Notice2026-10751
Union Pacific Corporation and Union Pacific Railroad Company-Control-Norfolk; Southern Corporation and Norfolk Southern Railway Company
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 29, 2026
Effective
May 28, 2026
Issuing agencies
Surface Transportation Board
Abstract
The Surface Transportation Board (the Board) is, among other things, accepting for consideration the revised, primary application filed on April 30, 2026 (the Revised Application), by Union Pacific Corporation (UPC) and Union Pacific Railroad Company (UP) (collectively, Union Pacific) and Norfolk Southern Corporation (NSC) and Norfolk Southern Railway Company (NS) (collectively, Norfolk Southern) (Union Pacific and Norfolk Southern collectively, Applicants). The Revised Application seeks Board approval for (i) the acquisition of control by UPC of NSC, and through NSC of NS and NS's rail carrier subsidiaries, and (ii) the resulting common control by UPC of UP and NS and the consolidation of the rail operations of UP and NS. This proposal is referred to as the Transaction. The Board is also accepting a related application. This decision embraces Union Pacific Corp.--Control--Peoria & Pekin Union Railway, Docket No. FD 36873 (Sub-No. 1). However, the Board will hold both proceedings, including the environmental review of the Transaction, in abeyance pending further Board order and will seek supplemental information from Applicants by July 27, 2026.
Full Text
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<title>Federal Register, Volume 91 Issue 103 (Friday, May 29, 2026)</title>
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[Federal Register Volume 91, Number 103 (Friday, May 29, 2026)]
[Notices]
[Pages 32171-32189]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-10751]
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SURFACE TRANSPORTATION BOARD
[Docket No. FD 36873]
Union Pacific Corporation and Union Pacific Railroad Company--
Control--Norfolk; Southern Corporation and Norfolk Southern Railway
Company
AGENCY: Surface Transportation Board.
ACTION: Decision No. 21 in Docket No. FD 36873 Notice of Acceptance of
Revised Application and a Related Filing; Holding Proceedings in
Abeyance; Requiring Supplemental Information; and Ruling on a
Communications Motion Related to the Proceedings.
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SUMMARY: The Surface Transportation Board (the Board) is, among other
things, accepting for consideration the revised, primary application
filed on April 30, 2026 (the Revised Application), by Union Pacific
Corporation (UPC) and Union Pacific Railroad Company (UP)
(collectively, Union Pacific) and Norfolk Southern
[[Page 32172]]
Corporation (NSC) and Norfolk Southern Railway Company (NS)
(collectively, Norfolk Southern) (Union Pacific and Norfolk Southern
collectively, Applicants). The Revised Application seeks Board approval
for (i) the acquisition of control by UPC of NSC, and through NSC of NS
and NS's rail carrier subsidiaries, and (ii) the resulting common
control by UPC of UP and NS and the consolidation of the rail
operations of UP and NS. This proposal is referred to as the
Transaction. The Board is also accepting a related application. This
decision embraces Union Pacific Corp.--Control--Peoria & Pekin Union
Railway, Docket No. FD 36873 (Sub-No. 1). However, the Board will hold
both proceedings, including the environmental review of the
Transaction, in abeyance pending further Board order and will seek
supplemental information from Applicants by July 27, 2026.
DATES: The effective date of this decision is May 28, 2026. Applicants
must provide the information discussed below by July 27, 2026.
ADDRESSES: Any filing submitted in the primary or related proceeding,
referring to Docket No. FD 36873, must be filed with the Board either
via e-filing on the Board's website or in writing addressed to: Surface
Transportation Board, 395 E Street SW, Washington, DC 20423-0001. In
addition, one copy of each filing must be sent (and may be sent by
email only, if service by email is acceptable to the recipient) to each
of the following: (1) Secretary of Transportation, 1200 New Jersey
Avenue SE, Washington, DC 20590; (2) Attorney General of the United
States, c/o Assistant Attorney General, Antitrust Division, Room 3109,
Department of Justice, Washington, DC 20530; (3) UP's representative,
Michael L. Rosenthal, Covington & Burling LLP, One CityCenter, 850
Tenth Street NW, Washington, DC 20001; (4) NS's representative, Raymond
A. Atkins, Sidley Austin LLP, 1501 K Street NW, Washington, DC 20005;
(5) any other person designated as a Party of Record on the service
list; \1\ and (6) the assigned administrative law judge (ALJ), the Hon.
Jenifer Soulikias, at <a href="/cdn-cgi/l/email-protection#3f5e5355114c504a535654565e4c1156515d50477f4c4b5d11585049"><span class="__cf_email__" data-cfemail="d5b4b9bffba6baa0b9bcbebcb4a6fbbcbbb7baad95a6a1b7fbb2baa3">[email protected]</span></a>.
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\1\ The Board has received numerous submissions through its e-
filing system that do not include the required certificate
indicating that parties of record have been served. Submissions
without a certificate of service will not appear as filings and will
not be considered by the Board. See Union Pac. Corp.--Control--
Norfolk S. Corp., FD 36873 et al., slip op. at 1-2 (STB served Mar.
17, 2026). Commenters who need assistance with the Board's filing
requirements may contact the Board's Rail Customer and Public
Assistance service at <a href="/cdn-cgi/l/email-protection#6e1c0d1e0f2e1d1a0c40090118"><span class="__cf_email__" data-cfemail="3042534051704344521e575f46">[email protected]</span></a> or (202) 245-0238.
FOR FURTHER INFORMATION CONTACT: Nathaniel Bawcombe at (202) 915-3555.
If you require an accommodation under the Americans with Disabilities
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Act, please call (202) 245-0245.
SUPPLEMENTARY INFORMATION: On July 30, 2025, Applicants filed a notice
of intent to file their original application (the Application). By
decision served August 28, 2025, the Board found the Transaction to be
a ``major'' transaction under 49 CFR 1180.2(a), as it is a control
transaction involving two or more Class I railroads. UPC presently
controls UP, a Class I railroad, and proposes to acquire common control
of NS, also a Class I railroad. See Union Pac. Corp.--Control--Norfolk
S. Corp. (Decision No. 3), FD 36873, slip op. at 2 (STB served Aug. 28,
2025). The Board took other actions in Decision No. 3 including (1)
assigning Judge Soulikias as ALJ to provide initial resolution of
discovery disputes and (2) requiring Applicants to file additional
information, generally, concerning their systems, traffic, and
interchange commitments. Id. at 2-4.
Applicants filed the Application on December 19, 2025, seeking
authority for the Transaction. Stakeholders filed comments concerning
completeness, and Applicants filed a response.
The Board rejected the Application in a decision served on January
16, 2026, finding that it was incomplete because it did not contain
certain information required by the Board's regulations. See Union Pac.
Corp.--Control--Norfolk S. Corp., (Decision No. 9), FD 36873 et al.,
slip op. at 1 (STB served Jan. 16, 2026). Specifically, the Application
was incomplete because the impact analyses proffered to satisfy 49 CFR
1180.7(b) did not contain market share projections for the entity to be
created by the Transaction that were consistent with the claims
elsewhere in the Application that the new entity would experience
growth by diverting traffic from trucks and other rail carriers. Id. at
1-2. The Application was also incomplete because it did not contain the
entire merger agreement required by 49 CFR 1180.6(a)(7)(ii), including
certain documents that were expressly defined to be part of the merger
agreement and that defined Applicants' obligations under it. Id. at 2.
The Board also rejected two related applications through which
Applicants sought to acquire control of the Peoria and Pekin Union
Railway Company (PPU) in Docket No. FD 36873 (Sub-No. 1) and the
Terminal Railroad Association of St. Louis (TRRA) in Docket No. FD
36873 (Sub-No. 2). Id.
The Board stated that its rejection was without prejudice to
Applicants filing a revised application. Id. The Board provided that,
if Applicants were to refile, they must also clarify a number of
smaller and technical issues not raised by commenters. Id. at 2 n.3,
Technical App. The Board also noted that Applicants could make
``additional changes to improve their Application now that they have
received comments from other stakeholders.'' Id. at 12.
On March 18, 2026, the Board, among other things, sought
transaction-related documents to facilitate its review. See Union Pac.
Corp.--Control--Norfolk S. Corp., FD 36873 et al. (Decision No. 13),
slip op. at 5-7 (STB served Mar. 18, 2026). Applicants filed responsive
materials on April 7, 2026. BNSF Railway Company (BNSF) replied with a
motion to enforce Decision No. 13, arguing that Applicants likely
possess more documents responsive to Decision No. 13 than were
produced, given the magnitude of the Transaction. (BNSF Mot. 2-3, Apr.
27, 2026.) Canadian Pacific Railway Company d/b/a Canadian Pacific
Kansas City and CPKC (CPKC) filed in support of BNSF's motion on April
28, 2026. On May 8, 2026, Applicants replied in opposition to BNSF's
motion and CPKC's response, arguing that they complied with Decision
No. 13.
On April 30, 2026, Applicants filed the Revised Application,
asserting that it contains the additional information requested in
Decision No. 9 as well as supplemental analyses in response to comments
received on the Application. (Rev. Appl. 1-12.) \2\ On the same date,
the Board issued a decision permitting comments, limited to whether the
Revised Application contains the information required in 49 CFR part
1180, to be filed by May 8, 2026, and permitted Applicants to file a
reply by May 12, 2026. See Union Pac. Corp.--Control--Norfolk S. Corp.
(Decision No.
[[Page 32173]]
17), FD 36873 et al., slip op. at 2 (STB served Apr. 30, 2026).\3\
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\2\ Citations to the Revised Application refer to the volume
number and page number that appear on the bottom right-hand corner
of each page. For example, ``Rev. Appl. 1-12'' refers to Revised
Application, Volume 1, page 12. Citations to an entire component of
the Revised Application refer to the Revised Application volume
number and exhibit number, if applicable. For example, ``Rev. Appl.,
Vol. 4, Ex. 7 (Form S-4)'' refers to the entirety of exhibit 7.
While attempting to avoid references to confidential or highly
confidential information in Board decisions, the Board reserves the
right to rely upon and disclose such information in decisions when
necessary. See Consumers Energy Co. v. CSX Transp., Inc., NOR 42142,
slip op. at 1 n.2 (STB served Jan. 11, 2018). In this case, the
Board determined that it could not adequately present its findings
with respect to the issues without disclosing certain information
designated as confidential.
\3\ The Board subsequently adjusted this comment deadline to a
later time on May 8, 2026. See Union Pac. Corp.--Control--Norfolk S.
Corp., FD 36873 et al. (STB served May 5, 2026).
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The Transaction. As Applicants explain in the Revised Application,
they are seeking approval under 49 U.S.C. 11323-25 \4\ for (i) the
acquisition of control by UPC of NSC, and through NSC of NS and NS's
rail carrier subsidiaries, and (ii) the resulting common control by UPC
of UP and NS and the consolidation of the rail operations of UP and NS.
(Rev. Appl. 1-12.)
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\4\ These proceedings are governed by those provisions as well
as the Board's regulations, including 49 CFR part 1180. See Major
Rail Consol. Procs. (Major Merger Rules), 5 S.T.B. 539 (2001).
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UP operates approximately 32,880 miles of railroad in 23 states,
primarily in the western United States. (Id. at 1-68, 1-70.) It has
eight principal routes. (Id. at 1-70.) \5\ Three of these routes are
anchored in Chicago, Ill., and extend between Chicago and Granger,
Wyo., before branching to the ports and terminals of Seattle, Wash.,
and Portland, Or., in the Pacific Northwest; Oakland in northern
California; and Los Angeles in southern California. (Id. at 1-70 to 1-
71.) UP also has three routes anchored in Los Angeles including UP's
main line between Los Angeles and El Paso, Tex., before branching to
Chicago via Kansas City, Mo., and St. Louis, Mo.; Memphis, Tenn., via
central Texas and Shreveport, La.; and New Orleans, La., via south
Texas. (Id. at 1-71.) UP also has a route between border crossings in
Mexico and Chicago via Memphis and St. Louis, and a route between
Seattle and Los Angeles. (Id.)
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\5\ Applicants provide a map indicating the lines of their
respective systems, shortline connections, other rail lines in the
territory, and the principal geographic points in the region
traversed. (Id., Vol. 1, App. A (Ex. 1, Map); see Applicants Errata,
May 13, 2026.)
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UP also has secondary routes between Denver, Colo., and Salt Lake
City, Utah; between Denver and Kansas City; and between Minnesota/Iowa
and Texas. (Id.) Additionally, UP has a network of feeder lines in
northern Iowa, Minnesota, and Wisconsin, and feeder lines in Idaho and
Montana, including a line to the Canadian border at Eastport, Idaho.
(Id.)
NS operates approximately 19,200 route miles in 22 eastern states
and the District of Columbia. (Id.) Three of its four principal routes
form a triangle covering the eastern United States and extend between
(1) Chicago and Atlanta, Ga.; (2) Atlanta/Chattanooga, Tenn., and the
Northeast; and (3) the Northeast and Chicago. NS also has a route
between Chicago and Norfolk, Va. (Id.) Furthermore, NS serves gateways
that connect to these principal routes, including in New England and
parts of the south and central United States. (Id.) Finally, NS has
feeder routes that serve origins or destinations including Birmingham,
Ala.; Mobile, Ala.; Charleston, S.C.; and Savannah, Ga. (Id.)
The Transaction involves UPC's acquisition and exercise of control
of NSC and its direct and indirect rail carrier subsidiaries. (Id. at
1-29.) To carry this out, UPC, Ruby Merger Sub 1 Corporation (Merger
Sub 1, a direct, wholly owned subsidiary of UPC), Ruby Merger Sub 2 LLC
(Merger Sub 2, a direct, wholly owned subsidiary of UPC), and NSC are
parties to a merger agreement, which they have included with the
Revised Application. (Id. at 1-29; id., Vol. 4 Agreement and Plan of
Merger.) Upon satisfaction of certain conditions and Board approval,
the merger agreement calls for UPC to acquire NSC through the merger of
Merger Sub 1 with and into NSC (First Merger). (Id. at 1-29.) NSC will
survive the First Merger and become a direct, wholly owned subsidiary
of UPC. (Id.) Upon completion of the First Merger, NSC will merge with
and into Merger Sub 2, with Merger Sub 2 surviving as a direct, wholly
owned subsidiary of UPC. (Id.)
Upon consummation of the Transaction, UP and NS rail operations
will be consolidated as set forth in the Operating Plan and Service
Assurance Plan, both included with the Revised Application. (Id. at 1-
30; id., Vol. 2, Ex. 13, Operating Plan; id., Vol. 2, Service Assurance
Plan.)
Terminal Railroads and TTX Company. Applicants note that they
collectively own more than 50% of the shares of two terminal railroads,
(a) PPU, which is owned 12.5% by UP and 40.64% by NS, and (b) TRRA,
which is owned 42.84% by UP and 14.29% by NS. (Id. at 1-30.) Applicants
filed related minor applications to control PPU and TRRA with the
Application filed in December but, in Decision No. 9, the Board
concluded that the related TRRA transaction should be classified as a
``significant'' transaction under the Board's regulations. Decision No.
9, FD 36873 et al., slip op. at 11. In that decision, the Board
acknowledged that Applicants had stated their intention to divest NS's
ownership interest in TRRA to reduce their collective ownership to
below 50% but noted that Applicants did not offer to condition the
transaction on such divestiture. Id.
