Federal rail board challenges potential Canadian Pacific-Norfolk Southern merger

[NS Newsfeed]

Two months after news broke of a potential merger between Canadian Pacific Railway and Norfolk Southern Corp., roughly two dozen letters have been posted on the website of the U.S. Surface Transportation Board registering wide-ranging concerns about the plan.



The letters, posted Friday, are from an array of interested parties, business and trade groups, members of Congress - including Virginia's delegation - and state officials.



Together, they embody a tapestry of questions, concerns, fears and outright opposition, calling on the Surface Transportation Board, which has federal oversight of railroad mergers, to closely scrutinize any proposal.



The opinions expressed in the letters are more evidence that Norfolk Southern's leadership "continues to mislead all stakeholders, including shippers, trade unions and lawmakers before they have even sat down with us to discuss the details of this transformational opportunity," wrote Martin Cej, a Canadian Pacific spokesman, in an email Friday.



A Norfolk Southern spokeswoman declined to comment.



In mid-November, Norfolk Southern announced that it had received an offer from Canadian Pacific, which it rejected in early December, calling it "grossly inadequate." The Calgary-based railroad modified its offer twice, only to have those offers spurned as well.



U.S. Senator Amy Klobuchar, D-Minn., was the first to weigh in, citing her state's position as the No. 3 agricultural exporter in the nation and how critical rail service is to producers.



"Significant consolidation has already occurred in the railroad industry," she wrote in a Dec. 7 letter, adding that the number of Class I railroads in the nation has shrunk from about 26 in 1980 to seven today. Of those seven, four handle more than 90 percent of the nation's rail freight, she wrote, voicing concern that "this proposed merger, if completed, would become the catalyst for a final round of railroad industry consolidation."



Other concerns ranged from the nature of the "voting trust," the mechanism that Canadian Pacific has proposed for acquiring Norfolk Southern, to reduced competition, the impact on traffic through Chicago, cuts at Norfolk Southern as part of a takeover, ceding control of a U.S. railroad to a Canadian company and impacts on "short line" railroads, which link some customers to major carriers.



Groups and individuals submitting letters included the House Judiciary Committee, Subaru of America, Illinois' congressional delegation, the Indiana and Pennsylvania manufacturers associations and the South Carolina-based Palmetto AgriBusiness Council.



"We do not believe a CP acquisition of Norfolk Southern would be in the public interest of the Commonwealth of Virginia," wrote Sens. Tim Kaine and Mark Warner, joined by 10 of the 11 Virginia members of the House of Representatives, in a Dec. 16 letter to the board. "Instead, the proposed merger appears likely to create significant public interest harm."



Reuters, which earlier this week wrote about the letters before the STB posted them, reported Friday that two trade unions representing workers at Norfolk Southern had joined those opposed to a merger.



As of late Friday, no official documents were pending.



"At this time, there is no proceeding before the agency related to a merger of CP and NS," the Surface Transportation Board stated on its website, above links to the letters that can be found at tinyurl.com/STBletters.