The proposed merger between Union Pacific and Norfolk Southern Railroad companies is before the Surface Transportation Board for potential approval. The STB accepted a revised application for review, with a final decision expected no earlier than the second half of 2027. Zak Andersen, the vice president of communication and chief of staff for Burlington Northern Santa Fe Railroad, offered his reaction to the potential merger.
“BNSF has been opposed to this proposal from the beginning, and it’s not just for the sake of opposing it. It’s what our customers are telling us. Because at the end of the day, we’re a competitive railroad, right? So, it doesn’t really matter what I think, or what BNSF thinks. It matters what our customers think, and our customers are telling us that they’re very concerned about this deal and very opposed to it, particularly the farm and ranch community. You’ve probably seen that many of the trade associations that represent agriculture in America – Farmers Union, Farm Bureau, National Grain and Feed, the Fertilizer Institute – have all come out strongly opposed to this. And the reason why is because, essentially, you’re going to concentrate 50 percent of the market share of the U.S. rail industry in one company.”
He said the merger would likely fail if it was being investigated by the Justice Department.
“If this was something that was going through the Department of Justice as a normal merger does, rather than the Surface Transportation Board, it would get tossed out for having too much concentration from the get-go. It wouldn’t even get considered. So, we’re talking about a massive railroad and an unprecedented level of concentration that they’re proposing here.”
Andersen said the U.S. railroad industry has already had too much consolidation, and this would not help.
“When you have that much concentration, pricing power follows. And Union Pacific has led the industry for years in revenue per unit, which is one of our measurements. And what that means is, for each car, how much revenue are you getting? The percentage of revenue over the industry average has been double digits – 24 – 37 percent, – depending on the time frame, from the get-go, and so there’s no reason to think that UP would not just export that pricing model to the east that they currently have in the west with captive shippers.”
This will ultimately not be a good thing for the U.S. agricultural sector.
“This transaction alone, and this is especially important for Ag country, would create 10,000 closed facilities where the only railroad that serves them is Union Pacific. That can’t feel good if you’re an ag facility in the Midwest. And to your point, and that’s a good way to think about it, this is already a highly concentrated industry. But if you just think about the big four railroads, and you mentioned them-UP, us, NS, and CSX-you essentially have four transcontinental networks. If you’re a shipper today and you’re not single-served, you can choose UP or BNSF, and then once you hit the Mississippi River, you can choose NS or CSX. This merger goes through; that’s over. You’ve got essentially two options at that point, if that. You only have one if you’re in one of 10,000 newly captive locations.”