The Surface Transportation Board (STB) on Jan. 14 approved, with conditions, CN’s acquisition of Class III Iowa Northern Railway Company (IANR), as well as related notices of exemption for trackage rights. There were no objections to the transaction; only certain conditions were requested. Current STB Chair Robert Primus filed the lone dissent. IANR is a 218-mile short line located entirely within Iowa. On Jan. 30, STB amended the transaction’s labor protection conditions.
“In today’s decision, the majority finds that the proposed transaction has potential anticompetitive impacts, but that those impacts may be sufficiently mitigated through targeted conditions,” STB said. “As a result, the Board approves the proposed acquisition with a number of conditions, including, most significantly, several specific requirements designed to keep gateways open on commercially reasonable terms in perpetuity; compliance with several reporting requirements during a three-year oversight period established by the Board; development of a scheduled local service plan; and maintenance of access to locations in current voluntary reciprocal switching tariffs.”
Board Members Hedlund, Schultz and Fuchs commented with separate expressions. Primus dissented with a separate expression: “While I disagree with today’s decision, as I believe this transaction will cause a substantial lessening of competition that is not outweighed by the transaction’s modest public benefits, I recognize the views of the other Board members in favor of approving this transaction. I will not stand in the way of a majority and bringing a conclusion to a matter before the Board.”
“The decision allows CN to combine IANR’s 175 route-miles with CN’s nearly 20,000-mile rail network as early as Feb. 13, 2025,” CN said. “A combined CN-IANR will offer single-line service to better connect grain, fertilizer, renewable fuels, and industrial markets to CN’s North American network. Customers and local businesses along the IANR network will benefit from new optionality to respond to the needs of their existing markets and accelerate growth in new markets.
“We recognize and thank the STB for its commitment to a rigorous process that has yielded the right outcome,” said CN President and CEO Tracy Robinson, Railway Age’s 2023 Railroader of the Year. “We look forward to welcoming the team at Iowa Northern Railway into our CN family of railroaders, and we are carefully preparing for a successful integration. We are excited to grow our network, offering customers, farmers and our supply chain partners with single-line access to new markets. This is an important step in our growth plan, reinforcing our commitment to providing customers with exceptional rail service and powering the economy.”
“I am honored by the STB’s approval of Iowa Northern joining with CN,” said Chairman Daniel Sabin. “This combination is a milestone in my 55-year career. I am proud of what Iowa Northern’s employees and customers have built and their important role in Iowa’s economy. I am also excited about the benefits of our combination for customers, employees and the communities we serve.”
Conditions
“The application seeking authority for [CN] to acquire control of Iowa Northern is approved, subject to the following conditions, as discussed more fully [in the decision],” STB said. Thye primary condition is the applicants’ commitments to keep gateways open on commercially reasonable terms in perpetuity, with the clarifications and enhancements … including requirements that:
- “Applicants provide to a shipper, upon request, a written justification for any rate increase above the rate of inflation, measured by Rail Cost Adjustment Factor or, in the case of a rate that contains a fuel surcharge provision, the All‐Inclusive Index Less Fuel (AII-LF) Index published by the Association of American Railroads, during the oversight period for traffic that originates or terminates on the IANR legacy lines, including interline movements.
- “Applicants provide quarterly reports on interchange volumes at gateways for at least three years as part of the Board’s oversight. The required reports will include (1) a count of cars interchanged in total and for each interchange partner
- and (2) a count of cars interchanged for each two-digit STCC and be submitted in a template provided by the Board. With their first submission, Applicants will also provide the same historical information for a two-year period dating back from the effective date of this decision, or if data is no longer available for the entirety of that time period, then from the earliest date for which it is available.
- “Applicants preserve 100% of the traffic tapes covering the duration of the Board’s oversight period.
- “Applicants’ commitments to develop and implement a scheduled local service plan and a report on the progress of implementation of a scheduled local service plan and customer service integration nine months from the effective date of the Board decision, including requirements that 1) Applicants shall submit such initial plan and report to the Board and all shippers on the IANR system. In the initial plan, Applicants should include a detailed description of IANR’s services pre-merger and what, if any, changes have been made since the voting trust was instituted; and 2) Applicants shall submit, during the oversight period, quarterly narratives regarding changes to any operating plans on the former IANR system to the Board and any impacted shippers
- “Applicants, for the duration of the oversight period, are prohibited from unilaterally terminating or modifying the interchange agreements between CN/GTC-Iowa Northern and CRANDIC.
- “Applicants maintain existing carrier access to locations in current CN and Iowa Northern voluntary reciprocal switch tariffs and that they do so by maintaining ‘commercially reasonable rates and service,’ and by allowing access to reciprocal switching for new shippers and shipments of new commodities on the IANR network.
- “Applicants must comply with the oversight condition, including the reporting requirements described above.
- “The terms of the settlement agreement entered into by CN/GTC with IAIS (Class II Iowa Interstate).
- “Applicants’ adherence to their commitments to 1) maintain the status quo for IANR outbound traffic until the parties can reach a mutually beneficial agreement on interchange; and 2) utilize confidential, voluntary, binding arbitration to permit efficient resolution of any future commercial disputes over the gateway commitment with customers, at a customer’s request.
On Jan. 31, the STB issued a decision (download below) that “corrects the employee protective conditions imposed in the Board’s earlier decision … In the application, CNR, GTC, and IANR (collectively, Applicants) noted that, should the proposed transaction be approved, they would agree to imposition of labor conditions in accordance with New York Dock Railway—Control—Brooklyn Eastern District Terminal … The Board agrees that New York Dock is the appropriate level of employee protection for this control transaction involving a Class I carrier. In the Approval Decision, however, the Board inadvertently applied New York Dock as modified by Wilmington Terminal Railroad—Purchase & Lease—CSX Transportation Inc. … The employee protective conditions outlined in Wilmington Terminal, however, are typically imposed only in line sale transactions. By letter filed on Jan. 29, 2025, Applicants informed the Board that the Approval Decision imposed the wrong employee protective conditions.”
Background
On Jan. 30, 2024, CN and IANR filed an application seeking Board approval for CN to acquire IANR. On the same date, Chicago, Central & Pacific Railroad Company (CCP), an indirect rail carrier subsidiary of CN, filed a verified notice of exemption seeking authority to acquire overhead and limited local trackage rights from IANR for an approximately 68.3-mile rail line between Cedar Falls Junction in Cedar Falls, Iowa, and Manly Yard in Manly, Iowa. Also on Jan. 30, 2024, I IANR filed a verified notice of exemption seeking authority to acquire overhead and limited local trackage rights from CCP for rail lines totaling approximately 200.9 miles in Iowa. On Feb. 29, 2024, the Board accepted the application and preliminarily determined the transactions to be minor. Several stakeholders submitted filings, including requests for certain conditions to be imposed.
Significant filings received by the Board are addressed in the full decision, Canadian National Railway Company and Grand Trunk Corporation—Control—Iowa Northern Railway Company, Docket No. FD 36744 (download below):
