Union Pacific, Norfolk Southern File Merger Application with Federal Rail Board

Union Pacific Corp. and Norfolk Southern Corp. are a step closer to merging after filing an application Dec. 19 with the Surface Transportation Board requesting approval to combine the two railroads.

The companies entered into a merger agreement on July 29 with the aim of creating the United States’ first transcontinental railroad. 

The move has been met with opposition from chemical industry trade groups, including the American Chemistry Council and the Alliance for Chemical Distribution. 

ACC contends the merger would create a monopoly that could lead to higher freight costs and more delivery disruptions.

In a Nov. 25 news release, the trade group stated the deal is gaining more detractors, including bipartisan pushback from U.S. senators and state attorney generals. 

A coalition of more than 60 trade associations, chambers of commerce and businesses sent a letter dated Nov. 24 to the Surface Transportation Board, or STB, highlighting the potential consequences of the merger, including supply chain disruptions. 

The letter writers noted that four Class I railroads control more than 90% of freight rail traffic. 

“The proposed UP/NS transaction would be the largest rail merger in history and would put control of more than 40% of rail traffic in the hands of a single railroad,” stated the letter, signed by ACC, ACD and groups from various other manufacturing sectors. 

Unions Join Opposition to Rail Consolidation 

Two rail unions, the Brotherhood of Locomotive Engineers and Trainmen and the Brotherhood of Maintenance of Way Employes division also have opposed the merger. 
Eric Byer, CEO of the Alliance for Chemical Distribution, shared statistics from the Union Pacific Railroad website in a LinkedIn post hours before the STB filing, arguing that the figures showed the merger was driven purely by financial motives. 

“Pretty telling link about how Union Pacific Railroad views this announcement today with Norfolk Southern,” he stated. “It's all about the financial benefit to shareholders. “Safety, operational efficiency, especially for shippers, and improved customer service are musts and simply won't be priorities with this proposed merger.”

The data in the linked site shows the value that the deal will create for Union Pacific shareholders. ACD has stated that most of its members already are served by one railroad and that rail reform is necessary to hold the railway accountable for supply chain disruptions “caused by extensive monopolies and an outdated regulatory system.”

Rail is a critical mode of transportation for the chemical sector. The industry shipped approximately 2.3 million carloads of plastics and chemical products in 2022, according to ACC.  

With estimated production increases of over 25 million metric tons by 2032, the trade group estimated the industry will generate more than 120,000 additional railcar shipments per year. 

Railroads Tout Efficiencies, Jobs 

Union Pacific stated in its news release that the merger combines two financially strong railroads with complementary networks, backed by a comprehensive safety integration plan and commitments to preserve all union jobs while adding approximately 900 new positions. The companies have characterized this as the most thoroughly planned railroad merger in history, with an estimated $2.1 billion of incremental capital to support revenue and cost synergies, with an expected $133 million in annual capital synergies.

The merger will create efficiencies by connecting the two systems, effectively bridging the gap between East and West, allowing freight to bypass congested interchanges, according to Union Pacific.

It will also lead to more direct access to global markets by providing single-line access to more than 100 ports.

The combined railroad also expects to add several routes, including two new daily intermodal train pairs connecting the East and the West with more direct service. The new routes would cut estimated transit times from Southern California to the Ohio Valley and Northeast by up to 20 hours and from Southern California to the Southeast by more than two days, Union Pacific noted.