The website provides details of CP’s proposal, along with details of its next steps in the effort to acquire NS, according to a CP press release.
CP described the merger as a “pro-customer, end-to-end, competition-enhancing business combination proposal.”
On Tuesday, CP notified NS of its intent to submit a resolution to NS shareholders to ask the NS board to “engage in good faith discussions” with CP regarding the Class I’s proposed takeover of NS. The notification appeared to signal that CP dropped the proxy-fight strategy for its proposed acquisition.
The shareholder resolution — which would be voted on at the NS annual meeting later this year — asks NS shareholders to formally vote “in favor of what they have been saying to CP anecdotally for months,” CP said.
Canadian Pacific officials today said they were “surprised and disappointed” to learn that Union Pacific Railroad‘s chief executive is reportedly working behind the scenes with other railroads to prevent consolidation of the Class I rail industry.
They reiterated their view that a CP merger with Norfolk Southern Corp. would enhance competition and is in the public’s interest. They noted that UP itself has been the product of numerous mergers that “created one of the largest route networks in North America.”
“It is unfortunate that UP would try to use political pressure to co-opt the regulatory process and prevent other railroads from enjoying these same benefits and becoming more effective competitors to UP,” CP officials said in a press release.
UP Chairman, Chief Executive Officer and President Lance Fritz was quoted by the Journal of Commerce as saying a CP-NS merger is not in the best interest of the rail industry or customers. Fritz was speaking to attendees of the annual winter meeting of Midwest Association of Rail Shippers, according to the Journal.
A CP-NS merger would damage competition and set off a string of consolidations that would present challenging headwinds to the North American rail industry, the Journal reported.
“There are a lot of risks in front of us. I’ve outlined a lot of them,” Fritz said, according to the Journal. “But, job 1, from our perspective, is to stop a Class I merger from occurring.”
CP officials responded to the reported comments by adding that Fritz’s “attempts to rally support for the status quo among the other Class Is demonstrate a disregard for competition, the processes of the STB, and the needs of shippers and the broader economy.”
Norfolk Southern is doing more with its property than just talk about mergers with Canadian Pacific.
The Albany Times-Union has been covering this recently. Norfolk Southern has been working on the former Delaware & Hudson line from Albany to Sunbury, Pa., that it purchased in 2015 from Canadian Pacific Railway.
NS has been inspecting the tracks and bridges, and plans to replace thousands of wood ties and “resurface” at least 40 miles of track and possibly as may as 80 in 2016.
NS also is actively seeking to build freight business along the line. The acquisition has eliminated interchanges with CP, enabling it to offer shippers faster service.
The former D&H line also brings NS trains closer to the Mechanicville intermodal yard, which the railroad operates as a joint venture with Pan Am Railways. Pan Am Southern, as the venture is called, operates east to Ayer, Mass., outside Boston.
The $217 million D&H purchase puts NS in direct competition with CSX between Albany and Chicago. The line crosses NS’ Southern Tier line at Binghamton, which connects the Midwest and the New York City metropolitan area.
CP will likely keep the line from Montreal to Albany, over which it moves crude oil and ethanol to the Port of Albany. That line has thrived, moving fracked oil from the Bakken fields of North Dakota to the port.
Reuters reviewed copies of the letters, which have not been made public. Sent last month, the letters revealed customers’ concerns over CP’s cost-cutting plans, the impact on service and the potential for higher prices for customers, the news agency reported.
CP has made three offers to acquire NS, and NS has rejected the offers as “grossly inadequate.” After the third rejection, CP officials said the company will “review its strategic alternatives.”
Canadian Pacific’s proposal to Norfolk Southern. The tenor of the dialogue regarding the buyout proposal was cautious and, I believe, tended to be more supportive of evolutionary change. Surface Transportation Board Chairman Dan Elliott told us that if there’s a filing, the process could take 16-plus months.
CN continues to set the standard — and not only with its reported 3Q operating ratio (OR) of 53.8. EVP and CMO JJ Ruest noted that CN’s capital plans should continue at roughly the same pace to support long-term capacity, surge capacity, service and safety efforts. JJ was also one of many presenters to discuss the “bright side of cheap natural gas,” which CN will see in western Canada and Louisiana.
