CERTIFICATE OF SERVICE

1, Paul E. Kepler, certify that, on this 29th day of April, 1996, I caused a copy
of the forgoing document to be served by first-class mail, postage prepaid, or by a
more expeditious manner of delivery on all parties of record in Finance Docket Ne.

32760, and on

Director of Operations Premerger Notification Office
Antitrust Division Bureau of Competition
Room 9104-TEA Room 303

Department of Justice Federal Trade Commission
Washington, D.C. 20530 Washington, D.C. 20580

iP
(dl Apher

“Paul E. Kepler *



3

the other recently merged Western railroad, the Burlington Northern Santa Fe.

CONCLUSION

USDA agrees with DOJ that this proposed merger is likely to significantly reduce
competition in various rail corridors, as it stated in its March 29, 1996 comments. In order to
preserve and enhance competition in Kansas City, Wichita, and Fort Worth, Texas corridor to the
Gulf Ports and to Mexico, USDA urged STB to consider requiring a third Class I railroad be
allowed to operate. DOJ has pointed to the probable reduction of rail competition along the
Central Corridor as a result of a combined UP-SP. Because of the potential growth in new
agricultural shipping patterns as a result of FAIR, USDA believes a third major railroad

operating in the Central Corridor will preserve necessary options and alternatives for present and

future grain transportation.

Respectively submitted,

eC pen

Administrator

Agricultural Marketing Service

U.S. Department of Agriculture
Washington, D.C. 20250


BEFORE THE

SURFACE TRANSPORTATION BOARD

FENANCE DOCKET No. 32760

UNION PACIFIC CORPORATION, UNION PACIFIC RAILROAD
COMPANY, AND MISSOURI PACIFIC RAILROAD COMPANY
----CONTROL AND MERGER----
SOUTHERN PACIFIC RAIL CORPORATION, SOUTHERN
PACIFIC TRANSPORTATION COMPANY, ST. LOUIS
SOUTHWESTERN RAILWAY COMPANY, SPCSL CORP.,
AND THE DENVER AND RIO GRANDE WESTERN
RAILROAD COMPANY

RESPONSIVE COMMENTS OF THE

UNITED STATES DEPARTMENT OF AGRICULTURE

Lon Hatamiya
Administrator

Agricultura] Marketing Service

U.S. Department of Agriculture
Washington, D.C. 20250

Date: April 29, 1996


BEFORE THE

fo

SURFACE TRANSPORTATION BOARD

FINANCE DOCKET No. 32760

UNION PACIFIC CORPORATION, UNION PACIFIC RAILROAD
COMPANY, AND MISSOURI PACIFIC RAILROAD COMPANY
----CONTROL AND MERGER----

SGUTHERN PACIFIC RAIL CORPORATION, SOUTHERN
PACIFIC TRANSPORTATION COMPANY, ST. LOUIS
SOUTHWESTERN RAILWAY COMPANY, SPCSL CORP.,
AND THE DENVER AND RIO GRANDE WESTERN
RAILROAD COMPANY

RESPONSIVE COMMENTS OF THE

UNITED STATES DEPARTMENT OF AGRICULTURE

These responsive comments are filed on behalf of the United States Department of
Agriculture (USDA) in the above proceeding in accordance with the former Interstate
Commerce Commission’s decision served December 27, 1995, setting forth the procedural
schedule for this contro] and merger proceeding between the Union Pacific (UP) and the
Southern Pacific (SP) Railroads. |

USDA noted its authority and stated its interest in this control and merger proceeding in
initial comments filed March 29, 1996. In those comments, USDA highlighted the importance of
rail service to the economic well-being of this Nation’s agricultural and rural economies. The
tremendous amounts of grain and other agricultural products that move to market by rail from
production areas that are frequently far removed from markets makes it imperative that

agricultural shippers retain and acquire as many competitive transportation alternatives and


2

options as possible as maior railroads continue to consolidate their systems.

In addition to suggesting trackage rights and line sales to ensure competition, USDA
urged the Surface Transportation Board (STB) to consider requiring service by a third Class I or
major railroad, as a condition of this proposed merger, in the Kansas City, Wichita, and Fort
Worth, Texas corridor to Gulf Ports and Mexican markets to provide alternate service for
agricultural traffic, especially the large volumes of wheat produced in the Lower Plains States.!

The U.S. Department of Justice (DOJ), in comments filed April 12, pointed out the large
number of markets in the West where rail competition would be reduced from three to two and —
from two to one with this proposed merger. USDA noted similar concerns in its comments
reminding STB that the entire Western half of the country, between the Mississippi River and the
Pacific Ocean would be dominated by just two Class I rail systems.

DOJ also pointed to current significant parallel lines in the UP and SP rail systems,
including those in the so-cailed Central Corridor between Kansas City and the West Coast. The
UP and SP currently compete over these lines. A merged UP-SP rail system will eliminate this
competition. With the recent passage of the Federal Agriculture Improvement and Reform Act
(FAIR), agricultural shippers and growers will have the opportunity to make production
decisions as market conditions dictate. FAIR should influence the way grain is produced,
marketed and transported in the future. The passage of FAIR raises USDA’s concer about the
future of rai] competition for agricultural shippers along the Central Corridor. An analyst for

DOJ has indicated the likelihood of price increases being in the interest of a merged UP-SP and

'The Lower Plains States, for purposes of this discussion, include Kansas, Oklahoma, and
Texas.