STB Member Criticizes Union Pacific-Norfolk Southern Merger
A Surface Transportation Board member called the Union Pacific-Norfolk Southern merger application 'shallow' and lacking detail, even as the board rejected
The Surface Transportation Board has rejected a request to dismiss the Union Pacific-Norfolk Southern merger application, but a board member's sharp criticism has cast doubt on the proposal's depth. In a concurring opinion, STB member Richard Kloster called the application "shallow," lacking detail on competition concerns and failing to offer meaningful concessions.
Kloster, an appointee of former President Donald Trump, voted with the full board to keep the formal review process moving forward. The request for dismissal had been filed by rival railroads BNSF and CSX, along with a coalition of shipper groups. They argued the application failed to meet the stricter burden of proof required under the STB's 2001 merger rules, which are being applied for the first time to this proceeding.
Kloster was careful to state he was not prejudging the ultimate merits of the case. He said he looked forward to the development of the formal record and was only reporting initial observations. Industry analyst Bill Stephens described Kloster's written remarks. "He said the merger application is shallow, lacks detail about how UP will address concerns about competition and doesn't offer meaningful concessions," Stephens said.
Political Dynamics and Market Reaction
The criticism from a Trump appointee complicates a political narrative that had suggested the administration might pressure the board to approve the deal. Union Pacific CEO Jim Vena appeared with President Trump in the Oval Office in September, and Trump subsequently called the merger a good idea. Kloster's skepticism, according to Stephens, undercuts that theory.
Adding to the political context, a coalition of shipper groups met with the White House Chief of Staff in recent days to register their opposition to the merger. Financial markets appeared to react positively to the board's decision not to dismiss the case. They showed little movement in response to Kloster's opinion, possibly because it was released after Friday's market close.
North American Rail Traffic Rebounds
Separately, North American rail traffic showed a strong recovery in the latest weekly data. After an anomalous dip the prior week, total volume was up 4.6% year-over-year in week 37, according to the Association of American Railroads.
The data reveals a split performance between commodity types and between the U.S. And the broader North American market.
| Metric | North America | United States |
|---|---|---|
| Total Volume | Up 4.6% | Up 4.9% |
| Carloads | Up 3.1% | Up 2.4% |
| Intermodal | Up 6.0% | Up 6.9% |
| Ex-Coal & Grain Carloads (U.S.) | N/A | Up 6.3% |
Coal, the largest carload commodity, fell 3.1% in the U.S., while grain, the third-largest, was down roughly 8%. Stripping out these two categories, however, U.S. Carloads showed a notably strong increase of 6.3%.
Intermodal Challenges and Advantages
On the intermodal front, carrier J.B. Hunt highlighted significant operational headwinds at a recent investor conference. The company cited high diesel and energy prices as pressures on its business. This is compounded by difficulty finding drayage drivers for the first- and last-mile movement of containers.
Stephens noted that intermodal currently offers roughly a 34% discount to truckload rates. This means higher fuel costs could widen intermodal's long-term price advantage over trucking. That advantage only holds, however, if drayage capacity can keep pace with demand.
Tightening regulatory compliance requirements for non-domiciled commercial driver's license holders has further squeezed the drayage labor pool. This creates a structural constraint that carriers and shippers are watching closely as they plan their logistics networks.
