In advance of the Surface Transportation Board (STB) evaluating a Union Pacific (UP)-Norfolk Southern (NS) merger application (yet to be filed), rival BNSF wants a separate proceeding to examine, with remedies, its allegations that UP has a history of not honoring competition-enhancing commitments such as it agreed to in 1996 when merging with Southern Pacific (SP).
In a Nov. 28 filing with the STB, BNSF says such an investigation must come ahead of evaluating the UP-NS merger application so as “to prevent further degradation” of competitive options.
STB merger rules require that within six months of the applicants’ late July 2025 notice of intent to merge, they must file the formal application. Once filed, STB rules allow for 30 days to accept (or not) the application as “complete.” Once accepted, STB publishes a procedural schedule for reviewing environmental, public interest, competition and service impacts.
BNSF says a longer timetable to permit a separate investigation is appropriate because STB precedent, “since time immemorial,” prevents “old harms” from being evaluated as part of merger application review. BNSF cites comments to that effect by now retired STB Chairperson Martin J. Oberman in 2022 during agency review of an approved Canadian Pacific-Kansas City Southern merger creating CPKC.
Alleged by BNSF is a UP “pattern of obstructive conduct” toward pro-competitive conditions imposed by STB in approving the 1996 UP-SP merger. That conduct, says BNSF, has systematically interfered with its ability to compete as was intended.
Among BNSF’s examples of UP “obstructive conduct” are UP giving “preference to its own trains” at the Eagle Pass, Tex., border crossing to Mexico; UP’s claim of “exclusive use of new sidings” at Baytown, Tex.(above); and UP’s “discriminatory dispatching” of trains.
Specifically, BNSF wants the STB—ahead of its review of the UP-NS merger application—to investigate “UP’s harmful conduct since the UP-SP merger; enforce the rights granted to BNSF to preserve competition; and modify the conditions of the UP-SP merger approval decision, as the Board deems necessary, to ensure customers are not further harmed by UP’s ongoing efforts to stifle, and its failure to preserve, competition.”
In its 106-page petition (STB Docket No. FD 32760 (Sub-No. 52), BNSF Railway Company—Petition for Review—UP/SP Merger Conditions, download below), BNSF reminds the STB that the 1996 UP-SP merger was “unprecedented in scope, combining two of the three largest railroads in the West and linking 35,000 miles of track in what became the nation’s biggest rail network.” It thus eliminated, said BNSF, direct and indirect competition across thousands of miles where the two carriers had previously gone head-to-head for customer business.
A UP-NS merger, creating the nation’s first U.S. transcontinental railroad, will further enlarge the UP network, which would have an enterprise value of $250 billion, with some 40% of U.S. rail traffic. This would dwarf rival CSX’s $83 billion value and make UP some 50% greater in enterprise value than BNSF (estimated, as BNSF is not publicly traded).
“The essential bargain struck [in 1996] by UP-SP to obtain Board approval for their merger,” says BNSF, “involved granting BNSF expansive rights and means to access shippers that otherwise would have suffered from a reduction in their competitive options as a result of the merger (so-called 2-to-1 shippers).”
To preserve those rights, says BNSF, “the Board imposed various conditions on UP, including, for example, requiring UP to (1) allow BNSF to have access to shippers at 2-to-1 points via extensive trackage rights over the combined UP/SP network; (2) allow shippers to elect to be served by BNSF when establishing new shipper facilities at 2-to-1 points and along BNSF’s trackage rights lines; (3) ensure that BNSF would have the benefit of access to certain infrastructure jointly funded with UP; and (4) ensure that BNSF has equal treatment with respect to dispatching and serving customers in several shared service areas.”
Significantly, says BNSF in support of its petition, the STB said it would “remain available—into the indefinite future—to consider and promptly resolve any disputes of general applicability relating to the conditions imposed.” BNSF says that since “UP has increasingly sought to frustrate the [1996] UP-SP merger conditions and, at times, simply refused to abide by the conditions,” its requested investigation, with remedies, is appropriate.
“With UP now proposing another unprecedented merger, this time with Norfolk Southern, the stakes for shippers nationwide could not be higher,” said BNSF Executive Vice President and Chief Legal Officer Jill Mulligan. “Before considering any new consolidation, we ask the Board to ensure the commitments made during the UP/SP merger are honored, and that competition is, at a minimum, preserved as required under the prior merger standards.”
BNSF’s allegations that UP cannot be trusted to abide by its prior commitments, punctuated by a request for a separate investigation ahead of STB accepting a UP-SP merger application, appears a clear signal that BNSF intends to be pugnacious during an expected merger review process. Its aggressive involvement, says a shipper group’s attorney asking not to be identified, “could serve to embolden CN, CPKC and CSX to join with BNSF and shipper groups in pressing for enforceable, pro-competitive conditions as part of a UP-NS merger approval.”
“I expect STB to give BNSF’s petition substantial weight,” the shipper attorney told Railway Age, emphasizing that “UP said it will abide by whatever conditions the STB may impose should its merger with NS be approved.”
