CSX Acquisition of Pan Am Railways

Gents, I read all these shortcomings in Pan Am's physical plant and wonder how this broken down road (a major interchange- Keag - accessed over Class 1!!!) can be made over to provide viable railroad transportation.

But I like to think "they ain't dumb at 500 Water", and nobody took Chessie's Fancy Feast away from her and said you don't get it back until you buy that pile of scrap and junk.

But I would think for any shipper in Northern New England, including maritime companies choosing to call at Saint John with cargo destined to the US, the thought of improved rail service, even if five years in the future, should be encouraging.

The St. Vincent Hospital tunnel in Worcester was built under contemporary requirements for new and re-built railroad overhead structures, so it is fully cleared. The relatively modern tunnel to the north under Lincoln Square is restricted to 19'6".

In search of the forest for the trees, as 2022 approaches, and with a nod to a couple of riffs from the Broadway musical Hamilton, my continued take on CSX's acquisition of PAR/.5 PAS is that without being "in the room where it happens", "we don't know what we don't know".

It's only the first inning of a game that will be played over at least 10 years. CSX had to buy 3 easily separate and distinct sections of the railroad lock, stock, and barrel. There's as much indication that this strategic move is defensive as it is offensive, ie., as much to keep a 3rd Class 1 out of Boston, et. al and make way for passenger rail and transit-oriented growth, as it is to become the 3rd Class 1 in Saint John, et. al.

Absent protecting their existing franchise from the Canadians and by accommodating re-structuring in the face of strategic pressure on freight rail infrastructure, the benefits of CSX's move at a cost exceeding a "bargain" have limitation as marginal (ie., only the net difference of handling traffic alternatively over existing gateways, ports, or lanes) as long as CSX maintained a friendly connection post-Mellon; short-haul; and otherwise necessarily requiring CSX ownership &/or operation of the entire railroad unclear.

Additionally, CSX must play within the larger economic rules of railroading and the New England transportation market when it comes to ports, premium service markets and everything in between no matter what they bring to the table.. And, from my own experience, I take with a grain of salt the public communication around this, which to date has had some measure of mixed messaging,. Lastly, it would not be out of the range of "post-PSR" behavior for CSX to take control of this generational opportunity to invest in, possibly hedge, and ultimately re-structure, including possible line sales/leasing, to create their best strategic position within New England's rail network.

A couple of recent cautionary telltales from this thread about the nature of CSX's play include discussion of the prospects around CN in that unless CSX cooperatively works with CN and can accomplish wholesale effective changes as to how they interchange on the eastern sides of their networks, cherry-picking traffic simply reduces traffic on an alternate existing agreed-upon gateway with marginal results, or, if done aggressively, also risks a CN response with broader implications. The reported rumor of CSX/MBTA talks, as another example, would likely be in the context of solutions to on-going Boston metropolitan, passenger rail, and transit-oriented development growth strategic pressure. In this particular case I'd put my money on Readville for Lowell yard horse trading to ultimately meet the "next up in line" re-development pressure and accommodate traffic, similar in value to CSX's PAR Maine forest products market, moved over to new, existing and/or re-purposed Lowell Line corridor facilities. GFI's proposed Wilmington Woburn Intermodal/New England Transrail project and concept, for example, would be just the kind of ticket for CSX to use the "north side" to move, consolidate and keep control of valuable "south side" traffic.

So, while I'm certainly finding the game important and chatter surrounding it interesting and entertaining, at such an early point in the game with mixed scouting on the fundamentals, I think best not to get too far ahead and let the game unfold instead. While I won't yet completely exclude many possibilities, only time will tell of CSX's root motivation and its influence on their behavior and the long-term outcome, including the mix of offense v. defense; growth v. retention/re-structuring; and, north vs. south of Portland including B&A v. PAS.

roberttosh wrote: ↑Wed Dec 29, 2021 11:17 pm A bigger issue is the previously mentioned I-495 off-ramp up in in the Lawrence/North Andover area, where there is no easy fix.

Lots of talk lately about MBTA Commuter Rail electrification. This will of course require even more clearance but then it may also provide the money to do it. We will just have to wait and see I guess.

That is a real tough spot to increase vertical clearances as they will either need to spend a crap load of money redesigning and raising the elevated 495 on/off-ramps, if that is even possible, or they have to undercut, where there is an existing road grade crossing just to the East and a bridge over a stream just to the West. Regardless, I don't think potential DS service is what's driving this transaction, much more to do with Forest and Energy products to and from ME, NH and NB.

There are a lot of drivers, but probably the biggest is that at the end of the day the opportunity to buy this property comes up once a generation... maybe never again.

Agreed, this is their only chance to expand their East Coast/I-95 corridor 400 miles to the North (more like 600 miles if you consider MNR access as far North as Madawaska) and at the same time to completely outflank the NS both in the Northeast and Southeast.

On one level, I'll buy the simple notion of what an extension of CSX's network means (although into a region with the least productive rail mileage) competitively, but, on a more-nuanced basis if this isn't about CSX protecting against being outflanked by CN or CP, it doesn't appear NS is behaving like they're being outflanked. Instead, I see that they might understand the defensive nature of CSX's move (and how they benefit from that) and/or the limitations on CSX in that if not careful, it could become a CP/CN/NS vs. CSX war up north and into the Southeast.