In the Revised Application, Applicants again submit a ``minor''
application for control of PPU in Docket No. FD 36873 (Sub-No. 1).\6\
Applicants explain that they still intend to divest as much of NS's
ownership interests and governance rights in PPU as is required so that
the combined UP/NS would not permanently have a controlling stake in
PPU, unless PPU's other current owner declines to acquire the
additional shares. (Rev. Appl. 1-32.) However, Applicants state that
they might need authority to control PPU before divestiture can occur
or if PPU's other current owner declines to acquire the necessary
shares. (Id.) Applicants state that, if they are unable to divest
shares before a decision permitting consummation of the Transaction,
they are willing to accept conditions on their acquisition of control
to ensure that (1) PPU's owners have equal access to PPU's rail lines
and other facilities, (2) PPU is operated without discrimination toward
any railroad, and (3) the acquisition of control would not otherwise
have any anticompetitive effects. (Id. at 1-81.)
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\6\ The Board rejected the original application for control of
PPU because it was purely incidental to the original Application
that the Board rejected. See Decision No. 9, FD 36873 et al., slip
op. at 2.
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The Revised Application does not include a related application for
authority to control TRRA. Instead, Applicants state that they are
``definitively committing not to acquire control of TRRA.'' (Id. at 1-
16.) Applicants indicate that they voluntarily commit to divest or
otherwise relinquish control of sufficient ownership interests and
governance rights in TRRA in connection with consummating the
Transaction. (Id. at 1-31.) They ask that the Board expressly impose
this ``TRRA Commitment'' as a condition on any approval authority, and
to condition their consummation of the Transaction on the TRRA
Commitment. (Id. at 1-31, 1-78, 1-79.) \7\
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\7\ Applicants state that TRRA has made clear that TRRA's
management reserves all rights and takes no position at this time on
the merits of the Transaction. (Rev. Appl. 1-79 n.76.)
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Applicants state that, through the Transaction, they would
collectively own 50% of a third terminal railroad, Kansas City Terminal
Railway (KCT). (Rev. Appl. 1-32.) They claim, however, that this change
would not give them control of KCT and thus does not require a control
application or other authorization. (Id. at 1-32, 1-84 to 1-86.)
Additionally, Applicants explain that while they would acquire more
than 50% ownership of TTX Company (TTX), a noncarrier rail car-pooling
entity jointly owned by Class I carriers, they have no interest in
controlling TTX
[[Page 32174]]
and therefore commit to divest sufficient shares of TTX to reduce their
collective ownership to 49%. (Id. at 1-32 to 1-33.)
Financial Arrangements. Applicants explain that, under their merger
agreement, UPC will acquire the outstanding stock of NSC in a stock and
cash transaction. (Id. at 1-36.) NSC shareholders will be entitled to
receive one share of UPC common stock and $88.82 in cash, without
interest, for each share of NSC common stock they hold immediately
prior to the completion of the First Merger. (Id.) \8\
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\8\ Applicants ask the Board to find the terms under which UPC
will acquire NSC's common stock are fair to the shareholders of UPC
and NSC. (Rev. Appl. 1-37); see Schwabacher v. United States, 334
U.S. 182, 198-99, 201 (1948); Zatz v. STB, 149 F.3d 144, 147 (2d
Cir. 1998).
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Applicants add that, in the aggregate, approximately 72.2% of the
consideration for the Transaction will be in the form of UPC stock and
27.8% in cash. (Rev. Appl. 1-36.) UPC will fund the stock portion of
the consideration through an exchange of one share of UPC common stock
(out of its treasury stock) for one share of NSC common stock. (Id.)
The cash portion of the consideration, together with all related fees
and expenses, is expected to total $20.1 billion, and UPC anticipates
it will fund this amount through a combination of cash on hand and new
debt. (Id.) It expects to raise the new debt by (a) issuing senior
unsecured notes on substantially similar terms to its outstanding
unsecured notes and (b) establishing one or more new credit or other
facilities with various banks or other parties and/or certain existing
credit facilities. (Id.)
Applicants state that the new debt will add ``modestly'' to UPC's
fixed charges. (Id. at 1-37.) They anticipate, however, that UPC will
have no difficulty absorbing these additional fixed charges and
reference pro forma financial statements included with the Revised
Application. (Id. at 1-37; id., Vol. 1, Exs. 16, 17, 18.)
Passenger Service Impacts.
National Railroad Passenger Corporation (Amtrak) Operations.
Applicants' Operating Plan discusses several Amtrak services hosted by
UP including the California Zephyr, Capitol Corridor, Cascades, Coast
Starlight, Gold Runner, Lincoln (Illinois), Missouri River Runner and
Lincoln/Missouri River Runner, Pacific Surfliner, Sunset Limited, Texas
Eagle, and the Winter Park ski train. (Id. at 2-757 to 2-763 (Ex. 13,
Operating Plan).)
NS also hosts Amtrak services including the Blue Water, Cardinal,
Carolinian, Crescent, Floridian (a temporary combination of the Capitol
Limited and Silver Star services), Lake Shore Limited, Mardi Gras,
Pennsylvanian, Pere Marquette, Piedmont, Richmond/Newport News/Norfolk,
Roanoke, and Wolverine. (Id. at 2-764 to 2-775 (Ex. 13, Operating
Plan).)
Other Passenger Rail Operations. Applicants also host other
passenger rail services including the Altamont Corridor Express,
Caltrain, Metra, Metrolink, Trinity Railway Express, Rocky Mountaineer,
and the Virginia Railway Express. (Id. at 2-775 to 2-780 (Ex. 13,
Operating Plan).) Although Applicants plan to add freight trains to a
number of these shared lines, they expect that the shared lines have
sufficient capacity to handle the increase. (Id.)
Discontinuances/Abandonments. Applicants do not contemplate any
abandonments, discontinuances, or line divestitures. (Id. at 1-540,
V.S. Parkerson 4.)
Public Interest Considerations and Applicants' Claims Concerning
Enhanced Competition.
Public Benefits. According to Applicants, the Transaction would
create a transcontinental railroad and ``drive growth'' by merging two
``complementary networks,'' one anchored in the West (UP) and one
anchored in the East (NS). (Id. at 1-12.) Currently, UP and NS have
central interchange gateways in Chicago, St. Louis, Memphis, and New
Orleans, but the Transaction would eliminate those interchanges. (Id.
at 1-13.) The new service would span coast-to-coast and connect major
metropolitan areas and approximately 100 ports in the United States.
(Id. at 1-60.) It would also provide ``single-line service
opportunities for more than 88,000 county-to-county lanes nationwide,
including 45,000 lanes in the watershed'' region. (Id. at 1-38.) \9\
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\9\ Applicants define the ``watershed'' region as any county
within approximately 250 miles of Chicago, St. Louis, Memphis, and
New Orleans. (Id. at 1-13; id. at 2-406 to 2-407, V.S. Hunt 19-20.)
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According to Applicants, single-line service would eliminate
operational and commercial frictions between carriers. (Id. at 1-38.)
Applicants assert that the more streamlined service stemming from the
Transaction would therefore reduce transit time and delay, improve
reliability, and lower logistics costs. (Id.) They also claim that
these benefits would be attractive to customers and hence increase
competition between rail carriers. (Id.) Applicants expect to attract
additional traffic by optimizing existing train and blocking plans and
offering new train services that take advantage of service and
efficiency made possible by the Transaction. (Id. at 1-60.)
Furthermore, Applicants assert that the Transaction would be
attractive to those who currently ``default'' to trucking goods in the
watershed markets due to rail service and pricing inefficiencies. (Id.
at 1-44.) The Transaction, according to Applicants, would give those
shippers access to single-line service and open new markets with what
Applicants assert is a lower-cost and safer option. (Id. at 1-45.) They
estimate that shippers will divert 2.1 million truckloads and save
approximately $3.5 billion annually. (Id. at 1-14.)
Applicants acknowledge that they would need to expand capacity.
(Id. at 1-59.) They anticipate that the cost of capacity expansion and
other measures necessary to implement the Transaction would exceed $2
billion. (Id.) Nonetheless, they believe the new entity would have no
difficulty in financing the investment. (Id.)
At bottom, according to Applicants, the Transaction would create a
more accessible, sustainable, and lower-cost supply chain option for
shipping numerous goods, including food products, petroleum products,
and building materials. (Id. at 1-14, 1-50; see also id. at 1-309 to 1-
325, V.S. Rocker/Elkins 35-51.) Applicants anticipate that the
Transaction would therefore aid in American industrial development and
help American manufacturers compete internationally. (Id. at 1-48.)
Manufacturers in the eastern U.S. would gain single-line access to West
Coast ports and western border crossings, and manufacturers in the
western U.S. will gain access to East Coast ports and eastern border
crossings. (Id. at 1-48 to 1-49.) Additionally, Applicants expect
environmental benefits due to diverting trucks from highways. (Id.)
According to Applicants, the reduction in truck traffic would also lead
to less highway congestion and lower repair costs. (Id. at 1-20.)
In total, Applicants estimate public benefits would be
approximately $6.385 billion in a normal year, including $1.784 billion
in net revenues from traffic attracted from trucks and other rail
carriers, $965 million in operating efficiencies and cost savings to
Applicants, $133 million in capital savings, and $3.504 billion in
shipper truck-to-rail savings. (Id. at 1-35; see id. at 1-120 (App. B,
Summary of Benefits Ex.); see also id. at 1-497 to 1-498, V.S. Janke 2-
3 (listing nonquantifiable benefits).) They also argue that the
[[Page 32175]]
public benefits cannot be achieved without a merger. (Id. at 1-41; id.
at 1-338 to 1-339, V.S. Rocker/Elkins 64-65; id. at 2-188 to 2-189,
V.S. Israel 8-9.) For example, they assert that an alliance with
unaffiliated carriers would leave partners with their own separate
interests and shareholders. (Id. at 1-41.)
Applicants state that more than 2,000 shippers, smaller railroads,
ports, public officials, labor unions, and other rail industry
stakeholders have submitted statements supporting the UP/NS
combination. (Id. at 1-66.) Volume 3 of the Revised Application
contains these statements.
Public Harm and Voluntary Conditions. Applicants argue that the
Transaction would not risk harm to the public interest. (Id. at 1-21.)
They claim that the Transaction is an end-to-end merger joining ``two
complementary rail networks.'' (Id. at 1-50.) Applicants assert that UP
and NS serve no more than four 3-to-2 shipper facilities and that they
found no corridors where they were the only two rail options. (Id. at
1-51 to 1-52.) They add that there is ``little potential'' for
horizontal effects in the few corridors where UP and NS were two of
only three options and conclude that there are ``no meaningful
geographic competition concerns.'' (Id. at 1-52.) They also claim that
concerns about foreclosure or reductions in independent routings are
``remote.'' (Id.)
Although they state five shippers would lose access to a second
Class I carrier, Applicants commit to providing those entities with
access to a Class I carrier other than UP/NS. (Id. at 51; id. at 1-395
to 1-397, V.S. Novak 22-24.) Applicants also make other commitments to
reduce potential competitive harms, including that they would keep all
existing gateways open for eligible traffic on commercially reasonable
terms, and would provide gateway reporting analogous to that imposed as
a condition on the transaction creating CPKC. (Id. at 1-52, 1-91);
Canadian Pac. Ry.--Control--Kan. City S., FD 36500 et al., slip op. at
81-82 (STB served Mar. 15, 2023). Additionally, Applicants state UP/NS
would also preserve competitive options involving the use of build-outs
or build-ins and would not create new regulatory bottlenecks that could
limit customer access to rate relief through the Board. (Rev. Appl. 1-
91.)
Enhanced Competition. Applicants argue that the Transaction would
not have ``an adverse effect on competition among rail carriers,'' but
rather would ``substantially enhance'' competition with other rail
carriers and trucks. (Rev. Appl. 1-53.) To address the Board's policy
statement on enhanced competition in Major Merger Rules and 49 CFR
1180(1)(d), Applicants propose a framework called Committed Gateway
Pricing (CGP). (Rev. Appl. 1-53.) According to Applicants, CGP would
extend the benefits of the Transaction to certain customers who would
otherwise not benefit from the new single-line service. (Id. at 1-377,
V.S. Novak 4.) More specifically, eligible customers shipping to or
from facilities served solely by BNSF or CSX Transportation, Inc.
(CSXT), or facilities on a shortline interchanging traffic solely with
BNSF or CSXT, would have access to ``rates that reflect the benefits of
the UP/NS merger for traffic shipped through mid-continent gateways to
or from facilities served solely by UP/NS or facilities on a shortline
interchanging traffic solely with UP/NS.'' (Id.)
Applicants propose that CGP terminate at the end of the Board's
oversight period. (Id. at 2-256, V.S. Israel 76.) However, they note
that, if anticipated public benefits do not materialize in a timely
manner, the Board could extend the period the CGP program is in place.
(Id. at 1-92 to 1-93; id. at 1-392, V.S. Novak 19.)
Schedule for Consummation. Applicants state that they would
consummate the Transaction as quickly as possible after the Board's
final grant of approval. (Id. at 1-34.) They add that full integration
of operations is expected to be completed within three years. (Id.)
Applicants provide additional information regarding implementation in
their Service Assurance Plan. (Id.)
Environmental Impacts. Applicants acknowledge that environmental
review under the National Environmental Policy Act of 1969 (NEPA), 42
U.S.C. 4321-4370m-11, is necessary in this proceeding. As discussed
below, the increased traffic that would result from the Transaction
would exceed the Board's thresholds for environmental review. Due to
the potentially significant impact that the Transaction may have on the
quality of the human environment in the affected area, the Board will
prepare an Environmental Impact Statement (EIS). Applicants have also
prepared a Safety Integration Plan (SIP), pursuant to the Board's
regulations at 49 CFR part 1106 and FRA's regulations at 49 CFR part
244, which will be addressed during the EIS process. In the SIP,
Applicants specify how they would ensure safe operations during the
acquisition and implementation process. In addition, Applicants have
prepared information on what measures they plan to take to address
potentially blocked crossings as a result of merger-related changes in
operations or increases in rail traffic as required by 49 CFR
1180.8(a)(2).
Historic Impacts. As part of the review process, the Board must
evaluate the potential impacts of the Transaction on historic
properties in accordance with Section 106 of the National Historic
Preservation Act (NHPA), 54 U.S.C. 306108; the Section 106 implementing
regulations, 36 CFR part 800; and the Board's environmental
regulations, 49 CFR part 1105. Applicants state that there are no plans
to dispose of or alter properties that are 50 years old or older as
part of the Transaction. (Rev. Appl. 1-72.) They also state that the
Transaction does not require any construction that would require Board
authorization under 49 U.S.C. 10901, nor are any abandonments
anticipated because of the Transaction. (UP Resp. to OEA Info. Request
No. 1, at 4, Dec. 18, 2025; Rev. Appl. 2-691, 2-1009 n.185.) However,
Applicants propose to make certain capital improvements, including
adding double track, extending sidings, upgrading an existing NS-UP
connection, upgrading a bridge, and expanding yards and terminals along
the combined network, which are subject to review under Section 106 of
the NHPA. (Rev. Appl. 2-895 to 2-930.)
Labor Impacts. Applicants state that Omaha, Neb., where Union
Pacific is headquartered, would serve as the headquarters for the
combined company but that Atlanta, Ga., where Norfolk Southern is
headquartered, would continue to serve as a regional operating center.
(Id. at 1-64.) Applicants assert that employee reductions would involve
management positions in general and administrative functions at NS's
Atlanta headquarters, ``driven by operational synergies and the
elimination of overlapping positions.'' (Id.) Applicants expect there
would be movement of individuals from both companies amongst various
positions to ensure optimal placement. (Id. at 1-528, V.S. Perkes 3.)
They provide specific estimates concerning the effect on management
employees at NS's current headquarters and offices, (Id. at 1-529, V.S.
