Canadian Pacific Railway and Kansas City Southern Merger Approved
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Canadian Pacific Railway and Kansas City Southern Merger Approved

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Fernando Mares By Fernando Mares | Journalist and Industry Analyst - Thu, 03/16/2023 - 16:35

The US Surface Transportation Board (STB) announced it approved the Canadian Pacific Railway (CP) acquisition of Kansas City Southern Railway (KCS). The move is expected to increase North America’s logistical capabilities by interconnecting the region with rail lines.

The decision comes almost a year and four months after both companies filed the merger application on Oct. 29, 2021. “Since that time, the STB has received nearly 2,000 comments and other filings and held a seven-day public hearing. In addition, the Board’s Office of Environmental Analysis held seven public meetings, all of which were attended by at least one Board member, and conducted a rigorous analysis, producing a comprehensive Final Environmental Impact Statement (FEIS) of more than 5,000 pages including appendices,” reads the STB report. 

STB noted that the combination of both companies’ railroads, which will be known as Canadian Pacific Kansas City (CPKC), will create the first single-line railroad service spanning Canada, the US and Mexico. However, the board stressed the merger will not compromise existing competition conditions: despite boosting the company’s efficiency, CPKC will continue to be the smallest Class I railroad. 

Nevertheless, STB said it will impose conditions to avoid anti-competitive behavior to maintain existing rail service options at gateways, which are interchange points between CPKC and other railroads, on commercially reasonable terms. These conditions apply to both existing and new services. The board said that if CPKC increases its rates to above the inflation rate, affected shippers are allowed to ask the company to provide them with a written justification. This will enable them to evaluate if the increase is reasonable, and if not, they can file a complaint at STB. 

STB judges the environmental effects of the merger to be positive as it will move over 64,000 truckloads a year from the roads to rail, resulting in a decrease in CO2 emissions of over 127,113t/y. The Board said that the derailment in East Palestine, Ohio harmed the public perception of railroads but stressed that trains are by far the safest means of transporting freight, including hazardous materials, as trucks caused 94% of hazardous materials incidents in 2021, while trains barely accounted for 1%.

CP said that STB authorized it to exercise control over KCS as early as Apr. 14, 2023. It added that it is reviewing the 212-page decision and that in the coming days, it will announce its plans regarding the creation of CPKC. Meanwhile, the company said the approval is great news since it will foster North America’s competitive advantages. "As the STB found, it will stimulate new competition, create jobs, lead to new investment in our rail network and drive economic growth. 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," said Keith Creel, CEO, CP.

Photo by:   Acton Crawford

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