CP-KCS: Illinois communities rebuff CP mitigation offer; railroad seeks 'dialogue rooted in facts and respect'
6/23/2022
By Grace Renderman, Associate Editor
Canadian Pacific and Kansas City Southern Railway continue to work toward completing what would be the biggest-ever merger in North America’s rail industry in the form of Canadian Pacific Kansas City (CPKC).
CP strategists knew there could be bumps in the road — at the very least, that there would be hands and voices raised from other interested parties, such as communities that line the merging rail routes. They knew they’d need to factor in communities’ concerns. And they believe they’ve done and/or are willing to do that.
A coalition of Chicago-area communities disagrees.
Formed “in support of protecting the quality of life for our children, families, businesses and property owners," the Coalition to Stop CPKC hopes either to receive more mitigation funding than CP has offered to date, or — as the group’s name suggests — convince regulators to put the kibosh on the proposed combination.
The coalition recently rejected a mitigation offer from CP and, at least for now, plans to “do everything we can to prevent this merger from occurring in order to do what is best for each of our communities,” as a statement reads on the organization’s website.
“No community in the coalition has an agreement for mitigation projects or costs,” coalition spokesperson Judy Pardonnet said in a June 21 email to RailPrime. “There has been a single offer that was a fraction of the necessary safety enhancements for the eight communities and DuPage County.”
Wanted: $9.5 billion
Under the proposed CP-KCS transaction, which was announced in March 2021, CP would acquire KCS stock in a cash transaction. The new entity CPKC — which would be the smallest of the six Class Is — would employ nearly 20,000 people and generate $8.7 billion in annual revenue. The railroad would be headquartered in Calgary, Alberta, and manage a 20,000-mile network in Canada, Mexico and the United States. CP and KCS filed a merger application with the Surface Transportation Board (STB) in October 2021.
CP-KCS is the first agreed-upon Class I merger pact since 1999, when Burlington Northern Santa Fe Corp. and CN sought to combine and form North American Railways Inc. The deal was called off in 2001 after the STB implemented more stringent merger rules. Between 2014 and 2016, CP also launched unsuccessful attempts to force mergers with Norfolk Southern Railway and CSX.
Chicago serves as one of CP’s largest intermodal freight hubs. While KCS does not currently operate in the Chicago area, the merger would introduce freight-traffic increases, according to CP’s 4,342-page merger application filed with the STB. Along the route that runs through these communities, for example, seven more trains would travel on the tracks in the first year, with additional trains projected in subsequent years. The average length of these trains is currently about 10,000 feet, according to the merger application.
The biggest CP-KCS change to the Chicago area would come in the form of new single-line routing options that allow shippers to bypass Chicago entirely, according to the merger application. The new options would utilize CP’s north-south route located 140 miles west of Chicago, which connects western Canada with Kansas City, Missouri.
In the merger filing, CP and KCS officials state the CP Bensenville intermodal terminal would experience a 213% increase in rail cars processed by the end of the third year following the merger. The terminal would process about 112 more cars daily post-transaction — about 10% of its existing volume.
CP had already planned to transform and expand the Bensenville yard independent of the proposed merger, according to the merger application. A settlement with the Illinois Tollway would allow the relocation of an embankment carrying a Union Pacific Railroad line across the center of the yard. During the project, the yard will be supported by the nearby Schiller Park intermodal terminal and other CP-owned facilities. Located five miles east of Bensenville, Schiller Park would experience a projected 2,440% increase in rail cars processed by the end of the third year following the merger, CP-KCS officials say in the merger application.
The Coalition to Stop CPKC was formed in late 2021 by eight municipalities in northeast Illinois, just outside of Chicago: DuPage County; the cities of Elgin and Wood Dale; and the villages of Bartlett, Bensenville, Hanover Park, Roselle and Schaumburg. The coalition is requesting about $9.5 billion from CP and KCS to mitigate the impact they claim the merger would have on their communities — environmental degradation, noise, delays to passenger-rail service, increased traffic along roads due to blocked grade crossings, among other concerns.
