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CPKC Merger Review to Stretch Well Into 2022

The STB issued a procedural schedule for the Canadian Pacific-Kansas City Southern merger days after the railroads filed their application. Photo by Kevin EuDaly. 

CPKC Merger Review to Stretch Well Into 2022

By Justin Franz

WASHINGTON — Even if the U.S. Surface Transportation Board has been hinting that it was warm toward the idea of a Canadian Pacific-Kansas City Southern merger — or at least more so than a KCS-Canadian National combination — they’re still going to take their sweet time reviewing the proposal. 

On Tuesday, the federal regulator laid out a procedural schedule for its review for the first proposed Class I merger in a generation. The announcement came the same day that the regulator posted CP-KCS’ massive 4,342-page merger application; a document that cost the two railroads a whopping $1.9 million to file. 

In that filing, the two railroads suggested that the STB could make a decision within 10 months. But in a separate filing, the STB said it will probably take even longer, setting out a 245-day schedule for stakeholders to submit comments and briefs. Final briefs would be due on July 1, 2022, and a final decision from the board would likely come three months after that, sometime in the fall.

“Given the high level of interest in this proceeding, as well as the complexity and magnitude of issues that may potentially arise, the Board proposes modifications to the schedule proposed by Applicants to ensure sufficient time for the submission and review of evidence and arguments, as well as for the careful consideration of the merits of the proposed transaction,” the board writes.

That timeline will give federal regulators and others plenty of time to chew through the massive document filed by the railroads. Inside the document, CP and KCS argue that their merger would dramatically increase train counts on the combined system — specifically in the Midwest — and increase competition between it and other Class I railroads. The railroads also said that the layout of the combined system would enable it to divert more traffic around Chicago and its rail congestion. 

The document also gets into nitty-gritty details like the potential concern of having the CPKC’s headquarters in Canada. In a letter in the filing from CP CEO Keith Creel, he notes that Canadian railroads have controlled U.S. routes for decades. He even brought his own biography into it. “As the U.S.-born CEO of a Canadian-based rail network and a combat veteran of the U.S. Army, I can assure the Board and the public that there is nothing to be concerned about,” Creel wrote. “The fact that CP is headquartered in Canada and will have a combined network that crosses international borders poses no national security concerns.”

Lastly, Creel argues that a CP-KCS merger would “dampen the likelihood” of another Class I merger, an argument likely to be appreciated by the STB. “The CP/KCS combination will yield a balanced and stable U.S. rail network: two in East, two in West, and two with networks spanning Canada and running North-South through America’s heartland. The Transaction will remove the incentives that exist today for another Class I railroad to destabilize this map by seeking to combine with KCS, and will also satisfy CP’s quest to grow its network reach beyond its limited U.S. footprint,” the application read. 

This article was posted on: November 2, 2021