NS and CP: Agreement Will Improve Performance

CALGARY – Canadian Pacific Railway (CPR) and Norfolk Southern Railway (NSR) on June 30 signed a memorandum of understanding for an exchange of trackage rights, freight haulage and yard services that both railroads say will increase operational efficiency and enhance rail service to customers.

“This agreement with NSR opens up new opportunity to move our northeastern U.S. franchise into a position of profitability,” Rob Ritchie, President and Chief Executive Officer of CPR, said. “We expect the changes will generate higher traffic volumes and revenues, greater productivity and lower operating costs.”

CPR announced in June 2003 it was restructuring its northeastern U.S. operations and was seeking proposals for ways to increase freight volumes, reduce operating costs and improve earnings. CPR’s northeastern U.S. network is operated as the Delaware and Hudson Railway.

“This is an excellent example of railroads cooperating to better serve our customers,” David R. Goode, Norfolk Southern Chairman, President and Chief Executive Officer, said. We will be able to jointly provide transportation solutions that will improve efficiency and quality of service for both carriers in the northeast U.S.”

Under the agreement, CPR and NSR will consolidate freight marshalling at yards in Buffalo and Binghamton, N.Y.:

  • CPR will cease yard operations in Buffalo, shifting all freight marshalling to the NSR yard there.
  • Similarly, NSR will shift its yard operations in Binghamton to CPR’s East Binghamton yard. There are three major components to the new trackage rights and freight haulage arrangements between CPR and NSR:
  • CPR will be able to move NSR freight traffic between Rouses Point and Saratoga Springs, N.Y., under a haulage arrangement. NSR will operate its own trains over CPR’s line between Saratoga Springs and Binghamton, N.Y., under a trackage rights arrangement. The arrangements will generate higher revenue for CPR and provide NSR with a substantially shorter route to Quebec and the Maritime provinces.
  • CPR’s freight traffic between Binghamton and Buffalo, N.Y., will move in NSR trains under a haulage arrangement, replacing a trackage rights agreement under which CPR operated its own trains between the two cities. The arrangement will reduce CPR’s operating costs and generate additional revenue for NSR.
  • CPR will operate over a new NSR route using existing rail lines between Detroit and Chicago under a trackage rights agreement. It will be the shortest rail route between the two cities and will provide CPR with a faster, lower-cost lane.

“CPR’s challenge remains to take this part of our network to a level of profitability that will make it self-sustaining,” Ritchie said. “We are prepared to examine additional measures that, in concert with our NSR agreement, will further optimize our assets and drive up profitability.”

New trackage rights arrangements and the discontinuance of trackage rights require approval of the U.S. Surface Transportation Board.