Railroad merger approved by federal board

WASHINGTON — Federal officials from the Surface Transportation Board (STB) announced Wednesday that they would allow a merger of Kansas City Southern and Canadian Pacific railroads, into the unified Canadian Pacific Kansas City (CPKC) railroad, the first-ever single-line railway to connect the United States, Mexico and Canada.

The merger’s streamlined freight route is expected to increase daily train counts by 14.4 in every Southeast Iowa town along the CP line between Sabula, Iowa and Kansas City, Missouri. In the segment connecting Ottumwa and Muscatine — which includes Columbus Junction, Washington and Richland — the change represents an over 330% jump by 2027. Immediately south of Ottumwa, the increase is projected at over 450%.

The decision is effective April 14, 2023, although petitions for reconsideration will be accepted until April 4, according to a clause of the 186-page decision.

Canadian Pacific President and CEO Keith Creel said the newly-combined network would drive economic growth as industries took advantage of the shipping options it enabled.

"This decision clearly recognizes the many benefits of this historic combination," Creel said in a news release. "These benefits are unparalleled for our employees, rail customers, communities and the North American economy at a time when the supply chains of these three great nations have never needed it more.“

In his opening remarks during a news conference Wednesday morning, U.S. Surface Transportation Board Chair Martin Oberman said the decision-making body had reached the same conclusion.

“We made this decision because we found … that on balance, the merger of these two railroads will benefit the American economy, and will be an improvement for all citizens in terms of safety and the environment,” he said.

The official highlighted competitiveness and environmental benefits in his comments, saying the merger would give the newly-combined railroads more “oomph and power in providing competitive service” against larger networks to the west, and reduce CO2 emissions by taking 64,000 trucks off the road.

As for safety concerns, Oberman said an at-least seven-year oversight period imposed on the merger would hold CPKC to lofty reporting requirements and give regulators unprecedented authority to impose new conditions if unexpected issues arose.

A news release from the STB suggested that regulators would keep a close eye on track-adjacent community complaints during that time.

“If CPKC’s traffic increases prove to be understated and unduly impact communities or other railroads … the Board stands ready to modify the required environmental mitigation measures and to issue supplemental orders addressing capacity,” it said in one paragraph about implications for the Chicago area.

Oberman said seven years made for the longest oversight period ever imposed, part of an effort to account for growing skepticism of train safety in light of catastrophic incidents on other rail lines.

“I think the conduct of the rail industry in general — not so much CP and KCS, in particular — has shown me as a board member that detailed reporting and oversight is essential,” he said at the news conference. “I think the board as a general proposition needs to toughen up its oversight of this industry … that is what really informed the longer oversight period and the very, very detailed reporting requirements.”

Such public skepticism was evident in many of the over-2,000 comments submitted throughout the deliberation process, often discouraging approval for the $31 billion acquisition.

One prominent comment came from the U.S. Department of Justice’s antitrust division, which filed a letter in January saying the proposed merger “Lessened competition among Class I railroads.” With the STB deciding on a 4-1 vote, lone dissenting Board Member Robert Primus voiced similar rhetoric.

“The transaction will further concentrate control over the nation’s railroads, which have already experienced massive consolidation in recent decades,” he wrote in his share of the decision document. “The decision does not adequately guard against merger-related service disruptions, at a time when rail service in general has been historically poor.”

Many local officials and activists have also proven less than optimistic about the merger, often focused on the noisiness of new train traffic which is usually required to sound horns at every grade crossing.

Of the four counties identified as the most adversely effected by the noise of new traffic, an impact assessment from the Office of Environmental Analysis found that three would be in Iowa: Clinton, Scott and Muscatine.

In March, survey of residents in the city of Washington found that the slim majority of 229 respondents wanted either a partial or full-time quiet zone for the city. Some have raised concerns about the demographics of impacted residents, with 82% of the city’s noise-sensitive receptors located in environmental justice bloc groups, according to STB documents.

Ainsworth resident Judy Schultz said in an interview early last year that additional railroad noise would be disruptive to the Washington County community of around 500. The town contains three at-grade crossings, each just a few blocks from the next.

“A train goes by, and you can’t talk,” Schultz said. “I think it’d be harder to like summer with that many going by.”

The STB decision acknowledged such worries, but said they were non-unique to a merger, and didn’t sway the board’s verdict. The decision does, however, require that CPKC adhere to the terms of already-signed community agreements, some of which mention shared investment in quiet zone infrastructure and preparations.

“Communities located near existing CP and KCS rail lines already experience intermittent train noise and have for many years,” it said. “The Board is imposing all of Applicants’ voluntary mitigation measures to help address potential noise impacts … Even with these mitigation measures, however, OEA expects that the transaction will result in unavoidable adverse noise impacts.”

Several critics have also focused on the potential hazards of growing rail traffic in their area. Former Washington City Council Member Steve Gault said in November that increased train counts would raise the odds of a “mess in our neighborhood,” while the Dubuque area Chamber of Commerce wrote in 2021 that a hazardous material derailment could “instantly cut off drinking water supply to 60,000 residents” in the community.

In Iowa, especially, opponents said more frequent train traffic would block emergency response routes, a concern the decision document addressed specifically. It said most communities would see only minimal or temporary new delays for road traffic resulting from the acquisition, since train lengths are expected to decrease as daily numbers grow.

“Most of these concerns relate to preexisting conditions not directly related to the Transaction,” wrote Surface Transportation Board Member Karen Hedlund in a concurring opinion. “While the EIS did observe that … frequency with which emergency vehicles will be delayed by trains will likely increase as a result of the Transaction, it also found that the likelihood of trains stopping and blocking grade crossings for a substantial amount of time during an emergency would likely be small.”

Oberman also pushed back on safety concerns during the news conference. He said road-based transportation was far riskier for hazardous materials, and that the merging companies had higher safety ratings than any other Class I railroad.

The chairman added that the board’s data-gathering measures — which covered five years of rail activity — offered assurance in its risk analysis.

“At some point, government has to function, it cannot forever review additional data that comes in,” he said. “I’m confident in saying this data cannot be studied any further. It has been studied until your eyeballs are falling out … there is no factual basis to conclude that the merger will worsen safety.”

Comments: Kalen.McCain@southeastiowaunion.com