What was poised to be a transformative merger in the railroad industry has encountered significant regulatory hurdles. The proposed $85 billion combination of Union Pacific (UP) and Norfolk Southern (NS) has been temporarily derailed after the Surface Transportation Board (STB) rejected the application, citing incomplete documentation.
STB's Ruling: The Devil in the Details
In a carefully worded statement, the STB found that the merger application failed to meet the agency's disclosure requirements. Specifically, the submission lacked comprehensive analysis of the merged entity's projected market share impact and omitted complete merger agreements, including all transaction-related contracts.
The STB emphasized that this rejection was based solely on the application's incompleteness as filed in December 2023 and does not reflect any judgment on the merits of the merger itself. The regulatory body explained that its rules mandate complete system impact analyses, including specific revenue and shipment volume projections to assess competitive effects.
The board noted that while UP and NS projected shipment growth from the merger—including traffic diversions—they simply summed their 2023 estimated market shares without providing future projections accounting for growth, diversions, and other market changes. The STB determined this approach insufficient for evaluating potential competitive harm.
Critical Omissions: Market Analysis and Transaction Evaluation
The STB highlighted two major deficiencies: inadequate market share projections and misclassification of the St. Louis Terminal Railroad Association control request as a minor transaction rather than a significant one. The board also identified several technical issues requiring resolution in any revised application.
TD Cowen analyst Jason Seidl noted in a research report that the STB's decision aligns with multiple investigative findings about the application's lack of key details. "We expect UP will continue working diligently on revisions but acknowledge this setback requires additional analysis," Seidl wrote, projecting a final decision timeline extending to 2027.
Competitors Raise Transparency Concerns
Before the STB's ruling, competing Class I railroads BNSF and Canadian National (CN) filed motions demanding greater disclosure from the merging parties. CN's Chief Legal Officer Olivier Chouc argued that UP and NS failed to meet transparency standards for evaluating potential competitive harm.
BNSF's filing contended that the merger would irreversibly reshape U.S. rail transportation for decades while the applicants avoided fundamental disclosures about internal assessments of competitive effects, service risks, and achievable benefits.
Path Forward: Revisions and Extended Timeline
While the rejection pauses the merger process, the STB explicitly stated this doesn't terminate proceedings. The board directed applicants to submit by February 17 a letter outlining their timeline for filing a revised application.
Independent rail analyst Tony Hatch likened the situation to pre-fight weigh-ins rather than a knockout blow. "The STB is essentially saying some information was missing without ruling on the enhanced competition arguments," Hatch observed. "This will likely be addressed when evaluating the actual merger rather than the application."
The proposed UP-NS combination represents one of the most significant potential transformations in U.S. rail transportation in recent history. The STB's decision introduces substantial uncertainty about the merger's ultimate prospects and timeline, with industry stakeholders closely watching how the applicants respond to the regulatory concerns.