Perkes 4), as well as UP's headquarters and offices, (Id. at 1-532,
V.S. Perkes 7). Applicants add, however, that ``adjustments will occur
gradually over three years, primarily through natural attrition and
phased implementation, with critical roles preserved until integration
is complete.'' (Id. at 1-533, V.S. Perkes 8.)
As to craft employees, Applicants expect efficiencies described in
the Operating Plan will reduce the number of positions required to
perform certain functions by 1,156 jobs by the end of
[[Page 32176]]
Year 3. (Id. at 1-541, V.S. Parkerson 5.) However, Applicants commit to
providing employment opportunities for all current craft employees and
state that reductions will be realized through attrition or relocating
employees to other employment opportunities.\10\ (Id.) Despite these
reductions, Applicants anticipate that growth resulting from the
Transaction would ultimately add a net 1,229 craft jobs by the end of
Year 3. (Id. at 1-541, V.S. Parkerson 5.)
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\10\ Applicants state that they ``have not yet reached
implementing agreements with unions representing UP and NS
employees, but they have begun preliminary conversations with
unions.'' (Rev. Appl. 1-65.) Indeed, UP states that it has entered
into preliminary job-preservation agreements with the International
Association of Sheet Metal, Air, Rail and Transportation Workers--
Transportation Division; the National Conference of Firemen &
Oilers; the Brotherhood of Railroad Carmen; the International
Brotherhood of Boilermakers; the United Supervisors Council of
America; and the American Train Dispatchers Association. (Id. at 1-
14, 1-65; id. at 1-538, V.S. Parkerson 2.)
---------------------------------------------------------------------------
Furthermore, Applicants note that the Transaction would be subject
to the employee conditions adopted in New York Dock--Control--Brooklyn
Eastern District Terminal, 360 I.C.C. 60 (1979). (Rev. Appl. 1-64 to 1-
65.) They state that they would also honor the obligations established
in the ``cramdown'' agreements reached in 2000 and 2001 with certain
labor organizations that represent certain classes of union-represented
employees of UP and NS. (Id. at 1-65.)
Downstream Effects. Applicants argue that they ``cannot predict''
downstream merger proposals. (Id. at 1-95.) They note that the CEO of
BNSF's owner, Berkshire Hathaway, has stated that the company ``has
been clear'' it is not interested in acquiring another Class I carrier,
but Applicants assert that even if BNSF were to seek to acquire CSXT
and form another transcontinental railroad, that development would not
diminish the public benefits of the Transaction. (Id.) Applicants add
that similar end-to-end Class I mergers would ``not result in any
harm'' if conditions like Applicants' gateway commitments are imposed
on any such future transactions. (Id.)
Furthermore, Applicants do not believe that any of the conditions
the Board might impose on the Transaction would need to be altered, or
that any new conditions would need to be imposed on the Transaction, if
the Board were to approve future rail mergers. (Id. at 1-96.) They add
that a second transcontinental railroad would ``be fully aligned with
the public interest.'' (Id. at 1-97.)
Service Assurance Plan. As required by 49 CFR 1180.10, Applicants
have included a Service Assurance Plan. (Id. at 1-103; id., Vol. 2
(Service Assurance Plan).) They assert that it describes the
integration of operations post-consummation as well as how the benefits
of the Transaction would be realized for the shipping public. (Id. at
1-104.) They also claim it would ensure that service would not be
undermined during the transition to one operator. (Id.)
Transnational and Other Information Requirements. Applicants state
that UP operates almost exclusively in the United States, crossing the
Canadian border only to facilitate interchange at Kingsport, B.C. (Id.
at 1-105.) Similarly, NS also operates entirely in the United States
except for trackage rights over approximately 1.9 miles of track
between the U.S.-Canada border at Buffalo, N.Y., and CN's Fort Erie
Yard in Fort Erie, Ont. (Id. at 1-106.) Although Applicants doubt
operations over this segment would affect United States operations,
they state that UP/NS would cooperate with relevant authorities in both
countries, including the FRA, as necessary. (Id.) They add that neither
UP nor NS are affected by any restrictions or preferences under the
laws of Mexico or Canada that could affect their commercial decisions
and that they also do not have any applicable ownership restrictions.
(Id. at 1-107.)
Revised Application and Related Application Accepted. As noted
above, the Board permitted comments on whether the Revised Application
contains the information required in 49 CFR part 1180, and a reply from
Applicants. See Decision No. 17, FD 36873 et al., slip op. at 2.
The Board received comments from Grand Trunk Corporation, on behalf
of itself and its U.S. rail operating subsidiaries (collectively, CN),
BNSF, CPKC, CSXT, New Jersey Transit Corporation (NJ Transit), the New
York Department of Transportation (NY DOT), the National Grain and Feed
Association (NGFA), Houston Super Neighborhood 64 and 68, M4 Railcar
Group, the NYC Department of Sanitation (DSNY), the Eastwood Civic
Association, Atlantic Systems, Supply Chain Acumen LLC (SCA), and a
number of individuals, including Lindsay Williams, Ruth Tines, J. Vann
Cunningham, and Colin Finney.\11\ Applicants filed a reply on May 12,
2026.
---------------------------------------------------------------------------
\11\ The Board also received a number of late-filed comments,
which will not be considered here.
---------------------------------------------------------------------------
Although the Revised Application does not contain the level of
detail on certain issues that the Board would have preferred,
particularly given the benefit of Board decisions and stakeholder
comments after the original Application, the Board has determined that
the Revised Application is complete, and the issues raised in the
comments do not warrant rejecting the Revised Application. As discussed
below, many of the issues pertain to the merits of the Revised
Application and will be further developed in the supplement the Board
will require prior to the submission of comments on the Revised
Application or, as appropriate, at a later stage of the proceeding.\12\
In addition, commenters raise concerns regarding missing or temporarily
inaccessible items, such as a map or workpapers. The Board concludes
that those deficiencies, while concerning in their frequency and
magnitude, do not warrant rejection. Applicants are remedying those
deficiencies, and the Board is requiring additional steps to improve
the process for submitting, replacing, cataloguing, and validating
workpapers. And, as discussed later in this decision, the Board will
not deem that the Revised Application is incomplete based on assertions
that Applicants have failed to comply with the information request in
Decision No. 13.
---------------------------------------------------------------------------
\12\ Although some commenters also raise concerns about
potential environmental impacts, such issues will not be considered
in this decision. Comments involving environmental issues should be
submitted to the Board's Office of Environmental Analysis (OEA) and
will be considered during the environmental review process.
---------------------------------------------------------------------------
A number of commenters challenge the market impact analyses from
Dr. Elizabeth Bailey and Dr. Mark Israel as well as the rail-to-rail
and truck-to-rail diversion study sponsored by David Hunt. These
comments, however, implicate the merits of the analyses, not the
completeness of the Revised Application. While commenters take issue
with the quality, depth, and scope of the work, the Revised Application
does include analysis of the market impact of the Transaction as
required by the Board's regulations: Bailey provides what Applicants
state are the actual market shares, and Hunt purports to provide the
projected market shares. Both Bailey and Israel discuss the competitive
impacts of the Transaction, including the potential impact of
competitive enhancements offered by Applicants. Commenters' substantive
concerns are properly addressed to the Transaction's merits. And
although there remain issues with supporting workpapers, these issues
can be corrected during the supplementation and abeyance period
discussed below, and commenters would have the benefit
[[Page 32177]]
of those corrections when commenting on the Revised Application's
merits.\13\
---------------------------------------------------------------------------
\13\ SCA asserts that Applicants do not include any sensitivity
analysis on how the Transaction would affect the combined entity if
the anticipated growth does not happen, but such a study is not
explicitly required by the Board's part 1180 regulations. Applicants
have also explained how the debt they would incur affects fixed
charges, and the merits of their claims can be examined as part of
the merits process.
---------------------------------------------------------------------------
Additionally, CN argues that the Revised Application is incomplete
because Applicants have not identified all shippers that would suffer a
loss of competition, primarily because Applicants treat access to
another Class I carrier through a shortline railroad the same as having
direct access. While the Board has questions about Applicants' analysis
(as discussed below in the supplementation discussion), Applicants have
provided sufficient information for completeness. Section 1180.7(b)(ii)
gives Applicants leeway in defining the points used to assess
competition loss, at least from a completeness perspective. Likewise,
while BNSF questions the type of relief to be provided shippers who
would lose access to another Class I carrier, that issue relates to the
merits rather than completeness.
Other commenters question whether Applicants' CGP program would
enhance competition, and some claim it would harm some shippers. As
discussed below, the Board has questions regarding CGP that Applicants
will be required to address in a supplement. But the Board concludes
that Applicants have provided information sufficient to comply with 49
CFR 1180.6(b)(10) at the completeness stage. That regulation requires
Applicants to propose measures to enhance competition, which Applicants
have at least purportedly done here with their CGP program. Major
Merger Rules provided applicants flexibility to craft a proposal and
did not dictate a particular approach to enhanced competition
proposals. See Major Merger Rules, 5 S.T.B. at 570. The questions
raised here concerning the efficacy or impact of Applicants' proposal
do not render the Revised Application incomplete.
Additionally, some commenters assert that Applicants have not
provided a thorough analysis of the downstream effects of the
Transaction. See 49 CFR 1180.6(b)(12). The Board finds that Applicants
have done enough for completeness purposes to at least ``initiate a
commentary'' about potential responsive merger applications, as the
rule requires. Major Merger Rules, 5 S.T.B. at 582. As such, Applicants
have complied with 49 CFR 1180.6(b)(12) from a completeness
perspective, even though there may be criticisms regarding the
robustness of the initial analysis.
NGFA claims that Applicants have not provided a sufficient plan in
writing to address the steps they would take to ensure adequate service
and have not provided service benchmarks below which concrete
consequences would be triggered. The Board concludes that Applicants do
provide benchmarks adequate for completeness, (see, e.g., Rev. Appl. 2-
1092 n.234; id. at 2-1093 n.235), and while the steps to address
shortcomings of projected benchmarks post-merger may be thin, they
satisfy the requirements of the regulations for the purposes of
completeness.\14\ Further, while NGFA claims the Revised Application is
incomplete based on Applicants' proposed arbitration program, an
arbitration program is not explicitly required, and questions about its
value are better addressed during the merits phase of the proceeding.
---------------------------------------------------------------------------
\14\ DSNY contends the Revised Application fails to provide the
required discussion of the effect of the Transaction on the adequacy
of municipal solid waste service, but there is no requirement that
Applicants specifically discuss the issue.
---------------------------------------------------------------------------
Some commenters argue that Applicants failed to submit related
applications to control TRRA and TTX, claiming that Applicants' plans
to divest control are too vague. As discussed below, although
commenters raise valid questions regarding the merits of Applicants'
TRRA and TTX proposals that warrant supplementation, the Board
concludes that these issues do not render the Revised Application
incomplete. Moreover, some commenters suggest that Applicants should
have filed a control application for KCT, but the Board concludes that
the lack of such an application does not render the Revised Application
incomplete.
TRRA. TRRA is a Class III terminal and switching carrier that
operates approximately 170 miles of rail line in and around St. Louis,
Mo., including two bridges over the Mississippi River. Decision No. 9,
FD 36873 et al., slip op. at 9. TRRA is owned 42.84% by UP and 14.29%
by NS, with CSXT, BNSF, and CN (via Illinois Central Railroad Company)
owning the rest. (Rev. Appl. 1-30, 1-77.)
As explained above, the Board rejected the previous Application as
incomplete in part because Applicants should have filed a control
application for TRRA as a ``significant'' transaction instead of a
``minor'' transaction. See Decision No. 9, FD 36873 et al., slip op. at
9-11. Rather than refile the TRRA application, Applicants have offered
to condition consummation of the Transaction on divesting whatever
ownership or governance interests are necessary so that the combined
company will not control TRRA. (Rev. Appl. 1-30 to 1-31.)
BNSF and CSXT both argue that 49 CFR 1180.6(a)(7)(ii), which
requires merger applicants to ``[s]ubmit a copy of any contract or
other written instrument entered into, or proposed to be entered into,
pertaining to the proposed transaction,'' required Applicants to submit
a copy of a proposed agreement to divest their interests in TRRA. (BNSF
Comments 4, May 8, 2026; CSXT Comments 7, May 8, 2026.) The Board
concludes that Applicants' failure to do this does not render the
Revised Application incomplete. For purposes of completeness, the
section 1180.6(a)(7) requirement does not include divestiture
agreements that may ultimately be necessary but have not been
negotiated.
As BNSF, CSXT, and CN point out, the Revised Application does not
provide many details about the divestiture, including timing, price,
and the impact on NS's outstanding liabilities to TRRA. (See, e.g., CN
Comments 32-36, May 8, 2026; BNSF Comments 4, May 8, 2026; CSXT
Comments 7, May 8, 2026.) CSXT also argues that Applicants' commitment
to modify TRRA's board and governance documents to avoid control ``may
be illusory'' because non-applicant owners of TRRA would have to agree,
and the Board cannot impose conditions on non-applicants as a condition
of the Transaction. (CSXT Comments 7, May 8, 2026.) CN argues that
shares of TRRA are expressly nontransferable (unless they are
transferred back to TRRA), casting doubt on Applicants' ability to
transfer the shares to other entities. (CN Comments 33-35, May 8,
2026.) Applicants respond that all of these concerns go to
implementation, not completeness, and that they have committed to
addressing them as a condition of consummation. (Applicants Reply 22,
May 12, 2026.)
Although the Board agrees that the Revised Application leaves many
questions about how the proposed divestiture can be accomplished,
Applicants have provided sufficient information to satisfy
completeness. The details of how their TRRA proposal would be
accomplished can be addressed in the supplement being required by the
Board and later in the proceeding.
TTX. TTX is a railcar pooling company that owns and manages fleets
of railcars. (Rev. Appl. 1-87.) These
[[Page 32178]]
include ``a fleet of flatcars that are used in rail transportation of
containers, truck trailers, automobiles, lumber, extra-dimensional
loads, and other commodities,'' as well as ``pools of boxcars and
gondolas,'' pursuant to Board-approved pooling agreements. (Id. at 1-87
to 1-88.) \15\ TTX owns over half of the well cars that are used for
intermodal traffic. (BNSF Comments 5, May 8, 2026.) TTX is owned by
seven railroads: UP (37.03%), NS (19.78%), CSXT, (19.78%), BNSF
(17.4%), CN (3.2%), CPKC (2.2%), and Ferromex (0.6%). (Rev. Appl. 1-
87.)
---------------------------------------------------------------------------
\15\ See TTX Co.--Appl. for Approval of Pooling of Car Servs.
with Respect to Flatcars, FD 27590 (Sub-No. 4), at 2 (STB served
Oct. 1, 2014) (renewing approval of flatcar pool); Am. Rail Box Car
Co. & Trailer Train Co.--Pooling, 347 I.C.C. 862 (1974) (approving
boxcar pool); Railgon Co. & Trailer Train Co.--Pooling of Car Serv.
Regarding Gondola Cars, FD 29121 (ICC served Mar. 17, 1980)
(approving gondola pool).
---------------------------------------------------------------------------
Although the combined shares of UP and NS in TTX exceed 50%,
Applicants state that they are not required to file a control
application for TTX because it is a noncarrier. (Id. at 1-89.) They
also say that the TTX-pooling agreements, which are subject to Board
approval, would prevent them from using a controlling interest in an
anticompetitive way. (Id. at 1-88 to 1-89.) To avoid ``distraction,''
however, they say that they will commit to divesting shares to reduce
their combined ownership interest to no greater than 49% ``at such time
as they are able to do so on commercially reasonable terms.'' (Id. at
1-89.)