Short lines still providing manifest/industrial carload exposure for Class Is — perhaps never more important, given the challenges to bulk. We heard from leaders at four top players in the field — Genesee & Wyoming CFO TJ Gallagher, Watco CEO Rick Webb, Patriot Rail President and CEO John Fenton and OmniTRAX CEO Kevin Shuba. All save the latter (no coal!) noted that their volumes have not improved, but each has employed innovative efforts to drive business to their lines, an exhausting and constant practice.
Tony Hatch is an independent transportation analyst and consultant, and a program consultant for Progressive Railroading’s RailTrends® conference.
The Surface Transportation Board (STB) has adopted a procedural schedule for Norfolk Southern Corp.’s petition to acquire control of 282.5 miles of Delaware & Hudson Railway (D&H) track from Canadian Pacific.
Any person who wants to participate in the proceeding as a party of record must file with the STB no later than Dec. 29. All comments, protests, requests for conditions, and any other evidence and argument in opposition to the primary application and related filings must be filed by Jan. 15, 2015; all responses to comments, protests, requests for conditions, other opposition and rebuttals in support of the primary application or related filings must be submitted by March 31, 2015.
NYS DOT POSTS Conditions to D&H, NS Merger
NYSDOT has filed their letter of support with STB for NS acquisition of D&H South lines but with 2 conditions imposed on D&H which NYSDOT argues is a de facto applicant in this proposed transaction in addition to NS:
1.) NYSDOT believes that S&NC could be harmed by this transaction because S&NC can only interchange with D&H and D&H may be disinterested given their short haul participation. Proposed remedy is for D&H to grant S&NC direct interchange with NS at Saratoga. (Opinion: Given S&NC is currently trying to ship tailings to a Hudson River port near Albany or to CSX at Selkirk Yd, I’m not sure how direct interchange with NS really helps S&NC except to remove D&H from existing east/west/south routing options with NS that apparently aren’t in use today).
2.) D&H must submit to STB its intent wrt disposition of trackage rights over NS to Allentown, Oak Island, Philadelphia, and DC, which will likely be unused following NS acquisition of D&H South.
The STB expects to render a final decision on the transaction no later than May 15, 2015.
“The board finds that the application is complete and that the control transaction is a minor transaction based upon the preliminary determination that transaction clearly will not have any anti-competitive effects,” STB members said in a decision. “The board makes this preliminary determination based on the evidence presented in the application and the record to date. The board emphasizes that this is not a final determination, and may be rebutted by subsequent filings and evidence submitted into the record for this proceeding.”
NS in November announced plans to acquire the D&H line between Sunbury, Pa., and Schenectady, N.Y., from CP for $217 million. CP would retain ownership of D&H’s line from Montreal to Albany, N.Y.
The southern portion of D&H’s lines connect with NS’ network in Sunbury and Binghamton, N.Y., and would provide the Class I single-line routes from Chicago and the southeastern U.S. to Albany and its recently built intermodal terminal in Mechanicville, N.Y. NS also would gain an enhanced connection to its joint venture subsidiary Pan Am Southern, which serves New England markets, and acquire D&H’s car shop in Binghamton.
Norfolk Southern Corp.and Canadian Pacificsubsidiary Delaware & Hudson Railway Co. (D&H) announced November 18, 2014 a proposed transaction under which NS would acquire 282.5 miles of a D&H line between Sunbury, Pa., and Schenectady, N.Y., for $217 million. CP would retain ownership of D&H’s line from Montreal to Albany, N.Y.
The southern portion of D&H’s lines connect with NS’ network in Sunbury and Binghamton, N.Y., and would provide the Class I single-line routes from Chicago and the southeastern U.S. to Albany and its recently built intermodal terminal in Mechanicville, N.Y., NS officials said. NS also would gain an enhanced connection to its joint venture subsidiary Pan Am Southern, which serves New England markets, and acquire D&H’s car shop in Binghamton along with other facilities along the corridor.
