NIIL, which should allevicte many shisper conce-rs regardiag sotzntial abuses of ra‘lroad

merket power.

Respeetfully subriitted.

Rill Hewks

Lone er Secretary

Markating ard Regulatory Programs
U.S. Department of Agriculture
Washington, D.C 20250

oo



also is conzerace that the downstream effects v- this renger could lead the U.S. farther down the
path toward a North American railroad ducpoly, a1 lead ty Lie gecurephee expansion of an
exiating regioaal rail monopoly,

VSDA’s gererel concer wita railroed mergers ix. recent yeers aas been based on ube

decling in the number of Class I railroads cm 33 competing carricrs ia the
pening

¢ 1980's to culs

sever today. ‘This has resulted in increased overall levels of raarset corcentnitior and reduced
cormpetition in the railroad industry which tas affected U.S. agriculture moze than ary cther
irdustrial sectn- of the sauntry. While the tcp five railroads criginated 57 percen: of all rail grain
traffic in 1982, by 1995 this fignre hac cl mbed to 90 serzent, 3y 2000, the top five raiLroads
originated nearly $8 percent of the 1.19 million carloads 9! grim Lauled by Class I railroads.
S.nilarly, assuming wo railroad markets (one in the Eest ard one in the West) the Hertiadahl-
Uirsckman Index (HH) ~ a standard rmeusure 0, concentration with:n é market - of the Eastem
Class - railroads inc-eased from 1.364 in 1980 tv 4,297 in 1999, while :he HHT of the Western

Class © railroads wne-cased from 1.364 in 1980 to 4.502 in 1999.2 TIEDs in exzess 07 [800

-ndicate a highly conceatrated market.

CONCLESION
ISDA neither supports ner apposes chis merger, However, we request taat tae Bourd. if it does

approve tais merger application, corditon +t with tae agreement made between CN and the

*R.L. Banks ane Associates, Ine.. Nortit American Railway Restructuring and Implications
Jor Merger Policy



TUWICATE OF SERVICE

The undersigned herehy ce-t fies that on June 25, 2COL. he caused ¢ cepy of the
Department of Agricalture’s co nmen s ta be served first-class mail, postage paic, o7 the
Seere.ary of the United Staes Department of Transpcrtation, the Actom2y Geaeral of the United
States, Paul Cunninghart, Esq.. Harkins Cunninghan. Wi liam ©. Sippel, Esq.. Fletcher &

Sippel LUC, ard all other pastes uf :evord in ST3 Pinanee Docket No. 34000.

ye Pa
(Lbek >

John A, Batson

Acting Program Marager
‘Transportation and Market'ng Analysis
Agr-cultural Marketiag Service



SUIT.
Y Le
re >,

Kk h

4

AY receives
S| JUN, 25 2004 3

BEFORE THE  walthice’ 5

SED

SURFACE TRANSPORTATION BOARD NG. gr

“Qrarns

STB FINANCE DOCKET NO, 34000

CANADIAN NATIONAL RAILWAY CO, et af, - CONTROL
WISCONSIN CENTRAL TRANSPORTATION CORD. ef ai.

Date: June 25, 2001

COMMENTS OF (HE

U.S. DEPARTMENT OF AGRICULTURE

Bill Hawks

Unde Secretary

Marketing end Regulatory Programs
U.S Department of Agriculture
Washingtor, D.C, 20250



AUTHORITY AND INTEREST
The Secretary of Agricultare is charged with the reszonsibility under the Avsiculural

Agjustment Act o7 1938 end the Agricultu-al Marketing Act of 1946 to represent Cre uteresis of

agricultural preduzers and shippers in impreving transpcrta:ion scrvices end facilities by, among
other things. initiating and sartivipating in Surface Transportation Board ‘Board) proceedings
invalving retes, charges, tariffs. practices, and services.

Gn April 9, 7001, Canadian Nationa! Railweys (CN) and Wisconsin Central
Transportation Corporation (WC) filed a contrcl aad mezge: application with che Bearc,
Tecuestng tat the application he treated as a minor transaction. On May 9, 2001, the Board
accepted the application for censideracion as a miror transactien

‘The Department of Agricucture (ISDA) neither surports nor opposes this merger.
UEDA, however, conears wil. the Buard’s ruling chat this merger should be classified as a minor
traasaction since any anti-compztitive effects will clearly be outweighed by che transaction’s

contribution to the public interest in meeting signiZicant aansportat.un ueeds (49 C.F.R. 3 1180.2

(bi), SDA recognizes that nany shispers will benefit from this mezger and that the merger- “f

conditioned by the CN agreement w.th the Natioaal Industrial T-anspertation League (NITL) -

will have few ciscernible competitive or service effects on chippers.!

' Tae CN-MIEL agreement provides tor the protection of rates and services through existing WC
interchanges with aay rail carrizr, preservation of siipper relief from bot-leneck rates {where a shipper
prior to the transavtion would have been entitled to he Board’s “contract exception"), an o Ter tw enter
into service protection agreements wich affected shippers, and the prom pt resoluticn of any cisputes by
arbitration

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LSDA hac been concerned taat this transaction would adverse-y afvect the transportation
of barley grown ir. North Dakota to breweries in Wisconsin Buclizyton Northern Santa Fe
(SNSPi and Canadiaa Pacific (CP) currently compete for he transportation of this barley ‘o the
Wisconsin markets and interchange with WC to reach these marsets. If the Buard includes -he
CN-NITL agreement as a condicion of the ne-ge-, however. these coacerns would be greatly
alleviated.

Farther. based npen tae aearly flawless irtegration of the Hlirois Central system inte the

em in 1999, LISDA does not expect significant rai] service disruptions due to this merger,
especia.ly since CN plars to ise 4 deliberace step-by-step approac’a to integration. In addition.
CN has stated that it is wiling to guarantee shippers that rail service will be at lees: as good as it
is curreully. Regarding the rail service 2uarartee. shippers, who are cautiously concemed, given
the way they have beer. ueuted by other railroacs engaging in large rail mergers, shou d he
reassured by the terms o° CN’s avrecment with the NITL. In addition. USDA recognizes the

servicz-oriented maaagemeat of tre applicasts acd is aware of .he potential economic

zlficiencies of this merger.
Although USDA is not cpposed to this merger, we do not support it due to our concerns
regarding the continuing coacentratior. in the sail transportation market. ‘Tis concentvatioa, if

Oneha'ed eculc increase the bargaining-power disadvantage of

pers aad smaller railroads

Thus. if tae Boand approves th:s merzer applicacion, USDA requests that the Board condition the

mercer with the agreement tha: C/N signed with the NOI'L.
Although the downstream effects of this merger could esc ta mereased rail competition
ia. die Midwest through the creation ofa third Cless [ railroad competing in the region, US JA

3