BNSF and CSXT argue, as they did with TRRA, that Applicants were
required by 49 CFR 1180.6(a)(7)(ii) to file a copy of a proposed
divestiture agreement for TTX. (BNSF Comments 5, May 8, 2026; CSXT
Comments 7 n.2, May 8, 2026.) As explained above, section
1180.6(a)(7)(ii) does not require Applicants to file a divestiture
agreement that has not yet been negotiated for their Revised
Application to be complete. The Board will, however, require Applicants
to provide more details about their intended divestiture, as discussed
below.
BNSF also argues that the Revised Application is incomplete because
it does not address ``the competitive impacts of the transaction'' with
respect to TTX, such as Applicants' claim that ``they will divert 1.58
million annual intermodal units to their combined railroad, a market
segment where TTX owns over half of the underlying well cars.'' (BNSF
Comments 5, May 8, 2026.) While the Board will scrutinize such
competitive impacts during its review of the Transaction, Applicants'
presentation is sufficient to satisfy completeness.
KCT. KCT is a terminal railroad located in Kansas City, Mo., and
Kansas City, Kan., that owns and dispatches approximately 95 miles of
track. (Rev. Appl. 1-81.) It is owned by UP, BNSF, CPKC, and NS, all of
whom can use KCT to interchange traffic with each other. (Id.) KCT also
provides switching access to certain shippers. (Id.)
Some commenters suggest that Applicants' combined interest in KCT
requires a control application. While the Board has questions regarding
Applicants' proposal to retain a 50% interest in KCT, the Board is
unpersuaded on this record that Applicants' combined 50% ownership of
KCT would give them control post-merger within the meaning of 49 U.S.C.
10102(3) and the Board's current precedent, and therefore concludes
that Applicants have satisfied completeness with regard to KCT.
Applicants' combined ownership of KCT will increase to 50% as a
result of the Transaction, with BNSF and CPKC each holding 25%. (Rev.
Appl. 1-81 to 1-82.) Applicants did not file a control application for
KCT, explaining that they will not control KCT post-merger because
their 50% share does not constitute a majority. Moreover, they say that
several factors will ensure that their share will not constitute de
facto control of KCT. First, the combined entity would have the right
to appoint only half of KCT's directors. (Id. at 1-82.) Second,
authority to manage the day-to-day operations of KCT rests in a General
Manager who must be appointed by a majority of the board. (Id. at 1-82
to 1-83.) Third, Applicants note that this is not a situation where the
other stockholdings are widely dispersed, since there are only two
other owners with 25% each. (Id. at 1-82.) Fourth, they say that KCT's
governing documents ensure that KCT cannot act in a discriminatory
manner. (Id. at 1-83 to 1-84.) Applicants argue that, under agency
precedent, a shareholder's 50% share does not constitute control when
the shareholder does not control the board of directors and when the
entity's operating agreement ensures impartiality. (Id. at 1-84 (citing
Burlington N., Inc.--Control & Merger, 366 I.C.C. 862, 865-66 (1983),
aff'd sub nom. Bhd. of Ry. & Airline Clerks v. Burlington N., Inc., 722
F.2d 380 (8th Cir. 1989)).\16\
---------------------------------------------------------------------------
\16\ Applicants cite other cases in support of their position
that 50% ownership does not constitute control, at least absent
indicia that are not present at this stage of the proceeding. (Rev.
Appl. 1-85 to 1-86 & n.86 (citing, inter alia, CSX Corp.--Control--
Conrail Inc., 3 S.T.B. 196, 349 (1998), aff'd sub nom. Erie-Niagara
Rail Steering Comm. v. STB, 247 F.3d 437 (2d Cir. 2001); Burlington
N.--Merger--Santa Fe Pac., 10 I.C.C.2d 661, 673 n.17 (1995), aff'd
sub nom. W. Resources, Inc. v. STB, 109 F.3d 782 (D.C. Cir. 1997);
and Borealis Infrastructure Trust Mgmt., Inc.--Acquis. Exemption--
Detroit River Tunnel Co., FD 33984, slip op. at 5 (STB served Dec.
19, 2001)).)
---------------------------------------------------------------------------
BNSF and CPKC argue that Applicants' combined 50% interest in KCT
could constitute control, and they ask the Board to reject the Revised
Application as incomplete if the Board concludes that Applicants would
control KCT. (BNSF Comments 5, May 8, 2026; CPKC Comments 13-14, May 8,
2026.) CPKC argues that ``ownership of 50% or less can entail control
when there is not another equal 50% owner, and that the power to veto
proposed initiatives of the other owners, which UP's 50% position would
provide, constitutes `negative' control even if it does not mean that
the controlling entity can dictate every aspect of the organization's
day-to-day operations.'' (CPKC Comments 13, May 8, 2026.) BNSF
similarly argues that 50% ownership can give rise to control under some
circumstances and that the combined UP/NS would have the power to block
any proposal made by BNSF and CPKC that requires majority support.
(BNSF Comments 5, May 8, 2026.)
It is not clear at this stage of the proceeding that Applicants
would gain control over KCT under the Board's current precedent given
the lack of a majority ownership stake, combined with the lack of a
majority of the board of directors and provisions in KCT's governing
documents requiring KCT's operation on a non-discriminatory basis.\17\
Without making any determinations regarding the potential competitive
effects associated with UP/NS's proposed 50% ownership of KCT, the
Board concludes that Applicants have satisfied completeness with regard
[[Page 32179]]
to KCT.\18\ But the Board recognizes that Applicants' 50% ownership
could give them the ability to veto proposals requiring a majority
vote, and that effect of this veto power could be consequential. Thus,
although Applicants will not be required to file a control application
for KCT as a prerequisite for the completeness of the Revised
Application, the Board will request more information regarding
Applicants' proposal regarding KCT, which could shed light on potential
competitive effects and future influence regarding KCT decision-making.
---------------------------------------------------------------------------
\17\ The cases cited by CPKC to support its claim that a 50%
share equals control involved circumstances much different than
those present here. See, e.g., Norfolk & W. Ry. & N.Y., Chi. & St.
Louis R.R. Merger, 324 I.C.C. 1, 32 (1964) (holding that 30% stock
ownership constituted control when the remaining stock ownership was
widely dispersed, with the stock owner regularly constituting a
majority of shares that actually voted at meetings for the election
of directors); Transcon. Bus Sys., Inc. v. Greyhound Corp., 104
M.C.C. 524, 526 (1968) (finding that an option held by 45% owner to
purchase remaining stock ``could be used as one of several weapons
held by Greyhound to keep [the other shareholders] in line''). And
while the power to control may indeed not ``depend on ownership of a
majority of a carrier's stock,'' (CPKC Comments 13-14, May 8, 2026
(citing Greyhound Corp.--Control--Tex. N. M. & Okla. Coaches, Inc.,
101 M.C.C. 655, 667 (1967))), that does not mean that 50% ownership
or less in a cooperative venture necessarily creates control where
the entity is otherwise structured to prevent that carrier's
domination.
\18\ The Board could in the future direct Applicants to file an
application for control of KCT, or take other appropriate action,
should evidence come to light during this proceeding that they would
in fact obtain control of KCT post-merger. Regardless of the control
issue, and as discussed below, the Board will direct Applicants to
provide information regarding the potential competitive effects of
any post-merger ability they may acquire to veto proposals requiring
a majority vote of KCT's owners.
---------------------------------------------------------------------------
In sum, the Board finds that Applicants have provided sufficient
information to satisfy the completeness requirements for a ``major''
transaction application, and the completeness issues raised by
commenters do not warrant rejecting the Revised Application. The Board
is also accepting the related application concerning PPU.
Additional Material and Abeyance. Although Applicants have included
sufficient information to satisfy the fairly narrow procedural question
of completeness, there are several aspects of the Revised Application
that are unclear or underdeveloped and require supplementation at this
stage of the proceeding so that the Board may have the information
necessary to thoroughly evaluate--and the public has an adequate
opportunity to comment on--whether the Transaction is in the public
interest. See 49 CFR 1180.1(a)-(c) (stating that the Board's evaluation
is governed by the public interest criteria in 49 U.S.C. 11324, and
that ``the Board does not favor consolidations that reduce the
transportation alternatives available to shippers unless there are
substantial and demonstrable public benefits that cannot otherwise be
achieved'').\19\ Major Merger Rules, 5 S.T.B. at 549.
---------------------------------------------------------------------------
\19\ (See also BNSF Comments 1-2, May 8, 2026 (arguing that
Applicants fail to demonstrate that the proposed transaction is in
the public interest, which shifts the burden to the Board and
parties ``to answer the tough questions'' that Applicants have
dodged); CPKC Comments 20, May 8, 2026 (``On many of the key public
interest questions raised by the proposed transaction, Applicants
have presented at best a barebones treatment . . . .'').)
---------------------------------------------------------------------------
The Board is committed to conducting a thorough and fair review
based on evidence and argument in this proceeding. Under the statute,
parties offering views on the merits of a proposed merger, including by
requesting conditions and proposing responsive applications, have a
limited opportunity, early in a proceeding, to make their principal
case to the Board. Based on the Board's initial assessment, the Board
concludes that information in the Revised Application lacks clarity and
detail and does not yet afford parties a meaningful opportunity to
comment on the merits of the Transaction. And the Board's own review of
the Transaction's consistency with the public interest, including its
consideration of the contours of potential conditions, would suffer.
This Transaction is the first proposed merger evaluated under new
rules forged following real-world consequences emanating from a 1990s
wave of major mergers. Such consequences cannot be ignored, assumed
away, or overlooked based on vague intentions or promises, particularly
given the possible implications of subsequent mergers for the long-term
future of the national rail network. Therefore, the current rules
establish a ``heavier burden'' for applicants, with new provisions
concerning competitive enhancement, benefit estimate integrity, service
assurance, and downstream effects. See Major Merger Rules, 5 S.T.B. at
546 (explaining that, under the new rules, ``applicants bear a heavier
burden to show that a major rail combination is consistent with the
public interest''). Indeed, in revising its major merger rules in 2001,
the Board raised concerns about the prospect of further Class I
railroad consolidation and explained that the new rules reflect a
``more skeptical, `show me' attitude toward claims of merger benefits
and toward claims that no transitional service problems would occur.''
Id. at 549. The rules also strengthened consideration of a merger's
impacts on communities, employees, shortline railroads, ports, and
others. In turning to the merits of the Transaction, the Board will not
launch a procedural schedule that in effect places undue burden on the
commenting parties to ascertain and evaluate important information
about the Transaction and how it corresponds to the new framework.
Accordingly, given the questions raised by the Board's initial
review of the Revised Application, the unprecedented scope of this
Transaction, the possible consequences of this and any potential future
major mergers for the nation's supply chains, the first-time
application of these rules, and the benefits of additional information
on this record, the Board will require Applicants to supplement their
Revised Application with the information detailed below by July 27,
2026,\20\ and will hold the proceedings in abeyance pending submission
and Board review of the supplemental information. 49 U.S.C. 1321(b)(3);
see Canadian Pac. Ry.--Control--Kan. City S., FD 36500 et al., slip op.
at 3 (STB served Mar. 16, 2022) (directing applicants to address an
apparent inconsistency in data submissions and suspending the
procedural schedule). The Board's assessment of the supplemental filing
may include an evaluation as to whether Applicants have presented a
prima facie case.\21\ In a future decision, the Board will establish an
appropriate procedural schedule for the remainder of the proceeding.
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\20\ The Board recognizes the detailed nature of the questions
and would entertain a request for a 30-day extension.
\21\ See 49 CFR 1180.4(c)(8); see also R.R. Consol. Procs.
Expedited Processing, 363 I.C.C. 767, 769 (1980).
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Abeyance of the proceedings does not affect discovery, including in
proceedings before the ALJ. See Decision No. 17, FD 36873 et al.
Continued discovery is essential to developing a record that allows for
full consideration of this unprecedented proposed Transaction, and the
Board is troubled by comments highlighting Applicants' purported
unwillingness to engage in discovery. (See, e.g., BNSF Comments 8, May
8, 2026; CPKC Comments 19, May 8, 2026.) However, while disputes remain
to be addressed by the ALJ, Applicants have expressed interest in
entering discovery guidelines to ``ensure that discovery proceeds
smoothly and disputes are resolved efficiently,'' and the Board expects
that Applicants and other parties will adhere to any discovery
guidelines imposed and expeditiously respond to discovery requests.
(Applicants Mot. to Enter Prop. Discovery Guidelines 1, May 4, 2026.)
Applicants will be required to provide supplemental information as
discussed below. But the following supplemental information requirement
is not intended to be an exhaustive list of potential questions or
concerns the Board may have in assessing the Revised Application. Nor
does the list below limit the subjects Applicants may address in their
supplement. Given the scope of the Board's questions, it is important
for Applicants to have the flexibility to improve or explain broad and
interdependent aspects of the Revised Application. For example, if
Applicants' supplement changes the
[[Page 32180]]
Revised Application's calculation of public benefits or proposed
conditions, Applicants should submit revised or updated portions of the
Revised Application, including expert analysis, as appropriate.
Enhanced Competition. The Board's major merger rules reflect a
policy shift that ``places greater emphasis in the public interest
assessment on enhancing competition while ensuring a stable and
balanced rail transportation system.'' Major Merger Rules, 5 S.T.B. at
546. This is in part due to the Board's concern that ``it is
increasingly difficult to remedy certain competitive harms directly and
proportionately'' and that future major mergers present an ``increased
likelihood of transitional service problems.'' Id. at 554; see id. at
550 (explaining that ``offering some new or enhanced rail-to-rail
competition or other competitive benefits is likely to be necessary to
resolve substantial difficulties so as to tip the balance in favor of
the public interest''). Although the Board did not specify precise
competitive enhancements that would tip the balance in future
proceedings, it explained that applicants could focus ``on enhancing
intramodal (rail-to-rail) competition, for example, by the granting of
trackage rights, the establishment of shared or joint access areas, the
removal of `paper' and `steel' barriers, and other techniques that
would enhance railroad-to-railroad competition.'' Id. at 554 (stating
that provisions for competitive enhancement would be ``given
substantial weight'' and ``are likely to be extremely important to [the
Board] in determining whether to approve a particular application'');
see id. at 547 (``Ultimately, the quantity and quality of competitive
enhancements that would be required would depend upon the circumstances
of a particular case.''). Thus, the Board's rules highlight the
importance of competition-enhancing conditions. See 49 CFR 1180.1(a)
(explaining that consolidations that reduce transportation alternatives
available to shippers are not favored absent substantial and
demonstrable public benefits, such as enhanced competition); see also
id. at 1180.1(c)-(d), 1180.6(b)(10)-(11).
Several commenters argue that the Revised Application provides only
a superficial or highly limited discussion of enhanced competition.
Many question whether CGP--the sole competitive-enhancing condition
proposed in the Revised Application--will provide much, if any,
competitive enhancements given its many exclusions and limitations.
(See CN Comments 26, May 8, 2026; BNSF Comments 7, May 8, 2026; CSXT
Comments 10-12, May 8, 2026; NGFA Comments 2-5, May 8, 2026; Cunningham
Comments 10, May 6, 2026.) As commenters note, Applicants describe CGP
as applying only to manifest carload shipments between UP/NS sole-
served facilities (and facilities on shortlines interchanging solely
with UP/NS) and BNSF or CSXT sole-served facilities (and facilities on
shortlines interchanging solely with BNSF or CSXT) that are
interchanged in Chicago, St. Louis, Memphis, or New Orleans. CGP does
not apply to intermodal or unit train shipments, shipments of finished
vehicles, shipments to and from storage-in-transit facilities or
facilities owned by rail carriers or their affiliates, or certain
specialized shipment types that present heightened operational capacity
and risk concerns. (Rev. Appl. 1-384 to 1-385, V.S. Novak 11-12.)
