A federal agency controlled by President Joe Biden’s representatives could soon approve a merger between two major railroad companies, despite warnings from the Justice Department, a step that would further consolidate the sector accused of cost-cutting and safety lapses .
The Surface Transportation Board is expected to make a final decision soon on the $27 billion merger between Canadian Pacific and Kansas City Southern. The merger, if approved, would give the combined railroads control of lines running from Canada to Mexico — a potentially blessing for the Canadian oil industry, which increases the possibility of more oil-carrying trains running through American cities and towns.
Approval of the merger would go against both the Biden administration’s longtime push to revive antitrust enforcement and its more recent push against the power of the rail industry after the toxic derailment of a Norfolk Southern train in East Palestine, Ohio.
The board’s timing and final decision remain up in the air, even as antitrust lawyers are increasingly worried it will approve the merger — and Canadian Pacific executives are projected trust.
The White House declined to comment. “We do not comment on pending decisions by independent agencies, including the Surface Transportation Board,” a White House spokesman said.
Canadian Pacific did not respond to a request for comment. Both Canadian Pacific and Kansas City Southern have stepped up their lobbying efforts in recent months as they seek final approval of the merger, hiring former lawmakers and aides who worked on transportation issues.
Railroad freight was one of the first industries to experience rapid consolidation following industry deregulation in the late 1970s. In 1980, there were 40 major railroad companies in North America. Today there are only seven.
“We’re already at such a point of massive consolidation that we’re going to have a rail line going from Halifax, Nova Scotia, to Vancouver, through the Midwest and into Mexico,” said Phillip Longman, policy director at Progressive. Antitrust group Open Markets. “It will make the old transcontinental railroad look like a branch line.”
Progressives argue that consolidation, along with increased Wall Street investment and interest in railroad companies, has given rise to cost-cutting, shortcuts to safety and a culture that fights any attempts at government regulation. The result, progressives argue, is more risks, more derailments and more accidents like the one in eastern Palestine.
“The basic business model is ‘cut expenses faster than we cut revenue,'” Longman said. “They’re compromising security everywhere.”
Canadian Pacific and Kansas City Southern are the sixth- and seventh-largest freight railroads in North America, and their merger would make it the first of two Class I railroads — roughly the largest companies in industry — in 20 years.
The companies have argued that there are few competitive threats in the merger because they operate in a broadly distinct geographic territory: Pacific Pacific in Canada and the upper Midwest; Kansas City Southern in the South, Texas and Mexico. They also said the merger would take more than 64,000 carbon-intensive long-haul trucks off the road each year.
“Our combination creates an unprecedented single line network connecting three nations. It’s a once-in-a-lifetime combination to inject new competition into the U.S. rail industry, where every existing customer has more options, not one less option,” Canadian Pacific CEO Keith Creel said during the board hearing of administration from September regarding the merger. . “And indeed, many shippers will have an alternative single-line rail option where they only have one today.”
Antitrust lawyers argued that earlier promises that rail mergers would take trucks off the road were overblown and said further consolidation would only exacerbate existing problems.
“Lack of competition has allowed railroads to cut capacity, capture and hoard business, lay off thousands of workers, and threaten the integrity of America’s freight network and supply chains, all while reaping monopoly profits.” he said Katie Porter (D-Calif.) wrote in a letter to the board opposing the merger.
The STB is independent of the Department of Transportation, and Biden appointed three of its five members. The Board has the final say on rail mergers and can reject any merger it deems to be against the public interest.
In a filing with the board, the Justice Department’s antitrust division remained silent and directly opposed the merger. But he suggested that further consolidation of the rail sector should be closely watched.
“The board should carefully consider the competitive impact of further consolidation,” department attorneys wrote. “This is especially relevant in light of the recent supply chain disruptions that have devastated American consumers and businesses. Rail freight connects us, from farms to backcountry cities and ports, and carries the goods Americans depend on. Competition in this critical infrastructure is essential.”
City staff released a significant environmental impact statement on the proposed merger on Jan. 27, and federal law requires the council to wait at least a month before issuing a final decision.
The two railroads combined have spent nearly $2 million lobbying for the merger since early 2021, according to federal lobbying records, with $320,000 going to former Sen. Byron Dorgan (DND) and $440,000 to former Rep. Jim. Slattery (D-Kan.).
The Surface Transportation Board was one of dozens of federal agencies covered by Biden 2021 executive order directs the government to do more to promote competition and reject monopoly power.
And the board took a number of important steps to spur competition in an already heavily regulated industry: It proposed a rule that would allow so-called tied shippers — those served by only one railroad — to request the services of another. the railroad owned by the rail monopoly and passed a rule that gives shippers more leverage when challenging rates they deem unreasonable.
I’m a passionate and motivated journalist with a focus on world news. My experience spans across various media outlets, including Buna Times where I serve as an author. Over the years, I have become well-versed in researching and reporting on global topics, ranging from international politics to current events.