STB FD 33388 10-21-97 D 182942 2/5

AugutI 21,1887

A G R E E WITH

F R E S H T ANO ECONOMIC DEVELOPMENT DIVISION A U ACTIVE AND C L O S B ) P R O J E C T S M 2ND PARTY O R D E R

P M P R O J E C T DESCRIPTION

ONCT 49)601M1 OfKrT RR SHORTSVULB P A S S t I O TRACK

Ontartn Cenkel Rellraed

POC X93553301 TULNOY.BLMAX I MBR C O S RAI . SOtNO CONSTR8

New York City PubUc DevelopmenI Corprxa«k>n

PlOA 793509M1 BOMBARDIBR INDUSTRIAL RAM. A C C E S S City ot Plattatxitgh Induatrial Daveto»>«pe "Agency

P O S W 395017301 BULK kiATERIAL HANOUNO EQUIP PORT O f O S W E G O

Pott olOewego

RCP S93702 3 71 DEV H S UOHT WT DIESEL L O C

RepuliMc Group. Inc

"•OMf CWy ol Rome

2935119C1 R C I I K t O U S T R I A L SPUR RBH.>«

R R T C R R T C Road-Ral Tranaftrt Co

S935'/9305 HKJHBRIDOB TERMINAL FHASB I B*>ROVEMEKT SB955990S HKJHBRIOOE TERMINAL PHASE ! Bf fWOVEWNT

R S I S R S R S

493575,301 I'.'IL REHAB - R O > I E S Y » R TO SILVER AK.- X T •93S2i>M RA. \ R E H A B - A S K ' ORO JCT TOMACHUiS

493525»:i RA* . R E H A B - R O C K J S T E R TO SILVER LAKE JT 493525971 RAIL REHAB - R O C H E S T E R TO S I V E R LAKE JT

Rocheelar 4 Sou9iem Rallrttad

193543301 SCOTIAOLENVILLEINOS PARK RAIL A C C E S S 86)506901 A O C H E M - O N O CONSTRUCTION

SCID SCIO Schenectwly County biduabal Davelopn»eol Agency

SEDA 193527901 QUADGRAPHK^S S O N G City o» Sar.xtoga Sprlnga Eeooomic Devatopment

SIOA 193521901 CADY HBX INDUSTRIAL PARK

Saratoga County ktduatrtal Davalopmefi Agency

SL SL 5K>ver 4 Lolhm

093707101 NYSDOT CONSULTANT 4 N S « X ACQLURB C O N R A I S99707101 NYSDOT CONSULTANT 4 N $ « S X A C G M R E CONRAI .

STL 793600901 DEKALB JCT t f rERCHANOB

Saint Lawrence Raikoad

TBSI 593558908 OAK PT.HARLEM RIVER YD PRIVATIZATION STUDY

Temple Baker 4 Sloan, hK

T1RR 593539301 TWR EMERGENCY REHAB. C R O S S W O RENEWAL

Tonawanda laland RaHroed

TLBS S937041'2 T E C H ASSIST FOR NEXT GENERATION LOCOMOTTV

TLBngineerIng Servlcaa

DOT L E T DO) L E T PRIM C O N T R A C T DOT L E T COtllP. A G R E E . COMP. COtm>. ACCOUNT FUND NUMBER BIO PRICE ACTUAL NUMBER NUH. 8CHO>. ACTUAL C L O S E D

B

B

B

B

B

0 0 0 0

02S1199

0140916 001

D002267 001

0011092 001 129186

0008897 001 089087

D140362 001

DOOriOft 031 . 2 9 K i (X100109 002 12)182

0TOii2S OOt 063092 OtW^.^4 X I 173191 O00»924 W 12 192 0006924 009 129192

OOOO.'SI 001 123196

76600 012965 0002622 001

0000)90 001

070181 081581

i m i 8 0 061B62

062869 062669

DI40889 001

022888 lXlt<1770 001 022888

D210S11 OOI

0550200 OOI

0000225 001

0006999 001

012)85

0926M 062)66

090161 061187

089082 081289

021069 101989

129164 102866

A U R E E . AMOUNT

105000 106000

100000

700000 700,000

95000 95.000

2000000 2.000,000

795X 79,SM

930000 14B228 77 *76 227

4OO'3O00 311918 S54105

45*95 4.817*16

1)00000 0

1.900 000

yxcoo yjo.ooo

220000 220.000

0 200000 200.000

22SOOO 225.000

400000 400.000

468000 466.000

125)000 1,259.000

"3 CU X

nr (t)

cr t—'

o rT

0 • t l

t-i

> a

DJC/FEDPROPX

AugutI 21.1807 PREWMT ANO ECONOBBC DEVELOPMENT DIVISION AU. ACTfVe AND CLOSB) n U J E C T S M2N0 PARTY ORDER

AOREE. WITH

TWS

r m PROJECT OESCRVnON

S99S64X1 BUFFALO RIVER BROOE ABUTMENT REMOVAL

UCIO 899549X1 CATSKIX MIN BRANCH SONO CONSTRUCTION UMar CoH(«y InduabM DeiMhipntanl Agency

UDC X9)584t0l MARKFTINO STRATEGY FOR OAK POINT UNK UOC X89S84M1 NYS URBAN 0EVELO««Nr CORPORATION N Y State Uifaan Davahipnwnl CerporaHon

VO? S07700101 BINGHAMTON RAIL PREIOMTTERMWAL STUDY Valky Devetopment Foundaaon. Ino.

YC 69)508X1 PENNYANTRANSLOADtNOPAOLnY Vain Ccunly kiduakW Oayatopmanl Agency

DOT LET DOT LET PRIM CONTRACT OOT LET COMP. AOREE. O0»». OOMt FUND NUMBER BIOfRICB ACTUAL NUMBBt MML 0CMB). ACTUAL CLOSED

DS501S7 OOI 112588 129087

0002084 OOI 080167 011690

C002208 001 080184 D008828 001

D142028 001

D000rj4 001

100894

11)081 112061

052)68 >70688

AGREE. AMOUNT

150000 150,000

250000 250000

25UOOO 49)85

29) 365

50000 SOOOO

700000 700,000

>441,888.507

DJCmtOJBCTS

DJOPEDPROPX

: .vIi : . . . , ./ .U - 4 I

Past : .1

NEW YORK STATE INVESTMENTS IN THE t ^ I L INDUSTRY

1. Investments i n Metr o p o L i t a n New York C i t y

Since 1974, the St a t e of New York has committed over

262.8 m i l l i o n d o l l a r s t o r a i l r o a d o p e r a t i o n s and f a c i l i t i e s i n

the New York C i t y m e t r o p o l i t a n area. This sum i n c l u d e s funds

i n v e s t e d i n the development of Oak P o i n t L i n k , t h e Harlem R i v e r

Yard, and Hunts P o i n t , as w e l l as r a i l c o n s t r u c t i o n and

maintenance on Long I s l a n d , and improved r a i l s e r v i c e t o the

Howland Hook Marine Terminal on Staten I s l a n d . I n p a r t i c u l a r .

New York has spent over 175 m i l l i o n d o l l a r s t o c o n s t r u c t and

access a multi- m o d a l f a c i l i t y a t Oak P o i n t , f o r purposes of

r o u t i n g f r e i g h t t r a f f i c around commuter congestion near Grand

C e n t r a l T e r m i n a l . The Sti't° nas committed another 30 m i l l i o n

d o l l a r s t o the opening and o p e r a t i o n of Oak Poin"c L i n k , and i , -

p r e s e n t l y p u r s u i n g a maintenance c o n t r a c t f o r the same.

2. Investment.^ i n B u f f a l o Area

New York has c o n t r a c t e d w^:th the C i t y of B u f f a l o , t h e

B u f f a l o and P i t t s b u r g h R a i l r o a d , the Depew, Lancaster & Western

R a i l r o a d , t h e Tonawanda I s l a n d R a i l r o a d , the E r i e County

I n d u s t r i a l Development Agency, and C o n r a i l , among o t h e r s , t o

secure the c o n s t r u c t i o n and improvement of r a i l f a c i l i t i e s i n and

around the B u f f a l o area. State-funded p r o j e c t s have i n c l u d e d

t r a c k r e h a b i l i t a t i o n and r e c o n s t r u c t i o n , r a i l s i d i n g

i n s t a l l a t i o n , r a i l yard improvements, and t e r m i n a l bypass

connection c o n s t r u c t i o n . New York's r a i l investments i n t h i s

area of the S t a t e over the l a s t two aecades exceed 29.8 m i l l i o n

(• \ f n i I t ( J.AL--I )

dollc.->rs .

3. Investments i n Passenger S e r v i c e

New York has f o r years v i g o r o u s l y supported the

development and improvement of passenger r a i l s e r v i c e i n the

n o r t h e a s t e r n U n i t e d S t a t e s . Under e x i s t i n g c o n t r a c t s w i t h

Amtrak, New York has spent or w i l l spend over 40 m i l l i o n d o l l a r s

on t r a c k upgrades, l i n e connections, passenger s t a t i o n

c o n s t r u c t i o n and r e h a b i l i t a t i o n , and subsidy programs. I n

a d d i t i o n . New York has committed r5.3 m i l l i o n d o l l a r s t o Conrai ,

Metro-North, and the D&H Railway, among o t h e r s , f o r p r o j e c t s

f a c i l i t a t i n g passenger s e r v i c e i n the New York C i t y m e t r o p o l i t a n

area, and along the Empire c o r r i d o r from New York C i t y t o Albany

and beyond.

4. Support f o r Delaware & Hudson Railway C o r p o r a t i o n

Throughout the 1980's, New York l e n t c o n s i d e r a b l e

f i n a n c i a l support t o the Delaware and Hudson Railway, and

c o n t r i b u t e d g r e a t l y t o i t s recovery from near bankruptcy.

S p e c i f i c a l l y , the S t a t e has a l l o c a t e d 80 m i l l i o n d o l l a r s t o

s u b s i d i z e D&H o p e r a t i o n s , and t o p r o v i d e f o r t r a c k , s i g n a l , and

yard improvements and emergency r e p a i r s , along w i t h locomotive

and boxcar purchases and improvements .

5. Investments i n Short-Line R a i l r o a d s

Over the l a s t two decades. New York has i n v e s t e d s t a t e

funds i n more than 28 s h o r t - l i n e and r e g i o n a l r a i l r o a d s s e r v i n g

New Yo. ": s h i p p e r s . The S t a t e has a l l o c a t e d over 66.18 m i l l i o n

d o l l a r s t o i n s t a l l and m a i n t a i n t r a c k s , c o n s t r u c t r a i l

- 2 -

f a c i l i t i e s , and expand r a i l yards, for the b e n e f i t of these small

r a i l c a r r i e r s . The State's e f f o r t s have f a c i l i t a t e d the

continued operation of such r a i l r o a d s , and ensured t h e i r

a v a i l a b i l i t y to New York shippers counting on .hem f o r service.

- 3 -

1 t..\.n i i j

H <1 i f

1 i 1 .l.-\L-.>

1 o( : )

• Agreements Betwern the State of New I anH ronT-,-iil Reoiiirina Further Performance

York bv Conrail

I Project & Contract Number'

Conrail Obligations Extending Beyond Projected nate of Ac a u i s i t i o n State Investment

• Rochester I n d u s t r i a l

• Park 1 (D139601)

Maintenance $ 401,700. 00

M Niagara Branch I Track • (D139744)

Maintenance $ 6,058,000. 00

1 Radisson Yard • (D139943)

Maintenance and Reimbursement

$ 2,386,047. 22

• Massena Branch 1 (D140722)

Mainenance and Operations

$ 7,500,000. 00

_ Albany-Buffalo I I n t e r l o c k i n g • (D94282)

Maintenance $ 5,397 , 500 . 00

• Phoenix Branch • (D094303)


m Niagara Junction 1 (D094538)

.Maintenance $ 578,000 . 00

Poughkeepsie-1 Schenectady High " Speed Program

(0094666 )

.Maintanance $ 47,380,000. 00

p Fulton-Oswego Track and Yard

. (D000306)


Buffalo-Niagara Falls Terminai

• (D000348)

Maintenance $ 4,700,000 . 00

Southern Tier • Mainline 1 {D140091)

Maintenance $ 8,536,000 00

• Contract numbers correspond wit h • York r a i l agreements l i s t e d i n Exhibit

those used to i d e n t i f y New (JAU-03) .

i \ ti 1 > ; i .1 .-\r- )

Southern Tier Graham Line (D140720 )

Southern Tier W e l l s v i l l e Line^ (D140447 )

Maintenance

Maintenance

S 17,000,000,00

$ 2,500,000.00

TOTAL: $ 107,485,287.22

^ A separate. Supplemental Agreement supersedes a l l three Southern Tier agreements u n t i l June 1, 1993. Under the Supplemental Agreement, Conrail's o b l i g a t i o n s also include providing s p e c i f i e d l o c a l and through f r e i g h t t r a i n service.

- 2 -

l/i<r> *6/77» •

S ^ " ^ STATE OF NEW YORK DEPARTMENT OF TRANSPORTATION

W I L U A M C. H E N N E S S Y . C O M M I S S I O N E R

0 1 , . . . l l i lM t > -lA^ '

Illll!!lllIl!lllllIllllll!!iilllllll!ll!:illllli;iiil"iI5IH

Philadelphia, Pa. 19104.

W I T N E S S E T H

• Id d of the Transportation Law authorizes WHEREAS, section 14-d °J f l ' for the ourpose of niaxn-

the commissioner "^-^//^.^".^^.^portat.on servxce": and taining and improving r a i l t.ansp

ted to the Deoaxtmenc WHEREAS, funds have been appropr^ ^^^^ ^ ^ ^-^^^^^^ ,3

for the payn^ent of ^ ^ « / " ! V i t h u . provisions of this be undertaken m ^"^^^^^^^^'f^^^/^n l4-d of the Transportation Law. pursuant to the provisions of Sv.ct.on ^ ^^^^^^

NOW. THEREFORE P^^^.^^L.^^'anribiigatron^h^ the mutual promises. " follows: contained, do agree and covenant

^ P T T g T ^ ONE

pppTMTTIONS

. che conm.is»io..er of Transportation '

s t a ; r r r e r ; r r . . " : " - - " - « - - represe.tat .ve.

the State Departr>ent o£ Transportation.

-Railroad" neans t.he Consolidated P a i l Corporation.

. . , r e e . e n t - ^ans th.s document and any attachments

hereto referred to herein.

. , r = , e c t t : « U i s 1 S r t ^ r ! « r s « ^ r t h ^ n t..e r^R part 140 Sub-I for accomplismng «

23 CFR i'att - i H is Aareement) . work schedule (Appendix 1 of this Agr

- 2 -

" P r o j e c t F a c i l i t i e s " T.eans .-r .aterials, equiprr.ent, f a c i l i t i e s or supoLies acquired, ccns t rucced , r econs t ruc ted , cst.a. l i s h e d , ^ r ' o ^ d or r e h a b i l i t a t e d by or on beha l f or R a i l r o a d pursuant to the" o rov i s ions of t h i s Agreerr.ent f o r the ?ur?ose accomolishmg tihac p o r t i o n of the work sec f o r t h i n the ^ork Schedule, which i s loca ted between Woodard, N . Y . and Massena. N . Y . (Appendix 1 o f t h i s Agreement) .

ARTICLE TWO

rAPIT.\L I.MPROVE.ME TTS

Sect ion 2 . 1 . D e s c r i o t i o n o f Work.

R a i l r o a d agrees to prov ide f o r the accor.plishment o f the work descr ibed i n the Work Schedules c o n s t i t u t i n g Appendix l o f t h i s Agreement ( h e r e i n a f t e r c o l l e c t i v e l y r e f e r r e d to as the do Schedule") , which are at tached here to and T.ade a p a r t he reof , . n accordance w i t h plans and s p e c i f i c a t i o n s approved by =

.and the R a i l r o a d . Any .'nonetary amounts s p e c i f i e d m ^^^^ '^^ schedule f o r p a r t i c u l a r items of work are e s t i r t a t e s . and t.ne t . a n s . e r o f I^ounts between l i n e iterr.s w i t h m the Work Schedule set r o r t h ^ i n ADPendix IB i s o e r m i t t e d as necessary, s u b j e c t to the p r i o r ' ^ r i . . . e n t p p r o v i ^ of the 'commissioner . Any t ime l i m i t s f o r t.he accompiisnment o? work which are set f o r t h m sa id Work Schedule may or iPodi f ied by the Com.-nissicner as he deerr.s necessary and any such ex tens ion or m o d i f i c a t i o n s h a l l not be unreasonably w i t . . h e l d .

g e c t i o n 2 . 2 . Per f orr.ance of Work.

R a i l r o a d agrees to undertake and t o proceed e x p e d i t i o u s l y w i t h the work to be acccmolished as desc r ibed i n t.he Work Schedule and t - comolete s a id work w i t h i n t.he time I L m i t s s p e c i f i e d m sa id Work Schedule; o rov ided . however, t h a t R a i l r o a d s h a l l . lot be o b l i g a t e d t o incur any costs f o r -.he pcrfor:nance o f work descr ibed i n the .Massena Branch Work Schedule (Appendix IB) which are m excess of the amount c e r t i f i e d to the R a i l r o a d by t.he State as a v a i l a b l e to the State f o r payment c f t.he R a i l r o a d under t h i s Agreem.ent. The Ra i l road s h a l l p rov ide the Commissioner w i t h a schedule f o r acco.mplishi.ng the work desc r ibed m Appendix 1 . R a i l r c a d s h a l l update said schedule annua l ly or as otherwise necessary to assure i t accur.v.teiy r e f l e c t s the Ra i l road s t i m e t a b l e f o r c o n ^ l e t i o n .

,1 J e 4 r ' •

- 3 -

Section 2.3. Maintenance.

Rai lroad agrees to .maintain at i t s own expense the Projec t F a c i l i t i e s as w e l l as a n c i l l a r y f a c i l i t i e s w i th in the ceograpnicai I ! ^ i t s ; f ; h e project F a c i l i t i e s used in providing services thereon i r ^ h e r e w i t h . m good order and repair in accordance wit.h applicable f e d e r a l .Railroad Admmistratif in track safety standards or t.he commissioner's standards of maintenance a s . s p e c i f i e d m the Maintenance Schedule (Appendix 2 ) .

Section 2.4. Reiinbursement-

BV executing th i s Agreement. State c e r t i f i e s that i t has agonies avai lable and w i l l reimburse Rai lroad for t.he ^^^^^^r ^ ^ J " up to a maximum of Seven ."dilUon Five Hundred Thousa.nd (S7 =00.000) Do l lar s , which Rai lroad incurs for work performed as described in the attached Work Schedule ident i f i ed as t.he .Hassena Branch .ork Schedule (Appendix IB) .

s a i d costs s h a l l include the cost of preliminary and •construction engineering, as we l l as any costs ^"^'-^/^^ under t.his Agreement n connection with sa id work, for - 'hic

• J ->i rTTD Part 140 S u b - I . and amencT.ents reimbursement i s mide under 23 CFR Part i4U i u a i , , ^ f - r e „ c e thereto i t bei.ng -ended by t.he part ies .nereto that by .efere.nce t l s^ d 23 CFR p L t .40 Sub-I , and — . ^^f^'"' ^f.^ that t.he orovi5ions t.hereof are deemed to be included ^•^^^^^''^^f are acce^.'ted as binding upon the part ies to the same ^^"^^^^^^ With t.he-same force and e f f e c t as i f sa id 23 ^ ^ V ^ ' H . f n!r of and amendments thereto, had been set forth m , f P^^. , ?^3^^^ th i s Agreement, provided, however, that State s h a l l not be cb l .gatec to oay .nor s h a l l Ra i l road claim reimbursement for t.he use of , f a c i l i t i e s o.r equipment acquired by Rai lroad i n with fands provided by State under th i s or any other Agree...ent. Rental charges for Railroad-owned equipment or f a c i l i t i e s . h a . i not b e " l i g S l o ' f o r reimbursement hereunder when State-f inanced e<.uiprnent or f a c i l i t i e s acceotabie to t.he Railroad are made avai lable withou-cost to Railroad for t.he work to be accomplished at t.he time and place required. Rai lroad s h a l l submit on a monthly basis to State

• ? a i r and reasonable charges for t.he cost of the work Fer-o....ed or f a c i l i t i e s and equipment provided, by Rai l road less ^^^^^^'^^

- of any Railroad-owned materials recovered, as evidenced by deta- .ed invoices acceptable to Conjpjass loner.

s ta te s h a l l reimburse Railroad in the amount of t.he^ approved Projec t Costs so submitted within t h i r t y (30) âys o. . ^ m i s s i o n by the R a i l r o a d . A-U costs so submitted ^ V / - ^ ; - ^ ^

Bs h a l l be subject to approval by Commissioner and to auui-Sn^Îssioner'or che State comptroller. Reimiûrsement t.heref=r by s tate to Rai l road w i l l be made in monthly progress Pî'"^^^;' , . _

r : . n : h 1 t .1 -•

- 4 -

" .ance with approved c e r t i f i c - e s t ^ . T a t l f f L t o r y month i n * < = ^ ° ' ^ * " ^ ^ , r ^ f a c i l i t i e s P^^^^'^"^' ^^^ect Coat , s h a l l the work BO P / ' ^ ; f ^ ; ^ ^ ° ^ f i n a l statement of P r o j e c t completion " ^ ' . ^ L i t h i n one hundred ^ ^ ^ f ^ J ^ ^ ^ e w i t h i n

submitted to State wi^ Hai lroad "^^^^..^^^^^ttatement. f i n a l " ^ " ^ ^ i ^ ^ ^ ' ^ ' : ' ; t^^ submission of the f .mal t n i r t y CO) days from the ^ I b j e c t to f i n a l aud i t . .

j r i t l e Mater ia l s . .

^•f accomolishi^'? materia ls - ; r r a r = h ' - . % * = ^ " - l e <.PPe^^^^^

- - r » A

the w ork sei s h a l l be the o

ted i n the reement, :e of t. At the

he materials vestea_x2^_j::;^:^^ c i « end of t.ne

° d Ihe term of th i s Agreement A otherwise ' " ^ ' ^ i T i f r r f l a S ^ a t e r i a l s . or - an e^^^^ 3ha l l be T t f o r l h in t:.e Spec ia l Provis ions (App ves ted i n the R a i l r o a d .

S e c t i o n 2 .6 . . A use ano — " ' • term of th i s Agreement Rai lroad agrees that during the ter .^^^^ be R a i i r o a a , . ^ies covered by th i s R a i l r o a d

wi thout the express w r i . t hav ing been obtained.

S e c t i o n 2 . 7 . i^^^^^^r^t P e r f o . r m i n 3 J i ° ^ -

-t::r:;ecined in oU.e --r/rati riarorTv r.rj'c=-n.r-. -r.r knT:"' equipment of ^ ^ ^ ^ " ^ R a i l r o a d ' s approval, per that State may, only w3.tn v^rk with i t s own . o r c e a .

Tr.«inection«

the commissioner

^ , i „ , U e term o£ ' ^^ ^ ^ ^ r p r e - " " ° ' " " ' " / t h e "

. h a l l have - ' / ^ ^ „ " , : t , : r a n d i r a . . f n : n ^ , the Agreement. ^"^^ R a i l r o a d , and upon p r i o r notice

- 5 -

ARTICLE THRF.S

r.r?JERAL PROVISICSS

Sect ion 3 .1 . Force Ma-eure.

* r ,Ar- ies hereunder s h a l l be subjec t The obligations of the p a r t i e s nereunu ^.^-ds

" force . a , e u r e ,whrch ' - " . - ^ r t : . " ; S : i = s " " s u ; r : : t : o n s ^

r«,":r;uM!re:L!:t;-and-orrer "-- roe-rjrrr rin r- e Che control of the part , ^ ^ " " - ^ ^ " ^ f . i ^ f a d to the extent that . £ol nonperrornance). bat only as l " " ^ ' j ob l iga t ions , such force - ^ e u r a s h a l l preven per-or..ance o£^

the opposit ion.

Sect ion 3 .2 . Successors and Ass igns .

A l l the covenants and obl igat ions of : - ^ \ P " ^ ; " „ „ ^ " ^ " under s h a l l bind t.heir successors and . expressly assumed by such successors and ass igns .

^^r-r inn 3 . 3 . I^^prT3retat ion .

The A r t i c l e and Sect ion ^ " d i n , s u u r e d in M „ t are for convenience only and s h a l l , ^ „ a n d

hereof . This Agreement s h a l l be " " " ^ ^ ^ ' T u Ap^nd^ces governed by the law. of ° ' / * J ^ J ° ^ ^ ; „ » e " t a S the attached hereto are in tegra l o a r t i e s

^ ^ r t ^ ^ U t h e i r ent irety in the main - i s Agreement.

Nothi.ng expressed or implied here in State or to give to any person, f irm or corporat ion other T a i l r o a d any Legal or e .u i tab le r i g h t V - ^ ^ i r t ^ ^ t ' l ^ y i n respect of th i s Agreement, ê i ther ^ supplemented, of the terms hereof may be termi.nated. ^^'^^^^^ ^^"P^ ^^t i .ng

• waived or rnodified o r a l l y , but only by an ^ " ^ " ^ ^ ^ ^ " ^ ^ ^ ^ f Tinned by Conîssioner and^Railroad - ^ - ^ ^ / / / / / . ^ °er^^^^^^^ expressly permits e i ther of saxd P ^ " " " .^J^ôn hereunder, i n amend.ment. supplementation, waiver or ^ " ^ ^ h the which event such act ion s h a l l be taken i n accordance with tn terms of such prov i s ion .

r a - - - ' ' -.1 ll."

- 6 -

g>r->^on 3.4. N o t i c e s .

^ - . ^ demand a u t h o r i z a t i o n , d i r e c t i o n , no t i ce , consent, r v e " ' ' o r o . r r o c . , e . n t prov id

b , de l ivered by hand or '=v/eposi t^in^the ^ ^^^^^^^ States , postage prepaia , i .-addressed as f o l l o w s :

commissioner of Transpor ta t ion State of New York Depart.T.ent of Transpor ta t ion 1220 Washington Avenue S ta te campus Albany, New York 12232

^« envelooe addressed to the a t tent ion o f : and i f to R a i l r o a d , m an envelope «i <-

General .Manager. Northeastern Region consolidated R a i l Corporation 54 Meadow Street Hew Haven, Conn. 06506

.•ach party ™ay change the a d d r e „ at^^hich - " " " ' ' cat ion hereunder by not i fy ing the other or s u e

Sect ion 3 .5 . Counterparts .

T h i s Agreement may be executed in any number of counter

par t s , each of which s h a l l be an o r i g i n a l .

sect ion 3-6- Re lar ionsh io of Par t i e s . .

The r e l a t i o n s h i p of the R a i l r o a d to ^^^^

of an independent contractor , and s a i d ^ - ; ; - ^ ^ ; , ^ ^ , : ^ : r t ^ a t ^ i t h i t s s t a t u s as such contractor , covenants and a g r e « th

i t w i l l conduct i t s e l f cons is tent ^ ^ - ^ / ^ f ^ ^ ' ^ ^ " 4 , , ; or employee neither hold i t s e l f out as nor claim^to be - ^ ^ ^ o n ' of the S ta te by reason hereof and . ^ r any r i g h t

hereof, make any claim^demend ° ^ . ^ P P ^ ^ f " / ^ f the S t a t e ! «r n r i v i l e q e app l i cab le to an o f f i c e r or employee or ^ or p r i v i l e g e «»pt ^ r V T i e n ' s compensation coverage, including but not limited . . ' coverage, or ' unemployment insurance bene f i t s , s o c i a l s e - u r i t y cover g ret irement membership or c r e d i t .

: b 1 t , .1 \ i

- 7 -

Sageion 3.7. Record:? and nocunenrs.

Railroad sh a l l maintain books, records and supporting d-oumpnts n connection wUh the work to be accomplished pursuant to this Agreement. A l l books, records, b i l l s , vouchers, payrolls, invoices and other documents of every type and description pertaining to the work under this Agreement s h a l l be available to commissioner or the State Comptroller, or their authorised-representatives, for inspection and audit. A l l costs charged to State under this Agreement shall be supported by P^^^^f^^^"1^^^^^ records, material consumption reports, business expense statements, paid invoices and contracts evidencing in d e t a i l the nature of the charges for which reimbursement is sought.

Section 3.8. Risk of L i a b i l i t y .

(a) Railroad agrees to indemnify and save harmless State from any and a l l l i a b i l i t y for injury to or death P^"°^ persons and for loss of. damage to. or destruction of any P"P«^V or equipment which arises from activ i t i e s conducted °^ of Railroad pursuant to this Agreement, except when attributable to the fault or negligence of the State or i t s agents, employees, or contractors other than the Railrcad.

(b) in case suit shall at any time be brought against State asserting a l i a b i l i t y agai.ist which Railroad agrees to indemnify and save harmless State, Railroad s h a l l , at its own cost and expense and without any cost or expense whatever to State defend such suit and indemnify and save harmless State against a l l costs and expenses t.hereof and promptly pay or cause to be paid any f i n a l judgment recovered against Stater provided however, that State shall promptly upon the bringi.ng or any such suit against i t give notice to Railroad and t.hereafter provide aU such information as may from ti.me to time be requested. State sha l l furnish to Railroad a l l such information relating to ciai.ms made for injuries, deaths, losses, damage, or destruction of the type covered by this Section as Railroad may from time to time request.

Section 3.9. Approval of Contracts.

Railroad shall n<Jt execute any contracts, subcontract, or amendment thereto, or obligate i t s e l f in any other manner with any third party relatina to or with respect to the work described in the work Schedule (Appendix 1) without the prior written approval of the Commissioner-

t.Mh 1 n 1 c I J . \ L - n I

Past; ' ot u5

- 8 -

; n r r 1 - n - e f f e c t i v e Date_^f.Aareement.

w n i-;*ve e f f e c t a t the time at which i t This Agreement s h a l l take e t - e u

! • approved by the State c o m p t r o l l e r .

c , ^ . . . n - ^ . l l . T.rm of ^Ms Agreement.

The term of th i s Agreement ^^f^^^^^.^^t^^Lir te^^rn l ' t ed

commencing the e f f ec t i ve ^ - " ^ ^ " ^ ^ . ^ . t r o . Clause , or under the i n accordance with Section 3.12 Termm S p e c i a l provis ions. Appendix 3 hereof .

g^r.(.iQn 3.1^ rerminarion C l a u s e .

^v,* r i a h t to terminate or suspend th i s State reserves t.he r i g n t to termination

Agreement for t.he S t a t e ' s d i s c r e t i o n of Commissioner, or suspension s h a l l be R a i l r o a d , and such by d e l i v e r y of ^^^'^"^ . '^^^^Hi i thereupon take e f f e c t immediately, t erminat ion or ^ ° \ = ^ * i L ^ " r i n t^ts S e c t i o n 3.12 s h a l l However, nothing in ^^^V^^reement ^ f^r e l i g i b l e costs r e l i e v e State of i t s o b l i g a t i o n " ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ r to r e c e i p t of such and expenses which R a i l r o a d i n c u r r e d a l e a a l l y w r i t t e n notice or for which ^.^^^ê purposes of th i s enforceab le l i a b i l i t y ^ " t l r m ^ I t i o r o r suspens i o n ! Agreement p r i o r to such terminat ion or

-r, I r inn - n ^ . , „ . . n t s Forc ing Agreement.

^ « n s i a t of th i s document and the This Agreement s h a l l c o n s i s t ot fol lowing attachments:

Appendix 1 - work Schedule ÎrlVcêdule - Supplemental Work Scneauie

I B - Massena Branch Work Schedule

Appendix 2 - Maintenance Schedule t^rendi^ i - " e ^ e ^ u i r e d Contract Provis ions

t \ n ! tM I

• 'a - ' f 1') o I '1

( J.M---'

- 9 -

CONSOLIDATED R A I L CORPORATION

By.

PEOPLE or THE STATE OF SEW YORK

By Commissio

^^TT^f /transpor t a t i o n

Approved:

.« . —

Attorney g e n e r a l

Approvedi_

fkjlC

•— — I * „ i i » r pursuant to , o r the f "P«t^t :%L>an=e MW Section 112. ^ t<a

• I L'c 1 1 -> t r. 5

COMMONWEALTH OF PENNSYLVANIA )

COUNTY OF PHILADELPHIA >

on this -V c« ^ ^ 4 ^

before personally ca„. - T M " — ^ ^ S ^ i - ^ " ^ to m. known and Vnovm to m. to be the,.£i^JMi

l A . ^ . A Rail corporation described in and of the consolidated Raii i-otp"

which executed t h . foregoing in.tru«.nt. and he

.cKnowledged to m. that he executed t h . .a... "

Notary Public

My Cotninnion £«I»M« •*•

• .\ n . 1 t 1 J .Al - o

APPENDIX 1 page 1 of 2

MASSENA BRANCH

WQRK SCHEDULE

Thi s Work Schedule consists of the following appendices:

lA - Supplemental Work Schedule IB - Massena Branch Work Schedule

The t o t a l State obligation of t.he Projec t Costs i s Seven Mi l l ion F ive Kundied Thousand Dol lars ($7,500,000).

The work described in th is Work Schedule is to be p e r formed on those properties of the Consolidated R a i l Corporation between Woodard, N.Y. and .Hassena. N . Y . . ly ing in the Counties of Onondaga, Oswego, Je f ferson and S t . Lawrence, in the State of New York, during calendar years 1980 and 1961.

The scope of work to be completed i n accordance with Work Schedules lA and IB s h a l l include, as appropriate:

GENERAL

1. D i s t r i b u t i o n of a l l materials required Icr the work-

2 . Cleanup of a l l scrap materials and d i s tr ibut ion of ' a l l replaced t i e s , timber and other m a t e r i a l s .

2 . Cutt ing and/or removal of brush and trees wi th in ten feet of track c e n t e r l i n e .

T I E RENF. ALS

1. Replacing defective t i e s designated by Rai lroad's inspectors w i th in the mile post and quantity l imi t s s p e c i f i e d .

2 . Replacing b^ken . damaged, corroded and single shoulder t i e p la tes at locations where new t i e s are i.-istalled under this Agreement, except where Work Schedule r a i l renewals w i l l renew or replace such t i e p l a t e s .

3 . Removing a l l track shims wi th in l i m i t s of t ie renewal projec t s .

APPENDIX 1 Page 2 of 2

4. Replacing de fec t ive switch t i e s wi th in ILmits of t i e renewal p r o j e c t s .

TRACK RAISING AND SURFACING

1. Replacing mud-fouled ballast".

2 . Making drainage improvements, including opening of blocked drainage d i t c h e s .

' 3 . Sur fac ing , a l ign ing and l eve l ing b a l l a s t .

MTSCELIANEOUS TRACK IMPPOV-MC^^^S 'WHEP.E TZ . RENEWALS ARE SCHEDULED

1. Renewing track and cross inc surfaces through p u b l i c and private highwav grade cross ings with .new t i e s , t i e p l a t e s , sp ikes , b a l l a s t and r e l a y e r r a i l , r e sur fac ing crossi.ng with guar-timbers and asphal t paving where Track R e h a b i l i t a t i o n Work Schedule requires work to be done through grade cross ings .

2 . At a l l l ocat ions where r a i l renewals are not scheduled

a . Replacement of cracked and broken s p l i c e bars

and defective b o l t s . b . Tightening of a l l j o in t b o l t s . c . cross-grindi .ng of a l l r a i l ends. d . Replacement of defect ive r a i l anchors, i n s t a l l

a t ion of proper design and quantity of r a i l anchors at R a i l r o a d ' s . standards for s i n g l e or double' t rack , as appropriate .

e . Renewal of i.nsulated j o i n t s , where necessary.

RAIL RENEWALS

1. Replacement of r a i l with re layer continuous welded r a i l within the mile post l i m i t s spec i f i ed for re layer r a i l .

2 At a l l l ocat ions where r a i l renewals are scheduled, re newal of turnouts and crossovers with new RE 132 or RE 140 mater ia l s

3 . Replacement'^f ocher track m a t e r i a l with new t r a c k mater ia l w i th in the mile post l i m i t s s p e c i f i e d for re layer r a i l including replacement wi th new reformed or overs ized s p l i c e b a r s , new spikes , r a i l anchors, in su la ted j o i n t s and new t ie p la tes as necessary.

0> 4 o ! ( .

APPENDIX lA

MASSENA BRANCH SUPPLEMENTAL WORK SCHEDULE

The following work is to be performed by Rai lroad at Rai lroad's expense on t.hose aropert ies of t.he Consolidated R a i l ' to^orat ion o^"E^n Woodard. N.Y. and Massena, N . Y . . duririg calendar year 1980:

Track Location Miles Quantity

A. T i e Renewals - Grade 3A. 4 and 5 Ties S 70.7-72.1 S 72.1-86.0 8 86.0-95.2 8 121.9-131.0

Sub-Total

B n i l n^^^^.i - nv 71 nr RE 132 P^i^v^r Welded R a i l

1.4 1.138 13.9 13,252

8.8 9, 300

9.1 9, 944 33.2 33,644

s 22.0-35.4 13.4 I n c l . 2 turnouts

S 70.7-84.1 - .. I' <=1- 5 turnouts

C. Track Raisi.na and Surfacing S s s s s s s

0.0-22.0 22.0 22.0-35.4 13.4 58.0-70.7 12.7 70.7-95.2 49.0 95.2-121.9 26.7 121.9-131.0 18.2 131.0-143.0 12.0 Sub-Total 154.0

^ "" Subject to approval by Ra i l road ' s Board of D i r e c t o r s , tha following quantity of work i s to be performed by Rai lroad at Ra i l road ' s expense on those propert ies of- the Consolidated R ^ i l corporation between Woodard, N.Y. and .Massena, N.Y. ^ ^ J ^ ^ ^ ^ f ^ f ^ ^ year 1981 with the understandi.ng t.hat the s p e c i f i c work schedule w i l l be submitted to the State on or before A p r i l 1, 1981:

A. T i e Renewals. Grade 3A. 4 and 5 t i e s 5.000 t i es B. R a i l Renewal, DY 127 or RE 132 Relayer

Welded R a i l , including 9 new turnouts u i to renew existing turnouts '^'^^TQ T i l l

C. Track Rais ing and >urfaci.ng ®

.n 1 tM : ( J . \ L - o I

APPENDIX 13

MASSENA BRANCH WORK SCHEDULE

^"^^ The following voi.< i s to be performed on those propert ies of the consolidated R a i l Corporation ber-een Wooaard, N.Y. and Massena. N . Y . , during calendar year 1980: . _

Track Location Miles

A. T ie Renewals - Crade 3A, 4 and 5 T ie s S 5

131.0-160.3 29.8 Sidings and Yard Tracks between MP 131.0 and .MP 160.8

Sub-Total

s Ketyi 70.7-041-1 /. ^ f 7(.f - r v / /X. t.

Track Rais ing and Surfacing S 70.7-84.1 S 143.0-160.3

Sidings various Locations Sub-Total

^^laver Welded R a i l

13.4

13.4 35.6

3.0 52.0

6 Turnouts

Subjec t to approval bv the Commissioner, the following work is to be performed" on t.hose propert ies of t.he Consolidated R a i l corporation bet-^en Woodard, N .Y. and .Massena, N . Y . . duri.ng , calendar year 1981, with t.he understanding that the s p e c i f i c worx schedule w i l l be submitted to the State on or before A p r i l 1, 19b-:

^ , T, ^ _„ j e / I ,mti-,i»^ 5,000 T ie s X A. T ie Renewals, Grade 3A. 4 and 5 ' ' B . R a i l Renewals, DY 127 or RE 132 Relayer

Welded R a i l , including 8 new turnouts to renew e x i s t i n g turnouts

C. Track Ra i s ing and Surfacing

Ttn A««««»»/ """"

. . . r ^ d U 17 Miles » 30 Miles t

Sfu/frf

/

f .X. h I h 1 I

r <t 2 c 1 Cl o f (•>

( J . ^ L - n

{>tAINTEiTANCE SCHEDLXE

Upon completion of each item of work spec i f i ed i n the work schedule (Appendix 1) , the Rai lroad f ^^^4^^^°'^ ° ' eiqht (8) years from the date of completion of t.he Project p i c i U t i e s ! maintain a l l track and roadbed r e h a b i l i t a t e d under the terms of this Agreement in a condition t.hat meets or exceeds a l l r e t i r e m e n t s of the following Federal Rai lroad Administration Track Safety Standards:

»" • • A FRA Class 3, where sa id Pro jec t F a c i l i t i e s include

r a i l renewals with continued welded r e l a y e r r a i l ; and

B. FRA Class 2, where sa id Projec t F a c i l i t i e s do not

include such r a i l renewals.

Except for and subject to the R a i l r o a d ' s rights to terminate and discontinue or abandon operations over the r a i l l i . -es s ^ j e c t to th is Agreement, Railroad ^ h a l l thereaf ter maintain a l l track rehab i l i t a t ed under t.he terms of th i s Agreement at ^ ^ ^ ^ l ^ n ^ u r a t e with f a c i l i t y usage for a period not to exceed t h i r t y (30) years from the date of th i s Agreement.

I

p i

n i t) 11 J -A'


SPECIAL PROVISIONS

1. For a period of eight (8) years from the effective date of this Agree.ment, Railroad wi:i:

»• • . A. Operate the Project F a c i l i t i e s between Woodard and

Massena. rehabilitated m accordance with the Work Schedule (Appendix 1), as a main freight route between Syracuse and Montreal.

B. Operate local freight service to the extent necessitated by r a i l t r a f f i c to and from r a i l customers on that portion of Railroad's line between .Massena and Woodeird. 2. Thereafter, for the remainder of the term of this Agreement. Railroad w i l l continue to operate local freight service to the extent necessitated by r a i l t r a f f i c to and frcm r a i l customers located berween Woodard and Massena,

Railroad shall have the right to abandon part or a l l of the Project F a c i l i t i e s , or discontinue or curtail services thereover; provided that:

A. Said abandomnent of part or a l l of Project F a c i l i t i e s , discontinuance or curtaiLment of service, has been authorized by the Interstate Commerce Commission or other body having jurisdiction thereof, as may be appropriate.

B. At the time of said abandonment of Project Facilities., discontinuance or curtailment of service, the applicable Project F a c i l i t i e s shall comply with a l l provisions of the Maintenance Schedule.

C. I f the operati.ng costs over any part of f Project F a c i l i t i e s beccmes excessive due to Railroad's failure to comply with the maintenance obligations set forth in the Maintenance Schedule (Appendix 2). such annual operati.ng costs, as a result of deferred maintenance, shall not be used as an ele.ment in the justification for abandon.ment of baid line or operations over said line. 3. In the event of Railroad's discontinuance of r a i l freight service over part or a l l of the Pro3ect F a c i l i t i e s :

t

(' I a I S o t V

APPENDIX .3 page 2 of 3

• v,f. rWi vears frcm the date of A. During the ^ " ^ . ^ / l ^ Z ^ a s . from Rai lroad

th is Agreement. State may, '^^l . e la ted f a c i l i t i e s that portion c f t.he Rai lroad s P^^^^^^^^.^^^.^^^es over which such occupied by t.he portion or t.he ' to Rai lroad serv ice has been <ii^=°'^^^^"^^;VH ^ L ^ ^ h a v e Leen determined by the by the State s h a l l be ^ ^ - \ ^ ^ i = ^ ^ / ^ ? i \ e g i o n a l R a i l Reorganization i ^ e c i a l court created l ^ ^ V t ^ W ^ ^ ^ ^ amended, in the Valuat ion Act of 1973 (45 U . S . C . A . §706 ^^^^^ 3.u.m? sum case, for the portion to be "^^^^^f/^^^^^j,^ ^^^^^ of th.e settle.ment ; i ^ l e m e n t wit.h - ^ ^ f - ^ f r e l e f a n portion mult ip l ied by a f r a c t i o n with the trustees of l iquidat ion value assigned by the whose numerator s h a l l be the net i i q u i value assigned U S ^ to the portion and ^ ^ o - ^ ^ ^ ^ ^ r i a n d ^ and buildi.ngs of the by USRA in the F i n a l System ^ l " ^ ' ^ ^ " ,^^^' tLrovements made pursuant t o t a l estate involved, ^he value 3 ^ , , , included to this Agreement and paid for by cn ^^^^^ in the determination of the P f ^ ^ ^ ^ ^ / / ^ i : : ; a t e value to the par t i cu lar the s p e c i a l Court have not assigned a separ vaJLuaticn C ^ ^ ^ t i o n Which the State f - - " / ^ ° / , ^ r o r otSer^ se, the option Sas not been concluded, by court orcer or - ^^^^^^^^ ,i,e pr i ce s h a l l be f a i r market value less 'depreciated value s h a l l ^provements made under th is <=°;^;^r-;^ J ^ 4 ^ t ^ ^ I n Section U - B of i^^determined using the same methods set .ortn th is Agreement.

