Following a unanimous decision in January by the Surface Transportation Board, which rejected the application merger submitted by Union Pacific (UP) for a proposed $85 billion merger between UP and Norfolk Southern (NS), a revised application is expected to be submitted to the STB by April 30. The revised merger application was a key theme of last week’s Northeast Association of Rail Shippers (NEARS) conference in Newport, Rhode Island last week.
When the merger was first announced in July 2025, the railroads the rail carriers said it would create the nation’s first transcontinental railroad—which will connect more than 50,000 route miles across 43 states from the East Coast to the West Coast and connect around 100 ports as well.
As previously reported by LM, in its January decision, the STB said that the application is incomplete because it “does not contain certain information required by the Board’s regulations, and is “based solely on the incompleteness of the December 19 application and should not read as an indication of how the Board might ultimately assess any future revised application.”
STB explained that, as per its regulations regarding information that must be in a merger application, it requires: full system impact analyses that include market share projections for the entity to be created by the transaction; and the entire merger agreement, including the submission of any contract or other written instrument that pertains to the transaction, with applicants required to submit “full system” impact analyses that include actual and projected market shares of certain revenues and traffic volumes demonstrating, among other things, the impacts of the transaction on competition.
Todd Rynaski, UP senior vice president-Strategy, explained at NEARS that this merger will provide various benefits for rail shippers, specifically focusing on the value of single-line service compared to interline, in that it results in more reliable service, 24-to-30 hours faster transit times, better pricing for a single move, 10,000 existing lanes going to single-line service (which customers benefit from for improved asset utilization (with smaller railcar fleets required), an easier onboarding and service experience, and enhancing competition. He added that a combined UP-NS network can convert 2 million truckloads to rail, with a focus on key growth areas, including long-haul intermodal, from Los Angeles to the Northeast, so-called “Watershed” mid-distance markets, coupled with single-line service reducing handling risk and transit variability.
“It is about making the customer experience as easy as possible, so you have one person to call, one contract, and one bill,” said Rynaski. “We are putting our money where our mouth is, with a $2.1 billion of capital expenditures to do the integration, with $1 million in infrastructure, $500 million in capacity upgrades, $500 million in facilities, and around $1.1 billion in IT integration. Ultimately, we believe a very strong case of this transaction is enhanced competition for all. As we get closer to April 30 the pace is going to increase a little bit [regarding the application], just to make sure we are ticking on the boxes and don’t stub our toe on anything.”
In citing various benefits of the merger, Rynaski noted that single-line pricing is historically lower than interline, with market competition remaining intact, adding that fewer trains moving the same volume results in various improvements, including improvements in car velocity, terminal dwell, network fluidity, and also increased productivity through process improvements, real-time data, and sharing of best practices between UP and NS.
From the perspective of NS, Mike McClellan, NS Senior Vice President & Chief Strategy Officer, explained at NEARS that the revised merger application is addressing the main things requested by the STB, which include: forward-looking data showing how the merged railroad would affect competition, in the form of multi-year market projections and analysis of how competition will change on specific routes and markets (related to the STB’s requirement of mergers enhancing competition and not simply preserving competition); a full disclosure of underlying data, methodologies, and affected shippers and routes; and also the refiling of a complete and standalone application, with all required materials and documents, instead of referring to previous filings and omitted exhibits.
McClellan explained that the revised application, which will be submitted to the STB later this month is much stronger than the previous one, especially in terms of the various datasets required by the STB, which focus on service performance metrics, including train speed, terminal dwell time, and car orders.
Looking at the value-add of intermodal in this merger, at a time when fuel prices are very high, McClellan said that one of the most compelling things it can do to reduce costs across North America is to create more competitive railroad products, which he called the foundation of this transaction.
“Let’s say 20% of moves today are intermodal and 80% is trucking, for the shipper, and by putting together new lanes and faster services, maybe that 20% can get up to 30% or 40%, that in and of itself is fast,” he said. “To the extent that we can put more products out there that are lower-cost than truck, everybody is going to benefit. Around two-thirds of the [merger’s] value proposition is growth, and we are going to launch new services and new lanes as fast as we can. That is really one of the first major benefits of this. We want to go forward with a pro-competitive and pro-shipper action plan. What you are going to see right off the bat is us doing things in the first year that are really going to try to give the shippers opportunities to use more of us.”
