A merger between two of North America’s largest railroads is set to go ahead after a board controlled by President Joe Biden’s appointees ignored the administration’s push against corporate concentration.
The Land Transportation Board has approved the merger of Canadian Pacific and Kansas City Southern, the continent’s sixth and seventh largest railroads. The merger would create a new rail line stretching from Vancouver to Nova Scotia, all the way to Veracruz, a port on the Gulf of Mexico. It would be the first merger of two Class I railroads — industry talk for the largest railroad companies — in two decades.
The decision will bitterly disappoint both progressives and environmentalists, who fear it will increase demand for Canadian oil and lead to the same kind of spending cuts favored by Wall Street that some have linked to the toxic derailment in East Palestine, Ohio.
The Surface Transportation Board has five members, three of whom were appointed by Biden. But it is an independent agency free from the influence of either the White House or the Department of Transportation, limiting the influence of ambitious confidence-busters on Biden’s economic team.
A key factor in the board’s decision was how consolidated the rail industry already is. Deregulation of the industry in the 1970s spurred a wave of mergers, with the number of major North American railroads growing from 40 to just seven today. The other five railroads are now larger than Canadian Pacific and Kansas City Southern; the new combined rail line, the Land Transport Board argued, would be better able to compete for business with the existing giants.
The Justice Department’s antitrust division has warned against the merger, and progressives in Congress — including Rep. Katie Porter (D-Calif.) and Sen. Elizabeth Warren (D-Mass.) — have come out against it. Canadian Pacific and Kansas City Southern spent nearly $2 million lobbying in favor of the merger, including by hiring former Sen. Byron Dorgan (DN.D.).
The combined tracks will create a “NAFTA super rail” ― the first railroad to connect North America’s three largest economies at a time of dramatic change in the continent’s energy systems. Electric vehicles assembled in Mexico will travel north to American drivers. Meanwhile, some of the world’s most carbon-rich oil will be sourced from Canada.
The new route will connect Alberta’s tar sands fields with refineries along the US Gulf Coast. With President Joe Biden rejecting Keystone XL, a pipeline designed to increase the flow of oil from Canada to the US, rail could become an attractive alternative route. Shipping oil by rail is almost always more expensive than by pipeline, but connecting the entire route under one company can eliminate the cost of paying two different railroads to access separate lines.
The recent derailment in East Palestine of a train carrying chemicals offers a grim reminder of the risk these so-called “bomb trains” pose to communities crossed by railway lines. A train carrying oil on a regional freight line in Quebec derailed in 2013 and exploded, killing nearly 50 people in Canada’s deadliest train crash since 1894. Since then, nearly two dozen more derailments have occurred in the US and Canada.
But incidents involving explosives remain relatively rare. A more common and widespread environmental impact of the merger may be increased air pollution from automobile traffic. Freight tracks, aiming to increase profits, add more and more cars to each train, sometimes stretching for miles and causing long delays at road junctions.
Along much of the railway’s route, the impact may be low. The Land Transportation Board estimated that the average wait time for a vehicle at most crossings would increase by just 0.7 seconds. The impact could be more severe in other jurisdictions, particularly the transit hub of the Detroit area, which is considered the most polluted zip code in the nation.
In a letter to the federal regulatory agency, the Michigan Environmental Council warned that air quality in that part of the state has already “deteriorated without additional merger-related train traffic passing through these cities.”
“Putting unwanted trains through Detroit only adds to the environmental injustice for the city, and we cannot allow it to continue with the merger of CP and KCS,” the letter said.
Citing Canadian Pacific’s own data provided to the Surface Transportation Board, the not-for-profit organization said the merger “will result in approximately 87 more trucks per day coming in and out” of a local facility.
“Unless serious efforts are made to mitigate the increased traffic and resulting pollution that the residents of our state will see, we urge you to reject this merger,” the Michigan Environmental Council said.