ARLINGTON, VIRGINIA, US — In comments submitted to the US Surface Transportation Board (STB) on Feb. 28, the National Grain and Feed Association (NGFA) encouraged the STB to ensure competitive opportunities for rail shippers continue under the merger of Canadian Pacific Railway and Kansas City Southern Railway.
The NGFA — which consists of grain, feed, processing, exporting and other grain-related companies that operate more than 8,000 facilities handling US grains and oilseeds — said that its opening comments are supported by the North American Millers’ Association (NAMA), the Agricultural Retailers Association (ARA), and the National Oilseed Processors Association (NOPA) on behalf of their members.
“The NGFA generally does not oppose the merger of CP and KCS, but the board should be proactive in conditioning any approval of the merger with conditions that strictly hold the railroads to their commitments concerning competition and service, and to generally preserve and encourage additional rail-to-rail competition …,” NGFA said in its comments.
CP agreed in September 2021 to acquire KCS in a stock and cash transaction valued at about $31 billion. The merged company would operate about 20,000 miles of rail. The STB announced it had accepted the merger application for consideration in November 2021. The STB’s procedural schedule for the regulatory review calls for final briefs on July 1. CP and KCS anticipate that the STB review of CP’s proposed control of KCS will be completed in the fourth quarter of 2022.
“However, despite the efforts of the STB to preserve rail-to-rail competition when evaluating and conditioning the approval of prior mergers between Class I railroads, the consolidation of the rail industry into essentially two rail duopolies in the Western and Eastern United States has resulted in the overall diminishment of rail-to-rail competition systemwide,” the NGFA said.
The NGFA said the STB should practice “proactive vigilance” and impose meaningful conditions on the CP-KCS merger designed to maintain competitive opportunities for rail shippers. These would include:
1. Establishing or directing the railways to establish reasonable terms for the continued use of existing gateways post-merger;
2. Clarifying that parties may challenge the reasonableness of Rule 11 rates established by the merged railroad at its interchanges with other railroads;
3. Conditioning merger approval on the applicants agreeing to enter into reciprocal switching arrangements at certain locations; and
4. Enabling rail shippers and other customers of the merged railroad to seek payment of money damages for service failures that result from the railways failing to adhere to their representations concerning service levels post-merger.
The STB also should maintain oversight over the implementation of the merger transaction for at least five years, consistent with prior merger proceedings, the NGFA said.
Read the NGFA’s full comments here.