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The Conrail Acquisition and What It Means for Virginia
The Conrail Acquisition and What It Means for Virginia
Special Edition of the "Mid-Week Report"
by Paul A. Wilson

Posted January 15, 1998
This article originally appeared in the January/February 1998 issue of The Rivanna Rail, the newsletter of the Rivanna Chapter, NRHS

The Plan

After a lengthy and very public battle over Conrail ownership, CSX and Norfolk Southern came to terms and presented a joint purchase plan for Conrail in June of 1997. They agreed on an asset split of the company; CSX will retain 42% of Conrail's physical plant and rolling stock, while NS will garner 58%. Facilities in key service areas like Detroit and New Jersey will retain the Conrail name, as CSAO or Conrail Shared Assets Organization, and they be jointly owned by CSX and NS. At a breathtaking purchase price of $10 billion, the two railroads have paid top dollar for this property. Clearly Conrail's stockholders did well, receiving $115 in cash for their shares; but will this latest mega-merger bring the promised benefits to eastern railroading? Will traffic boom in relatively untapped markets? How will the local scene change as a result? This article will begin to answer these questions.

The absorption of Conrail lines will be staggering in scope and complexity. The dismemberment of a railroad system the size of Conrail has never been attempted. The carving up of Conrail's 23,000 miles of track and the end of its near monopoly position in the Northeast will significantly alter the railroad landscape. The undoing the 1970s consolidation of bankrupt companies is in some ways a success story. The proposed merger marks the final phase in the resurgence of the region's railroad industry, one that was on the verge of collapse twenty-five years ago.

The greatest potential for growth and the stiffest challenges for both companies lie in North/South traffic along the Eastern Seaboard. Until the merger, the two southeastern railroads have been unable to link these major markets with effective service due to a less than eager interchange partner in Conrail. Conrail had retained the East Coast to Chicago and St. Louis focus of its principal predecessor companies, the New York Central and Pennsylvania. From its perspective the short hauls from Hagerstown, Washington and Philadelphia were hardly worth the trouble.

In Virginia, railroad industry observers are well-placed to see the changes that exploitation of this new traffic will bring. The changes wrought locally will not be as dramatic as those in the Midwest in terms of new traffic patterns. Yet, if the projections of CSX and NS hold true, traffic volume will increase dramatically in the long term. The two eastern systems will have two parallel route structures connecting northeastern points with the south. CSX already extends to Philadelphia and will receive the former Reading line into Northern New Jersey. From there, CSX ownership of the West Shore route will afford access to Selkirk Yard and New England. CSX hopes to capture 26,000 additional truckloads per year along the consolidated Atlantic Coast service route. As a result, their projections call for six additional trains on the RF&P.

Norfolk Southern will take control of the former Pennsylvania, Reading and Lehigh Valley lines linking Hagerstown, Harrisburg, Allentown and Northern New Jersey. The acquisition of these lines means the end of Hagerstown as a barrier between North and South. NS will also receive another prize from the merger: access to Amtrak's Northeast Corridor for through freight service. Lacking CSX's direct access, NS must still depend on CP's Saint Lawrence and Hudson subsidiary as well as Guilford lines to reach New England, Quebec and upstate New York. StL&H's interchange with NS will be moved to Harrisburg from Alexandria.

The Traffic Patterns

Central Virginia has two principal CSX routes, the Atlantic Service Route and what CSX calls the Central Route of former C&O lines. On the Central Route few changes are anticipated, except for the re-routing of unit sulfur and grain traffic from the Sand Patch Route of the ex-B&O. Some of these changes have already occurred. No intermodal service or increased manifest traffic is expected.

Changes on the RF&P will be more pronounced. CSX plans to add an average of six additional trains per day to the route. The new traffic pattern is outlined in the Table 1 below. Traffic will also include tri-level auto racks, which are now precluded by tight clearances in Conrail's Virginia Avenue tunnel in the District of Columbia. CSX will enlarge clearances in this tunnel, at a cost of $19 million. Even with the completion of the tunnel work, clearances will not accommodate double stack containers. NS trains will also use this tunnel, running on trackage rights.

For its part, Norfolk Southern plans to make better use of its parallel north-south route structure in Virginia in the wake of the merger. These routes, the Piedmont (former Southern) and Shenandoah (former N&W) will carry traffic to Atlanta and Knoxville respectively. NS plans to improve the Shenandoah Route for double-stack traffic. Hagerstown will continue to serve as the route of double-stack trains, while Amtrak's NEC will see NS manifest traffic, Roadrailer service and single-level intermodal trains. The efficiencies of the new plan require cooperation of Amtrak, in the case of NEC operating rights, and rail labor. NS and Amtrak must come to terms over increasing trains frequency, weights, speeds and hours of operation. NS would also like to raise clearances in Amtrak's Baltimore tunnels in order to accommodate tri-level auto racks.

To implement its plan, NS hopes to negotiate new crew agreements allowing it to establish new pools to operate Shenandoah-Harrisburg and Manassas-Harrisburg, eliminating the crew change at Hagerstown. Fixed plant improvements include a major clearance project and lengthened sidings on the Valley line (Shenandoah Route) at a cost of $33 million. Extended sidings on the Pulaski District between Radford and Bristol, Va. are also part of the upgrading of the Shenandoah Route. This work includes a completely new siding at Rural Retreat, Va. and lengthened sidings at Glade Springs and Clark. The total price for this work is $6.4 million.

