Baldwin, Marshall Demand Regulator Scrutinize Union Pacific-Norfolk Southern Merger as Poor Service, High Costs Already Plague Freight Rail Industry

WASHINGTON, D.C. – Following reports that Union Pacific has agreed to acquire Norfolk Southern, U.S. Senators Tammy Baldwin (D-WI) and Roger Marshall (R-KS) called on the Surface Transportation Board to scrutinize the impact of this merger on the already poor service and high costs experienced by American businesses and consumers that rely on freight rail. Since the 1950s, the rail industry has consolidated from over 100 Class I freight railroads to only six today, leaving U.S. manufacturers, utility companies, agricultural producers, and small businesses paying excessive rates despite poor service and reliability.

“If approved, this acquisition would be the most significant consolidation in freight rail in decades and would undoubtedly reshape the U.S. freight rail industry and supply chain,” wrote the Senators in a letter to the Surface Transportation Board. “Specifically, we are concerned that a merger of this magnitude would diminish options for industry to transport goods, increase costs, create more unreliable service for U.S. shippers, and reduce overall competition in a market.”

In the letter, the Senators urge the Surface Transportation Board (STB) to consider the impact on service and costs for rail shippers and consumers across the United States before approving Union Pacific’s acquisition of Norfolk Southern, two of only six Class I shippers nationwide. While Class I railroads continue to see record profits, shippers and consumers are paying the price. In 2022, every Class I railroad reported increased revenue, with Union Pacific and Norfolk Southern both reporting a 14 percent increase in operating revenue to $24.9 billion and $12.9 billion, respectively. In the letter, the Senators expressed concerns that a major rail merger could trigger additional industry consolidation and further worsen service and cost as competition diminishes.

“In recent years, we have heard from too many U.S. manufacturers, utility companies, agricultural producers and small businesses experiencing service and reliability problems while paying excessive rates. The railroad industry has proven to be more concerned with increasing their rates and profits rather than improving their service,” wrote the Senators.

Senators Baldwin and Marshall lead the Reliable Rail Service Act, which would strengthen our rail supply chain and ensure the largest freight railroads provide American businesses reliable services at reasonable rates so products can get to market more efficiently, and costs are lower for families. The Reliable Rail Service Act is supported by members of the agricultural industry, labor organizations, energy producers, and manufacturers who know firsthand how poor service, significant disruptions, and sky-high prices are impacting their businesses and prices for consumers.

A full version of this letter is available here and below.

Dear Chair Fuchs, Vice Chair Schultz, Member Primus, and Member Hedlund,

We write today with concerns about reports that Union Pacific (UP) has agreed to acquire Norfolk Southern (NS), which has reportedly set off other deal preparations at BNSF and CSX. If approved, this acquisition would be the most significant consolidation in freight rail in decades and would undoubtedly reshape the U.S. freight rail industry and supply chain. Specifically, we are concerned that a merger of this magnitude would diminish options for industry to transport goods, increase costs, create more unreliable service for U.S. shippers, and reduce overall competition in a market where the number of carriers has diminished since 1950. Should these railroads move forward with a merger and submit an application to the Surface Transportation Board (STB) for approval, we would urge you to consider these harms to rail shippers and consumers across the United States.

Since the 1950s, the rail industry has consolidated from over 100 Class I freight railroads to only six today. A long trend of industry consolidation has dramatically increased the power of railroads over shippers in the last few decades — leaving four carriers to provide nearly 90 percent of the nation’s freight rail transportation. In recent years, we have heard from too many U.S. manufacturers, utility companies, agricultural producers and small businesses experiencing service and reliability problems while paying excessive rates. The railroad industry has proven to be more concerned with increasing their rates and profits rather than improving their service.

While Class I railroads continue to see record profits, shippers and consumers are paying the price. UP has a market value of around $140 billion, and NS has a market value of around $60 billion. UP and NS both posted considerable profits as they recovered from pandemic disruptions to shipping and service. In 2022, every Class I railroad reported increased revenue, with UP and NS both reporting a 14 percent increase in operating revenue to $24.9 billion and $12.9 billion, respectively. As the remaining Class I railroads continue to profit, shippers are left with unreliable railroad service and high rates because they have limited to no other options to move goods to market at a reasonable rate. As a result, consumers continue to face higher costs for essential everyday goods.

A major rail merger has the potential to trigger additional industry consolidation. We are encouraged that the STB shared this concern in the context of the 2001 rulemaking process, in which the STB set new rules governing major railroad mergers and started requiring Class I railroads to prove that mergers would both enhance competition and are in the public interest. We strongly encourage the STB to keep this at the forefront of considerations.

In closing, we urge the Board to keep the best interests of rail shippers and consumers in mind throughout your careful review of this matter. We look forward to your response.

Sincerely,

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