B . At anv t i . . a f t e r . u l y ^• J j ^ ^ ^ ^ ; / ' , ^ : ^ i r i r o a T s h r i ' l t h . project F a c i l i t i e s , or any P ' ' " - " " , ! - ^ " " ' ; ^ -o t.he deoreciated r T i i u r s e the State a monetary - - " / l ^ f f , : " : u^der the" ter:ns ot „ l u e o£ the ac tua l - " " " " ' " ^ " ^ ^ ^ i f , ; L s £ e r to the Rai lroad free th i s Agreement, whereupon . . . t e r i a l s used for t.le and c l ear of a l l taxes L r t ^ i ^ the worX Schedule purpose o£ accomplrshmg the - " f determined by use of Vppendix 1) - This monetar-/ " - " " ^ f ' J ^ ^ , ^ th ir ty (30) year

, „ a i g h . l i « / e p r e c i a t i o n method^ depreciat ion

" r i r ' b e ^ " ^ t " e e f f e L i v e date of this Agreement.

^ o . i i i -oad's -eiiabursement, the State may i n l i e u of Uie Rai lroad s -Z"™", ^.ent as a p a r t i a l

e l e c t to use the ^ « P « = ; " J . ^ „ 7 i : : , 1 / r u ' o £ t h T i ^ r o v e d r a i l payment toward the purchas^ ° ' of such depreciated l i n e , provided, however, that t.h, ^ P F 1 - = ' ^ = „ require value s h a l l r e s u l t m " " " " ' " t ^ ' ^ ^ H e re su l t e > e r e o £ . I n e l ec t ing any payment " ^ ^ ' f ^ ^ . f , ^1 ^^f^^the^'^i ht of f i r s t r e f u s a l for ^ X J i Z , o f M i ^ ' u n e at i t s f a i r mar.et v a l u . .

APPENTIX : page 2 of 3

4. Project Coats for Supplemental Work Schedule (Appendix lA} s h a l l be paid by Rai lroad.

it no time she l l Railroad request reimsursement from State . 1 ^ s n a i l State reimo-^se R a - r o a c for Project Costs for quantities or units of '-or/-, cone u.ncer t.he Massena Bra.ncr. Wcrr. Sc-.eou.e (Appendix 1£; m excess cf q-.^antities cr ur.its cf respective items

of work done by Rai.roac at Rai lroad's expense '^ncer ene Supp.e-aental Work Scnecule 'Appendix lA - . State s.-.a.l provide State personnel at no cost tc Railroad for tr.e purpose cf ccrtif%-inc the quant i t ies or units cf work done u.ncer tr.e .Massena branch wo.k schedule (Appendix I B ) , whicn c e r t i f i c a t i o n s h a l l not be unreasona.. withheid.

6. This Acreement is exec.^tcry only to the amount of m.o.ney require: to reimburse t.he Railroad fcr ?ro ;ec t Costs fcr tr.e work aone uncer the Massena Branch Work Schecule lAppe.ndix IB) .

i

CONN 190* (1/731

STATE OF NEW YORK

DEPARTMENT OF TRANSPORTATION R A Y M O N D T . S C H U L E R . C O M M I S S I O N E R

X n 1 b 1 t

''age JO .,"r7,5

iiiiiiiii'lli ilii

lllllill!""

CONSOLIDATED RAIL CORPORATION POUGHKEEPSIE - SCHENECTADY HIGH SPEED RAIL TRACK AND SIGNAL PROGRAM PIN S935.12 , 3<^/

.\ n 1 n 1 I J .\L -n

.me _ 1 o t h ."

POUGhXEZFSIE - SCHENECTADY HIGH SPEED RAIL

TRACK AND SIGNAL PRCG.RAM

This Agreement dated Klarch 1, 1977 by and between the people of the State cf Hew York (hereinafter referred to as State) acting by and through the Ccmissicner cf Transportation and the Depart.-Tie-nt of Transportation (hereinafter referred to as Coronissioner and Departr^nt, respectively) with offices in the Admnistration and Engineering Buildin?:, State Canpus, Albaro', New York, 12232, and the Consolidated Rail Corporafion (herei.^.after referred to as Railroad), authorized to do business in New York State, with i t s main offices at 6 Penr. Center Plaza, Philadelphia, Pa. 1910-4.

W I _ T N E S S E T H

WHEREAS, the continued abandorj?.ent and curtailment of essential r a i l transportation services in the State thureaten the econocy cf the State, further exacerbate the probie.T.s attendi-ng the energy crisis and the quality of the e.nvironment, and adversely affect emplcituent levels and commercial and industrial enterprise within the State; a.nd

WKZPilAS, I t is ' / i t a l to the well beir^ of the State and It s citizens that steps be taken to assist in the preservation and Improvenent of service on essential lines and to insure the preservation, rehabilitation and upgradir^g of the f a c i l i t i e s necessary to the provision of such ser'/ice; and

WHEREAS, Section l-i-d of the Transportation Law authorizes the Conrrissicner to enter into contracts for thc purpose of naintaining and improving r a i l transportation lervice; and

WHEREAS, Chapter 257 of the Laws of New York of 1975 appropriated f'jnds to the Department for the payrtent of the State's share of the cost of ccnstruction, i.Tprcve.T.ent or re.habilitaticn of ary railroad capital f a c i l i t i e s a-id any capital ixprove-Tent used in connection therewith pur.iuant to the provisions of Section 14-d of the Transportation Law;

NOW, TKE.REFCRZ, the parties hereto, in consideration of the mutual promises, conditions, terms, and obligations herein contained, do agree and covenant as follows:

ARTICLE ONT

DEFINITICNS

"Conmissioner" r.eans the Commissioner of Transportation of the State of New York.

\ n i r-1 ( .) A, - •

"State" resins the State of New York acting ay or through the State Department cf Transportation.

"Railroad'' r.ear.s the Consolidated Rail Corporation.

"Amtrak" means .'âtlor.al Fîlroad Passenger Corporation.

ARTICLE 7.V0

CAPITAL U.CPP.OVg.giNTS

Section 2.1. Descrititicn of Work.*

Railroad agrees to provide for the accnmplishT.ent, at State erpense, of the work described in the Work Schedule (Appendix 1) of this Agree-T.ent which is attached hereto and r.ade a part hereof and in accordance with specifications approved by Conmicsioner. -P.ailroad-also agrees to acquire, t t State expense. •the-equipment described in tne r.Quioment Schedule4 ADPeiioix 2> of this Agreement v.hich is attached hereto and .~.ide a part hereof. Thc-!TK>netary amounts specified in-said Work .' • h' - '''' "' Eoui'pmer.t Schedule-for particular items of work and eouipnent are estimates, and-t.he .tra.".sfer of mnount'? between i rprT.i r.tftri a.i IT êcessarvs Any time ILT.its for t.he accomplishment cf wDrk v.htch are set forth in said V.ork Schedule may be extended or modifiad by the Commissioner as he dee.ms necessary.

Section 2.2. Perform.ancg of V/ork.

Railroad agrees to 'undertake and proceed expeditiously with the work to be acccm.plished as described in the Work Schedule, and to complete said v;ork Tdthin the time ILmits specifiedîn said Work Sched'J-e; provided, however, that Railroad .^hall not be. oblipatp-1 t3 i-ri?, \' r'-.p.'.r. Cor the icccm.plisLment of said wor.-c described in t.he V.'ork Sched'jie ••••nich are in excess of pav-r.enis to h^nnrip by .State •ir^-'-- A-r^q-er^.t. .=Ailroaa aiso agrees to --ixpeditiousiy acquire the- t,rack equip.cent described in the Equipment .. •Schedule.

Section 2.3. .Maintenance.

Railroad egrees to maintain the tracks, roadbec and signal systems covered by this Agreement as well as ancillary f a c i l i t i e s used in provldir.g services -.hereon in good order and repair in accordance with Federal ?.ailrcad .ivd.mirJ.straticn track safety standards and the Commissirner's standards cf maintenance as specified in Part A cf the Vainte.nance Schedule (Appendix 4). Railroad-al::.o acrees.to_ maintain'the t r a c k - e c u l c - / j n f ~ c v e r c d " b ; . - ^ ^ ^ ^ '-' • and^repaTr i n accoraance with the •':cmm.issioner' 3 standards of raxntenance -â-specified in Fnrt ct' -.he '.'.-'Inte"!?.nee Scheaule '. Apcei'.dix 4). The Cocaissioner's stanaarcs cf m.aintenance s.nuil be as specified in Appendix 4.

A !'l 1 I ' 1 I

Section 2.4 Rei.mbursement (Track, P.oaabed. Signals ar.d I:

State agrees to reLmb-urse .Railroad for the entire cost of track, roadbed, signal system.s a.nd track equipr.ent, as described In the attached Work Schedule (Appendix 1) and Equipr.ent Schedule (•Appendix 2)-including the cost of prelir.irary and construction engineering, removal and restoration of associated f a c i l i t i e s and roadbed stabilization work (as necessary-), as well as for f a c i l i t i e s provided by Railroad 'jnder this Agreement in corj.ectlcn with said work, pursuant to the Bro-wn Book dated J-une 1, 1930, which together with amendments thereto .has been issued by Coamdssioner. I t is Intended by the parties hereto that by reference to said Brora Book and amer.d.Tents thereto i t is agreed that the provisions thereof are deemed to be included herein and are accepted as binding upon the parties to t.he sa.T.e extent and with the same force and effect as i f said Brown Book and am.endments thereto had been set forth in and made a part of this Agreement.

Railroad shall submit to Commissioner costs pursua.nt to Bald Brown Book for the work performed or f a c i l i t i e s provided by Railrcad, j eaa -the-value-of-materials -rtfcovered; as evidenced by detailed i.nvoices acceptable to Comnissioner. State shall rei.mb'.irse Railrcad in the amount of the approved costs so submitted, but in no event shall the total cost to State of said work exceed the total amounts specified in the Executory Clause, Schedule 3(11), hereof, .except as such -pst^mav hereafter be increased cursuant to an .amendea a^ree.Tent,_ A l l costs so sub.mitted by .-Railroad shall be ""subjeTT^L; tipp:"J'7il by Comm.issioner and to audit by the State Comptroller. Reir.bursement therefor by State to P.ailroad w i l l be made in-monthly progress-payrents as to work perform.ed cr fa c i l i t i e s provided by Railroad in accordance '^.th approved certificates showing the cost of t.he work so perform.ed or .'"acillties provided. Upon the completion of a l l work by Railroad, a fLnal statement of costs shall be submitted tc State within ni.nety (90) days. The f i n a l reim.burser.ont pa>-ment to Railroad shall be rade within th i r t y (30) days from the submission of the f i n a l statement, subject to fi.nal audit by the State Com.ptroller.

. Section 2.5.—Use and Disposition of-Facilities and Eouipr.ent.

Railroad agrees that so long as i t operates traLns for i t s ovm account or operates passenger trains for AI.flRAX or for the successor of ^ :?AK during the pericds cf tim.e specified fcr each project in Appendix 4 over tracks upon which work has been performed by Railroad pursuant to this Agree.ment, none of the tracks or related f a c i l i t i e s covered by this Agreement, nor any item of equipm.ent acquired by Railroad in whole or in part ^.-ith funds wnich have been or w i l l be reimbursed by State pursuant

to this Agreement, s.hall be sold, rendered 'inusable. relinquished or disposed of by .Railroad without the e.xpress written consent of Commissioner f i r s t having been obtained.

Section 2.6. Vanner of Performing V/ork.

The work covered by this Agreement may be performed by the emplc>T.ent of the forces and the use cf the equipment of Railroad cr by contract, provided, however, that State may elect with Rail.'-oad's approval to perform any such work -with i t s own forces.

Section 2.7. Soeeds and Speed Restric

At the time t.hat a l l item.s of work at a particular_ location are com.pleted as provided for in Appendix 1, a l l speed restrictions in effect at that location shall be removed and the allowable sneed at such location shall t.hereafter be the sam.e as the higher cf tne then prevailing allowable speeds at either end cf th.-.t location, or, where applicable, the maxim.un design speed for such location, generally as set forth in Appendix 3. Neither this Section 2.7 nor any appendix referred to herein shall create any legal or equitable right, rer.edy or claim in any third party, unless specifically provided for in t.his agreement, regardless cf the fact that any such third party mdcht be benefited by_the perfcr-nances herein premised. Without in a.ny way diminishing, limiti.ng, or varyi.ng the'cbli-aticns of t.he Railroad as .herein set forth or ^ referred to, the parties a.jree that this Section 2.7 is not i.ntence^ to constitute a e^aarantee or -.varra-nty of a.ny kLnd by either the r a i l road or the State in favor of any third party.

ARTICI

MISCE1LA.NZ:::3

Section 3-1. Force Va.je'ure.

The obligations of the parties here-jnder shall be subject to force majeure (which shall include strikes, r i o t s , floods, accidents, acts of God. and other causes cr circ'u.m.st.ar.ces beyond the contrcl of the party claiming ?uch fcrce majeure as cn excuje for non-:=rfcr.mcj;ce), but cnly as long as. and tc the extent^that, such force .T.ajeure shall prevent performarxe of such obligations.

Section 3-2. Successors p.nd Assi,^.r.

All thc covenants and oblicaticn:: of tlic r^'i-ti-es hereunder shall bind their successors and assicn.' .vnetl-.cr t r not expressly assum.od by such successors and assigns.

Section 3.3. Intprprgtaticn.

The Article and Section headi:-.i:c utilized in this Ai:recm.ent are for convenience only and shall .not affect thc construction hereof.

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t' a H J J (1 r t -

This Agreem.ent shall be construed -irY-iaocordance-wlttr-ar.d-gorerned -HY-th -.,ft»« r.r the .. LAte of-N'ew York. A l l Appe.ndices attacned hereto are i.ntegral parts of this Agreem.ent and the previsions set forth in the Appe.ndices s.nail bind t.he parties hereto to the same extent as i f such provisions had been set forth i n their entirety in the :ain body of this Agree.ment. .^lothing expressed or implied herein shall give or be construed to give to any person., firm or corporation other than State or .Railroad any legal_ )r equitable right, rem.edy or claim under or in respect of this Agreement. .Maither this Agreement nor any of the terms hereof may be terminated, amended, supplem.ent€d, waived or modified o.-ally, but only by an instr'u.ment i n writing signed by Comiaissioner and Railroad 'inless a provision hereof expressly penmits either of said parties to effect termination, amendment, suppleme.itation, waiver or modificatin here'onder, i n which event sucn action shall be taken in accordance vri.th the terns of such provision.

Section 3.4. Severability.

I f any part of this Agreem.ent is determ.ined to be invalid, i l l e g a l or u.nenforceable, such determination shall not affect the validity, l e r a l i t y or enforceability of any other part of this Agree.ment a.nd the remaining parts of this Agree.m.e.nt shall be enforced as i f such i.nvalid, i l l e g a l or unenforceable part were not contained herein.

Section 3-5- Notices.

Any request, demand, authorization, direction, notice, consent, waiver, or other document provided for or permitted by this Agree.ment to bo rrade upon, given or funished to, or ^ ^ l ^ d with one party by the other party, shall be in vnriting and shai. be delivered by hand or by deposit i n the m.ails of the United States, postage prepaid, i f to Commissioner, in an envelope addressed as follows: Ccimaissioner of Transportation

State of New York Departm.ent of Transportation 1220 Washington Avenue State Cajnpus Albany, New York 12232

and i f to Railroad, Ln an envelope addressed to the attention of: General Manager, Northeastern Region Consolidated Rail Corporation 54 Meadow Street New Haven, Conn. 06506

Each party may change t.he address at which i t shall receive notification hereunder by notifying the other of such change.

Section 3.6. Couiitrrvarts.

This Agree.ment may be executed in ani' num.ber of counterparts, each of which shall be an original.

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Section 3.7. Relati-nshl? of Parties.

The relationship of the Railroad to the State is that of an independent contractor, and said ."ailroad, in accordance with i t s status as such contractor, covenants and agrees that i t - f l i l ^ conduct i t s e l f consistent with such status, that i t w i l l neither hold i t s e l f out as nor claim to be,an officer or employee of the State by reason hereof, and that i t w i l l .not, by reason hereof, laake any claim, demand or application to or for any right or privilege applicable to an officer or employee of the State, including, but not limited to workm.en's com.pensation coverage, unemploj-ment insurance benefits, social security coverage, or retirement membership or credit.

Section 3.8. Records and Documents.

Railroad shall maintain books, records and supporting docu,m.ents in con.nection 'vith thc work to be accomplished pursuant to this ,\grec.ment. A l l book::, records, b i l l s , vouchers, payrolls, invoices and other docum.ents of every type and description pertainir.g to the work ur.der this Agreem.ent nhall be available to Commissioner or the State Comptroller, or their authorized representatives, fcr i.nspcction and audit. A l l costs charged to ^ta-e u.nder this Agreem.ent shall be supported by payrolls and time records, material consum.ption reports, business expense statements paid invoices, and contracts evid(;ncir.g in detail the nature of t.he charges for which reim.bursem.ont is sought.

•Section-3^9-:—-AssiKn-ment of .'Igreemen .

Railroad agrees ..nor-to assign, transfer, convey, sublet or otherwise dispose of this Agree.ment or any part thereof, or ol Railroad right, t i t l e or interest therein or its power to execute such Agree.me.nt withouftne-prior writtenconsent ol commissioner.

Section 3.10. -Approval '.'f Contracta-.

Railroad shall not execute any contract, subcontract, or amendm.ent thereto, or obligate i t s e l f in ar.y other r-anr.er with any thi-d "ar*y with respect to the work to be 'undertaken purs-jant .o this 4reement without the. prior 'ATitten approval of the Comjaissioner.

Section 3.11. Effective Pat.? of A reement.

This .\croc:nfnt shall take effect at tlic ti.me at which i t is approved by Uic State Comptroller.

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( .I.Ai -

o t

Section 3.12. Termination Clause.

State reserves the right to terminate or suspend this Agreement, for any reason whatsoever. Such right of termination or suspension shall be exercised, at the discretion of Commissioner, by delivery of written notice thereof to Railrcad, and such termination or suspension shall thereupon take effect immediately. However, nothing in this Agreement k)r in this Sectirn 3.13 shall relieve State of i t s obligation to reimburse Railroad for costs and expenses which Railroad has incurred or committed i t s e l f to under the terms or for the purposes of this Agreement prior to such termination or suspension.

Section 3.13. Risk of Liability.

(a) Railroad agrees to indemjiify and save harmless State from any and a l l l i a b i l i t y fcr injury to or death of ar^r person or persons and for loss of, damage to, or destruction of any property or equipment v.'hich arises from activities conducted by or on behalf of Railroad pursuant to this Agreement.

Cb) In case suit shall at any time be brought against State asserting a l i a b i l i t y against which .Railroad agrees to indemiify and save harr.dess State, .Railroad shall, at i t s om cost and expense and without any cost or expense whatever to State, defend such suit and indemnify, and save harmless State against a l l costs and expenses thereof and promptly pay or cause to be paid any f i n a l judgment recovered against State; provided, however, that State shall prom.ptly upon the bringing of any such suit against i t give notice to .Railroad and t.hereafter provide a l l such information as may from ti.me "o time be requested. State shall furnish tc Railroad a l l such infor.-.ation relating to ciai.ms made for injuries, deaths, losses, damage, or destruction of the type covered by this Section as .Railroad .may from tim.e to time request.

' ^ r l i n 11 J.\l>t> /

Fase - o I M 5 -8-

Section 3.14. Documents Form.inc Aareement.

This Agreement s h a l l consist of this document and the

following attachments:

Appendix 1

Appendix 2

Appendix 3

Appendix 4

Appendix 5

Schedule B

Work Schedule

, Equipment Schedule m

Maximum Speeds f o r Passenger T r a i n s A f t e r C o m p l e t i o n o f Appenoix 1 Work Schedule

S t anda rds o f Main tenance

S p e c i a l P r o v i s i o n s

New Y o r k S t a t e R e q u i r e d Standard Clauses

CONSOLIDATED RAIL CORPORATION PEOPLE OF THE STATE OF NEW YORK

By.

EStCU. .r

«. •-r....:'jsioNW

By. yt Commiss ioner o f ' t r a n s p o r t a t i o n

1/

< „ . . • • ,

ApprDved_ > i i \

19

A t t o r n e y Genera l

Approved

/ ^ F o r ^ t h e S t a t e ' C o m p t r o l l ^

f i. .\ h I b 1 i. 1 .1 - •

2'I o f 5.

COMMCNWEALTH OF PENNSYLVANIA ) ) SS

COUNTY OF PHILADELPHIA )

On this Jio'^ day of 4^^../^ ^^77,

before me personally came R. p. .Soence .

to m.e known and known to me to be the President

of the Conaolidated Rail Corporation described in and which

executed the foregoing instrument, and he acknowledged to m.e

that he executed the same.

Notary Public

WORK SCHEDULE (a)

A. 1977 Work Schedule (b)

rk K(P to ?.(P ?.liles Days Location

li^l32<»^ Welded Rail (including Surfacinfr)

Appendix 1 Page 1 of 5

( . \ t i 1 h I I „ i .'.M-

t'HL'e 3U c\ i-S

Estimated Cost

2 113.4-126. 5 13.1 65 2 86.8- 89. 7 2.9 15 2 94.3- 104. 3 10.0 50 S 143.7-151. 5 7.8 40 '1 126.5-141. 8 15.3 C

s 156.5-•159. 6 3.1 C

Hudson-CP126 $1,520,000 Rhinecliff 3A0,000

Barrytown-Germ.antown 1,160,000 CP4-CF6 1,005,000 CP126-Rensselaer 2,300,OCO CP8-Schenectady 450.000 Sub-Total $6,775,ecu

2. Ties, including Surfacing Quantity

2 87.0- 89.7 2.7 8 2,700

2 94.3-101.0 6.7 18 6,700 Sdg 143.7-151.5 7.8 20 8,000

s 143.7-151.5 7.8 20 7,800 s 151.5-156.5 5.0 20 5,000

s 156.5-169.8 13.3 30 20,000 1 99.5-116.7 17.2 43 17,200 2 75.7- 80.0 4.3 11 4.300 2 82.0- 87.0 5.0 13 5,000 1 75.7- 88.0 12.3 31 12,300 1 88.0- 95.1 7.1 18 7,100 1 U6.7-121. 5 4.8 12 4,800

New ill 126.5-141.3 15.3 C 49,000

Rhinecliff Barrytov.Ti CP4-CP6 CP4-CP6 CP6-Cr8 CP8-CP11 Germantovm Hyde Park Staatsburg Hyde Park Rhinecliff Stockport CP12D-Rensselacr Sub-Total

$ 88,000 211,000 223,300 208,000 143.300 633,400 555,000 140,000 163,000 400,000 231,000 160,CX

1.500. OX $4,OP6,COO

3. Bridge TLmber (including spaci.nr bars, painting upper fla.nge. metal wai -.vay ;

S 160.4-160.5 0.1 15 '725 Mohawk River 5 81.000

4. cab Signal Wayside Installation-Desim and Construction (1977-78)

S 142.5-170.0 27.5 1 75.7-141.3 66.1 2 75.7-141.3 66.1

Rensselaor-CPU S 415.CCO Rensseiaer-Pourhkeepsie 795,000 RensselDor-roughkeepsie '^.CCO

Sub-Total $2,005,

Appendix 1 ' Page 2 of 5

f l I h i t • J A ( - I , )

I .JSC ,-1 .It u5

5 Restoration of Traf f ic Control Signal Syste.m

S 156.5-170.0 13.5 Canran-Hoffmans $ 275,000

6. Ditching, Brush Cutting, Restoration of "'ayside Signs

S 156.5-169.8 13.3 Carman-Hoffnans $ 33,000 r

7. Curve re-alignm.ent to larger radius (to be approved by Conrlssicner)

S 164.C-167.1 3.1 _ * 75,000

8. Install Traffic Control Signal Systems on New Track

NPW n 126.5-141.8 15.3 • $ 450.000

1977 Sub-Total $14,350,000

r 1978 Work Schedule ( c )

Trk ?.{P to ?^le3 Days_

1. New 132;*' Welded Rail ( inc luding Surfacing)

Location


r-.\ti i t) I L ____ . .l.M 1

('asee - 'it

Esti.mated Cost

s 159.6-169-8 10.2 40

s 151.5-156.5 5.0 40

s 141.8-143.7 1.9 10 2 104.3-111.3 7.0 35 2 7 9 . 9 - 35.9 6.0 30 2 85 .9 - 36.3 0 .9 5 2 89 .7 - 94.3 4 .6 23 1 95.1-111.4 16.3 82

Schenec-.ady-Hbf f mans $1,200,000 CP6-Sc-her.ectady 550,000

Rensselaer 300,000 Germantcvm nor th 881,000

Hyde Park-Staatsburg 745,000 S. of R h i n e c l i f f 110,XO

Rhinecl i f f-Barr-ytovm 562.XO Barrytown-Cermantovm 2.030.030

Sub-Total $6.;78,CX

2. ' Ties, including: Sto-facir.?

1 yNew ^2

2 1

2 1

121.5-126.5 140.5-143.7

80.0- 31.0 9 5 . 1 - 99.5

5.0 3.2 1.0 4.4

13 10

5 12

Quantity

5,OX 4 , 8X 1.5X 4 , 4 X

Stuyvesant Rensselaer Hyde Park N. o f Barrytovm Sub-Total

3. Curve re-align.m.ent to larger radius than 1 30' curve

104.3-105.0 104.3-105.0

0.7 0.7

Germantov.Ti Germanto-,m Sub- ' iOtal

$ 170, OX 149, XO 50, OX

150. CX $ ?19.X0

$ 25.XO 25.OX

f 50, CX

4. Bridge Ti.mber (Including soaci.ng bars, painting uccer flan

metax •.vax.c.vay ;

1 118.5-113.6 0.1 15 485 2 118.5-118.6 0 .1 15 485 1 126.1 2 40 2 126.1 2 40

4 2 126.7 2 32 til 126.7 2 32

S 158.9 3 82 S 165.3 2 56

5. Cab Sir-.al Test LOOP I nn ta l l - 1 t i c t i

Stockport Stockport Bridge 324 Bridge 324 Bridge 325 Bridge 325 Bridge 373-DiH Bridge 391-'.';altons

Syracuse, vjrana 'o!'.ix'vx • wcujr

Cab Sirnal Unit Installation on Locomotives

12 Units % $15.XO

1978 Sub-Total

$ 29. XO 29,CX 3.X0 3,OX 2,X0 2,000 5,X0 4.OX

$ 77. XO

% 150,XO

$ ISO.OCC

$7,354,CX


I tl 1 b

:' a u c

1979 Work Schedule ( c )

1. New Ii2#'-yelded Rai l ( includir .g Surfacing)

ew

Jew

1 113.4-115.1 1.7 9 1 111.4-113.4 2.0 10 1 75.7- 95.1 19.4 98 1 115.1-126.5 11.4 57 2 111.3-113.4 2.1 12 2 75.7- 79.9 4.2 23

#2 126.5-141.3 15.3 70

2. Ties, including Surfa cin£

2 81.0- 82.0 1.0 4 2 89.9- 94.3 4.4 10 2 101.0-113.2 12.2 30

) 2 126.5-140.5 14.0 40

3. I n s t a l l T r a f f i c Control

1 89.5-126.5 37.0

Hudson S. of Hudson

Poughkeepsie-Barrytovm Hudson-CP126

" S. of " idson CP75 -fiyde Park CP126-Rensselaer Sub-Total

Quantity

5 X 2,200 6.100

14. OX

9^^.4-126.5 3- i . l

N. c f Horde Park CPS9-CP94 Germantovm CP126-Rensselaer Sub-Total

CP89-CP126 CP94-CP126 Sub-Total

$ 250, CX 244,CX

2,400,X0 1,440,CX

265, CX 565. CX

1,836.OX $ 7,OX,OX

$ 25,XO 100, XO 275,CX 500.000

$ xo,xo

$ 750,XO 650.COO

$ 1,400,XO

4. I n s t a l l Hi.~h Speed Crosscvers-Rem.o

CP 89 Rhinec l i f f 1 CP 94 Barr/tov.-n 1 CP 105 Bermantcv.Ti 2 CP 113 Hudson 2 CP 123 Stu:,'V'esant 2 CP 1 Rensselaer 1 CP 6 Karner Road 1 CP 8 Carman 1 CP 9 Schenectady 2 CP 11 Hoffrans

Sub-Total 2

5. 21 S-ffitch Heaters f o r !Iew Rem.ote Crossovers

1979 Sub-Total "UO^ SCHEDULE TOTAL

% 230,XO 230,CX 370, XO 370, CX 370, XO 230,OX 230, XO 140, CX 370. CX 370. CX

$ 2,910,.X

$ 126, CX

$12,336.CX $34,040,XO

^ Appendix 1 Paee 5 of 5

L . v n l i t . „ t J A l

F a ii c .) 4 o t t>

Notes applicable to Appendix 1

C - probably done by contract. S - single track,

(a) -- A l l work in this Appandlx is to be completed in accordance with applicable Federal .Railroad Administration Track Safety Standards and Federal Railroad Administration Rules, Standards and Instructions for Pailroad Sig.nal Systems. Track shall be rehabilitated to the indicated standard:

FRA Class

MP 75.7 - }.(P 78.9 5 MP 78.9 - I'P 87.7 6 MP .87.7 - }.(P 124.3 5 MP 124.3 - CP 1 6 CP 1 - CP 5 4 CP 5 - MP 148. 3 5 MP 148.3 - MP 153.0 6 MP 158.0 - p 161.4 4 MP 161.4 - MP 169.3 6 MP 169.3 - CP 11 4. '

Cb) - A l l TOrk u.nder the 1977 Work Sched'ule is programm.ed to be completed prior to K'arch 31, 1978, except for the signal work.

(c) - Msignment of prio r i t i e s for work itews shown in this schedule v.hich are to be perform.ed in v;ork schedule calendar years subsequent to 1977 shall be mutually agreed upon by the parties and approved by the CcrJti- cner prior to October 1 of t.he year preceding that in v/hich the work is program-med.

f

EQUIPJ.ENT SCHEDULE

Appendix 2

h 1 I 1 I , .J . \ l - n )

(Mae .K' o t b5

EQUIF.OT

/ 2 Spike P'ullers / l Tie Cuttsr " i / \ Scarifier </ y \ Tie Destroyer

L.o. 2 Tie Handlers Tie Inserter y

i.>. 1 16-Tool Tamper ^ y*-J. Rail Lifter ^ -—Cz Tic Borers

y 4 :><3

/

9 JTi

t.^'2 Auto Spikers </ •^2 Ballast Regulators, i"^, tf"^ ^ Production Tamper*^ ^ i T ^ / ' J "

i -o . / 'Bo l t Machines / W r " w/l Cross S lo t t e r ^ ^ / y \ Backhoe w / T r a i l e r Z i , 7 » < ^

1 160 CFM T r a i l e r C o m p r e s s o r ^ ^ «..i>'6 I C X O B I Push Trucks'^

5 Portable P.adios

VEHICLES

7 r<J

^2 Buses 1 Fuel and Lube '

f.,C.l 1-Ton Pickup-i.^.l Pickup" {..(j.l Repair Van ^ ^

/ \ Boom and Dump" 7 - J

Estimated Cost

3 .1(7 C3

Estimated Cost

Ml, i'l!

$ 7 X , 0 X

g.7

2.1, T ' i ro . a O

$120.COO

EQUin.OT-SCHEDULE TOTAL $820.XO

3 9 r T - V

GRAND TOTAL OF CONTRACT §34,360,OX

App""' "'''

t \ n 1 h 1 t ( J .A u - e>!

•• MAXD.lU'.r SPEEDS FOR PASSEh'GER TPJIINS ATTER CCMPLETION CF APPENDIX 1 WORK SCHEDULE

MP to W

75.7 - Hyde Park (78.9) 78.9 - 87.7 87.7 - Rhinecliff (89.2) 89.2 - 121.J 121.5 - 124.3 124.3 - 126.5 126.5 - 140.5 140.5 - CP 1 CP 1 - CP 2 CP 2 - CP 3 CP 3 - CP 4 Trk 2 CP 4 - 145.0 Trk 1 145.0 - CP 5 CP 5 - 148.3 U8.3 - 158.0 158.0 - 160.2 160.2 - 161.4 161.4 - 169.3 169.3 - CP 11

December 1976

70U 70 70 fO. 70 70 70 70 15 20 29

.40 55 .TO 70

Without Cab Signals

79 79 79 79 79 79 79 79 30 30 30 50 79 79 79 60 79 79 79

With Cab Signals

90 ,95 80 90 . 85 110 110 110 30 30 30 50 80 90 110 60 80 110 80

Additional Curve Restrictions unless curve«^ »Hgned to lengthen radii ,^see Appendix 1)

Curve at 76.6 Curves 92.6 - 93-1 Curves at 93.9 - 99.4 Gerranto-.m 104.4 » Curves at Hudson 114.2 - 114.3 Curve at 119. 5 164.5 - 165.2* 165.2 - 165.6«

70 70 70 70 45 70

79 79 79 75 50 75 79 70

80 80 85 80 50 80 90 75


.Ml ! 15 1 I J AL - o (

S7AJJDARDS CF I.IAINTEJu'L'.'CE

PART A - TPJVCK MID SIGNALS

Upon com.pletion of the work specified in Appendix 1 and thereafter for a period cf eight (3) years from the end of the calendar year In which each segm.ent of such work itemJ.ced in Appendix 1 is ccr.-pleted, the .'ailroad shall mai.ntain the main tracks i n each segm.ent on Railroad's property i n a condition that m.eets or exceeds a l l requirements of Federal Railrcad Administration Track Safety Star.dards for the class cf track designated in Appendix 1 for t.hat segm.ent and t.he signal syctem in each segr.ent in acccrca.noe vath Federal Pailroad Adiiinistraticn R-ules. Standards and Instructions for Railroad Signal Syste.ms. provided t.hat Amtrai, or successor of Amtrak, by agreem.ent -.rLth .Railroad shares the track ana signal UBintenance costs on the line of railroad bstween .V? /..7 ^ Poughkeepsie ) and CP 11 (Hoffmans) based upon a f a c i l i t y usage form.'.ila to be set forth in a separate agreement betv.een .Railroa- and Amtrak. In the absence of a separate maintenance agreement „e.-.veen Railroad and /-mtrak for the mainte.na.nce of Pailroad's tra:-'._a.na other f a c i l i t i e s used by A.mtrak between ?.? 75.7 (Poug.hksepsie ) ar.d CP 11 (Hoffma.ns), Pailroad s.hall mai.ntain t.he main tracics and sigr.a-s at a level cocm.ensurate v.'ith ?.ailroad's maintenance respcnsi.i-ities set forth in other agreements with Amtrak.

Upon completion of aforesaid eight (8) year period, and for a period of at least t.hirty (30) years f."om the date of this ^.greement. --î--road shall maintain the main tracks a.nd signals on .Railroaa s proper./ between 75.7 (. oug.nl-.eepsie ) ar.d CP 11 (Hoffmans) at a level •.v.nich is the highest of the fcllo7,-ir.g:

a) The level specified in a separate maintenance agreem.e.n. between .âilroad and Aittrak or the successor cf^-T.trai, whereby ji.mtrak agrees to s.hare the track a.nd si=,..ax maintenance costs based upon a .'"acility usage form".ila to be set forth i n said maintenance agreement.

b) In the absence of a separate maintenance agreement bet-een .Railroad a.na A.mtrak fcr the rainte.na.ncs ot _ Railroad's track and ot.her f a c i l i t i e s usee by mtrcK between 75.7 (Poug.hkeepsie) and CP 11 (Hoffmans), Railroad shall mai.ntain main tracks a.nd si.gnals either at a level com~.ensurate v.ith .Railroad's naintenance responsibilities set forth in ot.her agreements -vith

_ Amtrak or at a level co.-mens-urate with f a c i l i t y usage, whichever is higher; provided, howeverthat i.n t.he

— . event that passenger service is disccnti.nued. .-jai--road shall only be re>v^red to maintain the mam trac-s and sigr.ais at a level corjr.ens'urate with f a c i l i t y usage.

^ . PART B - TPJVCK EQU1. .IEKT

m track equipment Tûrchased u.nder the term.s of this agreement as l i s ted . i n Appendix 2 s.hall ce maintained by .Railroad Ln good operating orde.,

repair, and condition.


f. X n : t) 1 I 1 .1 \L - 1 ' )

Cue,- ' 5

SPECIAL P.ROVISICNS

•>Jf 1. Durir" such timies as the track equipment purchased 'under the terms of this Agreement as listed in Appendix 2 fs not required fcr use by Railroad ior t.h;.- purpose of aoccm.plishing the track work specified i n Appendix 1 of this Agreement or for the purposes of accomplishing track v/ork pursuant to any future agreem.ent between Railroad and State or for ar.y ether track progra.ms 'u.ndertaken by Railroad in New York State, .Railroad agrees to make said equipment available for the accomplishjr.ent of track work on other r a i l lines i n New York State at t.he direction of the Commissioner. This provision is effective for a period not to exceed the useful l i f e of the equipm.ent commencing upon the date of receipt of said equipment by Pailroad.

2. Relayer r a i l and other reusable track and roadbed materials released from .Railroad property as a result of the v.ork specified in Appendix 1 of this Agreement, or equivalent a.m,o'unts thereof, with the approval of the Comnissioner shall be programmed fcr installation in other tracks of Pailroad in New York State. State progra.T.s shall take precedence i n the use of such materials over progTa.m.s undertaken by Railrcad.

3. Performance of work on Amtrak's property is contingent upon .Railroad secu^irj? Amtrak's permission to enter and use A.mtrak's property for . the purpose of acccmplis.hi.ng that portion of the work specified in Appendix 1 which is on Amtrak:'s property. State w i l l use i t s best efforts to assist .Railroad in obtaining said permissicn from Amtrak,

4. Railroad shall seek Amtrak's authorization to reuse cn Railroad's lines in New York State wit.h the approval cf t.he Ccmmissicner relayer r a i l and ether reusable track and roadbed materials released from Amtrak's property as a result of the work specified in Appenaix 1 of this Agreement.

5. A l l schematic plans and estimates associated with the signal system work included in Appendix 1 of this Agreem.ent shall be submitted to the Commissioner for review and approval before construction work begins.

6. A l l track and signal work on Amtrak's property between Carman (CP 8) - ._and Hoffmans (CP 11) pursua.nt to this Agreem.ent shall be completed

to allow operation of passenger trains over the segm.ent no later than October 29, 1973.

7. The cab signal system to be installed pursuant to Appendix 1 of this Agreement shall be ccm.patible with the cab signal system prc6.am.T.ed for l.nstallaticn cn the Metropolitan Transportation Authority's Hudson Division. The cab signal work specified in Appendix 1 of this Agreement shall be completed .no later than December 31. 1979.


.\ h 1 n 1 I 1 .) .M -() >

•Linv ' o f b5

SPECIAL PROVISIONS

8. Reductions in scheduled running times over each segm.ent resultir.g from the "without cab signals" speed increases for each segment specified below shall become effective on the date of t.he f i r s t timetable issuance subsequent to the completion of the track work In said segment. Reductions i n scheduled rur-.ing tines ever each segment resulting from the "with cab sigr.als" speed increases for each segment specified below shall become effective on the date of the f i r s t timetable issuance subsequent to the completion of the cab signal installation in said segments.

MINIMUM RUNNING TIMES EXCLUSIVE OF STATION STOPS

December Without With Segment 1976 Cab Signals Cab Signals

S't-'" Poughkeepsie to Rensselaer 64 mins. 58 mins. 50 mins.

Rensselaer to Hoffmans via 42 mins. — — South Schenectady

Rensselaer to Hoffmans via 30 mins. (1969) 27 mins. 24 mins. Downtown Schenectady

Ubdifications to these speeds a.nd running tim.es shall not be made except in accordance with the results of a Computer Train Performance Simulation acceptable to both Commissioner and Railroad.

4;: ot o?

RADISSCN YARD LYSANDER, NY

/>/// z9zr.JC.

^ aa of A p r i l 10. 1973. by This A g ^ ^ ^ ^ ^ ' ^ t ^ ^ s ^ ^ e of sew York (here inafter

and between the people through the commissioner of re ferred to a . State) ^ ^ ^ ^ . ^ I ^ ^ ^ f " ^ l ^ a ^ ^ ^ ^ (here inaf ter Transportat ion and ° ^ ^ " J 4 L ; ^ e n t ^ re spec t ive ly ) with re ferred to as commissioner ^^^ring Bu i ld ing . State o f f i c e s in the Administration and E n g - ^ e r ^ j ^ ^ . ^ ^ ^ ^ ^ ^^.^ campus. Albany. New York, f^^^'^f^^"^^^^) , authorized to do at ion (hereinafter re ferred ^ - ^ . ^ ^ i ; , ^ at S ix Penn Center business in New York State , wttn P laza . Phi lade lphia , P a . 1910*-

W _ I T I L E S , S . E T H

lawi of the Transoorvation Law authorizes WHEREAS, sec t ion 14-d ^ ^ ^ ^ ^ J ' ' ^ . ^ r a i l r o a d company

the commissioner ; ° . • ^ " ^ . ^ f ^ J f t i a n s p o r t a t i o n s e r v i c e thereon; f o r the purpose of improving r a i i . f and

Kvr^rrT. CNE

npyT]<TrriCNS

• . . . , « a n s the Commissioner of Transportat ion -commissioner ^ * ^ , , ^ * ^ ^ ° , , ^ o r i z e d r e p r e s e n t a t i v e ,

of the State of Sew York or n i s ciu>jr

.B..ax=enc- n-an. --i. Vo-^^ " a t . Department oi ' M successors and ass igns . Transoortat ion, swu-v-ca-w

. R a i l r o a d - = . a i « t h . C = « o U d a t . e S a . l corporat ion, i t s

successors and ass igns .

.„= .ct. ana --- f-t: :;r.: tHror'-^ernirarir' t ion. establishment, improvement, Aareement. of r i l l f a c i l i t i e s conducted pursuant to this Agreeme.

1, h . n 1 '. _ J .AS

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"State" means t.he People of the State of New York acting by and t.hrough t.he Commissioner.

••pro]ect F a c i l i t i e s " nieans a l l mater ia ls , equipment, f a c i l i t i e s or supplies acquired, constructed, reconstructed, establ ished, improved or rehabt l i ta ted by or on behal of Rai lroad pursuant to thm provis ions of th i s Agreement for t.he purpose of or in connection with accomplishing the work set . o r t h i n the Work Schedule (Appendix 1) .

"Agreement- means this document and any attachments hereto referred to here in .

-project S i te" means any property owned or leased by or otherwise made avai lable to Rai lroad for use in connection with t.he project .

-Projec t Costs" means e l i g i b l e costs as defined by 23 CFR part 140 Sub-I for accomplishing the work set forth m t.he Work Schedule (Appendix 1 ) .

- - -Revenue Car" means any r a i l r o a d car producing gr-ss road-haul revenue to the Rai lroad i n excess of $350.00, which originates or terminates outside l o c a l switching l imi ts i s tendered to or received from the Ra i l road by any shipper located at the Radisson I n d u s t r i a l park.

ARTICLE T^O

rRPTTAL IMPROVE.MESTS

Section 2.1. Descriotion of Work.

Rai lroad agrees to provide for the accomplishment c f the work described m the Work Schedule (Appendix 1) m a sound, economical and e f f i c i e n t manr.er and i a accordance with soec i f i ca t ions approved by t.he Commissioner in J * ^ * ' Spec ia l prov is ions . Any x . net ary amounts which may be » P « ^ - ; « ^ in said Work Schedule for p a r t i c u l a r items of work are estimates and the transfer of amounts between l i n e items is permitted as necessar-;: subject to t.he pr ior w r i t t e n approval of the Commissioner

I r i! • • .1 \ i ••

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^ . -mx-s --e acccnTolish.T.ent of work whicn . ay be sec Any ti.me - imi . s - C . -.e ^t. ^x-e-'êd by the Cotmis s lo.ner for'h m said Work Scneauê may Le ex-e..-ea sy - . -e .^,^,^-

he êens necessarv, and any such exte.nsion or rnodi f i ca . . -n . i . l

not be unreasonably withheld.

Section 2-2. pgrf^^^^gg o f Work .

. . i X r o a d a , . , . ,

co%lete sa id work within the time l imi t s s p e c i . - e d J r e r ^ . n .

c^r.r-nn 2 .2 . >taintenance.

Rai lroad a , r . « to ^ . n t a . n . " - f / f / . ^ ' / . ^ . ^ r w i t - h project r a c i l i t i . . in ^ r ^ r t : % : : t " e d ' n th.'i^tta^h;^ .Ma..nt=n-the commissioner •» standards as ' P " : - : ! ^ ^ " ^ ^ soeci. ' ied in ance S c h . d u l . (Appendix 2) . for t h . P " - ° t f , ' ' i ^ . t i i n ot woric . . i d . ^ . n t . n a n « S c h . d u l . . ==mmen=.n^_at t h . =o^

d..=ril=.d in * P I = « " t " , ; : , , ^ ^ ' - ° j : c i U t i . s - i ^ i n t h . g .ogr .ph ica l I t s oun .xpens . . i t s a n c i l l a r y t a c — f o r provtdi.ig

_ l l „ i t s of t h . r o ' t ^ r p r o , « r a c i l t f i e s i n ' L c o r d s n c .