“Acquiring this portion of the D&H provides for more efficient rail transportation system by consolidating freight operations with a single carrier,” said NS Chairman and Chief Executive Officer Wick Moorman. “Aligning the D&H track with Norfolk Southern’s 22-state network allows us to connect businesses in central Pennsylvania, upstate New York and New England with domestic and international markets, while enhancing the region’s competitive rail and surface transportation market.”
As part of the transaction, NS would retain and modify overhead trackage rights on the line between Schenectady, Crescent and Mechanicville, as well as Saratoga Springs, N.Y. D&H would retain local access to serve customers in Schenectady and maintain its access to shippers in Buffalo, N.Y. NS would retain its current employees and offer employment to about 150 D&H workers in the area.
But hold your hat folks, here is more from Norfolk Southern.
An acceleration of resource additions, coupled with the annual volume decline after Thanksgiving, should provide incremental improvements in train performance and terminal fluidity heading into next year, Norfolk Southern Corp. officials said in a service update posted on the Class I’s website on Monday.
“As severe winter weather will have an adverse impact to operations, we expect a return to historical train performance and velocity toward the end of the second quarter of 2015,” they said. “We remain committed to an improved operating environment ahead.”
The service update included a summary of recent actions taken by NS to boost operational performance, as well as measures the Class I expects to implement soon.
• plans to increase the number of active train and engine service (T&E) employees by about 400 in November and December, largely concentrated in the Northern Region between Chicago and New Jersey;
• expects to increase the number of active T&E employees in the range of 700 to 800 in 2015, with an emphasis on adding as many workers as possible in the year’s first half;
• plans to place the remaining 50 of 75 new purchased locomotives into service by 2014’s end, as well as take delivery of 40 used locomotives, with an additional 60 scheduled for early 2015 delivery;
• expects to complete rehabilitation work at several yard tracks in Conway yard by Thanksgiving; and
• projects to start to reaping benefits from the $160 million classification yard expansion in Bellevue, Ohio, in early December, with full operations phased in during first-quarter 2015. (For more information on the Bellevue yard expansion, and how it factors into NS’ long-term freight-moving strategy, read this cover story from
Progressive Railroading’s November issue.)
NS also is rerouting some loaded and empty trains over alternative gateways to better manage interchanges in Chicago, particularly through the coming winter months, and has completed about 90 percent of major rail, tie and surfacing work across the Northern Region to enhance velocity and fluidity.
The Class I plans to continue providing service updates on a regular basis.
Now a feature article on NS
Norfolk Southern’s Bellevue Yard expansion is vital to the railroad’s strategy for moving freight
Mark Dewberry was a 24-year-old project manager when he worked on the construction of the Linwood, N.C., hump yard in 1978, which is the last time a major classification yard was built by what is now Norfolk Southern Railway. Today, as NS’ chief engineer of design and construction, Dewberry is overseeing the largest single infrastructure project currently underway on the NS network, and of his career: the $160 million expansion and modernization of the Bellevue classification yard in northern Ohio.
Covering 650 acres and stretching 5.5 miles, Bellevue will become NS’ largest hump yard and one of the largest in North America when the expansion is completed in December. It’s one of 12 NS classification yards, where freight cars are collected and sorted for final destination. About 100 trains depart, move through or terminate daily at Bellevue, and 710 NS employees work there. Slated to be phased into full operation during first-quarter 2015, the expansion will double Bellevue’s capacity to accommodate current and future traffic demand.
What makes Bellevue such a crucial facility? Its location. The yard is halfway between New York City and Chicago, and sits at the intersection of five NS lines. The expansion is part of the Class I’s overall goal of having the “right assets in the right place at the right time” — as NS President James Squires described it at a Sept. 23 conference for investors and analysts in Cleveland and Bellevue.
“Bellevue is geographically and operationally located just where we need it for the growth we see coming,” Squires said, according to a transcript of his remarks.
“Our customers require different services in different places than they did just a few years ago. … Bellevue is at the crossroads of our changing coal merchandise and intermodal franchises, and really highlights how we’re using infrastructure to drive growth.”
