Dunn Hails STB Suspension Decision

March 27, 2000

USDA Under Secretary Michael V. Dunn "wholeheartedly supports" a Surface Transportation Board decision to suspend all railroad merger activity for 15 months while the STB develops new rules governing railroad mergers. USDA agrees that the rail industry should not now undertake what likely would be "a final restructuring of the North American railroad industry."

The STB told large railroads not to pursue further merger activities until the board had adopted new rules governing merger proceedings. That should take 15 months, the STB said. The decision came after four days of hearings triggered by the recent announcement that the Burlington Northern Santa Fe and the Canadian National railways systems intend to ask the STB to allow them to merge.

Railroad consolidation has been "aggressive" in recent years, the board noted, with only six large railroads remaining in the United States and Canada. But merger implementation typically has not gone smoothly, the board added, "and indeed the railroad industry and the shipping public have not yet fully recovered form the service disruptions associated with the previous round of mergers."

"This 15-month suspension of railroad mergers will give all interested parties time to put careful thought into the railroad merger rules that will be established by the STB," Dunn said. "Rail service is the only long-distance transportation alternative for many agricultural shippers, and we need to make sure that these new rules that will govern the final round of North American rail mergers reflect the rail system and rail service that U.S. agriculture wants and needs."

The STB noted that testimony at a hearing earlier this month "confirmed the board’s perception that a BNSF-CN combination would more than likely instigate, in the very near future, responsive mergers involving each of the other four large railroads."

BNSF and CN had argued that the board could move their proceeding forward and still revisit merger rules, but the board disagreed. It concluded that it makes no sense to attempt to develop new merger rules in the middle of what could be the final round of major railroad mergers, involving possibly all six of the largest North American railroads.

The parties would not know what evidence to present or what the final approval standards would be, and in the end, once new rules were adopted, the merger process likely would have to begin again, the STB said.

"Putting the industry through that process would likely destabilize the industry, force railroads whose management should be focusing on fixing their service problems to instead look for merger partners, defend their proposals and respond in the regulatory arena to other railroads’ proposals; drive away investors who have recently forsaken the railroad industry in favor of businesses that they have come to believe may have more favorable future prospects, and ultimately interfere with the industry’s ability to finance the capital improvements necessary to provide the better service that is key to their financial revitalization," said the STB.