Are there varying degrees of control parent railroads are able to exert on shortline railroads they may own?
A good case and point is CSX’s 85% ownership of the Indiana Railroad. For practical purposes, the INRD’s chief routes are Indianapolis to Effingham, Illinois and Chicago to Louisville. Coincidentally, CSX also interchanges with the IC at Effingham, Illiniois and goes to Indianapolis and has a major Chicago to Louisville artery.
Does CSX restrict INRD’s competition at all? Are there legal barriers restricting CSX’s ability to restrict INRD’s competition?
If CSX cannot restrict INRD’s competition, what made the cash-straped CSX buy a railroad with interests so antithetical to that of its own?
I know there were restrictions to the degree of control owning railroads can exert on other railroads, but I don’t know if that applies in instances such as the INRD and after deregulation.
I never connected the dots on this…lets see Indy to Effingham (actually Newton) and Chicago to Southern Indiana.
It appears that CSX has a pretty good situation going here. Go with non union carrier to handle the short haul stuff and keep the routes.
My guess is that CSX pretty much leaves IRR alone. Looking at the route map, CSX just filled in the Chicago - Louisville gap with the IRR purchase of the CP Latta.
The control may be light for a variety of reasons. INRD may be a useful feeder line and the STB may have insisted that CSX’s interest be held in trust. Rate divisions may be a factor. CSX has an interest in TransKentucky Transportation (of U28B fame), but has elected not to buy it back and absorb it completely.
Another reason it is easier to abandon a shortline than a branch of a Class I. In the past opponents of branchline abandoments have succesfully argued that the low return on the branshline can be made up by more profitable lines. On the other hand if you wall off the shortline from the Class I you can let it stand or fall on its own merits. It is a way of protecting yourself from government enfored cross subsidies.
I can’t pretend to know a great deal beyond what I have read about INRD. If I recall correctly there was a nice article about INRD in TRAINS (May 2002)concerning their one man crew operations a couple of years back and it gave some good insight into how Tom Hoback and his guys started the line. CSX is not mentioned as an investor and I’m not sure when they became involved. If memory serves Tom was with Perelman on the WP before he started INRD about 20 years ago. The thing about INRD is it has HUGE coal mines and power plants located on it so it is much more a regional than a short line. Smaller short lines can only dream of having the kind of revenues these guys command…
CSX is probably an outside investor and for a number of reasons has limited its control of the INRD as to do otherwise would cause a high level of regulatory scrutiny. Control of any railroad by another is strictly regulated by the STB and there are numerous filings and proceedings involved, particularly if the controlling party is a Class 1 railroad. CSX seems to like to take investment positions of this type in short lines, witness the P&L and now the A&O through holding company Four Rivers Transportation.
That was really enlightening . . . especially the regulatory rules bit.
FYI, Hoback did get his start as an accountant for the WP–where I believe he made his name by convincing the WP they would not get favorable ROI for refrigorator cars and WP never did buy another.
Later in his career, he worked for the IC, where he eventually learned of the possibility of acquiring the IC’s high-dry line to Indianapolis.
I really have to admire the guys guts, he started the railroad by selling his house, getting a loan from his mother, and living off of credit cards to make the down payment for the loan. That takes guts. However, looking back, he obviously k
My conversations with IRR regarding the Mattoon - Evansville line never got anywhere. They did call back but basically said the info was unavailable, which means they didnt want to deal with me on it.
Sure would like to get my hands on some of that data.