News & Reviews News Wire Union Pacific: CP-KCS merger could harm competition at Laredo gateway

Union Pacific: CP-KCS merger could harm competition at Laredo gateway

By Bill Stephens | March 1, 2022

Filing proposes conditions to protect competition, asks that CPKC is required to pay for capacity improvements on trackage-rights routes

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Train with two locomotives and hopper cars on track parallelling street
With its rear end still on the International Railway Bridge, an empty Kansas City Southern  grain train rolls by the Union Pacific depot and yard in Laredo, Texas, in November 2017. UP is asking federal regulators to protect competition at the Laredo gateway. (Bill Stephens)

WASHINGTON — Union Pacific has asked federal regulators to ensure that a merger of Canadian Pacific and Kansas City Southern does not undermine competition at the Laredo, Texas, gateway.

Laredo, the most important Mexico border crossing, is where UP interchanges with KCS de Mexico and stands to lose traffic to the combined Canadian Pacific Kansas City system.

UP, in a Monday filing with the Surface Transportation Board, also urged regulators to require CPKC to pay for capacity improvements on UP trackage rights routes it uses across southern Texas, as well as to consider the impact of projected traffic growth on shared routes in the Kansas City and St. Paul areas.

“An unconditioned combination of CP and KCS would likely cause a significant loss of competition, especially for traffic moving via the Laredo Gateway. CP would gain control of KCSM, and thus the ability to increase the costs or reduce the quality of rail service in Mexico for railroads providing shippers competitive options to CPKC north of Laredo,” UP wrote in its 334-page filing.

The promises CP has made to investors — including $1 billion in merger-related revenue growth — will put pressure on CPKC to divert traffic from UP and BNSF Railway, UP argues.

“CPKC would have a strong incentive to engage in this type of anticompetitive conduct: to meet Applicants’ aggressive promises to investors, CPKC must divert substantial volumes of business from shippers currently using UP or BNSF to provide service north of Laredo without sacrificing profits,” UP contends. “The limited (if not illusory) efficiencies arising from the proposed transaction will not achieve those aggressive promises.”

CP has said it will keep all gateways open on commercially reasonable terms. But UP asked the board to impose enforceable measures to preserve competition at Laredo and other gateways. Among them: Requiring CPKC to provide rate quotes for both single-line and interline service via gateways and permitting UP to use a proposed second bridge over the Rio Grande at Laredo.

UP also said the STB should require CPKC to reach agreements with other railroads and fund necessary capacity improvements before being permitted to increase train counts over shared or trackage-rights routes.

“Applicants failed to address the need for additional infrastructure and investment to accommodate the additional eight to 12 trains per day they plan to operate on UP-owned tracks between Robstown and Beaumont, Texas, including lines through the crowded Houston terminal,” UP notes. “BNSF also operates its own trains on many of these lines. Amtrak also operates on UP’s lines between Beaumont and Houston. Applicants also failed to address other railroads’ operations in analyzing the investment needs on lines they own but share with other railroads. They did not account for UP, BNSF, and Amtrak operations over the Neches River Bridge, a chokepoint for traffic moving between Houston and New Orleans. They also failed to address whether the 42-mile joint facility that UP and CP use to access Kansas City could accommodate their planned traffic growth of 14 trains per day. They also failed to address the impacts of their plan to route additional traffic through St. Paul, Minn., where their operations overlap with the operations of UP, BNSF, and Amtrak.”

10 thoughts on “Union Pacific: CP-KCS merger could harm competition at Laredo gateway

  1. Why is the Largest Railroad in the Nation worried about Competition They need to Take Care of there own Business and leave well enough Alone

  2. Of all the blather populating the ether relating to the impending CPKC nuptials this is the one with real merit. KCSdeM does not work with KCS without Uncle Pete’s track through Houston. This becomes doubly certain for CPKC. No one really thought about building a belt line around the metro area and now it’s too late. Expecting more traffic to move through Laredo to/from Beaumont on a plant that can barely handle what has now is unrealistic. UP wants and deserves investment for more capacity. CPKC needs to evaluate their options.

    1. This states the core argument. The rest of it is sticking your hand in the bowl and seeing if you can come out with any goodies.
      Get in the line Uncle Pete.
      Thank you Daniel.

  3. Same old song. Different verse. Another verse is the CSX -Amtrak about NOL – Mobile. A lot of these UP have eerily the same tone as CSX.

  4. If I recall didn’t UP promise all good things when they merged with SP then had almost a year melt down? O well that was then this is now and we want!

  5. the ONE railroad the merged or gobbled up with everyone in the West is worried about this…… i am sorry but this is laughable. Maybe UP need’s to realize that they cannot control or have everything.

  6. This kind of stuff is what makes me get tired of these joint rail use agreements. At first the weaker road needs it so as to reduce capex on its ROW and share those costs with a partner.

    But when the table “appears” to flip, then the other partner wants a handout and wants changes in the terms of the JV.

    This “if they are going to make money off of us, we don’t like it, so we want changes in the JV”. They are already making money off your JV, you are just mad because they can make *more* than you thanks to captive carriage.

    Railroading is not the NFL where the STB goes all out to make everyone equal and whole. If you don’t like that CP got the #1 draft pick, whose fault is that? Crying to the STB on competitive grounds based on a contract you signed in good faith seems like double dealing. If you don’t like it, end the contract (if it allows it) and write a new one that meets your terms. Then go to the STB for their blessing. Sheesh.

    1. How absolutely metrosexual of UPRR. They can’t run their own railroad, so tear down another railroad that wants to be a success.

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