Following weeks of “perhapses,” “maybes,” and a “conceivably” or two—self-serving bait for valuable feedback—railroads Union Pacific (UP) and Norfolk Southern (NS) have officially announced merger plans.
BNSF and CSX have yet to signal a defensive strategy. And how CN—which previously stood outside the chapel watching rival Canadian Pacific (CP) wed Kansas City Southern (KCS)—reacts is another mystery. Not to be ignored is a rich history of “inconsistent merger applications,” by which snubbed brides ask the rail regulator—Surface Transportation Board (STB) in this instance—to order a menage-a-trois as a condition of the primary merger. That could occur with UP-NS or, if it occurs, BNSF-CSX.
Although the STB has exclusive authority under the law to approve or reject a railroad merger application, the law directs STB to “accord substantial weight” to comments of the Department of Justice’s Antitrust Division (DOJ).
It could be two years before the stereotypical fat lady sings as numerous pre-merger formalities must first be satisfied. Once the STB accepts a formal merger application, it has 15 months for evidence gathering and deliberation before issuing a final “yes” or “no”—unlikely before mid- or late-2027. (For more information on railroad mergers, visit the Merger Resources quick link on the STB website.)
An early problematic hurdle is avoided by the absence of a voting trust under which shares of the railroad to be “acquired” are placed with a neutral trustee, permitting the two railroads to operate independently while awaiting an STB decision on the merger application.
In 2016, when CP sought to acquire NS, DOJ said it had “serious competitive concerns” with the voting trust—the deal voluntarily scuttled ahead of STB deciding. In 2021, STB’s rejection of a voting trust derailed a CN-KCS merger attempt. The STB did, however, approve a voting trust ahead of the CPKC merger.
Handicappers’ Guide
If you wager on who votes how, consider:
Chairperson and Republican Patrick J. Fuchs, 37, serving a second term expiring Jan. 14, 2029, is self-committed to “transparency,” to “follow the law” and assuring captive shippers “have access to markets on reasonable terms.” Coupling that to a voting record favorable and unfavorable to railroads, suggests he has no agenda—and is unlikely to adopt one given his relative youth and importance of preserving future opportunities in the public or private sector.
Republican Michelle A. Schultz, 53, whose first term expires Jan. 11, 2026, will require, if she is to cast a vote in 2027, a second nomination by POTUS 47, plus Senate confirmation. Said to have a “cautious approach” to matters of first impression, Schultz has been in lockstep with Fuchs—for independent reasons and not political or “me-too,” say sources. She recently recommended, following listening sessions with attorneys practicing before the STB, a streamlining of processes and procedures to speed decision making.
Democrat Robert E. Primus, 55, is in his second and final (by statute) term that expires Dec. 31, 2027. He has had testy exchanges with rail CEOs, but a cordial one over service and operational issues with UP CEO Jim Vena. Primus’ thumb is perceived on the scales in favor of rail labor and against carrier harmonizing of headcounts based on productivity improvements. At a rail labor gathering, he said, “Thank you for letting me represent you.” Primus, the lone “no” vote on the CPKC merger, cited market-power concentration and concern that mergers “degrade working conditions, depress wages and impair or eliminate organized labor.”
Democrat Karen J. Hedlund, 77, whose first term expires Dec. 31, 2025, will require renomination by POTUS 47 (her first was by President Biden) and Senate confirmation if she is to cast a vote in 2027. She may consider retirement, but if a merger filing is made—merger decisions among the most significant of STB responsibilities—she might seek a second term. When recently asked about a rail merger, Hedlund said, “Bring it on.”
A fifth seat (to fill former Chairperson Martin J. Oberman’s vacancy) is open for a Republican nominee. There is no evidence POTUS 47—pro-business and anti-regulation—has an opinion on rail mergers. The Heritage Foundation’s Project 2025, which POTUS 47 follows closely, makes no mention of the STB or rail mergers.
Presidential politics still matters, as the STB chairperson serves at the President’s invitation and the President chooses nominees.
Notable is that few corporations are as closely aligned with Republican administrations. Ronald Reagan’s Transportation Secretary Drew Lewis became UP chairperson and CEO. Andrew Card was George H.W. Bush’s Transportation Secretary and then George W. Bush’s chief of staff before becoming a UP Board member—as did Vice President Dick Cheney. A UP “funeral train” transported the casket of the elder Bush from Houston to College Station, Tex., for burial in 2018.
This balances against a current thin-skinned President whose loyalty to others is transactional and never enduring. George H.W. and son George W. Bush were harshly evaluative of POTUS 47’s first term (2017-2021). George W. Bush neither endorsed nor supported POTUS 47’s 2024 reelection. Cheney publicly endorsed POTUS 47 opponent Kamala Harris. Well documented is that POTUS 47 does not forget slights.
Nonetheless, there appears no justification to presume STB Republican members are under White House pressure to vote other than as the evidence leads them independently.
New Merger Rules
Should the now announced UP-NS merger intent advance to a formal merger application before the STB, it will be the first decided under New Merger Rules adopted by the agency in 2001. The CPKC transaction was decided under an exception to those rules owing to KCS’s small size relative to other Class I railroads—the STB in 2001 saying a KCS transaction would “not necessarily raise the same concerns and risks as other potential mergers between Class I railroads.”
The New Merger Rules increase applicant burdens to demonstrate the transaction is in the public interest and enhance—not simply preserve—competition. Said the STB in 2001:
“While further consolidation of the few remaining Class I carriers could result in efficiency gains and improved service, the Board believes additional consolidation in the industry is also likely to result in a number of anticompetitive effects, such as loss of geographic competition, that are increasingly difficult to remedy directly or proportionately. Offering some new or enhanced rail-to-rail competition or other competitive benefits is likely to be necessary to resolve substantial difficulties to tip the balance in favor of the public interest.”
CSX and NS, which in 1998 gained STB approval for joint acquisition of Conrail, later termed the 2001 New Merger Rules “apparent antagonism toward mergers.”
Competition enhancements might include constructing choke point bypass routes around Chicago and St. Louis; allowing segment rates where bottlenecks exist; offering reciprocal switching and trackage and traffic rights (the latter permitting freight solicitation); and demonstrating how train speeds will increase and terminal dwell times will improve. Advances in driverless trucks make cost savings and efficiencies from merger-created single-line service essential to improving the railroads’ competitive position, as intermodal growth increasingly is essential to railroad financial health.
The New Merger Rules also require an assessment of “downstream effects.” Most obvious are responsive mergers creating an east-west transcontinental duopoly, although such already exists regionally (and in Canada). Also to be provided is a “service assurance plan” to cure unexpected hiccups during the merger transition.
Is the STB prepared? While its fiscal year 2026 budget request of $40.8 million is a $7 million cut, Fuchs cites cost savings from eliminating “wasteful” contracts, not filling attrition-created “non-core” vacancies, plans to implement artificial intelligence for repetitive tasks, and clearing out long-in-limbo cases.
Railway Age Capitol Hill Contributing Editor Frank N. Wilner was a White House appointed chief of staff to Republican STB member Gus Owen when the 1996 UP-Southern Pacific merger was approved. He is author of Railroads & Economic Regulation,” available from Simmons-Boardman Books, 800-228-9670.
