ICC Asked to Reconsider Rail Merger of Southern Pacific and Santa Fe Lines

A proposed merger of Southern Pacific Railroad and Santa Fe Railway would create “a more competitive and more cost-efficient rail system in the western United States” and would bring annual cost savings of nearly $295 million, the parent firm said in a petition asking the Interstate Commerce Commission to reconsider the combination.

The merger of Santa Fe Southern Pacific’s two rail subsidiaries was denied last July by the ICC in a 4-1 vote. Last month, the ICC asked the Chicago company to supply more details about events since the July decision, including agreements reached with competing railroads that had objected to the merger.

Rail analysts had predicted that the cost savings of the merger would be greatly reduced by the agreements with competitors, which allow them to use some Southern Pacific and Santa Fe track, among other things.

But in its petition, filed Thursday, Santa Fe Southern said savings would actually increase because of the agreements. Annual savings from the proposed merger earlier had been estimated by the company at $288 million, $7 million less than the new estimate.

The new cost-savings estimate is higher primarily because an agreement with Union Pacific allows Santa Fe Southern to use some UP tracks in Texas and Illinois, giving it a route from the El Paso area to the Dallas area that is 280 miles shorter than the present route and a route from Chicago to the Gulf of Mexico that is 200 miles shorter, said Robert E. Gehrt, a spokesman for Santa Fe Southern.

“We believe our current filing and the comprehensive agreements we have reached with Union Pacific, Denver & Rio Grande Western, Missouri-Kansas-Texas and Texas Mexican warrant a reopening of the case and a review by the commission of the changed circumstances and of the new evidence we are prepared to submit,” Santa Fe Southern Chairman John J. Schmidt said in a statement Friday.

He added:”The agreements we have worked out with these other railroads would do more than preserve existing rail competition in affected regions identified by the commission;they would result in an overall enhancement of competition in the western United States.”