T i t i ^ ; u r a ^ ! r s « n ' d « d s ^ Of - - " . T e d L a l . a i l r o a d Administrat ion.

gagt:ian 2-4. Reimbursement.

State agrees to reimburse Rai lroad for e^t Costs, up

to a maximum of Two .^ i l l . on Seven Hundred s i t e . (52,700.000), l ess th.e cost of ^ ' ^ ? - ^ f " ^ ^ ^ r ' ^ l " ;

which Railroad incurs for - ^ - - l ^ ^ ^ ' ^ ' J ^ ^ ^ ^ ^ and attached work schedule, mcludi.ng ^ ^ ! ° / ^ ^ = ^ ^ ! t e 7 T r V l d e d by construction engi.neeri.ng. ^ ^ ^ ^ i l ^ i sa id ^ ' Rai l -oad under th is Agreement i n connecwôn wic.i Raxi-oaa un Sub-I . and amendments thereto, i t pursuant to 23 C R par- ^HU SUW . - - fe-ence to sa id being intended by t.he p a r t i e s hereto that -'^^^'^^''^.^^d that 23 ^ R part 140 Sub-I . and - ^ ^ ^ f , , ^ \ ; ' , e t n and are the provisions thereof - ^ ^ f ^ and with accepted as bi.ndi.ng upon t.he part es o -.e .am the same force and e f f ec t as ;^ = t Z ^ ' , 7 L d ^ I d e a oart of amendments thereto, had been set - ^ this Aareement. Provided, however, t.hat ^ - ^ ' X ^ ' l l Z ' f r . l l S l i g a t e d to pay nor s h a l l Rai lroad c l a i n - ^ ^ ' ^ f j " " ^ ; - , ; ^ " , , S e of f a c i l i t i e s or equipment acc-uired ny Ra. lroad -n -hole or m part with funds provided by State uncer

^ r .\ n 11) 1 I ( J \L -o

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this cr any other agree.r.ent. Rental charges for Railroad-owned equioment or f a c i l i t i e s shall .not ce eligiblr. iur reimoursemenc hereu.nder when Sta=e-fi.nanced equipment or iaciliti<is acceptable to - e railroad are made available without cos'. to Raiiroad .or the work to be accomplished ac the time and plncc required. RaiU-oad shall submit to Stace fair a.nd reason.ibU charges for che cose of Che work performed, or f a c i l i t i e s and (.cuipmenc provided, by Railroad, less the value of any Railroad-owned materials recovered, as evidenced by detailed i.nvoices acceptable to commissioner. State shall reimburse Railroad m the amount of the approved Project Costs so submitted. A l l cost^ so submitted by Railroad shall be subject to approval by Commit:iioner and to audit by the commissioner or t.he State Comptroller. Reimbursement therefor by State to Railroad w i l l be made in uonthly progress payments coveri.ng t.he Project Costs ino.:rred by Raiiroad duri.nq the oreceding month m accordance wich approve-i certificates showing the cost of che work so performed or f..cilities provided upon Che satisfactory completion of a l l work a final statement of Project Costs shall be submitted to State wichm one hundred eighty (180) days. The final reimbursement payment to Railroad •h a l l be made withm thirty (30) days from che submission of che final statement, subject to fina l aud_t.

Section 2.5. .Manner of oerfarmi.nc Work.

The work soecified in t.he Work Schedule (Appendix 1) may be oerformed by Che emplcr^ment of Railroad's manpower and equip-men- cr by aonroved contract, provided, however, chat State may elect vich R'allroad's approval to perform any .such work with its own forces and equipment.

Secttcn 2.5. I.nspec-

Duri.ng che t e m of chis Agreement, the Commissioner s h a l l nave Che r ight co enter upon t.he ?ro:ecc S i cc for che purposes of inspecting and examini.ng che condi-.ion of any Proiect F a c i l ' t y and/or reviewing any acc tv iCies condu :ceri pursuant to or in connection wich this Agreement. Sucn .:.qnc ..Iv.iLi be exercised only ac reasonable cim.es and upon prior notice CT R a i l r o a d .

.vh 1 b I t • J.M'-:

:i i! e 4-1 (1! o 5

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^>>rrion 2.7- L i a b i l i t y t>.r Loss or Damace-

Dur-ng che term of chis Agreement, ? a i l r o a d hereby . . S !h*2!^ ~ ea- --- e ent ire r i sk of los.«. and damage, from

as3ur.es and shal> -ea^ -..e eni.—-= P a c i l ' - ' e s inv and everv cause whatsoever, to the Project F a c i i . w . e s .

s h a l l continue in f u l l force and e f f e c t . In't.he event of loss or damage to an/ Project Fac i l iwy

duri.ng the term of chis Agreement, ordinary wear and tear excepted. Railroad at i t s or.tion s h a l l : (a) Place the same m good repa ir , condition and worki.ng order; c . .b) Replace cha same wich l ^ ^ ^ f r c i l i t i e s m good repair , condition - ^ - ^ ^ ^ ^ ^ ^ ^ f f / . ^ ^ , " ^ * ^ " ^ " ' ^ S i t e . The prov.sions of Chis Sect ion 2.7 are subject to ..he provisions of S-sction 3.5 and Appendix 2 .

c^^f.-^n use of Proiecc P a c i l i t i e s .

I'.aîroad s h a l l use che Projec t F a c i l i t i e s in ^ ^ , nro-— ia-u r and s h a l l con^sly wich and conform to a l l

Sâte Sû%Jcal laws, o i d i n a n c « . rules and regulations appUcaole to c h e ^ o s s t « i o n . use or maintenance Chereof. except during any p^rôd I h a t Rai lroad formally and m good ^ - f ^ " ^ « / ^ ^ , ^ , ^ i ^ , , , , , o n s V a l i d i t y or a p p l i c a b i l i t y . ^ ^ Z ^ ^ f ; ; ^ ^ ' ^ ^ ^ ^ ^ ^ ^ ^ , under chis Agreement, Project ^ " ^ ; ° % ; t l r o a ; s ^ U not be i s mad. by che State to or on behalf of sold removed frcm che Project S i t e , disposed ot or .ende- .a unisable wichout che express wriccen consent of f i r s t having been obcained and any conditions attached -o such consenc havi.ng been performed.

ARTICLE T?:: £E

MISCELLANEOUS

Section 1.1. Indem.nitv.

(a) Ra i l rcad agrees to i.ndemniry and save .narmless J ' T.-ur'/ to or deach oc any Stace from any and a i^ - l a o i - - - / — - n , u . / —

person or oersons and for loss of. carnage co, :r ^-anv orooerty or equicment which ar i s e s from a c t i v i t i e s i n d u c t e d b y ' o - r ^ . behalf of Railroad oursuar.c to chis wh..n atcributable to che fault or .negligence of ^ agents, employees, or contractors ocher Chan cie Rai l road .

r : \ f, 1 tl 1 !. J.-\L -<> I

P a i c 4;^ o \ o.^

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- , h a L i at any time be: brought agai.-.st (b) in case s u i t s h a l - at an/ aarccs co

„ * •i '?ib'i icv against which Ra i i -naa Stace asserci.ng a l .ab- .^^y ag ^îlroad s h i U . ^- °«^* indemnify and save f ^ ^ i ' " / ^ " ; . 3 t ; r exocn. . whatever co cost and expense and . ^ ^ f ^ ^ /ave harmless State State, defend such s u i t ^ ^ ^ f p r c ^ t l y pay or cause agai.nst a l l costs and ^ ^ ^ ' ^ " ^ ^ ^ " ^ " ^ / a g a i n s t State,- provided, to be paid any f i n a l ^ ^ ^ f " ^ " " " ^ ^ t.he bri . .g.ng of any such however. Chat State '^^^^ P - ^ ^ ^ ' i t ^ ^ a d and chereafter provide a l l s u i t against i t give ^ < = ^ i ! ^ „ " ° ^ * i " t i m e be raquested. State such information as may f ^ ^ ^ ' t n ' o r m a c i o n re la t ing to claims

• s h a l l furnish to Rai lroad a l l such mô ^ „ , , , , , , o n of the made for i n j u r i e s , f " * * . , ^ôad may from tir.e to time type covered by Chis Section as .Rail-oaa /

reques t .

'1 «. t- a a a i c - this Agreement

„ anv i n t ^ r i s i - t r r i n T i t h r t t ^ X ^ ^ ^ C o . " - " - '

wri t ten consent thereto.

c^;r*--:na 3T3' '^«^-Waiver . A-^^r.r. of -h i s Agreement can bo waived

so covenant or ; f ^ . f agair^t whom waiver i s except by Che wr i t ten -^r^du^gencl by a party in any regard claimed. Forbearance or J ^ , ^ ^ \ ^ .jie covenant or whaC3oever s h a l l not party, and. u n t i l complete condition to he performed ^ V ^ ^ ^ ' ^ / ^ " Covenant or condition, a performance by che other pa^ty of ava i lab le to i t under ^parcy s h a l l be - - t i r o r ^ n ^ ^ ^ u ' t y T e s r ^ t : L i d forbearance or this Agreement at law or -n CM^ / indulgence.

3 A ffneire Aareement

This i n s t r - ^ n t and --"- " ; r ? - : r c / s r a " i n r R a i U o a d , herein const i tute the ent i re ^ J f . - ' / ^ ; ^ r / n . -d .xcept by a

- r <=;haii not be amended, a i - e r e - . and i c sna-* -i^^- -.^r-ês hereto, wri t ten agreement signed by che =ar.-es

- 7 -

Section 2.5. Force .Majeure.

The obiigacior.s of che parCies hereunder s h a l l oc subject to --orce majeure (which s h a l l i.nclude s t r i k e s , n o e s , floods, . - r - d e n c s . acts of God. f i r e , lockouts, epidemics, insurrect ions . a J - I of oubl ic enemies, and oc^er causes or circomscances beyond t h ; contVcl of the parry claimi.ng such force majeure - -for nonperformance), but only as long as. and to the J*^^^' such force majeure s h a l l prevent perfor^nance of such obl igat ions , exceot chac .no party s h a l l be required to s e t t l e any s t r i k e , lockout or i n d u s t r i a l disturbance by acceding to che demands of the opposition.

Section 3.6. Successors and Assigns.

A l l Che covenants and obligacior.s of Che part ies hereunder s h a l l bi.nd the ir successors and assigns whecher or not expressly assumed by such successors and ass igns .

Section 3.7. in t erpre ta t ion .

^ h e ' A H i c i r i K d ' s e c t i o n headings u t i l i z e d in Chis Agreement are for convenience only and s h a l l noc a f f e c t the construction hereof . This Agreement s h a l l be constr-ued m accordance wich and governed by che laws of che State of New York. A l l Appendices attached hereto are i n t e g r a l parts of Chis Agreement and the provisions set forch m Che Appendices s h a l l bind t.he P^r- ies hereco co che same extent as i f such provisions had been sec forch m t.heir en t i re ly in che mam body of chis Agreement. Nochi.ng expressed or implied herein s h a l l give or be =^nstrued to give CO any oerson. f irm or corporation ocher Chan State or Rai lroad any legal or equitable r ight , remedy cr claim under or in resoect of th i s Agreement. Neicher Chis Agr e erne n c .nor any of. Che'terms hereof may be termi.nated, amended, supplemented, waived or mod.ified o r a l l y , but only by an instrument in writi.-.g-signed by Comiaissioner and Rai lroad unless a provis ion hereo. exoressly oernits e icher of sa id part ies to e f f e c t cermmation. am^ndmenc.'suDDlemencacion. waiver t r -.oru f - car. ion hereunder, tn which ovenc such action s h a l l be taken tn accordance w^t.. the Cei-n3 of such prov i s ion .

( ' '1 I 1 I ./ \ i ; - n )

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Seccicn 3.8. Mocices.

Any requesc. demand, auchorizacion. i i r e c c i o n , " ° t i c o . consenc. w a i L r . ' o r oth.er document p r - i d e a for or p e - - t e d b/ -h is Agreement to be made upon, gj-ven or -ur.n-o..ed .o. with one party by che other party. ^^^^J^ be del ivered by hand or by deposit m the mails of Jie unicea states postage prepaid, i f to Commissioner, m an envelope addressed, as fol lows:

Cocanissioner of Transportacion State of. New York Department of Transportat ion L220 washi-ngton Avenue State campus Albany, New York 12232

and i f to Rai lroad, i n an envelope addressed to the attention of:

. General .Manager, Norcheastern Region consolidated R a i l corporation^ " . _ 54- Meadow Stree t - , , . Hew Haven, Connecticut. 06506^

Each, oarty may change che address aC -which i t ^^^\^^^^^^^^^ not i f i ca t ion hereunder by notifyi.ng the ocher c f such change.

Section 3.9. Cnuncersarts .

This Agreement may be executed in any number of counterparts , eacn of which s h a l l be an or ig i .nal .

CO,.-, nr. V I Q . Re la t iansh i s of P a r t i e s .

The re la t ionsh ip of the Rai lroad to che State is chac of an mdecend^nt contractor, and sa id ^ ^ ^ ^ - ^ ^ ^ ^ ^ wich I t s status as such contractor, covenants ^ Chat i c w i l l conduce i c s e l i consiscenc - - ^ / - ^ ^ ^ ^ ^ J i ^ " wi^i nei-^er hold i c s e l f ouc as nor claim to h.- o f . . c - - or ^ ^ r J e e of Che State by reason hereof, . r d ^ ^ ^ ^ ^ ^ ^ J ^ ^ ^ by-reason hereof. make a.ny claim, iem^nc ;^.-^-=-^;r';:io;ee of anv ' i c — or pr iv i l ege aoplicable to an o t f i c e - or employee of any - ig . . - or ^ o orkme-v's coranensation che State, includi.ng but not . imi -ec o .orxme. ; cnveraae coverage, memployment insurance benenhs . s o c . a . s e c u . - . / coverage, or rer.ijrement .membership or c r e d i t .

>âee 4.S Of , >

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Section 3.11. Records and documents.

.a i lroad ^ i r a j j c m p ^ t s S ^ r p S i ^ S L t

trrirA,r;e rt"-j?r.iois%rofds u invoices and ocher documents of ^very ^ ^ P ^ ^ ^ ^ J ^ ^ - ^ J t i l a b l e to pertaining to Che work under this Agreement shall be Jhe commissioner and the State Comptroller, or - l e i ^ au«i representatives, for inspection and audit. e^^^^^r, t 1?. Approval of Contracts.

Railroad shall .not execute any contract, subcontract Railroaa snaxx iê«lf in anv other manner with

or amendment Chereto, or Q ^ ^ ate i t s e l f in J^Y ° p^.g^^ to be

r d e ^ ^ S n ' p S u I ^ i - r t h J I J^r gnt^^

? ? ^ ^ ^ : L i j L ? ^ I i = r t i : r t s ! ' a m e I S : n l r L ^ ^ ^ ^ ^ ^ ^ ^

except as otherwise provided for herein.

Section 3.13. Effective Date of Aareement.

-his Agreement shall take effect at the time at which

^ ^ ^ ^ ^

Section 3.14. Execator-/ Clause.

This contract shall b. d.eme<. executorv Jî? : °

«tent.o. -- /--if t,--!., : =.rcrunri..i:orsL:ir .ri.?c.xi:d « ^ i , - 1 t r t e v i S ' S i y i n r ^ n e y s available for th. purpose thereof. Section 3.15. Documents Formi.na Agreement.

This Agreement shall consist of this document a.nd Che following attachments:

Appendix 1 - Work Schedule Appendix 2 - Maintenance Schedule Aopendix 3 - Special Provisions p^^rract P-ovisions AD'-end'x 4 - New York State Required Cont-act ?-ovisiana

r ( .\ h 1 f:. 1 t I J . \ L - o )

- 10 -

Section 3.16. Term of Agreement.

The term of chis Agreement s h a l l be t h i r t y (30) years , commencing the e f f e c t i v e date hereof .

Seccion 3-17. Acqui s i t ion bv Sta te .

IA the eveui that any o t the project F a c i l i t i e s are transferred to or acquired by the State , no charge or -^a^" attributable to the enhanced value of the f a c i l i t i e s paid for in whole or in parti by and. not re ibursed to che State s h a l l be made by the R a i l r o a d .

CCKSOLIDATED RAIL CORPORATION PEOPLE OF THE STATE CF NEW YORK

BY_

. . . . . . . . . . . . . . . . . .

—-,' ' —' - r. : t . ^ -

BY . CoiiiaiASj.onfcr of t r a n s p o r t a t i o n

Approved:

JAf: 5 - i973

Attorney -<;e ne r a l

Appro

For che Compcroller pursuant to Section 112. State Finance Law

r h 1 n 11 I J.AL - h

' aee . ' ' ) o t P 5

C0^5M0NWEALTH OF PENNSYLVANIA ) SS

COUNTY CF PHILADELPHIA )

on this . £ 1 ^ day of ^ ^ ^ r r M ^ e C 1978,

before me personally came —

to mc known and known to me to be che ' - ir)/*^Z/<€T>^C- ' ^ -^.^^^^

r of the consolidated R a i l Corporation described in and

which executed the foregoing instrument, and he

acknowledged to me that he executed t.he same.

Nqtarv Public

T \ h ,\h 1 b 1 t , ,;/,( - „ ,

A?PE^•DIX 1 page 1 of 2

WORK SCHELULE CLASSIFICATION YARi: LYSANLER, NEW YOP-K

purchase and i .ns ta l l ^ ' ^ J ^ f ,3 ser-.e Radisson I n d u s t r i a l construction of an f^.cations and estimates park, in accordance wich P^^^J' J? !^;^J^^.^ , s s i cner . which s h a l l have been approved by ^he Commi

L. G ^ I N G K 22 3 ac-es- u n c l a s s i f i e d C l e i r and gr-ub 22.3 ac-es , a.T ieA -nn <—•b-'c vatrds ; place îccavacion 154,-û C-J3->- -excava._.-wi ci-^vrsaL'ast: seed 13,700 cubic yards of su^-oaiâs^;,

15.600 square yards.

$ 551.240

DRAINAGE _ l i n e a l feet of purchase and -•'••^"^\i^;î;' 'cc.M end sec t ions ; 30 inch CCMpipe; ^'Ô inch CC.M ena 237 l i n e a l feet of 43 i.nch CCM P^?^'

- 7 metal r i s e r s wich grat ings ; and ^ concrete headwalls; 2 CCl ? i ? e reducers; 1-24 inch end sec t ion .

ROADWAY AND PARiGlIG AREA „^ . , construct 2,100 sq-uare yards of 4 nc bicu.mi.ncus base course a.nd 2 -.nc. - e a . , surface .

^ ^ ' S S t r u c t a 1 story. 0 êet^by S O j e e c . concrece block yarc o r f i c e . san i tary , lighti.ng, o i l heat and a i -conditioning.

MECHANICAL AND EIîCTRICAL power c i s t r i b u c i o n anc y a r . we l l and wacer d i s c : i b u t i o n , . a n - . a r /

sys tem.

34.302

2i;391

84,000

47.300

(^ t . v h i m t ( . fAL ' -o ) i^itre .• 2 o f ' 5


WOR.X SCHEDUL;

6. TRACK WORK ^ ir Purchase and i n s t a l l the following:

19 119# NO. 3 turnouts 1 119» No. 10 turnout 3,075 LF 1151 track- (including r a i ^ , new ties 15,360 LT 105# track (and 6 inch ballasc) 6 Pair 11S#/119# compromise joints 4,102 LF - remove track 1,200 LF - acquire existi.ng track between

Sixty Road and Schlitz 170 LF 119# new track

7. C0 5MUNICATI0NS AND SIGNALS Provide necessary commmication and signal f a c i l i t i e s

8. GRADE CROSSING IMPROVEMENTS Improvements to be provided by an FHWA program

9. ENGINEERING

10. CONTINGENCIES

11. TOTAL COST

$1,156,121

35,340

154,626

190,904

$2,275,724

Railroad w i l l proceed e=cpeditiously - i t h the -orH j ^ ^ ^ ^ ^ u ! and w i l l .make reasonable efforts to compiete sa-c wor.'. and 1979

Hae-j of t)5

APPENDIX 2

MAINTENANCE SCHED J L E

For purposes of this - ^ , :,;: i:ciu;::s, standards of maintenance ^ ^ ^ f ^^,:\^^:emenl, sha l l be che as referred to in Section 2.3 n (FRA) :itandards for such Tame as Federal Railroad ^ ^ ^ ^ - " ^ ^ " ^ a t e ^ R A standards, the f a c i l i t i e s , in the ^ " ' ^ ^ ^ ° f S I S s ^ as che maintenance commissioner's standards f ^ ^ ^ H ^^ufacturer of sucri f a c i U t i e s , specifications recommended by accepted in the or maintenance procedures 3^ f a c i l i t i e s , whichever railroad industry for che same or similar .ac standard is higher.

standards of ! : ^ f , T f t l ' m applicable, to th . { ^ - ^ I ' ^ l ^ ' ^ l ^ ' l Z u l l c ^ Tf =h. P r o j ^ t .

::r:afriorth%r an :-i- ^ ^ r ^ - c ^ n d f t t i i L n r : ^ ; ^ ^ : ^ " - ^ ^

Kailroad. at no e=cpense ' a ^ ' t i e ° n « « s a r y

T o f . r i ! r « d ° « : r i ' t ? L ; " o rarr ; ' ; 'u t - i t s n« i . . t .na . , c . obligations

under this Agreement.

f h .\ n m i l ( j .M -t' I

Page 5 4 ol ( 5

APPENDIX 3 Pace 1 of 3

SPECIAL PROVISIONS

-ntS-nrS Tpe^t^d % ^ ^ ^ ^ ^ S ^ ^ ^ . ^

ii:r4eruiVr adUdsfiniy.i=£4^^^^ fi^•>^^r• 400 Revenue Cars handled au-mg auca ycoj., ^

excess of -^'=^^1°° 2*^!^^* bv April 1 of the following year. Railroad shall pay to the " a t e , by Apr.i i j ^ j , failing such amounts which Railroad f^* i / ? i i s descS:Id in sub-paragraph 2c Short of such guaranteed ^ ^ ^ ^ ^ ^ t ^ t s . excluding ^ L c ^ i l f ^ ^ t s ^ \ s - cJtbî^^^^^^^^^ l - r a n r o f i s L S - ^ i i l l l o t

S l e e T S n ^ t S ^ S ^ ^ a i ! ^ . T s ^ S r t r R i r J o a r b ^ the State under this Agreement.

t.j.VL,rorry e L?tnir:ii?a r: .s: ^ which agreements w i l l provider

a. That the shippers guarantee to -guaranteed-levels of Pevenue Car t r a f f i c per year at J:e Rail Marshalling Yard; and

h -"hat Railroad w i l l make a specified reimbursement

numher of additional Revenue Cars during a ten /ear ,.er-oa.

Therefore, the C=»issioner hereby_a=,uies=es in

road hereby agrees:

( i) any "Excess Payments" by ^ ^ ^ ^ ^ ^ ^ / ^ e i t ^ ^ t J o r ^ ^ toward Che satisfaction of Railroad's total payment obligation >o State under Special Provision 1; and,

( i i ) the total of a l l "Excess PaV^^^^^^T/îi'°*ceed duri.ng the\in year period hereinbefore ^P^^^^J^^^f !^\^°^:ad lor the total amount which shippers ^ê required to pay o ^î-ôa^. failure to generate guaranteed tr a f f i c duri.ng sucn ten ye v and.

M^n Anv suc^ ac-eemencs between Railroad and shippers Shall b. s i i i t c t fo't-^r-prfo; b i t t e n approval of th. C=n»issioner. and

h.xh 1 t-. 1 t I J.AL-" )


SPECIAL PROVISIONS

c. That in the event that any shipper f a i l s to generate a „**.^;gnt number of Revenue Cars in any year to meet such a

oulili^tee. such shipoer shall make a specified per-car payment to I^?!Sad iultiplied'^by che nu.mber of cars by which such snipper f a l l s short of such guaranteed number.

3. Railroad may reimburse, with the expressed written approval of the commissioner, any i.ndustrY corporation r e s p o n s i b l e ^ o r ^

Sd^s^^nrâ^rk ^ s S e i c r o r S d : i t ^ * w h ° i c h ' i f ? b';^?ocrtef S e r r

Sissi :Lnrfo;°Lc.; on:tJ;cSon 5Sii be d-™:i, , :,2 f« of Revenue Cars using tiie siding or lead_at a êjab^rsement rate of $15.00 oer Revenue Car. The aggregate or a l l payments by JJJ;^roa<l shall nit exceed the total costs of such construction and the financing thereof. 4. in the event that Che State reimb-irses the Tailroad Project Jost^ in excess of the amount set forth in Section 3.14. the ten year reimbursement period referred to in paragraph 1 ^\^^^^ JSlov.i such s h S l be extended for such time as shall be fey^êd ^° f ^^^^^^^^^ excess costs at the rate of $15 per Revenue Car No such excess costs shall be eligible for reimbursement by the State to tae S u r o a d unless a supplemental agreement providing therefor has been

-entered i.nto-between., the. State and Railroad. 5- State shall, at no expense to Railroad, acquire ^*5^^'5?f^^'^J•,, r;quired for construction of the Project Facilities^. ^ ^ « 4 ^ ! \ ^ ^ ^ ^ thereupon provide the Railroad with a- right of entry -,ran. -.he Railroad al easement in the Project Site for ""^truction and o?era?ion of Che Project F a c i l i t i e s for Che term of this Agreement. 6. Notwichstanding any ocher provision of ^^J^^^^^^J^îe^ê^'n^'' provision, term, or condition incorporated herein by reierence, no êndi°uie or work by the Railroad for any capital construction or SSpSnenTlhereof listed in Work Schedule (Appendix 1) shall be S?!r^!2 for reimbursement -under this Agreement -inless and until final plans, specifications and estimates for said capi.al constricSoA hive received che expressed -bitten approval of Che Cnrwriissicner.

7. During che term of this Agreement. Pailroad w i l l ^ « P*y"?"^îe e^ch tax vear to each teal property taxi.ng /^fiS^^'-^r^V Pro^-ct Sitf. is situate, m such amounts as are equal to the^«^l p'ocrty tnx l i a b i l i t y which Che Railroad would ^ - / ^ ^ ^ f I t been t.he owner oL record of Che Project Site for real propc. ./ tax purposes for such tax year.

f - f i n I I,, I |,, ,;_ , ^'^ee .<t, OJ t,5

APPENDIX 3 Pa?. 3 of 3

SPECIAL PROVISIONS

a At -he .Miration of th. ter= of this Aqree.-=ent. ' " a l l ^invej ,-old-Sd ^ . . . t a b l . - ^ ^ - • J ^ ^ - ^ i j ^ f c f s!« ^ I li) th. ^ ^ ^ j r t ?aci!iSfsm"th"sS«'Sa;'iny^1i^h:!-titl..or int.r.st S r e " . ?"tiMIll--oarf=r no additional consideration.

9 Stat, is holding 5500,000 In the proj«:t account "

Uy«e""f"th. p"fe:n?isitfoS irtSTciirofsSs p" ,

certifications shall be m writing and shall be in sucn rorm Commissioner may prescribe.

STB FD 33388 10-21-97 D 182942 3/5

I CONR 190b Mm) 0 1

' . . \ M 1 f) 1 t

o f (

S T A T E O F N E W Y O R K

D E P A R T M E N T O F T R A N S P O R T A T I O r ^

W I L L I A M C. HE[<1NESSY. C O M M I S S I O N E R

SDPFLEMENTAL #1 P / 3 9 i H 3

AGREEMENT 111:

PIK 3935.16 CONRm.*S RADISSON YAKD LYSANDER, ONONDAGA CTY.

[• xt\ 1 rM t ( J.M'-t>

t .tiit 5.S ot t .

D1399-: Radisscr. "ar-5UF?lZ-E:r:.U. AC-rEEZ-E:: ^ l Lysar.i-r, N i

PIN 3925.16

rhis Supclementa- . ^-se s-^- • —

1583, ' vy and be-.v=en the Jeotle of the State o: New York

• (hereinafter referred to « State) actih? by a.-.d .'--=> 5 -

Com.-3issioner ot Trar.srcna a— .

^.-.af-er referred to as Cc-T.issicr.er and

Departraent. respectively) with off ices .n the Adr:ini = trat icn _ _ ,-.-„a-<" \«»v "ork. 12222,

and -gir.eering Building, State Car.?us. . - a . . . ,

and Ccnsclidatec :^ail Corporation (hereinafter referred to as

Railroad^ authcnced to do business in Vav Ycr> Sta^e. vit±_

i t s nam offices at Six Penn Center rlana. 7^-acelchia . ^

Pe.tnsylvania 191C4.

W I T N L- S S E T S

\-Er^JL\S. state and ' .ailrtad entered mtc an arree.-eni

dated April 10, 1 9 - , Cort? t r c U . r ' s C e n t r a - Sc. 21:5-2 ^

•xprcve r a i l tra:^s; =rtaticn services to tne ritirtr^s cf tne

:he 19 ' : Acri=r=.-r.

n 1 h 1 I ( .1 .AL - o ) i' Past.' 5') of ti.^

^ •.-o -a*""'*s h*retc , in ccnsidera-icr. o:

the auttal prc.tises, conditions, terns and cbligaticns .ter-

ccntai.ted, agree a.nd covenant as follows:

I . Section 2.4. Reitburserrent. of the 197c . gree.-ne.nt

between the State and Railroad is hereby deleted ar.d replaced

by the following: •-

Section 2.4. Rei.TJc'-rse-ent.

State will rei.Tiurse Railrcad for Project Costs ut

to a xaxi.tun cf T--c Million Three .-:unc.-gci Ei r.tv Sever. Tr.Q' ar.d

Dollars (S2.28T.:CC) vhich Railroad inc-rs fcr -ork

oerfcrr.ed. a& described in the attached wor> Schedule,

including the cost of creli.tinar-;' and ccnstr-cticn

engineering, as well as fcr facilities creviced by

Railzoat under this Acreetant in connection with said

wcrlc, pursuant tc 23 CFR Fart 140 Sub-I, and anend-tents

thereto, i t being intended by the parties heretc that by

wa~o 2 i t 'S acreec t_.aw j.»w«.i3»..— — —— —

dee.-ed tc ce mcl -csc r.eram and are accepted as cindmc

upon the parties tc .-.e 3a.T.e e.xte.-.T: and w

shall net ce ci

h.xr, 1 tl 1 I J.Al -o )

l^atJe (1(1 o f 0.

the use cf f a c i l i t i e s cr er.:iprr.en.

cuired by Railrcad m whole cr m part with ftncs

rcvided by State u.nder t h i s cr any ether agreem.ent.

sh a l l net be e l i g i b l e f c r reinburseTent hsreuncer

f a c i l i t i e s acceptable to the

rti.Tiburse.T.ent fc

ac

p Rental charges fcr Railrcad-cwned e^-i-Ptnent or f a c i l i t i e s

when ^ *- —- g — ^: ^ _ ^ c i 4 w * • * . — —

State-financed eruipne

Railroad are xace availa.:le without cost tc Railroad for

the work tc be accc:.plishec at the time and place

required. Railroad shall subxit te State f a i r and

reasonable charges fer the cest of tne work perfcr:ned.

or f a c i l i t i e s and equipment prcvided, by Railroad, less

the va.ue cf any Railread-cwned materials reccvered, as

evidenced by detailed mvcices acceptable tc Zcmnissicne:

State shall rei.Tj:urse Railrcad m the arr.c-nt c: -.e

' - . - a i i A l ' c o s t s SO

atcrc'--ed Pre:ect Cests se s'unm e-. »c t tc accrcval c j

g . • — ' .- -.-.< - — — • — " * Railrcad snail be s;

Ccrvrissicner and te audit by the Ccmmissicner cr tne

«: r - i fi.e-~ se...s— —=

: _ ..--- v -rceres5 ca-.-ents

— - — o

t h i r t y (2C) days frcm the

statement, sub]

s'ubmission o f the f i n a l

ib-iect to f i n a l audit.

2. section 3.4, ^v^cutcr-/ Clause, of the 1973 .Agree

ment i s hereby deleted.

3. Appendix-l, Work Schedule, of the -"S Agreement is

hereby deleted and replaced winh the revised Appendix 1

attached hereto.

4. Paragraph 9 ef Appendix 3 cf the 197S Agreement is

herebv deleted.

5. A 11 ether provisions ef the 19^3 .Agreement and any

= -an;;''' -" ^u""' force and supplemental agreeme.it theretc sna. . .ema... - -

_> • - " r- - - - d t^'» car t ies te the extent e f f e c t and s..a__ con,—nue uw r-—

net incc. ts is tent herewith.

K.xh 1 tl I t ( J . A l ' - ( ' )

IN WIT^'iSS *<r..z.-~ •, the State and R a i l r c a d , thrcugh

- t i r duly au thor iced r ep re sen t a t i ve s , have executed t h i s

^crc^^uent the day and year f i r s t above w r i t t e n .

CCNSCLI2ATED RAII CCRPCF-ATICN »E2^"Li: CF THE ST.A" CF NTW YORK

3v

a—u . T i t l e

Comm.issioner o; T r a n s c e r t a t i c n

ppreved Cate:

A t t c rney Genera..

JUL 0 i ise3 •ec _/a'

- >

r c . - e r .

rape . • o t b .'

CC>C.2ir»'"E.A: TH or r iNN s i -. .-u> . .n

:OUNTY Oi' PHILACELPHIA

on t h i s 21st day of Ap r i l • ^ ^ - before

me oersonally came James A. Hagen to me known Sr. Vice President, .^4a-od

a.id :<nown to me to be the Marketing & Sales o i conso.^waw-a

Rail corporation described m and which executed the foregoi.ng

instrument, and he aci^ncwledged tc me that he executed the

same.

Ml(m ^ McCOURT

r .V n I I ' 1 t

r ,1 s e • • 4 o t ! J.Al - (^ )

A??E:^TZ

pace 1 of 2 5-JrPc.^T YAiir TC srR'v- . ^ A : : I S S C N I N D U S T R I . A

LYSANDER., NEW YORK

.MOOiriEO WORK SCHECULE

SEPTEMBER 5, 15S1

Grading (by conrracror)

Clear and gr-ub U n c l a s s i f i e d Excavation Subba l las t Seeci.ng Stone Slope Pre tac t ion F i l t e r Faoric

5 1-192.978. 9:

- 22.5 4 acres - :.44, 347 C Y - 24, 896 C Y

3, : 4 1 S.Y _ g 463 C Y - 3 O , 665 S.Y

Orai.-.age (by c o n - r o C . 3 . . /

30- L i amers r A . C C ..M. Pipe - 192 L . F . 43" L; a.-e-er A . C C Pipe - 237 L . F . 24" Cia-T.etsr .A. C. C ..X. P ipe E.-.c S e c t i o n - 1 ea . 30" C ia r . e t a r A. C C ..M. Pipe End S e c t i o n - 6 ea . 30" Diameter .Meral End - 1 ea . 18" Diameter A . C C ..M. P ipe -Risers - sa . 30" - 24" . i . e . C M . P ice .Reducer - 5 L . F . 48" - 30" A . C C . M . P ipe .Reducer - 6 L . F . Concre-e He2C*fall — 1 ea. D r a m a c s Str^ucture — 1 ea . Trener. i C ' l l v e r t E x c a v a t i o n — 335 C Y.

Rcac'^.i" ley c c i t r a e t e r ;

Stens Pive.me.tt - 5 ,ST9 S.Y. 6S7 £ . Y .

Trac .vcr . '^ Tey r a c - e r ;

—

- r e - 3 i l l a s i ',4" de - - •- ; - ^ , ' Lc'-' 1~a.z f. - 133 l e r a i l . 6 ' t i e s _ 6 3 .1

'. ne-- r a i l ! i ' " l e s - - 3 0 . : Lay 7rac.<. - .11 le . i l " . r a i l . " ' t i e s - 2 , .: c 4. -

- — _ _ « . _ ^ 5 — • - — - t . — — - • — — - — —' • ; n s z i _ l T . " = r T l i n z e « a y Read Tress m e

P e r f r r r . a n r e a ? •- enc 3end : = een t rae

;v zz\'~.~:-.i~.z .-. I t e r s 1 - 5 ;

50 .703 -95

18. 5 4:

943, 13;

I . \ r i 1 :> 1 I I J AL - b I

1 .\ a e tl 5 o t o 5

•.cdisson I n d u s t r i a l Park •=ce T-'o

APPENDIX I pace 2 oi 2

TracKwo rk (bv C o n r a i l f o r c e s ) 4 5 , 0 4 0 . 0 0

Remove Track - • s i - . r . Lay Track 127 l b , f i t r a i l 1". ^les - 660 L . F . I n s t a l l Turnout, No. 10, 119 l b . new - 1 e a .

7. Communicatiens and S i g n a l s

F l a s h e r s -o be i n s t a l l e d -j^der saparaee highway program

5. E n c m e e r i n c

9. TOTAL P.RCJECT COST

- 0 -

$ 112,800.6 9

S 2 ,386,047.22

(f I I

04

^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ . .\ t l 1 t I t 1 J .A I -

t • ; i c l o t 1

Scha r f u l a i ahmwn on M/a p a « * a r * In f r m t » t " L O C A L T I M C i tUnWar r f a r d a y . . a « i : as a a a a r v M b v aacn c r r r .

NEW YORK CENTRAL SYSTEM T h e W a t e r L e v e l R o u t e — Y o u C a n S t e e p

Table I .

NEW VORK AND B O S T O N - A l i t N V . B U r f A L O - C L E V E L A N D - T O L t D O - CHICAOO f o r add i t i o i i * ! I r e l f h t on l f po in ts botwoon Now Vorh owd Buffalo, aoo fab lo 19; Buffalo and CKica(o via Tolodoi aoo Tablo |

•3

Mla.l A f r t > J*. I9^5.

Lwt BowYorh . / P T ^+ 0 | l,rmnj i tmrtt. JtrmtmaJ., • > tlt.t'k .Strftt^

t4.% I . » e Y o n k e r s

j i •) i . r t { f ( ) ( o i i - H . i r m < f.

40 ft | , v r H f ^ k t k 111

j 8 . v L r t H ' a r o n t N r w u u r e h | )

7J 8 ' , ¥ f H o u K d h f f t ' * * ! '

U 4 k h i n r c i i f f

1 0 1 6 < > p r m u i > i ' i w n A ,

I I i . 7 i l - V f H u d t o D

l a i I , . . . . N e w i o n H ' > ' ^ k A

m . " . M v j v v e j a n t A

S c h ( x l , i r ^ L ; i i i i : i i i C A

C a i i l r t o r , o n - H u d % o f i A

ua i Arf.aibawy I .P.I \ 1484 . . . .Troy-"

I A

-I- U j l 0 •

iri i n j» • IS 1 27 i D&i!^ D u l r i Df t i i f

A M i A M P H P M

6 J f i V 4 ^ t : JO 3 00 4 40 \llVi *4S0: j III2S7 . . . 1

* 7 i e ; A 9 i 5 1 21 *)50 5 21

7 5 1 ' - - 200 to i ; !!!' 215 »442 4 n . . . 1

8 j j l - - 2 » «41

- • - - -502

- -710

g « ' i i » ">« 7 4S • 1 • V •

•2S

.... Lvr B o « t » i i ' / G M ^ u t k S: I , .'

I 1 Hat. k hu .

6.1 N > * t . n n v ! ] , r A

11 4 l - V t r . i n i i p e [ i

44- < 1-Vf U " r r f s l r r . ,

B v ' i l . v r J . n m e r ^

J l . v f ( h i i n a m A . .

* » 4 A f r . A l b a n y \ i . / '

ua.j l.vf Albany 1 /

17* g I vr .A ni^(»rrtan, . ,

K'- 4 l . v f k . - r r '

ithrf * \ r r Syracuse-*^., t [.v*- S ) r r a c u « 0

1 l . v f S r . , j f f c , . .

K » * 4 1 v f K • i e i i ' ' » , .

Lj l.vf Hu.tv,..^

4J« 4 Al-' Buffalo I mt* 4 I vf Buffalo ' fnt.

Q <5 I I «r .

, l u I f 1 2 0 7 .

1 0 4 .

1210 122 122s

I 1 11 2 1 ! I 24 2 22 '

2S4 )42

4 Ml 44S _ p M 5 W .

1 ,

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* Stotw on i icnat to tliM-'harrf pjn^rncfr^ f rntn 1 fvord ?t TKoma% or to ff^-nvf rf vfD'jf p i s i r n - f r ^ t^r Win<'».ir and i>fvond.

c Siotit oil «iffna: to dvi. riarsf pas>f n a m fn'm I>*iroit and beyond, or to r*reivf tiaNêocn It r 1.. tmaco and bevopu.

^ Stops on »i(inai tu reef ivp or d i j c h a r t r r -ssfr-FPn (or or Ircm N i i t i lod bfvoot!.

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F o r n u m b o f ot l a b i a u p o n w h i c h a a c h i t a t l o o l o c a t e d . »«« G o n t r a l I n t f o i of S t a t i e n f in k a o B p a r t ^ f Ouido _ ^

/ S i o o i to »*c«tT» or dtacKjrcc pwieneert (or or from kûtet r o i o i 1 beyond, or lo r-<eive or d m hariie paîentreri ter or Irom Albany a b r y » n d .

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/ D i i l y , Oacept Suiulav. ty tonnectir.s traio,

j M D a i l / i by conneciing irain.

I X Stops on «iKDal lu reve ve passcQKrr* (or Detroit or hevund.

' QSa'ops on iiffDai 10 rerr vf paaftfncrn.

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I ^ ". h-j train doei not carry checked bacgafe. ! > f » f n i i e n t bii« lervice between Heari.n (Miiacfn? to r»i;fn»d statiooyl ( an 1 Sewbur*;h S o lervir.- S u « f jv« < r hoiitiaT* i are 4^ cersu K a i ( \

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4 ' ^ V i l > " w i » i r i , . , .

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^ ^ f " - * . ' - . , 1 . 1 . . - t , . 1 1 . . . I F , . . n . , . - - ^ . . . .

- . . fenj ,e>» oou ,

Chicaco

. . . ' . . . .w- ^ taa iu iu i vn r quarter m e i are deauabie. ^ - I - r e m h i t e r v i f < on iv . ^--^K-iie i r tH

& " • " Auto S * r v i c a avallabia at this point. A g T u • . lano ( e r i t r j , i ^ r r n i n i '

i

L x h i b I t ( J.AL'

Fape 1 1 o t IS

88 Seba^-I. «l,.r.. on W. pa«. ar. Caotam -OAYLieHT SAVIHO - Umo.

THE DELAWARE AND HUDSON RAILROAD o a r p a r a t i o B

EaatoFn " Oarl l fbt S a a l o f " tlioo.

T,blo | - S * « « T 0 8 * t w o CH«M>I .« I» OIVISIOPS.

A m . n ' i j ' v I

i,V i .c > Mow Vorb I. laa i r I r a r r a , Maai tark i.-.n .s t r rc* . Tontort Crototi.ltarmofi • aacoa ... m . . ^ -.' I, f oua^haapaia . Rhinoclta Hudaon ' aibaof

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E X P L A N A T I O N CF SIONS.

• Dails

• Daily, Facapt .- uodaa.

I Daily. FBcf pi Saturday.

«p.aaFnfCra n.>t carnatl i.- t r t w a ^

Ihrar atationa

I i M n p i to iliachar«r p i i i rngr ra l r o »

l ' ! ! ! ! ! ! ! ! * I Alt,a0T and painta aoutri oo nutice to coa-

I I durio ' anil wiil atup aiatioti aiunaj la : r rc r ive pAaacngera (or kou i fa I'oiDl aad

^ I p O ' Q t a f i t i r t t i .

1 ....*.*.'.!. i , / S l o p i only to r e c r i F * p a i i r o r a r a .

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' ' " ' ' ' pn.iiB anuth ol A'batiF ani) i topi op airnal

. _ in r p r r i r r paaarticera l^r ânitot-i s p n a n

- - I aad p3int i aorth.

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' . i fna ' 11 r r r r r r paairnetwa

( Mopi oii.y to diactiargr paaarnftF*.