One of the fascinating elements of CSX's play is their CEO Foote with his background as CN's marketing guy, so, obviously he knows the markets up north and, to some degree, CN and CP's strategic outlook. But, he does appear to be more of a "duopolist", less focused upon beating another railroad up. So, in that vein, I question, and it will be interesting to see, how aggressive CSX will be visa vi the other 3 Class 1 players. If he plays hard he might get close to the marrow of CN and CP's eastern franchises risking a level of response reflecting that reality. Instead, another scenario might be that with his firewall up against the Canadians, protecting what is the most to lose amongst the players with this generational opportunity, he'll keep his elbows down when it comes to the other Class 1's.

IMO that is a good analysis. Only time will tell what their play will be.

Regarding NS, I simply don't think they care. The evidence to me seems fairly clear:

Down to one train pair on the Tier
Continued "rightsizing" on the system due to PSR
Inability to or unwilling to help alleviate the PAS crew shortage to move their traffic, which resulted in the reduction of service
Inability or unwilling to maintain the Patriot Corridor to Class 3 which it was at the outset and was the stated goal
Lack of interest in owning PAS outright
Apathetic stance on selling PAR to CSXT as long as their key pair keep running

Sure there are others.

As we close out this "annus horribilis", I must wonder if the acquisition by Chessie of the several Pan Am properties, WILL result, after a reasonable passage of time, in more viable railroad transportation than at present.

I cannot reasonably expect to be around to observe if such will be the case, so I'm wondering what the learned members (no sarcasm whatever) participating here hold such expectation will come to pass.

There is no doubt whatsoever that CSX will flip anything that they can price as a local move, which is a pretty good chunk of business up in Irving territory. There is also no doubt that they will go hard after competitive business, such as the big Butane move to TX, or anything going to jointly served NS/CSX locations, such as shared asset, shortlines or other class ones like the FEC. The question is how hard do they push for transload business or development of new facilities where they can really crush the competition. A perfect example would be the big Irving saw mill at St Leonard, NB. If CSX really wanted to go for the throat, they could very easily use the transload right across the border at Van Buren to completely cut CN out of the equation on anything going to CSX points. In the Bangor area, they could try to develop an LPG facility which would seriously eat into CP's market share in that area. They could also work closely with the NBSR to transload CN Maritime business at SJ, again, especially if it's going to or from CSX points. The big problem that both CN and CP face, is that at the end of the day, CSX will in most cases have access to both the origin and destination areas on Maritime and Northern Maine business. That is a huge advantage that really allows CSX to control their own destiny and it's really just a matter of how aggressive they want to get. CN and especially CP should be pretty worried at this point.

Further to the strategic chess game commentary, I'll throw this out (and apologies if this has already been posited, but I've not seen this said outright): CP's acquisition of CMQ itself likely was a factor in CSX's interest in acquiring PAR. Consider that CP retreated from the region in the mid-90s, indicating they had no hopes for the region's future (and given there is less traffic on the Moosehead now than in the 90s, that thinking was certainly understandable). CP had the opportunity to buy back into the region (at a fire-sale price, thank you) in 2013 and showed no interest. Granted, CP was under EHH control at the time, and I can't imagine he would have entertained such a move. And then, six years later, CP comes in and pays a big premium for CMQ that, while by all appearances was very well managed and stable, had not appreciably increased traffic over MMA days (and crude was now problematic). CP's audacious move raised a lot of "what do they know that we don't know?" flags among "strategerists", which in turn must have prompted a deep dive into the potential of Saint John's industrial base and PAR's access to NB and the Irving roads.

Three 16Rs operating between Buckland and 402, based on posts within the last hour to one of the PAR groups. Shippers must be loving this.

I'm also guessing that CSX must have its' eye on CBR heading to Irving at SJ. With nothing really moving through Maine anymore, CBR has sort of become an afterthought on this board, though in reality, CN still moves substantial volumes in Manifest service over the top. Before the Lac Megantic tragedy, CSX handled significant CBR volumes in conjunction with BNSF and Pan Am, so going forward, with better track infrastructure and more competitive pricing (2 line vs 3 line), there is no reason to think that they cannot recapture some of this business.

Cowford wrote: ↑Fri Dec 31, 2021 11:48 am Consider that CP retreated from the region in the mid-90s, indicating they had no hopes for the region's future (and given there is less traffic on the Moosehead now than in the 90s, that thinking was certainly understandable).

One wonders whether CP regrets selling the old Canadian Atlantic Railway at the end of 1994. With proper marketing, and service especially to big customers such as Irving, other lumber, gas and steamship lines, the line could have become profitable especially when leveraging the rest of the CP network to the west. If the entire Montreal to Saint John CAR was a part of CP today, how much of an influence would that be on CSX or any other interested entity in acquiring Pan Am?

roberttosh wrote: ↑Fri Dec 31, 2021 1:07 pm I'm also guessing that CSX must have its' eye on CBR heading to Irving at SJ. With nothing really moving through Maine anymore, CBR has sort of become an afterthought on this board, though in reality, CN still moves substantial volumes in Manifest service over the top. Before the Lac Megantic tragedy, CSX handled significant CBR volumes in conjunction with BNSF and Pan Am, so going forward, with better track infrastructure and more competitive pricing (2 line vs 3 line), there is no reason to think that they cannot recapture some of this business.

Don't forget having a properly trained Fire Department that won't bleed the air off and a train crew that secures enough hand brakes LOL