NS executives hope a vastly bigger Bellevue also will help the Class I improve its operating efficiency by “pre-blocking” rail cars for longer hauls, and increasing direct interchanges with western carriers that will help reduce switching at other terminals. Also, more capacity at the yard will open up space at other terminals, thus improving asset utilization. Once the bigger and better Bellevue comes on line, customers should see transit times improve by one to 2.3 days, NS officials say.
Since the railroad broke ground on the project in April 2012, NS traffic volume — driven in large part by the crude production and shale-drilling business — has mushroomed in the railroad’s northern region. About a year into the expansion effort, the rapid growth in the region’s traffic motivated NS officials to move up the project’s completion date by about six months. As a result, NS now expects to start deriving benefits from its investment by year’s end.
The project calls for adding 39 miles of track and 145 miles of underground cable for communications and signaling systems, which will allow NS to double Bellevue’s capacity from 1,800 to 3,600 cars. The new track will feature 38 new classification tracks, a five-mile mainline track around the yard, three forwarding tracks, two receiving tracks, one pullback track and one hump lead track.
When completed, Bellevue will feature a total of 80 classification tracks and will be the only yard in the NS network to contain two operating humps used to sort rail cars. Also, crews have constructed a four-story control tower and mechanical and maintenance-of-way facilities, and installed 11 100-foot light towers to illuminate the yard and 22 diesel-powered back-up generators.
As of mid-October, the project was about 95 percent completed, according to Dewberry, who has been involved in the planning, design and construction from the get-go. Most of the track construction was finished, and crews were getting the computer process control function that operates the hump operations up to speed.
The primary challenge of the massive job has been building nearly 40 miles of track in what already was a very busy classification yard, Dewberry says. So, how did Dewberry and construction crews manage it?
“We worked very closely with our transportation people during the construction,” he says. “They made a lot of sacrifices to keep us going, to give us the tracks, train crews and engines that we needed to do things like unload rock. All our disciplines — engineering, transportation, operations — we all worked together to get the [task] done, and get it done when it was needed.”
Construction crews’ first tasks involved grading the land, mainly for the classification yard and some of the support track, the creation of a drainage system and the laying of underground cable.
“Bellevue, Ohio, is excellent farmland, but not that great for structural fill,” Dewberry says. “We had to stabilize the ground with stone and grout and various stabilization methods, especially in the hump area where so much rail-car activity would be happening in a concentrated area.”
Also early on, crews needed to relocate a number of buildings that were in the way of the expansion’s progress, but housed functions that were necessary to maintain the yard’s existing operations. A pedestrian underpass and associated retaining walls also had to be built beneath the new hump lead so that employees could cross the yard from the employee parking area to the yard’s administration building.
“That was the first 12 or 13 months: the grading, the draining, the underground cable, the underpass, which actually took more than half way into the second year to do it totally,” Dewberry says. When grading was about 75 percent finished, crews started working on the second mainline around the yard, a project component the transportation department believed was important to maintain the yard’s operation during construction.
It was about 13 months into the expansion when NS officials determined the completion timeline had to be shortened to accommodate the increasing traffic through the region.
“We had to sit down and rethink the whole job to figure out where we were going to take time out of the schedule,” Dewberry says. “Every group on the facility had to turn their schedule upside down to accommodate other NS groups in order to accelerate the project.”
Crews worked with the signals team to relocate controls, computers and cabling associated with running the old yard. Classification track construction also was moved up. By November 2013, the second mainline around the yard was opened. And by December 2013 — just before the start of an unusually severe winter season — all the tracks and switches in the yard were constructed, with a majority covered with ballast and surfaced.
Since then, backup power for the old and new yards has been installed, and a new compressor system that operates the retarders on the new hump system is in place. Additionally, construction of a one-mile connection between the yard and the NS Sandusky line has begun. As of mid-October, testing of the second hump was expected to begin soon.
When a train pulls into Bellevue, it enters one of 12 two-mile-long receiving tracks. From there, the cars are pushed over the hump and released one or a few at a time to one of two lead tracks. Next, a computer system determines the speed of each car based on weight and other factors. Retarders control the cars’ speed as they’re routed to specific tracks, depending on their destination. They’re then organized into “blocks” for outbound tracks.
