CN, CP continue sparring over KCS merger

Canadian Pacific has come out swinging after CN applied to the U.S. Surface Transportation Board (STB) to force the sale of a section of Kansas City Southern track to CN.

CN made Notice of Intent to file a Responsive Application asking the STB force a divestiture to CN of KCS’s lines from Kansas City, Missouri, to Springfield and East St. Louis, Illinois (the Springfield Line) as part of the STB’s regulatory review of CP’s proposed combination with Kansas City Southern (KCS).

CN said in it application that “the Springfield Line is a direct competitive alternative to CP’s route from Kansas City to Chicago, and beyond to Detroit and eastern Canada. CP and KCS have made it clear in their merger application that they plan no investment on the Springfield Line, and instead will de-emphasize it in favor of CP’s existing parallel line.”

In response, CP issued a statement, which asserts “CN’s proposal is built on a series of factual errors or misstatements.”

Not parallel

CP said in its statement that KCS’s Kansas City-Springfield line is not in fact “parallel” to CP’s line between Kansas City and Chicago. A parallel line would mean a reduction in competition for shippers on that route, and is key to the STB’s analysis.

CP also said that KCS’s line does not reach Chicago, and “contrary to CN’s misleading statements, KCS’s line is not part of a through route to Chicago in conjunction with CN.”

The CP statement went on the assert that “there is no direct connection between KCS and CN today at Springfield, and historic interchange volumes reflect the absence of any actual service here. Only four cars were interchanged by KCS at Springfield with CN in 2020 and 133 cars interchanged with CN in 2019.”

Spending on upgrades

For its part, CN says it would spend US$250 million on the line, including terminal upgrades.  “Putting the Springfield Line under CN’s control represents a major opportunity to improve transportation options, promote rail-to-rail competition, and take many of thousands of long-haul trucks off the road annually through increased rail-to-truck competition,” the railway said in a release.

“CN’s plan for the line will benefit all stakeholders and will advance CN’s continual efforts to ensure competition and choice in our industry, while also creating new jobs and economic opportunities in the region.”

CP countered, saying CPKC would not downgrade any lines. “Instead, CPKC will maintain existing levels of service on these lines and will not re-route traffic away from these lines, contrary to CN’s assertions.” CP anticipates an increase of traffic on this corridor of 30 percent.

CP said it will respond to any formal CN request for conditions in the pending STB proceeding at the appropriate time.