Trains Turntable: Commentary from CPKC CEO Keith Creel
Over the last several months, the Class I railroads not named Union Pacific or Norfolk Southern have been accused of opposing the largest, most unnecessary proposed rail merger ever attempted because those railroads are afraid to compete or are selfishly afraid it will hurt their business. Those railroads are unwilling to look forward and get over the past, we’ve been told.
The simple fact is that a merger of this magnitude brings unnecessary risk to the U.S. rail network. It creates a Goliath with unprecedented market power in the hands of a company that already has an established, long history of uncompetitive behavior. Certainly, CPKC, the railway which I have the honor of leading, will advocate for its interests and, in the end, be strong and successful, regardless of merger approval or rejection.
But one railway’s interests aren’t what’s at issue here. That’s the whole point.
It is not voices from Class I railroads that are going to determine the future of this industry. Rail customers’ voices will. Rail customers have the strongest voice because they have the most at stake. The 2001 merger rules were written to protect rail customers and our economy. The new rules were written to put customers and the overall U.S. rail network first, not the railroads.
Before 2001, a wave of industry consolidation happened for more than a decade under old merger policy that favored the rationalization of the nation’s rail system and elimination of excess capacity. It was an era that saw railroads go from being in distress and disrepair, to thriving after the Staggers Act. We got back to healthy balance sheets that enabled large capital investments, and in turn, this new reality encouraged more mergers.
The scale started to tip in the late 1990s and by the year 2000, then Surface Transportation Board Chair Linda J. Morgan and the board had to say stop. Under her leadership, the board reset the rules so that future rail megamergers would have to be shown to be in the public interest and in the shippers’ interests, where benefits must outweigh the harms. A potential merger must take into account broader full-system market impacts and demonstrate how it would enhance competition, protect customers’ service, and guard customers against service meltdowns which became common with the mergers of the 90’s.
The new rules are meant to save customers from the very things we stand to see out of the proposed UP-NS merger – fewer options and harm to competition. That point was made clear to me by the large deficiencies in the rejected UP-NS application that lacked proper market impact analysis.
Historically and currently, Union Pacific has never been bashful about throwing its weight around. A transcontinental Union Pacific turns leverage into dominance, on an industry-wide scale. Giving Union Pacific the ability to force more customers and more markets to bend to its will is not in the customers’ or the nation’s best interests.
That said, I understand the feeling expressed routinely to myself and others that it is risky to stand up to the already aggressive railroad you depend on to move your business. It’s not uncommon to hear from leaders of large companies that they fear the risk of retaliation under the weight of today’s Union Pacific if they are to bring their concerns forward. Imagine then, the far greater risk of having to operate under a permanent and more powerful future transcontinental UP.
The industry, the supply chain, the country, and the STB need to hear these opinions and have these constructive conversations. Shipper associations are critically important, as are their filings and advocacy. But the customers’ direct voices matter most in this forever decision. The STB needs to know specific customers’ benefits versus harms analysis represented by the proposed UP-NS merger.
I encourage every rail customer to get involved. File a notice of intent to participate. Maybe in the end you don’t join the conversation. That of course is your choice. But don’t miss the chance to participate. You can file a notice now, even before the re-filing of the merger application on April 30.
The truth has to be known and heard. If rail customers don’t provide their perspective, it’s not going to be heard. I have no doubt the STB will look to do what’s right to protect the strength of the U.S. rail network, which supports the strength and vitality of the American economy. They are very data-driven, and their decisions are evidence-based. They need to have fullness of data and evidence to make the right decision. If you don’t share your concerns, this irreversible decision will be made based only on what Union Pacific and the few that benefit say.
Rail shippers know the facts. Make sure the STB receives them. Don’t let your company’s history be determined or written without your voice.
Keith Creel is the president and chief executive officer of CPKC.
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