Further, CGP would extend only through the oversight period absent a
Board extension. (Id. at 1-92.)
CN argues that ``CGP cannot be what the Board intended under the
new rules when it adopted the requirement that applicants propose
competitive enhancements,'' as it applies to less than 1% of rail
traffic and may harm shippers regardless of their eligibility for CGP.
(CN Comments 25-26, May 8, 2026 (citing Rev. Appl. 2-256 to 2-257, V.S.
Israel 76-77 (discussing the potential incentive for UP/NS ``to compete
less aggressively and transact at rates higher than would otherwise
occur absent the gateway rate mechanism'')).) Similarly, BNSF argues
that CGP does not remedy vertical foreclosure or enhance competition,
as it applies ``to a small subset of traffic and is shot through with
caveats and limitations.'' (BNSF Comments 7 n.5, May 8, 2026 (arguing
that CGP ``covers less than 1% of traffic, is limited to four gateways,
and excludes intermodal, autos, unit trains, TIH/PIH, dimensional
shippers, and Canadian carriers'').) CSXT argues that CGP excludes
shippers with direct rail-to-rail competition and thus does not enhance
such competition. (CSXT Comments 10-11, May 8, 2026.) Commenters also
raise concerns about the proposed limited duration of CGP, (see BNSF
Comments 7 n.5, May 8, 2026; Cunningham Comments 10, May 6, 2026), and
whether there would be any benefit to extending CGP's duration if
anticipated public benefits fail to materialize, (see CSXT Comments 12,
May 8, 2026).
While the major merger rules repeatedly emphasize competitive
enhancements as important to the Board's public interest calculus, the
sole competitive enhancement Applicants propose--CGP--appears to
exclude a significant amount of traffic hauled or proposed to be hauled
by Applicants, terminates with the conclusion of the Board's oversight
period, and may harm some shippers by incentivizing UP/NS to compete
less aggressively for some traffic. (See Rev. Appl. 2-256 to 2-257,
V.S. Israel 76-77.) At this stage in the proceeding, the Board will not
engage in any weighing of CGP against other effects of the Transaction.
However, Applicants' policy choices underlying CGP and Applicants' own
claims as to its effects raise substantial questions that must be
addressed early in this proceeding. Further information from Applicants
will facilitate meaningful public comment and the Board's review of
CGP's effects, including as relevant for considering any conditions
pertaining to the program or other potential competitive enhancements.
Specifically, the Board directs Applicants to:
<bullet> [EC-1] For each proposed CGP exclusion or limitation,\22\
(a) applying Israel's model, quantify the degree to which inclusion in
CGP would generate consumer surplus for the excluded group; (b) explain
the rationale for excluding or limiting that group from CGP
eligibility; and (c) where the exclusion or limitation is for
operational reasons, estimate the costs of any operational modification
required to make the excluded group CGP-eligible. While some traffic
may fall in multiple excluded groups, Applicants shall address and
compare the potential public benefits and costs of making each
individual excluded group CGP-eligible, rather than address all groups
in aggregate.
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\22\ For purposes of this directive, Applicants' analysis shall
include, but is not limited to, the following proposed exclusions or
limitations: unit trains, TIH/PIH, intermodal, automotive,
interchange points outside of the four covered gateways, connecting
carriers other than BNSF and CSXT, and shippers with direct rail-to-
rail competition. Each exclusion or limitation shall be considered
an excluded group and addressed individually (e.g., unit trains
shall be addressed individually).
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<bullet> [EC-2] For the proposed time limitation of CGP, (a)
address the extent to which any harms of the Transaction, which CGP may
be intended to offset, are permanent; (b) applying Israel's model,
explain the selection of CGP's termination date on public interest
grounds, factoring in any potential consumer surplus from extending the
program; and (c) address whether the proposed time limitation of CGP
reduces the net benefits of the Transaction as compared to a longer
duration or permanent condition.
[[Page 32181]]
<bullet> [EC-3] For the set of carloads identified as eligible for
CGP but not identified as potentially benefitting from CGP, (see Rev.
Appl. 2-261, V.S. Israel 81, Fig. 14), quantify any potential harm \23\
and discuss whether and how the design of CGP maximizes net benefits
for CGP-eligible traffic.
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\23\ Applicants shall present the quantification of any harms in
the same format as the quantification of projected benefits. (See
Rev. Appl. 2-261, V.S. Israel 81, Fig. 14.)
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<bullet> [EC-4] Discuss the extent to which Applicants propose any
specific measures (e.g., specific service benchmarks with clear
timeframes) against which CGP service performance will be measured
relative to comparable single-line traffic moving in UP/NS service, and
detail any specific enforcement mechanisms to ensure non-discriminatory
handling of traffic moving under CGP. (See Rev. Appl. 1-390, V.S. Novak
17.)
<bullet> [EC-5] For sole-served shippers served by either UP or NS
on a single-line basis,\24\ (a) quantify, by commodity group and
Business Economic Area, the amount of traffic that is potentially
disciplined by geographic competition; and (b) explain the extent to
which any proposed conditions (e.g., CGP, gateway protections, access
remedies) provide a meaningful offset for any loss in any geographic
competitive constraint for this traffic.
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\24\ For purposes of this directive, Applicants shall include
shippers served by a Class II or Class III carrier interchanging
solely with UP or NS.
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<bullet> [EC-6] Discuss the extent to which CGP would enable
shippers to have competitive choice to help reduce or avoid use of the
merged carrier during service disruptions, should transitional service
problems occur.
Access: 2-to-1 and 3-to-2 Shippers. Protection against a reduction
in the number of railroads serving a shipper facility is not new.
Indeed, the Board's major merger rules state that the Board
``consistently impose[s] conditions to preserve two-railroad service''
and will impose remedies to preserve competition on a case-by-case
basis where a shipper's rail access is reduced from three carriers to
two. Major Merger Rules, 5 S.T.B. at 548-49 & n.10. In comments on the
new rules, UP itself endorsed a case-by-case analysis for 3-to-2
situations and argued that the Board should examine each situation on
its facts, and, if the evidence demonstrates that a competing railroad
would be ineffective in constraining the merged carrier, introduce a
third competitor. Id. at 691. Recent Board precedent (in a minor
transaction) addresses the competitive impact of a proposed transaction
on 3-to-2 shipper facilities. See Canadian Nat'l Ry.--Control--Iowa N.
Ry., FD 36744 et al., slip op. at 7-11 (STB served Jan. 14, 2025)
(``There can still be a significant lessening of competition even where
the merging parties are not the only, or even the two largest,
competitors in the market.''). The major merger rules call for
applicants to list 2-to-1 and 3-to-2 shippers. See 49 CFR 1180.7(b)(2).
While Applicants' treatment of 2-to-1 and 3-to-2 shipper facilities
does not fail the minimum informational requirements for
completeness,\25\ the Board's review of the merits of Applicants'
proposed access remedies would benefit from additional information, and
such information would also aid in enabling meaningful public comment
from affected parties. Indeed, the Board's experience in imposing and
enforcing past major merger conditions protecting against a reduction
in serving railroads indicates the benefits of ascertaining and
evaluating the specifics of potential remedies early in the merger
review process.\26\
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\25\ Applicants detail the steps they took to develop their list
of 2-to-1 and 3-to-2 shipper facilities but acknowledge that their
original method fell short of identifying all of the necessary
facilities. (Rev. Appl. 1-394 to 1-397, V.S. Novak 21-24.)
Applicants acknowledge that there may be further facilities they
have yet to identify. (Id. at 1-397, V.S. Novak 24.)
\26\ See BNSF Ry.--Terminal Trackage Rts.--Kan. City S. Ry., FD
32760 (Sub-No. 46), slip op. at 9 (STB served July 5, 2016)
(analyzing requested terminal trackage rights using a public
interest standard to determine if they were necessary to effectuate
the merger conditions imposed decades earlier).
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As such, the Board directs Applicants to:
<bullet> [A-1] List each 2-to-1 and 3-to-2 shipper facility--
including each shipper facility that would face a 2-to-1 or 3-to-2
reduction in direct access to Class I carriers \27\--and, for each
facility listed, address how pre-merger competition among carriers will
be maintained.
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\27\ For purposes of Applicants' responses to A-1, A-2, and A-3,
direct access to a Class I carrier does not include access via a
Class II or III carrier that connects to a Class I carrier.
---------------------------------------------------------------------------
<bullet> [A-2] For each 3-to-2 shipper facility, explain why the
Board should not remedy a reduction in carriers serving the facility.
For each facility for which Applicants maintain no condition should be
imposed, detail how any alternative competitive constraint would fully
protect against competitive harm from a loss of a competitive
intramodal option.
<bullet> [A-3] For each 2-to-1 and 3-to-2 shipper facility, provide
any contracts or agreements, and any supporting details relevant to the
Board's examination of the arrangement, pertaining to access or
competition protection, and--if no contract or agreement has been
entered into--describe Applicants' most recent proposal to provide
access or competition protection to such facility and the status of any
negotiations on such proposal.
<bullet> [A-4] Confirm that Applicants do not intend to take any
action to reduce or eliminate the access of any Class II carrier, Class
III carrier, or a port to a Class I carrier following the Transaction,
including, for example, through changes involving interchange
commitments, lease arrangements, routing, or service.
Public Benefits: Diversion Analysis. Applicants' public-interest
analysis relies principally on the proposed diversion of approximately
2.1 million truckloads of traffic from long-haul trucking to rail,
which Applicants' expert estimates will save customers approximately
$3.5 billion annually and result in cascading benefits to multiple
stakeholders. (Rev. Appl. 1-14.) One of the goals of the Board's Major
Merger Rules was to align an application's projections for the benefits
of a merger with the realized transaction and to provide means to
alleviate any inconsistencies. See 49 CFR 1180.1(c)(1) (``To ensure
that applicants have no incentive to exaggerate the projected benefits
to the public, the Board expects applicants to propose additional
measures that the Board might take if the anticipated public benefits
fail to materialize in a timely manner.''); Major Merger Rules, 5
S.T.B. at 579-581. The Board requires additional information to
evaluate, and for the public to have a meaningful opportunity to
comment on, Applicants' projected diversions and the accompanying
asserted public benefits.
Specifically, the Board requires Applicants to:
<bullet> [PB-1] Confirm whether Applicants' diversion analyses and
public benefit summaries reflect Applicants' assumption that no
competitive response, by any market participant, in any form, will
occur during the first three years after consummation. If Applicants'
analyses and summaries incorporate a competitive response, detail how
that response was incorporated into the model and affects the diversion
and benefit estimates.
<bullet> [PB-2] Taking into account analyses reflected in the
documents produced in response to Decision No. 13, identify and
describe the most likely competitive responses from any mode of
transportation to the proposed Transaction and how each of those
responses would impact Applicants' ability to attract new traffic. For
each
[[Page 32182]]
competitive response identified, Applicants shall (a) provide a
quantitative estimate or, if a quantitative estimate is not feasible, a
detailed qualitative assessment of the potential reduction in projected
diversions; \28\ (b) provide the resulting impact on Applicants'
projected net revenues and annual public benefits; and (c) discuss the
impact on Applicants' earnings available for fixed charges. See 49 CFR
1180.6(a)(2)(ii) & (iii).
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\28\ For purposes of PB-2, Applicants' analysis shall include,
at a minimum, carload and intermodal on an individual basis, and
rail-to-rail and truck-to-rail on an individual basis.
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<bullet> [PB-3] Provide any document generated by or for UP or NS
since July 30, 2024, that contains diversion projections under
competitive response scenarios that are materially lower than Hunt's
estimates and, if any such projections exist, explain any material
differences.
<bullet> [PB-4] Confirm whether Applicants' diversion analysis and
public benefit summaries reflect any impact from CGP.
<bullet> [PB-5] Given that Applicants state that they do not
currently have sufficient capacity to support the projected traffic
growth, (see Rev. Appl. 1-59), (a) explain how Applicants will achieve
the projected benefits of the Transaction within the first three years
after consummation considering the time needed for Applicants and
shippers, as applicable, to construct the infrastructure (e.g., new
sidings, siding extensions, new mainline track, yard expansions,
shipper facility investments) and deploy operational assets (e.g.,
containers, cars, and chassis) needed to generate and handle projected
traffic growth; and (b) provide a quantitative estimate or, if a
quantitative estimate is not feasible, a detailed qualitative
assessment as to the extent to which Applicants' projected benefits are
dependent on shipper investment.
<bullet> [PB-6] Beyond the conversion of routes to single-line
service, elaborate on the extent to which other changes to business or
commercial strategies or practices (including with respect to pricing)
are planned or modeled to achieve the projected traffic diversions.
Applicants shall specify (a) the extent to which rate adjustments
(outside of the CGP) are planned to achieve projected diversions and
(b) the extent to which Applicants' modeled revenue projections reflect
any reduction in revenue per carload (or other pricing adjustment) for
any shipper or group of shippers (outside of CGP).
<bullet> [PB-7] Provide a discussion of (a) any proposed oversight
framework for both diversions and the related public benefits projected
by Applicants and (b) if the anticipated public benefits fail to
materialize in a timely manner after consummation,\29\ any proposed
measures that could be enacted swiftly \30\ and any proposed measures
that could be available for shippers that are excluded from CGP (as
referenced in EC-1 above). For each CGP-excluded group, identify any
mechanism that would provide relief or generate other benefits should
Applicants' projected benefits fail to materialize.
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\29\ The Board notes that there is history of prior major
mergers that have fallen short of truck-to-rail conversion
projections on past applicants' timelines. For example, in the most
recent Class I merger, Canadian Pacific--Kansas City Southern, the
applicants forecasted converting 64,000 trucks per year from highway
to rail. See Canadian Pac. Ry.--Control--Kan. City S., FD 36500 et
al., slip op. at 21 (STB served Mar. 15, 2023). Three years after
consummation, that goal has not yet been realized. See CPKC's Jan.
2026 Traffic Diversion Submission 6, Canadian Pac. Ry.--Control--
Kan. City S. (Gen. Oversight), FD 36500 (Sub-No. 6) (filed Jan. 15,
2026). Applicants here project substantially more diversions--2.1
million truck-to-rail conversions. (See Rev. Appl. 1-14.)
\30\ The Board notes that an extension of the CGP could be years
after the timeline on which Applicants project benefits would
materialize. (See Rev. Appl. 1-92 to 1-93 (discussing the
possibility of the Board extending CGP ``if the other anticipated
public benefits of the merger fail to materialize in a timely
manner'').)
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<bullet> [PB-8] Given the significant length-of-haul opportunities
identified in Hunt's truck-to-rail diversion analysis that go beyond
the watershed area,\31\ (a) elaborate on what efforts have been made in
the area of joint-line agreements between UP and NS regarding these
opportunities from January 1, 2023, to present and (b) specify the
reasons the traffic did not convert to rail without a merger.
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\31\ In Hunt's truck-to-rail diversion analysis, the data shows
that average length-of-haul is 2,070 door-to-door miles for the
1.203 million annual trucks to be converted to intermodal rail.
(Rev. Appl. 2-450, V.S. Hunt 63.) Nearly 80% of the truck-to-rail
diversions are 1,500 miles and longer. (Rev. Appl. 2-451, V.S. Hunt
64.)
