STB member Kloster wants UP and NS to put their best case on the record

Surface Transportation Board member Richard Kloster backed the 4-0 vote to keep the UP-NS merger application alive, but told Union Pacific and Norfolk Southern to show their full case now.

The Board denied three motions on Sept. 18 that asked it to throw out the revised application before any review of its merits. BNSF Railway, CSX Transportation and five shipper associations had filed them on Aug. 6, arguing that the railroads had not made a prima facie case.

Kloster, who joined the Board in June, voted with Board Members Fuchs, Hedlund and Schultz. He also attached a separate concurring statement to Decision No. 37, setting out early doubts about the filing.

What Kloster wrote about the filing

Kloster said the movants had to clear a very high bar, because the Board was required to read the railroads’ evidence in its most favorable light. Even so, he wrote, they raised “significant, compelling arguments” that the applicants will have to answer in detail.

In his view, the application lacks transparency and depth. The railroads have filed thousands of pages, he noted, but offer no robust plan for dealing with competition concerns or limiting potential harm. He added that they lean heavily on gains for intermodal traffic, a segment he regards as already competitive.

Concessions held back for later

Kloster also pointed to an apparent strategy of “letting the line out slowly.” Opponents, he noted, suggest the railroads first offer conditions of little value on minor issues and watch how stakeholders react before putting more meaningful conditions on major issues on the table.

His answer was that the applicants should bring their strongest case with the application itself, so the Board can rule on the merger’s merits. “The Board should not have to sift through vague language to try and figure out where any deficiencies may be in the Applicants’ proposal,” he wrote.

Kloster stressed that he has made no decision on the merits and remains open-minded. He concluded that the railroads have much work ahead to show the deal serves the public interest, while noting that the proceeding is at an early stage.

What the dismissal motions argued

The motions centered on competition. Opponents said the merger could shut rivals out through vertical foreclosure and remove geographic competition, and that the railroads assessed some interline traffic by category instead of with evidence specific to this deal. They also argued that Committed Gateway Pricing, the railroads’ main offer to enhance competition, covers less than 1% of traffic, ends with the oversight period and could raise rates for some shippers.

The shipper associations added that the railroads had not shown which public benefits only the merger could produce, and that the claims program in their Service Assurance Plan excludes most potential traffic. CSX and Canadian Pacific Kansas City (CPKC) said the application does not examine how further Class I mergers would shape the industry.

In their Aug. 26 reply, Union Pacific and Norfolk Southern called the motions a coordinated attempt to argue the merits before opponents’ own arguments are tested. They said the deal would enhance rail competition, that Committed Gateway Pricing supports that aim and that their vertical foreclosure analysis is specific to this transaction.

What happens next in the UP-NS review

The Board said keeping the case open signals no view on the merits and does not endorse the railroads’ analyses. Opponents can raise their objections again in opening comments due Nov. 18, 2026, and responses to those comments are due Feb. 16, 2027.

This is the first case the Board will assess under the major merger rules it adopted in 2001, and the decision says some objections raise significant factual questions. A footnote adds that the environmental review will now rely on updated traffic projections the railroads submitted on Sept. 9, not the version filed on July 27.

The earlier steps in the proceeding, from the first application to the August schedule, are set out in our report on the ruling.