CN to sell 850 miles of lines in the Upper Midwest

[Shortline614]

https://trn.trains.com/news/news-wire/2 ... an-ontario From Trains Magazine (It's behind a paywall.)

CN wants to sell 850 miles of mostly ex-Wisconsin Central track in Wisconsin, Michigan, and Ontario. They did not say which specific lines will be offered. CN wants all the trackage sold in one year.

The line sales are certainly a part of a plan to shore up CN's finances, as they lost 450$ this quarter, mostly due to the COVID economic downturn.

However, I wonder if CN needs cash in order to invest in other acquisitions? They have been trying to acquire CSX's Montreal-Syracuse line. They also reportedly put out a bid for the CMQ when it was up for sale. The philosophy being: "Let's shed the lines we own but don't have interest in, so that we can acquire lines that we do have interest in that we don't own."

I'd expect all the Upper Peninsula Lines, and the former Algoma Central Railroad to go. I think the line to Arcadia, Wisconsin will be safe due to intermodal.

[eolesen]

Will be interesting to see if the WisDOT picks up any of the Wisconsin trackage for E&LS or maybe WSOR to operate. That's been discussed in other forums for a while.

[mtuandrew]

I could definitely see E&LS and LS&I being asked to operate the northern Wisconsin and Michigan lines, and WSOR to take on the former GB&W. I also wonder if CN is considering shredding the ex-CC&P line to Omaha & Sioux City again.

[Cowford]

The line sales are certainly a part of a plan to shore up CN's finances, as they lost 450$ this quarter, mostly due to the COVID economic downturn.

CN did not report a loss. CN's net income was $540M, and that's after a one-time $486M charge on assets being marked for sale.

[OldHeadRailroader]

I've been waiting for this moment for 15 years, so glad many Wisconsin branch lines will be sold off to a shortline operator! The Bradley and Ashland Subs will rise again under G&W, Watco, Progressive Rail or E&LS ownership, like when WC ran 100 car trains Ashland southward into Prentice and Wausau! You can bet they will be bidding on it. Maybe the Rhinelander roundhouse will become a repair facility for the new operator, we can always dream! Not sure why CN would want to keep the Dresser, Manitowoc and Neenah-Green Bay north lines into the UP, car loadings have been down for years under CN ownership and it's an under utilized secondary main backwater. No IM ramp in GB, ore traffic is way down, numerous lost business due to multiple rate increases in the CN era, why do they keep it when they would still get the cars at interchange anyway?! WC is coming back now reincarnated.

[mtuandrew]

Took a while for me to identify the lines in question, but CN did release a map:



https://www.wxpr.org/post/cn-divest-sev ... ail-routes

I’m not impressed. No interchange possibilities with any other roads, excepting the West Bend and Saukville branches which realistically should be in the WSOR portfolio. No large traffic generators - the Michigan lines in particular look mighty barren.

This looks like CN building a case to abandon half these miles. Check out the Wisconsin State Railroad Map and you’ll see discontinuance or out-of-service orders on these segments:

• Marengo-White Pine
• Ashland-Park Falls
• Tony-Prentice
• Rhinelander-Goodman
• Manawa-New London

And I bet if Munising-Newberry isn’t under a discontinuance order, it could be soon.

Most of these lines could have something of a future (though Ironwood Junction-White Pine Mine is almost certainly dead permanently), but not unless CN relents and allows third-party interchange.

[Shortline614]

And the winner is... WATCO!

From Trains Magazine:

MONTREAL — Watco will buy 650 miles of branch lines in Wisconsin and Michigan from Canadian National, along with 250 miles of the company’s Soo Subdivision in Ontario, the companies announced today.

Link to article: https://www.trains.com/trn/watco-purcha ... o-from-cn/

Link to the press release: https://www.cn.ca/en/news/2021/03/cn-an ... orthern-o/

650 miles in the US, 250 in Canada including the former Algoma Central. WATCO already owns the Wisconsin Southern, which operates 778 miles, 180 of which are trackage rights. In total 1678 miles. Quite impressive!

