March 29, 2023

Brighton Journal

Complete News World

The United States allows the Canadian Pacific Railway and Kansas City to merge

A federal regulator on Wednesday approved a Canadian freight railroad’s plan to buy an American competitor, a $31 billion deal that would make the railroad the first to operate across North America.

In approving the deal, the regulator, the Surface Transportation Board, said the new single-line service would divert about 64,000 trucks a year to rail from road, potentially enhancing safety and reducing carbon emissions, and adding more than 800 union jobs in the United States. The Surface Transport Board said the merger would not reduce competition.

“Overall, the merger of these two railroads will benefit the American economy and constitute an improvement for all citizens in terms of safety and the environment,” said Martin J. Opperman, chairman of the five-member board, in a press release. conference on Wednesday.

Under the merger plan, Canadian Pacific, the sixth-largest freight railroad by revenue in the United States, agreed to purchase the second-largest carrier, Kansas City Southern. Combined rail will never be outdone by the fifth largest airline, Canadian National.

The deal is the first merger between the two major railways since the 1990s. It also caps a years-long campaign by Canada Pacific for growth. The company has unsuccessfully sought mergers with several other large railroads, including the Norfolk Southern and X-X, over the past decade.

Canadian Pacific said it may take over southern Kansas City as soon as April 14, creating a new carrier, Canadian Pacific Kansas City. The company expects to spend three years bringing the rails together. The combined company, based in Calgary, Alberta, will operate about 20,000 miles of track and employ about 20,000 people.

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“This decision clearly recognizes the many benefits of this historic combination,” Canadian Pacific CEO Keith Creel said in a statement. “As the STB has found, it will stimulate new competition, create jobs, lead to new investments in our rail network, and drive economic growth.”

Mr. Opperman said the merger is known as an “end-to-end” merger because there is little overlap between the companies’ networks, a unique feature among recent rail mergers.

“There will be no loss in a parallel competitive path by bringing these two lines together,” he said. “This is a central fact in this decision.”

While the board approved the merger, it imposed some conditions. Railroads would have to keep open their existing gates, junctions where railroads meet and shippers have the opportunity to transfer their goods from one company’s trains to another. The board also created a process that allows shippers to challenge certain rate increases by the new company. Canadian Pacific has requested additional data over seven years so the board can monitor compliance with the conditions it imposes for approval of the merger.

The decision came amid growing concerns about the deal. In a letter to the Surface Transportation Board in January, the DOJ said it had “serious concerns” about consolidating the industry and asked the regulator to carefully examine the merger. Sen. Elizabeth Warren, Democrat of Massachusetts, this month asked the Board of Transportation to block the deal outright, saying it would reduce competition and could lead to higher shipping costs, fewer jobs, and more service disruptions.

In a letter to the agency, she wrote: “This merger clearly fails the public interest test, and accordingly, I ask the STB to uphold and deny the law.”

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The board has a congressional mandate to review railroad mergers considering their impact on transportation for the public and on competition, among other factors.

Mr. Opperman noted that Canadian Pacific and Kansas City Southern were the smallest of the large American freight carriers known as Class 1 railroads. He also acknowledged criticisms that the industry had really become too tight-knit in recent decades.

He said, “This merger presented the scene that we are working on today, and we must act in the best interests of the country as a whole when considering such a deal.” He said the merger would “actually provide a stronger competitive landscape”.

The board’s decision also took into consideration the environment and other factors. in Detailed review in January, the board found that the merger would have little negative impact on safety, air quality, or other concerns, although some communities may experience a rise in air or noise pollution. Mr. Obermann also said on Wednesday that the merger could improve safety by removing the transport of hazardous materials from roads to rail.

Rail safety has taken on new importance since the Norfolk Southern train derailed in East Palestine, Ohio, in early February, causing a spill of hazardous chemicals and prompting officials to allow the controlled burning of some of the materials. On Tuesday, the Ohio Attorney General filed a lawsuit against Norfolk Southern.