Major rail merger moves forward, defying antitrust pressure from Biden

A merger between two of North America’s largest railroads is set to take place after a board controlled by President Joe Biden appointees ignored the administration’s push against corporate concentration.

The Surface Transportation Board approved the merger of Canadian Pacific and Kansas City Southern, the sixth and seventh largest railways on the continent. The merger will create a new railroad that will stretch from Vancouver to Nova Scotia, to Veracruz, a port on the Gulf of Mexico. It will be the first merger of two Class I (industry parlance for the largest rail companies) railroads in two decades.

The decision will sourly disappoint both progressives and environmentalists, who fear it will increase demand for Canadian oil and lead to the same kind of Wall Street-favored cost cutting that some have linked to the toxic derailment in East Palestine, Ohio.

The Surface Transportation Board has five members, three of them Biden appointees. But it is an independent agency, free from the influence of the White House or the Department of Transportation, which limits the influence of would-be confidence-busters in Biden’s economic team.

A key factor in the board’s decision was how established the rail industry already is. Deregulation of the industry in the 1970s sparked a wave of mergers, bringing the number of major North American railroads from 40 to just seven today. The other five railways are already larger than Canadian Pacific and Kansas City Southern; the new combined railroad, the Surface Transportation Board argued, would be better able to compete for business with the existing giants.

The Antitrust Division of the Department of Justice warned against merger, and progressives in Congress, including Rep. Katie Porter (D-Calif.) and Sen. Elizabeth Warren (D-Mass.), spoke out against it. Canadian Pacific and Kansas City Southern spent nearly $2 million lobbying in support of the merger, including hiring former Sen. Byron Dorgan (DN.D.).

The combined tracks will establish a “NAFTA Super Railroad” ― the first railroad to connect the three largest economies in North America at a time of dramatic change in the continent’s energy systems. Electric vehicles assembled in Mexico will travel north for American drivers. Meanwhile, some of the world’s most carbon-intensive oil will be shipped from Canada.

The new route will connect Alberta’s tar sands fields with refineries on the US Gulf Coast as President Joe Biden banned Keystone XL, a pipeline meant to increase the flow of oil from Canada to the US. , the railway could become an attractive alternative route. Shipping oil by rail is almost always more expensive than a pipeline, but connecting the entire route under a single company could eliminate the cost of paying two different railroads to access separate lines.

The recent derailment in eastern Palestine of a train carrying chemicals provides a grim reminder of the risk that these so-called “train bombs” pose to communities traversed by rail lines. A train carrying oil along a regional freight line in Quebec derailed in 2013 and exploded, killing nearly 50 people in Canada’s deadliest train accident since 1894. Nearly two dozen train accidents have occurred since then. more derailments in the US and Canada.

But accidents involving explosives remain relatively rare. A more mundane and widespread environmental impact of the meltdown could be increased air pollution from automobile traffic. Freight rails with the goal of increasing profit have added more and more cars to each train, sometimes stretching for miles and causing long delays at highway intersections.

On much of the rail route, the impact could be small. The Surface Transportation Board estimated that the average wait time per vehicle at most grade crossings would increase by just 0.7 seconds. The impact could be greater in other jurisdictions, particularly a transit hub in the Detroit area that is widely considered the most polluted ZIP code in the country.

In a letter to the federal regulatory agency, the Michigan Environmental Council warned that air quality in that part of the state has already “worsened without the additional melt-related train traffic passing through these cities.”

“Running unwanted trains through Detroit only adds to the environmental injustice to the city, and we cannot allow the merger of CP and KCS to continue,” the letter said.

Citing Canadian Pacific’s own data submitted to the Surface Transportation Board, the nonprofit organization said the merger would “result in an estimated 87 more trucks per day moving in and out” of a local facility.

“Unless serious efforts are made to mitigate the increased traffic and resulting pollution that would be seen by the residents of our state, we urge you to reject this merger,” the Michigan Environmental Council said.