BNSF Railway has commented on the recently announced operating agreement between Union Pacific (UP) and Canadian National (CN), arguing that it undermines Union Pacific’s justification for its proposed merger with Norfolk Southern (NS).
The comments follow the announcement that Union Pacific and CN have signed a memorandum of understanding to expand cross-border rail operations. The agreement includes new operating rights for Union Pacific over CN’s Elgin, Joliet & Eastern Railway corridor in the Chicago area, while CN will gain access to Union Pacific’s network between Memphis, Tennessee, and Eagle Pass, Texas, creating new freight routes between Canada and Mexico.
In a statement, BNSF spokesperson Zak Andersen, Chief of Staff and Vice President of Communications, said the agreement demonstrates that the operational benefits highlighted by Union Pacific can be achieved without a merger.
Zak Andersen said:Yesterday’s announcement does nothing to change the fact that this merger doesn’t enhance competition and would leave thousands of rail customers with fewer competitive options and a single railroad controlling roughly 50% of the market.
More importantly, UP’s agreement with CN undermines one of the core arguments for the merger. For a year, UP has claimed that partnerships cannot deliver the benefits it says this transaction would create. Yet the CN agreement closely resembles partnerships that BNSF and other Class I railroads have successfully operated for decades.
UP is required to demonstrate that the benefits it claims can only be achieved through a merger. Its own agreement with CN shows the opposite. The benefits UP highlights can be pursued today without a merger, and significant portions of the arrangement are not even contingent on merger approval.
As such, according to BNSF, the agreement shows that many of the operational improvements promoted by Union Pacific could be pursued through commercial partnerships rather than consolidation.
Union Pacific has maintained that its proposed merger with Norfolk Southern would create the first single-line rail network linking the US East and West Coasts, while the agreement with CN is intended to improve rail connectivity between Canada, the United States and Mexico through expanded operating rights.
BNSF has consistently opposed the proposed transaction, arguing that it would reduce competition across the North American freight rail market.
