Federal railroad regulators are officially on the clock – and so, too, is the fate of train traffic along the Mississippi River in eastern Iowa. The U.S. Surface Transportation Board (STB) can issue their ruling as early as Monday, Feb. 27, on the proposed $31 billion merger of the Canadian Pacific (CP) and Kansas City […]
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Federal railroad regulators are officially on the clock – and so, too, is the fate of train traffic along the Mississippi River in eastern Iowa.
The U.S. Surface Transportation Board (STB) can issue their ruling as early as Monday, Feb. 27, on the proposed $31 billion merger of the Canadian Pacific (CP) and Kansas City Southern (KCS) railways.
The STB’s Office of Environmental Analysis (OEA) cleared the way for the decision by releasing its awaited Final Environmental Impact Statement (EIS) on Friday evening, Jan. 27.
The federal agency’s expected Jan. 19 verdict on the railroads joining forces had been delayed because federal law requires the EIS to be printed for 30 days first in the Federal Register.
Besides analyzing the potential impact of combining the two Midwest rail giants, the Final EIS includes additional recommendations and addresses public comments made since an EIS draft version was issued Aug. 5, 2022.
Despite any additions or changes, though, the OEA stayed with its original conclusion that the first major railroad merger in a generation "would not result in major impacts” to the environment, the final report says, “with the exception of (the frequency of) noise."
The final report is a massive, three-volume document well over 5,000 pages. Besides measuring how the merger might affect wildlife, plus air and water quality, it also considered how the new CPKC railroad could impact communities such as the Iowa riverfront towns in the Quad Cities region.
The full EIS is available here.
If the STB allows CP to acquire KCS, that will create the first railroad directly linking stops in both Canada and Mexico through America’s heartland with about 21,000 miles of track including nearly 9,000 in the U.S.
The local impact includes an expected tripling of traffic from today’s average of seven or eight per day to as many as 21 to 22 in any 24-hour period by 2027. The EIS anticipates that to be the highest rail traffic increase nationally if the merger is approved.
The Final EIS concludes that road crossing wait times would not dramatically increase per train, though, with lengths expected to remain an average 6,817 feet – or roughly 1.3 miles. The report also expects “only minor adverse impacts” on safety at crossings despite the increased train traffic.
The study says the greatest increase in the probability of a derailment or other accident because of the merger comes on the rail line between the southern tip of the QC region in Muscatine to Ottumwa, 90 minutes to the southwest.
The projected increase is 0.32 incidents for an overall 0.43 probability per year. Other lines expect much smaller increases, and the OEA anticipates most incidents “would be minor and would not result in any injuries or fatalities,” according to the EIS.
The chance of hazardous materials spilling from railcars into waterways or groundwater also remains very low, the OEA added.
The EIS expressed optimism the merger could result in a decrease of air pollution with an expected removal of 64,000 trucks per year from highways. The OEA said more freight is expected to travel by rail because joining two railways with no existing overlap in service should increase efficiencies and overall demand.
Between July and September 2022, the four largest Mississippi riverfront communities in the Quad Cities area all agreed to financial settlements with CP to help fund rail-crossing improvements.
Davenport ($10 million), Bettendorf ($3 million), Muscatine ($3 million) and LeClaire ($750,000) agreed to those settlements in exchange for not opposing the merger during the EIS process. If the move is approved, each city is scheduled to receive their improvement fund 90 days after the STB decision.
North of LeClaire and south of Clinton, the towns of Camanche ($200,000) and Princeton ($100,000) separately declined settlement offers and continue to oppose the merger.
Buffalo, situated south of Davenport and north of Muscatine, has been in discussions with CP over possible mitigation efforts – but has yet to consider any settlement proposals.
Department of Justice weighs in
Besides the Final EIS, the STB said it has much more to consider – and if authorized – what, if any, mitigating conditions to impose.
Included among the additional factors is advice from the U.S. Department of Justice (DOJ), which reaffirmed in a Tuesday, Jan. 24, letter to the regulators its “serious concerns” about potential harm the merger could have on the rail industry.
The DOJ’s Antitrust Division was absent from an STB hearing for the merger Sept. 28, 2022 -- which a CP/KCS witness argued, “should infer the Antitrust Division does not believe the transaction has the potential to cause harm.”
However, “no such inference should be drawn,” the DOJ wrote.
The Jan. 24 letter, the DOJ explained, was “to emphasize the importance of protecting and promoting competition in the railroad industry, and to clarify the department’s position on the proposed merger.”
In its initial comments last April, the DOJ said they shared, “the board’s serious concerns about increasing consolidation in the industry” and encouraged the STB to “thoroughly examine” potential harms.
Combining CP and KCS would leave only five other Class I railroads operating in America.
“Class I freight rail was a significantly concentrated industry before the proposed transaction,” the letter continues. “In light of the trend toward concentration in the industry, the (STB) should carefully consider the competition impacts of further consolidation. This is especially relevant in light of the recent supply chain disruptions that have wreaked havoc on American consumers and businesses. Freight rail connects us, from farms to cities, and from the ports through the heartland, and carries the goods that Americans depend on. Competition in this critical infrastructure is essential. The board should scrutinize any transaction that could weaken our freight rail system.”
Also in the letter, the DOJ reaffirmed the Antitrust Division’s mission “to promote competition in the American economy,” and noted Attorney General Merrick Garland has a “statutory right to intervene in Class I merger proceedings,” if necessary.
“Beyond the elimination of head-to-head competition,” the DOJ wrote, “mergers that increase market power can harm competition in several ways.”
Included among the concerns expressed by the DOJ:
- A ‘”reduced incentive to invest in research and implementation of important new technologies;”
- The potential to “deny shippers access to the lowest cost or fastest end-to-end routings;”
- The power to raise “costs for their rivals through control over inputs or access;”
- Enabling anti-competitive behavior, such as refusing “to interchange traffic” or an outright “diversion of traffic,” and exerting “more extensive power over bottlenecks.”
