The Surface Transportation Board (STB) has formally approved the proposed Class I railroad merger between Canadian Pacific Railway (CP) and Kansas City Southern Railway (KCS).
With approval, the newly merged Canadian Pacific Kansas City (CPKC) will provide the first-ever single-line service spanning Canada, the United States, and Mexico.
The decision includes an unprecedented seven-year oversight period and contains many conditions designed to mitigate environmental impacts, preserve competition, protect railroad workers, and promote efficient passenger rail.
“The Board has carefully considered the full record, weighed the public benefits against potentially harmful impacts, and imposed appropriate conditions to mitigate those impacts in its approval of the merger,” the STB said in a press announcement, concluding “the merger and imposed conditions to result in an overall public benefit.”
STB anticipates two benefits of note to grain shippers: The merger is expected to facilitate the flow of grain from the Midwest to the Gulf Coast and Mexico and enhance competition for traffic with other Class I railroads.
“Shipping of grain, automotive parts and vehicles, and intermodal goods will improve with new single-line options, and shippers will have opportunities to expand their market reach,” the STB wrote.
Grain is the largest line of business for Canadian Pacific, which moved a record 2.29 million metric tons (MMT) of grain in January. Thus far in the 2022-23 crop year, CP has moved more than 15 MMT of grain, a 45% increase compared to the same time in 2022.
CP President and CEO Keith Creel said the STB decision clearly recognized the many benefits of this historic combination.
“As the STB found, it will stimulate new competition, create jobs, lead to new investment in our rail network, and drive economic growth,” Creel said.
“These benefits are unparalleled for our employees, rail customers, communities and the North American economy at a time when the supply chains of these three great nations have never needed it more.”
To mitigate concerns over potential negative effects on competition, STB placed conditions on the merger, including keeping gateways to other Class I railroads open on commercially reasonable terms, submitting certain service data to assist STB in monitoring the merger, and submitting “Service Action Plans” to STB to address specific service issues if they arise.
Even with the combination of the two railroads, CPKC will continue to be the smallest Class I railroad, with a network that is a few thousand route miles shorter than the next smallest Class I and half the size of the Western railroads.
The transaction is end-to-end, meaning there are little to no track redundancies or overlapping routes between the railroads; they connect only in Kansas City.
The transaction will reduce travel time for traffic moving over the single-line service and should result in increased incentives for investment and eliminate the need for the two now-separate CP and KCS systems to interchange traffic moving from one system to the other.
“This will enhance efficiency, which in turn will enable the new CPKC system to better compete for traffic with the other larger Class I carriers. There is substantial (though not unanimous) shipper support for this transaction — the Board has received more than 450 support letters,” the STB wrote.
The STB also expects the growth in rail traffic resulting from the merger will be safer, more efficient, and will have fewer emissions than the truckloads that it will remove from North American roads.
The board anticipates that CPKC will be able to attract 64,000 truckloads from the roads to rail each year, helping to reduce congestion on the Nation’s roads.
Source:michiganfarmnews.com
Categories: Kansas, Business, Crops