WASHINGTON — Federal regulators June 8 sanctioned splitting Conrail Inc. between Norfolk Southern Corp. and CSX Corp., a massive consolidation of the rail system in the eastern United States that some plastics and chemical observers fear will raise prices for resin shipments.
But the Surface Transportation Board said the merger will boost competition in key Eastern markets, including the chemical coast of New Jersey. The agency also noted it is taking steps to keep this deal from creating the traffic tie-ups that plagued Union Pacific Railroad Co.'s purchase of the Southern Pacific railroad.
``It will inject competition in the East like no other rail merger has ever done,'' said STB Chairwoman Linda Morgan. The merger will create two dominant railroads east of the Mississippi River.
STB staffers said much of New Jersey, Philadelphia and Detroit will see more rail competition because they will be served by so-called shared-asset areas, track that both Norfolk Southern and CSX will be able to run trains on, the agency said. STB estimated the merger will yield $1 billion a year in benefits when it is fully implemented in three years.
STB approval was expected, and plastics industry officials said some of their concerns were addressed. But plastics industry lobbyists remained opposed to the deal, particularly because the high sale price of Conrail will translate into higher prices, particularly for captive shippers, according to Maureen Healy, director of transportation issues for the Washington-based Society of the Plastics Industry Inc.
Healy also said that while the merger may increase competition on the Eastern seaboard, many shippers in the plastics breadbasket of Ohio will have fewer options.
STB officials disagreed. ``The question is whether it will hurt these people,'' said STB lawyer Louis Mackall. ``We've done quite a bit of study. We don't think the effects will be very substantial.''
Some of the plastics industry's concern comes down to wanting solid monitoring to see that the merger goes smoothly, particularly since splitting Conrail is more complicated than typical railroad mergers, said SPI lawyer Martin Bercovici.
``If Murphy's law applies here, we've got a huge problem,'' he said.
STB Vice Chairman Gus Owen said the agency is listening to critics who faulted it for not moving quickly enough in the Union Pacific situation: ``Let me stress to the skeptics that the agency will be an alert watchdog.''
In particular, STB officials said this merger cannot be implemented until all labor agreements have been reached and all the computer systems have been linked—two areas where the UP-SP merger ran into problems.
At a June 3 STB hearing, Equistar Chemicals testified that it did not oppose the merger but wanted its distribution center in Finderne, N.J., to be included in a shared-asset area. STB instructed the railroads to consider that.
``There are benefits to this merger,'' said Michael Ferro, a lawyer for Houston-based Equistar. ``If these benefits come about, there will be benefits to shippers.''
STB decision's also gave additional trackage rights in Ohio to the Wheeling & Lake Erie Railway Co., a move state officials said would help the plastics industry.