96116.docx

MEMORANDUM
TO:FREEMAN DUNCAN, A.G. LEGISLATIVE LIAISON
FROM:DON HOWELL, PUC LEAD ATTORNEY
DATE:JANUARY 16, 1996
RE:DRAFT CONCURRENT RESOLUTION URGING THE U.S. DEPARTMENT OF TRANSPORTATION TO INTRODUCE RAIL COMPETITION IN SOUTHERN IDAHO AS A CONDITION OF THE UNION PACIFIC-SOUTHERN PACIFIC MERGER.
Monsanto Company and its communications specialist, Trent Clark, have drafted a Concurrent Resolution urging the U.S. Department of Transportation to introduce railroad competition in southern Idaho as a condition for approving the Union Pacific-Southern Pacific Railroad (UP-SP) Merger.  A copy of the draft resolution is attached.  Several state officials, including the Attorney General, have previously taken positions on the UP-SP merger.
THE MERGER APPLICATION
In December 1995, UP-SP filed an Application with the Interstate Commerce Commission (ICC)(footnote: 1) seeking authority to merge the two railroads.  As part of the application process, UP solicited support of various Idaho shippers and government officials.  UP’s lobbyist, Charlie Clark, requested that supporters submit “verified statements” (i.e., affidavits) for inclusion in the merger Application.  UP received verified statements of support from the Governor, Lieutenant Governor, Senate Pro Tem, Speaker of the House, and the Attorney General.  As  explained below, the Attorney General’s verified statement was not included in the UP-SP Application.  
THE DRAFT RESOLUTION
The draft Resolution seeks Legislative and Congressional support to introduce rail competition in southern Idaho.  The Resolution urges the ICC or its successor to “consider providing competitive rail carrier access through Idaho as a condition [for approving the] merger.”  Page 2, lines 1-3.  Currently, the only interstate railroad serving southern Idaho is UP.  As a means of introducing competition in southern Idaho, Monsanto suggested that UP consider allowing Burlington Northern Railroad (BN) to serve eastern and southern Idaho customers by acquiring “trackage rights” over UP lines.  Granting BN trackage rights on UP’s southern Idaho lines would introduce “competition” for those Idaho shippers served exclusively by UP.  Unlike southern Idaho, UP and BN compete for Idaho traffic in northern Idaho.
BACKGROUND
In early November, 1995, UP rejected Monsanto’s trackage rights proposal.  The following day, the Governor signed a verified statement generally supporting the merger.  However, the Governor did request that UP and SP consider implementing a “shared trackage agreement” with BN.  The Governor observed that such an agreement “would enhance in-state competition since BN and UP currently only compete for traffic in northern Idaho.”  More importantly, the Governor’s statement stopped short of requesting that the ICC only approve the merger conditioned upon introducing rail competition in southern Idaho.  The Lieutenant Governor, Senate Pro Tem, and the Speaker’s verified statements do not mention the introduction of competition in southern Idaho.  
On November 27, 1995, the Attorney General signed a verified statement.  As did the Governor, the Attorney General also addressed rail competition in southern Idaho.  After outlining the advantages of the merger, the Attorney General’s statement recited:
While I support the UP-SP merger, I urge UP-SP and the BN-SF to consider a shared trackage agreement that would have access points in Southern Idaho.  This type of agreement would enhance rail competition and benefit Idaho’s captive UP customers.  I would also urge the Commission to consider taking action to introduce rail competition in Southern Idaho.  Enhanced rail competition state wide would be beneficial to Idaho particularly in light of the BN-SF merger.
Although the Attorney General used somewhat stronger language than the Governor, his verified statement stopped short of asking the ICC to only approve the merger conditioned upon southern Idaho rail competition.  His verified statement is attached.  The Attorney General’s statement was not included in the Application possibly because of his assertion encouraging competition.
As outlined in my November 16th Memorandum to the Attorney General, the ICC has traditionally refused to impose competition as a condition to approving mergers except in those cases where competition already existed.  It is this reason why UP and BN voluntarily entered into a trackage agreement providing BN an opportunity to serve rail customers formerly served by SP.  Because rail competition did not previously exist in southern Idaho, UP is reluctant to grant trackage rights to a competitor.  Requests to introduce competition where none existed have been uniformly rejected by the ICC in the past.  Although the draft Resolution lists several compelling reasons to support competition (protect Idaho captive customers, promote the exportation of Idaho products, etc.), these requests are consistently denied.
If I can provide further information, please call me at 334-0312.
Donald L. Howell II
cc:  Jack McMahon
cm\m-duncan.dh
FOOTNOTES
1:
On December 29, 1995, the President signed into law a bill that eliminates the ICC and transfers its rail functions to the US DOT.