[Shortline614]

Providing a bit of an update to this story. All the way back on April 27th, 2021, the STB delayed the sale of CN lines to WATCO indefinitely. Most shippers located along the line supported the sale; however, several shipper organizations and Representative for Wisconsin Tom Tiffany had some concerns. CN wanted to sale to be exempt from STB review, while the shipper organizations and Representative Tiffany wanted a actual review. The start date was originally set for June 30th, but that date has come and gone and the STB still hasn't rendered a decision.

From Trains Magazine:

WASHINGTON – Federal regulators have indefinitely postponed Canadian National’s proposed sale of former Wisconsin Central branches to short line operator Watco.

https://www.trains.com/trn/news-reviews ... -michigan/

More recently Northwoods Distribution Services, Inc sent a letter to the STB regarding the sale. While they do support the sale of the southern and central clusters to the Fox Valley & Lake Superior, they do not support the sale of the northern cluster to the FV&LS and the Grand Elk Railroad. They have serious complaints that the two railroads would only have one interchange partner - Canadian National. The document goes on to say that CN is acting in an anti-competitive manor that only harms those using rail service in the Northwoods. Citing Biden's recent executive order on railroad competition, Northwoods Distribution Services demands the STB modify the sale to include:

STB bifurcate the CN-Watco sale as follows:
 Approve the sale for Central and Southern Wisconsin. This should benefit
shippers there
 Direct CN to enter into negotiations to sell the Route 8 Corridor and its feeder
lines including the right of way.
 Require CN to include the 19 miles of rail from Goodman to Pembine, which
would permit interchange with the Escanaba & Lake Superior (E&LS) Railroad.
 Require CN to include 5.9 miles of track from Tony to Ladysmith, which could
permit interchange with the Union Pacific and competition.
 Require interchange and trackage rights with both the CN & EL&S
 Requiring that ownership of the right-of-way be transferred to the future
owner; this is essential for real competition and sustainable service. This will
permit the addition of other stabilizing sources of revenue along the right of
way; helping to provide economic stability for the operating company and
regional benefits
 We urge the STB to consider the optimum solution of directing the sale of an
economic unit from Escanaba to the Twin Cities, as was available to the
Northwoods Shippers with the WC.

https://dcms-external.s3.amazonaws.com/ ... 302818.pdf

Personally, I would like the STB to not only approve the sale, but modify it so that the two new railroads have competitive rail access. That last demand is real interesting... Does "sale of an economic unit" mean that they want the FV&LS to be granted trackage rights to the Twin Cities. The document is not clear.

[Shortline614]

Sorry for double posting, but just to clarify: WATCO has established a new subsidiary named the Fox Valley & Lake Superior to operate the Wisconsin lines. The Grand Elk Railroad (an existing WATCO subsidiary) which runs between Elkhart, Indiana and Grand Rapids, Michigan is slated to take over the lines in Michigan and Ontario.

[NotYou]

From the business / railroad side, an indefinite hold on the transaction is a really weird situation to be in, esp. if the transaction contracts were written not expecting such a situation. Sounds like some of the old ICC days I have read about. Guess CN and Watco say never mind, no hard feelings after a year or so?

[eolesen]

STB has approved.

https://www.stb.gov/news-communications ... /pr-21-55/

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[Shortline614]

The transaction should close on the 27th.

As for why the STB decided to put this deal on hold for 8 months despite widespread shipper support is beyond me. The opposition was smoothed over very quickly and even those who had objections supported it in the end. Reading the decision there are no conditions or anything. They approved the deal as originally proposed. Guess that is the modern "activist" STB for you!

Anyways, new regional railroad. ("Regionals" are defined as a railroad with over 350 miles of track.) The Fox Valley & Lake Superior rail system. I Hope WATCO the best in bringing traffic back to the Northwoods. They are really going to need it.

[eolesen]

With two other mergers and a visible Amtrak issue underway simultaneously, something had to give.

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[NotYou]

The indefinite hold of approval / rejection still smells funny to me.