Building and operating two humps will help NS sort and classify cars more quickly. That’s why a diamond crossover was located between the two hump leads, which will allow for two sets of cars to be classified simultaneously.
Norfolk and Western Railway leaders had expansion in mind when they built Bellevue in 1966-67; they set aside enough property to double its size when business warranted it. More than 45 years later, that time is now, says Jerry Hall, NS’ vice president of network and service management.
“As we saw our volumes really ramp up over the past couple of years, we realized that we really needed to speed this project up because a lot of our growth is in the northern part of our system,” he says. “The timing was perfect to get the new Bellevue on line as soon as possible. With the doubling of capacity at Bellevue, we’re very confident that it can handle the increase in volume over the coming years.”
Hall noted that a significant cost of running a railroad is the handling and switching of rail cars in yards and terminals. The Bellevue expansion will help NS lower those handling and switching costs, while also increasing efficiency, he says. For example, traffic moving from the Philadelphia area to Chicago currently is handled at three or four yards. With more capacity and classification tracks at Bellevue, NS will be able to sort and build bigger blocks of cars there and allow trains to bypass two other yards on the way to Chicago, saving money and handling time.
Bypassing extra yards also will help improve traffic flow and reduce delays for other railroads that move traffic on the Class I’s lines in the region, NS executives say. One example is Amtrak, which operates trains on NS track between Chicago and Cleveland and has struggled with its own on-time performance problems due to freight train delays.
“One of the big benefits of the Bellevue expansion is it will save us from having to send a lot of traffic to Chicago to be handled by one of the big terminals there,” Hall says.
The decision to double Bellevue’s size was not a “seat-of-the-pants-type decision,” according to Hall. Transportation managers relied on computer modeling tools to help determine the best locations for improving the NS network. One tool used was the algorithm blocking and classification, or ABC system, which is designed to identify and route traffic on the most efficient line. The ABC model identified Bellevue as the best route for NS, while a second tool — the operating plan developer, which can determine a proposed service plan’s impact on car miles, train miles and crew recruitment — showed the yard lacked the necessary capacity to handle a surge in traffic.
Gearing Up For Growth
After the expansion, Bellevue’s traffic volume is expected to increase about 81 percent and additional capacity will be created at NS terminals in Elkhart, Ind., Conway, Pa., and Columbus, Ohio. More employees are being brought on board, too: NS announced in April 2012 that it expected 275 new railroad jobs would be added to Bellevue’s employment base. This year alone, the Class I expects it will have hired 109 conductors to serve the larger yard, accommodate an overall increase in traffic and address attrition due to retirements.
Overall, the Bellevue expansion will have a significant impact on the railroad’s entire network, NS executives believe.
“A lot of science and planning has gone into this project,” says Hall. “It allows us to reduce unnecessary car handlings across the network, streamline the operation, and help improve customer service and the flow of traffic through Chicago. … We’re very excited about it. We can’t wait to flip the switch and start using it.”
October 11, 1922 The Ft. Wayne Union Railway is incorporated to serve the International Harvester plant on the east side of Ft. Wayne. It is jointly owned by the Pennsylvania, Nickel Plate, New York Central and Wabash railroads, each with a 25% share in the new company.
Originally the Fort Wayne Union Railway, the curvy Union Belt runs between the NS Huntington District and Piqua Yard on the east side of Fort Wayne. The connection to the the Huntington District is next to the old Gladieux Refinery. A long time ago the Union Belt actually crossed underneath the Huntington District and ran into the Chicago District near the Maumee River. The bridge underneath the Huntington District is still there today and you can see it just east of the State Road 930 Cloverleaf. The line runs along Meyer Rd. near the old International Harvester plant then curves west towards Piqua Yard. Here the track runs across the old Piqua Yard hump and then into the Triple Crown Yard. Norfolk Southern operates the Union Belt to switch out several shippers along the line. The western most end of the track is used by roadrailer trains switching the Triple Crown Yard. NS refers to the line as “the belt.” NS used to run roadrailers in and out of Triple Crown using the Union Belt on a regular basis but now predominately uses the Piqua Wye near Winter St. instead.
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