The money would fund crossing upgrades, new bridges, interchanges and overpasses, impact vibration dampeners and more projects, according to letters sent to the STB, to serve the more than 1 million people living in the eight communities. Each community submitted a letter detailing its own concerns and issues regarding the merger.
Claims unsubstantiated, CP says
In March, a CP-penned op-ed was published in the Daily Herald, a newspaper covering the northwest Chicago suburbs where the coalition’s communities are located, that addresses concerns residents have, said CP spokesperson Andy Cummings in an email.
In the piece, CP officials claim the merger would provide economic and environmental benefits to the communities involved — more efficient transportation options for the economy; fewer trucks on congested public highways in the Chicago area; lower emissions; and improved economic growth.
Though the Class I acknowledges concerns regarding increases in freight-rail traffic, claims of “immeasurable, collective harm” are unsubstantiated, wrote CP officials.
CP has made “a significant proposal to the coalition and CP has worked with other communities to address concerns,” CP spokesperson Andy Cummings said. Photos: CPR.CA, KCSOUTHERN.COM“Chicagoland is the largest freight rail hub on the continent, and for decades, suburbs have thrived beside rail lines that handle higher numbers of freight and passenger trains,” the op-ed states. “The railroad and the communities matured together and our railroaders lived — and still live — in these communities.”
The changes proposed in the merger application don’t represent a radical shift in neither freight- nor passenger-rail service along the route, CP officials wrote. Forty-one trains would operate on the communities’ route based on today’s numbers, with three of them being freight trains and the other 38 being Metra passenger trains. Before the pandemic, the Milwaukee District West route handled 58 trains, and in 2007, it handled that plus an additional three freight trains. The number of daily trains running through the community has lessened since the 1980s, CP officials said.
“As these numbers demonstrate, the additional traffic that would come from the merger falls squarely within the line's historic use. And through most communities, the freight trains will operate nonstop at normal track speeds, passing through nearly all road crossings in about 3 minutes or less. That adds up to about 24 minutes per day, or one minute per hour, of added gate-down times,” they wrote in the op-ed.
The extra minutes would be an “exchange” for the extra benefits that would accompany the merger if it were to be approved, officials wrote.
“CP continues to listen to community concerns and talk to community leaders about reasonable solutions. We firmly believe this collaborative process will yield the best possible outcome and we look forward to an ongoing dialogue rooted in facts and respect,” CP officials wrote.
Mitigating potential environmental effects
Community officials say they want the process to be more collaborative.
The Fox River, which runs through the heart of the city of Elgin, is 150 feet away from the existing railroad tracks. Not only are residents concerned about how an increase in freight traffic might affect the river’s ecosystem, they are also worried about how a potential derailment would affect the river because it’s the main drinking water source for many residents, says Elgin Mayor Dave Kaptain. Elgin is also a roosting area for the American bald eagle, which often nests within 100 feet of the tracks at some points, he says.
The city is asking the would-be merged railroads for $5 billion in mitigation costs — more than half of the overall total requested by the coalition, even though the city only contained little more than 114,000 people as of the 2020 census, or just 10% of the 1 million people living in the eight communities.
That cost is so high because of the potential need to move Metra train stations either below the rail line or completely underground to accommodate the expected rise in rail line traffic, Kaptain says. Plans drawn up by city engineers suggest the line be elevated in some segments, while the commuter rail stations would be below them or entirely underground. The city suffers from space restrictions due to the river, he said.
Metra: A combined CP-KCS would cause significant delays along commuter-rail routes
By Grace Renderman, Associate EditorChicago’s commuter-rail system Metra claims its operations would be heavily impacted by the merger of Canadian Pacific and Kansas City Southern Railway.
In an analysis filed June 9 with the Surface Transportation Board, Metra officials say increased freight traffic post-merger would increase delays per 100 train miles by nearly 1,200% on impacted lines. In Metra’s March 15 filing, the commuter-rail system estimated a 400% increase in delays per 100 train miles.
One impacted line is Milwaukee District West, which serves the communities of the Coalition to Stop CPKC, a group of eight Chicago-area towns that oppose the merger, Metra officials wrote.
