The transcon merger, webinar version: Top 10 takeaways — by Tony Hatch

Editor’s note: On Sept. 25, RailTrends hosted an online event concepted and led by independent transportation analyst Tony Hatch titled “The Freight Rail Transcon Merger Story — So Far: A Virtual Salon.” The panelists: Roger Nober, director of the Regulatory Studies Center and professor of practice, Trachtenberg School of Public Policy, and former STB chairman and a former BNSF chief legal officer; David Woodruff, CN’s former AVP and head of U.S. public and government affairs; Rick Paterson, managing director, Equity Division, at Loop Capital Markets; and Hatch, co-founder of RailTrends. What follows are Hatch’s top 10 takeaways from the event — the first in a series. 
 
That's one (webinar) down, more to go. Our Transcon Merger/Regulatory update went well. None of us four — former STB Chairman/BNSF CLO Roger Nober; former GR for CN David Woodruff; ops analyst supreme and RailTrends presenter Rick Paterson; and me — are either for or against the proposed UP-NS merger. That's not our job(s). We just wanted to highlight the obstacles to successful conclusion that we feel many investors and others are ignoring in a rush to the winner's circle. 
 
Pricing power remains, but is more muted, as Rick noted; railroads haven't grown, UP least of all — it’s therefore time for a "Hail Mary" (I brought Flutie into the mix). But is it? Roger and David, representing the DC side of the call, were stars. Roger noted some things I haven't thought of: 
 
1. Amtrak and other passenger services will be important stakeholders in the equation. 

2. Robert Primus faces "an uphill battle" to get back in the game, and the Federal Reserve case (based supposedly on "cause") is not a useful parallel. 

3. No one can yet fully interpret the meaning as it applies here of "enhanced." 

4. Some shippers may support a merger with caveats — they might see it and the related access remedies as the only way to get to some form of access/reciprocal switching (a very long-term goal consistently unachieved). 

5. Future remedies would have to be more ironclad. (NOTE - Minor Mea Culpa: traditional STB oversight was 5 years, made into 7 by CPKC and ... 10? 20? Forever? For this discussion — another sign in the false-flag partisan discussion point to the possibility of more regulation as a possible result/remedy.) 

6. He nicely summed up his position — that the key question isn't necessarily IF the merger gets approved, but what gets approved; what will the newco look and operate like? 

7. David brought up two more stakeholders — short lines (collectively via the ASLRRA or individually, in some cases via their big PE/Infra owners), and legislators (this merger involves more Congressional districts than any other before it, of course). 

8. How will the CPKC case come into play? Growth numbers; gateway oversite; partnerships vs single line; some IT/integration issues, etc. 

9. How long will the process take? Bet on the "over"! (NOTE - my assumption is that merger #2, should it come to pass, will be much simpler and faster). One reason is that ... 

10. The STB has got to get this right, set the blueprint for the way the industry operates for the rest of the 21st century.