UP–NS Refiles Merger Plan, But Sidesteps Future Service

by Jim Mathews / President & CEO

[Note: an outage at our website hosting vendor last week kept us from publishing this analysis. We’re running it here as is, knowing that the continuing saga of this potential merger will result in many more blog posts in the future.]

Union Pacific Railroad and Norfolk Southern Railway refiled their proposed merger application with the Surface Transportation Board Thursday after the Board rejected their earlier submission this winter as incomplete. As expected, the new filing includes more documentation, more route-by-route explanation, and more detail about some of the things the STB flagged last time about market share estimation and the like.

But how the combined railroad says it would accommodate passenger trains? Very little has changed.

Our early impression is that this is largely a more detailed version of the same argument the railroads made the first time around: they say, with very little evidence, that the merger won’t harm passenger service because they’ll still be able to meet their existing obligations to Amtrak and commuter agencies. That very narrow claim treats passenger rail as something that exists today and just needs to keep running as-is, rather than something the country is actively working to expand.

That’s pretty important, because the railroads justify the merger itself on the basis of future freight growth. If freight is expected to grow across the network, then it’s reasonable to ask how that same network will support the next generation of passenger service, too.

You might remember that last year I criticized the UP-NS application as basically preserving the rail status quo with no real acknowledgement of the future...even though at least 49 percent of the future of U.S. passenger rail (if you accept the Federal Railroad Administration’s Corridor ID projects list as a proxy) would sit inside the newly merged behemoth. Nothing in the new filing so far changes my mind on that score.

To remind, Corridor ID is the Federal pipeline that’s supposed to help launch new intercity passenger routes across the country. Because nearly half of the corridors now advancing through that program touch lines that would be part of a combined UP–NS system, you can’t avoid the need to evaluate how those future services might fit into the picture if you’re trying to decide what the deal might mean overall for passenger rail.

So, yes, the strikingly modest UP-NS claim about maintaining the status quo is, technically, responsive to the regulatory requirement that merger applicants file a Service Assurance Plan describing “definitively” how railroads would “continue to facilitate Amtrak or commuter services...so as to fulfill existing performance agreements” (you can read the entire regulatory section on Service Assurance Plans by clicking here: 49 C.F.R. § 1180.10).

But a merger application like this, open to public scrutiny, is as much a sales pitch as it is a legal document, and UP and NS need to use their filing to convince the STB Members -- who are the public’s stand-ins as they consider the public benefits, and potential harms, of the transaction -- that this merger is a good deal not just for the companies and their executives but for the public at large.

Under the currently in force rules for evaluating mergers, the Board’s responsibility in reviewing a major rail consolidation is broader than merely ensuring today’s trains keep running on today’s schedules. The public-interest standard necessarily includes whether a transaction could constrain reasonably foreseeable passenger-service expansion that Federal and state partners are already funding and planning.

And that’s more than just a policy or good-government argument. In those same merger regulations that the Applicants cite, I look at 49 C.F.R. § 1180.1(c)(2) (ii) “Harm to essential services,” and here the regulation is clear that STB can and should look beyond maintaining the status quo: “The Board must ensure that essential freight, passenger, and commuter rail services are preserved wherever feasible. An existing service is essential if there is sufficient public need for the service and adequate alternative transportation is not available. The Board’s focus is on the ability of the nation’s transportation infrastructure to continue to provide and support essential services. Mergers should strengthen, not undermine, the ability of the rail network to advance the nation’s economic growth and competitiveness, both domestically and internationally.”

Another wrinkle is that UP and NS actually increased their growth estimates for the transaction, with even more new trains in certain places than were contemplated in the 2025 application. So, even as we see several corridors where UP and NS acknowledge additional freight traffic, they’re relying primarily on assertions that existing infrastructure — or relatively modest targeted investments — will preserve current passenger service levels.

That might well prove correct in some cases (I guess I'm willing to give some benefit of a doubt), but that's not the same thing as demonstrating that the network will remain flexible enough to support the next generation of state-supported service, Corridor ID buildouts, or frequency increases on existing routes. U.S. rail networks groan right now under existing loads.

Over the next several weeks, our policy and analysis team will be working through the railroads’ traffic projections and operating plans and comparing them with the corridor-level modeling work we already have underway. We’re especially interested in identifying places where increased freight traffic could create pressure points for existing trains — or for the services states and regions are planning to add next.

As just one example, my gut says the application’s Chicago–Toledo–Cleveland / Floridian and Lake Shore Limited claims deserve especially close stress-testing. The application’s growth plan section posits 13 new trains per day on the Lake Shore and Floridian routes, and nineteen additional trains each day in an already congested portion of Metra’s western territory. We’ll also want to look especially hard at Crescent/New Orleans and Atlanta/Back Belt, as well as the California and Texas investment plans. The merger documents suggest 25 new trains each day along the Crescent, where timekeeping was so bad two years ago that the Justice Dept. had to haul Norfolk Southern in front of a Federal court to obtain a settlement in which N-S promised to run the Crescent at the absolute highest priority.

There are many, many examples of this kind of thing in the documents. Downloading all of the application documents, appendices, and Excel-sheet workpapers was 2.1 gigabytes, so reviewing it all is going to take time. We’ll keep you posted as we learn more. But our initial takeaway is straightforward: the new filing answers some procedural questions the Board raised earlier this year, while leaving some important passenger-rail questions still very much on the table...questions we have every intention of raising for an answer in the public record once we file.