From the Editor: Of competition, a couple of 'e' words and the UP-NS refile

Amid the increasing rhetorical din, the revised Union Pacific Railroad-Norfolk Southern Railway merger application is on the clock.

On April 30, the Class Is submitted an amended application to the Surface Transportation Board (STB) seeking to merge through an $85 billion transaction. The STB has until May’s end to review and act on it. The board rejected the initial application on Jan. 16, deeming it incomplete.

Additional analysis performed during the application revision process reinforces that UP-NS would drive growth, create substantial cost savings for shippers and strengthen the U.S. supply chain, UP and NS officials said. The analysis is the first in rail merger history to use 100% actual traffic data provided by all Class Is at the time instead of sample data available from the STB, they said.

The merger will make rail significantly more competitive with long-haul trucking, diverting about 2.1 million trucks off highways, according to UP-NS. Shifting freight from higher-cost trucks to lower-cost rail will save shippers about $3.5 billion annually, the two railroads estimate.

In the revised application, UP-NS commits to divesting or otherwise relinquishing control of the 170-mile Terminal Railroad Association of St. Louis (TRRA). UP owns 42.84% of TRRA; NS, 14.29%.

UP-NS also provided data on the traffic they anticipate taking from the other Class Is. Most of the estimated new traffic on UP-NS would be diverted from CSX and BNSF, according to the revised application.

For CSX, the estimated 244,000 carloads/units diverted represent 4% of the 6.1 million units the Class I handled in 2023. The estimated 303,000 units diverted from BNSF represent 3.4% of the 9 million units BNSF handled in 2023. UP-NS also would attract an estimated 303,000 intermodal containers currently moving on other railroads, the merger partners wrote.

“We are confident our updated application meets the STB’s guidance and presents an even stronger case for why America needs a seamless coast-to-coast railroad to reinvigorate the rail industry,” said UP CEO Jim Vena, who also talked about the benefits of UP-NS with Managing Editor Jeff Stagl in this month's cover story.

Enhance or eliminate?

A new coalition of various industry stakeholders begs to differ. Formed last month, the Stop the Rail Merger Coalition includes BNSF, CPKC, the Alliance for Chemical Distribution, American Chemistry Council, American Farm Bureau Federation, Teamsters Rail Conference, National Industrial Transportation League and Vinyl Institute.

UP-NS is “driven by Wall Street on the promise of a big shareholder payout,” said BNSF President and CEO Katie Farmer in the coalition’s April 30 press release. “It will eliminate competition, raise costs for consumers and destabilize the supply chain that powers the American economy.”

The merger rules require a combined UP-NS to enhance competition. What constitutes “enhanced competition” ... or “eliminate,” for that matter? These and other questions would be the STB’s and STB’s alone to address.

It’d take the board a year or so to issue a decision, UP-NS leaders believe. My colleague and friend Tony Hatch — you’ll read and hear more from the independent transportation analyst on UP-NS in the weeks ahead — told Managing Editor Jeff Stagl a few days before the application was filed that he believes it’d take longer, through late 2027 or early 2028, say. I’m with Tony. Let the clock-watching begin (again).

Speaking of hearing from Tony: On May 15, the co-founder of RailTrends will be among the featured speakers at "Inside the Revised UP-NS Merger Application: A Virtual Salon."

Joining Tony will be David Woodruff, principal at WashingtonGPS and former AVP and head of U.S. public and government affairs for CN; Farrukh Bezar, operating partner-transportation and logistics, Littlejohn & Co.; and Roger Nober, professorial lecturer in law and affiliated scholar with the regulatory studies center at George Washington. Nober also is former chair of the Surface Transportation Board.

Cost to attend the virtual event — which will be held from 10:30 a.m. - 12:30 p.m. Eastern Time on May 15 — is $349. To register, visit https://www.tradepress.com/payments/NET/webinar/?TradeShowID=615