Shippers Want Review of CN Line Sales

Two shipper groups have objected to the sale of Midwest branch and secondary mainlines by Canadian National to short line holding company Watco.

The Wisconsin Central Group and the Lake States Shippers Association have asked the U.S. Surface Transportation Board to deem the sale of 650 miles of track in Wisconsin and the Upper Peninsula of Michigan as a “significant” transaction that would require board review.

CN and Watco contend that the sale is exempt from STB review.

The shippers said they are taking no position on the merits of the CN-Watco deal, but said conditions attached to CN’s 2001 acquisition of Wisconsin Central could be applied to Watco.

Another objection by the shippers is that CN and Watco did not consult with them during the sale negotiations.

“The proposed transaction is ‘significant’ for the broad Great Lakes Forests Region and its communities and, in the present context is significant for the nation’s general system of railroad transportation as a whole. It is not a private matter to be resolved between and among private railroads behind closed doors,” wrote John Duncan Varda, the lawyer for Wisconsin Central Group and Lake States Shippers Association, in an STB filing.

Several other parties also sent letters to the STB asking regulators to review the CN-Watco transaction.

The letters caught some railroad industry observes off guard.

“I’m surprised that this is the least bit contentious. Sales of short line properties are always negotiated in private,” William Schauer, a rail consultant and former Wisconsin Central official, told Trains magazine.

Schauer believes the transaction will be good for shippers because they will receive better service and more attention from Watco than they would get from CN.

One industry observer believes the reaction to the line sale is in part a lingering legacy of the 2001 CN acquisition of Wisconsin Central.

In particular, shippers may still have grievances about the rapid operational changes CN made after buying WC.

Analyst Anthony B. Hatch told Trains that the way the changes were made upset many shippers and led to Wisconsin becoming a hotbed of anti-railroad sentiment.

Hatch believes that having Watco own the affected rail lines will be good for shippers because short lines hustle for local business.

“You’d think this would be a very positive thing,” he said. “For those who want more service up there, having a short line work hard for two loads a week is a good thing. Watco has a good reputation with customers.”

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