Big Trouble for Rail Mergers: Chemical Firms Sound the Alarm

Concerns Over Service Disruptions and Higher Costs

Big names in the chemical world are not happy about the idea of Union Pacific (UP) and Norfolk Southern (NS) joining forces. Companies like Cabot, Huntsman, and Lubrizol, along with over thirty others, have spoken up. They say past rail mergers have caused more problems than they solved. Think service disruptions, higher costs, and weaker supply chains.

Loss of Choices and Competition

The chemical industry is worried about losing choices. Right now, seven big railroads control most of the traffic in the U.S. If UP and NS merge, competition could take a hit. This could mean higher prices and worse service for shippers.

Midwest Overlap and Price Power

There’s a big overlap in the Midwest where UP and NS both operate. If they merge, companies in that area could lose their ability to choose between the two. This could give the merged company a lot of power to raise prices and cut corners on service.

National Impact on Shippers

It’s not just about the Midwest. Shippers moving goods across the country could also lose options. Right now, they can choose between Norfolk Southern or CSX once their shipments reach the Mississippi River. A merger would take that choice away.

Past Mergers: A Cautionary Tale

Past mergers haven’t been smooth. The CPKC merger, for example, caused big delays and higher costs. Chemical companies had to spend extra on emergency trucking to meet customer demands.

Strict Scrutiny from the Surface Transportation Board (STB)

The chemical industry wants the Surface Transportation Board (STB) to be strict. They say any merger should clearly show benefits for service, safety, and competition. The burden is on UP and NS to prove their merger is a good idea.

Pushing for Reciprocal Switching

The industry is pushing for bigger changes, like expanding “reciprocal switching.” This would force the merged company to transfer freight to competing rail networks upon request. It’s one way to keep competition alive.

All Eyes on the STB

As the merger talks continue, all eyes are on the STB. The goal is to make sure railroads help, not hurt, American industry.