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Service Assurance Plan. The Board's major merger rules envision
proactive steps to address service issues surrounding the
implementation of a merger. See 49 CFR 1180.1(h)(1) (``The quality of
service is of vital importance. Accordingly, applicants must . . .
[identify] the precise steps they would take to ensure adequate service
and to provide for improved service . . . [A]pplicants will be required
to provide service benchmarks, describe the extent to which they have
entered into any arrangements with shippers and shipper groups to
compensate for service failures, and establish contingency plans that
would be available to mitigate any unanticipated service
disruption.''). In Major Merger Rules, the Board ``strongly encouraged
applicants to make a commitment in the application to submit to
arbitration all claims of merger-related service failures,'' and the
Board provided an example of an arbitration process with specific
standards for a service failure and a system for compensating shippers
harmed by failures such that disputes could be ``readily handled'' by
an arbitration should an affected shipper elect to use arbitration.
Major Merger Rules, 5 S.T.B. at 580.
The Revised Application proposes an arbitration system for service
failures. Specifically, Applicants propose to provide arbitration, on
complaint by a shipper, when Applicants fail ``to provide reasonable
service due to merger implementation problems during the statute of
limitations period.'' (Rev. Appl. 2-1141 (Service Assurance Plan).)
Applicants propose to require a customer to demonstrate ``substantial
deterioration in service.'' (Id.) Under the proposal, Applicants would
``have the right to cure the alleged failure to provide reasonable
service'' within a 30-day period, and the proposed arbitration process
would terminate three years after the effective date of the Board's
approval of the Transaction. (Id. at 2-1141, 43 (Service Assurance
Plan).) While Applicants provide the information required for the
purposes of completeness, additional information is needed to assess
the usefulness of the proposed arbitration process and allow parties to
understand rights and remedies associated with the proposal. (NGFA
Comments 5, May 8, 2026 (``Applicants must submit a precise, detailed
Service Assurance Plan that provides the Board and industry
stakeholders in advance with a written plan to which the Applicants can
be held to account when any post-merger service disruptions occur.'').)
Accordingly, the Board directs Applicants to:
<bullet> [SA-1] Elaborate on the terms ``substantial deterioration
in service,'' ``reasonable service,'' and ``cure,'' and explain any
criteria (e.g., specific measurable benchmarks and clear timeframes)
that would be used when evaluating those terms in the context of
individual shipper claims.
<bullet> [SA-2] Explain the compensation available to shippers
under the proposed arbitration system, including how Applicants
envision the compensation will be calculated and what forms it might
take (e.g., direct payment, rate reductions). (Rev. Appl. 2-1142
(Service Assurance Plan).)
<bullet> [SA-3] Explain any remedies available for traffic
Applicants have
[[Page 32183]]
designated as ineligible for the proposed arbitration system, including
exempt commodities and traffic moving under contract, and describe the
process for shippers of such traffic to obtain such remedies.
Issues Involving Gateways and Car Supply (TRRA, KCT, and TTX).
Absent conditions, the Transaction, if approved, would result in the
combined UP/NS holding 50% or more of the ownership interests in
various entities, including terminal railroads at important gateways
(TRRA in St. Louis and KCT in Kansas City) and the rail car-pooling
company, TTX. As discussed above, though the Transaction would lead to
Applicants' majority ownership of TRRA and 50% ownership of KCT,
Applicants assert that they will divest sufficient interests in TRRA
rather than acquiring control, and that their combined 50% ownership
interest in KCT would not constitute control. Applicants would also
gain majority control of TTX and, as with TRRA, propose to divest their
interests below 50%. Thus, through various mechanisms, the Revised
Application states that Applicants will not control these three
entities, with differing commitments as to certainty of divestiture,
resulting ownership, and timelines for TRRA and TTX.
Even if Board authority for control of these entities is not
required at this time based on the current record, Applicants'
substantial ownership interests in these entities may have competitive
impacts that the Board may consider in determining whether the
Transaction is consistent with the public interest. See 49 CFR
1180.1(c); see also TTX Co.--Appl. for Approval of Pooling of Car Serv.
with Respect to Flatcars, FD 27590 (Sub-No. 4) (STB served Oct. 1,
2014) (approving TTX's flatcar pooling authority for 15 years). The
Board's rules contemplate conditions that would enhance competition in
ways that strengthen and sustain the rail network as a whole, including
portions of the network operated by Class II and Class III carriers, 49
CFR 1180.1(d), and require evaluation of impacts on network links,
including Class II and III carriers, 49 CFR 1180.7(b).
In Decision No. 9, the Board determined that Applicants' acquiring
control of TRRA would be a ``significant'' transaction because, on the
record presented, the Board could not find that any anticompetitive
effects of the transaction (which, as the Board held, were possible)
would clearly be outweighed by the anticipated public benefits.
Decision No. 9, slip op. at 10-11. In addition to concerns about TRRA,
commenters have raised potential public interest concerns related to
KCT (see, e.g., CPKC Comments 13-14, May 8, 2026) and TTX (see, e.g.,
BNSF Comments 5-6, May 8, 2026.) The Board requires additional
information regarding Applicants' planned disposition of their
interests in TRRA and TTX and retention of their 50% interest in KCT at
the outset of the proceeding to facilitate the Board's assessment of,
and public comments on, the public interest implications.
Specifically, the Board directs Applicants:
<bullet> For TRRA:
[cir] [TRRA-1] Explain Applicants' proposal for receiving Board
review and confirmation that any divestiture has been sufficient to
avoid legal control requiring Board authority, such that any express
condition requiring divestiture before consummation has been satisfied.
[cir] [TRRA-2] Provide additional details regarding TRRA-related
corporate documents that may affect the implementation of Applicants'
proposal to divest shares and Board seats sufficient to avoid majority
control by Applicants. For each such document, explain what changes
would be required, and whether in Applicants' view such changes must be
pursued under state law or whether preemption under 49 U.S.C. 11321(a)
may apply.
[cir] [TRRA-3] Given Applicants' proposed operational changes at
the St. Louis Gateway, which include re-routing traffic that
historically has been interchanged with TRRA (see, e.g., Rev. Appl. 2-
874 (Service Assurance Plan)), provide additional details regarding
Applicants' plans and incentives to invest in, and assume the
liabilities of, TRRA.
<bullet> For KCT:
[cir] [KCT-1] Identify any decision-making mechanism, including in
KCT's governance documents, that would resolve any deadlock on KCT
decisions, including investment decisions.\32\
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\32\ The Board notes that Applicants propose to keep a 50%
ownership interest in KCT and, therefore, apparently, the power to
veto proposals from KCT's other owners, and have not committed to
divesting ownership below 50%.
---------------------------------------------------------------------------
[cir] [KCT-2] Given Applicants' proposed operational changes at the
Kansas City Gateway, which include adjusting current interchanges with
KCT (see, e.g., Rev. Appl. 2-874 to 2-875 (Service Assurance Plan)),
provide additional details regarding Applicants' plans and incentives
to invest in, and assume the liabilities of, KCT.
[cir] [KCT-3] Should the Board identify competitive impacts
resulting from Applicants' 50% ownership interest in KCT that must be
remedied by divestiture, provide any additional details regarding KCT-
related corporate documents that may impact the implementation of any
divestiture of shares and board seats.
<bullet> For TTX:
[cir] [TTX-1] Confirm whether Applicants would consummate the
Transaction without first divesting from TTX. If so, provide additional
details regarding Applicants' commitment to divest ``at such time as
they are able to do so on commercially reasonable terms.'' (Id. at 1-
89.) This response shall discuss Applicants' proposal for how the Board
can evaluate, and confirm, whether TTX's divestment commitment has been
satisfied, including what standards would govern the Board's
adjudication of a claim that Applicants failed to divest after
receiving a ``commercially reasonable'' offer \33\ and whether any
deadlines or specific timing constraints apply to Applicants'
commitment that they will divest ``at such time as they are able.''
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\33\ Although the Board does not expect Applicants to predict
the specific terms of any offer, Applicants shall address the
definition of ``commercially reasonable'' as necessary for the Board
to consider the enforceable parameters of their proposed condition.
---------------------------------------------------------------------------
[cir] [TTX-2] Provide additional details regarding TTX-related
corporate documents that may impact the implementation of Applicants'
proposal to divest shares and Board seats sufficient to avoid majority
control by Applicants. For each such document, explain what changes
would be required, and whether in Applicants' view such changes must be
pursued under state law or whether preemption under 49 U.S.C. 11321(a)
may apply.
[cir] [TTX-3] Explain the potential impacts on competition of (a)
Applicants' control interests if divestiture is not consummated and (b)
Applicant's proposed 49% control of TTX, if implemented.
Market Share Projections. Under 49 CFR 1180.7(b), Applicants are
required to submit ``full system'' impact analyses that include any
operations in Mexico and Canada. For major mergers, these analyses must
meet certain ``minimum requirements'' to ensure that such applicants
``supply the types of information we have found most helpful in
assessing harm to competition or to essential services . . . .'' Major
Merger Rules, 5 S.T.B. at 599. Among other things, the analyses must
``demonstrate the impacts of the transaction--both adverse and
beneficial--on competition within regions of the United States and this
nation as a whole . . . .'' 49 CFR 1180.7(b). They must account for
``inter- and intramodal competition, product competition, and
geographic
[[Page 32184]]
competition.'' Id. They ``should reflect the consolidated company's
marketing plan.'' Id. at 1180.7(a). They ``must'' provide actual and
projected market shares of (i) originated and terminated traffic by
railroad for each major point on the combined system and (ii) revenues
and traffic volumes for major interregional or corridor flows by major
commodity group. Id. at 1180.7(b)(2)-(3). And ``[f]or each major
commodity group, an analysis of traffic flows indicating patterns of
geographic competition or product competition across different railroad
systems, showing actual and projected revenues and traffic volumes.''
Id. at 1180.7(b)(4). These detailed market-share projections are
required because ``[a]ny railroad combination,'' including an end-to-
end combination, ``entails a risk that the merged carrier would acquire
and exploit increased market power.'' Id. at 1180.1(c)(2)(i). In
Decision No. 9, the Board concluded that the Application was incomplete
because the full-system impact analyses did not contain Applicants'
``projected market shares'' as required by 49 CFR 1180.7(b), including
the failure to account for merger-related traffic growth, diversions,
or future changes to market conditions. In the Revised Application,
Applicants assert that they have addressed the Board's prior basis for
rejection by deriving post-merger market share projections that
incorporate traffic that Applicants anticipate attracting from trucks
and other railroads. (Rev. Appl. 1-16.)
The Board requires additional information to evaluate Applicants'
projected market shares, and such information will also benefit the
public's opportunity for comment. Specifically, the Board directs
Applicants to:
<bullet> [MS-1] For each route on which Applicants' combined market
share will increase if the Transaction is approved, elaborate on the
potential impact on competing or alternative routes, including whether
those competing or alternative routes' viability may be jeopardized due
to insufficient post-Transaction traffic, (see, e.g., NS_STB_00001186;
NS_STB_00001321).
<bullet> [MS-2] Because the diversion analysis does not account for
industry changes since 2023 from transactions involving CP-KCS, CSXT-
Pan Am, and CN-Iowa Northern, (Rev. Appl. 2-457, V.S. Hunt 70), discuss
the impact of these transactions on Applicants' ability to achieve the
truck-to-rail and rail-to-rail diversions modeled by Hunt's diversion
and projected market share analysis.\34\
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\34\ See, e.g., the Falcon Premium intermodal service offered by
UP, CN, and Grupo M[eacute]xico, and the intermodal service provided
by BNSF, Grupo M[eacute]xico, and J.B. Hunt.
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Downstream Merger Impacts. As addressed above, the Board received
comments arguing that Applicants did not thoroughly address potential
downstream merger applications. See 49 CFR 1180.6(b)(12). BNSF argues
that Applicants ``dismiss[ ] the analysis as impossible'' in the
Revised Application, but that documents produced pursuant to Decision
No. 13 ``tell quite a different story.'' (BNSF Comments 6, May 8,
2026.) BNSF states that the lack of candor concerning Applicants' ``
`end game' assessments'' deprives the Board of ``even the most basic
tools to wrestle with those industry-shaping issues.'' (Id. at 6-7.)
Similarly, CN argues that Applicants do not provide a commentary on
potential downstream mergers even though Applicants clearly considered
such impacts. (CN Comments 23-24, May 8, 2026.)
While the Board's rules do not require specific benefit
calculations based on the potential for possible downstream merger
responses, the Board can fully analyze the effects of major mergers on
the current landscape only if Applicants provide ``preliminary evidence
about the evolving structure of the industry that would likely result
from their proposal and others like it; if they address the merits of
such a structure; if they provide their views on how to deal with
potential problems that structure could cause to service, efficiency,
and competition,'' and if other parties then express their concerns on
a full record. Major Merger Rules, 5 S.T.B. at 582. Accordingly, to
further this critical discussion, Applicants should provide further
discussion about the potential for downstream merger applications,
including further consolidation of the Class I railroads, including the
Canadian carriers.
Specifically, the Board directs that:
<bullet> [DS-1] Because Applicants have taken the position that any
additional Class I mergers would not likely result in harm if they are
``essentially end-to-end,'' (Rev. Appl. 1-95), Applicants shall
specifically discuss whether any subsequent mergers--involving BNSF,
CSXT, CN, or CPKC--would be ``end-to-end,'' and if not, provide their
view on how to deal with potential problems resulting from further
consolidation.
<bullet> [DS-2] Elaborate on the extent to which subsequent major
mergers involving BNSF, CSXT, CN, or CPKC could cumulatively reduce
geographic competition and impact market power, and discuss any
implications for the Board's use of its conditioning authority in this
proceeding.
<bullet> [DS-3] For each condition proposed in the Revised
Application (including but not limited to CGP, open gateway
commitments, access protections, and divestiture commitments), identify
whether the condition would be rendered less effective by a subsequent
major merger involving BNSF, CSXT, CN, or CPKC.
Passenger Rail. There appears to be one passenger rail route for
which the Revised Application does not include a 49 CFR 1180.8(b)(2)
passenger rail impact analysis. According to FRA's Intercity Passenger
Rail Service Quality and Performance Reports, UP has hosted the Amtrak
Heartland Flyer's northbound trains for 60 minutes each train run from
October to December since at least 2021. See Federal Railroad
Administration, FY26 Q1 Host Runtime Metric, <a href="https://railroads.dot.gov/elibrary/fy26-q1-host-runtime-metric">https://railroads.dot.gov/elibrary/fy26-q1-host-runtime-metric</a>.
Further, NJ Transit and NY DOT claim the Revised Application does
not include several passenger rail services where NS has trackage
rights on the lines used by those passenger services. (NJ Transit
Comments 1-2, May 8, 2026; NY DOT Comments 2-7, May 7, 2026.) In reply,
Applicants argue that the Board's regulations only require an impact
analysis for passenger services that are operated ``over the lines of
applicant carriers,'' which does not include lines where an applicant
carrier only has operating rights. (Applicants Reply 37-38, May 12,
2026 (citing 49 CFR 1180.8(b)(2), 1180.3(b)).) Moreover, Applicants
state that most of the services raised by NJ Transit will not be
affected because there is no projected increase in trains due to the
Transaction. (Id. at 39.) This includes the Pascack Valley Line, Bergen
Line, Main Line, Montclair-Boonton Line, Morristown Line, Gladstone
Branch, and Raritan Valley Line. (Id.) Likewise, Applicants state that
the ``Southern Route'' and the ``Port Jervis line,'' both raised in NY
DOT's comments, will not be affected because no additional trains are
projected on those lines as a result of the Transaction. (Id. at 36,
41.)