' iStiipa w ll.^ch.\r|:r pMirncfra trow ' I I poitita anuth of Albany ami to r»c«l»a

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A L U E Q U I P M E N T - R A I L R O A D O P E R A T E D

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NO. 14 t«U I»E» IT I«W-D» l t»

TH«0U8H COACHES AND P » » 1 0 « C»»

N O R T H B O U r n O T R A I N S

NO. 3!' UlUIIENTIAN DAILY

THROUCH COACHES AND PARLOR C»»

( Z J i a i a / . S r r a i r r i

SEW- YORK T O ALBANY

(.Saaa'O'iiArj i f u ' . ' t l f - a f t i )

A L B A N V TO M O . N I R E A L

»IONTRE»L L I M I T E D - D A I L Y 0 I H NO a

THROUBN COACHES AND SLEEPINO CARS »»ITM ROOWIETTES « I D " 0 0 « « S LOUNOE

NF.'.V \ I iKK r > M 'NTRf .M

R O r r E T BREAKFAST INTO MONTREAL IN LOUNOE CAR

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M O N T R E A L TO A L B A N V

{ D i » i » i S e r m . i i

A L B A N V T'-l NEW YORK

NiONTREAL I INI ITED DSIVY O 1 H NO. 10

TMROUOH COACHES ANO S L E E P I N G CANS WITH R O O M E T T E S - B E O R O O R i S LOUNOE

M O N r R E ' ^ L T > NEW VOKK

B O r r E T BRE»KFAST INTO NEW YORK IH LOONOE C»«

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Faut' 1 2 ot IS I THE DELAWARE AND HUDSON RAILROAD

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EXPLANATION OF SIGNS - Pagea Jl'jand na. All conditional atopa ara for raaanga p<oaoii|ori oolf.

• D a i i v .

t D A , , V , r r c r r l SuDilay.

I D a i l y . F i c t p t îaturday.

I t D a i l y , FFCFpt M o n d a f ,

\ Sundav ooijr .

a M o p l r.n aflFatice notice to i,i<.k up f o t .Mradvi . ie and weat.

* .Stopa on adaance notice to let o i l I r o m Meadv i l l e and oeat.

< M o p t d> ly 10 r e r r n e pas ie t iaen t o t p o i n u eat t of H o n e i l .

. I ' l t o c i on AilvAtire nonce to pick up paaaenaen fo r Chicago a " " 10 tr t I 'd paa ienarr l I t o i t i l i i n a f i a m t o n and eaat.

F Slopf to receiee paiFengera,

> t - p i i i c n a i to receive anil ducha rge pa j j e i i ge ra .

. . ' . j i l v a r i - e n i l " e lo tere ive ot disctiatge r a i senge r i ,

1-1 t . i .11 Ai'.vaK r nni I r to d ' lcharee PA»*teiiFer«,

• 1 I ~ i o r n i lai y 10 Ft off pasiencert I r o m po i r . u C A J I of Hor t ie l l

! *Sa t ' i r i l ay ooiy

n Keculaf . t " o > i in i lav on v on otKer dav* Stopa on ad ra ,1 ce to i n c I .> *Ne,ii;ri4 I t - i m B i n c M m t o u a i d west and ]

i,.tA*engerA lo t K deewood and eaat. 7 Mondav thr l u c h K i i d a y only , eacFM h o l n . a v l . O n Satan

- u n d i y ard ho i id tv4 throui th t i c k e t ! w i l l be honored » i a £ a i

; ( . r evho i ind l . i n e j C l e v e l . i m l to V o u n a i t o w n . L o n a u i i t icket a « r

. At 1. ieveland,

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1 r r r v .N .1 iF , p j ^ e a j ^

I « ûni*3v and h o l i d i y l on ly .

stonA on advance nniice to d l f cha t ee r a » e n c e r a f r o m R. A ,'«1 anti ea.t ami to receive p a n e n e e i i I ' T b i ' i g n a m t u n and 1

i j ' .Mnn* on ad..in'-e notice to pick up pjAaengeia fo r Ch . l ' l lei Jtt pa.AeneerA f r o m VoungAtown and eaat.

A l l - ' t o u A - ' i t i cke t ! w i l l S e honored via t ' a j t e r n Greyho FA \ ' i u n i » i ' i « '.i n t- leveiand. Consul t t icket .igent at ^ o -

T a b l o 0 .

NEW rORR «H0 YUUAN. ELDRED AND HIGHLAND LAHt . Via Shohola.

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OB m 3

BEFORE THE SURFACE TRANSPORTATION BOARD

Finance Docket No. 33388

CSX CORPORATION AND CSX TRANSPORTATION INC., NORFOLK SOUTHERN CORPORATION AND NORFOLK SOUTHERN RAILWAY COMPANY

-- CONTROL AND OPERATING LEASES AGREEMENTS -CONRAiL INC. AND CONSOLIDATED RAIL CORPORATION

Verified Statement

of

Robert L. Banks

I. Qualifications and Introduction

My name is Robert L. Banks. I am Chief Executive of R.L. Banks & Associates, Inc.,

a f irm of transportat ion economists and engineers, w i th of f ices at 1 71 7 K Street, NW,

Washington, DC 20006 and at 4 Britton Avenue, Belvedere, CA 94920 . Details of

my qualif ications are set out at Appendix A.

In response to the proposed joint acquisit ion of Conrail bv CSX Corporat ion (CSX) and

Norfolk Southern Corporat ion (NS), the State of New York has asked me to address

the public interest in restoring pre-Conrail intramodal rail compet i t ion in that part of the

State east of the Hudson River and in correct ion of the anti compet i t ive rail situation

which obtains at Buffalo, NY.

These matters are wor thy of at tent ion by the Surface Transportat ion Board (STB) in

this proceeding because they f low f rom shortfalls in ci complex regulatory and planning

process which began m the early 1970's and wh ich cont inue to the present

Appl icat ion, These shortfal ls lead ineluctably to the conclusion that the process failed

to reach the competi t ive goals wh ich had been set for it. All involved agreed that

continued rail intramodal compet i t ion throughout the Northeast and Midwest served

the public interest. In the event, that goal was not realized in the part of New York

State east of the Hudson River, nor at Buffalo.

II. Changes in Rail-Rail Competition from the PennCentral Merger and Conrail's

Creation

The fol lowing summary sets forth the series of events wh ich have together deprived

southern and western New York of ef fect ive rail-rail compet i t ion.

Rail intramo&al compet i t ion was vigorous in New York east of the Hudson River via

interline connect ions and joint routes and rates. Marine carferry operations provided

a vital link between New Jersey terminals and receiving points in Brooklyn and Queens

for rail carload traf f ic, including joint line routes to. f rom New England.

The PennCentral (PC) merger eliminated three of the pre-1 968 rail compet i tors (PC

control led a fourth railroad, Lehigh Valley (LV)). Merger of Pennsylvania Railroad

(PRR). New York Central Railroad (NYC) and New York, New Haven and Hartford

Railroad (NH) left {1) PC LV; (2) Baltimore & Ohio Railroad (BO); (3) Reading Company

(RDG); (4) Central Railroad Company of New Jersey (CNJ); (5) Erie-Lackawanna

Railroad (EL); and (6) the Long Island Rail Road (LIRR). PC served directly both sides

of the Hudson River on its own tracks and via interchange wi th the LIRR.

The level of real, ef fect ive interrail competi t ion has to be judged by the fact that after

PC entered bankruptcy reorganization in eariy 1970, cessation of interline revenue

payments to PC's connect ing lines, including compet i t ive route railroads, resulted in

their financial failures.

Fol lowing these events and the mid 1 973 decision of the Trustees of PC that that rail

carrie- could not be reorganized successfully under Section 77 of the Federal

Bankruptcy Law, Congress intervened, held extensive hearings, and enacted special

legislation to address the threat to the public interest f rom discont inuance of rail

service and compet i t ion in the Northeast and Midwest .

The process of analysis and planning was given to a special non-governmental agency,

United States Railway Associat ion (USRA). However . USRA had no power to compel

profitable rail carriers to part icipate in its Preliminary and Final System Plans (PSP and

FSP, of February and July, 1975, respect ively).

During the 1 973 75 period, the EL trustees initially determined that that railroad could

be reorganized in the tradit ional bankruptcy process. Ult imately, m early 1975, the

EL trustees reversed their f indings and wi th Court approval became subject to the

USRA planning process.

Despite great ef fort by USRA to devise a regional rail system wh ich would (1) maintain

essential services and (2) maintain and enhance rail-rail compet i t ion. USRA's

recommended solut ion, a Three-System East, consist ing of Conrail (CRC), Chessie

System (CS) •i ien comprised of Chesapeake & Ohio (CO) and Baltimore & Ohio (BO)

and Norfo'K & Western Railway (NW) failed to at tract support and cooperat ion f rom

CS and ^,W.

USRA's econdary plan involved two regional reorganizations (PC-Ann Arbor (AA)) and

Mid-Atlantic Rail Corporat ion/EL (MARCEL) plus CS and NW, or four separate Eastern

railroad systems. The prospect ive financial weakness of proposed combinat ions of

regional bankrupts led USRA not to recommend that backup plan.

Instead. USRA recommended a Unified Conrail system as its secondary plan

condit ioned by acquisi t ion of line segments by other profitable railroads to provide

service, while maintaining compet i t ion via trackage rights and joint use.

The result was that in New York State, be tween Albany and the Metropol i tan New

York area east of the Hudson River including Long Island, direct rail compet i t ion was

effectively lost to sole service via CRC, At Buffalo, CRC emerged wi th such market

power that it ef fect ively dampened the l imited compet i t ion that otherwise existed.

III. How the Problems Can Be Rectified

Regulatory practice and theory have changed signif icantly since CRC was formed in

1976. Market entry and exit has been eased for rail carriers. The rail industry has

further been reorganized into a small number of large interregional railroads and a

larger number of regional and shortl ine railroads through merger, consol idat ion and

property divest i ture. In several of the ra.lroad mergers since 1 9 8 1 , trackage r ights

have been granted to entities other than railroads to ef fect improvements to rail-rail

compet i t ion.

These changes in regulatory policy and practice have not resulted in abandoning the

public interest in just and reasonable rail rates and services; changes have been

adopted to make the process conform tc modern economic theory and practice wh ich

are grounded in reliance upon market forces and compet i t ion to discipline market

power. Given the enormous financial investment that assembly of property and new

railroad construct ion would entail, prescribed joint use of exist ing rail facil i t ies is

understood to he a widely accepted practice to secure access to rail-rail compet i t ion .

The Primary Appl icat ion recognizes the need to restore rail compet i t ion south and west

of the Hudson, and elsewhere, through its proposals for establ ishment of Shared

Assets Areas. However, no such condit ion is deemed essential east thereof By the

same token, I f ind it ironic that while the Primary Appl icat ion recognizes the need to

continue compet i t ive access and to make provision for compet i t ion at numerous other

locations where current competi t ion would be el iminated, such as Indianapolis and a

few other Indiana and Ohio points, Appl icants made no provision for the restorat ion

of compet i t ion at locations such as that part of New York east of the Hudson River

and at Buffalo, which lost that condit ion during tne sequence of events leading to

CRC's format ion.

East of the Hudson River

Restored rail, intermodal compet i t ion in New York east of the Hudson River can be

realized by grant ing access to and service via present CRC lines to an independent rail

carrier unaff i l iated w i th CRC or CSX. by a grant of author i ty f rom this bc^rd to New

York to choose a railroad carrier to provide service under contemporary economic

circumstances governing trackage rights, to assemble and disassemble trains and

serve specific locations customers on lines which CSX seeks to acquire. Details of

this remedy are set forth in New York 's Responsive Appl icat ion and in the Verified

Statement of Walter H. Schuchmann.

Pro competi t ive trackage rights grants have been characteristic of many raiiroad

mergers and consol idat ions consummated during the past 40 years. Indeed, in the

recent western rail merger cases, the grants of trackage rights were the most

extensive in the history of U.S. railroad regulation and, because of special

circumstances then obtaining, and which obtain here as wel l , the Board delegated to

others having a direct and legit imate interest, the right of choice among prospective

railroad operators to exercise such trackage r ights.

In and of themselves, the grant ing by regulators of physical, commercial and

operating access by non-part ic ipants to merged facilities can cure many of the anti

competi t ive aspects of any merger or acquisit ion of joint contro l . Such access wil l in

this case permit a rail competi tor to offer contract rates and services to ef fect bona

fide compet i t ion w i th CSX. In my opinion, this solution is mandated in this proceeding

by the antecedents in the planning and operat ing process which led to the formation

of CRC and the result ing foreclosure of access by financially viable compet i tors in the

area of New York east of the Hudson River. Having lost genuine access to directly

competi t ive rail service, first in the PC merger and subsequently m the PSP and FSP

process, long haul rail movement after 1 976 , to and from many establ ishments m the

eastern part of New \'ork consuming commodit ies typically moved by rail, as

summarized in Table 1. on page 6, was and is today provided exclusively by CRC.

At Buffalo

The situation at Buffalo is similar to that east of the Hudson River While Buffalo

today enjoys some reciprocal sw i tch ing , the charges for swi tch ing services have

increased substantial ly since the format ion of CRC in 1976. Today, little if any rail

traff ic can be considered subject to compet i t ion, a situation which wou ld persist under

the Appl icants ' plan. The Erie-Niagara Rail Steering Committee is seeking approval of

appropriate requirements for the restorat ion of intramodal rail compet i t ion throughout

the Buffalo swi tch ing distr ict, uti l izing a Shared Assets Area similar to that proposed

by Appl icants at Detroit . In my v iew, this is an effect ive remedy for the problem

described.

Table 1

Agricultural, Mining, Construct ion and Manufactur ing Establ ishments

in New York East of the Hudson River

1994

SIC NOS, 07 08 10-14 15-17 20-39

County Agr For Mining Construe. Mfg .

RENSSELAER 30 5 336 120

COLUMBIA 46 2 180 104

DUTCHESS 147 14 755 21 1

PUTNAM 68 2 357 60

WESTCHESTER 637 16 2 ,839 1,043

BRONX 24 3 859 524

NEW YORK 138 40 1,623 6 ,432

KINGS 143 2 2 ,338 2 ,593

QUEENS 135 8 3 ,066 1,992

NASSAU 913 6 3,587 1 771

SUFFOLK 929 20 4,71 1 2 ,544

TOTAL 3,213 92 20 ,631 1 7,397

Source; US Bureau of the Census, 1994 County Business Patterns.

Prior to the formation of CRC, many shipper sidings in the Buffalo area were served

by the rail compet i tors which antedated the creation of that carrier. Those

predecessor railroads included: PC (comprised of previous compet i tors PRR and NYC),

EL, LV, NW, CS and Buffalo Creek Railroad Company iBCR). Much of the swi tch ing

wi thm the Buffalo terminal was performed by BCR which was a property jointly leased

by EL and LV CRC inherited BCR ownership in the FSP designation process. [See

FSP, Vol. I Part II p .228, Note 13 and p.283 which reference the assignment to

Conrail.I In the period prior to CRC (as well as before the PC merger), the BCR

provided local industrial swi tch ing as well as interline connect ions between the other

rail carriers serving the Buffalo terminal which did not possess direct access to

discrete shipper sidings. This latter group of joint line compet i tors included Canadian

National Railways (CN), CS and NW which BCR served via the three principal roads

EL, LV and NYC. [Source: The Official Guide of the Railways, February 1 968, pp,651

and 783.1

It IS notewor thy that resolut ion of the terminal access problem in the Buffalo area was

another failed at tempt by USRA. Apparently no consideration was given to the likely

diminut ion of rail intramodal compet i t ion when a neutral terminal carrier became

captive to CRC.

IV. Pre-Conrail Rail Competition East of the Hudson River

Prior to the PC merger there were nine line-haul railroad rate and service opt ions

available individually or in combinat ion to shippers and receivers in the eleven count ies

east of the Hudson River between Albany and New York City:

Baltimore & Ohio Railroad (BO) New Haven Railroad (NH) Central R.R. of New Jersey (CNJ) New York Central Railroad (NYC) Erie-Lackawanna Railroad (EL) Pennsylvania Railroad (PRR) Lehigh Valley Railroad (LV) Reading Company (RDG) Long Island Rail Road (LIRR)

At New York City several of these roads piovided their own proprietary cross-harbor

marine services. In addit ion to such uudct lines, joint interline connect ions were

ef fected on the eastern side of the harbor by swi tch ing and terminal carriers such as

8

Brooklyn Eastern District Termmal Railroad (BEDT), New York Dock Railway (NYD) and

Bush Terminal Railroad Co. (BT) Those three rail interchange entit ies provided rail-

marine access via float bridges which enabled carferry loads of rail cars to be

transferred for interchange. The location of the physical facilit ies of these pre-CRC

carriers is shown at Map One, on the fo l lowing page. Since CRC was created, all

have been succeeded by one rail/marine carrier, the New York Cross Harbor Railroad

(NYCH), as shown at Map Two, at p. 10.

After the 1968 PC merger the number of l ine-haul rail compet i tors decreased to six,

wi th the consolidation of PRR, NYC and NH into a single enterprise.

After PC's bankruptcy m 1970. two and a fract ion years later, and ult imately the

creation of CRC in 1976, the LIRR and New York east of the Hudson River became

captive to CRC (all connect ions other than CRC were el iminated by FSP creation of

Unified CRC, discussed below). Interchanges be tween CRC and its connect ions at

longest haul junct ions were no longer mandated when archaic joint through route

regulation was excised by the Staggers Act of 1 980 and the Northeast Rail Services

Act ot 1 9 8 1 .

Thus competi t ive rail service at stations in the eleven New York counties east of the

Hudson River was substantial ly reduced by the PC merger itself, and then effect ively

eliminated m the formation and operation of CRC.

The virtual elimination of railroad compet i t ive access to New York stations in the

eleven county area resulted f rom several events. The PC merger caused a substantial

diversion of both traff ic and revenue from several of the smaller railroad carriers. This

led to a net decrease in the traff ic via such joint interline routes upon which

condit ioned approval of the PC merger had been granted. Yet, notwi ths tand ing PC's

aggressive solicitation of its own routes, by 1970, the PC merger had failed to

produce income adequate to sustain the merged carriers.

The financial failure of PC led to court ordered relief f rom requirements to make

revenue payments to its interline partners (CNJ, RDG, EL, LV and others). This loss

of essential revenue led to their o w n financial bankruptc ies (except for CNJ wh ich had

Map One

NEW YORK HAR5CR RAiLHCAD OPERAiiGMS Carfloci Terrn:ncls ana Lend rxoures

Adapted f rom an unident i f ied source.

R.L. BANKS & ASSOCIATES. INC. I b

Map Two

10

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11

gone into financial reorganization in 1 967) . PC had been forced to accept the already

bankrupt NH in response to the latter 's demands for protect ion in the PC merger

Itself .thereby eliminating still another interline compet i tor . Similarly, PC control led LV

until that carrier failed and entered a separate bankruptcy reorganization proceedmg

which was ended by formation of CRC, wi th its inclusion of the LV assets.

The formation of CRC therefore resulted in the ult imate loss by the eleven county

region of access to direct railroad compet i t ion through the cumulat 've process of

mergers and acquisitions and changes in the phi losophy under wh ich the public

interest was presumed to be best served, i e., ordered compet i t ive access and/or

shared use of facilit ies.

V. Goals of the Preliminary and Final System Plans

It cannot be argued that a return to the superf luity of rail intramodal compet i t ion

(which preceded the PC merger) is either desirable or economical ly viable. However ,

a return to the level of compet i t ion envisioned m the PSP and FSP for CRC (and other

systems) is necessary if the interests of New York are to be finally addressed and

satisf ied.

Restoration of true competi t ion for eastern New York points wil l require relief wh ich

the FSP recognized would be in the public interest after EL came into the 3R Act

processes. As the FSP September 1975 Supplement noted:

A unified ConRail however, wcu id eliminate effect ive intramodal (rail-rail) compet i t ion in a large section of the eastern part of the Region. (FSP Supplemental Report p. 1091

That shortcoming has been experienced since 1 976 wi th the format ion of what the

FSP described as Unified ConRail. Simply put, CRC has had no incentive to develop

Its north south (or vice versa) freight traff ic f lows. It has instead elected to

concentrate its ef forts on east west f lows wh ich favor CRC's long haul mileage and

operat ing conf igurat ion. This contr ibuted to the loss of substantial rail traff ic

originating or destined to points in New York east of the Hudson River. It should be

12

noted that the Joint Appl icants ' vvitnesses cite the relatively shorter haul associated

wi th north-south traff ic in the eastern US as a disincentive for CRC to focus favorably

on such markets.

I do not mean to dimmish either the level of ef fort or the amount of detail

comprehended by the ef forts of the USRA staff in its analysis of the regional railroad

restructuring problems and proposed solutions which represented broad public

part icipation. When threatened w i th the probable l iquidation of PC, the Regional Rail

Reoiganization (3R) Act was passed by Congress in late 1 973 to provide an alternative

to traditional railroad bankruptcy reorganization procedures then in proceedings before

several US cour ts .

USRA was given broader powers than those afforded to bankruptcy judges and

operated under a constrained t imetable. By February 26, 1975 USRA had to issue its

PSP findings and recommendat ions (only 14 months after enactment of the 3R Act

which required it). By July 26, 1975 the FSP was requ'red to be delivered to

Congress, an event complicated by the January 1 975 decision by Trustees of the EL

that the railroad could not be f inancial ly reorganized, and therefore that EL assets were

to be included in both the PSP and FSP processes.

The goals of ihe 3R Act wi th respect to the research and planning exercises

undertaken by the USRA are set forth in the 3R Act itself isee PSP Vol. 1 p.2221 m

Section 101 [Declaration of Policy), u^ore specifically, the purposes set forth m

Section 101(b) demonstrate the intent ot Congress at the time the process was

init iated, January 2, 1974. Of the six purposes enumerated in the referenced sub

section of the 3R Act , two specif ically spoke to the need to restore and enhance rail-

rail compet i t ion.

In reaching its conclusions in the PSP USRA found as fo l lows, at page 17:

• The Northeast and Midwest Region should be served by three major rail systems - a ConRail largely based on Penn Central, the Norfolk & Western and the Chessie System supplemented by strengthened operat ions of the smaller solvent railroads. In thr,-interest of preserving compet i t ion m major markets, the Norfolk & Western and or the Chessie Svstem should expand to contro ' and operate services over certain mam lines of the bankrupts.

13

Because of tr.ese transfers of properties to solvents, ConRail would not exercise monopoly control over any major market in the Region.

ConRail s system initially should include some 15 ,000 miles of principal, secondary and feeder lines including 3 ,400 miles of light density Imes. This system wil l enable ConRail and the Region's solvents to provide carriage for more than 95.5 percent of the traffic currently generated by the Region s shippers.

These findings were unacceptable to both CS (a CSX predecessor), and NW (an NS

predecessor), thereby forcing the FSP to address only a 'Unif ied Conrail ' which

resulted m substantial el imination of intramodal compet i t ion m the seventeen state

plannmg region, including New York east of the Hudson River, and its severe

diminution at Buffalo. Thus m the FSP, USRA found that non-acceptance by the

solvents (CS and NW) of the Imes and services proposed for their acquisi t ion,

effect ively foreclosed direct rail-to-rail compet i t ion in much of the Northeast region.

(See FSP pp.13-151.

A situation m which ran intramodal compet i t ion ^vould be maintained and enhanced

was analyzed by USRA after it received the individual negative responses f r o n NW

and CS to the PSP proposed "Three System East. " A new alternative was considered

(but not recommended by USRA) to partially achieve these goals by use of two

combinat ions. These were (1) small CRC, comprised of PC and AA lines, and (2) Mid

Atlantic Rail Corporation EL (MARCEL) comprised of the lines of LV, RDG, CNJ,

Lehigh & Hudson River (LHR) and the eastern port ion of EL. USRA chose not to

recommend this alternative, instead favoring creation ot the larger ( "unified ") CRC

system.

Al though the FSP did not explicit ly provide for cont inuat ion of compet i t ion east of the

Hudson River, an alternative v iew /vas advanced by Wil l iam W. Scranton, a former

governor of the Commonweal th of Pennsylvania (and a member of the USRA Board

of Directors at the time the FSP was issued) in support of fhe format ion of both CRC

and the MARC EL systems.

The relevant port ion of the Scranton Separate Statement ( included ,i the FSP as an

At tachment) states that:

14

If the USRA preferred plan (which includes the Chessie System purchasing much of the Erie Lackawanna and Reading railroads) does not become a reality for any reason, then I advocate the two-sys tem plan "MARC EL plus ConRail (PC A A) System ' rather than "Unified ConRail".

The USRA fmancial projections indicate that Unified ConRail " has a greater likelihood for profitabil i ty and viability than ConRail and MARCEL. But "Unified ConRail" has the dist inct disadvantage of monopoly. In the belief that compet i t ion benets better management and better service, I prefer a smaller ConRail and M A R C E L . Further, two major systems in the Northeast are preferable to a monopoly in work ing toward a viable railroad structure for the whole Nation. [See FSP p. 1 85.1

From the passages cited m the FSP, it is apparent that the failure of CS and NW to

participate in the restructur ing of the northeastern railroads forced the formation of

unif ied CRC and resulting losses of service at points where former PC nad competed

directly wi th one or more of the other northeastern bankrupt railroads including

Reading,CNJ and EL in the metropol i tan region of New Yor'' east of the Hudson River,

and at Buffalo.

The direct predecessors (CS and NW) of the present Joint Appl icants (CSX and NS)

appear to h?we b t e n disinterested m the 3R Act procedures and planning processes

until such time as CRC achieved real financial strength and a proven record.

The impact of the failure of the USRA FSP to persuade CS or NW to participate m the

restructuring process left the subject area " captive,"' i.e., w i th rail service exclusively

provided by CRC. Thus the explicit statutory goal of the FSP, that it .. "be formulated

m such a way as to ef fectuate . . the retention and promot ion of rail ., services" m

the region was evaded. [See PSP, p. 12, FSP. pp. 198-199 (a copy of the 3R Act

Section 206(a) Goals).] The combinat ion of creation of a unif ied CRC system and

absence of rail compet i tors m New York east of the Hudson River ef fect ively

foreclosed even the possibil i ty of intramodal rail compet i t ion m that area until the

mstant proceeding. It must therefore be concluded that the failure of NW and CS to

participate m the FSP acquisit ions planned for and designated by USRA for each of

those rail carrier systems led to a further reduction in compet i t ive rail services m the

eleven county region In ef fect , only CRC acquired through long haul routes to f rom

the region.

15

It IS pertinent that CSX's predecessor, CS, was designated in the FSP to receive many

routes and services historically operated by the EL and RDG CNJ rail companies. CS

refused those offers of rail assets, and consequent ly, rail service m New York east of

the Hudson River became, for all practical purposes, captive to CRC. [Final System

Plan, Supplemental Report at 100 et seq.l

That circumstance is signif icant for another reason. As condit ions of the PC merger,

both EL and Delaware & Hudson Railway (DH) were acquired by NW Those railroads

were not merged wi th NW but were segregated on July 1, 1968 into an NW

subsidiary, DERECO Corporat ion. When EL f inances were impaired by the PC merger

and the impact on its eastern lines of Hurricane Agnes m 1972, EL declared

bankruptcy under Section 77, a process which was reported to forecast restored

financial viability for EL. That forecast was subsequently reversed in early 1975 and

EL sought inclusion under terms of the 3R Act FSP procedure. By contrast, DH was

able to survive financially and went mto the FSP process as a proposed acquiror of

certain lines and/or service rights m the region between Potomac Yard, VA and

Montreal. Quebec ' 'la Rouses Point, New York). [For a complete descript ion of

trackage rights and lines of fered by USRA to DH, see FSP, p.316-17 Also, see

Official Guide, D&H Freight Schedules, March Apri l 1 9 8 1 , pp.181-2.1 In addit ion to

DH, the then remaining solvent regional rail carriers, were Canadian National (CN),

Canadian Pacific (CP), CS and NW.

With cont inued deterioration of the EL prospects and f inances, NW reversed course

as gracefully as circumstances permit ted. As described m the FSP, NW disposed of

EL after the latter became subject to the 3R Act m January 1975. DH was

subsequently sold, first by NW on January 4, 1984 to Guilford Transportat ion

Industries, i-ic. and then m January 1 9 9 1 , by the latter to CP. DH was subsequently

renamed St. Lawrence and Hudson Railway and is currently operating on former DH

trackage nghts over CRC.

CSX predecessor BO was also a part icipant in t raf f ic which moved to and f rom New

Vork and via New York to and f rom New England stat ions. BO owned and control led

the RDG which in turn owned and control led the CNJ. CNJ was the first of the 3R

Act railroads to have entered bankruptcy reorganization in 1967 fo l lowmg the lailure

of the State of New Jersey legislature to appropriate revenues to compensate the CNJ

16

for passenger services performed under New Jersey's authorization and supervis ion.

[See Moody 's 1967 Transportation Manual, p.652.1 CNJ and RDG both enjoyed

access to eastern New York by interline routes w i th NH (which became a part of PC

m 1968) as well as via the LHR which interlined w i th NH via the lat ter 's bridge over

the Hudson River at Poughkeepsie, New York.

VI. The Conrail Compromise: Rationale and Appl icat ion

As I have discussed above, USRA was given no alternative to the creation of CRC's

monopoly by the separate rejections by CS and NW, of a multiple rail carrier sys tem

to serve New York. The effect ive elimination of intramodal compet i t ion be tween

railroads in this region resulted from the acquisit ion by CRC of rail assets and facil i t ies

of the former EL, RDG, CNJ and LV, as well as f rom failure to provide another railroad

access via trackage rights or other means (haulage or terminal access) to the traff ic

base now captive to Cr^C.

CRC was formed in 1976 under a forecast of the future by USRA that demanded

much of the new company 's management. Several problems which had plagued

CRC's predecessors in a period of unprofi table service and operations had to be cured;

these are discussed at length m the FSP. In short, CRC faced the need to make

massive expenditures upgrading or replacing plant and equipment includmg rol l ing

stock and motive power,

CRC financial results reflected these substantial burdens and, until 1980, those

weaknesses and the need for further public funding by Congress cont inued to focus

Congress' at tent ion on CRC, Due to the statutory author i ty and financial requirements

to make substantial capital improvements in CRC, the company was f rom the outset

government -owned, a fact which concerned the privately held railroad compet i tors m

the Northeast and Midwest . Congress instructed USRA to exercise oversight over

CRC: USRA therefore stood between CRC and polit ical pressures f rom the publ ic, the

Congress and the Federal Executive. CRC's financial needs exceeded those forecast

by USRA each year during the period between 1976 and 1980.

17

By Its passage of the Staggers Rail Act of 1980 and the Northeast Rail Services Act

(NERSA) m 1 9 8 1 , Congress further reduced traditional economic regulation of

railroads, including CRC, and charged both USRA and CRC to forecast how CRC

would achieve profi tabi l i ty in the years 1 982 through 1 986. CRC reported its f inancial

forecast for the period and USRA assisted w i th review of and findings that CRC's five

year business plan was reasonable and likely to succeed. For example, m 1983 the

USRA determined that CRC could become prof i table, based upon several changes in

Its corporate structure and business plans, a new president, improved management,

cost structure revision, transfer of commuter rail business to local authori t ies, contract

ratemakmg and accelerated plant rat ional izat ion. The combinat ion of f inancial viabil i ty

forecast by CRC and USRA, plus CRC's improvir.g earnings cleared the way for CRC

to become attract ive for sale as an equity investment in private ownersh ip.

VII . Rise and Role of Conrail 's Short Line Connect ions

Under both the Staggers Rail Act of 1 980 and the Northeast Rail Services Act of 1 981

(NERSA), CRC was given freedom to abandon property deemed incapable of producing

net revenue. These actions were str ipped of the previously burdensome public interest

cross-subsidy criteria which prior to NERSA had been used to govern railroad line

abandonments. A signif icant change m the regulatory procedures governing service

and facility abandonment provided for partial subsidy by those railroads or customers

desiring service to be cont inued. Under NERSA, such costs are not l imited to the prior

standard of cost avoidabil i tv. Now they of ten included ownership, maintenance and

return on investment factors wh ich are necessary to comply wi th evenhanded service

demands and cost coverage. In many instances, when CRC desired to avoid the costs

associated wi th short haul and swi tchmg services, it was able to secure such services

via abandonment or sale of a port ion of a Ime to a new prospective operator Over

time sixteen separate railroad companies took over segments nf CRC wi thm New York.

Thirteen short line railroad operat ing companies have been formed m the State since

the creation of CRC in 1976. Other short line railroads which existed prior to the

formation of CRC acquired port ions of the CRC system wi th in New York which that

carrier chose to divest.

18

Shortline railroad successors to CRC m New 'Vork include:

Bradford Industrial Rail New York 84 Lake Erie

Buffalo Southern Ontario Central

Central New York Ontario Midland

Danbury Termmal Owego and Harford

Depew, Lancaster & Western Tonawanda Island

Finger Lakes Wellsboro & Corning

Mohawk, Adirondack & Northern

Those pre CRC short lines which acquired CRC line segments m New York since 1 976

include:

Genesee and W y o m m g Livonia, Avon & Lakeville Midd le town and New Jersey Buffalo & Pittsburgh New York Susquehanna & Western Spnngfield Termmal (former Boston & Maine)

An example directly relevant to an area of major concern to New York involved a

longstanding route via LHR and the former NH's Poughkeepsie Bridge. The FSP

supplement conveyed that route to CRC. Fol lowmg a 1974 fire wh ich closed the

bridge the route was abandoned and replaced by single-line CRC rout ing via Selkirk

(Albany! New York. In 1 975 76 USRA endeavored to secure compet i t ive access to

tfie area immediately west of the Hudson River and beyond by the sale of r ights to DH

to offer through route service between connect ions at Buffalo, Newark and Potomac

Yard. The rental payments for such rights would have been direct to CRC.

In Its April 1981 Response to Section 703(c) of the Staggers Rail Act of 1980. CRC

addressed three alternative scenarios involving the rai lroad's shor t - term future (5

years). The most favorable results were produced by a f inancial scenario wh ich

became CRC's Five Year Busmess Plan for the period 1982 1986, inclusive. The

forecast results were based upon the Reagan Administrat ion s national budget

premises that CRC should be permit ted: (1) substantial addit ional track abandonment;

(2) reductions in labor force and changes m work rules w i thout f inancial penalt ies; and

19

(3) State and/or local f inancial support for CRC operated passenger commuter services

as well as for CRC lines which either lost money or were financially marginal. In the

absence of these further reforms, a cessation of service and dismemberment of the

CRC system were threatened. [See Options for Conrail, Conrail Response of Apri l 1,

1981 (Letter of Transmittal , p.2).!

In many instances, during the period fo l lowing the 1 981 determinat ion by USRA that

CRC could achieve profi tabi l i ty by 1986, CRC used the relaxation of economic

regulation set forth in the Staggers Act to improve its financial performance. Often

those who desired a service to be maintained or initiated agreed to pay a signif icant

port ion of the cost associated w i th such services (and facil i t ies). In many cases. New

York State filled that role, as Mr. James Utermark explains in his Verif ied Statement.

In other cases, threatened cessation of services by CRC prompted a new operator to

acquire the facilities and operate under less cumbersome (and less expensive) work

rules.

V i l l . The CSX-NS Appl icat ion Falls Short Of FSP Goals

As stated m Section 206 of the 3R Act , there were eight goals for the FSP

(paraphrased below). The goals were to:

1) create through reorganization a financially self-sustaining rail service system m the Northeast and Midwest Region;

2) establish and maintain a rail service system adequate to meet rail transport needs and service requirements in the region;

3) establish improved high speed ro'i passenger service consonant w i th Secretary of Transportat ion s recommendat ions of 1971 for the Northeast Corridor;

4) preserve, consistent w i th other goals, existing patterns of service by railroads (including short-l ine and terminals) including other modes of transport which promote fuel eff ic iency and energy conservat ion;

5) retain and promote compet i t ion m the provision of railroad and other transport services in the region;

2 0

6)

7)

attain and mamtam environmental standards, giving environmental impact of alternative courses of act ion;

weight to

8)

move passengers and freight in rail transport m the region in the most eff icient manner consistent w i th safe operations (mcluding commuter and intercity passenger services, coordinat ion w i th Amtrak and public authorit ies); and

minimize job losses and associated unemployment and communi ty benefits and costs in the region.

I respectfully submit that the FSP goals were not fulf i l led when the FSP process itself

failed to secure cooperat ion from compet i t ion between rail carriers m the area of

concern east of the Hudson River. Wi th the prescience which hindsight facil i tates, it

is now evident that the FSP as presented by USRA in the original document (July 26,

1975) as well as in its Supplement (September 1975) , focused too narrowly on the

profitability and eff ic iency of CRC to the detr iment of other equally important goals.

Further it reflected the intransigence of the profi table regional railroads, the

predecessors of CSX and NS, to cooperate in meeting FSP goals. Because CS and

NW failed to participate in acquiring rail access as defined in the FSP due to their

individual financial reservations wi th either: (1) the price of the assets to be acquired,

or (2) their liability for labor condit ions and related costs under such acquisit ions, the

goals of the FSP went largely unfulf i l led. Perhaps such caution should have been

excused at the t ime, given the uncertain value of the railroad franchise m the

Northeast and Midwest : a second and similar failure today would be completely

unjustif ied.

Instead of establishing and maintaining a rail service system adequate to meet rail

transport needs while preserving existing patterns of service by railroads, USRA

recommended a system wh ich would dilute intramodal rail competi t ion and services

m favor of one large system which would take nearly eight years to begm to achieve

financial prosperity. Achieving this latter goal would require further amendment of the

then applicable regulatory scheme for CRC and other rail carriers.

In New York east of the Hudson River, as well as in the Buffalo area, what was

achieved in the FSP process was a financial reorganization of several regional bankrupt

rail carriers, formation of an effect ively ant i -compet i t ive rail environment, and

foreclosure of intramodal compet i t ion. Notwi thstanding CRC's remarkable success in

21

the period 1 982 86 and subsequently, as well as the benefits of smgle system service

and scope so of ten admiringly cited by the Appl icants m this proceeding, these

Applicants have aroused an area of concern to New York wh ich now must be satisfied

as a price partially o f fset t ing all the other anti social ef fects of monopoly rai lroading,

which Applicants omit to ment ion.

Clearly the time has come for the STB to rectify the errors of the planners and

participants in the Northeastern railroad rationalization and improvement exercises of

the previous two decades, errors which would be cont inued through uncondi t ioned

approval of the CSX-NS Appl icat ion.

IX. Testimony Of Witness McClellan

Joint Appl icants' Witness McClel lan's verified statement displays among other things

his long and intimate involvement wi th the problems of CRC and its predecessors, PRR

and NYC. Signif icantly, Joint Appl icant NS and its Witness McClel lan look w i th favor

upon trackage rights, shared haulage and swi tching operat ions of the type sought here

by New York, In an October 1995 interview by Progressive Railroads, Witness

McCle'lan is quoted as fo l lows:

Exclusive use of its o w n tracks everywhere is a luxury each railroad can no longer af ford. I realize that railroads hate to share assets. It is an operating hassle, as many of my railroad colleagues say regularly.. In our v iew tracksharing is pro competi t ive. It al lows NS and our r i i l road partners to stay m low-volume markets that one or more railroads would otherwise have to exit . [Progressive Railroads, "Managing Capacity for Growth" , October 1995, pp. 45-49. Quotat ion is f rom p.45 "The NS View of Track Sharing"', Letter from Witness McClellan.1

Alt f tough I agree wholeheartedly wi th this McClellan v iew, he has others wh ich (

regard wi th less enthusiasm. For example, he asserts that whi le the FSP as designed

by USRA "would not have produced a totally balanced northeastern rail system, it

would have maintained the rail competi t ion that did exist at the t ime. " [McClel lan VS,

p.5.1 I believe this conclusion is factually erroneous, though it may serve NS' present

interest. At the time of the FSP exercise, Witness McClellan was a member of the

USRA plannmg staff wh ich was relatively removed f rom the pressures of the

22

USRA plannmg staff which was relatively removed from the pressures of the

marketplace. After complet ing his service on the FSP he resumed his career m the

railroad industry, principally m the NS and its predecessor Southern Railway (SOU).

His critique of the origmal FSP proposal, wh ich is refuted by the excerpt I have

extensively quoted previously, may be colored by this l imited vantage point.

Witness McClellan testif ies that when CS failed to participate m the FSP goal of

competi t ive rail service, an alternative was proposed which comprised t w o systems;

(1) ""big CRC"' comprised of PC and AA and (2) MARC EL. which included the

residuum of other bankrupt railroads ,n the region. This second system was intended

to provide, at least partially, for maintenance of rail intramodal compet i t ion, but USRA

did not support this alternative scheme due to the risk that neither of the compet i tor

systems was likely to survive financially.

As Witness McClel lan points out. DOT during the 1970 's was pur suing a di f ferent pian

for rationalization of the northeastern railroads. This is signif icant because the

Secretcry of DOT was also a member of USRA's 1 1 member Board of Directors [See

3R Act Sec. 201(d) m FSP, p. 1951 and USRA had, m addit ion to its other dut ies, a

responsibil ity to review and comment upon DOT's early (30 days after the January

1974 enactment of the 3R Act) report on rail services m the Northeastern and

Midwestern region. In making his report, the Secretary of DOT was to publish his

conclusions and recommendat ions wi th respect to rail service m the Northeast and Mid

West.

In his Februarv 1974 report, the Secretary of DOT framed several recommendat ions

to aid USRA m its ef for ts. Critical to the direct ion of the report are the conclusions

wi th respect to maintenance and enhancement of rail compet i t ion. Note the process

of reasoning displayed in the conclusions of the Secretary's report, which I quote

verbat im:

• Fundamental consol idat ion and restructur ing of region's rail industry required to realize public policy goals;

• major benefi ts to be realized wil l be (1) improved capital product iv i ty and viable financial base for regional rail industry and (2) higher quality rail service for env, e region;

23

to improve product iv i ty, existing dupl icat ive and underuti l ized individual railroad mainlines in the region should be consol idated into a high volume, upgraded network;

to maintain and enhance rail compet i t ion and improve operating eff iciency wi th in the region, the region's railroads should share facilit.es and coordinate operations over the high volume ne twork ;

local rail services should be fulfi l led generally by a single rail carrier wi th direct rail service to give the rail mode a viable economic base and support effect ive intermodal compet i t ion;

existing highly duplicative feeder and local service network used to provide local rail services should be streamlined by abandonment of financially non viable rail facil i t ies. [See Rail Service in the Midwest and Northeast Region, Secretary of Transportat ion, February 1, 1974, pp.2 3.1

Further, in addressing rail compet i t ion and the restructur ing process, the Secretary set

the f ramework of the debate which ensued. The f ramework reflects the then extant

industry profile where most freight traff ic was interchanged between rail carriers while

shippers had the commercial right to specify how their shipments were to be routed

wi th in the national railroad network. [See Op. Cit. pp.12 13.1

The Secretary also stated that, under the private enterprise system m this country ,

balanced compet i t ion is vital to regulate eff ic iency and safeguard the public interest.

Competi t ion was then defined by the Secretary as having two aspects: (1) short hauls

and light traff ic density markets should be served by intermodal compet i t ion between

rail and motor carriers: (2) high traff ic volumes and relatively long rail haul markets

should [of themselvesi promote rail intramodal compet i t ion so that the fo l lowing

results obtain.

At the local service level, rail services should. . . be consol idated so that service is provided by only one railroad. On the mainlines, inter railroad compet i t ion should generally be maintained for direct service between the region's major traff ic generating centers. In certain areas, this compet i t ive service may be provided over the same right-of way . I Ibid., p.14,1

24

The predisposit ion of the Secretary and DOT staff to limit the application of the 3R Act

analysis process to large traff ic producing markets and simpli f icat ion, i.e. non inclusion

of surplus rail lines connect ing market or sub market pairs, set the stage for much of

USRA action during the balance of the plannmg period (February 1974 through

February 1976).

Joint Appl icants ' Witness McClellan masks how the DOT restructur ing mit iat ive thus

skewed or confused the attent ion of all concerned parties m the region, most

especially those m the affected area of New York.

Indeed, the identity and scope of the predecessors of each Joint Appl icant changed

during the 1 970s and 1 980s. Chessie System was a consolidation of Chesapeake &

Ohio (C&O) BO/Western Maryland fo l lowed by Seaboard Coast Line (SCL) absorpt ion

of Louisville & Nashville (L&N). The result ing combinat ion of those merged railroads

resulted m CSX, an effect ive merger of CS and SCL, plus RF&P, which CSX

purchased. Similarly, NW and SOU merged to form NS during the same period. Both

of these interregional consol idat ions were congruent wi th the Secretary 's

recommendat ions m the 1974 Report.

Witness McClellan favors the USRA-DOT methodology selectively. Forexample, when

describing the Jomt Appl icat ion process as it relates to existing interchanges between

each Joint Appl icant and CRC, Ime segments are iissigned either to one or the other

of the acquirors. Where the Joint Appl icants could not agree on the process of

acquisit ion (which railroad should acquire and operate CRC assets), CRC facilit ies are

treated as Shared Assets, e g. the CRC Amtrak line in the Northeast Corridor, between

Philadelphia and northern New Jersey metropol i tan New York to which each Joint

Applicant will have access.

