Conrail split might benefit state's rivals Added service to N.Y., N.J. worrisome to Md. coal producers, port

'Competitive disadvantage'

Maryland to ask Norfolk Southern, CSX for concessions

April 10, 1997|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

The split-up of Conrail by CSX Corp. and Norfolk Southern Corp. could place the port of Baltimore and Western Maryland coal producers at a disadvantage as the deal opens new opportunities for competing interests elsewhere, state officials and coal producers warned yesterday.

After fighting bitterly over Conrail Inc., Norfolk Southern and CSX agreed several months ago to divide Conrail, leaving two major freight systems east of the Mississippi River. Under the final agreement announced Tuesday, Norfolk Southern would acquire most of Conrail's tracks in Maryland, including those at the port of Baltimore.

The agreement preserves two Class I railroads at the port as well as the jobs of hundreds of CSX employees in Western Maryland -- two key goals of state officials.

But the proposed split-up of Conrail, which must be approved by federal regulators, will create competitive rail service at ports in New York and New Jersey currently served by just one railroad. And that could spell more trouble for the port of Baltimore, which has been struggling to retain cargo amid intense competition from other East Coast ports.

"We are interested in the implications of these plans and intend to analyze whether they create new competitive disadvantages for our state," Gov. Parris N. Glendening said yesterday.

State officials are scheduled to meet tomorrow with representatives from both Norfolk Southern and CSX. They are hoping to gain concessions from the two companies in exchange for the state's support of the agreement, which goes to the federal Surface Transportation Board this summer.

It was not clear, however, how the state's worries might be addressed. And CSX officials yesterday expressed little patience with Maryland's latest concerns.

"For the first time in more than 30 years, the port of Baltimore and the state of Maryland will be served by two strong railroads which will reach the entire territory east of the Mississippi," said CSX spokesman Tom Hoppin. "That can only be looked at as a positive. Instead of looking for excuses that are phantoms, people should be celebrating this deal."

In Western Maryland, however, coal producers also were apprehensive. CSX's and Norfolk Southern's agreement to share the Conrail/Monongahela Railroad, they said, will give three major coal producers in southwest Pennsylvania the ability to ship coal to Northeast utility plants via single-line service on two Class I railroads.

"That would upset the competitive balance," said Scott Rotruck, vice president of Anker Energy Corp., a Western Maryland coal producer. "We are not against the merger. We just want competitive transportation alternatives."

One possible remedy would be to grant Norfolk Southern access to Western Maryland coal fields, he said. Currently, the coal fields are served only by CSX.

As proposed, Norfolk Southern would get 6,000 miles of tracks that produce about 58 percent of Conrail's revenues while CSX would acquire 3,600 miles accounting for 42 percent of the revenues. The two rail systems would share another 1,000 miles.

Norfolk Southern will pay about $5.9 billion for its share of the $115-a-share cash deal for Conrail, while CSX will pay $4.3 billion. The deal is the latest in a series of railroad mergers and could lead to consolidations creating two transcontinental giants.

The impetus for a merger began in October when CSX and Conrail agreed to team up. That deal threatened rail competition the port as well as the jobs of hundreds in Cumberland. Norfolk Southern launched an aggressive effort to defeat the CSX-Conrail deal, which it insisted would be anti-competitive.

CSX and Norfolk Southern subsequently reached agreement to split up Conrail, the rail system that was created in 1976 by the federal government from the remains of the Penn Central and other bankrupt railroads.

Under the deal, Norfolk Southern would acquire lines in the Baltimore-Washington area along with the right to move freight during night hours over Amtrak's heavily used Northeast Corridor. Norfolk Southern is talking with Amtrak about relaxing those restrictions, and state officials are worried that the Northeast Corridor might become too congested. In addition, they are trying to determine how freight operations would affect MARC rail service for Maryland commuters.

"We've come a long way since October," said Maryland Transportation Secretary David L. Winstead. "The major concerns we had are being addressed, but there are concerns that remain."

Pub Date: 4/10/97

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