Transportation Secretary Elizabeth Hanford Dole told Congress yesterday that she will accept some legislative limits on Norfolk Southern's ability to use Conrail's tax deductions in the event that Conrail is sold to Norfolk Southern as she has proposed.
Her statement before a House Energy and Commerce subcommittee did not please Norfolk Southern, which has a lot of congressional hurdles to clear if it is to purchase federally owned Conrail for the $1.2 billion it has offered, as yesterday's developments showed.
* The House Ways and Means Committee -- the tax-writing body -- plans a May 1 hearing of its own to address tax questions in the Conrail deal.
Ways and Means must approve the legislation along with Energy and Commerce before the bill can move to the House floor.
* The Senate Commerce Committee -- a friendlier, more Republican environment for Dole's proposal than the House is -- postponed marking up its version of the Conrail legislation.
Several senators suggested that Norfolk Southern reach agreements first with some smaller railroads to protect shared freight rates and to guarantee access. Norfolk Southern has concluded such an agreement protecting joint rates with the Kansas City Southern, a railroad based on the home turf of Sen. John C. Danforth (R-Mo.), chairman of the Commerce Committee, and Sen. Nancy Landon Kassebaum (R-Kan.), a member of the committee.
Norfolk Southern is attempting to reach agreements on various subjects with the Illinois Central Gulf, the Chicago and North Western, the Richmond, Fredericksburg and Potomac and the Grand Trunk Western.
* Sen. Arlen Specter (R-Pa.), who has made no secret of his hopes to talk the Norfolk Southern deal to death, announced that he will introduce legislation to combine Conrail with Amtrak for bookkeeping purposes and to use Conrail's profits to write down the Amtrak subsidy.
President Reagan is trying in his budget to eliminate Amtrak.
* Those who would reregulate the railroads have been concerned about some of the marketing, pricing and access-limiting techniques that railroads have used against each other since deregulation in 1980.
Rep. W. J. (Billy) Tauzin (D-La.), one of the sponsors of partial reregulation legislation, told Dole that "we might want to attach" some of those ideas to the Conrail proposal. "I urge you not to do that," Tauzin added.
All this came into play on a day that saw scores of Conrail employes -- many of whom are opposed to a Norfolk Southern takeover -- line the halls of the Rayburn House Office Building and fill the Energy and Commerce hearing room in a silent protest. Many were wearing "Let Conrail Be Conrail" buttons; a few had on T-shirts bearing a big red X that crossed over the initials N.S.
Dole's statement about accepting tax deduction limitations came in her first appearance in the House in support of her plan to sell Conrail and to get the government out of the railroad business.
Potential tax breaks for Norfolk Southern have become an issue despite assertions by Dole and the U.S. Treasury that Norfolk Southern is receiving no more than the normal tax treatment that would accrue to any corporation making an acquisition.
J. Paul Molloy, one of the herd of attorney/lobbyists Norfolk Southern has engaged to push its interests on Capitol Hill, said after Dole's testimony that such a limitation "is something we would fight. We want to be able . . . to take full tax advantage."
Asked if tax deduction limitations would cause Norfolk Southern to withdraw its offer, Molloy said, "It is always difficult to say at what point do you walk away from a deal. But every time we agree to keep a gateway access point between two railroads open, or maintain a joint rate single charge for moving freight over more than one railroad , or agree to divest, at some point you say this is not a good investment. . . . We hope it never gets there."
Rep. James J. Florio (D-N.J.), chairman of the subcommittee, and Rep. John D. Dingell (D-Mich.), chairman of the full committee, hammered away at Dole on a number of technical issues during her four hours as a witness. She demonstrated again that she comes prepared, but many questions were left to be answered later.
Dole was able to tell Florio that formal agreements have been reached by Norfolk Southern to divest track or track use rights to two other railroads in the Northeast and the Midwest, and that those divestitures are ready for review by the Justice Department.
Justice has demanded divestiture as a condition of approving a merger between Norfolk Southern and Conrail.