Conrail takeover endorsed by state Glendening lauds plan from CSX and Norfolk Southern

October 03, 1997|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

Culminating nearly a year of negotiations that one top state official said had "soap opera-like qualities," Maryland gave its blessing yesterday to CSX and Norfolk Southern's $10.2 billion plan to take over Conrail.

During a ceremony at Dundalk Marine Terminal attended by several hundred people, Gov. Parris N. Glendening praised the deal, saying it assures continued commuter rail service, infrastructure improvements, more jobs in Western Maryland and, perhaps most importantly, competition between two Class I railroads.

"This competition results in a choice for shippers, as well as rate benefits for the port and other freight rail users throughout the state," said Glendening, who, wearing an Orioles jacket, stood on a platform with other dignitaries in front of nose-to-nose Norfolk Southern and CSX locomotives.

The merger plan -- which would leave only two major freight systems east of the Mississippi River -- needs the approval of the federal Surface Transportation Board, which could take up to a year to scrutinize its impact on competition and service.

With federal regulatory approval on the line, Norfolk Southern and CSX have been aggressively seeking political support in the states served by Conrail to acquire the rail system that was created by the federal government in 1976 from the remains of the Penn Central and other bankrupt railroads.

Several Southern states have endorsed the takeover, but zTC Maryland is the first with much at stake to do so. Maryland withheld its endorsement until it concluded an operating agreement with CSX to continue running much of the Maryland Rail Commuter (MARC) system at the current level and add service between Washington and Frederick.

Still, despite a signed agreement to continue operating MARC through 1999, state officials are worried about how the railroads ultimately will accommodate passenger needs as they aggressively seek more lucrative freight business.

"We're worried about freight lines nationwide trying to squeeze out mass transit," Glendening said in a interview.

The Conrail takeover drama began last October, when CSX announced plans to acquire the rail system. That immediately panicked Maryland officials, who feared that rail competition would vanish throughout the state since CSX and Conrail were Maryland's only major railroads.

"We were scared to death," Sen. Barbara A. Mikulski recalled during yesterday's ceremonies, adding that, during the back-and-forth discussions with the railroads, she did "shooters of Mylanta."

But CSX's announcement to take over Conrail was quickly followed by a hostile takeover bid from Norfolk Southern that ultimately ran up the price tag to $10.2 billion and resulted in CSX and NorfolkSouthern agreeing to divide the 11,000-mile Conrail system.

In the complicated merger process, Maryland officials negotiated with both sides, seeking to protect state business and economic interests. "Over the past year, the merger at times has had some soap opera qualities to it," James Brady, Maryland's secretary of the Department of Business and Economic Development, said yesterday.

If the plan is approved, Norfolk Southern will acquire most of Conrail's tracks in Maryland, including those at the port of Baltimore. The Norfolk, Va.-based railroad has promised to build a $15 million automobile-distribution facility in the Baltimore area, spend $19 million to raise the clearances on the Conrail line so double-stacked containers can move in and out of the port for the first time, and build a new rail yard at Dundalk Marine Terminal.

The infrastructure improvements, along with competition between Norfolk Southern and CSX, could lower the cost of moving cargo through the port of Baltimore, making it more attractive for shippers and steamship lines. That could help stem, or even reverse, the loss of cargo the port has experienced in the past two years.

"The port of Baltimore, the city of Baltimore and the state of Maryland will have first-class rail service from the two principal carriers covering the entire eastern half of the United States," CSX Chairman and Chief Executive Officer John W. Snow said yesterday.

Pub Date: 10/03/97

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