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The tripling of freight train traffic on the Iowa Quad Cities riverfront received a delayed and hotly debated go-ahead Wednesday, March 15, from federal regulators.
The U.S. Surface Transportation Board (STB) finally put its stamp of approval on the long-discussed $31.6 billion merger of the Canadian Pacific (CP) and Kansas City Southern (KCS) railroads. The companies agreed to merge in the fall of 2021 and the STB used all of 2022 to hear public debate and study the potential environmental impact from the deal.
In a 212-page decision released Wednesday morning, the STB jointly echoed past statements by ultimately reasoning that the merger will increase railroad competition and help take trucks off the highway.
However, the three-man, two-woman board’s decision was not unanimous. Voting against the merger was board member Robert Primus, a New Jersey native and Capitol Hill veteran confirmed to the STB by the U.S. Senate in September 2020.
Beyond what CP and KCS already proposed, the regulatory board imposed few conditions from the various rejected requests for concessions from other major railroads, the Chicago suburbs and Chicagoland commuter railroad Metra – which owns a line featuring CP operations and expressed fears of passenger delays and impacts on safety.
Most significantly, though, the board did order a seven-year oversight period and what it called “extensive data-reporting requirements” to allow regulators to monitor competition and other potential issues. Industry experts called those moves “unprecedented.”
The nearly two-month delayed decision followed a renewed round of debate after a fiery Friday, Feb. 3, derailment of a Norfolk Southern train carrying hazardous materials in East Palestine, Ohio. Toxic chemicals were released and burned in the accident, forcing both evacuations and investigations with fears of air and water contamination.
A series of derailments also followed the Northeast Ohio tragedy, raising further questions about the safety of the railroad industry – especially the trend for longer and heavier trains. Even before the accidents, a bill was introduced in the Iowa Legislature by a local lawmaker over the issue.
Former presidential candidate and current U.S. Sen. Elizabeth Warren wrote a Thursday, March 2, letter asking the STB to block the deal citing concerns about reduced competition and the increased risks of incidents from more train traffic and longer trains.
The U.S. Justice Department also expressed concern about consolidation in the railroad industry.
Additionally, part of Illinois’ Congressional delegation -- U.S. Sens. Dick Durbin and Tammy Duckworth, and U.S. Reps. Raja Krishnamoorthi and Delia Ramirez – joined together for a Friday, Feb. 17, letter urging the STB to delay a final ruling pending more study of the effects of the merger.
The lawmakers argued the STB’s final environmental impact study released in late January was based on faulty projections and models from the railroads themselves. The later-than-expected release of the study led to the initial delay of the STB’s decision.
Included among the fierce opposition to the merger were the local small towns of Camanche and Princeton, Iowa. The two communities between Clinton and LeClaire on U.S. Highway 67 each feature train tracks cutting through town and in close proximity to residences and businesses.
Both rejected settlement offers from CP last fall to help cover some of the cost of safety improvements at their train crossings.
Camanche declined a $200,000 offer while Princeton turned down $100,000 -- despite larger communities around them accepting offers between July and September 2022 in exchange of stopping their public opposition.
Approval of the merger means Davenport ($10 million), Bettendorf ($3 million), Muscatine ($3 million) and LeClaire ($750,000) are scheduled to receive their improvement funds 90 days from now.
The CP-operated tracks from Sabula to Muscatine – cutting through the Iowa Quad Cities – are projected to see the most effect nationally from the merger, according to the STB. Train traffic locally is expected to increase from an average of seven to eight per day to as many as 21-22 or nearly one per hour by 2027.
In the decision, the STB acknowledged the opposition to increased train traffic, but said the last year’s worth of environmental review found that many concerned communities already live in areas with “substantial” train traffic.
“This transaction, however, should ultimately enhance safety and benefit the environment,” board members wrote, noting rail transportation is overall safer and better for the environment than transportation by truck.
STB approval allows the merger to become effective Friday, April 14, with the creation of the first railroad linking Canada with Mexico through America’s heartland.
The combined railroad – to be called Canadian Pacific Kansas City (CPKC) – joins 7,300 miles of KCS tracks, which drives south into Mexico, with 15,000 miles of CP line. It also runs north through Canada. Neither railway overlaps the other, but they do connect in Kansas City, Missouri.
The company remains headquartered in CP’s hometown of Alberta, Canada. CP’s former U.S. headquarters is transferring to the new railroad’s combined American headquarters at KCS in Kansas City.
The merger is the first between major railroads since the 1990s – and many experts predict, the last with only five other major railroads remaining in North America including CP’s rival Canadian National (CN); plus BNSF, CSX, Norfolk Southern and Union Pacific.
Market analysts say CPKC is the smallest of the remaining railroads in terms of revenue but will boast the longest reach – surpassing the 18,600 miles in the CN system.
With a single line connecting Canadian ports and the Midwest with Texas, the Gulf Coast and Mexico, CPKC projects gaining 80,000 carloads and 137,000 containers previously handled by competitors – including an estimated 64,000 trucks, which should be eliminated off highways within three years according to estimates.
The new railroad projects are expected to generate $820 million annually in new revenue from the growth, as well as realize $173 million per year from new efficiencies and cost savings. CPKC has said no routes or facilities will be closed, and already the company has been adding employees to help handle the growth – including at CP’s railroad switching yard in Davenport.
