The Surface Transportation Board (STB) has approved Canadian National Railway’s (CN) acquisition of Iowa Northern Railway (IANR), a regional railroad that spans 218 miles.
The $230 million deal was officially approved on January 14, 2025, but the STB has added several conditions to ensure that the acquisition does not harm competition or create unfair advantages.
While CN believes that this acquisition will help improve rail competition in the region, the STB has carefully considered potential issues that could arise, especially for smaller businesses that rely on IANR’s services.
CN has argued that the deal will make it easier for Iowa businesses to access single-line rail service and reduce the amount of freight on highways. However, the STB recognizes that mergers like this can sometimes lead to less competition, especially for smaller shippers who depend on local services.
To address these concerns, the STB has set a number of requirements. One of the most important is that CN must create a local service plan for IANR that is predictable and accessible to all businesses, including smaller ones. The STB also requires that CN keep key gateways open on reasonable terms to ensure that other rail companies still can access important locations. The board also made sure that rail companies could still enter into agreements for reciprocal switching, which would allow businesses to access the rail network more easily.
The merger is set to go into effect on February 13, 2025. As part of the deal, CN will gain trackage rights on routes between Cedar Falls and Manly, Iowa. In return, Iowa Northern will have rights on CN’s Chicago, Central & Pacific routes. This exchange of trackage rights is intended to improve both companies’ access to important rail routes.
The STB’s decision was not unanimous, as Chairman Robert E. Primus voted against the merger. He believes the acquisition would reduce competition and harm small businesses that rely on IANR’s services. Primus pointed out that while the merger might offer some benefits, these weren’t enough to outweigh the potential harm to local competition. However, despite his objections, Primus said he would not block the majority’s decision.
Other board members supported the approval but had their own concerns. Board member Karen Hedlund, for example, agreed with the decision but was worried about whether the conditions placed on CN would really protect the smaller shippers who depend on IANR. She stressed the importance of making sure that the service provided to these businesses, especially those in agriculture, remains strong after the merger.
Patrick Fuchs, another board member, described the decision as a reasonable compromise. He noted that while some parts of the decision and the conditions attached were not exactly what he would have preferred, the overall result seemed fair. Fuchs also used the opportunity to suggest improvements to how the STB reviews smaller transactions, so the process can be faster and more efficient in the future.
Michelle Schultz, the fourth board member, agreed with Fuchs’ points about improving the review process. She also supported the merger’s approval, even though she didn’t agree with every condition attached. She noted that some conditions might not have been necessary, but overall, she believed the decision was the right one.
The approval of this merger has brought out mixed reactions. Supporters of the deal, including CN, argue that the acquisition will benefit the freight industry in Iowa by offering better access to rail service and boosting efficiency. CN believes the deal will help reduce freight on highways and improve overall logistics in the region. Additionally, the company thinks it will strengthen IANR financially.
The conditions imposed on CN are intended to prevent any negative impact on competition or the interests of small businesses. Still, the debate over the deal is not over, and many will be watching to see how the merger plays out once it is finalized.
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Sources for this article: Yahoo News, CN.