Witness McClel lan is focused on what he regards as the next step in a planning and

operating process in which he has been a part icipant since the PC merger m 1968.

Now, nearly 30 years later, however , he seeks to avoid any problems of omission m

the antecedent proceedings and events which left much of New York w i th single rail

carrier access, especially that area east of the Hudson River By failing even to

ment ion the capt iv i ty to CRC wh ich resulted from the USRA/DOT analysis and

25

planning ef for ts, it appears that neither Joint Appl icant is interested in enhanced

access or intramodal rail compet i t ion by another rail carrier in those market segments.

As Witness McClellan testif ies, CRC has access to some very substantial markets, of

which New York City is cited as the only example. That would appear to be the case

no mattei who is permit ted to acquire CRC, What is important is to relieve the

captivity of the New York area where CRC possesses a real monopoly on rail access

and services. Since both NS and CSX have joined m their Appl icat ion for Joint

Control, neither can be expected to restore rail intramodal compet i t ion m this market

area. CRC. it should Le remembered, w ' l disappear and leave the market capt ive to

the Joint Appl icants unless New York secures the nght to select another rail carrier

to serve this import' ' int market. [McClel lan VS, p. 23.1

Given the pervasive nature of the Joint Appl icants ' predisposit ion to cont inue things

as they are, it vould appear that New York 's public i .erest in restoring rail intramodal

competi t ion can - ily be achieved by having the STB accept and grant a pe "> for

New York tc . ame - lother rail carnci in the area where compet i t ive rail freight service

has been ,. ssiriq j ince the failure of the PC merger resulted in the format ion of CRC.

X. Testimony of Witness Hoppe

Witness Hoppe, like \,\;itness McClel lan. was int imately involved in the USRA planning

process as he recounts in his verif ied statement. [See Hoppe VS, pp. 13 16.1

Of particular signif icance is his discussion of how USRA devised the FSP

recommendatio. is and the ..nmediately subsequent reactions by potential designees

which led to the failure to achieve USRA's goals m draft ing the FSP. The central

issue, as Witness Hoppe states in his test imony, represents a case vhere "the best

IS the enemy of the good, " i.e., a Unif ied Conrail had the best f inancial forecasts, but

an eastern rail system, w i th three rail carriers (CRC, CS and NW) would provide the

opt imum long term solut ion. As Witness Hoppe sees ' t :

Many on the USRA staff expected that luni f iedl Big Conrail would be at best an inter im solut ion, and that after it was turned around the need for compet i t ion might require future changes in the structure: the possibil i ty

26

of future restructuring was accordingly provided for in the FSP. [Hoppe VS, pp.15-16 1

When CS was unable to reach economical ly ^/lable labor agreements w i th employees

serv'ing the Imes which CS was recommended to acquire, the result was a foregone

conclusion Creation of ""Unified"' ur "Big " Conrail resulted m an almost complete

Tonraii monopoly on rail freight service northeast of a diac,onal line d rawn between

Buffalo and Philadelphia. Thus, the absence of compet i t ion was not preferred; it was

the default solut ion. [Hoppe VS, p. 16.1

I submit that for Witness Hoppe and other senior members of USRA staf f the issues

propounded in the 3R Act were among themselves di f f icul t to rationalize. As he

states:

[t lhe preferred solut ion, then, was nc" a Conraii of the f "-ape and size as we know it today or a rail monopoly in all of New York except the area immediately around Buffalo, but a system under wh ich there wou ld be competi t ive access to the New York City area both f rom the nor th and west, via Philadelphia, Reading, Harrisburg and points west and south IHoppe VS, p. 14.1

Further, USRA, while favoring maintaining ef fect ive compet i t ion in the Northeast as

Its recommendat ions in the PSP and FSP suggest, in the end gave greater weight to

CRC's need for f jnds in the future. The rationale of USRA was simply that CRC self-

suff iciency wa.. p iramourit to maintaining compet i t ion. The bankrupt railroads in the

Northeast and Midwest Region were reported by JSRA to be losing a mill ion dollars

daily during the period when USRA was preparing its PSP and FSP report in 1 975. As

Witness Hoppe states:

that fact alone, no doubt, decreased the enthusiasm of any potent ial solvent buyers. Turning CRC around was going to be di f f icul t enough, wi thout the further loss ot revenues or introducing ineff iciencies due to dupl icat ion. [Ibid. 1

I believe that the statement just quoted f rom Witness Hoppe fails to comprehend the

impact of cont inuing restructur ing of the regulatory scheme under wh ich CRC was

27

conceived and formed initially. It is iromc that the acquisit ion of CRC assets m the

FSP proposals would likely have cost the acquirors much less than they now propose

to expend.

Witness Hoppe left USRA after the adoption of the FSP and the format ion of CRC m

1976. After the passage of the Staggers Act m 1980, as a consul tant to CRC, he

directed the consul tant 's review and support of CRC's analysis m 1980-81 of three

options for CRC, as required by the Staggers Act ,

CRC and Mr, Hoppe recognized that the substantial federal investment expended on

restoration and maintenance of CRC's fixed plant between 1 976 and 1 980 might not

be recovered through the process of selling CRC Imes and other assets to prospect ive

railroad entit ies. Further, as Witness Hoppe states, in 1981 there were strong

possibilit ies that CRC, even after achieving financial st rength, would be sold to one

or more of the emerging interregional rail carrier networks. As the 1981 Options for

Conrail Report demonstrates, the consultant studies undertaken m respect of sat isfying

the requirements of the Staggers Act considered, inter alia, the impact of selling CRC

lines to others under the Staggers Act alternatives to CRC achieving sel f -suff ic iency.

Traffic f low analyses using historical ICC One Percent Waybi l l Data resulted in

ident i fy ing two prospective acquirors of CRC assets, CSX and NS. That t ransact ion

resembled what the Joint Appl icants seek in the present proceeding, e.g. CSX to

acquire what was characterized as "Conrail North"' and NW to acquire what was

characterized as "Conrail South'" [See Options for Conrail, Conrai l 's Response of Apri l

1 9 8 1 , pp.1 1 4 through 1 1 7 1

I believe that Witness Hoppe is accurate in his statement that:

[ t lhe t w o "packages"' proposed m "'Options " thus had a considerable resemblance to the division of CRC now proposed m the Appl icat ion. [Hoppe VS, p. 18.1

I do not. however share his conclusion that z'.'ch a split i f CRC wou ld satisfy the goal

of maintaining or enhancing compet i t ion m the region of New York where no

enhancement mechanism has been devised to c i r e the present CRC monopoly or the

resulting CSX monopoly after the proposed transact ion.

28

The principal f laws in Mr. Hoppe's test imony are his omissions. For example, it would

have been reasonable to suppose, given Mr Hoppe's experience as Chief Executive

of The Long Island Rail Road, that he would by now have been suff ic ient ly aware of

•he concerns not only of that railroad, but also of the communi ty it serves, to

aopreciate the public interest shortcomings of a grand easiern railroad conf igurat ion

which physically terminates virtually all freight trains serving the largest US

metropoli tan region m locations which necessarily generate hundreds of mill ions of

avoidable truck-miles to link railroad facilities w i th those of railroad customers, actual

or potential . The adverse consequences of such a policy are summarized m Table 2,

which identifies (1) the annual volume of Trans-Hudson truck tr ips, (2) the est imated

costs of the congestion generated by such tr ips, and (3) the tons of pol lutant by

which those trips pollute the surrounding air.

XI. The Need For Effpctiv.i Rail Intramodal Competition in New York East of the

Hudson Rivei

In addressing this topic, I am struck by the failure of witnesses for the Joint

Appl icants even to acknowledge that Metropol i tan New York City has not been the

beneficiary of maintaining, much less enhancing rail intramodal compet i t ion in the

formation of CRC and af terwards.

With the bankruptcy of all the railroads which competed w i th PC in this area, the

destruct ion of tfie independence of the NH by its merger into PC, and the el imination

by CRC of lines and routes which it regarded as dupl icat ive and uneconomic, rail

intramodal competi t ion has been removed in the region between Albany and Long

Island Metropol i tan New York.

The only one of the previously existing rail compet i tors is the LIRR, which

interchanges wi th CRC at Fresh Pond Junct ion on Long Island. The FSP failed to

recommend, even as an alternative to its principal recommendat ions, that LIRR be

granted the right to serve shippers and receivers on the CRC line on the east shore of

the Hudson River. Had it been granted such r ights, the resultant interchanges would

29

Table 2

Congestion and Environmental Impacts of Truck Traffic Resulting From Termination of Rail Freight Service

on the West Shore of the Hudson River

Year

Annual Trans-Hudson Bi-Directional

Truck Crossings (1)

(000)

Total Congestion

Cost (2) ($ 000)

Total Pollutant Emissions (3) (000 Gal.)

Year

Annual Trans-Hudson Bi-Directional

Truck Crossings (1)

(000)

Total Congestion

Cost (2) ($ 000)

Nitrocon Oxi je

Hydro Cartons

Cartoon Monoxide

1985 15,707 $7,259 169,797 33,928 176,237 1986 16,082 7,433 173.845 34,737 180,439 1987 16,248 7.509 175,641 35,096 182.302 19P3 19,993 9,240 216,123 43.185 224,320 1989 16,250 7,510 175,660 35.100 182,.?23 1990 15,911 7,353 171,995 34,367 178,518 1991 15.198 7,024 164,289 32,827 170.520 1992 15.366 7,102 166,104 33,190 172,404 1993 15.564 7.193 168.246 33,618 174,628 1994 16.320 7.543 176,422 35.252 183,113 1995 20,309 9,386 219.544 43.868 227.871

;i) Source; New York Metropolitan Transportation Council Includes Kingston-Rhinecliff Bridge. Mid-Hudson Bndge, Newburgh-Beacon Bridge, Beer Mountain Bndge, Tappan Zee Bndge, George Washington Bridge, Lincoln Tunnel, and Holland Tunnel Assumes each crossing one mile long.

(2) Source; Statistical Abstract of the United States, 1995. Based on the 1990 average congestion cost per vehicle mile for the New Yor1< City Metropolitan area estimated by the Texas Transportation Institute.

(3) Source: U,S. Environmental Protection Agency. Based on heavy-duty diesel vehicle emmissions in urban area

30

have permitted designated rail carriers to mf^rchange wi th potential through route

partners such as the former DH, New York 's current trackage rights proposal at last

would remedy this longstanding deficie 'cy.

Further changes in the t ia f f ic mix and volume of the region's rail carriers have, of

course, cont inued smce 1976, Notwi ths tand ing, it is now even more essential to

restore viable direct rail c.^mpetition m the region of New York between Albany and

the New York metropol i tan area, plus Long Island. The dramatic increase m north-

south trade and traff ic wh ich has occurred since the passage of the North American

Free Trade Agreement (NAFTA), are i l lustrated by Charts A and B, showing,

respectively, the g rowth of US exports and imports to and from our principal trading

partners Most str iking on these charts is the substantial surge m the value of trade

with Canada since NAFTA. But the vast preponderance of traff ic g rowth

corresponding to the trade increase has moved by motor carrier, w i th the increase m

bi-directional truck crossings between eastern New York on the one hand and Ontario

and Quebec on the other, amount ing to 48 . 7 percent in the period 1 984-95 , whereas

corresponding rail traff ic rose only 18 percent durmg those years. [Parsons

Brinckerhoff et al, "Trade and Traffic Across the Eastern US-Canada Border", Eastern

Border Transportat ion Coali t ion, Youngs town, NY, May 19971 Rail movements

between Canada and the US m 1 995 amounted to 45 mill ion metric tons southbound

and 12 million metric tons nor thward, as Table 3 shows. These data col lectively

suggest the untapped potential for traff ic development on the routes as to which New

York wishes to spur the g row th of rail use, a g rowth wh 'ch , in my v iew, can best be

stimulated by the introduct ion of now absent compet i t ion.

The commodi ty f lows inbound to New York east of the Hudson River include two

groups which are signif icant in terms of Canada US trade under NAFTA Those

commodit ies are newspr int and related paper products in bulk and lumber, m both

dimensional sizes and p lywood sheeting (principally used in construct ion act iv i ty) .

Such goods are not stored in large quanti t ies near the markets m which they are

consumed. Instead their f anspo r ta t i on is analogous to a pipeline m which discrete

amounts of product f low between point of product ion and point of consumpt ion. Thus

the necessity exists that rail t ransportat ion of these commodi t ies in mult iple carload

lots be regular and dependably scheduled. Given the interline nature of the f lows,

31

Chart A US Export of Merchandise to Selected Countries

(m millions of US$)

•'JO o :

•:o.cc

zaozz

o •• 3 coa I

3 OOQ

. jnaoa

m 'jo»n

« • • ' j K

O • - • l e f T T i j n v

:3 oco

Source: Statist ical A b s f a c t of the United States.

32

Chart B Growth of US Imports from Selected Countries

(m billions of US$(

1965 •970 1975 •980

/•ar

985 •990 1995

Source: Statistical Abstract of the United States.

33

Table 3

Rail Movements Between Canada and The United States

Metric Tonnes lOOO)

Year Canada to US US to Canada

1977 28,267 8,879

1978 30,074 9.189

1979 31,019 10,079

1980 31.301 8,927

1 981 28,577 8.1 78

1982 23.562 5,787

1983 25,609 6,360

1984 27,822 6,837

1985 N A N/A

1986 N A N A

1987 27,334 6.772

1988 28,896 7,706

1989 29.1 77 8,058

1990 29,824 8,454

1991 30,639 7,924

1992 35, 112 8,782

1993 39,025 10,735

1994 .''.895 1 1,757

1995 44,840 1 2, n 7

Data represents CN and CP traffic only. N A - Not available for this table. Source: Statistics Canada.

34

CRC has traditionally resisted what it regarded as a short haul between Canadian rail

connect ions and destinations m the Albany New York metropol i tan area served

exclusively by itself.

XI I . Reaching the FSP Goals In the Contemporary Environment

I have cited the posit ive att i tude which Joint Apphcants Witness McClellan appears

to hold toward trackage r ights, including sharing of terminal and haulage services.One

of the principal benefits to be gained by joint use of one carr ier 's track and roadway

by two (or more) users is the result ing enhancement of compet i t ion and asset use.

By avoiding unnecessary investment in duplicative facilities and structures, scarce

capital assets can be conserved or deployed elsewhere for higher return on

investment.

New York 's Witness Utermark m his Verified Statement of October 1, 1 997 identif ies

both the track segments and points via which New York seeks to select a third rail

carrier to provide rail compet i t ion. Wi th respect to rect i fy ing the errors inherent m the

FSP process and to fulfi l l the FSP goals to enhance and maintain then exist ing rail

intramodal compet i t ion. New York must be granted the r ight in this proceeding to

name a third party rail carrier to provide such competi t ive access and services east of

the Hudson River, including Metropol i tan New York City and Long Island.

I respectful ly urge that the Board so condit ion its order in these proceedings.

35

Appendix A

Qualif ications of

Robert L. Banks

Chief Executive of R.L. Banks & Assoc ia tes, Inc. Mr. Banks is a professional t ransportat ion analyst and economist He is a Phi Beta Ki'ppa graduate ot Columbia University and was a Fellow in Transportat ion at Vale Universi ty Graduate School where he specialized in studies of t ransportat ion operat ions, account ing and stat is t ics.

Mr. Banks, the founder of the f i rm, has acted as a policy advisor and technical analyst for nur-nerous carriers of all modes, industr ies, f inancial inst i tut ions, governmenta l ent i t ies and trade associat ions, and has di rected over 1,000 studies during the past 4 0 years, in the U,S., Canada and overseas, relat ing to all aspects of t ranspor tat ion: t ra f f ic , revenues, operat ions, costs, econcmics and f inance. In addit iori he has part ic ipated in many negot iat ions w i t h railroads concerning rates, services and line acquisi t ions, and has been a wi tness m many cases involving railrcad merger and structural reorganizat ion He is a cert i f ied member of the Amer ican Society of Transportat ion and Logist ics, Inc , a member of the Amer ican Economic Associat ion, of the National Assoc ia t ion of Busmess Economists, of the Transportat ion Research Forum and of the Amer ican Associat ion of Railroad Super intendents. He fias been Associate Professor of Transportat ion at Southeastern University and has test i f ied before several Congressional commi t tees . He lias also appeared as an expert in numerous proceedings before the interstate Commerce Comnnssion, the Canadian Transport Comfnission, two Canadian Royal Commissions on Transportat ion, and state and local regulatorv commissions, and has part ic ipated in arbi t rat ion proceedings as a member of an arbitration panel.

Prior To establishing the f i rm, Mr, Banks was w i t h the "Departmerit of the Air Force as an Industrial Specialist m Transportat ion. In this capaci ty he conducted classif ied analyses of capaci ty and demand for rail and h ighway transport :n various foreign countr ies, and before that was a staff member of the Civil Aeronaut ics Board. His CAB assignments included studies of the impact of government subsidy upon carrier management and proposed services.

Mr. Banks began tiis career w i th the Traff ic Department of the New York Central Sys tem. During his Army service. Mr Ranks was a Transportat ion Off icer of the U.S. Mil i tary Government in Germany.

Mr, Banks is the author of many publ ished articles on a wide range ot t ransportat ion subjects; he has been frequently quoted on t ransportat ion subjects m The New York Times, The Wall Street Journal and other publ icat ions.

V e r i f i c a t i o n

D i s t r i c t of ) ) ss:

Columbia )

Robert L. Banks, being d u l y sworn, deposes and says

t h a t he has read the f o r e g o i n g Statement, knows the c o n t e n t s

t h e r e o f , and t h a t t he same are t r u e as s t a t e d t o the best of h i s

knowledge, i n f o r m a t i o n and b e l i e f .

Subscribed and sworn t o before me t h i s ^ / day of October, 1997 :

Notary P u b l i c i n and f o r the D i s t r i c t of Columbia

STB FD 33388 10-21-97 r 182942 4/5

VERIFIED STATEMENT OF

STEPHEN D'ARRI GO

My name i s Stephen D'Arrigo, and ny b'lsinos.- address i t .

315 New York C i t y Ternuna 1 ••: :.x, S«-w York. ' a:,. Chief

E x e c u t i v e O f f i c e r of D'Arrigo Bros. C'. of NV'V York, and Chairmar.

of the T r a f f i c Committee of the Hunt; -.t .Market Board.

The Fvaid "presents 67 f r e s h produce v/hole.'' .a l e r s and

jobbers i n business at the Hunts Point Market m The i-i onx .

Fresh produce i s received at t.he Market f o r r e s a l e di-'• 17" i bu t i on

t o g r o c e r y chains, vendors and * : • :-LI i t <ind vegetable

r e t a i l e r s throughout the Now York Ci t y Met • ; . -. t at: A: ••a :

s u r r o u n d i n g c o u n t i e s . Pr.>d'a."-' ' r i t j : i : . " : •:

o r i g i n a t e s at growers' gat.hering p o i n t s L:

St a t e s , as we .1 1 as i n Canada, Mex:,-' ,

A f r 'ca Europe and A u s t r a l i r . i . Ann'ja;; .-,

d i s t r i b u t e over 1.5 m i l l i o n tons oi :..

m i l l i o n i n l o c a l economic a c t i v i t y .

[Ui'' ' t t i - p e r i s h a b l e natu'-

long d i s t a i ^ - o t ^ ttiat shipments- t H u r . ! s ;

transport,;' . : .-. r v : •• qua 1 i * y :

our member? ' at : 1 i t y ' -'Ompet- •.% ' '

markets 'n P h i l a d e l p h i a and Newark, N.'w

chain warehouses i n Nc--* •' : :. N -'• r^'A .

t i m e l y and predic-t.,'; a nusso: • :•

cannot he simp'. \- nui h- .:: : • : •'• ' •

L i k e w i s e , t . , : . ; : \ i i : . o r char.,'t'S

j : . t , : n ' . " . l l : K> -

. :r :: ' ).• t ed

.•\mer i can , . •

t .' P o i n t .'•;e;Tibers

j " n e r a t i : . q '..)ver ;

he

pment i no aay

hrec-" days l a t e r

i s i v e t . i-.'ie

c o n s t a n t changes i n supply and demand r e s u l t i n g from weather

c o n d i t i o n s , seasonal customer preferences and o t h e r f a c t o r s . I I

n o t , our members' a l r e a d y t h i n margins w.:, r - squeezed f u r t h e r

by o v e r s u p p l y , a problerr, evory b i t . as har. : shortage.

The Hunts Point Market oper'.cd in 1 967. At i t s

i n c e p t i o n , the maiki-t ;ed tm r a i l as tne most c o s t - e f f e c t i v e

mode f o r t r a n s ; : • :ig t i m e - s e n s i t i v e produce, r e c e i v i n g upwards

of 20,000 inbound r e f r i g e r a t e d r a i i c a r s a n n u a l l y through Maybrook

and S e l k i r k , NY and the Harlem River Ynrd. Over the years,

however, as the number of major r a i l r o a d ; - s e r v i n g New York

dwindled t o a s i n g l e c a r r i e r -- C o n r a i l -- i n c r e a s i n g t r a n s i t

d e l a y s , s e r v i c e q u a l i t y i n c o n s i s t e n c i e s and r i s i n g r a t e l e v e l s

f o r c e d the d i v e r s i o n c f more and more into:;-.: : v . \ i t : : - t o over-

t h e - r o a d t r u c k s . Today, r a ^ l ; i n c l u d i n g boxcars and pi.jgy: • •

accounts f o r abcnit 35-40* of .he : . • ; -.nd sh.::,' : . i s ,

i n c l u d i n g aboul 2400 r e f r i g e i M ' ' i l-ox-ci: i:.- and 18,000

piggyback carloads each year. I n i - j n t r a s t , me 250 • : .: -k loads

are deliver'^^'d • . i docks each day . . ' -. . t i :.a'.

a l r e a d y experience high ti-ar;-,': .-oncent i-a t i l e v e l s .

Under t !.• • plan f o r the d i v i ; r. : ' -r.r.i . , CSX and

N o r f o l k Southern propcj •• •• :• • . : the

p r o p e r t ie-js and operat ing r i g h t s o*. :••'.:. :. : i n e , wh i c h

Harlem River Y,ivd and Hunts Point tn>n! the -A-'.-I • ir. gateways v i a

S e l k i r k . The M'irkr^t won!;; .--wapi Conrai! * ; ':'.X s o l e

p r o v i d e r of :-a :: . i * • : : • - , ' ^ "

i f t h i s change -- s t a n d i n ; • • : any p o s i t i v e

impact on r a t e s and s e r v i c e such as might a l l o w us t o reduce our

r e l i a n c e on the army ot t : ,. -ks t h a t s t r a i n Bronx s t r e e t s every

day en r o u t e to the Market. Another asp<K-' : rhe CSX,/Norfolk

Southern p l a n , however, does pose a d i r t -*, . nd immedint-? t h r e a t

t o our members' businesses.

While C o n r a i l ' s monopoly : : a i l s e r v i c e t o New Y,-rk

C i t y and Hunts Point would pass i n t a c t t o CSX, I understand t h a t

Conrai1-served t e r m i n a l s i n Northern New Jersey, Newark and

P h i l a d e l p h i a w i l l be opened t o c o m p e t i t i o n as shared asset

areas, ' t o be served by both CSX and N o r f o l k Southern. Where

f j r e v i o u s l y our membeis and t h e i r New Jersey P h i l a d e l p h i a

c o m p e t i t o r s were a l l a t the mercy of a s i n g l e r a i l r o a d , under the

CSX/Norfolk Southern plan the New Jerse\ •: . a d e l p h i a markets

w i l l enjoy new, r a i l - t o - r a i l compoi .• . ;.. " have spo: • '• years

i n one t the most c o m p e t i t i v e l i n e s of business i n the East, and

I know from experience t h a t having a •' : ice of vendors leads

d i r e c t l y t o lower p r i c e s and b e t t e r s e r v i c e . Under the c a r r i e r s '

p l a n , 1 see these b e n e f i t s going t o our M<-i!.>.- i s c o m p e t i t o r s , but

not t o us, w i t h the p r e d i c t a b l e r e s u l t that t h e i i " n:,!->' ' shares

w i l l grow at our e.xpense.

The State of New York and t ,-. : : C i t y • -• :••.

Development Corpor a t i o n are proposin-g tc address t h i s imbalari'-e

by asking the Board t o grant trackage r i g r i ' . * a sec •. i r.: .

c a r r i e r , not a i f i i i a t e d w i t h CS.X : : • • ..thern, : ; r o v i d e

t r e i g h t s e r v i ce on the Hudson ;: :,; • . t i or w i t h CSX. The

Hunts P o i n t Ma t-Ret ' : :: • - \ • • • • : : . y .--up p o r t t h i s

c o n d i t i o n , which a t l e a s t would l e v e l a p l a y i n g f i e l d t h a t

o t h e r w i s e w i l l be t i l t e d a r t i f i c i a l l y i n our c o m p e t i t o r s ' fa v o j

Moreover, t o the e x t e n t t h a t c o m p e t i t i o n on the Hudson Line

produces r a t e s and s e r v i c e l e v e l s t h a t lead t o d i v e r s i o n s back

from motor c a r r i e r s , p u b l i c h e a l t h and s a f e t y w i l l b e n e f i t

f u r t h e r from a r e d u c t i o n i n t r u c k t r •.: • ; m a congested urban

area.


C i t y of New York )

) ss :

Borough of The Bronx )

Stephen D'Arrigo, being d u l y sworn, deposes and says

t h a t he has read the f o r e g o i n g Statement, knows the cc'ntents

t h e r e o f , and t h a t the same are t r u e as s t a t e d t o the best of h i s


Stephen o ' A r r i g o

Subscribed and sworn t o b e l o r e me t h i s d.c. : October, 1997:

Notary P u b l i c i n and f o r the State of New York

VERIFICATION

CITY OF NEW YORK ) )

BOROUGH OF THE BRONX ) SS;

STEPHEN D'ARRIGO, being duly sworn, deposes

and states t h a t he has read the foregoing Statement, knows

the contents thereof, and that the same are true as

stated to thv. best of his knowledge, information and

b e l i e f .

Subscribed and sworn to before me t h i s 15th day of October, 1997

A-

STEPHEN D'ARRIGO o, c

Notary Public i n and for the State of New York

IRVING L SHERMAM Notary Pwbli; v'-. 'e c' York

f.'; '•'.vo;-^*: Quaiii.ea in BM .. oi<niy

Commissior Exp July 31 t998

3

I i


ALAN FIRESTONE

My name is Alan F i r e s t o n e , and my business i s 210 .M i l l e r

Place, H i c k s v i l l - ; , New Yoik. I am President of F i r e s t o n e Plywood

Corp., a d i s t r i t ' u t e r of plywood and plyw,:oJ products t o f u r n i t u r e

makers, toy manufacturers, d i s p l a y s t r u c t u r e manufacturers,

b u i l d e r s and ot h e r wood component users i n N'-w York C i t y , on Long

I s l a n d , and throughout the NY/NJ/Connecticut m e t r o p o l i t a n area.

I am making t h i s Statement i n ;ro r t of the S t a t e of New

York's request f o r a trackage r i g h t s c o n d i t i o n on Board approval of

the planned d i v i s i o n of C o n r a i l betwoo!, ind Norf c i k Southern.

The' requested r i g h t s woulc' b r i n g s e r v i c e by a second r a i l f r e i g h t

c a r r i e r over the Hudson l i n e from A1 bany ./Sel k i rk through

Poughkeepsie t o the Long I s l a n d Rai :r

i n t e r c h a n g e a t Fresh Pond, NY.

Our company rec e i v e s shipment:

p a r t i c l e board at our H i c k s v i i l e f a o i i .

product i s rec e i v e d f.o.b. dest - o

i n c l u d e d i n the p r i c e that we pay i . ; •.'

product sources are geographica11v v:

plywood from s u f ^ p l i o r s i n Cana^da , "•'' :•:

Coast, as w e l l as more l o c a l ,• .. •• •:

however, the focus i s c n ' '1 i 'red pi : •

c o m p e t i t i v e , and i l ou:- : • :.: ' ' : •

New Jersey and • :. • • c o s t s ,

For many years, :!:-.• :!,a j." : ; l y . :

; : N' w York t. At 1 anr i c

: inbound plywood and

l y . In most cases, the

. • • ; r a i i : : l i o n cost.s

s h : t->per . Ou r po r er. t i a 1

. • ; • -VN-. • ha •• rchaseri

• • •••idwf?st and the West

. • ; ; .- . I n a i l cases,

•.;r business i s h i g h l y

;her than our Northern

:: :y business s u f f e r s ,

und plywood shipments

moved by r a i l , from western and Canadian sources through gateways

t o C o n r a i l (such as A1 bany ,/Selk i rk ^ and, u l t i m a t e l y , t o the f o r

d e l i v e r y t o H i':-ksv i 1 1 e . T r a f f i c would br> i nt erchangeo t o C o n r a i l

by d i f f e r e n t c a r r i e r s , depending upon tho o r i g i n , and LIRR's

d e l i v e r y terms b a s i c a l l y were f i x e d . Th- movt.ment and i t s p r i c i n g ,

t h e r e f o r e , e f f e c t i v o l y w; •.*: : ••: \ :• ' r . r a i l . G r a d u a l l y ,

lack of c o m p e t i t i o n : ; . ' s servic*- led t o complacency ;, ri".'

p a r t of the ca: : .' : , : : : . t rant •. : : .: • t s t o our suppiie'S

d r i f t e d upward. The r e s u l t was i i i g h e r d e l i v o r e d p r i c e s f o i

Canadian and western plywood moving by r a i l , and a near t o t a l s h i f t

by F i r e s t o n e t' t r u c k - s e r v e d sources i n the East. Today, we

r e c e i v e approximately 500 t r u c k l o a d s of pl-ywood and p a r ' t i c l e board

at H i c k s v i i l e each year. The r a i l e'quivaior.t , i f that s ^ r v i " ' -A-i;

a v a i l a b l e a', a reasc>nable, comp* • • o.-- • , -A'OUIO :• . -•

c a r l o a d s .

C o n r a i l ' s apparent d i s i i . t . i>-s- :• l i e r i . n g C'^mpetit iv.--ly

p r i c e d r a i i s e r v i c e f o r shipments from C'-.-.-i : in -.md w- •.- -• r :. .-• .:

has had the e f i e ^ i t both of i n c r e a s i :. : ; . s t s ,

and l i m i t i n g the numoer of suppl :••!.'- -..,:: : ..-u . .. , -.%'

choose from i n m'-. : nc; • - ur needs . r r : ': v '.'X \-: : u- : f ; v

Southern t t : : -. :• ' • : . i between the:: . • ..•.'•, : . o. • : ' • ,

even more seri o u s r i s k t c our company.

As I noted, our bu.« i ne«.« is ho.,:../ • inp..-t . i . .• . Ma r.v '.

our competit :•; -.re base...: • , :•;,::• • .'.-er m Northern Ne-

Jersey. As I understanc • • • • ; Co., '::.•, : N : • Southerr,

propose t o share use : i :.ra . . . :, .'.'.rthern New Jersey.

However, CS."' alone would operate the C o n r a i l l i n e s on the east s i d e

of the Hudson. I f t h i s plan i s approved, our New Jersey

c o m p e t i t o r s w i l l gain new access t o the s e r v i c e s of two r a i l

c a r r i e r s , w h i l e we remain dependent on a s i n g l e system.. The

consequences, I b e l i e v e , are not hard tc p r e d i c t : the a v a i l a b i l i t y

of c o m p e t i t i v e r a i i and w - l l as t r u c k s e r v i c e w i l l i n c r e a s e

s i g n i f i c a n t l y the source c o m p e t i t i o n enjoyed by our r i v a l s . T h i s ,

i n t u r n , would lower t h e i r d e l i v e r e d product costs and t i p t he

market balance- m r h e i r f a v o r , at our expense.

I f the Board decides t o approve the CSX-Norfolk Southern

p l a n , i t should make sure t h a t shippers sucii as F i r e s t o n e l o c a t e d

east of the Hudson River are not harmed as a r e s u l t . The best way

t o do t h i s would be to g i v e us access r • s a m e c o m p e t i t i v e r a i l

t r a n s p o r t a t i o n o p p o r t u n i t i e s being granted t o our North Jersey

c o u n t e r p a r t s . The State of New York's proposal wou.ld a l l o w a

second r a i l c a r r i e r t o o b t a i n trackage r i g h t s over the Hudson Line

v i a Poughkeepsie, t o compete w i t h CSX f o r f r e i g h t t r a f f i c t o and

from New York r : i t y and Long IsLana. : :•. - one Plywood Corp.

supports t h i s proposal as an e f f e ' - t i v o - --y.- t o rest.^re an even

p l a y i n g f i e 1 1 t o r Now York metropol . • ;: : • i vi , :•: ; i ' rs . Jn

behalf of my company, I urge the L <!: : : ;: ; : .•• i t .

-3-

OCT-Ol-97 15 55 FROM SLOVER a LOFTUS ID 2 0 2 3 4 7 3 6 1 9 PACE B'B

VE.^^IFICATIGN

STATE OF NEW YORK ) ) ^ SS '

CCUNTY OF ^^ J i ^ U )

Alan F i r e s t o n e , being duly svvcrn, ceposes and says t n a t

he has read the foregoing Statement, ki.ows the contents t h e r e o f ,

and t h a t the sane are t r u e as stated t o the best of hi.s knowledge,

i n f o n n a t i o n and b e l i e f .

Swcrn and sub s c r i b e d j t betore me th's W cay of n J i U U ^ , l'^97

Notary PuDlic

Ky Cornirission e x p i r e s :

FLORENCE OSTROWSKY MoMry PuMic 8tM« of MMV Vtofk

i4M0763 ^ QIMMHM in NMMU County At/ OommMon EJVVM Au0u« 31. laZf


JIM CHRISTii:

My name i s Jim C h r i c i - i e and I am employed t y USA Waste

Services Co. (USA Waste) as Regional Vic--^ P r e s i d e n t , I r a n s t e r

Systems l o r tht; A t l a n t i c Region. .My business address i s 111

Paterson Avenuo, Iriboken, New Jersey 070.30. P r i o r t o j o i n i n g USA

Waste i n 1994, I was employed i n a s i r t u l a r c a p a c i t y by Browning-

F e r r i s I n d u s t r i e s .

USA Waste engages i n the o 0 o- i L i o r i , p r o c e s s i n g , and

d i s p o s a l of m u n i c i p a l s c l i d waste (.MSW-STCC Nr-. 4029 1 14) i n

nuni''r"us regions throughout the Unite'! . • •.: --s, i n : . : .. : • •.• New-

York C i t y M e t r o p o l i t a n Area. Because the New York C i t y area

lacks f a c i l i t i e s f i the d i s p o s a l of mucli o,t the r e g i in ' s MSW, i t

must be transpoj-ted lent. stances .in t a t e commerce t c

d i s p o s a l s i t e s i n sanh s t a t e s ;, :. . , :, r g i a and V i r g i n i a .

Under our c u r r e n t c o n t r a c t s , USA 'A'asr.- .'lan'dles approx .mately

5 , 000 tons o{ ysw d a i l y throughou- • r. N»-A' York C i t y .irea.

Much of the MSW shipped by USA A:; •. i rr>ni N- v, ;. . • •_.

moves t o l a n d t i ^ l s that we own or c o n t r o l i r. V i r g i n i a . because

of the volumes and d i s t a n c e , MSW i s id'o . ; ;ted t o r a i l r o a d

s e r v i c e whe• • • i • isonaL. •' t access is a v a i l a b l e . At p r e s e n t ,

we move about 1500 tons ot MSW per o... : . , .: ,' . - i

c o n t a i n e r s , 4 t • a l i a t c a i , irom the Harlem River Yai- i in the

Bronx. The • : !!••:. :- . v i a Conrai 1 • • - . ;h S e l k i r k , 'lY •

Hagerstown, MD, t o r interchange t ; :• . . .-ory by N o r f o l k

Southern t ^ i ..A i ved f a c i l i t y . :. s . .i i iiwes t e r n (Amelia

County) V i r g i n i a . A l t e r n a t i v e l y , we can snip MSW v i a C o n r a i l and

CSX t o a l a n d f i l l m southeastern V i r g i n i a , though t h a t s i t e i s

some 2 m i l e s from the r a i l yard which means h i g h e r costs f o r

d e s t i n a t i o n t r a r - i s f c r s .

Since i t . - c r e a t i o n i n the mid-19''0s, Conrai.". has

enjoyed a monopoly over r a i l r o a d s e r v i c e s t o and from p o i n t s on

the east s i d e ot the Hudson. I : . •:. .".y • , the C o n r a i l monopoly

has c r e a t e d problems f o r MSW shippe r s , some of which <ire w e l l

summarized m some of t h ^ v e r i f i e d statements f i l e d w i t h the ICC

i n Docket No. Ex Partei No. 346 (Sub-N . '; , R a i l General

Exemption A u t h o r i t y -- Exemption of Non Ferrous Recyclables and

R a i l r o a d Rates on Recyclable Conmiodi t i e s • They inciu'.le h igh

charges, lack of equipment, i n d i f f e r e n t s e r v i c e , e t c . For i t s

p a r t , USA Wast.> has managed t o av e r t many of these pr(,>blems

through c o n t r a c t s n e g o t i a t e d wi t h C;. ;.: : . ' : : ons .

R e g r e t t a b l y , however, the A p p l i c a n t s ' proposal f o r tho d i v i s i o n

of C o n r a i l w i l l s i g n : * : -co •.-••.v ; ; ari:-p :• i t i o n

problems t o t USA Waste, part i cu l a 1 y i t n :'.:••: ' ..: .MSV.'

shipments o r i g i n a t i n g i n tho Bronx.

Whilo Ci'nt-ciil i s a monopolist, i L. i s neuti-a . -A-hen i t

comes To ir)ip.{ , i no s ri i p.ri'f'n t s i n v- : •.-; ;i'; OS.X • : N."- . The .-- • !

C o n r a i l ' ^ . - . :• .• .ive? a reasonably long • . . : : o,;

d e s t i n a t i o n c a r r i e r , whJch i n the past ha.*-- ••:..!£• led us : secure

g e n e r a l l y s,o . : • : : • •. • : : -u: s-i . ; r- •: t .-. Unde - t h- .'SX-NS

plan t o d 1 \- : : -, w- •.•••r, CSX a lone A . 1 : t ake over

C o n r a i l o p e t a i . :.; :, i:..- east .-..i- ' : ::<. iiudson R i v e r ,

i n c l u d i n g s e r v i c e from Harlem Riv^o o :. :.ce CSX becomes the

o r i g i n a t i n g c a r r i e r , our o p t i o n s t o use NS w i l l be s e v e r e l y

c u r t a i l e d as CSX w i l l f a v o r i t s long hauls t the d e t r i m e n t of NS

and, u l t i m a t e l y , our t r a n s p o r t a t i o n c o s t s . A CSX l o n i - h a u l ,

which IS the only s e r v i c e t h a t that car:.": nas been w i l l i n g t o

discuss With us, would leave NS w i t h only a 60-mile haul (from

Petersburg, VA) t o our Amelia Cou;.--. .•• . A p p a r e n t l y b e l i e v i n g

t h a t any r a t e they quoted woulc :..•/ be used as a " s t a l k i n g

hov-e' t o i n f l u e n c e CSX r a t e s t o the southeastern V i r g i n i a

l a n d t i i i , NS w i l l o n l y o f f e r us rrO-.- : : , . i i e q u a l i z e o: exceed i t s

revenues on the c u r r e n t haul from Hagerstown. When a'ided t o the

quoted CSX o r i g i n r a t e s , t h i s r a i s e s the • . • f our use of the

Amelia County f a c i l i t y t o a l e v e l that t h r e a t e n s t o e l i m i n a t e the

o p t i o n a l t o g e t h e r once our current contract • x - . i r e s . Thus,

a l r e a d y we see t :.• Af : 1 ic-ants' pr> ; . ' ' .:--•: r e s t r i c t i n g the

l i m i t e d o p t i o n s a v a i l a b l e t o r a i l shippers T: the east s i d e of

the Hudson River. I n a t r u l y com;•' ' ive environment. T b e l i e v e

th a t t r a n s p o r t a t i o n companies become responsive t o t i . - ..stomers'

needs. We see t h i s d a i l y i n our u t i l i z a t i o n ot motoi" c a r i i a v j o ,

which i s h i g h l y c o m p e t i t i v e .

The high value which USA Waste places upon -ompetit v-

r a i l 1'' :-. . • :r t.he reason we supp • • * :.' : : ; -sal of the Sa*. •

New York t o md.K-' : r;ipel i t i or; a : • : t he east side - .• f

the Hudso- , -. 'O . A seco- ; • : ' :• • o • , • : :-1 g i n a t . • o: • i':;- * i •

east : ; :.> : t,- w: . ; ••• .; • • acce.'--. rig-haul NS s e r v i c e

v i a I t s new t : .1 r.age agreement .v::;. :•.• 'r^.-iil System t o our

M i d - A t l a n t i c l a n d f i l l s , and o b t a i n the b e n e t i t s of t r u e

c o m p e t i t i o n between CSX and NS. We are c o n l i d e n t t h a t we w i l l

make increased use of r a i l s e r v i c e when i t i s o f f e r e d i n a

c o m p e t i t i v e env i rc^nmen t. .

By the same token, we are extremely apprehensive over

the impact t h a t new r a i l c o m p e t i t i o n on the west s i d e of the

Hudson Rive r , which the A p p l i c a n t s propose, w i l l have on our

business. USA Waste competes v i g o r o u s l y w i t h o t h e r -^'is-t

companies who w i l l be i n the new shared asset r e g i o n ' proposed

by t.he A p p l i c a n t s t o r the Northern New Jersey area. The f a i l u r e

t o p r o v i d e f o r c o m p e t i t i v e s e r v i c e on the east s i d e o: the Hudson

both w i l l d e p r i v e USA Waste of the b e i i e t i t s >ol ra 1 c.^ompeti t i on,

and w i l l c o n f r o n t us w i t h c o m p e t i t o r s upon whom the Ap^plicants

have bestowed new r a i l a l t e r n a t i v e s . As a major r a i l s h i p p e i

w i t h a d i r e c t stake i n the f u t u r e of Conr.i : . ^ l i n e s , USA Waste

urges the Board t o adopt the proposal of the S t a t e ol New York t o

p r o v i d e c o m p e t i t i v e r a i i s e r v i c e t o shippers c n the east s i d e of

the Hudson River.


S t a t e of New Jersey )

] ss :

County of OpOOOU' 'h

Jim C h r i s t i e , being d u l y s-w ;o. , deposes and says t h a t

he has read the f o r e g o i n g Statement, knows the contents t h e r e o f ,

and thcU the same are t r u e as s t a t e d t o the best of h i s

knowledge, i n f c i r m a t i o n and b e l i e f .

Subscribed tjrid sv.'orn t r j b efore me t h i s V^'^day of October, 1997 :

N'.-^ciry iffuhlic m and t o r />C{\h State of Nev*/Jersey V /

Morn€ ^~ a l -/-A aj in ii^

-5-


JIM CHRISTIL

My name i s Jim C h r i s t i e and I am employed by USA Waste

Services Co. (USA Waste) as Regional Vice P r e s i d e n t , T r a n s f e r

Systems f o r the A t l a n t i c Region. My business address i s 111

Paterson Avenue, Hoboken, New Jersey 07030. P r i o r t o j o i n i n g USA

Waste i n 1994, I was employed i n a s i m i l a r c a p a c i t y by Browning-

F e r r i s I n d u s t r i e s .

USA Waste engages i n the c o l l e c t i o n , p r o c e s s i n g , and

d i s p o s a l of m u n i c i p a l s o l i d waste (MSW-STCC No. 4029 1 1 4 i i n

numerous regions throughout the United S t a t e s , i n c l u d i n g the New

York C i t y M e t r o p o l i t a n Area. Because the New York C i t y area

lacks f a c i l i t i e s f o r the d i s p o s a l of much ct tne region's MSW, i t

must be t r a n s p o r t e d long d i s t a n c e s m i n t e r s t a t e commerce t o

d i s p o s a l s i t e s m such s t a t e s as I l l i n o i s , Georgia and V i r g i n i a .

Under our c u r r e n t c o n t r a c t s , USA Waste handles a p p r o x i m a t e l y

5,000 tons of MSW d a i l y throughout the New York C i t y area.

