BNSF Announces Multi-Customer Build-in to Bayport, TX

Date: Aug 22, 2001

BNSF has announced its second build-in since the beginning of this year to petrochemical production facilities in the Texas Gulf Coast region. BNSF will seek an exemption from the STB to build-in to Bayport, TX to serve four (4) petrochemical complexes. The shippers to be served are ATOFINA Petrochemicals, Basell USA, Equistar Chemicals and Lyondell Chemical Company. In late January BNSF announced a build-in to serve the Union Carbide (now, Dow Chemical) plant at Seadrift, TX.

The build-in will be approximately 13 miles in length. Bayport is a former SP-served point; and the BNSF build-in will employ the generic build-in/build-out protective condition of the UP/SP merger to connect with the UP main line running east of Houston. In anointing BNSF as the "replacement competition" for the loss of the SP, BNSF was given the right to serve any point previously served exclusively by either SP or UP via a build-in/build-out to the line of the other of the merging carriers, along with trackage rights along the "other carrier's" line to the extent BNSF did not already possess such rights.

Bayport is a major petrochemicals production area, serving as home not only to the four complexes covered by the exemption application, but also to a number of other plants. In addition, the build-in also may serve to "de-leverage" other plants, i.e., those currently competitively served but unable to realize the full benefits of that dual service due to the UP's ability to apply leverage over the sole-served plants at Bayport.

The significance of the Bayport area to UP was highlighted in the Houston/Gulf Coast Oversight phase of the UP/SP merger oversight where the STB was considering the request of the petrochemicals industry and KCS to open Houston to competitive rail service following the UP service melt-down. In a hearing before the STB, a representative of the Port of Houston Authority stated that the Port supported competitive rail service--except at Bayport. The Port's posture regarding Bayport was in fulfillment of a term of a settlement in the UP/SP merger proceeding.

The BNSF proposal to serve Bayport, following closely behind Seadrift, strongly evidences, at least insofar as BNSF is concerned, a new era of railroad competition, with closed points on UP no longer being beyond approach. Presumably, UP will reciprocate, although examination of the two carriers' route maps indicates that BNSF has greater opportunity than UP to seek to encroach on the other's heretofore sole-served customers.

For further information, please contact Martin W. Bercovici at (202) 434-4144 or via e-mail at bercovici@khlaw.com.