In the merger application, CP-KCS did not factor into their proposal the potential impacts on passenger rail in the region, Metra officials claim. The Class Is underestimated train counts between Milwaukee and Chicago by at least 6.28 trains in their original application filing, which was ordered to be amended in April following discovery of discrepancies in the offered data, Metra officials wrote.
An updated merger application was filed May 13, but the update still did not account for passenger rail, Metra officials wrote in the June 9 filing.
“Nothing in the new information provided by [CP-KCS] changes Metra’s assessment that the transaction will harm commuter rail service in the Chicago region and that [CP-KCS] have failed to adequately consider this harm,” Metra officials wrote.
While Metra owns the tracks on which CP trains operate, CP handles dispatching operations. Metra asked the STB to transfer those dispatching rights to Metra in the event the merger is approved, according to the filing.
CP-KCS also used outdated modeling systems to represent their traffic projections, Metra officials wrote. Although CP-KCS had the option of using the more modern Rail Traffic Controller (RTC) modeling system to create data projections, they did not do so, Metra officials wrote. RTC is a simulation software package that mimics train dispatching using elements similar to human dispatching.
Using RTC software, Metra remodeled the data projections using figures from the amended merger application, where it found the projected 1,200% increase in delays on multiple Metra lines, according to the STB filing. Even now, Metra struggles with capacity issues on the western reaches of its operations due to overflow freight traffic from the CP-operated Marquette Subdivision in eastern Iowa, so the merger’s associated freight-traffic increases would make congestion even worse, Metra officials wrote.
CP plans to reply to Metra's comments in a filing with the STB in July, CP spokesperson Andy Cummings said in a June 21 email.
“That filing will outline how Metra's method and analysis of the proposed CPKC train traffic is flawed and their sensational conclusions about increased delays are just plain wrong,” Cummings said.
In the meantime, CP officials will continue discussions with Metra officials on what the merger would mean for the Chicago area’s commuter-rail systems, he said.
“This is like working on an island,” Kaptain said. “Costs were skyrocketing because of just the labor costs. … This would be a really tricky thing to try to put [to] an estimate. Some people look at this and say this will be a really monumental project.”
Elgin officials also are concerned about the impact more freight-rail traffic could have on the city’s downtown businesses. Since the completion of Interstate 90 through the north end of the community in the late 1970s, only one out of 50 travelers on the interstate stops in Elgin, Kaptain said. With traffic worsening, the city could be even less attractive to tourists.
“One of the big complaints is the human impact that this will have on the quality of life,” Kaptain added. “The issue that most people have is the noise from train horns at the crossings.”
While Kaptain claims Elgin is expected to receive 11 trains daily (up from three trains, the current daily count) following the merger, the city would receive an incremental 7.1 trains daily, handling primarily intermodal and automotive loads, according to the merger application. The existing double track would neither cause concern for the local rail infrastructure’s ability to handle more traffic, nor would it impact Metra service, according to the application. The Elgin Subdivision is “underutilized,” railroad officials wrote.
“At Chicago, the impact of the transaction will be minimal. Because KCS does not serve Chicago, implementing the transaction will not require any integration of operations there. Instead, the only effects will arise from changes in traffic volumes,” railroad officials wrote in the application. “The combined CP/KCS system will benefit Chicago-area shippers with new intermodal services connecting Chicago with Texas and Mexico. These trains will route directly in and out of CP’s terminals (Bensenville and Schiller Park) on the northwest edge of Chicago.”
The merger application identifies 35 segments of track across the national network where the projected increase in freight-rail traffic would exceed the STB’s Office of Environmental Analysis. One of those nonattainment segments is in Elgin. Attainment areas identified by the U.S. Environmental Protection Agency are those where the region’s air quality meets or exceeds the national standard, while nonattainment areas don’t meet the national standard.
“We recognize that we will be increasing the number of trains that operate through certain ... communities (while naturally reducing highway traffic and train traffic moving through communities on our competitors’ lines). We will work hard to be a good neighbor and mitigate potential adverse community impacts, and we will work closely with the Board’s Office of Environmental [Analysis] to ensure that these issues are carefully and appropriately analyzed,” the merger application states.