Additionally, Applicants assert that the UP and NS lines used to
host passenger services have sufficient capacity to support the
projected freight increase while maintaining the current passenger
service levels. (Rev. Appl. 2-757 to 2-763 (Ex. 13, Operating Plan).)
But the only information provided to support that assertion is a
worksheet showing the maximum daily capacity of rail line segments.
(See, e.g., id. at 2-757
[[Page 32185]]
n.100 (Ex. 13, Operating Plan).) The maximum daily train capacity does
not explain how passenger trains will actually be affected. Passenger
trains have specific schedules and are likely to travel at greater
speeds than freight traffic. Applicants' Road Volume Capacity Summary
worksheet does not illustrate how passenger and freight traffic will
interact.
Thus, the Board directs Applicants to:
<bullet> [PR-1] Provide a passenger impact analysis for the
Heartland Flyer service or explain why such an analysis is not needed.
<bullet> [PR-2] Because Conrail's Lehigh Line, over which NS has
trackage rights, is projected to have a significant increase in train
traffic, provide a passenger rail impact analysis for the Lehigh Line
as Applicants prepared for NS- and UP-owned lines that carry passenger
routes.
<bullet> [PR-3] Address, in the passenger impact analysis and SAP,
how the UP and NS lines used to host passenger services have sufficient
capacity to support projected freight increases while maintaining
current passenger service levels. Supplemental information could
include, for example, a dispatching plan for handling post-merger
traffic increases, train modeling evidence showing passenger rail
impacts (or the lack thereof), and an analysis of the anticipated
freight traffic schedules and how they impact the existing passenger
services.
Workpaper Issues. On May 14, 2026, BNSF filed a letter expressing
concern with the quality and sufficiency of the workpaper submissions
by Applicants. BNSF notes instances of outdated scripts and missing
workpapers. BNSF argues that Applicants should have provided complete
workpapers with the Revised Application and that their failure to do so
compromises the integrity of the Board's proceedings. BNSF asks that
the Board require Applicants to certify compliance with Decision Nos.
3, 8, and 9. On May 15, 2026, CPKC filed a letter joining in BNSF's
concerns and arguing that Applicants had still yet to provide a
complete and usable set of workpapers.
Applicants filed a response to CPKC and BNSF on May 15, 2026,
stating that they believe all legitimate issues that have been
identified have been resolved. Applicants commit to continue responding
promptly to any additional issues raised by other parties.
Subsequently, CPKC filed an additional letter on May 19, 2026,
asserting that it has discovered further deficiencies in Applicants'
workpapers and arguing that the time it takes for other parties to
process and begin analysis of the Revised Application anew is
untenable.
The Board appreciates the complexity and magnitude of the workpaper
production in this proceeding, but the manner in which Applicants have
managed the workpaper submission process has raised legitimate concerns
that parties and the Board may not have a reliable and static set of
workpapers to use in assessing and responding to the Revised
Application. Therefore, with the upcoming submission of supplemental
information, Applicants will be required to submit a new, complete set
of workpapers and certify compliance with the requirements of Decision
Nos. 3, 8, and 9, and the further guidance below. Continued significant
issues regarding the workpaper submission process could delay the
proceeding to the extent they impede the ability to respond to or
analyze the Revised Application and supplement.
With the supplement and going forward, Applicants' workpaper
submissions must follow the guidance in Decision Nos. 3, 8, and 9, as
amended to comply with the below. To improve the process of submitting,
replacing, cataloguing, and validating workpapers, Applicants will be
required to:
1. Provide a single, comprehensive index containing all document
names. Where the principal index ``FD 36873 Workpaper Index.xlsx''
today contains an entry referencing a secondary index, in the form
``see separate index titled '[Expert VS] Workpaper Index,''' replace
this entry with the list of that expert's workpapers and their
confidentiality designations. There are currently five sub-indices
referenced by the principal index. Bring all of the content in the sub-
indices into the principal index.
2. After ``FD 36873 Workpaper Index.xlsx'' has been augmented with
all information formerly contained in sub-indices, populate three
additional columns with the following information:
a. A column titled, ``Upstream References.'' If a workpaper
contains formulas that reference one or more upstream workpapers, list
all such workpapers in this column. If a workpaper does not contain
formulas referencing other documents, leave its entry blank.
b. A column titled, ``Downstream Feeds.'' If a workpaper contains
cells that are referenced by one or more downstream workpapers, list
all such workpapers in this column. If a workpaper is not referenced by
formulas in any other workpaper, leave its entry blank.
c. A column titled, ``Exhibits and Entries.'' List all exhibits,
graphs, tables, and numeric figures in the Revised Application text
that are drawn from this workpaper, using as specific a reference as
possible, (e.g. to the volume, page, and figure or table). If a
workpaper does not directly feed content in the Revised Application,
leave this column blank.
If a change to a workpaper results in a change to the content of
the Revised Application (a chart, figure, or citation), Applicants must
file an errata to the Revised Application reflecting that change.
Completeness of Applicants' Document Production in Response to
Decision No. 13. As noted above, on March 18, 2026, the Board directed
Applicants to submit additional information deemed necessary to
facilitate the Board's review of a revised application. Decision No.
13, FD 36873 et al., slip op. at 5-7. Specifically, the Board required
Applicants to submit documents of the kind ordinarily requested by the
Federal Trade Commission and the Department of Justice in merger cases
subject to review under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (HSR Act), 15 U.S.C. 18a. The submission was to be made in
advance of the anticipated April 30 filing date of the Revised
Application. Decision No. 13, FD 36873 et al., slip op. at 7.
Applicants submitted their responses to Decision No. 13, including
the production of documents, on April 7, 2026. (See Norfolk S. Letter
1-2, Apr. 7, 2026; Union Pac. Letter, Apr. 7, 2026.)
On April 27, 2026, BNSF filed a motion to enforce Decision No. 13,
arguing that the universe of submitted documents was too small to
plausibly represent a complete response to the Board's order. CPKC
filed a reply in support of BNSF's motion on April 28, 2026, and
Applicants replied on May 8, 2026.
In comments on the completeness of the Revised Application, CPKC
and CSX assert that the Revised Application is incomplete on the ground
that Applicants have allegedly failed to comply with Decision No. 13,
as set forth in BNSF's motion to enforce. (CPKC Comments 14-15, May 8,
2026; CSX Comments 8-9, May 8, 2026.)
For present purposes, the sufficiency of Applicants' production in
response to Decision No. 13 does not bear on the completeness of the
Revised Application. In Decision No. 13 the Board exercised its general
authority to request information supplemental to a refiled application.
Decision No. 13, FD 36873 et al, slip op. at 5 (citing 49
[[Page 32186]]
U.S.C. 1321(b)(3)). It did not indicate that the Board intended to make
compliance with Decision No. 13 part and parcel of a revised
application itself (although the Board would have had authority to do
so had it chosen that path, see 49 CFR 1180.4(c)(2)(v)). The Board will
rule on BNSF's motion to enforce Decision No. 13 at a later date.
Ex Parte Communications. On August 29, 2025, Applicants filed a
motion to permit stakeholder communications in accordance with 49
U.S.C. 11324(f).\35\ In it, Applicants ask the Board to waive in this
proceeding the prohibition on ex parte communications for railroad
merger proceedings established in Petition of Fieldston Co. to
Establish Procedures Regarding Ex Parte Communications in Railroad
Merger Proceedings (Fieldston), 1 S.T.B. 1083 (1996). Applicants argue
that Fieldston relied on justifications that ``are no longer valid,''
and that allowing parties to the proceeding to participate in ex parte
communications would facilitate the Board's decision-making.
(Applicants Mot. 2-5, Aug. 29, 2025.)
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\35\ Section 11324(f) permits, but does not require, ex parte
communications in consolidation, merger, or acquisition of control
proceedings involving at least one Class I rail carrier, subject to
certain requirements.
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Applicants state that, in Fieldston, the Board expressed concerns
about reducing oral communications to writing and reflecting such
communications in the public record. (Id. at 3-4.) According to
Applicants, those concerns were remedied by the Board's more recent
rules allowing ex parte communications in informal rulemaking
proceedings, which require participating stakeholders to submit a
memorandum that, among other things, ``summarizes the data and
arguments presented during the ex parte communication.'' 49 CFR
1102.2(g)(4). Under those rules, the Board reviews the memorandum to
ensure it is ``sufficiently detailed,'' and then places it in the
public docket. Id. According to Applicants, such procedures safeguard
fairness and transparency and should be employed in this proceeding.
(Applicants Mot. 4, Aug. 29, 2025.) Applicants also argue that ex parte
communications could further the Board's ability to issue an efficient
and timely decision, contrary to the Board's finding in Fieldston that
ex parte communications would impede efficiency. (Id. at 3, 5-6.)
Additionally, Applicants argue that the Board in Fieldston provided no
support for finding that judicial review of a railroad merger decision
would be complicated if the Board exercised its discretion to permit ex
parte communications. (Id. at 4.)
The other Class I railroads each replied to Applicants' motion.
BNSF and CN support Applicants' motion. BNSF argues that ex parte
communications would ``increase[e] the flow of information and
technical expertise between the Board and its stakeholders,''
facilitating ``decision-making that is grounded in the complex
operational and market realities of the rail industry.'' (BNSF Reply 3,
Sept. 22, 2025.) Similarly, CN argues that ex parte communications in
this proceeding would enhance efficiency and ``contribute to more
timely and informed decision-making.'' (CN Reply 2, Sept. 17, 2025.)
CSXT replies that it does not oppose ex parte communications in this
proceeding, subject to safeguards ensuring that they are helpful,
efficient, and fair. (CSXT Reply 2-8, Sept. 22, 2025.)
CPKC opposes Applicants' motion, arguing that the principles
underlying Fieldston remain valid and that Applicants underestimate
``practical, due process, and fairness concerns'' associated with
permitting ex parte communications in this proceeding. (CPKC Reply 2,
5, Sept. 19, 2025.) CPKC also argues that rail merger proceedings are
distinguishable from informal rulemaking proceedings, in which the
Board generally permits ex parte communications. CPKC reasons that, in
rail merger proceedings, the Board acts as a decision maker rather than
a policymaker. (Id. at 7.) CPKC also argues that merger proceedings are
subject to statutory deadlines that do not apply to informal rulemaking
proceedings. (Id.) Should the Board decide to permit ex parte
communications in this proceeding, CPKC argues that the Board should
impose certain safeguards. (Id. at 8-11.)
The Board will deny Applicants' motion to waive the ex parte
communication prohibitions in Fieldston at this time.\36\ Ex parte
communications provide an opportunity for freer discussions between
parties and the Board, potentially aiding in the Board's understanding
of key issues and its decision making. However, given the high level of
interest in this proceeding, a broad Fieldston waiver at this juncture
could complicate and delay any future record building process. Under
Applicants' proposal, entertaining ex parte communications would also
require additional filings--namely, summaries of each ex parte
communication and potentially numerous responses to each summary--
adding to what will likely be a large and complex record and requiring
Board members and staff to expend resources on additional review.
(Applicants Mot. 3, 5, Aug. 29, 2025); see 49 CFR 1102.2(g)(4)(ii); see
also Fieldston, 1 S.T.B. at 1084 (discussing practical bases for
deciding not to entertain ex parte communications); Pet. for
Rulemaking--Amends. to Reguls. Governing Ex Parte Commc'ns, EP 782,
slip op. at 5-6 (STB served Apr. 14, 2026).
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\36\ Because Applicants' motion will be denied, the Board need
not address arguments, raised in replies to Applicants' Fieldston
motion and comments on the Board's proposed procedural schedule, on
how and when to permit ex parte communications.
---------------------------------------------------------------------------
Additionally, the concerns expressed in Fieldston about
transparency and fairness in merger proceedings were not necessarily
``remedied'' by the Board's rules imposing safeguards on ex parte
communications in informal rulemaking proceedings. (Applicants Mot. 3,
5, Aug. 29, 2025.) When the Board amended its rules to allow ex parte
communications in informal rulemakings, it specifically declined to
determine whether ex parte communications should be permitted in major
rail merger proceedings. See Ex Parte Commc'ns in Informal Rulemaking
Procs., EP 739, slip op. at 8 n.13 (STB served Feb. 28, 2018). In
Fieldston, the agency recognized that potential trade-offs in allowing
ex parte communication are heightened in the merger context. Fieldston,
1 S.T.B. at 1085.
However, as the record develops, if the Board identifies specific
issues for which ex parte communications would have particular value,
the Board will again evaluate whether the benefits of such
communications outweigh the burden of additional filings and any other
effects. In that event, the Board will issue a decision inviting such
communications and providing for any necessary safeguards, including
subject matter or procedural limitations.
Environmental Matters. NEPA requires that the Board examine the
potential environmental impacts of Board actions that fall within the
statutory definition of ``major federal action.'' See 42 U.S.C.
4336e(10); 49 CFR 1105.5.\37\ Under NEPA and the Board's environmental
regulations, actions subject to NEPA are separated into three classes
that prescribe the level of environmental review required. See 42
U.S.C. 4336(b); 49 CFR 1105.6. The
[[Page 32187]]
Board must prepare an EIS for proposed actions that have a reasonably
foreseeable significant effect on the quality of the human environment.
See 42 U.S.C. 4336(b)(1). The Board must prepare a more limited
Environmental Assessment (EA) with respect to proposed actions that do
not have a reasonably foreseeable significant effect on the quality of
the human environment, or if the significance of such effect is
unknown, unless the Board determines that the proposed action is
categorically excluded from the requirement to prepare an EA or EIS.
See 42 U.S.C. 4336(b)(2). As pertinent here, a merger transaction
normally requires the preparation of an EA or EIS where the thresholds
listed in the Board's regulations would be exceeded. See 49 CFR
1105.6(b)(4), 1105.7(e)(5).
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\37\ The Board's current regulation references the definition of
``major Federal action'' contained in the Council on Environmental
Quality's (CEQ's) former NEPA implementing regulations at 40 CFR
parts 1500-1508. As explained below, CEQ has recently rescinded
these regulations. 91 FR 618 (Jan. 1, 2026). Therefore, the
operative definition is the statutory definition at 42 U.S.C.
4336e(10).
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The thresholds for assessing environmental impacts from increased
rail traffic on rail lines in railroad merger proceedings are an
increase in rail traffic of at least 100% (measured in gross ton miles
annually) or an increase of at least eight trains per day. 49 CFR
1105.7(e)(5)(i)(A). Rail lines located in areas classified as being in
``nonattainment'' under the Clean Air Act (42 U.S.C. 7401-7671q) are
also assessed if they would experience an increase in rail traffic of
at least 50% (measured in gross ton miles annually) or an increase of
at least three trains per day. 49 CFR 1105.7(e)(5)(ii)(A).
Additionally, the thresholds for assessing environmental impacts
from increased activity at rail facilities, including rail yards and
intermodal facilities, are an increase in rail yard activity of at
least 100% (measured by carload activity) or an average increase in
truck traffic of more than 10% of the average daily traffic or 50
vehicles a day on any affected road segment. 49 CFR 1105.7(e)(5)(i)(B),
(C). For rail facilities in nonattainment areas, the thresholds are an
increase in rail yard activity of at least 20% (measured by carload
activity) or an average increase in truck traffic of more than 10% of
the average daily traffic or 50 vehicles a day on a given road segment.
