There are full page ads in some of the national papers discussing the potential merger of major rail lines that would impact our state and could impact Louisiana’s competitiveness. We should be aware of what a merger could do to shippers, supply chains and businesses throughout our state.
The Canadian Pacific’s (CP) merger with Kansas City Southern (KCS), would create competition that would ultimately drive down costs for shippers and ultimately consumers. The combined railroad would still be the smallest of the Class 1 railroads and there would be no overlap in lines allowing for greater capacity and competition in the future — competition that will serve us all.
Canadian National (CN) railroad is also bidding for KCS. This combination would make a large railroad even larger, resulting in the third-biggest Class 1 railroad in North America. This will empower CN to dictate their prices and could leave hundreds of shippers with fewer options and higher prices to get our goods to market.
Taking a closer look, you will see that CN and KCS would result in a loss of competition, reducing the number of Class 1 railroads in Louisiana from six to five. While the CP-KCS combined network has no overlap, the CN-KCS combined network overlaps from New Orleans to Baton Rouge. There are 109 shipper facilities between New Orleans and Baton Rouge that currently have dual service by CN and KCS and many of those shippers have expressed concern over the proposed merger of CN-KCS, which would reduce their service to one provider.
As a Certified Economic Developer, it’s my professional opinion that a free and fair market comes from opportunities to increase competition, not narrow the playing field. Farmers, petrochemical companies and industrial interests in our state have already been hit hard over the past year by the shipping and supply chain disruptions caused by the COVID-19 pandemic. Fewer options and less competition will not help.
To be competitive, users of our freight rail industry need reliable service. They need options they can count on to get goods to market quickly and competitively without hassle, and at a good price. Based upon the more than 600 letters of support from shippers and other stakeholders from across the country who see the benefits of increased competition, it seems CP is the clear railroad of choice to merge with KCS.
As regulators review this proposed transaction, we urge them to take into consideration the impact a merger would have on shippers and consumers in Louisiana and support the best option which I believe is a CP-KCS merger.