WASHINGTON — One year ago this week Canadian National announced its $230 million deal to acquire the 218-mile Iowa Northern Railway.
Today CN should be 100 days into integrating Iowa Northern into its 18,800-mile system, assuming regulatory approval of the acquisition.
Or CN should be licking its wounds, in the unlikely event that the Surface Transportation Board had rejected the deal.
Instead, CN and Iowa Northern are still waiting: The STB is now 130 days past its own regulatory deadline for issuing a decision on the CN-IANR transaction.
CN filed its merger application on Jan. 30, 2024. The board accepted it as a “minor” transaction and set out a merger review schedule that included a July 26 date for a final decision, and an Aug. 25 effective date.
When will the STB act? It’s unclear: A board spokesman said today that the agency cannot comment on a pending matter.
It’s the second time this year that the board has failed to meet its regulatory requirements regarding timelines for a minor transaction involving Class I railroads and a short line.
In a pair of October decisions issued six months past the deadline, the STB approved Canadian Pacific Kansas City and CSX’s plans to acquire and operate Genesee & Wyoming short line Meridian & Bigbee. The railroads this month began interline service over the route through Alabama and Mississippi, which is a shortcut between the Southeast and Texas and Mexico.
The MNBR tardiness was not lost on Republican board members Patrick Fuchs and Michelle Schultz, who wrote separate concurring notes. “The Board cannot reasonably expect to hold stakeholders accountable to Board rules if we do not hold ourselves to the same standard,” Schultz wrote. “The Board must prioritize issuing its decisions in a timelier manner.”
At the RailTrends conference last month, Schultz said the board must meet its deadlines.
“Part of our role is to administer decisions in a timely fashion. And we can do better,” Schultz said. “Please note that this is not a criticism of board staff or my colleagues since I joined the board. The demand on the docket has been extraordinarily high, both with cases filed with the board and with discretionary matters that the board has taken up. Those have contributed to longer time periods to issue decisions.”
Delays increase costs and uncertainty for railroads and can even hinder investments, she noted. “The question becomes not what will the board decide, but when or if the board decides,” Schultz said.
Since the retirement of former Chairman Martin J. Oberman in May, the board has been split along party lines with two Democrats and two Republicans. Some observers suggest the members are at loggerheads over what conditions to impose as part of their approval of the CN-IANR deal.
In a March 29 decision affirming that the CN-IANR deal as a minor transaction, board member Robert Primus — who is now the board chairman — raised concerns about whether the acquisition’s public interest benefits would outweigh any anticompetitive effects that it may create.
If the board is at an impasse and remains deadlocked, it’s unlikely that a fifth member will be sworn in before the middle of 2025, potentially leaving CN and IANR stuck in regulatory limbo.
“Nobody benefits from these strung out, overly long processes,” Association of American Railroads CEO Ian Jefferies told the RailTrends conference. “We need some discipline there and I think new leadership should be focused on that.”
I really hope this is rejected or major conditions imposed. IANR parallels CN for almost its entire length, so competition would certainly be lost, without major conditions.
Seems like IANR would be a good fit for Iowa Interstate. Oh wait, that merger happened about 120 years ago, when Rock Island bought Burlington, Cedar Rapids & Northern. But Iowa Northern shippers would have a direct connection with al 6 Class I railroads.
BCR&N was part of a through route from St Louis to St Paul. If UP were to buy, or get trackage rights over IANR, they could route St Louis – St Paul traffic via Springfield, Peoria, Nelson, Cedar Rapids, and Manly. Longer than BNSF but shorter than anything UP has now.
Ideally, let IAIS buy it and grant UP trackage rights. But I won’t hold my breath. ID doubt IAIS or UP are even interested.
“We need some discipline there and I think new leadership should be focused on that.”
No one will argue on that in any situation, but we are dealing with politics here, not business.
But it would help if the AAR would post that same mantra on the mirror of rail safety so they can see it a little more clearly every day.
They too must eat the same dog food they send to everyone else.
Hard to believe that a federal agency would be late in any decision. President Trump should erase this bureaucratic outfit.