Nevada County Picayune and Gurdon Times Newspaper Archive

Brady: "Merger Reeks Of Monopoly"

Arkansas could wind up with only one railroad company serving the entire state.

This, according to Bill Brady, a lobbyist for Conrail, would not be good for the people of the state.

Speaking to members of the Clark County Industrial Council Thursday morning, Feb. 15, Brady said Union Pacific Railroad is working hard to merge with Southern Pacific Railroad.

If successful the two rail services would become one and would then operate on parallel rail lines. The question Brady posed, though, was how long would the two sets of rails be utilized.

He told the CCIC Conrail is the fifth largest rail line in the nation, primarily operating in the Northeast, going as far west as Chicago.

Brady said Conrail also made a bona fide cash offer for the old Cotton Belt line which is owned by Southern Pacific. This offer, though, was turned down.

According to Brady, UP and Southern Pacific serve basically the same territory -- from the Mississippi River to California.

There are three things to be considered, Brady said, with the merger. The first is the North American Free Trade Agreement; the second is how such a merger would affect Arkansas; and third, how Clark County would be impacted.

An enormous amount of traffic is generated from the Gulf Coast and Mexico to the Rust Belt, Brady said. Most of it travels directly through Arkansas by either UP or Southern Pacific.

This, he said will not change. The traffic must continue as goods are shipped from these southern regions to the more heavily industrialized eastern sector of the nation.

A merger between these two rail lines, however, will mean one line controls 90 percent of the goods shipped by rail through Arkansas.

"There would be a lack of competition," Brady said. "The Mexican government is concerned about the merger."

The U.S. Justice Department has been questioned on the issue of a possible UP-Southern Pacific merger, but the problem is it has no jurisdiction in the case.

Brady said there will be three bureaucrats who make the final decision. They are with the Surface Transportation Board, which used to be the Interstate Commerce Commission before it was abolished. The STB is a division of the Department of Transportation.

Brady said if two members vote for the merger there will be no recourse left.

He said Conrail's purpose is not to prevent a merger, but to get the STB to notify UP there is a problem with the application for merger needing to be solved.

Brady said negotiations need to be held so other Class I railroads can become involved and there would be true competition as a result.

Conrail offered to buy 3,000 miles of the old Cotton Belt railroad and everything that goes with it, Brady told the CCIC, but this offer was rejected.

"We want to get back to the table," he said.

Interestingly, Brady said the important issue in the case is not whether or not Conrail can be a major player, but in making sure UP doesn't have a monopoly on rail transportation in the state.

He said State Sen. Mike Ross, who represents the area, has sent a letter to the STB opposing the merger. Additionally, 25 other officials have voiced their opposition in the case.

According to Brady, UP officials have stated one of the lines will be used to ship goods from the north and east while the other line ships south and west.

"This won't be long term," he said. "When they merge, UP will find out which line is the most profitable and the other will (most likely) be shut down.

"They're denying it. But we think the railroad business dictates not running parallel lines that close together."

Brady said Southern Pacific has been in dire straits financially and is on the verge of completely going "belly up." He said the SP rail lines and equipment have not been properly maintained because of the financial problems the company has.

"It's not good business for there to be only one railroad in the state," he said. "There is no competition."

While Brady couldn't say how a merger would affect Clark County, he did say what would most likely happen to the SP lines is they would be sold off to short line companies.

Union Pacific has already said it will close its short line railroad from Gurdon to Camden, which has many people concerned.

Brady said Conrail may do the same thing if it owned the lines, but it would be a business decision.

However, he said, if UP doesn't own the SP lines, there is less chance the rail will be abandoned.

Shipping goods by rail, Brady continued, is also less expensive than shipping by truck. It also saves wear and tear on the highways.

Arkansas, he said, is in a hot spot. The state is successfully attracting business and industry, and is the key link in the NAFTA line from Mexico to the eastern seaboard.

Union Pacific, Brady said, is attempting to get around anti-trust laws by saying it will rent the use of the lines to Burlington-Northern.

But, as Brady pointed out, should the B-N line rent the tracks, it will make no further investment in them, and there will be no repairs or upgrades made.

Brady suggested everyone on hand get in touch with their legislators and have them voice their opposition to the merger.

Outgoing CCIC President Percy Malone opened the meeting with an update on what has been going on with industry in the area.

He said representatives with Polycarbon were in town last week and a contractor for the building was selected.

Nabholz Construction will be doing the work on the CCIC's spec building in the Clark County Industrial Park.

Malone said more than 1,000 applications have been received for possible employment with Polycarbon, while only 50 or 60 will be hired initially.

He said the company expects to have 120 employees within 18-24 months.

Malone has been in touch with officials at Rohr Industries on a regular basis. He said the company is still interested in locating in Clark County, but isn't sure when this may happen.

According to Malone, Rohr has had some positive things occur recently which could lead to the company's expanding into Arkansas.

He said Bowater officials have completed the renewal of their land options in the county for a newsprint mill.

Mark Moffitt, executive director of the CCIC, said he's been working with Hix Smith, owner of Smith Ready Mix.

Smith Ready Mix will be locating a new state-of-the-art plant in Caddo Valley which will employ six or eight people.

Moffitt said here will be four front-end loading mixers which are more effective and efficient.

He said the company's equipment is also environmentally friendly and Smith Ready Mix will be a good addition to the area.

With Malone stepping down at the end of his two-year term