49 CFR 1105.7(e)(5)(ii)(B), (C).
Based on the information provided by Applicants to date, OEA has
identified rail lines, rail yards, and intermodal facilities that would
experience increases in rail traffic and activity that would exceed the
analysis thresholds as a result of the Transaction.\38\
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\38\ The Board will not conduct an environmental review of the
control application in Docket No. FD 36873 (Sub-No. 1). That
transaction is categorically excluded under 49 CFR 1105.6(c)(1)
because there will be no significant changes in operations as a
result of the acquisition. (See Rev. Appl. 2-1162.)
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The NEPA Process. Based on information provided by Applicants and
in consultation with OEA, the Board has determined that the preparation
of an EIS is appropriate in this proceeding.\39\ Under NEPA, an agency
must prepare an EIS for actions that would have a ``reasonably
foreseeable significant effect on the quality of the human
environment.'' 42 U.S.C. 4336(b)(1). An EIS is usually not required in
merger cases; a more limited EA generally is sufficient because there
are not usually significant environmental impacts from the change in
owners and operators of existing lines. 49 CFR 1105.6(b)(4). In this
case, however, an EIS is warranted in light of the potential for
significant impacts of the Transaction on numerous communities across
the United States that would likely result from increased activity
levels on rail line segments and at rail facilities. (See UP Resp. to
OEA Info. Request No. 1, Master Segment Table, Dec. 18, 2025; UP Resp.
to OEA Info. Request No. 3, Master Data Tables, Apr. 30, 2026.)
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\39\ Along with the procedural schedule, the environmental
review will also be held in abeyance pending Board review of the
required supplementation discussed above.
---------------------------------------------------------------------------
Consistent with recent Board precedent, the Board will follow the
EIS process described below in this proceeding.\40\ This process is
based on recent changes regarding the interpretation and application of
NEPA. NEPA's statutory and regulatory framework has changed
significantly since the Board last revised its environmental
regulations in 1991. In 2023, Congress amended NEPA to clarify and
streamline the environmental review process. Public Law 118-5, 321.
Among other things, the revised statute addresses the requirements for
providing notice of the intent to prepare an EIS and for soliciting
comments. See 42 U.S.C. 4336a(c).
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\40\ See Nev. Gold Rail LLC--Constr. Exemption--in Eureka &
Landers Cntys., Nev., FD 36889, slip op. at 2-5 (STB served May 22,
2026).
---------------------------------------------------------------------------
In 2025, CEQ published an Interim Final Rule, effective April 11,
2025, rescinding ``all iterations'' of its NEPA implementing
regulations. 90 FR 10,610 (Feb. 25, 2025).\41\ The rescinded
regulations included procedures for scoping, preparing, and seeking
comment on an EIS. See 40 CFR 1501.9 and part 1502 (2020). Following
the rescission, CEQ published NEPA implementation guidance envisioning
a streamlined EIS process, focused on the statutory requirements.\42\
CEQ's actions were directed by Executive Order 14154, Unleashing
American Energy, 90 FR 8353 (Jan. 20, 2025), which also directed that
revisions to individual agencies' NEPA implementing regulations must be
consistent with NEPA as amended.
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\41\ CEQ adopted the Interim Final Rule as Final on January 8,
2026. 91 FR 618.
\42\ Memorandum for Heads of Departments and Agencies:
Implementation of the National Environmental Policy Act (Sept. 29,
2025) (CEQ Guidance), available at <a href="https://ceq.doe.gov/guidance/guidance.html">https://ceq.doe.gov/guidance/guidance.html</a> (last visited Apr. 23, 2026).
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Moreover, in Seven County Infrastructure Coalition v. Eagle County
Colorado (Seven County)--a case upholding a Board EIS--the Supreme
Court called for adherence to the ``statutory text'' and ``common
sense'' in NEPA reviews. Seven Cnty., 605 U.S. 168, 184 (2025). The
Court stated that ``NEPA is a purely procedural statute that, as
relevant here, simply requires an agency to prepare an EIS--in essence,
a report.'' Id. at 173; see also id. at 183 (indicating that the NEPA
process should be seen as a ``modest procedural requirement'').
In light of these changes to NEPA's legal framework and to promote
a more efficient process,\43\ the Board finds it is appropriate to
waive certain requirements contained in 49 CFR 1105.10(a)(2)-(4) in
this proceeding.\44\ These waivers are consistent with the Board's
recent proposed changes to its environmental regulations. Permitting
Reform--Env't Rev. Process (Permitting Reform), EP 779 (STB served Mar.
25, 2026). The Board will also increase public engagement early in the
environmental review process--with numerous public meetings and
opportunities for public comment.
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\43\ As CEQ has noted, ``NEPA implementation reform now has been
called for, authorized, and directed by all three branches of
government at the highest possible level: Congress, the President,
and the Supreme Court.'' CEQ Guidance 6.
\44\ The Board may waive its regulations and has done so on its
own motion in various contexts and proceedings. See, e.g., Expanding
Access to Rate Relief, EP 665 (Sub-No. 2), slip op. at 1-2 (STB
served Mar. 28, 2018) (waiving the prohibition on ex parte
communications based on regulatory revisions adopted by the Board
during the pendency of the proceeding); Lake Providence Port
Comm'n--Feeder Line Appl.--Line of Delta S. R.R. Located in E.
Carroll & Madison Pars., La., FD 36447, slip op. at 5 & n.15 (STB
served Dec. 11, 2020) (waiving timeframe for posting notice of
feeder line application acceptance); Rio Grande Pac.--Continuance in
Control--Colo., Midland & Pac. Ry., FD 37470 (STB served Jan. 29,
2021) (waiving regulatory deadline for Board decision on motion for
access).
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The EIS process will include robust public involvement and will
ensure that the Board considers the potential environmental effects of
the Transaction as required under NEPA. OEA will send out thousands of
letters requesting preliminary comments on the
[[Page 32188]]
Transaction from appropriate federal, state, Tribal, and local
agencies. A project web page has also been made available to the public
and will be updated throughout the EIS process.\45\ OEA will publish a
Notice of Intent to Prepare an EIS (NOI) containing detailed
information about the planned scope of analysis for the EIS including,
among other things, the purpose and need for the Transaction; a summary
of expected effects; a summary of anticipated reviews, consultations,
permits and authorizations; and a description of the public scoping
process. See Permitting Reform, EP 779, slip op. at 36 (proposed 49 CFR
1105.9(f)(1)).
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\45\ <a href="https://www.stb.gov/upns-eis-fd36873">https://www.stb.gov/upns-eis-fd36873</a>.
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The NOI in this proceeding will be more fulsome than under the
Board's prior EIS process and will serve as an opportunity for
interested members of the public to provide substantive comments
earlier in the environmental review process. The NOI will also include
a request for public comment on potential effects and on relevant
information, studies, or analyses with respect to the Transaction. Id.
at 36-37 (proposed 49 CFR 1105.9(f)(2)).
Following the NOI and scoping process, OEA will prepare and publish
an EIS that will analyze in detail the potential environmental impacts
of the Transaction, respond to public comments on the NOI, and, if
appropriate, make recommendations for environmental mitigation. In
making its final decision in this proceeding, the Board will consider
the entire record, including the record on the transportation merits,
the NOI, the EIS, and all public and agency comments received. The
Board will decide whether the Transaction should be authorized, and if
so, what conditions, including environmental mitigation conditions, to
impose.
OEA will provide ample opportunities for timely public
participation in this proceeding, including at least 12 in-person
public meetings.\46\ Public participation is an integral part of the
Board's EIS process, and meetings, including several virtual meetings,
will be planned as appropriate to facilitate public involvement in
areas of the country that may be impacted.\47\ To appropriately
consider the Transaction's potential environmental effects and to
provide meaningful opportunities for public participation early in the
process, the Board will modify its procedures in two ways.
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\46\ During the EIS process for the last major merger, OEA held
four in-person public meetings. Canadian Pac. Ry.--Control--Kan.
City S., FD 36500 et al., slip op. at 152 (STB served Mar. 15,
2023).
\47\ For example, the Board intends to hold at least one such
meeting in Houston, Tex., in light of the city's interest in the
Transaction as reflected in its comments on the completeness of the
Revised Application discussed above. Additional details, such as the
timing and specific locations for in-person public meetings, will be
outlined in the NOI.
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First, the Board is modifying the process set forth at 49 CFR
1105.10(a)(2) for publishing an NOI to prepare an EIS. Specifically,
OEA will address any comments on the NOI in the EIS itself, rather than
publishing a ``Final Scope of Study'' following publication of the NOI
and request for comments. The Board's NOI process in this proceeding
will present more detailed information to the public at the NOI stage
than under the Board's previous process. The two-step NOI process, as
reflected in section 1105.10(a)(2), is not required under NEPA's
current framework. Section 107(c) of NEPA, added as part of the 2023
amendments, provides that EIS NOIs must ``include a request for public
comment on alternatives or impacts and on relevant information,
studies, or analyses with respect to the proposed agency action.'' 42
U.S.C. 4336a(c). The statute does not mandate a further scoping
process, nor envision publication of a ``Final Scope of Study'' or
similar document following the NOI comment period and before publishing
the EIS. See id. The modified NOI process that the Board will use in
this proceeding is consistent with CEQ's current guidance. See CEQ
Guidance, App. 1.
Second, the Board will waive the requirements for a Draft EIS and
public comment period on the Draft EIS as reflected in 49 CFR
1105.10(a)(3) and (4).\48\ The historical requirement that agencies
publish a Draft EIS for public comment before issuing a Final EIS
stemmed not from NEPA itself, but from CEQ's now-rescinded NEPA
implementing regulations. See 40 CFR 1502.9 (2020). The 2023 NEPA
amendments, in laying out the requirements for an EIS, do not require
publication of a Draft EIS. See 42 U.S.C. 4336, 4336a; CEQ Guidance,
App. 1. In this proceeding, applying the Board's Draft EIS provisions
is therefore unnecessary, and the Board will still be able to ensure
adequate and meaningful public participation, as discussed above.\49\
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\48\ The Board's regulations also allow for waiver of certain
Draft EIS requirements. See 49 CFR 1105.10(c) (allowing for waiver
of 49 CFR 1105.10(a)(4) in individual proceedings). The waiver
provisions are not intended to ``waive'' the Board's
responsibilities under any environmental laws, but rather to
``enable tailoring the environmental analysis to the specific
circumstances at hand, and to give [the Board] flexibility in
applying [its] own internal procedures.'' Implementation of Envt'l
L., 7 I.C.C. 2d 807, 815 (1991).
\49\ When assessing significant environmental effects and
feasible alternatives for purposes of NEPA, an agency will
invariably make a series of fact-dependent, context-specific, and
policy-laden choices about the depth and breadth of its inquiry[.]''
Seven Cnty., 605 U.S. at 183. Here, the Board has determined that
its assessment of the environmental effects of the Transaction will
be better informed through a broad public inquiry at the scoping
stage rather than a formal comment period on a complete Draft EIS.
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Historic Review. In accordance with Section 106 of the NHPA, the
Board is required to determine the effects of its licensing actions on
cultural resources. The Board's environmental rules establish
exceptions to the need for historic review in certain cases, including
the sale of a rail line for the purpose of continued rail operations
where further Board approval is required to abandon any service and
there are no plans to dispose of or alter properties subject to the
Board's jurisdiction that are 50 years old or older.\50\ 49 CFR
1105.8(b)(1). Applicants do not propose to construct any new rail lines
subject to Board licensing or to abandon any rail lines as part of the
Transaction. (UP Resp. to OEA Info. Request No. 1, at 4, Dec. 18, 2025;
Rev. Appl. 2-691, 2-1009 n.185.) Applicants also have no plans to
dispose of or alter properties that are 50 or more years old, (Rev.
Appl. 1-72), and any future line abandonment or construction activities
by Applicants would be subject to the Board's jurisdiction. However,
Applicants intend to make certain capital improvements as part of the
Transaction, including adding double track, extending sidings,
upgrading an existing NS-UP connection, upgrading a bridge, and
expanding yards and terminals along the combined network. (Rev. Appl.
2-895 to 2-930.) Consistent with past practice in merger cases, OEA
will therefore conduct any necessary Section 106 review on the capital
improvement projects that Applicants would undertake as part of the
Transaction during the EIS process because those projects are the only
components of the Transaction that could have the potential to affect
cultural resources.
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\50\ Though the Board has proposed revisions to its
environmental regulations, it is not proposing to modify its current
regulation regarding the historic review and reporting process.
Proposed 49 CFR 1105.14 retains all the language that is in current
49 CFR 1105.8. See Permitting Reform, EP 779, slip op. at 16 n.26.
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Safety Integration Plan. Applicants state that a SIP is being
separately submitted to the Board and FRA to address the safe
integration of their rail
[[Page 32189]]
lines, equipment, personnel, and operating practices. (Rev. Appl. 1-
100.) A SIP is a comprehensive written plan, prepared in accordance
with FRA guidelines or regulations, explaining the process by which
Applicants intend to integrate the operation of the properties involved
in a manner that would maintain safety at every step of the integration
process, in the event the Board approves the Transaction. 49 CFR
1106.2; see also 49 CFR 244.9. Applicants submitted the proposed SIP,
prepared in consultation with FRA, to OEA and to FRA consistent with 49
CFR 1106.4(a) and 1180.8(a)(1). The proposed SIP will be made available
for public review and comment during the EIS process. If the Board
authorizes the Transaction and adopts the SIP, the Board requires
compliance with the SIP as a condition to its authorization. 49 CFR
1106.4(b)(4).
Blocked Crossings Plan. Applicants state that they will submit
information regarding measures that Applicants plan to take to address
potentially blocked crossings as a result of merger-related changes in
operations or increases in rail traffic as part of the environmental
review process. (Rev. Appl. 1-101.) Applicants submitted their blocked
crossings plan to OEA, consistent with 49 CFR 1180.8(a)(2), and OEA
will consider it when preparing the EIS in this proceeding.\51\
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\51\ Applicants' blocked crossings plan is available on the
Board's website under ``Environmental Comments,'' (environmental
comment EI-34241).
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Service of Decisions, Orders, and Notices. The Board will serve
copies of its decisions, orders, and notices on those persons who are
designated on the official service list as a Party of Record or Non-
Party. All other interested persons are encouraged to secure copies of
decisions, orders, and notices via the Board's website at <a href="http://www.stb.gov">www.stb.gov</a>.
Access to Filings. Under the Board's rules, any document filed with
the Board (including applications, pleadings, etc.) shall be promptly
furnished to interested persons on request, unless subject to a
protective order. 49 CFR 1180.4(a)(3). The Revised Application and
other filings in this proceeding will be furnished to interested
persons upon request and will also be available on the Board's website
at <a href="http://www.stb.gov">www.stb.gov</a>. In addition, the Revised Application may be obtained
from Messrs. Rosenthal and Atkins at the addresses indicated above.
It is ordered:
1. The Revised Application in Docket No. FD 36873 and the related
application filed in the embraced docket, Docket No. FD 36873 (Sub-No.
1), are accepted for consideration.
2. The proceedings, including the environmental review of the
Transaction, are held in abeyance pending further Board order.
3. Applicants are directed to provide the supplemental information
discussed above by July 27, 2026.
4. Applicants' August 29, 2025 motion to permit ex parte
stakeholder communications is denied.
5. The Board waives the requirements in 49 CFR 1105.10(a)(2)-(4)
for publication of a Final Scope of Study and a Draft EIS.
6. This decision will be published in the Federal Register.
7. This decision is effective on May 28, 2026.
Decided: May 26, 2026.
By the Board, Board Members Fuchs, Hedlund, and Schultz.
Aretha Laws-Byrum,
Clearance Clerk.
[FR Doc. 2026-10751 Filed 5-28-26; 8:45 am]
BILLING CODE 4915-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.