Traffic density data issue snags regulatory review of CP-KCS merger

WASHINGTON – Federal regulators have asked Canadian Pacific and Kansas City Southern to explain a discrepancy in the baseline traffic figures they use as part of their merger application.

 The railroads provided one set of traffic density data for the merger application itself and another set for the Surface Transportation Board’s environmental analysis. CP and KCS have explained that they calculate gross ton miles differently, with CP breaking down tonnage in far more detail for each line segment.

 But the STB, in a decision released on Wednesday, asked CP and KCS to provide additional detail by March 21. The board also asked the railroads to state which data should be used in review of the merger. And the STB suspended the merger review procedural schedule until the data issue is sorted out.

“CP welcomes and expects a comprehensive regulatory and environmental review of our application and shares the STB’s desire for accurate, consistent information across all aspects of that review,” CP said in a statement. “As called for by the decision, CP will submit to the STB by March 21 a full explanation of the data submitted with its Application and shared with the Board’s Office of Environmental Analysis in connection with its review of the Application. We look forward to the STB restarting the procedural schedule for its review of the proposed CP-KCS transaction following its review of the explanation Applicants will provide.” 

Canadian National pointed out the apparent inconsistency in the data as part of its request that the STB force CP to divest the KCS Springfield Line, the former Gateway Western route linking Springfield, Ill., with Kansas City and St. Louis. 

 If federal regulators make divestiture a condition of the CP-KCS merger, CN says it will spend $250 million to improve the trackage and tie it to its former Illinois Central Gilman Subdivision to create a new single-line route from Kansas City to Michigan and Eastern Canada.

 CN claims that CP intends to downgrade the former Gateway Western trackage and has questioned CP’s calculations of current and projected traffic volumes on the route.

 CP has said that CN used the data to create “an apples-to-oranges comparison between two very different calculations of traffic density on the line” and pointed the STB to traffic data submitted as part of the environmental review.

 CP says line divestiture would be unprecedented for an end-to-end merger and that the former Gateway Western trackage will be an integral part of the combined CP-KCS network.