Board Proposes Tougher Merger Rules for Railroads

The U.S. Surface Transportation Board proposed rules Tuesday that would make it tougher for major railroad companies to merge in light of serious delays and other problems that resulted from recent combinations.

New rules would require companies to show how a merger would enhance competition and be more accountable for claimed merger benefits and service promises, the agency said, reversing a 20-year pro-merger stance.

“The last round of consolidations resulted in significant transitional service problems, which could recur with future mergers,” the board said.

The 1996 merger of Union Pacific Corp. and Southern Pacific Rail Corp. led to serious bottlenecks across the merged company’s system in 1997. The logjams affected shipments moving into and out of Southern California’s two major ports at Los Angeles and Long Beach.

The purchase and division of Conrail Inc. by Norfolk Southern Corp. and CSX Corp. in the East saw widespread delays in 1999, despite extensive planning to avoid a repeat of Union Pacific’s experience.

The board in March imposed a 15-month moratorium on new rail mergers to give it time to develop the rules.

Canadian National Railway Co. and Burlington Northern Santa Fe Corp., whose merger plans were frozen by the moratorium, abandoned the deal in July after a federal appeals court upheld the moratorium.

The Assn. of American Railroads said it was studying the proposal.

Comments on the proposed rules are due Nov. 17. The board said it would issue final rules by June 11.