a work expressing my personal feelings regarding this development:

  by Shortline614
It's done! I was a little late on my prediction, but from now on I'll refrain from guessing when the government does stuff. :wink:

Looking through the conditions, they all are either: conditions that CPKC agreed to during the course of the hearings; minor conditions that won’t have much impact on the new railroad; or standard conditions applied to every merger. This is as close to a no-strings-attached approval as you can get. No concessions to CN, which I am a little surprised by. There is a condition that says that CPKC must work with UP and BNSF to make sure their routes along the Texas Gulf Coast don't get clogged up. This may result in a Houston Bypass route over UP for CPKC.

The full list of conditions:

#1 Applicants’ commitments to keep gateways open on commercially reasonable terms and create no new bottlenecks.
#2 CPKC will shift its crew change location near Ottumwa, IA. to a point further west and south on the CP Laredo Subdivision.
#3 CPKC committed to provide a dispute resolution process to address certain possible commuter rail disruptions in Chicago.
#4 Having CPKC honor the promises it made during the hearings, including but not limited to:
- Honor CP’s commitments made under the settlement agreement with Amtrak, including CP’s agreement to support certain planned expansions of Amtrak passenger service.
- Not initiate the termination of reciprocal switching access for any shipper facility directly served by CP or KCS.
- Cooperate with UP and BNSF to ensure adequate capacity along the Texas Gulf Coast Route. (Houston Bypass.)
- Unless otherwise agreed to by CPKC and Metra, do not implement an ordinary course operating plan directing CPKC through freight trains operating between Kansas City, Mo., and St. Paul, Minn., over certain Metra Lines, except in emergency or other non-routine situations.
#5 An oversight condition of seven years to monitor and address as necessary various issues raised by commenters including:
- Rate manipulation or other post-Transaction conduct… for transborder traffic moving through the gateway at Laredo, TX.
- Operational complexities in the Texas Gulf Coast area that necessitate coordination among parties to ensure adequate capacity and to maintain fluidity on shared lines.
- Concerns regarding the volume of traffic moving through the Polo Line joint facility between Airline Junction, Mo., and Polo, Mo.
- Possible impacts in St. Paul, Minn., particularly at Hoffman Avenue.
- Possible impacts on cross-border traffic flows over the Laredo Bridge.
- Possible delays and service disruptions impacting Chicago-area lines and commuter rail service provided by Metra.
#6 In connection with the oversight condition, a condition requiring Applicants to report numerous service, operational, competition-related, and other metrics at prescribed frequencies.
#7 A condition requiring Applicants to adhere to the terms of the CPKC Service Promise to address any post-Transaction service disruptions.
#8 The labor protection conditions provided in New York Dock Railway—Control— Brooklyn Eastern District (New York Dock) and honor the obligations established in the “Revised Standards for Preemption of Collective Bargaining Agreements for Transactions Initiated Pursuant to Section 11323 of the Interstate Commerce Act.”
#9 A condition requiring Applicants to abide by the terms of the settlement agreement that CP entered into with Iowa Interstate Railroad, LLC.

Merger takes effect April 16th!
  by JayBee
Shortline614 wrote: Thu Mar 16, 2023 10:33 am
Merger takes effect April 16th!
April 14th, 2023, unless someone successfully gets a Federal Court to issue an injunction. It would be April 15th, thirty days after the decision was rendered, except March has 31 days, so April 14th.
  by justalurker66
On April 14, 2023, Canadian Pacific (“CP”) will exercise the authority granted by the U.S. Surface Transportation Board’s (“STB”) March 15 final decision and combine with Kansas City Southern (“KCS”) to create Canadian Pacific Kansas City (“CPKC”), the first and only single-line railway connecting the U.S., Mexico and Canada. CP also announced the executive leadership team that will lead CPKC.
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