WASHINGTON — CSX Transportation’s proposed acquisition of New England regional Pan Am Railways will get a more thorough review.
The Surface Transportation Board has decided that the merger application will be treated as a significant transaction, not the minor deal that CSX and Pan Am had sought.
The move, announced in a draft notice in the Federal Register on Thursday, will create a longer review path for the deal and require CSX to submit a more detailed merger application and a revised proposed schedule.
As a minor transaction, CSX had hoped the deal would close in late September. But the board’s decision means the railroads won’t be able to tie the knot until December 2021, assuming the deal is approved following a typical 270-day review schedule.
Several parties — including short line Vermont Rail System, the Vermont and Massachusetts congressional delegations, Vermont and Massachusetts transportation officials, and a Massachusetts water agency — had asked the board to consider the merger as a significant transaction.
“CSX is confident that the proposed acquisition of Pan Am Railways will enhance customer competitiveness and provide benefits to stakeholders in New England and beyond,” the railroad said in a statement. “We look forward to demonstrating this further in our next filing to the STB.”
CSX on Nov. 30 announced that it had reached a deal to acquire privately held Pan Am Railways, which stretches from the Albany area to Maine and totals 1,700 miles when trackage and haulage rights are included [see “CSX to acquire New England regional Pan Am Railways,” Trains News Wire, Nov. 30, 2020].
CSX said that as an end-to-end merger the acquisition of Pan Am would not have an adverse impact on railroad competition in New England. Its Feb. 25 merger application included letters of support from 58 groups, including shippers and some railroads. Norfolk Southern, Poland Spring, and J.B. Hunt subsequently supported the deal, with NS urging the board to consider it a minor transaction.
But Vermont Rail System asked federal regulators to reject the deal, saying it would reduce competition. Much of VRS’s opposition flows from a separate element of the Pan Am deal: The naming of a Genesee & Wyoming subsidiary as neutral operator of the Pan Am Southern. CSX will step into Pan Am Railways’ 50% stake in Pan Am Southern, the joint venture with Norfolk Southern that provides NS with a route into New England.
Genesee & Wyoming’s Pittsburg & Shawmut would operate Pan Am Southern under the Berkshire & Eastern name. The Pan Am Southern consists of about 425 miles of rail lines and trackage rights routes, including the B&M main line between Mechanicville, N.Y., and Ayer, Mass., that provides NS access to the Boston area via its so-called Patriot Corridor.
Pan Am’s Springfield Terminal subsidiary currently operates the Pan Am Southern, which also includes the north-south route Pan Am uses along the Connecticut River between White River Junction, Vt., and its branches in Connecticut via Springfield, Mass. Pan Am operates over G&W’s New England Central on trackage rights between White River Junction and East Northfield, Mass.
Norfolk Southern also gains trackage rights over CSX, Providence & Worcester, and Pan Am Railways between the Albany, N.Y., area and Ayer, Mass., for intermodal and automotive traffic.
The STB said it could not determine that the CSX-Pan Am deal “clearly would not have any anticompetitive effects, based on the current record.”
The board also said the competitive impact of CSX acquiring Pan Am Southern, which was created to enable NS to be a more viable competitor to CSX in New England, was unclear.
Judging the deal as a significant transaction will provide the board with more information and time to analyze competitive concerns, the STB said.
CSX must provide the board with a revised review schedule no later than April 1.
The board’s action is not without precedent. In 2007, Canadian Pacific sought to have its acquisition of regional Dakota, Minnesota & Eastern treated as a minor deal, but the board considered the acquisition as a significant transaction. The board ultimately approved that deal.
— Updated at 10:10 a.m. with CSX statement.
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