Much of the MSW shipped by USA Waste from New York C i t y

moves t o l a n d f i l l s t h a t we own or c o n t r o l i n V i r g i n i a . Because

of the volu.mes and d i s t a n c e . MSW i s i d e a l l y s u i t e d t o r a i l r o a d

s e r v i c e where reasonably d i r e c t access i s a v a i l a b l e . .^t t r e s e n ^ ,

we move about 1500 tons of MSW per day by r a i l i n sealed

c o n t a i n e r s , 4 t o a f l a t c a r , from, the Harlem River Ya: : :: the

Bronx. The t r a f f i c moves v i a C o n r a i i through S e l k i r k , NY to

Hagerstown, MD, f o r interchange t c and d e l i v e r y t ' N o r f o l k

Southern t o our r a i l - s e r v e d f a c i l i t y i n southwestern ''Amelia

County) V i r g i n i a . A l t e r n a t i v e l y , we can ship MSW v i a C o n r a i l and

CSX t o a l a n d f i l l m southeastern V i r g i n i a , though t h a t s i t e i s

some 2 m i l e s from the r a i l yard which means higher costs f o r

d e s t i n a t i o n t r a n s f e r s .

Since i t s c r e a t i o n i n the mid-1970s, C o n r a i , has

enjoyed a monopoly over r a i l r o a d s e r v i c e s t o and from p o i n t s on

the east s i d e of the Hudson. In many cases, the C o n r a i l monopcly

has c r e a t e d problems f o r MSW s h i p p e r s , some of which are w e l l

summarized i n some of the v e r i f i e d statements f i l e d -w:th the ICC

i n Docket No. Ex Parte No. 34 6 (Sub-No. 3f, , R a i l General

Exemption A u t h o r i t y -- Exemrtion of Non Ferrous Recyc^abies and

R a i l r o a d Rates on Recyclable Commodities. They i n c l u - i e h i gh

charges, lack of equipment, i n d i f f e r e n t s e r v i c e , e t c . For i t s

p a r t , USA Waste has managed t o a v e r t many ot these pr t.ems

through c o n t r a c t s n e g o t i a t e d v. i t h Conrai. ..: : i t s connections.

R e g r e t t a b l y , however, the A p p l i c a n t s ' pror'^.-ai f c r t h - d i v i s i o r i

of C o n r a i l - w i l l g i v e r i s e t o s i g n i f i c a n t ne- - tran:^; •• ;* , on

problems f o r USA Waste, p a r t i c u l a r l y w i t h respect • '•' ••.

shipments o r i g i n a t i n g m the Bronx.

While C o n r a i l i s a monopolist, i t i s n e u t r a , •when : t

SX ' r NS .

• : . . f o r ea .-h

'--.ailed us t

comes t o j o i n t ^ i ne shipments ir.\- . •. -.

C o n r a i l ' s system leaves a reasonai .-..•

d e s t i n a t l o ^ l c a r r i e r , which m the r *

g e n e r a l l y s a t i s f a c t r r y ra ••.>.-• : t .: . ' t :• •

pian to d i v i d e C o n r a i l , however, ;SX .. •' :< ..id take

C o n r a i l o p e r a t i o n s on the east .-.uo : :.- Hudson R i v e r ,

i n c l u d i n g s e r v i c e from Harlem River Yard. Once CSX becomes the

o r i g i n a t i n g c a r r i e r , our o p t i o n s t o use NS w i l l be s e v e r e l y

c u r t a i l e d as CSX w i l l f a v o r i t s long hauls t ^ the d e t r i m e n t of NS

and, u l t i m a t e l y , our t r a n s p o r t a t i o n costs. A CSX l o n g - h a u l ,

which i s the o n l y s e r v i c e t h a t t h a t c a r r i e r has been w i l l i n g t o

d i s c u s s w i t h us, would leave NS w i t h only a 60-mile haul (from

P e t e r s b u r g , VA) t o our Amelia County s i t e . A p p a r e n t l y b e l i e v i n g

t h a t any r a t e they quoted would o n l y be used as a ' s t a l k i n g

horse' t o i n f l u e n c e CSX r a t e s t o the southeastern V i r g i n i a

l a n d f i l l , NS w i l l o n l y o f f e r us r a t e s t h a t e q u a l i z e or exceed i t s

revenues on the c u r r e n t haul from, Hagerstown. When added t o the

quoted CSX o r i g i n r a t e s , t h i s r a i s e s the cost of our use of the

Am.elia County f a c i l i t y t o a l e v e l t h a t threatens t o e..rr... nate t'^e

o p t i o n a l t o g e t h e r once our c u r r e n t contract - x t i r e s . Thus,

a l r e a d y we see the A p p l i c a n t s ' proposal f u r t h e r r e s t r i c t i n g the

l i m i t e d o p t i o n s a v a i l a b i e t o r a i l shippers on the east s i d e '. f

the Hudson River. In a t r u l y c o m p e t i t i v e n v: r'onment , :• . .'--.-e

t h a t t r a n s p o r t a t i o n companies become responsive t c th- .ostomers'

needs. We see t h i s d a i l y i n our u t i l i z a t i o n ot motor c f . r r i a g e ,

which i s h i g h l y c o m p e t i t i v e .

The high value which USA Wast. ; ..i.-es nnon .-ompet.t.ve

r a i l s e r v i c e i s t..he reason we suppc-rt : :.• ; : p .-sal ot the Sate

New York t o make r a i l c o m p e t i t i o n a rec^..--, :. the east s i c r

the Hudson River . A secc:. ; t : • . : • • c a r r i f : : . :. : o ; - : t r . -

east of t.he Hudson w . . . •••:.:;r:" ... t , access long-hau. NS s e r v i c e

v i a i t s new trackage agr'^emer.t -A-it'" t ' i " c:-' K a i l System t c our

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M i d - A t l a n t i c l a n d f i l l s , and o b t a i n the b e n e f i t s of t r u e

c o m p e t i t i o n between CSX and NS. We are c o n f i d e n t t h a t we w i l l

make increased use of r a i l s e r v i c e when i t i s o f f e r e d i n a

c o m p e t i t i v e environment.

By the same token, we are extremely apprehensive over

the impact t h a t new r a i l c o m p e t i t i o n on the west s i d e of the

Hudson River, which the A p p l i c a n t s propose, w i l l have on our

business. USA Waste competes v i g o r o u s l y w i t h o t h e r waste

companies who w i l l be m the new shared asset r e g i o n proposed

by the A p p l i c a n t s f o r the Northern New Jersey area. The f a i l u r e

t o p r o v i d e f o r c o m p e t i t i v e s e r v i c e on the east s i d e of the Hudson

botIi w i l l d e p r i v e USA Waste of the b e n e f i t s of r a i l c o m p e t i t i o n ,

and w i l l c o n f r o n t us w i t h c o m p e t i t o r s upon whom the A p p l i c a n t s

have bestowed new r a i l a l t e r n a t i v e s . As a major r a i . shipper

w i t h a d i r e c t stake i n the f u t u r e of C o n r a i l ' s l i n e s , USA Waste

urges the Board t o adopt the proposal of the S t a t e of New York t o

p r o v i d e c o m p e t i t i v e r a i l s e r v i c e t o shippers on the east side of

the Hudson River.


S t a t e of New Jersey ) ) ) ss :

County of tAoOO^C'Lrh'l

Jim C h r i s t i e , bf^ng duly sworn, deposes and says t h a t

he has read the f o r e g o i n g Statement, knows the contents t h e r e o f ,

and t h a t the same are t r u e as s t a t e d t o the best of h i s


Subscribed and sworn to before I S me t h

1997 : 'day of October,

Notary B u b l i c i r . and f o r X l i * State of New/Jersey /

f^HOr/iir Y~ -/-^iruj in f?LjL 5m o i AJtf^xjUc/^v

3

BEFORE THE SURFACE TRANSPORTATION BOARD

CSX CORPORATION AND CSX Tr•NSPORTATION, INC., NORFOLK SL.. THERN CORPORATION AND NORFOLK SOUTHERN RAILWAY COMPANY -- CONTROL AND OPERATING LEASES/AGREEMENTS -- CONRAIL, INC. AND CONSOLIDATED RAIL CORPORATION

Finance Docket No. 3 3 388

ARGUMENT

This proceeding i s unique i n the modern era. Unlike

v i r t u a l l y every r a i l r o a d merger or c o n t r o l proposal brought

before the Board and i t s predecessor i n recent decades, t h i s case

does not focus on the questions whether and to what extent a

planned c o n s o l i d a t i o n of two (2) or more c a r r i e r s w i l l e l i m i n a t e

competition between them. In t h i s proceeding, the Board and the

public face a proposal by two (2) dominant forces i n eastern r a i l

t r a n s p o r t a t i o n t o d i v i d e between them the assets of the only

other, major market p a r t i c i p a n t -- a r a i l r o a d which i t s e l f holds

a v i r t u a l monopoly over r a i l s ervice t o , from and w i t h i n tne

Northeast.

In a d d i t i o n t o t h e i r proposed d i v i s i o n of C o n r a i l , CSX

and NS also seek approval under 49 U.S.C. S11323, et seq. of

t h e i r negotiated plan t o allow p o t e n t i a l r a i l competition to

ari s e m selected 'Shared Assets Areas' and j o i n t service f a c i l i

t i e s . This, too, i s without recent precedent: the scope and

impact of competition i n these areas would be determined not by

market forces, but by the j o i n t d i k t a t of CSX and NS . • Like

wise, the s t r i c t l y l i m i t e d boundaries of the Shared Assets Areas

and j o i n t f a c i l i t i e s were f i x e d s o l e l y by CSX and NS m t h e i r

p r i v a t e n e g o t i a t i o n s , ' w i t h l i t t l e or no acknowxedged basis i n

shipper preferer.ces or considerations of the current balance of

regional t r a n s p o r t a t i o n options.

Further s e t t i n g t h i s case apart from i t s modern prede

cessors i s the nature of the f i r m t o be acquired and d i v i d e d . As

f u r t h e r described i n f r a , Conrail's c r e a t i o n was the r e s u l t of a

complex, Congresjionally-mandated and monitored process, the

lodestar goal of winch was the p r e s e r v a t i o n and enhancement of

e f f e c t i v e r a i l competition throughout as much of New York and the

Northeast as possible. The e-iergence of the present C o n r a i l

monopoly was a r e s u l t disfavored by a l l key p a r t i c i p a n t s --

i n c l u d i n g the United States Railway Association ("USRA' ) and the

former I n t a r s t a t e Commerce Commission (•ICC'). Indeed, the

r e s t o r a t i o n of a New York/Northeast r a i l f r e i g h t system t h a t more

c l o s e l y matches Congress' competitive goals i s a stated purpose

For example, r a i l s witching and other services w i t h i n the Shared Assets Areas are to be conducted by a co n t r a c t o r known as the C o n r a i l Shared Assets Operator ('CSAO'), which would be c o n t r o l l e d by a board of d i r e c t o r s appointed e q u a l l y by CSX and NS. See A p p l i c a t i o n , Vol. 1 at 9, 41-42. Thus, any prospective a c t i o n or investment by the CSAO th a t would give one c a r r i e r a competitive advantage could and presumably would be blocked by the other.

'See, e.g. Tobias Depo. Tr. at 235-39. Throughout these Comments, references t o t r a n s c r i p t s of witness depositions w i l l be by the witness' name, followed by "Depo. Tr." and the t r a n s c r i p t page references.

of CSX's and NS' A p p l i c a t i o n . See A p p l i c a t i o n , Vol. 1, V.S.

Hoppe at 18-19.

F i n a l l y , as noted supra and f u r t h e r described hereaf

t e r . New York has invested or guaranteed over one b i l l i o n d o l l a r s

-- $600 m i l l i o n since 1974 alone -- m r a i l service and i n f r a

s t r u c t u r e , much of which was f o r the support of Conrail and i t s

f a c i l i t i e s , and the development of c r i t i c a l commuter and i n t e r

c i t y passenger routes. Taken together, these f a c t o r s argue

s t r o n g l y f o r an a n a l y t i c a l framework f o r a p p l i c a t i o n of the

governing p u b l i c i n t e r e s t standard t h a t i s not l i m i t e d simply t o

the impact of the proposed t r a n s a c t i o n on e x i s t i n g r a i l competi

t i o n .

New York submits t h a t p r o p e r l y considered, the CSX-NS

plan f o r the d i v i s i o n of Conrail should not be approved as

proposed. Rather, i n order t o be adjudged consistent w i t h the

pub l i c i n t e r e s t under the relevant l e g a l and p u b l i c p o l i c y

c r i t e r i a , the subject t r a n s a c t i o n must be conditioned as f o l l o w s :

1. New York's contemporaneous J o i n t Responsive A p p l i c a t i o n prov i d i n g pro-competitive trackage r i g h t s f o r r a i l service over the Hudson Line should be granted;

2. B u f f a l o and i t s surrounding environs should be designated and operated as a Shared Assets Area, i n the manner requested by ENRSC;

3. A 10-year overs i g h t and rep o r t i n g c o n d i t i o n should be imposed to monitor the impact of the Primary A p plicants' d i v i s i o n and operat i o n s plan on commuter and i n t e r c i t y passenger s e r v i c e ;

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4. The Primary Applicants should be ordered to fo r m a l l y and s p e c i f i c a l l y assume Conrail's o b l i g a t i o n s under t h i r teen (13) enumerated contracts w i t h New York and i t s agencies, as to which the over r i d e - clause of 49 U.S.C. §11321(a)

should be held i n a p p l i c a b l e ;

5. The s p e c i f i c conditions sought by .Metro-North and Southern T i e r West respecting t h e i r a c q u i s i t i o n of and/or r e l i a n c e on c e r t a i n l i n e s to be a l l o c a t e d to NS should be granted; and

6. Appropriate conditions should be imposed t c pr o t e c t New York r a i l shippers from increased rates j u s t i f i e d on the basis of the p r i c e paid by the Primary Applicants f o r t h e i r i n t e r e s t i n Co n r a i l .

Each of these necessary remedies i s discussed m

f u r t h e r d e t a i l below.

I

THE APPLICABLE LEGAL STANDARD

Under the governing s t a t u t e (49 U.S.C. §1 1 323, e t .

seq•) , the Board's s i n g l e and e s s e n t i a l standard of approval i n

r a i l r o a d c o n t r o l proceedmc?! i s tha t "the [Board] f i n d the

[ t r a n s a c t i o n ] to be consi s t e n t w i t h the publ i c i n t e r e s t . "

Finance Docket No. 32760, Union P a c i f i c Corp., Union P a c i f i c R.R.

Co., and Missouri P a c i f i c R.R. Co. -- Control and .Merger --

Southern P a c i f i c Rail Corp., .Southern P a c i f i c Transc. Co.. St.

Louis Southwestern Ry. Co , SPCSL Corp., and The Denver and Rio

Grande Western R.R. Co.. Decision served /'igust 12, 1996, at 98

("UP_SP 1. A key issue m a l l cases i s whether claimed or

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perceived p u b l i c b e n e f i t s are overshadowed by pur e l y p r i v a t e

b e n e f i t s , which may accrue s o l e l y to the merging c a r r i e r s at the

expense of the p u b l i c . See CSX Corp. Control -- Chessie and

Seaboard CL. I . , 36 3 I.C.C. 5 18 , 55 1-52 i l 9 8 0 ) . ^

In the modern era, agercy s c r u t i n y of proposed r a i l r o a d

c o n s o l i d a t i o n s has tended to focus pri.T.arily (though not exclu

s i v e l y ) on the e f f e c t s of a tr a n s a c t i o n on competition, a theme

echoed i n the National R a i l Transportation P o l i c y . 49 U.S.C.

§10101. See UP,-"CNW, at 5 3-54. As noted supra , however, those

cases a l l have involved proposed c a r r i e r combinations where the

p r i n c i p a l issue concerned the fear t h a t e x i s t i n g competition

would be diminished. Here, by co n t r a s t , the Primary Applicants

have presented a plan to r e s t r u c t u r e the present, Conrail monopo

l y over Northeastern r a i l s e r vice so as to d i v i d e the key f a c i l i

t i e s of th a t monopoly between them. Both the nature of the

A p p l i c a t i o n and the nature and h i s t o r y of the a c q u i s i t i o n t a r g e t

i m p l i c a t e l e g a l and p u b l i c p o l i c y considerations t h a t d e f i n e the

""public interest"" f a r more broadly than has occurrad i n more

^The ICC expounded upon t h i s p o i n t i n i t s UP/CNW de c i s i o n :

[ B ] e n e f i t s t o the combining c a r r i e r s which are the r e s u l t of increased market power, such as the a b i l i t y to increase rates at the same or reduced service l e v e l s , are e x c l u s i v e l y p r i v a t e b e n e f i t s t h a t d e t r a c t from any p u b l i c b e n e f i t s associated w i t h the c o n t r o l t r a n s a c t i o n .

See Finance Docket No. 3 2 13, Union P a c i f i c Corp., Union P a c i f i c R.R. Co. and Missouri Pa-, f i c R.R. Co. -- Control -- Chicagc and North Western Transp. C and Chicago and North Western Rv . Cc•, Decision served Februaiy 21, 1995 : "UP CNW ;, at 53.

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recent r a i l merger proceedings.

F i r s t , w h ile the Board does not s i t as an a n t i t r u s t

c o u r t , a n t i t r u s t p r i n c i p l e s inform the Board's e v a l u a t i o n of a

p a r t i c u l a r t r a n s a c t i o n against the p u b l i c i n t e r e s t standard,

p a r t i c u l a r l y i n considering whether and to what extent amieliora-

t i v e c o n d i t i o n s should be imposed. See .McLean Trucking v. United

States, 321 U.S. 67, 86-88 (1944). Here, the Primary Applicants

propose what amounts to a formal d i v i s i o n of the Northeast r a i l

market, w i t h only l i m i t e d , new o p p o r t u n i t i e s f o r competition. In

general, a d i v i s i o n of a market by e r s t w h i l e competitors amounts

to a per se v i o l a t i o n of Section 1 of the Sherman Act. See, e.g.

Palmer v. BRG of Ga, Inc., 498 U.S. 46 (1990); United States v.

Topco Assocs. Inc., 405 U.S. 596 (1972). While the per se r u l e

i s not a u t o m a t i c a l l y applied i n the context of conduct by a

regulated e n t i t y , " the f a c t t h a t the heart of the A p p l i c a t i o n

here i s a proposal by CSX and NS to carve up Conrail between them,

w i t h r a i l - t o - r a i l competition permitted only i n those areas to

which both have agreed, warrants p a r t i c u l a r l y close and t a i l o r e d

s c r u t i n y by the Board.'

Second, the Board's consideration of the A p p l i c a t i o n

and I t s proponents' arguments must defer to Congress' s t a t e d

"Cf.. Consolidated Gas Co. v. C i t v Gas Co. of Fla. , 66 5 F. Supp. 1493, 1527-31 (S.D. Fla. 1987).

'For example, as addressed i n d e t a i l i n f r a , the Applicants' o s t e n s i b l e promotion of r a i l competition i n c e r t a i n areas such as Northern New Jersey and D e t r o i t , raises separate issues of a n t i c o mpetitive impact on Conrai1-captive shippers and receivers i n other areas -- such as New York C i t y and B u f f a l o -- whose competi t o r s would gain new access to r a i l service a l t e r n a t i v e s .

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goals i n c r e a t i n g C o n r a i l , and the v e r a l l consistency of the

CSX-NS plan w i t h the f i n a l r e a l i z a t i o n cf those goals. The

Primary Applicants themselves i n v i t e such an e v a l u a t i o n , as thev

present t h e i r plan as the u l t i m a t e f u l f i l l m e n t of Congress' and

USRA's o r i g i n a l i n t e n t . See, e.g.. A p p l i c a t i o n , Vol 1, V.S.

Hoppe at 18; V.S. McClellan at 13, 50.

The USRA's Fi n a l System Plan (""FSP"), published i n

July, 1975, was subsequently approved by Congress through the

enactment of the Railroad R e v i t a l i z a t i o n and Regulatory Reform

Act of 1976 (4R A c t ) , Pub. L. 94-210, 90 Stat. 31. In the FSP,

USRA considered many d i f f e r e n t approaches toward r e v i v i n g r a i l

road operations i n New York and the Northeast, u l t i m a t e l y recom

mending one t h a t would ensure adequate competition throughout the

region. See g e n e r a l l y FSP, Chap. 1, at 13-36. USRA's pr e f e r r e d

s o l u t i o n was a r a i l t r a n s p o r t a t i o n s t r u c t u r e b u i l t around the

establishment of three major competing systems, together w i t h

several smaller, solvent c a r r i e r s who were o f f e r e d access t o

previousl y unaccessible p o r t i o n s of the region through trackage

r i g h t s and other means. In short, the FSP set f o r t h a pro-

competitive r e g i o n a l r a i l r o a d system t h a t would allow three major

c a r r i e r s and the smaller solvent l i n e s t o serve and compete m

the major markets of New York and the Northeast. As stated i n

FSP:

The Association believes the i n d i c a t e d indust r y s t r u c t u r e recoimr.endations o f f e r the best approach t o reversing the f i n a n c i a l p l i g h t of the Region's r a i l i n d u s t r y , while ensuring adequate competition. The Plan contemplates u l t i m a t e r e s t o r a t i o n of the Region's r a i l

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system t o e f f i c i e n c y l e v e l s enjoyed by most r a i l r o a d s i n the country. I t can also serve as the basis f o r f u r t h e r e v o l u t i o n a r y changes i n the r e g i o n a l r a i l system as may be r e quired .

This basic s t r u c t u r e w i l l o f f e r competit i o n between at least two r a i l r o a d s i n major markets of the Region, supplemented by the services of the smaller r a i l r o a d s . I t w i l l enable such major r a i l r o a d s as Chessie and NSrW to continue as solvent c a r r i e r s , w i t h o u t undermining the chances f o r C o n r a i l t o a t t a i n solvency -n the p r i v a t e sector. I t also should serve to s t a b i l i z e and i n several instances enhance performance of the smaller solvent r a i l r o a d s .

I d . at 3

S i g n i f i c a n t l y , both the USRA and the ICC -- i n comments

on the FSP -- s p e c i f i c a l l y r e j e c t e d the c r e a t i o n of a u n i f i e d

Conrail as a plan t h a t would •eliminate competition i n a large

and important area i n the eastern part of the Region and, thus,

would compromise one of the basic goals of the [3R] Act. FSP,

Chap. 1, at 16-17. The ICC's conclusion was p a r t i c u l a r l y p o i n t

ed

I t i s our opinion t h a t establishment of Unif i e d ConRail as the Regional r a i l s t r u c t u r e i s not a s a t i s f a c t o r y s o l u t i o n f o r three basic reasons:

• U n i f i e d ConRail f a i l s to meet the Act's goals of preserving and promoting competition (Section 206(a)(5)) and preserving e x i s t i n g p a t t e r n s of service (Section 2 0 6 ( a ) ( 4 ) ) .

• The monopolistic nature of U n i f i e d ConRail precludes e f f e c t i v e r e g u l a t i o n of Con-

•8-

R a i l by the forces of a free market environment and w i l l r e q u i r e increased r e g u l a t i o n by the Commission i n crder to p r o t e c t the Region's r a i l users and solvent r a i l r o a d s .

• U n i f i e d ConRail would set a dangerous precedent f o r nat i o n a l r a i l r o a d t r a n s p o r t a t i o n p o l i c y i n other regions of the nation by f a i l i n g to provide the intramodal competition necessary to cause service and e f f i c i e n c y improvements.

ICC Evaluation of the U.S. Railwav Association's F i n a l Svstem

Plan, August 25, 1975, at 8.

While USRA's primary goal of region-wide r a i l competi'

t i o n was not achieved i n 1976, i t emerges as a c e n t r a l theme of

the A p p l i c a t i o n . The claims of NS Chairman and CEO David R.

Goode are r e p r e s e n t a t i v e :

• This t r a n s a c t i o n i s by f a r the most pro-c o m p e t i t i v e r a i l r o a d r e s t r u c t u r i n g i n h i s t o ry. I t w i l l create two new Northeast/Southeast r a i l systems t h a t w i l l do t h e i r utmost to best each ether i n the marketplace every day. This w i l l b r i n g about a blossoming of r a i l competition, the l i k e s of which the Northeast has not experienced m decades

• The advantages to our customers of the new competitive s t r u c t u r e are c l e a r . As network businesses, r a i l r o a d s are most e f f e c t i v e when they connect the markets t h e i r customers want to reach. This t r a n s a c t i o n w i l l create two f a r - f l u n g t r a n s p o r t a t i o n networks, and each one w i l l serve most major markets in the East.

• The t r a n s a c t i o n has been c a r e f u l l y s t r u ctured to keep both networks balanced i n order to ensure that both w i l l remain strong and vigorous competitors i n a l l of t h e i r

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ma j o r markets.

A p p l i c a t i o n , Vol. 1 at 323-32. P a r t i c u l a r l y i n l i g h t cf these

claims, tne measure of the Primary A p p l i c a n t s ' t r u e achievement

of the goal of regional competition i s a c r i t i c a l c r i t e r i o n f o r

the Board to apply m ev a l u a t i n g the CSX-NS proposal.

New York submits t h a t when analyzed using the l e g a l and

p o l i c y c r i t e r i a o u t l i n e d above, and w i t h due regard f o r Conrail's

dominant r o l e i n New York and New York's corresponding investment

i n the i n t r a s t a t e r a i l system, the d i v i s i o n of Conr a i l as pro

posed by CSX and NS i s i n c o n s i s t e n t w i t h the p u b l i c i n t e r e s t and

should not be approved. Properly conditioned" t o ameliorate

adverse impacts on competition and other s i g n i f i c a n t State

i n t e r e s t s as f u r t h e r explained below, however, the t r a n s a c t i o n ' s

p o t e n t i a l p u b l i c b e n e f i t s would predominate s u f f i c i e n t l y to

enable i t to proceed, consistent w i t h 4^ U.S.C. §11324(c).

''The Board r e t a i n s broad a u t h o r i t y t o impose c o n d i t i o n s on approval i n order to ameliorate p o t e n t i a l harmful e f f e c t s or otherwise promote important p u b l i c i n t e r e s t goals. See Union P a c i f i c -- Control -- Missouri P a c i f i c ; Western P a c i f i c , 36 6 I.C.C. 459, 562-64 (1992), a f f d sub, nom. Southern P a c i f i c Transp. Co. v. I .CC. , 736 F.2d 708 (D.C. C i r . 1984), c e r t . denied, 469 U.S. 1208 (1985).

-10-

I I

APPROVAL OF THE TRANSACTION SHOULD BE CONDITIONED ON

COMPETITIVE RAIL SERVICE EAST OF THE HUDSON RIVER

The New York Met r o p o l i t a n Area and Hudson Fiver Valley

are c e n t r a l features of Conrail's service t e r r i t o r y , and one of

the country's largest markets f c r the consumption of products and

t r a n s p o r t a t i o n services. Likewise, from both a f r e i g h t and

passenger r a i l standpoint, the region i s one i n which New York

has an enormous f i n a n c i a l stake, i n l i g h t of past and ongoing

p u b l i c investments i n commuter and i n t e r - c i t y passenger f a c i l i

t i e s , yard and te r m i n a l investments, and f r e i g h t s e rvice enhance

ments such as the Oak Point Link. See V.S. Utermark at 7-9,

E x h i b i t (JAU-4).

In t h e i r A p p l i c a t i o n , CSX and NS devote considerable

a t t e n t i o n to the New York Met r o p o l i t a n Area and i t s r e l a t e d p o r t

and t e r m i n a l f a c i l i t i e s , p r i n c i p a l l y i n terms of the claimed

p u b l i c b e n e f i t s of the North Jersey Shared Assets Area. See,

e-q-> A p p l i c a t i o n , Vol. 1, V.S. McClellan at 13-14; Vol. 2B, V.S.

Kal t at 6. The testimony of NS' Witness Harris i s representa

t i v e :

The j o i n t use of the Shared Assets Areas w i l l create competitive r a i l options f o r shippers on these l i n e s t h a t are c u r r e n t l y served only by C o n r a i l . A f t e r the r e s t r u c t u r i n g . Northern New Jersey and Southern New Jersey/Philadelphia w i l l each be a j o i n t access area w i t h both Norfolk Southern and CSX having d i r e c t access to a l l customers. Because Norfolk Southern and CSX w i l l establ i s h rates independently of each other, they

-11-

w i l l need t o compete f o r f r e i g h t i n the Shared Assets Areas.

Competition between Norfolk Southern and CSX f o r t r a f f i c moving m the Shared Assets Areas should provide shippers w i t h superior p r i c e and q u a l i t y choices. Most t r a f f i c w i l l be able t o move over a s i n g l e r a i l r o a d f o r considerable distances over e i t h e r Norfolk Southern or CSX. Consequently, as a general matter, Norfolk Southern's and CSX's j o i n t operation of the Shared Assets Areas should r e s u l t i n lower rates and higher q u a l i t y f o r shippers.

A p p l i c a t i o n , Vol. 2B, V.S. H a r r i s at 18. In a d d i t i o n to "lower

rates and higher q u a l i t y ' service f o r shippers, the r a i l competi

t i o n and extended hauls a v a i l a b l e through the North Jersey Shared

Assets Area p u r p o r t e d l y w i l l lead to s i g n i f i c a n t t r a f f i c d i v e r

sions from motor c a r r i e r s , w i t h attendant b e n e f i t s f o r road

c o n d i t i o n s , t r a f f i c and environmental q u a l i t y . See, e.g..

A p p l i c a t i o n , Vol. 2A, V.S. Bryan.

Assuming arguendo the p u b l i c b e n e f i t s t h a t the Primary

Applicants a t t r i b u t e t o t h e i r f u t u r e plans f o r Conrail's l i n e s i n

the New York M e t r o p o l i t a n Area, there i s a g l a r i n g and s i g n i f

i c a n t defect i n t h i s element of t h e i r proposal: r a i l competition

would stop at the Hudson River. The Primary Ap p l i c a n t s ' f a i l u r e

to extend competitive r a i l s e r v ice to shippers and receivers i n

New York C i t y , Long I s l a n d and the counties of the eastern Hudson

River V a l l e y must be corrected by the Board, before the CSX-NS

plan f o r Conrail can be approved.

•12-

A. As Propostd, the Primary Ap p l i c a n t s '

Plan f o r Eastern New York Is A n t i - c o m p e t i t i v e

Under the Primary Applicants' plan, a l l of the Conrail

l i n e s located east of the Hudson River and south of Albany would

be a l l o c a t e d to CSX. See, e.g., A p p l i c a t i o n , Vol. 1, V.S.

McClellan at 15. While NS vaguely claims t h a t i t w i l l compete

for t r a f f i c moving to and from New York C i t y and other east-of-

Hudson p o i n t s , only CSX w i l l o f f e r d i r e c t r a i l s e r v i c e . To reach

these p o i n t s , NS would have to r e l y on intermodal or drayage

service through crowded tunnels and over bridges;' i n t e r l i n e

movements wi t h CSX i t s e l f ; * or a car f l o a t from G r e e n v i l l e , NJ

across New York Harbor.- None of these "options," however, i s

an e f f e c t i v e s u b s t i t u t e f o r d i r e c t r a i l access.

The e f f i c i e n c y of continued r e l i a n c e on drayage and

intermodal service as an e f f e c t i v e s u b s t i t u t e f c r d i r e c t r a i l i s

b e l i e d by the repeated testimony of the Primary Ap p l i c a n t s '

witnesses t h a t one of the p u b l i c b e n e f i t s of t h e i r C o n r a i l plan

would be extended r a i l hauls t h a t would reduce the need f o r motor

carnage. See A p p l i c a t i o n , Vol. 2A, V.S. Bryan; Vol. 2B, V.S.

Williams. Likewise, the prospect of CSX competing against i t s

own long-haul by o f f e r i n g a t t r a c t i v e i n t e r l i n e rates w i t h NS

where CSX would serve only as an o r i g i n or d e s t i n a t i o n c a r r i e r

must be considered remote, ^ee Williams, Depo. Tr. at 369, 381-

Finkbiner Depo. Tr. at 99, 104.

*McClellan Depo. Tr. at 251-52.

'Id . , at 253.

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83 (confirming r a i l r o a d s ' preference f o r s i n g l e - l m e long h a u l s ) ,

S i m i i l a r l y , the Primary Applicants' own witnesse3

confirm the present inadequacy of a cross-harbor car f l o a t as a

means of a l l o w i n g NS t o compete east of the Hudson. CSX's

operations expert, John Orrison, pronounced the e x i s t i n g car

f l o a t " d i l a p i d a t e d " and unable to handle a d d i t i o n a l t r a f f i c

without s i g n i f i c a n t new investment. Orrison, Depo. Tr. at 61-64.

Even NS' Witness .McClellan, who mentioned the car f l o a t as an

option, admitted t h a t the f a c i l i t y had serious problems and

confirmed t h a t NS' p o s t - t r a n s a c t i o n plans contain no p r o j e c t i o n s

of new t r a f f i c t o be handled via the car f l o a t . .McClellan Depo.

Tr. at 253-54.

The e f f e c t i v e ceding of a monopoly over r a i l f r e i g h t

service east of the Hudson River to CSX, i n the context of the

p a r t i e s ' l a r g e r t r a n s a c t i o n , w i l l have d i r e c t and s u b s t a n t i a l

a n t i - c o m p e t i t i v e impacts on shippers, receivers and communities

in New York C i t y , Long Island and the eastern Hudson Valley

counties south of Albany. I t i s also f l a t l y i n c o n s i s t e n t w i t h

Congress' and USRA's stated goals f o r r a i l service i n the region

served by Conr a i l -- goals t h a t the Primary Applicants herein

have adopted as t h e i r own.

Included w i t h these Comments are the V e r i f i e d State

ments of Stephen D'Arrigo, Alan Firestone and Jim C h r i s t i e , a l l

of whom r e l y upon r a i l service to and from New York C i t y and Long

Island l o c a t i o n s , and a l l of whom face competitors located i n the

North Jersey and other Shared Assets Areas. As they e x p l a i n ,

-14-

under a Conrail monopoly they and t h e i r west side counterparts

compete on a l e v e l playing f i e l d . Through the Primary A p p l i

cants' u n i l a t e r a l a c t i o n to open the west side of the Hudson to

competition while leaving the east side c a p t i v e , however, the

f i e l d a r t i f i c i a l l y w i l l be t i l t e d m favor of the west side

businesses. Produce d i s t r i b u t o r s , municipal waste and wood

products shippers, and myriad other east side merchandise sh i p

pers/receivers w i l l lose market share and revenue, s o l e l y as a

r e s u l t of the Primary Applicants' proposals. See V.S. D'Arrigo

at 3; V.S. C h r i s t i e at 4; V.S. Firestone at 3. See also J o i n t

Responsive A p p l i c a t i o n . V.S. Robertson.

Witness C h r i s t i e also describes the loss of intramodal

t r a n s p o r t a t i o n competition t h a t his company, USA Waste, i s

threatened w i t h as a r e s u l t of the lack of east side r a i l a l t e r

native,-.. S p e c i f i c a l l y , w i t h CSX i n c o n t r o l of o r i g i n shipments

from Harle.i: River Yard i n the Bronx i n l i e u of C o n r a i l , CSX's

acknowledged preference to maximize i t s long-haul stands to

deprive USA Waste of c o s t - e f f e c t i v e access to i t s NS-served

l a n d f i l l i n V i r g i n i a , l e a v i r - the company dependent on i t s

a l t e r n a t e , CSX-served s i t e . Even before the t r a n s a c t i o n has been

approved, USA Waste has experienced the adverse e f f e c t s of the

prospective loss of Conrail as a n e u t r a l o r i g i n c a r r i e r . V.S.

C h r i s t i e at 3.

In a d d i t i o n to the s p e c i f i c , adverse impacts on e x i s t

ing competition t h a t would r e s u l t from approval of the Applica

t i o n as proposed, the agreement by CSX and NS to leave t h a t

-15-

p o r t i o n of New York east of the Hudson River without e f f e c t i v e

r a i l competition i s at odds w i t h Congress' c l e a r l y intended goals

f o r the r a i l l i n e s t h a t u l t i m a t e l y became Co n r a i l . As sumjnarized

i n the a u t h o r i t i e s referenced i n Part IB, supra, and f u r t h e r

explained m the accompanying V e r i f i e d Statement of Robert L.

Banks, USRA's mandate was to preserve or r e p l i c a t e as nearly as

possible the competitive r a i l s ervice t h a t e x i s t e d throughout New

York State before the bankruptcies of thc e a r l y 1970s.

V.S. Banks a t 11-16.

Through t h e i r A p p l i c a t i o n , CSX and NS propose to crack

open the C o n r a i l monopoly which has s t i f l e d t r a n s p o r t a t i o n

e f f i c i e n c y and development f o r over two (2) decades. See, e.g.

A p p l i c a t i o n , Vol. 1, V.S. Snow at 9, 12-13. By f a i l i n g to

provide f o r competitive r a i l s ervice east of the Hudson, however.

Primary A p p l i c a n t s ' plan a c t u a l l y gives r i s e t o new, anti-compet

i t i v e impacts on shippers represented by witnesses D'Arrigo,

Firestone and C h r i s t i e . And as Witness Banks e x p l a i n s , such a

r e s u l t i s i n i m i c a l to Congress' and USRA's unchallenged goals.

V.S. Banks at 19-21. Absent condit i o n s to ameliorate these

adverse impacts, t h e r e f o r e , the subject t r a n s a c t i o n should not be

approved.

B. The Trackage Rights Conditions

Proposed By New York Should be Approved

In t h e i r J o i n t Responsive A p p l i c a t i o n submitted contem

poraneous herewith. New York and NYCEDC propose t h a t the Board

c o n d i t i o n approval of the Primary A p p l i c a t i o n on a grant of pro--16-

competitive trackage r i g h t s over the Ccnrail l i n e segments

between Selkirk/Albany/Schenectady and Poughkeepsie, NY, and

between .Mott Haven Junction and Fresh Pond, NY. See J o i n t

Responsive A p p l i c a t i o n , at 4-5. When combined wi t h p r i v a t e l y -

negotiated trackage r i g h t s over the l i n e c o n t r o l l e d by .Yetro-

North between Poughkeepsie and Mott Haven Junction, trackage

r i g h t s over the Conrail segments would permit a second c a r r i e r

(t o be designated j o i n t l y by New York and NYCEDC") to provide

competition f o r CSX in o f f e r i n g f r e i g h t service t o shippers and

f a c i l i t i e s (such as the Harlem River- Yard) along the Hudson Line

east of the r i v e r , and on Long Island v i a the f r e i g h t service

franchisee of the Long Island Railroad -- c u r r e n t l y , the New York

& A t l a n t i c Railway.

The r e l i e f sought i n the J o i n t Responsive A p p l i c a t i o n

would address the a n t i - c o m p e t i t i v e impacts of the CSX-NS proposal

in a manner t h a t i s operationa 1 .y f e a s i b l e , and would produce

public b e n e f i t s t h a t outweigh any reduction i n the p u b l i c bene

f i t s produced by the subject t r a n s a c t i o n . Under the governing

leg a l c r i t e r i a , t h e r e f o r e , i t should be .jranted. See BN, Santa

Fe, supra at 55-56; 49 C.F.R. Part 116C.l(d).

--Accompany.! ng the J o i n t Responsive A p p l i c a t i o n i s the V e r i f i e d Statement of Metro-North President Donald Nelson, -who t e s t i f i e s as to Metro-North's a b i l i t y and w i l l i n g n e s s t o n e g o t i ate an agreement f o r trackage r i g h t s w i t h a second r a i l f r e i g h t c a r r i e r . See V.S. Nelson at 8-9.

• The g r a n t i n g cf trackage r i g h t s upon request of a non-c a r r i e r f o r the b e n e f i t of a c a r r i e r t o be i d e n t i f i e d at a l a t e r date f i n d s precedent i n the Board's recent western railror-.d merger d e c i s i o n s . See UP 'SP, supra at 185.

Trackage r i g h t s over the Hudson Line t o S e l k i r k Yard

would permit the d i r e c t interchange of r a i l f r e i g h t t o and from

the Delaware &, Hudson Railway ('D&H"). As explained i n the

A p p l i c a t i o n , an agreement reached between NS and D&H's parent

provides f o r D&H to perform haulage service f o r NS from an

upgraded interchange at Su.ibury, PA to the Albany area. See

A p p l i c a t i o n , Vol. 3B, E x h i b i t 13-NS at 53. Thus, an interchange

With D&H at S e l k i r k w i l l amount to a d i r e c t interchange w i t h the

NS system, thereby a l l o w i n g east-of-Hudson shippers dual access

to NS and CSX l i n e - h a u l service comparable to t h e i r west side

counterparts -- p a r t i c u l a r l y f o r movements to and from Western

gateways. See J o i n t Responsive A p p l i c a t i o n , at 5, 8-9; V.S.

Robertson at 9 . In t h i s .manner, the competitive imbalance

r e s u l t i n g from Primary Applicants' u n i l a t e r a l d e signation of the

boundaries of the North Jersey Shared Assets Area w i l l be amelio

rated .

The trackage r i g h t s r e l i e f sought by New York and

NYCEDC IS o p e r a t i o n a l l y f e a s i b l e . CSX's witness Orrison t e s t i

f i e d t h a t both the S e l k i r k Yard and the Hudson Line have ample

excess f r e i g h t capacity,-' and Metro-North President Nelson

confirms the a b i l i t y of the busiest segments of the l i n e t o

absorb s i g n i f i c a n t increases i n f r e i g h t t r a f f i c as w e l l as the

presence of a second f r e i g h t c a r r i e r . See V.S. Nelson at 7-8.-'

-Orrison Depo. Tr. at 51-52, 67-68.

Messrs. Nelson and Orrison each a t t r i b u t e d the Hudson Line's a d d i t i o n a l f r e i g h t capacity i n part t o the Oak Point Link, a S200 m i l l i o n r a i l bypass funded by New York. See, e.g..

-16-

The o p e r a t i o n a l f e a s i b i l i t y cf the trackage r i g h t s proposed by

New York and NYCEDC i s f u r t h e r v e r i f i e d by the independent

appr a i s a l and analysis of .Mr. Walter Schuchmann, an expert •*^cse

e v a l u a t i o n included d i r e c t physical observations of the l i n e s m

question. See J o i n t Responsive A p p l i c a t i o n , V.S. Schuchmann at

5-11 .

F i n a l l y , the east-of-Hudson r e l i e f sought by New York

would produce p u b l i c b e n e f i t s i n the form of enhanced competi

t i o n - " and restored balance m a f f e c t e d markets, withou t any

red u c t i o n i n p u b l i c b e n e f i t s t h a t might be associated w i t h the

Primary A p p l i c a t i o n . I t i s w e l l - s e t t l e d t h a t the c r e a t i o n or

perpetuation of a r a i l r o a d monopoly i s not a "public benefit'"

w i t h i n the meaning of the governing s t a t u t e and regulations,-'

and t h a t i s the only consequence of the Primary A p p l i c a n t s '

C o n r a i l d i v i s i o n proposal t h a t would be a f f e c t e d by New York's

trackage r i g h t s c o n d i t i o n . Perforce, the t h i r d prong of the

Board's m.erger co n d i t i o n s t e s t i s s a t i s f i e d .

To summarize, the Primary Applicants' proposal t o b r i n g

r a i l competition t o New York " e t r o p o l i t a n Area shippers located

west of the Hudson River i n the North Jersey Shared Assets Area,

Orrison Depo. Tr. at 56.

•"As several witnesses t e s t i f y , p r o v i d i n g competitive r a i l s e r v i c e east of the Hudson River i s expected to have a net, p o s i t i v e e f f e c t on t r a n s p o r t a t i o n service and costs, as w e l l as r e l a t e d p o s i t i v e environmental impacts, much as i s claimed by the Applicants w i t h respect to the North Jersey Shared Assets Area. See, e.g. V.S. D'Arrigo at 4.

See UP,'-'CNW, supra at 53.

-19-

while leaving t h e i r eastern counterparts subject t o a continued

monopoly, w i l l have a d i r e c t and adverse competitive impact on

r a i l shippers i n New York C i t y , Long I s l a n d , and the eastern

Hudson Valley counties south of Albany. Absent Board a c t i o n to

ameliorate these impacts, the subject t r a n s a c t i o n i s i n c o n s i s t e n t

With the pu b l i c i n t e r e s t and should not be approved. For the

reasons set f o r t h above and m the J o i n t Responsive A p p l i c a t i o n ,

t h e r e f o r e . New York's request f o r pro-competitive trackage r i g h t s

over the Hudson Line should be granted.

I l l


COMPET' ' IVE RAIL SERVICE IN THh BUFFALO AREA

The Primary Applicants' proposal f o r p o s t - t r a n s a c t i o n

operations i n the B u f f a l o area e s s e n t i a l l y amounts to a d i v i s i o n

and a l l o c a t i o n of l i n e s and shipping l o c a t i o n s , w i t h no r e a l

changes m the compe t i t i v e outlook f o r area shippers and rec e i v

ers heretofore dependent on C o n r a i l . See A p p l i c a t i o n , Vol. 1 at

35-38, 52. While NS i s to be granted trackage r i g h t s over one

l i n e a l l o c a t e d t o CSX -- the Niagara Branch t o Suspension Bridge,

NY -- those r i g h t s are not f o r the purpose of curi n g any e r s t

w h ile d e f i c i e n c i e s i n NS' connections w i t h Canadian rc.-.L c a r r i

ers. See Tobias Depo. Tr. at 104. Indeed, NS' operating w i t

nesses were unable t o a r t i c u l a t e a reason why NS sought the

r i g h t s i n the f i r s t place, or to what use they would be put. See

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Tobias Depo. Tr. at 104; Mohan Depo. Tr. at 431-32.

