UP, BNSF says CP-KCS merge traffic will melt Houston terminal

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A BNSF Railway automatic cog train meets Southern Kansas City locomotives at the interchange point in Robstown, Texas in 2017. Bill Stephens

WASHINGTON — Canadian Pacific and Kansas City Southern executives say there’s enough capacity in Houston to handle the eight additional trains a day they’ll pass through the busy terminal within three years of their merger.

But Union Pacific and BNSF Railway told federal regulators in testimony Thursday and Friday that they have serious concerns that the unprecedented increase in rail traffic could plunge Houston into gridlock, as it did after the acquisition of Southern Pacific by UP in 1996. The Houston collapse spread through the UP system and affected the entire rail network.

“Houston’s history is well known to this board. And it is with that history, and a healthy respect for historical operational implications, that we should see the step-wise change of function in merger-related volume,” says John Turner, senior vice president of Harriman Dispatch Center and network planning at UP, “Failure to adequately prepare, plan for and recognize these risks condemns us to repeating history.”

BNSF and UP officials criticized CP and KCS for failing to identify needed capacity projects in Houston and the Gulf Coast, even as the railroads plan to add and expand capacity. sidings on their lines between Beaumont and the Midwest. KCS currently operates 10-11 trains per day through Houston.

‘I find it a little ironic that in the detailed operating plan required across the CPKC joint railway they need to add capacity on those lines, yet there is a claim that there is there would be no additional capacity required on the rights of way lines. “, says Turner.

BNSF and UP officials said CP and KCS took a simplistic view of the Houston terminal, saying overall volume through Houston would remain below peak 2016 levels despite eight additional CPKC trains.

Union Pacific told federal regulators how Kansas City Southern trains pass through the Houston terminal. The blue and purple lines represent the normal course of the KCS; green lines represent alternate routes that can be used when no other route is available. Union Pacific

One of the flaws in this analysis, Turner says, is that the data used encompasses all of Houston, an unusual terminal teeming with construction sites and local jobs that serve 900 customers. Much of the traffic stays in Houston, as residents commute from factory to factory and job site to job site. UP and BNSF depart and terminate trains in Houston, but KCS is the only railroad to operate significant numbers of trains throughout the 15-meter terminal.

On the track rights routes that KCS uses to pass through Houston, the planned volume increases would increase the number of daily trains from 6% to 32% above peak levels for eastbound traffic and from 3% to 32 % for westbound trains, Turner said.

That would create congestion on Houston’s cobweb of rail lines and junctions, Turner says. CPKC trains up to 10,000 feet would block several key interlockings simultaneously as they wound their way through Houston, he said.

This map shows how the merger of Canadian Pacific and Kansas City Southern would increase direct rail traffic from 2016 peak levels on line segments in Houston. Union Pacific

UP and BNSF have also raised concerns about potential bottlenecks elsewhere in Texas, including on UP’s Brownsville Subdivision and around the Neches River Bridge in Beaumont.

CP and KCS have not approached UP or BNSF to study capacity needs, identify capacity expansion projects or fund them, UP and BNSF say. That’s a problem, Turner says, because CPKC plans to increase traffic within three years of the merger, whereas planning and building capacity projects in Houston can take five to seven years.

BNSF and UP have asked the STB to condition merger approval on CPKC, which awaits traffic increases until capacity projects are identified, funded by CPKC, and completed.

Jon Gabriel, BNSF’s vice president of service design and performance, told the STB that it would only take three to six months to complete a traffic study.

STB members wondered how practical such a condition would be, given that CP and KCS would not know the scope of capacity projects or their cost. But UP attorney Michael Rosenthal said it was a problem CP and KCS had created by not addressing the issue in their merger petition.

Board member Karen Hedlund said she fears the capacity study process could drag on for years given the ongoing dispute between Amtrak and host railroads CSX Transportation and Norfolk Southern. on the proposed launch of Gulf Coast passenger service.

CP and KCS said they have a vested interest in ensuring the Houston terminal remains fluid, as their ability to capture traffic currently handled by UP and BNSF depends on providing consistent and reliable service.

Laredo Gateway Issues

BNSF and UP also said CPKC would be well advised to choke off their interchange traffic at the Laredo Gate, the busiest border crossing into Mexico, in favor of their own new single-line routes to Chicago and Canada. They therefore asked the Board to establish a rate-splitting mechanism that would be an effective means of enforcing CP’s and KCS’ promises to keep all gateways open on commercially reasonable terms.

UP and BNSF say KCS made a similar open gateway promise when it acquired the Texas-Mexican Railway Short Line, which runs from Laredo to Robstown, Texas, and is a key part of the KCS International Corridor across the country. ‘Lone Star State.

BNSF says KCS used its control over cross-border movement pricing to freeze BNSF out of the market for carload traffic, citing the precipitous decline of its exchange with KCS for Mexican traffic after it gained full control of Tex-Mex. BNSF says KCS has doubled fares from Robstown to Laredo.

But CP and KCS said BNSF had moved its operations to the Eagle Pass gateway, where it trades with Ferromex.

“That’s not true,” says Paul Hirsch, assistant vice president of BNSF’s business unit in Mexico. “BNSF was shut out of business in Laredo, lost business and never got it back. BNSF created new business with new customers and destinations from Eagle Pass. Laredo and Eagle Pass serve different markets and cannot substitute for each other.

Now BNSF fears CPKC will similarly choke off its fast-growing intermodal and auto traffic that is currently moving under a 2016 deal with KCS.

BNSF Railway says its cross-border carload traffic through Laredo plummeted after Kansas City Southern acquired Tex-Mex in 2005 and fears its fast-growing intermodal and automobile traffic, shown in blue, will suffer the same fate after a merger between Canadian Pacific and KCS. BNSF Railroad

Board members raised several issues in separate, in-depth discussions with BNSF and UP representatives.

Among the issues: BNSF was asking the STB to establish a cross-border pricing mechanism that would include intermodal shipments, which are exempt from board review. The BNSF, noted board member Patrick Fuchs, has always said that intermodal should remain unregulated because intermodal faces strong competition from trucks and other railroads.

STB Chairman Martin J. Oberman said BNSF’s request appears reactive because the merger process allows the railroad to seek “bonuses” it had not sought despite losing cross-border traffic from carloads for the benefit of KCS since 2005. No tariff disputes have been filed concerning cross-border transport. traffic, he noted.

BNSF lawyer Peter Denton said he strongly disagreed, noting that the mergers forever changed the competitive landscape and that the railroad was simply looking to compete on an equal footing. equality.

BNSF and UP also noted that several major transportation groups support their proposal for a proportional rate mechanism that would allow customers to request interchange rates that cover movements on both sides of the border.

The board also detailed its schedule for the rest of the hearings. Monday’s session will run from 1:30 p.m. to 6 p.m. ET, and Tuesday from 9:30 a.m. ET to 1 p.m. at the latest to address the remaining witnesses. CP-KCS closing arguments will begin Thursday at 10:30 a.m. ET.

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