In West Virginia, NS will undertake upgrades to the Deepwater District (former Virginian) to the tune of $10.3 million. This work will allow for an increase in coal traffic to northeastern points via Roanoke and the Shenandoah Route. CR presently hauls this coal traffic on a circuitous route via Columbus, Ohio. As a result of these improvements, NS is planning on twelve trains per day via the Valley Line, with the addition of a Harrisburg/New Orleans intermodal train, an Allentown/Knoxville manifest and several re-routed coal trains from mines on former Conrail lines in West Virginia. As part of the plan for through trains on the Northeast Corridor, the Washington District between Alexandria and Manassas may host up to eight trains per day. Under the current NS plan the NEC will carry an Oak Island (NJ) to Linwood (NC) manifest and a Portside (Elizabeth, NJ) to Atlanta Triple Crown roadrailer. South of Baltimore, the Corridor will see a Baltimore/Roanoke manifest and a Baltimore/New Orleans intermodal train. The Manassas-Riverton Jct. B-Line traffic levels should remain stable under Norfolk Southern's new operating plan.

Charlottesville will see a modest increase averaging two to four additional trains per day and double stacks will be more common on the Piedmont Route. No Piedmont Route capacity upgrades are called for in the plan. See Table 2 for new or re-aligned NS trains.

The Months Ahead

The original 350-day approval schedule has been lengthened by 45 days, pushing the Surface Transportation Board's ruling back until July 23, 1998 at the earliest. The Board needs the extra time to review the railroads' safety plans. If the schedule holds, the effective date of control by CSX and NS is now set for Aug. 22, 1998. As for the success of the application, several large shipper groups, labor and the State of Ohio remain opposed. On the other hand, most of the claims of connecting and short lines have been settled and the National Industrial Transportation League has recently announced its support for the merger. The Susquehanna, for example, has been bought out by management with backing from NS and CSX. Opposition by CN and CP has been placated through the granting of favorable interchange and rate agreements. It is likely, therefore, that the merger will be approved with a few minor changes here and there.

Caution will be the watchword in the wake of the UP/SP difficulties and will probably be magnified by Norfolk Southern's "go slow" management style. Much has been made of UP's problems and their effect on the "Surf" Board's thinking regarding the NS/CSX/CR plan. Upon closer examination, though, the NS/CSX plan is quite different from UP's absorption of SP. The plan does not contain the kind of major route changes and yard closings that caused the UP collapse in Texas over the summer. Many of the capacity improvements and connecting tracks are already under construction in the Midwest, well in advance of the merger. NS recently received advance approval to begin construction of connecting tracks at Bucyrus, Ohio, Alexandria, Ind. and Sidney, Ill. It should also be pointed out that Conrail is no SP. The company is in good shape, both financially and in terms of its physical plant and motive power. CSX and NS are not planning firings en masse. They do claim that eventually 2,000 Conrail jobs that will become redundant. Most of these are among "front office" forces and few job cutbacks are expected in the operating crafts.

We can expect to see the new operational patterns to be gradually phased in, as Conrail lines will be slowly converted to the new patterns, many of which are dependent on the negotiation of new labor agreements. There will probably not be a dramatic "Day One", but the next several years should prove interesting, both for the armchair rail baron and the trackside train watcher. The West has witnessed its major upheavals; now it's our turn.

Table 1 CSX Atlantic Coast Service
Current New Origin Destination Notes Intermodal Q173 Q173 Kearny Jacksonville no changes Q174 Q174 Jacksonville Kearny no changes Q175 Q175 Philadelphia Jacksonville no changes Q176 Q176 Jacksonville Philadelphia no changes -- Q195 Boston Atlanta new service -- Q196 Atlanta Boston new service Manifest Q400 HACU Hamlet Cumberland Q401 CUHA Cumberland Hamlet Q402 -- Seminary Philadelphia CP run-through (dropped) Q403 -- Philadelphia Seminary CP run-through (dropped) NS interchange with CP moved to Harrisburg as part of the acquisition plan Q405 PGHA Philadelphia Hamlet Q406 HAPG Hamlet Philadelphia Q409 SETA Selkirk Tampa term. moved to Selkirk Q410 WXSE Waycross Selkirk term. moved to Selkirk Q412 RMBA Rocky Mount Balt.-Bay View Q413 BARM Balt.-Bay View Rocky Mount Q414 RICU Richmond Cumberland Q415 CURI Cumberland Richmond -- RMOI Rocky Mount Oak Island new service -- OIRM Oak Island Rocky Mount new service K650 TAOJ Tampa Greenville NJ juice train -- OJTA Greenville NJ Tampa juice train empties
Table 2 New or realigned Norfolk Southern trains Shenandoah and Piedmont Route Virginia Service
Current New Origin Dest Notes Intermodal 203 IMBLNO Baltimore New Orleans extended to Balt. & NO, to run via NEC 204 IMNOBL New Orleans Baltimore as above 214 IMATER-1 Atlanta E-Rail retains current route 213 IMERAT-1 E-Rail Atlanta retains current route 212 IMATER-2 Atlanta E-Rail retains current route 211 IMERAT-2 E-Rail Atlanta retains current route E-Rail will be the NS intermodal terminal in Elizabeth, NJ -- IMHBNO Harrisburg New Orleans new service -- IMNOHB New Orleans Harrisburg new service 227 IMNIDE Norfolk Detroit re-routed via Manassas & Harrisburg, double stacks 228 IMDENI Detroit Norfolk as above Roadrailer 265 TCPSAT Portside Atlanta moved to NEC 266 TCATPS Atlanta Portside moved to NEC Portside will be the Triple Crown terminal in Elizabeth, NJ Manifest -- GMALKX Allentown Knoxville via Hagerstown & Roanoke -- GMKXAL Knoxville Allentown via Roanoke & Hagerstown -- GMBLRO Baltimore Roanoke via NEC -- GMROBL Roanoke Baltimore via NEC -- GMOILI Oak Island Linwood via NEC -- GMLIOI Linwood Oak Island via NEC

Text and graphics 1998 by Paul A. Wilson