STB Rejects Petitions to Deny UP/Norfolk Merger Proposal

The U.S. Surface Transportation Board has rejected petitions from rail carriers and shipper groups that had called on the agency to deny Union Pacific's planned mega-merger with Norfolk Southern. 

Three motions requesting a denial had been filed by BNSF Railway, CSX Transportation, and a shipper coalition that included the American Chemistry Council, American Fuel & Petrochemical Manufacturers, and the Alliance for Chemical Distribution among others. In their filings, the companies and the group argued that UP and Norfolk had not provided enough basic evidence to show that their proposed merger could qualify for approval. 

The STB ultimately ruled that while the motions "raise important questions and issues," it will still allow a formal review to proceed so the board can consider additional evidence and arguments before deciding the merger’s fate. The STB also clarified that the decision to reject the denial petitions does not reflect its opinions regarding the merits of the proposed merger.

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STB board member Richard Kloster also expressed concerns over certain elements of the proposal, particularly around what he described as a lack of transparency from UP and Norfolk.

"Applicants have submitted thousands of pages of documents, yet they do not offer a very robust plan for how they will address competitive concerns or mitigate potential harms," Kloster wrote in the STB's decision. "They also rely heavily on the benefits to intermodal shipments, a market segment which, by today’s standards, is already competitive."

Kloster went on to state that UP and Norfolk "still have a long way to go to show that the (merger) is in the public interest," while adding that he remains open-minded to further arguments and evidence as the review process plays out.

The STB rejected the initial merger application from UP and Norfolk in January, citing a lack of projected market-share data, and a failure of the two companies to include the complete agreement in their submission. The railways resubmitted their application in April with up-to-date market-share figures, additional competitive analysis, and a copy of the full agreement from the railways. The board accepted the revised application in late May, before it resumed its formal review in mid August.

The proposed $85 billion merger would form the first U.S. transcontinental railroad operated by a single company. UP has claimed that the deal would make rail more competitive with long-haul trucking, create billions in savings for shippers, and eliminate the need for time-consuming interchange points along the Mississippi River, where cargo is passed between western railroads and eastern operators. Opponents have argued that the merger would actually reduce competitive shipping options, raise rates for shippers, and lead to longer rail freight transit times.