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EITHER CONRAIL DEAL MAY BOOST WNY FIRMS

Western New York industries may enjoy better rail service regardless of whether Norfolk Southern Corp. or CSX Corp. ends up winning a heated takeover battle for Conrail.

On Wednesday Norfolk Southern launched a $9.1 billion bid for the former castoff of a declining railroad industry, topping CSX's earlier offer by $1 billion.

Either merger would create the nation's third-largest railroad, a giant that would dominate the rail freight industry in the East.

The Buffalo region could benefit if the new owner is more willing to deal with economic developers, said Ronald Coan, executive director of the Erie County Industrial Development Agency.

"Monopolization doesn't necessarily imply anything good, but at the same time Conrail, which dominates the area, has had a set of objectives that is not always compatible with freight transfer and a new user may be more open," he said.

Conrail, he said, has been inclined to consolidate its rail lines in this region regardless of the needs of companies. Further, the railroad company has been difficult to work with on proposals to develop some of its property, including abandoned sites, Coan said.

A spokesman for the state Department of Transportation, however, said the DOT is concerned about a loss of competition in either merger scenario.

"Our concern is maintaining competitive access to freight and passenger rail," said Michael Fleischer. He said the DOT will examine both bids with an eye on how they might hurt short line rail companies.

The short line companies need major railroad companies to gain access to their track, he said. "If there's only one shipper shipping into New York State, then there's no place else to go," Fleischer said of the short lines.

A rail task force formed by the Southern Tier West Regional Planning Board was to discuss the proposed mergers today in Salamanca.

Donald R. Rychnowski, executive director of the planning board, said, "We aren't sure just what it means in terms of the Southern Tier."

The planning board had been negotiating with Conrail for five years to buy the railroad line between Hornell and Corry, Pa., on behalf of local industrial development agencies, after Conrail announced it would abandon that stretch of track. Those talks broke off when a connecting line from Corry to Meadville, Pa., was sold to a CSX-financed investor group.

Norfolk Southern's offer would mean $100 per share in cash, beating the CSX offer of a cash-and-stock mix that values Conrail at about $87.68 per share based on Wednesday's price for CSX stock.

"This proposal is better on every point than the CSX-Conrail proposal announced last week," said David R. Goode, chairman, president and chief executive of Norfolk Southern.

The CSX offer was initially worth $8.4 billion, but its stock price has fallen more than 6 percent since then.

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