The Department of Transportation has concluded that a recent Interstate Commerce Commission staff report overestimated the amount of traffic that a combined Norfolk Southern-Conrail railway system would gain from other railroads.

DOT has urged Congress to approve the sale of Consolidated Rail Corp. to Norfolk Southern Corp, which has offered to pay $1.2 billion for the government's 85 percent share.

The ICC staff, working at the request of the House subcommittee on transportation and tourism, estimated that rival railroads would lose $289 million to $320 million in annual freight revenue if the merger goes through.

DOT's Federal Railroad Administration estimated that the freight revenue diverted would be $185 million to $264 million. Norfolk Southern projects that $176 million would be diverted.

The ICC had acknowleged several flaws in its data and analysis. 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 also 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.

According to FRA, the ICC, "limited both by time and the charter they were working under, made their diversion evaluations essentially based only on the information provided by the railroads themselves."

FRA said its analysis was based on a consistent and detailed methodology, data base and assumptions. "We continue to stand behind our own detailed diversion estimates," it said.