U.S. EPA Sues NS over East Palestine Derailment

The federal government is suing Norfolk Southern over the Feb. 3 derailment at East Palestine.

The lawsuit was filed on behalf of the U.S. Environmental Protection agency by the U.S. Department of Justice in the U.S. District Court for the Northern District  of Ohio.

The suit alleges that NS violated the Clean Water Act. It is similar to a lawsuit filed against NS by the State of Ohio.

U.S. EPA is seeking to force NS to pay the full costs of the environmental cleanup and claims the railroad unlawfully polluted waterways.

The carrier would be subject to penalties of $64,618 per day per violation of federal law and of $55,808 per day or $2,232 per barrel of oil or unit of hazardous substance for discharge of oil or hazardous substances into waterways.

Another objective of the lawsuit is to obtain an order to NS “to remedy, mitigate, and offset the harm to public health and the environment” caused by those violations.

In a related development, Ohio Attorney General Dave Yost said NS has agreed to hire Ohio companies as part of the cleanup operation in East Palestine.

Yost said that agreement will not affect the state’s lawsuit against NS stemming from the derailment.

DOJ Favors Reciprocal Switching Rule

The U.S. Department of Justice has submitted a brief to the U.S. Surface Transportation Board that is largely in favor of the Board promulgating rules to allow reciprocal switching.

The STB will hold hearings on the matter on March 15-16. The proposed reciprocal switching rule has languished on the agency’s agenda since 2016 but changes in the Board’s membership has revived interest in the issue.

The STB is considering allowing certain shippers with access to just one railroad to seek a reciprocal switching agreement with another railroad that is nearby.

The railroading providing direct service to the shipper would be required to interchange cars to the nearby railroad for a fee to be set by regulators.

The DOJ brief described the proposed STB rule as “a well-tailored first step” toward increasing competition.

The brief said the rule would increase the likelihood of direct competition, is not overly burdensome, and would minimize the need for complex rate regulation.

It noted that Canadian National and Canadian Pacific are already familiar with reciprocal switching, which is practiced in Canada and known as interswitching.

Amtrak Pays $2M in Discrimination Claims

The U.S. Department of Justice said this week that Amtrak has paid more than $2 million to more than 1,500 people regarding disability discrimination claims.

The payments were part of a settlement agreement reached last month to resolve a DOJ determination that Amtrak had failed to bring all of its stations into compliance with Americans with Disabilities Act standards.

The claims stemmed from instances in which Amtrak passengers were traveling or attempting to travel by train.

In a news release, DOT said it has been seeking for the past year to identify those who may have suffered discrimination.

Amtrak agreed as part of the settlement to give priority to eliminating barriers to access to its trains at its stations and to train on-board staff on ADA requirements and how to handle ADA complaints.

The settlement gives Amtrak a nine year time frame in which to complete designs to make at least 135 existing stations accessible. There are 90 stations at which construction is underway and 45 at which construction has yet to commence.

Amtrak said in a statement that it has invested more than $489 million in 204 stations in various stages of work to bring them into compliance with ADA standards.

The passenger carrier said it plans to spend more than $143 million this year on accessibility planning and construction to more than 43 stations.

DOJ Raises Concerns About CSX-Pan Am Merger

The U.S. Department of Justice has recommended to the U.S. Surface Transportation Board that CSX be ordered to sell its stake in Pan Am Southern as a condition of its merger with Pan Am Railways.

CSX wants to acquire Pan Am, which owns half ownership of PAS with Norfolk Southern.

DOT said the acquisition of Pan Am by CSX raises competitive concerns because CSX would own its own route into New England and half-own the parallel PAS.

“The proposed transaction would give CSX both control over the operating entity on a competing line and a 50 percent stake in the track and physical infrastructure of that line,” DOJ said in a filing with the STB. “This arrangement is likely to diminish competition between CSX and PAS on these parallel routes,”

Pan Am Southern was created by the two railroads to provide NS with access to the Boston region via Ayer, Massachusetts.

It also operates a north-south route along the Connecticut River from Vermont to Connecticut.

However, CSX has proposed assuming Pan Am’s share of PAS while turning the latter over to a Genesee & Wyoming subsidiary, the Berkshire & Eastern, to be a neutral operator of the PAS routes.

“Additionally, the transaction may allow CSX to impair the ability of its remaining rival, NS, to effectively compete. Although NS owns, and will continue to own, the other 50 percent of the PAS line, CSX could potentially hamstring its rival through its stake in PAS and its control of the joint venture’s operating entity. Because certain joint venture customers will purchase service attributable to NS, CSX could undermine NS notwithstanding the joint venture by sabotaging this service and expecting to recapture traffic on its independent line.”

DOJ also raised concerns about reduced competition in the Knowledge Corridor along the Connecticut River from White River Junction, Vermont, through Massachusetts and Connecticut.

