An Interstate Commerce Commission staff report has concluded that Norfolk Southern Corp. underestimated the amount of traffic that other railroads would lose if it acquires Conrail.
Norfolk Southern's study of possible traffic shifts yielded "highly conservative, understated results," according to the report, released yesterday by the House subcommittee on commerce, transportation and tourism.
"It is obvious that an insufficient number of factors were considered in the model to result in a fair assessment of traffic diversion," said the ICC staff, in response to a request from subcommittee Chairman James J. Florio (D-N.J.).
Congress must approve the Reagan administration's proposal to sell the government's 85 percent share of Conrail to Norfolk Southern for $1.2 billion. The Senate is expected to approve the merger this fall, but Florio has expressed misgivings about the sale and is planning to hold more hearings on it in September.
Norfolk Southern said yesterday it had not seen the study and therefore could not respond.
The ICC added several caveats to its analysis and acknowledged that there were "flaws in the data available."
The agency focused only on traffic diversion from other carriers to a combined Norfolk Southern-Conrail system, and ignored traffic gains to those carriers.
The study used information from more than a dozen railroads, and therefore had to compare traffic studies using different base years, different computer models and different methods of analysis.
Because of these problems, "it became necessary in several instances to assume a 'worst case scenario,' " where "the benefit of the doubt was given to the carrier claiming the possible diversion," the report said.
Nevertheless, the ICC staff "concludes that a substantial amount of traffic may be diverted from other carriers to the new NS-Conrail system if the proposed sale is approved."
The ICC study estimates that traffic worth $304 million would be diverted from other railroads to a combined Norfolk Southern-Conrail system, while Norfolk Southern projects that $176 million would be diverted. But the study warns that such a "grand total" of the individual estimates "should be considered only as an extremely generalized 'order of magnitude.' "
More specifically, for example, the ICC study concludes that the Atchison, Topeka & Santa Fe Railway Co. will lose $20.6 million in traffic to a combined Norfolk Southern-Conrail system, while Norfolk Southern estimates $14.5 million.
Estimates of diverted traffic "are highest for coal, auto and auto parts, and grain," the study said.