Feds pause Union Pacific-Norfolk Southern rail merger

OMAHA — The federal government on Thursday paused a proposed merger of two railroad behemoths, Nebraska staple Union Pacific and Georgia-based Norfolk Southern.

The U.S. Surface Transportation Board, an independent federal agency which regulates ground transportation and freight, requested more information about the future company.

The feds asked both companies for more details by July 27 about April’s amended application for the merger. The Surface Transportation Board must sign off on railroad combinations.

The board had rejected as incomplete a previous application in January, citing the need for a clearer explanation of expected impacts on competing railroads and haulers. 

The Surface Transportation Board on Thursday said both companies had provided “sufficient information to satisfy the completeness requirements for a major merger application.” 

However, it argued in the statement that parts of the application needed a boost, including seeking more public input on questions about whether the merger is in the public interest.

Among its specific asks, the board sought more on merged market share, downstream impacts, effects on passenger rail, competitive pressures and train car supplies.

Because of the pause’s timing, the board said the companies would have to wait for the required environmental impact review before such mergers, likely slowing merger plans.

Attorneys general from Iowa, Kansas, Florida, Montana and the Dakotas have joined business groups, competing railroads and some organized labor in opposing the merger.

One of their key concerns has been the risk to competition that could increase costs for the manufacturers, farmers and ranchers who rely on the railroads to get their products to market.

Nebraska Gov. Jim Pillen had no immediate comment Thursday. But he has been largely supportive of the deal, including state incentives to keep the merged company in Omaha.

The railroads have said the $85 billion deal would provide a one-carrier coast-to-coast rail system that would create a combined enterprise of more than $250 billion. Shares in both companies dipped following the announcement.

The two companies have said the merger would create more union jobs, increase efficiencies and boost domestic businesses at a time when many industries need to boost sales. 

Union Pacific CEO Jim Vena said in a statement Thursday he is “confident this merger will deliver more reliable and lower-cost transportation … for American businesses.”

Nebraska business leaders, Gov. Pillen step up support for Union Pacific-led merger

“We look forward to the opportunity to show the facts and demonstrate the benefits for our customers, employees and America,” Vena said.

Norfolk Southern President and CEO Mark George said the “time is right for a more competitive U.S. rail network that reduces costs for American shippers and consumers.” 

“We have more confidence than ever in the value this proposal will deliver for all stakeholders and look forward to a full and transparent review,” George said.

Reuters reported that the Trump administration, via the Justice Department, is actively monitoring the merger review under the board’s 2001 major merger framework. 

If approved, the application would seek to rename the combined company as Union Pacific Transcontinental Railroad. 

This report includes material from Examiner Senior Reporter Cindy Gonzalez’s previous work.