Guest comment: Resubmitted and ready — Why the UP-NS merger deserves a fair hearing 

By Michael F. Gorman 
 
On April 30, Union Pacific and Norfolk Southern refiled their merger application with the Surface Transportation Board, correcting the procedural deficiencies that led to January's rejection. That review deserves a clear-eyed look at how their merger would benefit shippers, consumers, unions and the American public. 

A true coast-to-coast railroad — Union Pacific in the West and Norfolk Southern in the East — eliminates that handoff for roughly 10,000 existing origin-destination pairs that cross the Mississippi, greatly simplifying the trip by creating one carrier, one service plan and one responsible party. The result is two-day faster transit times and more reliable service. Hub Group, one of America's largest intermodal carriers, filed a support letter with the STB arguing the merger would unlock intermodal's growth potential. Knight-Swift Transportation also wrote in support. These are not idealists or lobbyists; they are logistics companies that book freight every day on the railroad and know precisely the gains to be had from making railroads more competitive with trucks.   

Currently, highways east of Chicago are overrun with trucks going to places like Detroit, Pittsburgh and Cincinnati. The goods on these trucks get offloaded from a western railroad at Chicago and crowd the highways going east because the time lost connecting to an eastern train in Chicago is too great. It is the same reason I drive to Columbus or Cincinnati to get on a direct flight instead of going to the Dayton airport and connecting: The long drive allows me to avoid having to make time-eating connections. 

Goods that can travel across the country on a single railroad would bring enormous benefits to consumers — and people who drive on the nation’s roads, as well. A container that moves on a single-line railroad from Los Angeles to Charlotte competes directly with a truck. If it must interchange (and sit in a rail yard for several days) in Chicago or other gateway, it is no longer as competitive with truck wins on speed or reliability and the container goes back on the highway. The merger would potentially make rail genuinely competitive for long-haul container shipments that currently default to the road because rail transport would be unreliable. 

There have been concerns that a coast-to-coast railroad would be anticompetitive. First, virtually no one is served only by one or the other, thus competition is not reduced. Second, there are already two coast-to-coast railroads in North America — Canadian Pacific and CN. And third, like the Canadian Pacific-Kansas City Southern merger, this merger is end to end. The CPKCS merger has caused virtually no problems — in fact, it served to spark competition and expand infrastructure investment. 

But the most underappreciated argument for this merger has nothing to do not with improving railroad efficiency but with reducing highway congestion.  

Class Is receive no government subsidy to maintain their infrastructure, and they invest nearly $25 billion per year in their own tracks. U.S. taxpayers, by contrast, transfer roughly $40 billion annually to the Highway Trust Fund to subsidize the trucking industry's use of public roads. Trucks account for a disproportionate share of road wear, highway fatalities and transportation-related emissions. One intermodal train displaces roughly 500 trucks, which reduces congestion, extends road life, reduces accident rates and cuts emissions without spending a dollar of public money. 

This is, in effect, infrastructure policy achieved through private action: It requires no highway bill, federal appropriation or regulatory mandate. A railroad that is more efficient and can maintain lower rates and induce more shippers to choose rail over trucks. 

The STB's job is to evaluate whether this merger serves the public interest. The people who move freight for a living — shippers, logistics providers and a large segment of rail labor — have concluded that it does. The loudest opposition comes from competing railroads, whose interest in the status quo is transparent. The board should evaluate the revised application on its merits and determine what it would mean for the shippers who depend on freight rail, the workers who run it, the farmers who need it and the American public that pays for the roads every time rail falls short. 

Michael F. Gorman is the Niehaus Chair in Business Analytics and Operations Management at the University of Dayton. Email him at mgorman1@udayton.edu