Union Pacific and Norfolk Southern have filed their paperwork with the Surface Transportation Board (STB) for a regulatory approval of their proposed merger. This official part of the process comes after the news broke in July the two Class 1 rail companies wanted to pursue a merger creating a transcontinental railroad with 50,000 route miles.
The STB will be the oversight board for the deal and will issue a schedule for the rest of the review process.
What Supporters Say, How Customers Are Reacting
In the application for merger, the companies included 2,000 letters of support from stakeholders.
The Rail Customer Coalition (RCC) has formed with dozens of member organizations across multiple rail customer industries to highlight their concern that competition must remain intact.
As pointed out by the RCC, four companies control 90% of U.S. freight rail traffic, and rail customers face frequent service disruptions while freight rail rates have increased more than 40% (inflation-adjusted) over the past two decades.
What It Means For Agriculture
“Farmers and ag retailers operate on razor-thin margins, so even a small, artificial cost increase can have a big impact,” says RCC member Daren Coppock, president & CEO, Agricultural Retailers Association. “When rail service is dominated by just a few players, they hold the power to set terms that work for them — not for the shippers and customers who depend on rail to move agricultural commodities, fertilizer, ag chemicals, fuel and other essential supplies. That imbalance drives up costs and threatens the reliability of our entire supply chain.”
According to the National Grain and Feed Association, 3.2 million rail cars of grains, oil seeds and other agricultural products move by rail on an annual basis. That adds up to be 10% of all rail shipments. At least 26% of grain has at least one rail movement.
“Our industry supplies the tools that help growers protect their crops and stay productive, and we rely on a rail system that works,” says RCC member Terry Kippley, president and CEO, Council of Producers & Distributors of Agrotechnology. “Competition in freight rail is essential for predictable service and a resilient supply chain. The STB should take a hard look at this proposal and ensure that this merger supports American agriculture rather than putting new pressure on farmers and the companies that serve them.”
The proposed UP-NS merger would be the largest merger ever considered by the STB.
In reaction to the merger being officially filed for STB review, The Fertilizer Institute gave this statement: “The fertilizer industry relies heavily on rail, and many shippers already operate with limited transportation options, increasing costs and continued service challenges, all with a “take-it-or-leave-it” approach from railroads. Our priority is a rail system that provides reliable service and a balanced relationship between carriers and carload shippers, with accountability for systemic rail service failures and a rate review process that is efficient, timely and economical. While we are still reviewing today’s STB filing, it is difficult to see how any coast-to-coast merger would improve this imbalance or meet the standard set out in the Surface Transportation Board’s merger rules. Today railroads hold all the cards, and larger railroads only give carriers a bigger deck. Now that UP and NS have submitted their merger application, we urge the Board to make the merger’s impact on carload shippers, including fertilizer and agriculture, a priority during the review process. The potential for this merger makes needed rail policy reforms to reset the balance between railroads and carload shippers even more critical.”