PAS uses its own trackage and trackage rights over G&W’s New England Central to reach White River Junction to interchange with Vermont Rail System.

“If the CSX-Pan Am transaction is consummated and B&E becomes the contract operator of the Knowledge Corridor PAS line, G&W subsidiaries will be both the contract operator of PAS and PAS’s primary competitor,” the DOJ wrote in its filing. “In effect, the proposed remedy reduces the numbers of competitors in the Knowledge Corridor from two to one.”

DOJ said it was “highly skeptical” that two G&W railroads — Berkshire & Eastern and New England Central — could compete with each other effectively on the north-south route.

“Ultimately, the easiest, cleanest, and least risky solution would be a structural remedy involving the sale of Pan Am’s stake in PAS to another party that could operate PAS,” the Justice Department said. “Structural remedies are strongly preferred in merger cases because they are clean and effective, and they avoid ongoing government entanglement in the market.”

Amtrak Settles Discrimination Complaint for $2.25M

Amtrak will pay $2.25 million to settle a complaint that it discriminated against disabled passengers by failing to accommodate those passengers at its stations.

As part of the settlement, the passenger carrier agreed to renovate dozens of stations over the next decade to accommodate people in wheelchairs or with limited mobility.

The case stemmed from a U.S. Justice Department investigation into claims dating from 2011, 2012, and 2013 that some stations violate the Americans with Disabilities Act.

Amtrak said it will complete improvements at 90 stations within the next decade and begin work at another 45.

U.S. Argues 4 Class 1 Railroads Bear Burden of Proof They Did Not Collude n Antitrust case

The U.S. Department of Justice is arguing in a court filing that Class I railroads bear the burden of proof in showing that their communications did not violate federal antitrust law.

The three railroads were sued by several major shippers over fuel surcharges that the carriers imposed in the early 2000s.

The lawsuit contends that CSX, Norfolk Southern, Union Pacific and BNSF engaged in illegal price fixing as early as 2003.

The carriers have countered that their discussions among themselves are protected by the

the Staggers Act, contended that carriers should not face antitrust action related to certain communications about prices.

The lawsuit is being heard in the U.S. District Court for the District of Columbia.

The suit is a consolidation of several suits that were amalgamated last February.

Agency Wants RR Conversations used in Court

Discussions among Class 1 railroads about fuel prices should not be excluded from being introduced during litigation involving alleged price fixing the U.S. Department of Justice argued recently in a court filing.

The agency filed a legal brief saying the broad application of law that the railroads are seeking the court to adopt “would exclude critical evidence of antitrust violations.”

The litigation, which dates to 2007, involved dozens of lawsuits filed against BNSF, CSX, Norfolk Southern and Union Pacific.

The lawsuits allege that the railroads coordinated the imposition of fuel surcharges and that conspiracy led to billions of dollars in profit.

The railroads have contended that an obscure federal law protects such conversations among carriers.

DOJ Opposes CP Voting Trust Arrangement

A powerful opponent has lined up in opposition of Canadian Pacific’s plan to acquire Norfolk Southern.

The U.S. Department of Justice on Friday told the U.S. Surface Transportation Board that CP’s proposed voting trust would compromise the independence of NS before the STB could finish its review of the proposed merger.

CP has proposed placing itself into control of a voting trust during the merger review process.

CP CEO E. Hunter Harrison and select members of his CP management team would then take over the management of NS.

“Canadian Pacific’s voting trust proposal would compromise Norfolk Southern’s independence and effectively combine the two railroads prior to completion of the STB’s review,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “That makes no sense. We urge the STB to preserve its ability to review the impact of the proposal on competition and consumers before Canadian Pacific starts scrambling the eggs.”

The Justice Department said the two railroads would have an economic incentives to align their business strategies before the merger has been reviewed and that those arrangements would be difficult to undo if the STB rules against the merger.

“The STB should reject the proposed voting trust structure because it risks altering the competitive landscape between the two railroads and indeed the entire rail system in a way that could not be reversed if the STB rejects the merger,” the Justice Department said in a filing with the STB.

“In reality . . . CP hopes to use Mr. Harrison as its proxy to implement the changes it desires at NS,” the Justice Department filing said.

Earlier this year, CP asked the STB to review whether a hypothetical trust structure would pass legal muster.

The STB has not said when it will rule on that request, but it has set an April 13 deadline for the submission of statements by interested parties.

Typically, a voting trust is put in place at the company to be acquired not at the company making the acquisition.

A CP spokesman expressed disappointment with the position of the Justice Department.

“Voting trusts have long been recognized by the STB, regulators and the courts as an effective means of insulating the carriers from unlawful common control during regulatory review,” said CP spokesman Martin Cej. “We strongly believe Mr. Harrison would be completely independent and clear from any influence at CP if he were to assume the role of CEO at NS.”