A ‘picked-on’ community
If enacted, the merger would be a “kick in the gut” to the village of Bensenville, village president Frank DeSimone says. His community is home to the Bensenville Yard, which is located next to O’Hare International Airport and is CP’s largest intermodal terminal. The village is asking for mitigation money to build new infrastructure, police and fire stations, and a laundry list of other requests after city planners evaluated the impact on Bensenville-area traffic based on the railroads’ STB filings.
In comments filed with the STB, DeSimone claims a 25% increase in the number of rail cars handled at the Bensenville Yard over three years; a 140% increase in the number of cars coming through the community; and a 235% increase in the number of trains traveling daily through the village. According to the merger application, car volumes at the Bensenville yard would increase 213% by the end of the third year following the merger.
In total, the village is asking for $265 million, including $125 million to build a new interchange, $75 million to build an overpass on Bensenville’s primary road and $2 million for a quad-gate grade crossing.
Bensenville representatives have discussed merger mitigation strategies and concessions with officials from CP and KCS, DeSimone says.
“We told them our feelings on [the merger],” DeSimone said. “They said, ‘OK, we understand your feelings.’ They look like they’re going to still try to move forward, and we’re going to try and save our town. [There will be] an increase of about 300 trucks per day coming out of that yard, right on the streets. … Our police station backs up to that yard. It's just a two-lane road right now. I think traffic is going to be ridiculous. ... The impact will be detrimental, especially [to] our residents.”
While the merger would bring more economic opportunity to the region, DeSimone says he believes the increase in rail (and road) traffic would “kill our downtown business.”
With the projected increase in freight traffic, and other area developments such as the 2009 O’Hare airport expansion, DeSimone says his community has been “picked on.” In 2009, the village settled with the city of Chicago for $16 million in mitigation costs in exchange for village property to expand the airport.
“[CP and KCS] need to come back to the table and think about an alternative way to get this done, thinking about the little people around them,” DeSimone says. “I get it. It's a big multibillion-dollar merger. But … I'm going to stick up for what our residents want.”
An offer refused
CP made an offer to the coalition in late March to provide a $10 million lump sum payment to the coalition to help mitigate some of the impacts. The coalition rejected the offer.
“Considering that the estimated total cost of the mitigation conditions the Coalition believes will be required to attempt to protect their communities from the harm CPKC will inflict on them post-merger is over $9 billion, CP's offer to pay the coalition members a lump sum of merely $10 million is clearly not a serious attempt to reach a mutually acceptable settlement,” wrote Carie Anne Ergo, chairperson of the coalition and a village administrator of Itasca, in a reply filed with the STB May 24, directed to CP.
CP officials questioned the coalition’s own level of seriousness.
"That $9 billion would be double the entire CREATE program involving freight and commuter rail lines carrying more than 1,300 freight and passenger trains across the Chicago region,” CP’s Cummings said in a June 21 email to RailPrime. “This is not the position of a party interested in a serious exploration of the public-interest implications of the CP-KCS combination.”
CP has made “a significant proposal to the coalition and CP has worked with other communities to address concerns,” Cummings said, including working with the village of Hampshire, which has agreed to a deal with CP that would establish a quiet zone along a stretch of tracks through a $625,000 project once the merger is complete. The village also plans to close at least one grade crossing to comply with quiet-zone regulations.
Meanwhile, Metra, the Chicago commuter-rail service that also has publicly opposed the merger, recently submitted comments with the STB detailing a projected increase of up to 1,200% in commuter-rail service delays on the Milwaukee District West and North lines that serve the communities in the coalition (see sidebar).
CP will respond to Metra’s claims in a filing with the STB next month, Cummings said.
The CP-KCS merger application is required to undergo a 16-month review process that will conclude by the end of May 2023. Final briefs in the review process are due July 1. A public hearing and final decision will be issued within 90 days following the close of the evidentiary period.
In short: There will be many more comments filed and statements made regarding the CP-KCS merger in the next year or so. Stay tuned.
