Expect a Major Rail Consolidation

Evidence, arguments, and testimony presented by the Union Pacific and Norfolk Southern and interested parties (Rail Shippers, Labor, Competitors, Federal, State, and Local government agencies, and the Public) will influence how each Surface Transportation Board (“STB” or the “Board”) Member chooses to interpret the Board’s earlier June 11, 2001 “Major Rail Consolidation Procedures” Final Ruling^[1]. The Ruling at §1180.1 (a) states, “To meet the needs of the public and the national defense, the Board seeks to ensure balanced and sustainable competition in the railroad industry. The Board welcomes private-sector initiatives that enhance “capabilities and competitiveness” and goes on to state, “the Board does not favor consolidations that reduce the transportation alternatives available to shippers unless there are substantial and demonstrable public benefits to the transaction that cannot otherwise be achieved. Such public benefits include improved service, enhanced competition, and greater economic efficiency.

Applicants shall make a good-faith effort to calculate the net public benefits their proposed rail consolidation merger would generate and explain how the transaction and conditions they propose would enhance competition. The Board will then carefully evaluate such evidence, arguments, and testimony (of all interested parties) and any conditions the applicants suggest that would not simply preserve but also enhance competition in ways that strengthen and sustain the rail network as a whole. The Board is required to provide a fair arrangement for the protection of the rail employees of applicants who are affected by a consolidation. Mergers should strengthen, not undermine, the ability of the rail network to advance the nation’s economic growth and competitiveness, both domestically and internationally. Applicants must discuss and assess the national defense implications of their proposed merger, as rail mergers must not compromise the United States military’s ability to rely on rail transportation to meet the nation’s defense needs.

The Administration’s “America First” policies emphasize domestic economic growth and the removal of burdensome and ideologically motivated regulations. The STB is a federal agency with exclusive jurisdiction over rail mergers (49 U.S.C. §11321). As a multi-member body with varying political preferences, Board members will be influenced by the current Administration’s politics as they weigh arguments, testimony, and evidence presented before making a final decision (note on August 27^th, President Trump fired Robert Primus, a Democratic board member, the only member of the board to oppose the CPKC merger). Federal law (49 U.S.C. §11324) holds the STB “shall approve and authorize a transaction when […] it finds the transaction is consistent with the public interest”. Determining what is and is not in the public interest is therefore central to the STB’s review of proposed mergers and acquisitions. The U.S. Court of Appeals for the Seventh Circuit emphasized that the Board must act within its statutory authority when, on July 8, 2025, it vacated the Board’s Reciprocal Switching Final Ruling, finding that the STB had overstepped its statutory authority and remanding the Ruling for further proceedings^[2].

Board Members will have to weigh the arguments and testimony of interested parties and then evaluate whether the rail consolidation transaction would serve the ‘public’ interest and enhance competition. Market participants are already arguing in their self-interest. CSX is being pressured^[3] and the CPKC (which already has a single line 20,000-mile transcontinental railroad is arguing against^[4]. Expect more debate to come.

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