Under the Primary Applicants' plan, B u f f a l o area

shippers w i l l see no expansion of t h e i r current r a i l t r a n s p o r t a

t i o n o p tions, and none w i l l obtain access to dual l i n e - h a u l

service. See Mohan Depo. Tr. at 429-30, 487-88; Orrison Depo.

Tr. at 71.-'' These shippers' counterparts m the D e t r o i t area,

however, w i l l gain new access to competitive r a i l s e r v i c e by

v i r t u e of the Applicants' decision t o designate D e t r c i t as a

Shared Assets Area. As explained i n greater d e t a i l i n the

Comments of ENRSC, the terminal and r e l a t e d f a c i l i t i e s i n and

around B u f f a l o compete w i t h D e t r o i t f o r important U.S.-Canada

cross-border through t r a f f i c . By bestowing the b e n e f i t s of r a i l

c ompetition on D e t r o i t while leaving B u f f a l o shippers subject to

de f a c t o s i n g l e - c a r r i e r dominance, the Primary Ap p l i c a n t s ' plan

repeats the adverse consequences v i s i t e d on shippers east of the

Hudson River, described supra. See also V.S. Banks at 5-7.

ENRSC has requested t h a t the Board address the a n t i

c o mpetitive impacts of the Primary A p p l i c a n t s ' proposal on

shippers i n the B u f f a l o area by imposing a c o n d i t i o n r e q u i r i n g

the Primary Applicants to e s t a b l i s h a Shared Assets Area f o r

B u f f a l o on par w i t h t h a t t o be esta b l i s h e d i n D e t r o i t . New York

supports t h i s r e l i e f f o r the reasons a r t i c u l a t e d by ENRSC and

•"Portions of the B u f f a l o area are open t o r e c i p r o c a l s w i t ching, under Conrail's T a r i f f CR 8001-Series. As more f u r t h e r discussed i n the Comments of ENRC, however, the charges f o r switching under t h a t t a r i f f (over S450 per car i n many cases) e f f e c t i v e l y preclude use of the service as a meaningful o p t i o n to access other p a r t i c i p a t i n g r a i l r o a d s . See Document CRllPOOOlOi-110 .

•21-

based on the p r i n c i p l e s set f o r t h i n Part I , supra. I f the Board

otherwise determines to approve the A p p l i c a t i o n , i t should only

do so With adoption of the pro-competitive conditions sought by

ENRSC.

IV

THE PUBLIC INTEREST REQUIRES IMPOSITION OF BiN OVERSIGHT CONDITION

TO PROTECT PRESENT AND FUTURE PASSENGER TRANSPORTATION SERVICES IN NEW YORK

New York's witness Utermark has d e t a i l e d f o r the Board

both the State's massive f i n a n c i a l investment i n r a i l r o a d passen

ger operations and f a c i l i t i e s , and the c r u c i a l importance which

r a i l passenger service plays i n the State's s o c i a l and economic

welfai'e. V.S. Utermark at 8-9, 13-19. As the evidence d i s c l o s

es, Conrail i s the cornerstone of the New York passenger network

as i t s f a c i l i t i e s are the backbone of both the commuter and

i n t e r - C i t y systems. The commuter system i s the l i f e l i n e of New

York C i t y , and the i n t e r - c i t y l i n e s l i n k New York's p r i n c i p a l

m e t r o p o l i t a n areas.

While New York i s g r a t i f i e d by the Primary Applicants'

Statements t h a t they w i l l "honor" a l l of Conrail's passenger

comm.itments ( A p p l i c a t i o n , Vol. 3A at 275 ), something more e x p l i c

i t i s requ i r e d . New York submits t h a t the Boord must go on

record a f f i r m a t i v e l y ordering CSX and NS to f a i t h f u l l y maintain

t h e i r operations and f a c i l i t i e s so th a t they can adequately and

e f f i c i e n t l y s u s t a i n both the present l e v e l of passenger opera-

-22-

t i o n s i n New York, and f u t u r e operations d i c t a t e d by New York's

investments and i t s expanding and dynamic needs. To insure t h a t

New York's p u b l i c i n t e r e s t i n adequate and e f f i c i e n t passenger

t r a n s p o r t a t i o n services i s met, the Board must r e t a i n oversight

over the Primary Applicants' commitment to New York's passengers

f o r a period of ten (10) years. See V.S. Utermark at 19-20.

Under such a p r o v i s i o n . New York must be e n t i t l e d t o p e t i t i o n f o r

and receive Board orders which compel the Primary Applicants to

meet New York's reasonable needs f o r passenger s e r v i c e based upon

New York's investment i n f a c i l i t i e s b e n e f i t i n g C o n r a i l and

Conrail's r e c i p r o c a l conmiitments. Further, the c o n d i t i o n should

include:

1. an express commitment by the Primary Applicants to continue the New York program to achieve high speed passenger service between New York C i t y and Albany (125 MPH) and between Albany and B u f f a l o (100 MPH); and

2. an express commitment by the Primary Applicants to enhance and expand t h e i r passenger f a c i l i t i e s m conjunction w i t h Amtrak as circumstances r e q u i r e , consistent w i t h New York's investment i n Conraxl f a c i l i t i e s .

Oversight conditions have been imposed by the Board i n

previous c o n s o l i d a t i o n cases s p e c i f i c a l l y t o monitor the u l t i m a t e

f u l f i l l m e n t of p r o j e c t i o n s , plans or assurances p r o f f e r e d by

a p p l i c a n t c a r r i e r s i n support of t h e i r c o n t r o l proposals. See,

e.g., UP_1SP, supra at 226. P a r t i c u l a r i y given New York's enor

mous stake i n both the preservation and p r o t e c t i o n of cur r e n t

passenger service l e v e l s , and i n the a b i l i t y to meet the p u b l i c ' s

growing need f o r expanded and enhanced se r v i c e , o v e r s i g h t i s the

•23-

a p p r o p r i a t e remedy to guarantee the Primary Applicants' casual

( a l b e i t p o s i t i v e l y stated) commitments.


THE ASSUMPTION OF CONRAIL'S CONTRACTS WITH NEW YORK

Unconditioned approval of the Primary App l i c a n t s '

proposed t r a n s a c t i o n could cost New York and i t s c i t i z e n s m.il-

l i o n s of d o l l a r s i n l o s t b e n e f i t s due from Conrail under e x i s t i n g

c o n t r a c t s . As witness Utermark explains. New York has invested

more than $160 m i l l i o n t o secure r a i l c o n s t r u c t i o n , maintenance

and operation services from Co n r a i l through dozens of agreements

over the l a s t LWO decades. V.S. Utermark at 8-9. Th i r t e e n (13)

of these agreements remain m e f f e c t today, and r e q u i r e f u r t h e r

performance by Conrail i n coming years. These outstanding

c o n t r a c t s represent p u b l i c investments f o r a v a r i e t y of c r u c i a l

r a i l maintenance and operation services (see V.S. Utermark,

E x h i b i t {JAU-5), i n c l u d i n g :

• High-speed t r a c k and si g n a l c o n s t r u c t i o n and maintenance along the Poughkeepsie t o Schenectady r a i l c o r r i d o r ($47 m i l l i o n ) ;

• Maintenance of through and l o c a l t r a i n s e r vice over the Southern T i e r Mam Line and Southern T i e r Extension from B u f f a l o and Horneil t o Corry, Pennsylvania ($28 m i l l i o n ) ;

• Track and s i g n a l improvements and maintenance i n the Buffalo-Niagara t e r m i n a l area, i n part t o preserve passenger service ($11 m i l l i o n ) ;

•24-

• High-speed track and s i g n a l c o n s t r u c t i o n and maintenance along the Poughkeepsie-Croton Harmon route ($28 m i l l i o n ) ;

• Track r e h a b i l i t a t i o n between Suffern and Port Jervis ($17 m i l l i o n ) ; and

• Track maintenance and upgrades along the B u f f a l o to Albany route, again i n par t t o f a c i l i t a t e passenger service ($5 m i l l i o n ) .

Despite the s i g n i f i c a n t sums and important services at

issue, the Primary Applicants as yet have made no s p a c i f i c

commitment to carry out Conrail's o b l i g a t i o n s under these agree

ments, i f the proposed t r a n s a c t i o n i s approved. Provisions of

the Transaction Agreement and other p o r t i o n s of the A p p l i c a t i o n

purport to address categories of Co n r a i l c o n t r a c t s , and provide

g e n e r a l l y f o r t h e i r a l l o c a t i o n t o , and m some cases, assumption

by CSX or NS. See A p p l i c a t i o n , Vol. 8B, Transaction Agreement

§2.2. Nowhere, however, do Applicants s p e c i f i c a l l y discuss

Conrail's contracts w i t h New York, or commit to honoring t h e i r

terms. Indeed, n e i t h e r CSX nor NS has even i d e n t i f i e d , l e t

alone described t h e i r plans f o r Conrail c o n t r a c t s they expect to

i n h e r i t as a r e s u l t of the proposed transaction.''

See, e.g., Norfolk Southern's Responses t o F i r s t Set of I n t e r r o g a t o r i e s and Requests f o r Production of Documents of the State of New York (NS-24) at 13 ("NS does not know the i d e n t i t y and terms of," or the e x i s t i n g o b l i g a t i o n s of Conrail under, '•agreements and other undertakings between Conrail and the State of New York . . . r e l a t i n g to l i n e s i n New York t h a t would be operated by NS . . . " upon consummation of the Transa c t i o n ) .

-25-

New York r e s p e c t f u l l y requests t h a t the Board recognize

the s u b s t a n t i a l mvestment of public funds at stake, and New

York's e n t i t l e m e n t to be n e f i t s promised by and due from Conrail

i n r e t u r n , by c o n d i t i o n i n g any approval of the proposed transac

t i o n as o u t l i n e d below.-*

CSX and NS claim to have v o l u n t a r i l y agreed to honor

and assume Conrail's c o n t r a c t u a l o b l i g a t i o n s r e l a t i n g to the

"purchase of t r a n s p o r t a t i o n services." A p p l i c a t i o n , Vol. 8B,

Transaction Agreement §§I.l, 2.2. Section 2.2(c) of the Trans

a c t i o n Agreement provides f o r CSX and NS t o ' c a r r [ y ] out" these

so-called "Existing Transportation Contracts" through t h e i r

"stated term." I d . Though several of New York's contracts w i t h

Conrail may q u a l i f y as "Transportation Contracts, " Applicants

have not s p e c i f i c a l l y designated any of them as such, e i t h e r i n

the A p p l i c a t i o n or i n t h e i r discovery responses.''' In l i g h t of

t h i s u n c e r t a i n t y . New York requests t h a t the Board r e q u i r e

Applicants t o i d e n t i f y those agreements l i s t e d i n E x h i b i t

(JAU-5) t h a t c o n s t i t u t e "Transportation Contracts" w i t h i n the

meaning of Section 2.2(c). Further, New York requests t h a t the

Board compel Applicants to agree f o r m a l l y and i n w r i t i n g to

""carry out . . . through t h e i r stated term" a l l such con t r a c t s m

The Board has recognized i n past proceedings t h a t a f a c t o r i n determining whether [a] proposed t r a n s a c t i o n i s i n the p u b l i c i n t e r e s t i s the guestion of whether [ i t ] would abrogate an e x i s t i n g c o n t r a c t u a l agreement."" Finance Docket No. 32896, Kansas C i t y Terminal Ry. and the Atchison, Topeka and Santa Fe Ry. -- Contract to Operate Exemption -- m Kansas C i t y , MC, Decision served November 20, 1996, at 7.

See note 1", supra.

-26-

accordance w i t h t h e i r commitment m the A p p l i c a t i o n to do so.-"

Many of New York's outstanding contracts w i t h Conrail

may not q u a l i f y as "Transportation Contracts' under Sections i . i

and 2.2(c) of the Transaction Agreement. For t h i s reason, the

Board cannot r e l y s o l e l y on enforcement of the Applicants' own,

l i m i t e d p r o v i s i o n s f o r the assumption of Conr a i l commitments t o

adequately p r o t e c t New York's p u b l i c investments and e n t i t l e

ments. A p p l i c a n t s ' v o l u n t a r y accommodation of Transportation

Contracts, w h i l e necessary and appro p r i a t e , leaves unresolved

t h e i r p o s t - t r a n s a c t i c n plans f o r contracts i n v o l v i n g other,

equally important o b l i g a t i o n s . The Board, of course, i s not

bound to respect the decisions and provisi o n s made by CSX and NS

in t h e i r A p p l i c a t i o n . As i n past merger proceedings, the Board

may c o n d i t i o n approval of the t r a n s a c t i o n upon Applicants'

observation and performance of contracts they have n r othei-wise

taken on.^-

As Mr. Utermark discusses i n h i s V e r i f i e d Statement, a

number of New York's 13 outstanding contracts r e q u i r e Conrail to

perform c e r t a i n long-term maintenance and r e p a i r s of r a i l l i n e s

In past merger proceedings, the Board has not he s i t a t e d to r e g u i r e t h a t a p p l i c a n t c a r r i e r s abide by t h e i r representations regarding plans t o honor p r e - e x i s t i n g c o n t r a c t s . See UP.'SP, supra at 183 (Board w i l l "•hold[ ] a p p l i c a n t s t o t h e i r representat i o n t h a t UP/SP w i l l accept the terms of the . . . agreement entered i n t o by SP"); i d . at 196.

- See UP/SP, supra at 185 ("to preserve the pre-merger status quo," Board im.posed c o n d i t i o n r e q u i r i n g merged UP/SP to honor p r e - e x i s t i n g agreement between the former SP and a p a r t i c u l a r s h i p p e r ) .

-27-

and f a c i l i t i e s a l l over the State. See V.S. Utermark at "^-12.

Though perhaps not "" t r a n s p c r t a t i o n services as defined by the

Applicants, such undertakings s t i l l are c r u c i a l t o the continued

safety and u t i l i t y of .New York's r a i l system. I d . Absent

binding agreements to assure t i m e l y and proper performance of

these services, the State and i t s c i t i z e n s are l e f t without any

guarantee t h a t a f f e c t e d r a i l i n f r a s t r u c t u r e s w i l l remain v i a b l e

and i n t a c t .

Several of New York's other C o n r a i l agreements requ i r e

reimbursement from Conrail over a s p e c i f i e d time period f o r sums

expended by New York i n support of various r a i l - r e l a t e d pro

jects.-- Again, Applicants' d e f i n i t i o n of and p r o v i s i o n s f o r

"Transportation Contracts" may not extend to these o b l i g a t i o n s .

Nonetheless, New York expects and i s e n t i t l e d t o Conrail's f u l l

discharge of the s u b s t a n t i a l f i n a n c i a l debts owed t o New York

under the p a r t i e s ' v a l i d c o n t r a c t u a l arrangements.

New York urges the Board to recognize the p u b l i c ' s

i n t e r e s t i n and dependence upon a l l of Conrail's c o n t r a c t u a l

promises, by r e q u i r i n g t h a t Applicants expressly assume responsi

b i l i t y not only f o r "Transportation Contracts," but f o r each of

the agreements l i s t e d i n E x h i b i t (JAU-5). Only a Board-

ordered c o n d i t i o n to t h i s e f f e c t w i l l ensure t h a t pledges made by

C o n r a i l , and r e l i e d on by New York r a i l r o a d s , r a i l users, and

taxpaying c i t i z e n s , p r o p e r l y w i l l be preserved.

"•See, e.g., E x h i b i t (JAU-3), Contract D139943

-28-

Past merger proceedings have shown t h a t even years

a f t e r consummation of an approved t r a n s a c t i o n , c o n s o l i d a t i n g r a i l

c a r r i e r s sometimes seek t o disavow v a l i d c o n t r a c t u a l o b l i g a t i o n s

that they claim impairs implementation of some aspect of the

e a r l i e r t r a n s action."' C a r r i e r s have r e l i e d on the s t a t u t o r y

o v e r r i d e ' p r o v i s i o n now c o d i f i e d at 49 U.S.C. §11321fai, as

a u t h o r i t y t o disregard l e g a l l y binding commitments without p r i o r

c o n s u l t a t i o n of the Board or any a f f e c t e d p a r t y . To ensure t h a t

the c o n d i t i o n s discussed above serve t h e i r intended purpose, and

pro t e c t New York's i n t e r e s t i n and r e l i a n c e on i t s Conrail

c o n t r a c t s , the Board should c l a r i f y t h a t avoidance of New York's

contracts i s not necessary'" t o e f f e c t u a t e the proposed transac

t i o n , w i t h i n the meaning of Section 11321 ( a ) .

To be sure, the "necessity" standard f o r i n v o c a t i o n of

section 11321(a) iimnunity i s s t r i c t . " The s t a t u t e i t s e l f "clea

r l y expresses a s e n s i t i v i t y t o s t a t e law," and, as i n t e r p r e t e d .

See, e.g., Norfolk and W. Ry. v. American Train Dispatchers' Ass'n, 499 U.S. 115 ( 1 9 9 1 ) ( a p p l i c a t i o n approved i n 1982; abrogation of c o l l e c t i v e bargaining agreement e f f e c t e d i n 1986); American Tr a i n Dispatchers Ass'n v. ICC, 26 F.3d 1157 (D.C. C i r . 1 9 9 4 ) ( a p p l i c a t i o n approved i n 1980; abrogation of c o l l e c t i v e bargaining agreement e f f e c t e d i n 1988).

P a r t i e s t o p r i o r Board proceedings have made arrangements among themselves w i t h respect to the a p p l i c a b i l i t y of the immunity p r o v i s i o n . In UP/SP, f o r example, the a p p l i c a n t s pledged to l i m i t t h e i r use of the immunity p r o v i s i o n , i n c e r t a i n circumstances, despite the cost savings i t s i n v o c a t i o n might a f f o r d them. UP/SP at 251.

'^Nothing herein should be construed as concurrence by New York t h a t Section 11321(a) pr o p e r l y could be invoked i n t h i s case to avoid or n u l l i f y Conrail c o n t r a c t commitments t c New York. The requested c l a r i f i c a t i o n i s precautionary.

-29-

permits " n u l l i f i c a t i o n " of s t a t e law r e s t r i c t i o n s or c o n t r a c t s

only when they "threaten [ t h e ] success" of an approved transac

t i o n . - ' The Primary Applicants' performance of Conrail's con

t r a c t o b l i g a t i o n s to New York w i l l not s i g n i f i c a n t l y a f f e c t , l e t

alone negate" or "'impinge upon"-" any aspect of the Primary

Ap p l i c a n t s ' t r a n s e c t i o n . Though i n h e r i t i n g Conrail c o n t r a c t s mr y

prove f i n a n c i a l l y undesirable to the Primary Applicants, t h a t

would not j u s t i f y t h e i r r e n u n c i a t i o n of performance as 'neces

sary " to implement the proposed t r a n s a c t i o n . The Board should

issue a c l a r i f icat..'r co t h a t e f f e c t .

VI

THE SEPARATE CONDITIONS SOUGHT BY .lETRO-NORTH AND

SOUTHERN TIER WEST SHOULD B£ GRANTE..

In separate Comments f i l e d i n t h i s proceeding, Metro-

North and Southe:rn T i e r West each seek conditions designed t o

preserve t e n t a t i v e or prospective agreements w i t h C o n r a i l and/or

NS concerning the f u t u r e d i s p o s i t i o n of r a i l l i n e s c r i t i c a l l y

important t o t h e i r and t h e i r c o n s t i t u e n t s ' i n t e r e s t s . New York

f u l l y supports the r e l i e f sought by Metro-North and Southern T i e r

West, and urges t h a t i t be granted.

" P a l e s t i n e , Texas v. United States. 559 F.2d 408, 414-15 (5th C i r . 1 977 ) .

"' See P a l e s t i n e , 559 F. 2d at 414-15.

-30-

A. Metro-North

As described i n f u r t h e r d e t a i l by witness Utermark,

.Metro-North i s responsible f o r commuter passenger service over

the r a i l l i n o between Hoboken, NJ and Port J e r v i s , NY, which

serves comjnuters i n Orange and Rockland Counties, New York. See

V.S. Utermark at 15-16. Approximately 66 miles of t h i s l i n e

(between Suffern, NY and Port J e r v i s , NY) i s owned by C o n r a i l ,

and under the proposed t r a n s a c t i o n would be assigned to NS.

The Comments of Mecro-North and accompanying V e r i f i e d

Statemionts of .Messrs. Donald Nelson and Howard Permut exp l a i n the

pu b l i c 1 nve',, ements and l e l a t e d circumstances t h a t are expected to

double comjT-.uter r i d e r s h i p on the Port J e r v i s Line by the year

2002. Passenger increases are expected .o begin as e a r l y as t h i s

year, however. Metro-North's concern i s t h a t i t w i l l not be able

to j u s t i f y the m u l t i - m i l l i o n d o l l a r p u b l i c investments needed to

upgrade s i g n a l l i n g and other f a c i l i t i e s i f the l i n e i s to be

c o n t r o l l e d by a f r e i g h t c a r r i e r , and perhaps dispatched from a

remote l o c a t i o n by personnel u n f a m i l i a r w i t h commuter operations.

For these reasons, Metro-North commenced n e g o t i a t i o n s w i t h

Conrail f o r purchase of the l i n e .

Metro-North's Comments i n d i c a t e t h a t w hile a t e n t a t i v e

agreement was reached w i t h Conrail f o r a c q u i s i t i o n of the l i n e

f o r $9.8 m i l l i o n , subsequent n e g o t i a t i o n s w i t h NS toward a f i n a l

c o n t ract and clos.i.,ig came to an abrupt n a l t l a s t month. Based

upon these f a c t s and consistent w i t h i t s o b l i g a t i o n s under New

York law to provide safe and adequate passenger s e r v i c e over the

-31-

l i n e , .Metro-North seeks a co n d i t i o n r e q u i r i n g NS to proceed w i t h

conveyance of the l i n e on terms agreed to by C o n r a i l , or a l t e r n a

t i v e l y , to agree to a long-term extension of the current trackage

r i g h t s agreement between Metro-North and C o n r a i l , which otherwise

becomes subject to term i n a t i o n on one year's n o t i c e a f t e r Decem

ber 31, 1997.

The conditions sought by Metro-North are consistent

w i t h the Primary Applicants' professed i n t e n t i o n s t o honor

Conrail's p r i o r o b l i g a t i o n s and undertakings, and c l e a r l y would

serve the pub l i c ' s i n t e r e s t m safe, adequate and expanded

passenger r a i l s e r v i c e . By the same token, NS would receive f a i r

c o n s i d e r a t i o n f o r the l i n e , along w i t h s u f f i c i e n t r i g h t s co

conduct f r e i g h t operc,tions i n accordance w i t h the Primary A p p l i

cants' Operating Plan. New York submits t h a t the Metro-North

c o n d i t i o n s are reasonable, f e a s i b l e and mandated by l e g i t i m a t e

p u b l i c i n t e r e s t c o n s i d e r a t i o n s , and t h e r e f o r e should be granted.

B . Southern Tier West

One of the many r a i l l i n e s i n which New York has made

conoiderable investment i n exchange f o r Conrail covenants of

continued maintenance and operation i s the so-called Southern

T i e r Extension from H o r n e i l , NY through Olean and Jamestown to

Corry, PA. See V.S. Utermark, E x h i b i t (JAU-5). Pursuant to

agreements w i t h New York respecting the l i n e , C o n r a i l at present

IS indebted to t h ^ State m the amount of $2,136 m i l l i o n , which

i s due and payable by Conrail (or i t s successor) i n June, 1998.

-32-

I d .

With New York's endorsement and support. Southern Tier

West has been engaged f o r some time i n neg o t i a t i o n s -- f i r s t w i t h

Conrail and more r e c e n t l y w i t h NS'* -- over the f u t u r e of the

Southern Tier Extension. As discussed i n the Comments of South

ern T i e r West, these ne g o t i a t i o n s have included proposals i n

which tax abatements and other consideration would be exchanged

for covenants ensuring the continued maintenance of and r a i l

f r e i g h t operations over the l i n e . Southern T i e r West f u r t h e r

explains the adverse r e g i o n a l impacts -- economic and otherwise

-- which are threatened by the prolonged and continued u n c e r t a i n

t y over NS' i n t e n t i o n s v i s - a - v i s the f u t u r e of the Southern T i e r

Extension. While recent n e g o t i a t i o n s apparently showed some

promise. Southern T i e r West has been unable t o come to closure

w i t h NS on an acceptable agreement. Meanwhile, the Conrail

indebtedness t o New York remains outstanding.

Southern T i e r West requests t h a t i f the Board i s

disposed t o approve the proposed t r a n s a c t i o n , i t do so only upon

c o n d i t i o n t h a t (1) NS s t a t e i n w r i t i n g i t s plans f o r the Southern

T i e r Extension; (2) Conr a i l s a t i s f y i t s f i n a n c i a l o b l i g a t i o n s to

New York; (3) NS r e s t o r e the l i n e t o operable c o n d i t i o n as

required by e x i s t i n g agreements; and (4) NS agree to a 5-year

extension of the service and maintenance covenants provided under

said agreements. New York submits t h a t given the prolonged

^*Under the proposed t r a n s a c t i o n , the Southern T i e r Extension would be assigned t o NS. See Comments of Southern T i e r West.

-33-

u n c e r t a i n t y over NS' i n t e n t i o n s , the pu b l i c ' s past and present

investment i n the l i n e (which has yet to be recovered) and the

demonstrated, continued need f o r adequate r a i l f r e i g h t s e rvice i n

the a f f e c t e d region, the conditions sought by Southern Tier West

are reasonable and necessary. New York supports Southern T i e r

West's conditio n s request, and urges t h a t i t be granted.

V I I

THE BOARD SHOULD ADOPT CONDITIONS TO PROTECT NEW YORK SHIPPERS

FROM FUTURE RAIL RATE INCREASES

The Board can take a d m i n i s t r a t i v e n o t i c e of the f a c t

that the p r i c e paid by NS and CSX f o r Conrail s u b s t a n t i a l l y

exceeds both the market p r i c e of Conrail's shares when CSX made

i t s i n i t i a l tender o f f e r and the book value of the assets to be

operated by the Primary Applicants. See, e.g., Ap p l i c a " i o n , Vol

7A at 441. As witness Utermark explains, the excess -- and the

questions of how and by whom i t w i l l be funded -- i s cause f o r

concern among New York-based shippers dependent on r a i l s e r vice

from the Primary Applicants:

Our concern i s heightened by the f a c t t h a t we made s i g n i f i c a n t c o n t r i b u t i o n s t o Conr a i l which were m a t e r i a l i n c r e a t i n g the successf u l e n t e r p r i s e which Applicants seek t o acq u i r e . I t would be perverse i f the Board permitted Applicants to fund t h e i r purchase from increased charges to New Yorkers, whose funds i n part made Conrail p r o f i t a b l e i n the f i r s t place.

V.S. utermark at 12.

-34-

New York has no quar r e l i n the a b s t r a c t w i t h the p r i c e

t h a t the Primary Applicants chose to pay f o r C o n r a i l . The

recovery of any d i f f e r e n c e between t h a t p r i c e and the value of

the assets acquired, however, must not become a pr e t e x t f o r

higher r a i i r a t es on f r e i g h t t r a f f i c which has no e f f e c t i v e ,

competitive a l t e r n a t i v e s . New York submits, t h e r e f o r e , t h a t i f

the Board app oves the proposed t r a n s a c t i o n , i t c r a f t and impcse

appropriate c o n d i t i o n s to preclude NS and CSX from using t h e i r

a c g u i s i t i o n p r i c e f o r Conrail t o j u s t i f y increases i n f r e i g h t

rate l e v e l s .

CONCLUSION

For a l l of the reasons set f o r t h herein. New York

submits t h a t the c o n t r o l of Conrail and d i v i s i o n and separate

operation of Conrail's assets by CSX and NS as proposed m the

Primary A p p l i c a t i o n i s c o n t r a r y to the p u b l i c i n t e r e s t , and

should not be approved.

I f the Board nonetheless determines to approve the

Primary A p p l i c a t i o n , i t should only do so upon each of the

f o l l o w i n g c o n d i t i o n s :

1. The J o i n t Responsive A p p l i c a t i o n of New York and

NYCEDC should be granted.

2. The condition s requested by ENRSC regarding the

establishment of a Shared Assets Area i n and around louffalo, NY

should be granted.

-35-

3. The Board should prescribe a lO-year o v e r s i g h t and

r e p o r t i n g c o n d i t i o n as described i n Part IV, supra, to monitor

the Primary Applicants' compliance w i t h other c o n d i t i o n s and

ensure t h a t t h e i r implementation of the subject t r a n s a c t i o n does

not impair or otherwise adversely a f f e c t current and planned

commuter and i n t e r - c i t y passenger r a i l operations.

4. The Primary Applicants should be req u i r e d to

assume in w r i t i n g a l l of Conrail's o b l i g a t i o n s under the con

t r a c t s w i t h New York i d e n t i f i e d i n E x h i b i t (JAU-5) to the

V e r i f i e d Statement of James Utermark, and the Board should

c l a r i f y t h a t pursuant to 49 U.S.C. §11321(a), no o v e r r i d e or

avoidance of any of those contracts i s necessary to l e t the

Primary Applicants carry out the subject t r a n s a c t i o n .

5. The separate c o n d i t i o n s sought by and described i n

the Comments of Metro-North and Southern T i e r West should be

granted.

6. The Board should cidopt appropriate c o n d i t i o n s t o

ensure t h a t the a c q u i s i t i o n p r i c e paid f o r C o n r a i l by the Primary

Applicants cannot be used t o j u s t i f y unreasonable r a i l r a t e

•36-

increases t o New York shippers

Respectfully submitted,

THE STATE OF NEW YORK BY AND THROUGH ITS DEPARTMENT OF TRANSPORTATION

OF COUNSEL:

Slover & Loftus 1224 Seventeenth S t r e e t , NW. Washington, D.C. 20036

Dennis C. Vacco Attorney General of the

State of New York Stephen D. Houck

Assistant Attorney General George R. Mesires

Assistant Attorney General 120 Broadway, Suite 2601 New York, New York 10271

William L. Slover Kelvin J. Dowd Christopher A. M i l l s Jean M. Cunningham Slover & Loftus 1224 Seventeenth S t r e e t , Washington, D.C. 20C36 (202) 347-7170

N.W.

Dated: October 21, 1997 Attorneys and Practioners

•37.

APPENDI.X Of

DEPOSITION TRANSCRIPT F.XCERPTS

STEPHEN C. TOBIAS

15

16

17

C . I s - h a t t c c u r e soT.e d e f i c i e n c y i n y o u r

2 c u r r e n t Canadian c o.-. n e c t i c r. s ?

3 A. Not 1.1 a t l':n aware c f .

4 Q. As f a r as you k.now, t .he c o n n e c t i o n s

5 t h a t .NS p r e s e n t l y has w i t h CP and C.N are adequate

6 t o h a n d l e t h e b u s i .n e s ."3 ?

7 A. Ftom my p e r s p e c t i v e , t h e y a r e .

8 Q. So you w o u l d n ' t be a b l e t c p r o v i d e me

9 w i t h any i n f o r m a t i o n as t o why t h o s e r i g h t s a re

10 p a r t of t h e d e a l o r why t h e y ' r e o v e r h e a d and not

11 l o c a l o r a n y t h i n g l i k e t h a t ; i s t h a t r i g h t ^

12 A. N o t h i n g o t h e r t h a n what I ' v e a l r e a d y

13 a r t i c u l a t e d .

14 y. Okay. Pardon -e i f I a l r e a d y asked

t h i s q u e s t i o n , b u t d i d you e v e r u n d e r s t a n d o r d i d

anyone e v e r t e l l ycu t h a t t h e r e was ev e r a

p r o p c s a l made t o e s t a b l i s h a s h a r e d a s s e t area i n

18 B u f f : ^ l o ?

19 A. Not t o my knowledge.

20 Q- From an o p e r a t i o n a l s t a n d p o i n t , and

21 f o r g i v e me i f what seems t o me t o be a s i m p l e

22 q u e s t i o n i s t o o c o m p l i c a t e d because I'm .not a.n

23 c p e r a t m g e x p e r t , b u t fr o m an o p e r a t i o n a l

2 4 s t a n d p o i n t , can you or do you see any se r i c u s

25 I T p e d i m e n t s t c t h e C c n r a i l f a c i l i t i e s m t h e

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Fe a t S t r e a t o r .

Q' T h a t ' s c o r r e c t . And Mr. Mohan

t e s l e d about t h a t . But t h a t ' s f o c u s i n g more

on t h e t r a i n f l o w s and t r a m o p e r a t i o n s and

B l o c k i n g s and r o u t i n g s . And I ' d l i k e t o c o n f i r m

t h a t t h e p h y s i c a l i n t e r c h a n g e s t h a t e x i s t t o d a y ,

w h ether t h e y ' r e d i r e c t p h y s i c a l i n t e r c h a n g e s , a r e

t h e r e i n t e r c h a n g e s u s i n g one o f t h e t h r e e

p r i n c i p a l t e r m i n a l s w i t c h c a r r i e r s , IHB, B&OCT,

and BRC, i f y o u ' r e aware o f any p h y s i c a l

i n t e r c h a n g e s t h a t w i l l change?

A. O u t s i d e o f t h e p l a n ?

Q. W e l l , I d o n ' t know t h a t t h e r e a r e any

even r e f l e c t e d m t h e p l a n . Mr. Mohan i n d i c a t e d

he was n o t aware of any. Are you aware c f any?

^- ^ ' ^ t r y i n g t o u n d e r s t a n d y o u r q u e s t i o n .

Q. Changes, any changes m t h e p h y s i c a l

i n t e r c h a n g e s between t h e r a i l c a r r i e r s t h a t w i l l

o c c u r ?

A. Ot h e r t h a n t h e S t r e a t o r o p p o r t u n i t y ,

I'm n o t aware of any i n t e r c h a n g e p o i n t

r e c c n f i g u r a t i o n s m t h e p l a n . I'm not aware c f

any a d d i t i o n a l m t e r c n a n g e r e c c n f i g u r a t i c n s t h a t

ir-c^e.....^ o e m g ::iscussed c r n e g o t i a t e d .

ALDERSON REPORTING COMPANY. INC. .202«289 2260 SOO fOS DE»C

" l l M t h S T NW 4ih FLOOR .\ ASH'NGTON 0 C 20005

236

1 T h a t ' s n o t t o say t h a t , a t some p o i n t m t h e

2 f u t u r e , as i t r e l a t e s t o two p a r t i e s

3 r e n e g o t i a t i n g an i n t e r c h a n g e p o i n t , t h a t t h a t

4 c a n ' t t a k e p l a c e .

5 Q. R i g h t . T h a n k y o u , s i r . And I guess

6 t h a t ' s what I was l o o k i n g a t . We know what t h e

7 p l a n says. And I guess I was i n t e r e s t e d , s i n c e

8 t h a t t i m e , s i n c e .Mr. Mohan has not been i n v o l v e d

9 m any g o i n g f o r w a r d , w h e t h e r y o u ' r e aware o f any

10 such change?

11 A. I'm not aware c f any s i g n i f i c a n t

12 changes i n t h a t r e g a r d o r f o r t h a t m a t t e r any

13 o t h e r changes t o t h e p l a n .

14 Q. So y o u ' r e n o t aware of any c l o s u r e s or

15 d o w n r a t m g or d o w n g r a d i n g o f f a c i l i t i e s t h a t w i l l

16 o c c u r i n Chicago? And I d o n ' t want t o m i s l e a d

17 you because I b e l i e v e Calumet w i l l change.

18 A. T h a t ' s c o v e r e d m t h e p l a n .

19 Q. R i g h t .

20 A, T h a t ' s v e r y c l e a r l y c o v e r e d m t h e

21 p l a n , t h a t some of t h e s w i t c h i n g o p e r a t i o n s at

22 Calumet w i l l be d e a l t w i t h a t E l k h a r t . T h a t ' s

23 n o t t o say t h a t Calumet i s b e i n g phased o u t .

24 Calumet w i l l s t i l l f u n c t i o . n as a f a c i l i t y f o r

1 n C h i c a g o .

ALDERSON REPORTING COMPANY. INC. '202'289 2260 '900' C'OR Oi^C

n n 14th ST NA 4tn FLOOR WASHINGTON 0 C 20005

STB FD 33388 10-21-97 D 182942 5/5

2 3 7

1 Q . Do you have p l a n s t c expand t h a t or. t h e

2 i n t e r m o d a l s i d e ?

3 A . That IS a p o s s i b i l i t y , h a b e e n

4 d i s c u s s e d , no d e c i s i o n has been r e a c h e d

5 Q . And t h e r e may be o t h e r changes t h a t a r e

6 r e p o r t e d m t h e p l a n . But do you r e c a l l any

7 o t h e r changes b e s i d e s Calumet, even as r e p o r t e d

8 i n t h e p l a n , t h a t a r e o f a s i g n i f i c a n t n a t u r e m

9 t e r m s c f t h e changes c f t h e o p e r a t i o n s i n Chicago

10 and ot.her t h a n t h e S t r e a t o r bypass o p p o r t u n i t y

11 t h a t you mentioned?

'2 A. As I t r e l a t e s t o i n t e r c h a n g e ?

-3 Q. Yes, s i r , w i t h t h e Western c a r r i e r s .

14 A. No, not t h a t I r e c a l l .

15 Q. Thank you, s i r . Are you aware o f any

16 changes m p r a c t i c e s o r p r o c e d u r e s t h a t w i l l be

17 r e q u i r e d by any of t h o s e t h r e e t e r m i n a l s w i t c h i n g

18 r a i l r o a d s t h a t I r e f e r e n c e d e a r l i e r as a r e s u l t

1 ^ -''le p l a n o r g o i n g f o r w a r d f r c m t.he d e v e l o p m e n t

20 p l a n ?

21 A. Anc t h e t h r e e . . a r r i e r s were?

22 Q. IHB, B&CCT, and BRC.

2^ A. I'm not aware a t t h i s po:.nt of any

24 changes m Chicagc o u t s i d e t h e c c n f i n e s o f t h e

25 p l a n . O b v i o u s l y t h e I H i B i s g c m g t o undergo

ALDERSON REPORTING COMPANY INC. 202'289 2160 '800 fQR DE°C

n i l i4ih ST NW 4tn FLOOR WASHINGTON D C 20005

2 3 3

sor^e y e t t c be i e t e r - ^ m e d r e c c n f i g u . ' a t i c n s as a

2 r e s u l t c f t h e p l a n , i f t n i s t r a s a c t i c n i s

3 a p p r o v e d c v t .h e STB.

4 Q. One c f t h e r e c o n f i g u r a t i o n s as I

5 u n d e r s t a n d i t , and I do n ' t u n d e r s t a n d i t v e r y

6 w e l l , i n v o l v e s I b e l i e v e t h e B l u e I s l a n d Yard

t h a t CSX i s g o i n g t o have p r i n c i p a l use of and

8 r e s p o n s i b i l i t y f o r ; i s t h a t c c r r e c - ?

9 A. Th a t ' s my u n d e r s t a n d i n g .

Q. Could you e x p l a i n , I d o n ' t knew hew

11 t h a t f i t s i r and how t h a t w i l l a f f e c t , i f a t a l l

7

10

12

14

15

16

18

c u r r e n t l y e x i s t i n g o p e r a t i o n s i n Chicago f o r

13 o t h e r c a r r i e r s 7

A. W e l l , under t h e c i r c u m s t a n c e s I t h i n k

t h a t q u e s t i o n would b e s t Le a d d r e s s e d t o CSX.

Q. Okay. T h a t ' s f i n e . C u r r e n t l y 3N,'Santa

Fe, f o r i n s t a n c e , has I b e l i e v e c u t o m o b i l e

t r a f f i c c l a s s i f i e d by IHB p e r h a p s a t Gibson and

19 perhaps n o t i n v o l v i n g Blue I s l a n d . But v c u ' r e

20 not aware of m y o u r d i s c u s s i o n s any e f f e c t t n a t

21 t r a n s a c t i o n w i l l have on any o f t h e Western

22 c a r r i e r s and t h e i r changes o r t r a n s a c t i o n s i n

2 3 C n 1 c a g c ?

A. Not o t h e r t n a n what i s d e p i c t e d m t h e

2 5 p 1 a .n .

ALDERSON REPORTING COMPANY. LNC. 202'2a9 2260 800' FOR DEPO

n i l 14th ST NW 4th FLOOR WASHINGTON DC .:0006

1 Q. Wit.h r e s p e c t t o S t r e a t o r , you s u g g e s t e d

2 t.hat I t was p o s s i b l e a.nd t h e p l a n "av' p r o T t c t

3 t h a t c e r t a i n volumes w i l l be i.n tere.hanged a t

4 S t r . - a t o r r a t h e r t h a n Chicago wit.h BN/Santa Fe; i s

5 t h a t c o r r e c t , s i r ?

6 A. I t h i n k , m r e s p o n s e t o yo u r q u e s t i o n ,

7 I s a i d t h a t S t r e a t o r o f f e r e d t h e o p p o r t u n i t y f o r

8 i n t e r c h a n g e r e c o n f i g u r a t i o n .

9 Q. Do you a n t i c i p a t e t h a t N o r f o l k S o u t h e r n

10 13 g o i n g t o p u r s u e t h a t o p p o r t u n i t y ?

11 A. W e l l , t h a t a g a i n w o u l d be as a r ^ a s u l t

12 of any c o o r d i n a t i o n t h a t was re a c h e d w i t h

13 BN/Santa Fe t o t h a t e x t e n t .

14 Q. Who i s o r w i l l be r e s p o n s i b l e f o r d o i n g

15 t h a t c o o r d i n a t i o n w i - h 3N/Santa Fe?

16 A. W e l l , t r a d i t i o n a l l y t h a t w o u l d f a l l

17 under t h e s e r v i c e d e s i g n g r o u p and o - a e r a t i o n s m

18 A t l a n t a .

19 Q. And who i s ''es p o n s i b l e f c r t h a t

20 f u n c t i o n , t h e nam e of t h e persor. ?

21 A. Don Z u r i c h , a s s i s t a n t v i c e p r e s i d e . n t o f

22 t r a n s p o r t a t i o n .

23 Q. Are you aware of w h e t h e r c r n o t he o r

24 anyone i n h i s group has s t a r t e d d i s c u s s i o n s w i t h

25 3N Santa Fe i n t h a t r e a a r d ?

ALDERSON REPORTING COMPANY, INC. '202 '289 2260 '800' FOR DEPC

n n 14th ST N W 4th FLOOR vVASHING'ON D ' 20005

JOHN H. W ILLIA.MS

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4 i n d u s t r y t h a t I want to see

5 thcuqhts cn. You've had experience d e a l i n g wi'.h

^ ,= .-v,c>^Ac;c30vears. -s ^ marketing departments f c r the .ast

8 chat c o r r e c t ?

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geherai:..' a r a . l r o a d p r e f e r e h c e t o .ax... = e 11

j_2 revenues^ NO. I don't t h i n k I would agree w i t h

14 t h a t .

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16 don't agree? I t h i n k r a i l r o a d s are l i k e any o t h e r

I 13 A

J .-Hor/ r rv and maximize 18 American business today and they . r ,

19 t h e i r p r o f i t s . ,0 Q OKay And dc you thinK they t r y t o

max.-,.te t h e . r p r o f . t . on .nd.v.dual movements^

2- A. Yes. Okay. And you t h i n k t h a t g e n e r a l

m^-^ r r - ' i t s comes mto p^ay 24 p r e f e r e n c e t o m a x i m i - e p r ^ . ^ - o

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2 Q. L e n g t h of h a u l , c o u l d t h a t a f f e c t i t as

3 w e ' l '

4 A, W e l l , I t h i n k t h e c o n t r a c t and t h e

5 terms of t h e c o n t r a c t would be t h e go'.'ernmg

6 f a c t o r s ,

7 Q. Okay, I j u s t have some q u e s t i o n s now

8 or your d i v e r s i o n a n a l y s i s . And a g a i n , t o p u t

9 t-':at a n a l y s i s m c o n t e x t , I want t o see i f we

10 c o u l d come t o soine agreement on some o t h e r

11 p r e f e r e n c e s t h a t e x i s t i n t h e i n d u s t r y . Would

12 you agree w i t h -ne t h a t t h e r e ' s a s h i p p e r

13 p r e f e r e n c e t o g e t as low a r a t e as p o s s i o l e f o r

14 r e l i a b l e r a i l r o a d s e r v i c e ?

