Union Pacific and Norfolk Southern are hoping a do-over on their paperwork can bring the railroads closer to federal approval for their planned $85 billion merger.
The railroads refiled their merger application with the Surface Transportation Board (STB) Thursday in hopes of pushing forward with the process. The board, which regulates U.S. railroad freight, denied the first application from the railroads in January.
The revised filing quantifies expected market gains, including roughly 303,000 intermodal containers shifting from rival railroads and 2.1 million truckloads projected to convert to rail annually. At the request of the STB, the updated analysis now relies on full traffic data from all six North American Class I railroads, rather than the four that were included in the original application.
Union Pacific argued shifting freight from higher-cost trucks to lower-cost rail will save shippers $3.5 billion annually, according to the updated estimate.
Additionally, the update addresses structural questions raised after the initial application, including the treatment of shared rail infrastructure. Union Pacific clarified that the combined railroads would commit to divest or otherwise relinquish control of the Terminal Railroad Association of St. Louis (TRRA), a key switching and interchange carrier in the region, as a condition to the merger’s close.
Competitor CSX had argued that ownership over the carrier would give Union Pacific complete control of the St. Louis gateway, which Class I railroads rely on to compete.
The merger agreement includes a $2.5 billion breakup fee, payable by either Union Pacific or Norfolk Southern depending on the circumstances, such as if their boards opted not to recommend the deal or if the companies pursued an alternative transaction. Union Pacific would also have to pay the extra charge if the deal fails due to regulatory blocks or “materially burdensome” conditions.
Both railroads can opt to terminate the deal if it isn’t closed by Jan. 28, 2028 or if the STB or a court issues a final decision blocking the merger.
If the STB accepts the latest application, it will review public comment and rebuttals in the coming months before ruling sometime in 2027.
A day prior to the filing, multiple major industry stakeholders including BNSF Railway, CPKC Railway and the Teamsters Rail Conference joined forces to launch an alliance opposing the proposed merger.
The Stop the Rail Merger Coalition, which also includes groups such as the American Chemistry Council and the American Farm Bureau Federation, has warned the merger would reduce competition, drive up costs for American manufacturers, farmers and consumers and inject new vulnerabilities into the nation’s workforce and supply chain.
Both BNSF and CPKC have previously called on the STB to strike down the deal, having pointed out in December that the merger filing was incomplete.
“This did not begin with a customer asking for a UP-NS merger to happen,” said Katie Farmer, president and CEO of BNSF Railway, in a statement. “It’s driven by Wall Street on the promise of a big shareholder payout. It will eliminate competition, raise costs for consumers and destabilize the supply chain that powers the American economy.”
Keith Creel, president and CEO of CPKC, noted that opposing stakeholders have “deep and widespread unease” about the megamerger.
“This decision is irreversible—it is imperative the Surface Transportation Board hears from all concerned parties,” Creel said.
The Teamsters Rail Conference has been the most vocal group with ties to the merger applicants speaking out against the deal. The labor association represents nearly 20,000 Union Pacific and Norfolk Southern workers, amounting to over half of their unionized employees.
Although Union Pacific has reiterated it would protect all current union jobs after the merger, Teamsters Rail Conference president Mark Wallace critiqued the railroad for failing to make workforce commitments necessary to maintain network reliability.
“Merging two Class I carriers of this scale without binding employment guarantees is not a business decision,” Wallace said. “It is a gamble with the nation’s supply chain and the workers who keep it moving that ultimately the American taxpayer will have to bail out.”
The applicants said in the updated filing that they would add a new service connecting Northern California to the southeast, which would create 1,200 new union jobs over three years.
Both the debut of the coalition and the second filing from Union Pacific and Norfolk Southern followed first-quarter earnings reports for the railroads released last month.
UP generated a 3 percent operating revenue increase to $6.2 billion driven by core pricing gains, fuel surcharge revenue and business mix partially offset by 1 percent fewer carloads. Similarly, NSC saw operating revenues increase 5 percent to $3 billion, with volume declining 1 percent year over year.
Union Pacific reported net income of $1.7 billion, or $2.87 per diluted share. The results include merger costs of $36 million or 6 cents per diluted share. Norfolk Southern said income from railway operations totaled $877 million, or $2.43 per share on a diluted basis. Merger-related expenses totaled $52 million, while $10 million was allocated to costs associated with the February 2023 East Palestine, Ohio derailment.
BNSF’s operating revenues saw a 5 percent jump to $6 billion on net earnings of $1.4 billion. Volumes for the Berkshire Hathaway-owned railroad increased 2.2 percent.
The war in Iran has led to a hike in fuel prices impacting all facets of the supply chain, railroads included. Fuel expenses at Union Pacific grew 7 percent in the quarter, while Norfolk Southern said fuel prices were $31 million higher than the year-ago period and over $40 million higher than the Class I’s expectations.
The higher fuel prices led CSX to raise its annual guidance last month.
