Rail Merger Questions Intensify as Industry Scrutiny Builds

The proposed merger between Union Pacific and Norfolk Southern continues to dominate rail industry discussion as Class Is and other market participants weighed in on whether the re-filed UPNS merger application is complete enough to move forward into formal review proceedings.

In the latest episode of FTR’s Rail and Intermodal Update podcast, Joseph Towers breaks down the growing list of objections filed with the Surface Transportation Board (STB), the responses from the applicants themselves, and the broader implications for rail competition, intermodal capacity, and future freight flows.

Three Major Issues Emerging Around the UPNS Merger

The most detailed objections came from the other Class I railroads, with several themes consistently appearing throughout the filings.

1. Market Share and Competitive Impact Concerns

The opposing Class I railroads argued that the amended application still lacks sufficient detail surrounding future market share projections and competitive impacts.

According to the filings:

• Critics argue the application does not fully demonstrate projected post-merger traffic and market concentration.
• Questions remain around how much share the combined railroad could control across various freight categories.
• Concerns also center on how the merger could reshape long-term rail competition.

One filing cited estimates suggesting the combined entity could control roughly half of the domestic U.S. rail freight market.

The broader issue is not simply scale itself, but whether regulators believe the application adequately explains how competition would be preserved across the network.

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2. Ownership and Gateway Control Remain a Flashpoint

A second major area of concern revolves around ownership stakes in critical interchange and terminal infrastructure.

Terminal Railroad Association of St. Louis (TRRA)

The STB had previously indicated that the applicants would need to treat control of the Terminal Railroad Association of St. Louis as a significant transaction rather than a minor one.

An application for the TRRA was not submitted with the revised application with UPNS expressing in their application that, upon approval of the merger, they will divest at least a portion of their ownership to avoid being a majority owner. Critics argue the revised application still does not fully address the “how” behind their plan sufficiently.

The concern stems from the strategic importance of major interchange gateways where multiple Class I railroads rely on shared infrastructure.

Kansas City Terminal (KCT) and TTX

The filings also raised questions surrounding:

• Combined ownership and governance influence over the Kansas City Terminal
• Future control of equipment pools tied to intermodal operations
• Potential conflicts, such as equipment availability, resulting from projected truck-to-intermodal diversions

One particularly notable concern involved TTX, which owns a substantial portion of North America’s intermodal well car fleet. Critics argued that projected freight diversion into the combined UPNS network could create competitive concerns if governance structures are not clearly addressed.

3. The Debate Around “2-to-1” Shippers

Another major issue receiving attention involves what are commonly referred to as “2-to-1” shippers.

These are customers that currently have access to two competing railroads but could potentially lose that competitive option after consolidation.

Several filings argued that the merger application acknowledges some of these risks but does not yet provide fully developed remedies.

This issue has and will receive close scrutiny from regulators because of its direct impact on competition within the rail industry.

Questions Around Growth Assumptions

One of the more interesting arguments raised during the filings focused on the merger’s projected growth assumptions.

A recurring theme within the UPNS narrative has been the expectation that the combined network could shift significant freight from truck to rail, including projections that millions of truckloads could eventually move onto the rail network.

However, some commenters questioned what happens if that growth fails to materialize.

The concern is that if the project volume growth estimates do not materialize, the high transaction costs would necessarily need to be spread over a flat or falling volume base, which could accelerate modal shifts to truck, the exact oppositive of what UPNS seeks to accomplish.

UPNS Pushes Back Against Criticism

Union Pacific and Norfolk Southern strongly rejected many of the objections raised by competitors.

According to the applicants:

• The amended filing already contains the required market projections
• They do not intend to control TRRA following the merger
• Divestiture plans eliminate the need for separate ownership filings
• Commitments exist to preserve two-carrier access for impacted shippers

The applicants maintain that the revised filing satisfies the STB’s requirements and should be deemed complete.

The next major step now rests with the STB itself, which must decide whether the application is sufficiently complete to formally begin the review process — a process expected to stretch well into 2027 if approved to proceed.

STB Confirmation Process Also Advances

The podcast also highlighted movement surrounding Richard Kloster’s nomination to the Surface Transportation Board.

Kloster recently advanced following a narrow Senate procedural vote and now awaits final confirmation.

If confirmed:

• The STB would expand to four members
• Republicans would hold a 3-to-1 majority
• Kloster would participate in voting related to the UPNS merger proceedings

The Merger is Still in Its Early Stages

While the headlines surrounding the proposed UPNS merger continue to intensify, the process itself remains far from complete.

The current phase is still focused primarily on whether the application meets procedural and informational requirements necessary for the STB to formally begin its review.

But even at this early stage, the filings are already providing a clear preview of the major competitive, operational, and regulatory issues likely to dominate industry discussion over the next several years.

Rail Traffic Trends Continue to Show Mixed Signals

Beyond merger developments and changes at the STB, the podcast also reviewed the latest weekly rail traffic data across North America.

Areas Showing Growth

Recent gains included:

• Agricultural traffic
• Chemicals and petroleum products
• Automotive shipments
• Intermodal volumes in the U.S.

Areas Remaining Under Pressure

At the same time, several categories continued to soften, including:

• Metallic ores and metal products
• Coal
• Forest products
• Canadian intermodal traffic

🎧 Listen to the full Rail & Intermodal Update episode for complete analysis and context.

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