A group of U.S. ports and terminal operators has raised concern about the pending $85 billion railroad merger between Union Pacific and Norfolk Southern, maintaining that it could degrade intermodal rail services, harm port competition and hinder regional trade.
In a letter to the Surface Transportation Board (STB), the National Association of Waterfront Employers (NAWE) urged the regulatory body to rigorously evaluate the merger’s potential effects on intermodal shipping before considering its approval.
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The ports publicized the letter on Monday, the same day BNSF Railway filed a petition with the STB requesting the board immediately review Union Pacific’s compliance with its prior acquisition of Southern Pacific in 1996. The Berkshire Hathaway-owned railroad has been a top critic of the looming deal, and is claiming Union Pacific has engaged in “obstructive conduct” since the Southern Pacific merger that has harmed customers and competition alike.
NAWE members contend that further concentration of the intermodal rail market would lead to fewer service options, or the prioritization of more cost-effective routes. Both outcomes could diminish economic opportunities in certain port regions, the group argues.
“Many businesses rely, in turn, on the competitiveness of their local port delivery system,” wrote Carl Bentzel, president of NAWE, in the letter. “As such, continued concentration of intermodal rail service could negatively impact local and regional trade if rail carriers prioritize services that meet their own needs while disregarding opportunities to serve other regional port areas.”
BNSF had previously shared concerns that the merger would result in the mass culling of 300 intermodal lanes across the U.S., with Union Pacific CEO Jim Vena refuting that claim. However, the railroad has given no direct indication of how many lanes it would plan on scrapping or consolidating, if any.
Marine terminals rely on efficient intermodal rail to handle increasing volumes of trade, according to NAWE, which said this service is pivotal to moving imports and exports through “increasingly strained” port complexes.
“The market for intermodal shipping service into Chicago, which in turn acts as a hub shipment for much of the nation’s interior cargo, is serviced in large part through the Ports of Los Angeles and Long Beach where over 60 percent of import cargo is serviced by intermodal rail,” Bentzel said. “These ports, and the terminals that operate in the port, are market dominant precisely because of the levels of intermodal rail.”
Additionally, Bentzel and NAWE asserted that intermodal rail expansion—not consolidation—is critical to supporting port and terminal growth.
“We need intermodal railroad services that expand the reach and capacity of medium-sized ports so they grow, but more fundamentally, we need to build a stronger business partnership with the railroads,” Bentzel wrote. “Other port areas of the nation continue to struggle for commitment of service and greater level of investment to help spur growth.”
Bentzel also said the rail industry has lagged the maritime and terminal sectors when it comes to investing in and expanding intermodal business opportunities through U.S. ports.
“Marine terminals are forced to bear all of the costs, while the railroad usually takes more of an, ‘if you build it, I may carry your cargo, if I see fit’ approach,” said Bentzel. “This results in a situation where the marine terminal industry finances and manages all the placement of intermodal on-dock rail transport, sometimes with very little in return on commitments in level of service.”
The organization also criticized the Class I railroads’ recent shift to precision scheduled railroading (PSR), which is a network scheduling system designed to boost service and profits for the railroads. The strategy has taken criticism from industry players due to more service consolidations and fewer stops, as well as fewer staff.
BNSF wants government to review 30-year-old UP-SP merger
As for BNSF’s request, the railroad argues that Union Pacific has spent nearly three decades undermining the competitive protections the STB put in place when it approved its merger of Southern Pacific.
Those conditions gave BNSF extensive rights—like trackage rights, customer access and equal dispatching—to ensure shippers in the western U.S. wouldn’t lose rail competition. BNSF says UP has steadily chipped away at those rights through delay, obstruction and refusal to comply with the merger conditions.
BNSF is asking the STB to reopen and review the entire UP/SP merger framework, enforce the existing conditions and modify them where necessary to restore and protect competition for shippers.
“With UP now proposing another unprecedented merger, this time with Norfolk Southern, the stakes for shippers nationwide could not be higher,” said BNSF executive vice president and chief legal officer Jill Mulligan, in a statement. “Before considering any new consolidation, we ask the board to ensure the commitments made during the UP/SP merger are honored, and that competition is, at a minimum, preserved as required under the prior merger standards.”
Union Pacific intends to submit a detailed merger application to the STB as soon as this week.
