WASHINGTON (Reuters) -Union Pacific’s proposed purchase of smaller rival rail operator Norfolk Southern will need to be approved by the Surface Transportation Board in Washington, an independent federal agency that oversees competition and other areas of importance in the rail industry.
The $85 billion deal announced on Tuesday would create the nation’s first coast-to-coast freight rail operator and reshape the movement of goods from grains to autos across the U.S., which are issues of focus for the board.
Below are details of the board and what it will examine for the Union Pacific deal.
What is the Surface Transportation Board?
Created in 1996, the agency reviews railroad mergers, rates, service issues and big construction projects. It replaced the Interstate Commerce Commission, which was established in 1887.
STB chairman Patrick Fuchs has said he wants the agency to update the board’s regulatory framework to improve competition and reduce regulatory barriers.
The board rarely rejects mergers outright, but in 2021 it rejected Canadian National’s plan to place Kansas City Southern in a temporary “voting trust” that would have allowed Kansas City Southern shareholders to receive the deal’s consideration without having to wait for full regulatory approval. That, and a higher bid from another Canadian railroad, helped end Canadian National’s bid.
What is the process for a railroad merger?
Approval could easily take a year or more. Applicants first file a notice saying they intend to apply for a merger approval.
The application for the merger is then filed three to six months after that. The STB then will decide if it is complete or not, before opening for public comments and responses for 90 days.
It could then spend another year, hold a hearing, and get rebuttals and additional filings. Once the evidence is closed, the board will typically take another 90 days to issue a written opinion that generally includes an oversight period.
The Attorney General also has authority to weigh in on large railroad mergers, giving the Justice Department a potential say in the merger.
What does the board usually recommend for a rail merger?
The STB’s approval of the acquisition of Kansas City Southern Railway Company by Canadian Pacific Railway Limited came after a seven-day hearing and included an unprecedented seven-year oversight period and contained many conditions to address environmental impacts, preserve competition, protect railroad workers, and promote efficient passenger rail.
What factors will the Board look at for the Union Pacific deal?
The deal is the first to be considered under rules adopted in 2001 that will “substantially increase the burden on applicants to demonstrate that a proposed transaction would be in the public interest,” and would require them to show how the deal will increase competition in key areas. The board will also look at how shippers of products view the deal and its impact on unions.
The largest U.S. rail union, the International Association of Sheet Metal, Air, Rail and Transportation Workers, said it intends to oppose the Union Pacific deal in proceedings before the Surface Transportation Board on Tuesday.
It fears the deal could reduce worker safety and job security, and downgrade service quality.
(Reporting by Chris Sanders and David ShepardsonEditing by Marguerita Choy)
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