15 A. Yes.

16 Q. Okay. Would you agree w i t h me t h a t

17 t h e r e ' s a r a i l r o a d p r e f e r e n c e n o t t o s h o r t h a u l

19 i t s e l f ^

19 A. Yes.

20 Q. Would you agree w i t h me t h a t s h i p p e r s

21 p r e f e r t o a v o i d r o u t e s t h a t -- and per h a p s t h i s

22 IS a p r e f e r e n c e t.hat's common t o s h i p p e r s and

23 r a i l r o a d s , p r e f e r t o a v c i d r o u t e s t h a t s u f f e r

2-4 from t r a f f i c c o n g e s t i o n ' '

2 5 «. Yes ,

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Q. Would >• ou agree w i t h me t h a t t h e r e ' s a

oreference to have •••our ove ment s occur m c y c l e

times t h a t enable you to p l a n your business

e f f i c i e n ' " l y ?

A. Yes,

Q. Aad m p a r t i c u l a r , w i t h respect t o

u t i l i t y companies, would you agree w i t h m,e t h a t

t h e r e ' s a shipper p r e f e r e n c e t o o b t a i n s e r v i c e

under r e l i a b l e s e r v i c e parameters mc'uding c y c l e

times, perhaps t r a . n s i z e , o t h e r s e r v i c e

c o n d i t i o n s t h a t a f f e c t the a b i l i t y t o plan your

power requirements?

A. Yes.

Q. Now, when you performed your d i v e r s i o n

a n a l y s i s , you assumed t h a t 100 percent of a l l

j o i n t - l m e t r a f f i c would be d i v e r t e d t o

s m g l e - l m e movements, c o r r e c t ?

A. Yes,

Q. And as I u n d e r s t a n d y o u r t e s t i m o n , . i s

based on t h e , q u o t e , known s h i p p e r p r e f e r e n c e f o r

s m g l e - l m e se r •-•ice?

A . Yes ,

Q. Is t h a t the c n l y b a s i s f o r t h a t

assumption, t h a t IOC percent w i l l be diverted:'

A . Well, I c e r t a 1 n 1 %• t h i n k i t ' s the

ALDERSON REPORTING COMPANY INC. 202'2e9 2260 800' = 0R OEPC

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c a s15, yes

T .h a t ' s t h e c r i m a r •.• b a s i 5 you t h i h k

A. Witn e s s nods head

Q . Why do you t h i n k s h i p p e r s p r e f e r

5 s m g l e - l m e ser'.'ice'

g A. Because i t a v o i d s i n t e r c h a n g e s , i t

a v o i d s two c r more c a r r i e r s who d i s a g r e e a b c u t

who i s r e s p o n s i b l e f o r f a i l i n g t o p r o v i d e s e r v i c e

9 because i t perm.its t h e s h i p p e r t o d e a l w i t h : u s t

10 one e n t i t y f rom a r a t e m a k m g customer s e r v i c e

11 p o m t of -.-lew, because i t ' s g e n e r a l l y m.ore

12 e f f i c i e n t and l o w e r c o s t f o r t h e r a i l r o a d t o

13 p r o d u c e s i n g l e - s y s t e m s e r v i c e w i t h o u t t h e

14 i n t e r c h a n g e s and t h e i n t e r f a c e s w i t h o t h e r

15 c a r r i e r s

16 Q. Can't t h e : o m t l i n e c a r r i e r s work

17 t h e s e t h i n g s out among t h e m s e l v e s t h r o u g h

18 c o n t r a c t u a l a r r angement s :>

19 A. That has ai w a y s been arg".ed t o be

20 p o s s i b l e . And i t has been d e m o n s t r a t e d a t l e a s t

21 i n t h e p a s t 15 y e a r s t h a t t h e s h i p p e r s p r e f e r

22 sm::le-s-.-steT. ser'.'ice because t h e c a r r i e r s c a n ' t

2 3 a .n d i o n t work i t o u t .

2 4 Q. I s I t '.'Our e x p e r i e n c e m t h e i n d u s t r y

25 t h a t t h e r e are no

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^bottom of the Hudson l i n e and go -- i t ' s on

p i l l a r s i n tne water. And i t goes down t o a

poin t c a l l e d the Harlem River Yard area.

Q. What's your u n d e r s t a n d i n g cf the

purpose of the Oak Point l i n k ?

A. My purpose of i t was t o help f o r the

development of in t e r m o d a l and otl.er f r e i g h t

o p e r a t i o n s m the Oak Pomt area.

Q. So, when you t e s t i f i e d t h a t you t h i n k

the Hudson River l i n e can handle s i g n i f i c a n t

a d d i t i o n a l f r e i g h t t r a f f i c , i s one of the reasons

you have i n mind t h a t the Oak Point l i n k a l l o w s

t h a t bypass of some of those commuter t r a c k s ?

A. That's one of the cases, yes.

Q. Turn, i f you would, t o page 213 of

volume 3A. And, at the bottom of t h a t page,

under t.he heading shared assets area, t h e r e ' s a

d e s c r i p t i o n of the shared assets areas being

managed by something c a l l e d the C o n r a i l shared

assets o p e r a t i o n or CSAO. I s i t your

understanding t h a t the CSAO w i l l have a board of

d i r e c t o r s appointed e q u a l l y by NS and CSX?

A. I t i s my un d e r s t a n d i n g , yes.

Q. Do you have any understandmg as to

whether the CSAO w i l l have any a b i l i t y t o i t s e l f

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f r e i g h t cars on, so any f r e i g h t car t h a t would

q u a l i f y for" f l o a t o p e r a t i o n .

^ Q. Are t h e r e any l i m i t s e i t h e r m term.s cf

bow many cars can be handled at one time or m a

week or any p h y s i c a l l i m i t a t i o n s on the c a p a c i t y

of t h a t Cross Harbor o p e r a t i o n ?

A. I don't know Cross Harbor's c u r r e n t

o p e r a t i o n except through c o n v e r s a t i o n s t h a t I had

w i t h C o n r a i l . My u n d e r s t a n d i n g i s t h a t i t ' s a

very s m a l l o p e r a t i o n , i t ' s o n l y a h a n d f u l of

cars, i t ' s a d i l a p i d a t e d o p e r a t i o n m terms of

equipment and f a c i l i t i e s and cap.acities

accommodated by the resources i n the f a c i l i t i e s

and t h e i r c o n d i t i o n s .

And so, when you were a s k i n g about the

c a p a c i t y , you would have to look a t , you know,

what time frame and, you know, what type of

s i t u a t i o n t h a t o p e r a t i o n would be m.

Q. We.ll, i f CSX were t o be t r a n s p o r t i n g

f r e i g h t from, you know, any of the Western

gateways headed toward New York C i t y or Long

I s l a n d , based cn your u n d e r s t a n d i n g of the

choices, would i t be ac c u r a t e t h a t you would take

i t over S e l k i r k and down the Hudson River l i n e as

opposed t o t h r e e G r e e n v i l l e and over the Cross

ALDERSON REPORTING COMPANY, INC. U02;289-226C ;S00) 'OR 3EP0

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Harbor?

A. The choices are determined by the

shipper, not the r a i l r o a d . The s h i p p e r p i c k s the

r o u t i n g and the c a r r i e r s t h a t they want t o m.ove

t r a f f i - on. The o p e r a t m g p l a n accommodates the

movement of t h a t t r a f f i c .

Q. Well, my q u e s t i o n , perhaps I should

phrase i t a l i t t l e d i f f e r e n t l y . Just from the

stan d p o i n t of your e x p e r t i s e as a r a i l r o a d

o p e r a t o r , assuming t h a t you were making the

de c i s i o n s , would you consider i t t o be a more

e f f i c i e n t o p e r a t i o n , a s u p e r i o r o p e r a t i o n f o r CSX

to take i t over S e l k i r k and down the Hudson River

l i n e as opposed t o the Cross Harbor?

A. Again I t h i n k we're s p e c u l a t i n g .

Q. Sure. We're assuming.

A. The reason f o r i t i s the custom'3r wants

t h a t f r e i g h t car t o go to some p o i n t . They have

a number of d i f f e r e n t d e c i s i o n s they make m the

l o g i s t i c s t h a t move t h a t f r e i g h t car, once a

f r e i g h t -ar gets i n t o the Manhattan area, how

I t ' s going to t r a n s f e r the f r e i g h t t o t r u c k to a

b u i l d i n g , f o r exan:pie.

The s h i p p e r i s going t o look at the

p a t t e r n s cf s e r v i c e p r o v i d e d by d i f f e r e n t

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c a r r i e r s and make t h e i r determ.mat i on based o f f

of t h e i r knowledge and what t.hey want to a t t a i n

Wit.h t.heir l o g i s t i c s . The r a i l r o a d puts toget.her

o p e r a t i n g p l a n s .

We are pi,inning on p u t t i n g t o g e t h e r an

o p e r a t i n g p l a n t h a t a l l o w s f o r t r a i n s t o go down

the Hudson l:.ne f o r d i s t r i b u t i o n of equipment and

cars and f r e i g h t at the Oak Point area. We are

also p u t t i n g t o g e t h e r p l a n s , and i t was shown on

the document, f o r t h a t gateway t o b r i n g t r a i n s

down to the North Jersey area.

They could make connections t o the

Cross Harbor. So there w i l l be e f f i c i e n t good

connections t h a t ar omg t o be p r o v i d e d by CSX

f o r cars t o move through a l l these d i f f e r e n t

p o s s i b l e r o u t i n g s .

Q. Do you have the sam.e o p t i m i i s t i c view of

the p o t e n t i a l f o r f r e i g h t i n c r e a s e s using the

Cross Harbor as you e a r l i e r t e s t i f i e d you do f o r

the Hudson River l i n e ?

A. Would you r e s t a t e your q u e s t i o n .

Q. Yes, I'm s o r r y . Do you b e l i e v e thac

the Tress Harbor opt ^ r a t i o n has the same p o t e n t i a l

to handle s i g n i f i c a n t i n c r e a s e s m f r e i g h t

t r a f f i c t h a t you e a r l i e r t e s t i f i e d you b e l i e v e

ALDERSON REPORTING COMPANY, INC. ,::2;289'2260 (Soo 'OR :EP:

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1 the Hudson River l i n e has?

2 A. Not unless the Cross Harbor has

3 investment placed m i t .

4 Q. What k i n d of investment?

5 A. As I .Mentioned e a r l i e r , the c o n d i t i o n

6 of t h e i r equipment and p i e r s are m very poor

7 c o n d i t i o n . I t h i n k t h a t he's got -- the company

has l i m i t s t o the number of cars t h a t they can

move. So, you know, i f you had l o t s of car5 show

up, I t h i n k he would have c o n g e s t i o n , the company

11 would have c o n g e s t i o n .

12 Q. Do you have any o r d e r of magnitude as

13 t o how much mvestment i n d o l l a r s would be

14 necessary?

15 A. No, t h a t ' s p u r e l y s p e c u l a t i o n .

MS. CLAYTON: I o b j e c t to your asking

him about another company's's p l a n s . He a l r e a d y

s a i d he doesn't know t h e i r o p e r a t i o n , he hasn't

19 been t o see i t .

20 MR. DOWD: For the r e c o r d my - u e s t i o n

21 IS d i d he have an idea and he s a i d he d i d n ' t and

22 t h a t ' s f i n e .

23 BY MR. DOWD:

^* Q- ^'d l i k e t o ask you a couple q u e s t i o n s

abcut Albany and the S e l k i r k area. '.that's your

ALDERSON REPORTING COMPANY, INC. ;202)289'226C (800; 'OR :EPC

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1 served by CSX, those l o c a l customers. There are

2 l o c a l customers m the B u f f a l o area t h a t w i l l ce

3 served by N o r f o l k Southern because C o n r a i l l i n e s

4 are assigned to them.

5 Q. And are t h e r e any t h a t you're aware of

6 t h a t w i l l be served by both?

7 A. No.

8 0- Okay. Are you f a m i l i a i w i t h the

9 trackage r i g h t s arrangement under which N o r f o l k

Southern i s given t r a c k a g e r i g h t s up the Niagara

11 branch t o Suspension Bridge?

12 A. I'm not f a m i l i a r w i t h t h a t .

3 Q« Okay. Did you or anyone under your

s u p e r v i s i o n study or e v a l u a t e from an o p e r a t i o n a l

s t a n d p o i n t any sce n a r i o s f o r p o s t • t r a n s a c t i o n

16 o p e r a t i o n s i n B u f f a l o d i f f e r e n t from the

17 arrangement t h a t i s i n the a p p l i c a t i o n ?

1® ^ - We d i d our o p e r a t i n g p l a n based o f f of

the boundaries t h a t were g i v e n t o us from, the

A p r i l 8 agreement.

0* Okay. So i s i t your t e s t i m o n y t h a t you

d i d not evaluate any s c e n a r i o s f o r B u f f a l o o t h e r

than the one t h a t ' s m the a p p l i c a t i o n ?

24 A. That i s c o r r e c t .

'•^ Q' Were you ever aware cr d i d anyone ever

ALDERSON REPORTING COMPANY, INC. (202)28«22*C (800) 'OS OEPO

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>a'a . , _ , ^ , . ' , r , o r f o r t h e -^or t h e a p p - i - a u - - -

;f T r i p l e Crown s e r v i c e s t h r o u g h Long

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.er-^ i n t e r m o d a l s e r v i c e e a s t cf New Y.^k C i t y ^

A. We have had d i s c u s s i o n s w i t h t h e -ong

i s l a n d Rai

o p e r a t i o n

i s l a n d out t o t h e e a s t end c f Long I s l a n d .

Q. When you say t h e Long I s l a n d , i s t h a t

. - ^ n=,-^road o r t h e New York and t h e Long I s i a n d Ra^^roaa o i

A t l a n t i c ?

A. Whatever t h e c u r r e n t d e s i g n a t i o n i s .

Q. The f r e i g h t ?

A. The f r e i g h t o p e r a t i o n of t h e Long

i s l a n d R a i l r o a d , t h a t w o u l d be a c c u r a t e .

Q. i s t h a t t h e e x t e n t of y o u r --

A . Yes.

Q. And, i f t h a t s e r v i c e o c c u r r e d o r came

a b o u t , how w o u l d t h a t s e r v i c e be p e r f o r m e d ?

A. Through t h e Amtrak t u n n e l s , t h r o u g h

u n i o n S t a t i o n , o u t t o t h e e a s t e r n end of Long

I s l a n d . Q. What about t h e c r o s s h a r b o r o p e r a t i o n ? A. I'm n o t f a m i l i a r w i t h t h a t o p e r a t i o n .

Q. To y o u r k n o w l e d g e does N o r f o l k S o u t h e r n

c o n s i d e r rhe e a s t c f New York,'-ong I s l a n d a r e a t o

be W i t h m t h e r e g i o n t h a t w o u l d be p e n e t r a t e d by

t h e haulage a r r a n g e m e n t t h a t ycu have r e a c h e d

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Q. T h a t ' s t h e N' e w England s e r v i c e t h a t you

r e f e r r e d t o as N o r f o l k So ut.hern s m g l e - l m e

i n t e r T c d a l s e r v i c e , t h a t ' s t c New E.n g l a n d ?

A. The r e f e r e n c e here t o . N o r f o l k S o u t h e r n

s m g l e - l i . n e s e r v i c e I b e l i e v e i s t o a l l o f t h e

N o r t h e a s t , i n c l u s i v e of t h e CP p o t e n t i a l GTI

s e r v i c e .

Q. And a l s o i n c l u s i v e o f e a s t o f New

York/Long I s l a n d p o m t s ?

A. C o r r e c t .

Q. For t h e East of New York,/Long I s l a n d

p o i n t s t h e n , what w i l l N o r f o l k S o u t h e r n

s m g l e - l i n e i n t e r m o d a l s e r v i c e be f r o m o r t o

p o m t s e a s t o f New York a.nd Long Islan'd?

A. Two ansv;ers. One i s t h e co.ntemplated

T - i p l e Crown s e r v i c e w i t h New York and A t l a n t i c

or the f r e i g h t o p e r a t i o n of t h e c u r r e n t Long

I s l a n d R a i l r o a d . The second i s t h e way t h a t

i n t e r m o d a l t r a f f i c i s h a n d l e d c u r r e n t l y , w h i c h i s

h a n d l e d v i a d r a y s ovei" t h e N o r t h e r n New J e r s e y

i n t e r m o d a l t e r m i n a l s , m t h i s case E - R a i l .

Q. Would you agree t h a t one c f t.he them.es

t h a t runs t h r o u g h o u t t h e t e s t i m o n y o f a number of

N o r f o l k S o u t h e r n ana CSX w i t n e s s e s m t h e

a p p l i c a t i o n i s t h e s u p e r i o r i t y o f s m g l e - l m e .

ALDERSON REPORTING COMPA.NY. INC. i202l289 2260 (SOOi FQR OEPO

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River t o t.he shared assets area?

A. No. not f o r r a i i c a r s .

Q. Has N o r f o l k Southern considered using

Oak Point l i n k t o connect the east s i d e of the

Hudson River t o N o r f o l k Southern l i n e s ?

A. The Oak Point l i n k connects t o the

Harlem River l i n e and then goes up the Hudson

l i n e . So t h a t ' s CSX p r o p e r t y . There's no way --

we would have t o get a l l the way t o Albany and

then come down the r i v e r . No, t h a t ' s CSX

o p e r a t i o n s .

Q. What I'm r e f e r r i n g t o i s the connection

from Oak P o i n t Yard m New York.

A. I n New York.

Q. To the Harlem River Yard on Long

I s l a n d .

A. No, we're -- we do not p l a n t o have any

r a i l o p e r a t i o n s east of G r e e n v i l l e p i e r s .

Q. So the only l i n k t h a t N o r f o l k Southern

t-lans t o use t o access t h a t area. M e t r o p o l i t a n

New Y o r k . C i t y , i s the Cross Harbor o p e r a t i o n ?

A. That's c o r r e c t . There w i l l be -- I

would say t h e r e ' s i n t e r l i n e , t h e r e w i l l be

i n t e r l i n e t r a f f i c t h a t moves NS t o CSX t h a t w i l l

operate on CSX l i n e s east of the Hudson.

1

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0. Can you des c r i b e t h a t o p e r a t i o n ,

please .

A. Sure. I don't t h i n k the exact

i n t e r c h a n g e p o i n t has been determined y e t , but

l e t ' s suppose i t would p r o b a b l y be Albany. CSX

from, say, a l o c a l s t a t i o n cn N o r f o l k Southern

would take a car to Albany and g i v e i t to CSX and

they would take i t down the Hudson River and

d e l i v e r i t to the d e s t i n a t i o n on t h e i r l i n e s .

Q- So y o u ' r e saying t h a t , aside from Cross

Harbor, t h i s method t h a t you j u s t d e s c r i b e d i s

the o t h e r means you would use?

A. I t ' s an i n t e r l i n e movement w i t h CSX,

yes .

0. Other than those two ways, are th e r e

other ways t h a t N o r f o l k Southern plans to compete

f o r t h a t t r a f f i c ?

A. Not f o r c a r l o a d t r a f f i c . Now, f o r

in t e r m o d a l t r a f f i c , of course, w e ' l l do what

C o n r a i l does today, w e ' l l dray from New Jersey.

Q. Do you have any knowledge of the

c a p a c i t y of the Cross Harbor R a i l r o a d o p e r a t i o n ?

A. No, I don't. I've been t o l d a l o t of

Cross Harbor s t o r i e s , but I r e a l l y have no

p a r t i c u l a r knowledge of i t .

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1 Q. Do you p r o j e c t t h a t , as a r e s u - t of the

2 t r a n s a c t i o n , t r a f f i c on the Cross Harbor

3 o p e r a t i o n w i l l i n c r e a se or decrease?

4 A. We do not have -- t h e r e are no

5 n o t h i n g i n the o p e r a t i n g or t r a f f i c s t u d i e s t h a t

6 addresses f u t u r e volumes on the Cross Harbor

7 R a i l r o a d .

8 Q. And. aside fro.m what's i.n t.he

9 a p p l i c a t i o n , do you have any knowledge of t.hat?

10 I t ' s not i n the a p p l i c a t i o n . Do you have any

11 knowledge of i t o t h e r than t h a t ?

12 A. I've been t o New York a m . i l l i o n times

13 t o t a l k t o people i n c l u d i n g the Cress Harbor

14 R a i l r o a d . And t h e r e are a l l s o r t s of plans t o

15 increase c a p a c i t y , get a new r a t e o p e r a t o r , throw

16 the o l d oper a t o r out, et c e t e r a , et c e t e r a , et

17 c e t e r a , I'm aware of a l l those. But, i n term.s of

18 f a c t s -- I've seen some bro c h u r e s . I haven't

19 seen too many f a c t s , however.

20 Q. What i s N o r f o l k Southern's

21 understandmg as to t.he s t a t e of the Cross Harbor

22 o p e r a t i o n , i t s v i a b i l i t y as a I m k from, east of

2 3 the Hudson to .Norfolk Southern l i n e s ?

24 A. My unde r s t a n d i n g i s i t ' s not doing very

25 w e l l . I t has f i n a n c i a l problem.s. And t h e r e ' s a

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I q u e s t i o n cf who t h e f u t u r e o p e r a t o r w i l l be.

Q. Could you d e s c r i o e m more d e t a i l t h e

f i n a n c i a l procle.ms t h a t you r e f e r r e d t o ?

A. T h a t ' s a l l I ' v e been t o l d m.amly by

P o r t A u t h o r i t y and C i t y of New York o f f i c i a l s ,

6 t h a t t h e company has p r o b l e m s , f i n a n c i a l

7 proble.ms.

8 Q. And does N o r f o l k S o u t h e r n a n t i c i p a t e

9 i n v e s t i n g m t h e o p e r a t i o n ?

IQ A. We h a v e n ' t c o n s i d e r e d i t one way o r

11 a n o t h e r , we ] u s t h a v e n ' t c o n s i d e r e d i t , no.

12 Q. So y o u ' r e aware t h a t t h e r e a r e p r o b l e m s

13 w i t h i t . I t m i g h t n o t be a v i a b l e r o u t e f r o m e a s t

14 of t h e Hudson t o N o r f o l k S o u t h e r n l i n e s ?

A. I t may n o t be a v i a b l e r o u t e u n d e r t h e

p r e s e n t o p e r a t o r . I u n d e r s t a n d some o t h e r

17 o p e r a t o r s i n c l u d i n g t h e New York and A t l a n t i c a r e

18 v y m g t o t a k e o v e r t h e s e r v i c e s . I d i d n o t get

t h e sense t h a t t h e s e r v i c e was g o i n g away. I g o t

t h e sense t h a t t h a t t h e c u r r e n t o p e r a t o r m i g h t go

2 1 i n t o d e f a u l t .

22 I a l s o g o t t h e sense t h e c u r r e n t

23 o p e r a t o r v e r y much wants t o s t a y m b u s m e s s . So

24 t h e r e seems t o be a n e a l t h y c o m p e t i t i o n t o

25 p e r f o r m t h a t s e r v i c e . The q u e s t i o n i s I d o n ' t

ALDERSON REPORTING COMPANY. INC. 202 289 2260 '800' FCR CERQ

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D. MICHAEL .MOHAN

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aware of

SS would

whether t n e c ra c.-vage and r o u t e s by w h i c h

r e a c .n S e .n e c a ':' a r d .nave c e e .n d e t e r ~ i n e d ?

A. I'm not aware of t h e p r o g r e s s c f t.ne

n e g o t i a t i o n s you a l l u d e t o .

Q. What IS your u n d e r s t a n d i n g as t o how NS

would be l i k e l y t o access Seneca Yard i n £3 u t t a o

A. My u n d e r s t a n d i n g i s t n a t NS c o u l d come

down f r o m B u f f a l o J u n c t i o n , CP Draw, t h e n c e v i a

the t o oe CSX mam t o Seneca Ya r d .

0 - I s i L c o r r e c t t h a t t h i s NS access t o

Seneca Yard i s s o l e l y f o r p u r p o s e s o f i n t e r c h a n g e

w i t h S c u t h B u f f a l o R a i lway?

A. My u n d e r s t a n d i n g i s t h a t t h a t ' s t h e

pur p o s e . But I b e l i e v e t h a t NS i s a l s o t o be

g i v e n some use o f a c e r t a i n number o f t r a c k s

d e s i g n a t e d m Seneca Yard.

C. And i s t h a t use s o l e l y f r o m c o n n e c t i o n

w i c h t h e i n t e r c h a n g e of t r a f f i c w i t h S o u t h

B u f f a l o R a i l w a y ?

A. And t o make up i t s c u t s o r t r a i n s and

d e p a r t Seneca w i t h South B u f f a l o R a i l w a y t r a f f i c .

Q. How does NS i n t e r c h a n g e w i t h S outh

B u f f a l o t o d a y ?

A . : e 1 e V e s ove a t i o n _ nea;

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Q . 'W .n a t IS tne pur p o s e c f S ' s a c q u i r i n g

access t o Seneca 'if a r d "

A . The a r r a .n g e T e n t was s t r u c c y t r. e

n e g o t i a t i . n g t e a r r . And i c w o u l d g i v e .\'S sore

a a l o n a l i n t e r c h a n g e c a p a c i t y . And, l o o k i n g a t

, h e o v e r a l l m o v e m e .n'

e l i m i n a t e a movement f o r t h e Sout.h B u f f a l o t o g e t

to t h e T ' l f f t a r e a . I t ' s a more d i r e c t movement

f o r t h e S o u t h B u f f a l o R a i l w a v .

t r a f f i c . I t u i d

Q. Are you f a m i l i a r w i t : :i e segment i n

B u f f a l o known as z he Howard S t r e e t .Runner?

A. I r e c a l l t h e nanie, n o t much more.

Q. S t i l l r e f e r r i n g t o page 234, t h e

o p e r a t i n g p l a n i n d i c a t e s t h a t NS w i l l be a s s i g n e d

t h e C o n r a i l p o r t i o n of t.he form.er B i s c n Yard

p r o p e r t y f o r f u t u r e d e v e l o p m e n t . Can you t e l l us

what p l a n s NS has f o r f u t u r e development cf t h e

B i s o n Yard?

A. No p l a n s a t t h i s t i m e t c -he c e s t of my

knowledge. T h a t ' s always been d i s c u s s e d i.n t e r m s

of p r o p e r t y t h a t ' s a v a i l a b l e f o r f u t u r e e x p a n s i o n

s h o u l d t h a t be needed.

Q. What IS t h e -se t h a t NS prop o s e s t o

ma,<e of B i s o n under t n e o p e r a t m g p l a n ?

A. Under t n e c c e r a t i n a c l a n , t n e use i s

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f o r t h e i n t e r m o d a l , a u t c" c c i •.' e ano t r a n s p o r t

a .n d t r a n s l o a d uses c u r r e n t l - . / at B i s o n .

Q . W i l l t .h e s e uses i n v o l v e t .n e i .n t e : 3 n g e

A. Not a t t h a t p o m t ;e cu B i s o n

a u t o m o t i v e , m t e r m, o a a 1 . a .n a .-3 o m, e t r a .n s 1 o a d " f

c o m m c d i t i e s . 7.he p a r c e l a l l u d e d t o f o r f u t u r e

expa.nsicn i s a d i f f e r e n t p a r c e l a t B i s o n .

Q. I s I t t h e o t h e r end of t h e y a r d t h a t I

u n d e r s t a n d was segmented a t o.ne p o i n t ?

A. I t ' s -the f o r m e r : o i n t f a c i l i t y y a r d ,

yes. t h a t ' s r i g h t .

Q. Please r e f e r t o page 103 w h i c h r e f e r s

a t t h e b o t t o m of t h e page t o t r a c k a g e r i g h t s NS

W i l l have on t h e C o n r a i l l m e t o con.nect w i t h

t r a c k a g e c. f Canadian c a r r i e r s a t Sus p e n s i o n

B r i d g e . Do you f i n d t h a t ?

A. I do.

Q. What Cana'iian c a r r i e r s w i l l NS c o n n e c t

w i t h v i a t h e s e o v e r h e a d t r a c k a a e r i a h t s ?

I'm not awa c t a n v t h m a i ; e c - a .n

, g t .n a t w o u * o a K e a n \' use o lese trac.<aae

r 1 gn t s. T h i s was an a r r a n g e m e n t s t r u cK by t h e

n e g o t i a t o r s . The p l a n c c n t e - p l a t e s cont.num::

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1 1 .n t e r 0 h a r. g e w i r i Canadian P a c i t i c a c S K Vara i n

2 B u f f a l o .

3 Q . W i l l N S h a •-' e t h e a b i l i t y t c i n t e r c h a n g e

4 w i t h Canadian ? .5 c i f i c a t Suspension Bridge

5 t h e s e t r a c k a g e r i g h t s ?

6 A. A c c o r d i n g t o t h i s passage, y e s .

7 Q. And would t h e same be t r u e as t o

9 Canadian .National?

9 A. I n t h e p l a n as f i l e d , t h e r e i s no

10 c o n t e m p l a t i o n of c h a n g i n g t h e i n t e r c h a n g e p o m t

11 W i t h CN, As t h e p l a n was p r e p a r e d , t h e

12 i n t e r c h a n g e was e i t h e r a t F o r t E r i e c r P o r t

13 R o b i n s o n . And t h e r e ' s no c o n t e m p l a t e d change i n

14 t h a t a r r a n g e m e n t .

15 Q. And i s i t your t e s t i m o n y t h a t t h e r e ' s

16 no i n t e r c h a n g e w i t h CP c o n t e m p l a t e d a t S u s p e n s i o n

17 B r i d g e ^

18 A. I n t h e p l a n f i l i n g . What t h e

19 n e g o t i a t o r s may have i n t e n d e d I don't know.

20 Q. T h a t ' s my n e x t q u e s t i o n , what i s t h e

21 p u r p o s e of th e s e t r a c k a g e r i g h t s , i f y o u ' r e

22 making no use of them?

23 A. I t i s a r i g h t t h a t was n e g o t i a t e d by

24 t h e n e g o t i a t i n g team. And I'm not awa'-e of what

2 5 t h e 1 1 i n d e n t i o n s T, i g ,n t c e .

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two about NS's new r i 5 n c 3 at one f e n e c a Yard 1 n

B u f f a l o . You a r e aware t h a t C c n r a i l -- s t r i k e

t h a t .

My u n d e r s t a n d m g i s t n a t c u r r e n t l y N' S

m t e r c h a .n g e s w i t h S o uth B u f f a l o R a i l r o a d a t the

S t a t i o n C Yard b u t t h a t p o s t - t r a n s a c 1 1 on NS w i l l

be al.lowed t o i n t e r c h a n g e wit.n S outn B u f t a . o at

th e Seneca Yard?

A. T h a t ' s r i g h t .

Q. How i s NS g o i n g t o u t i l i z e t h e s e new

t r a c k a g e r i g h t s i n t o Seneca Yard and how does

N o r f o l k S o u t h e r n a n t i c i p a t e i t w i l l b e n e f i t from

t h e s e new r i g h t s ?

A. The b a s i c i n t e n t i s t o use t h e r i g h t s

a t Seneca f o r i n t e r c h a n g e w i t h t h e South B u f f a l o

assuming t h a t t h e South B u f f a l o i s w i l l i n g and

a g r e e a b l e . We w o u l d assume t h a t t h e y w o u l d be

because t h a t i s a much l e s s cumbersome

i n t e r c h a n g e move f o r them.

So NS •••ould have t h e a b i l i t y t o

o r i g i n a t e f r o m t h e Seneca i n t e r c h a n g e , i f i t

chose t o do so, and p i c k up en r o u t e , i f t h e

r a volumes w a r r a n t , and a v o i d f u r t h e r

t e r m i n a l p r o c e s s i n g a t B u f f a l o . So i t ' s t h e

ma' a o r e a w < w a r o ~, 0 v e f o r t h e South

ALDERSON REPORTING COMPANY. INC. •202 289 2260 SOO' ^CB i^io.^

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B u f f a l o R a i l w a y .

Q. Would you say t n a t t n e b e n e f i t s c f

these new t r a c .< a g e r i g .n t s i n t o Seneca Yard

e n ] o y e d by .NS w i l l .mure t o s h i p p e r s ?

A. They c c u l d .

Q. Could you e l a b o r a t e on how t h e y m i g h t ?

A. Reduce t r a n s i t t i m e s on t r a f f i c t o and

from t h e South B u f f a l o , f e w e r t e r m i n a l h a n d l i n g s .

Q. So t.hic change s h o u l d i m p r o v e NS

s e r v i c e t o t h e Bethlehem S t e e l f a c i l i t y m

Lackawanna?

A. I t s h o u l d , yes.

Q. Which i s s e r v e d by t h e S o u t h B u f f a l o

R a i l r o a d ?

A. T h a t ' s c o r r e c t .

Q. Are y o i f a m i l i a r w i t h t h e P h i l a d e l p h i a ,

Bethlehem & New England R a i l r o a d w h i c h s e r v e s t h e

Bethlehem S t e e l f a c i l i t y m B e t h l e h e m ,

P e n n s y l v a n i a , and i n t e r c h a n g e s w i t h Conra-1 as

w e l l as DiH?

I know t h a t i t e x i s t s , yes.

Does t h e o p e r a t i n g p l a n c o n t e m p l a t e any

cnanges r e g a r d i . n g t.he c a r r i e r s t h a t have access

t c r a i l r o a d i.ntc t.nis Bet.hie.hem. S t e e l

t a c 1 • 11 %• 1 .n 3 e t h 1 e h e ~ . ? e .n .n s v 1 \' a .n i a ?

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1111 14th ST N W 4th FLOOR WASHINGTON 0 C 20005

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CERTIFICATE OF SERVICE

I hereby c e r t i f y t h a t on t h i s 21st day of October,

1997, I caused copies of the foregoing Comments to be served by

hand upon the f o l l o w i n g :

The Honorable Jacob Leventhal Dennis G. Lyons, Esq. Federal Energy Regulatory Commission Arnold & Porter

555 12th S t r e e t , N.W. Washington, D.C. 20004

Samuel M. Sipe, J r . , Esq. oteptoe & Johnson 1330 Connecticut Ave., N.W. Washington, D.C. 20036

888 F i r s t S t r e e t , N.E. Suite I I F Washington, D.C 20426

Paul A. Cunningham, Esq. Harkins Cunningham Suite 60C 1300 19th S t r e e t , N.W. Washington, D.C 20036

Richard A. A l l e n , Esq. Zuckert, Scoutt & Rasenberger, L.L.P. 888 17th S t r e e t , N.W.

Washington, D.C. 20006-3939

and by f i r s t class U.S. m a i l , postage prepaid, on a l l other

p a r t i e s of record.

Kelvin J.

•38-

STB FD 33388 10-21-97 D 182941

BEFORE THE SURF. \CE TRANSPORTATION BOARD

ISI-5

Finance Docket No. o3388

CSX Corporation and CSX TramporUition, Inc. Norfolk Southern Corporation Ami Norfolk Railway Company

—Control .Ami Operating; Lcascs/A^rmncnts— Conrail Inc. Ami Consolidntcii Rail Corporation

COMMENTS AND REQUEST FOR CONDITIONS

OF

INLAND STEEL COMPANY

Edward C. McCarthy A.ssistant Gonoral Counsel Law Department INLAND STEEL COMPANY 30 West Monroe St. Chicago, IL 60603 312-899-3148

October 21, 1997

ISI-5

BEFORE THE SURFACE IRANSPORTATION BOARD

Finance Docket No. 33388

CSX Corporation ami CSX Tran<:portation, inc. Norfolk Soutlicrn Corporation And Norfolk Railiraii Conipany

—Control Ami Operating; I^casc^/t^^rccnh'>:t<— Conrail Inc. And Conaoiidatcd Rail Corphmition

COMMENTS AND REQUEST FOR CONDI FIONS OF

INLAND STEEL COMPANY

Inland Steel Company (ISC) is a wholly-owned subsidiary of Inland Steel

Industries, Inc. ISC is the sixth largest steel producer in the United States. The

company mines and transports iron ore, makes iron and produces carbon and

high-strength, low-alloy steels. Its sole steelmaking facility is the 1 ,'-H)()-acre

Indiana Harbor Works (IHW) at East Chicago, Indiana, with an annual raw

steelmaking capacity of six million tons. The company, in joint venture with

Nippon Steel Corporation, operates 1/N Tek, a cold-rolling mill near New

Carlisle, Indiana (NCW), with annual steel finishing capacity of one million tons.

Ihe company also operates 1/N Kote in joint ventureship vvith Nippon Steel

Corporation. I / N Kote, located adjacent to I / N Tek, galvanizes finished steel

and has an annual capacitv of 900,000 tons.

Conrail (CK) is ISC's largest railroad carrier of outbound steel products,

and it transports over 95"'(. of the work-in-progress inventories moving between

the Indiana Harbor Works and the joint venture facilities. CSXT is a significant

carrier of coal, coke and finished steel for Inland. Norfolk Southern (NS)

transports finished steel for Inland. NS also serves coal and coke producers that

ha\ e been suppliers in the past and have the potential to be suppliers in the

future.

ISC's IHW is served by two carriers, the Elgin, joliet and Eastern Railway

(EjE) and the Indiana Harbor Belt Railroad (IHB), in which CR has a 51' .. equity

interest. IHW is the Indiana Harbor belt Railrt>ad's largest shipper, and the IHB

is of critical importance to the operations at the Indian.) Harbor Works and at the

joint ventures.'

ISC is heavily dependent on rail transportation for its inbound raw

materials, for its coal and coke requirements, for the distribution of its finished

steel products, and for the transfer of steel inventories between its IHW and joint

\ e.iture facilities. It is important to understand that the joint ventures in New

Carlisle, Indiana are supplied with steel solely from IHW on a just-in-time basis.

CurrentK', dedicated dailv train service h\ CR is tightly coordinated to insure the

a\ailabilitv of the right steel arriving at the right time at the joint venture

facilities. Disruption in this service results in costly plant shutdowns, with

consequences that extend through the suppl\' chain bv affecting the just-in-time

scheduling of product lrt>pi these facilities to automotive and appliance

manufacturers.

ISC's comments on the transaction which is the subject of this proceeding

pertain to the impact the acquisition will ha\ e on critical traffic lanes where ISC

currently is provided single line serv ice which will become joint line service- .

Itulian.i H.irhur Rcll ccnnccls to all major Irimk linos in thc ChiLaeo area ami cilhcr orieinatcs or delivers Mj;nilii.,inl \oliiiiies of ma! ami linisheii ^leel Irdin nr In llie Indi.m.i H.irhoi Works It is the Jelivennj; or Olluiiiatinj: e.irner tor all ssork in proeress inventories nioseJ \ia C'onr.iil hetween IHW a ui the joint ventures. C"R serves the |oinl ventures direetlv.

All r.iil tr.ilTie oriyin.iliiii; Irom or ilestmed lo the Imliana Harbor Works is hamlied hy either the Intlian.i Harhoi Belt i>i Miiiii. Joliet aiul liaslern KaiUv.iv as previouslv noted I rom Inland's st.mdpoini. these earners serve as svviieh earners Hv siniile line .md |oint line serviee. Inl.md refers t(> the nun.!'"-r ol trunk-

and the impact on the operations of the IHB. Also, ISC supports the conditions

which I he National Industrial Transportation League is recommending be

imptvsed upon the joint acquisition of CR, if approved.

Single Line to joint Line Service

ISC's concern on steel shipments to its customers relates to service for its

two largest steel movements, i.e., from the joint ventures to Kenton, Ohio and to

lndianapt)lis, Indiana.

Currently, both of these moves are CR direct, and ISC has been working

with CR to establish regularlv-scheduled train service to customers at these

destinations. This direct regular and reliable service has permitted ISC to

demonstrate to its customers at Kenton, Ohio that the volumes of steel shipped

via rail can be substantially increased without sacrificing the reliability of

deliveries or increasing weather-related transit damage to the steel^.

Consequentiv, significant volumes have been shifted from truck to rail.

For example, Inland could potentially ship over 350 carloads of steel to Kenton

per month, on average. In September 1996, before the inception of improv ed

service, less than 160 cars of steel per month, on average, were mov ing to

Kenton. In September 1997, with the improved service, the number of cars has

risen to more than 242. ISC believes that the rail share of this traffic can continue

to grow, given the current service. 1 he same tvpc of arrangements are being

worked out for the traffic going to Indianapolis. This has the potential of shifting

the railcar equivalent of 70 cars per month from truck to rail.

Post-acquisition, lK>vvever, both of these movements wi l l become joint

liiv. e.uriers mvolved m movement

Coki rolled and eoated llmshed sieel are shipped to these eustomers. who ineorpoiate the steel intci proiluels lhal reijuiie perleet surlaee quaiilv I he longer llic sieel is in transit, the highei hecomes the risk lhal eondens.ilion inside the r.iilroad eovered eoil ear will loim and d.image the surt.u e qualilv of the steel.

NS/CSXT movements. The STB and its oredecessor, the ICC, have frequently

recognized that the probability of increased transit time and decreased reliability

versus single line service is significant. If ISC were to experience a deterioration

of rail service levels to either of these destinations, it would be forced in the case

of Kenton to reduce rail shipments and actually convert rail shipments to truck,

at additional expense. At Indianapolis, the effort to shift volume from truck to

rail could not be sustained.

Inland has requested that both CSXT and NS commit to enter into an

agreement to continue to provide single line or run-through service from NCW

to Kenton and Indianapolis and that the carriers provide detailed operating plans

which would insure the continuation of the type of service necessary to continue

the conversion of truck traffic to rail. Neither applicant has responded with any

commitment other than agreeing to discuss these moves after the acquisition.

Indiana Harbor Belt Railroad Operation

As the IHB's largest shipper, ISC is keenlv interested in ownership and

operational changes regarding this railroad. The "Agreement"^ relating to the

IHB which vvas filed by NS and CSXT raises serious concerns about the ability of

IHB management to operate independently and to utilize assets to provide

reliable service to its shippers if NS and CSXT become the majority equity

owners. IS' has been informed that detailed plans concerning IHB operations

vvill not be available until well after filing deadlines in this proceeding have

passed. As a result, ISC cannot evaluate future IHB service, which is critical to

the operations of IHW.

•'.Agreement Relating lo the Contraelu.il Rights and Ownership Interest ol ConsoIidated Rail Corporali>)n with respeet lo the Indiana Harh*ir Belt Railroad Company", l-inanee DiH.kct No. . . . 88, Volume 8C of 8, i:\hibit 2. pp (W. -714.

To ISC's knowledge, the "Agreement" referred to above is the only specific

commitment relating to thc IHB that exists. Among other things, this

"Agreement" specifi' allv allocates facilities such as the Gibson Yard, which is an

es.sential facilitv for ISC's traffic, to equal usage by CSXT and NS. While the

definitio.t of Gibson Yard in the "Agreement" is not specific, the Gibson Yard in

general includes facilities which are essential to the interchange of rail traffic to

and from the IHW. Disruptions to the large amounts of IHW traffic routed

through the Gibson Yard resulting from NS's and CSXT's as.sertion of their

respective rights pursuant to the "Agreement" would pose a serious threat to

operations at IHW. This threat could result in the shutdown of production

facilities and would evenidaily require that more inventory be carried to

compensate for erratic service. Both would be very costly propositions for steel

mill operations.

The "Agreement" also provides the mechanism to rotate the General

Manager between the CSXT and NS every year if the other carrier is dissatisfied

vvith IHB management. This possibility alone, of "yo-yo" IHB management,

poses a verv real threat to consistent and reliable service.

Summary

While ISC takes no position on the overall merit of the transaction

proposed in this proceeding, it respectfully requests that, if the traasaction is

approved, approval be conditioned upon the following requirements:

1. NS and CSXT shall agree to provide single line or run-through

service from NCW to ISC customers in Kenton, Ohio and

Indianapolis, Indiana, along with detailed operating plans

which ensure the continuation of the service that is currently

being provided from NCW to Kenton, and which replicates

the service planned for the NCW to the Indianapolis lane.

Service shall be provided at rates specified in the current

single line contract with CR. As the carrier directly servicing

the ISC joint ventures, NS shall manage the single line or run-

through service.

2. NS shall be granted trackage rights to directly service ISC's

IHW, at trackage fee levels which shall allow NS to effectively

compete for traffic originating from and destined to IHW.

3. The full set of conditions advocated by The National

Industrial Transportation League in its filing to the STB in this

proceeding shall be adopted as condit.ons to the joint

acquisition of CR by NS and CSXT.

Respectfully submitted,

Edward C. McCarthy J Assistant General Counsel Law Department INLAND STEEL COMl^ANY 30 West Mon«-oe St. Chicago, IL 60603 312-899-3148

October 21, 1997

Certificate of Serv ice

I hereby < ertify that I have on this 21st day of October, 1997, caused to be

served copies of the foregoing Comments and Request for Conditions on all

parties of record in this proceeding, by first-class mail/postage prepaid, or by

hand delivery

Susan B. Urban

STB FD 33388 10-21-97 D 182942 2/5 - Surface Transportation Board

Documents

Transcript of STB FD 33388 10-21-97 D 182942 2/5 - Surface Transportation Board