Klobuchar urges inquiry of proposed rail merger

WASHINGTON – With rail delays in the Upper Midwest potentially costing farmers and other shippers hundreds of millions of dollars, Sen. Amy Klobuchar, D-Minn., has asked federal officials to examine a rumored railroad merger that she worries might cause more problems.

Klobuchar said she fears the potential merger of CSX and Canadian Pacific railroads could reduce competition needed to increase shipping opportunities at affordable prices.

"Given recent concerns about shipping delays and ongoing concerns about anticompetitive conduct in the railroad industry, any further consolidation would prompt significant concern," Klobuchar said in a letter to the U.S. attorney general and the chairman of the U.S. Surface Transportation Board.

While the board currently has the power to block railroad mergers like the one Canadian Pacific reportedly broached with CSX, railroads are currently exempt from U.S. antitrust laws aimed at keeping companies from combining in ways that monopolize markets. Klobuchar has introduced legislation that would make railroads subject to the same antitrust laws and oversight as other U.S. businesses.

"Without access to competition, rail customers are often in a 'take it or leave it' position with respect to both price and service," Klobuchar wrote to Attorney General Eric Holder and Transportation Board Chairman Daniel Elliott. "I have long been concerned about costs for shippers and the recent delays are another example of why we need more railroad competition."

A study by state agricultural officials estimated that the inability to get products to market has cost Minnesota farmers more than $100 million.

Earlier this month, Klobuchar and Sen. John Thune, R-S.D., asked the U.S. Department of Agriculture to expand the study of economic disruptions caused by rail delays to the entire Upper Midwest. Klobuchar and Senators Al Franken of Minnesota and Heidi Heitkamp of North Dakota asked the Transportation Board to collect and make public various measurements regarding how many rail cars are serving individual product markets and how long shippers are waiting for service.

Canadian Pacific, whose U.S. headquarters is in Minneapolis, declined a Star Tribune request for comment on Klobuchar's letter.

"It is CP's long-standing policy not to comment on rumors and speculation," railroad spokesman Martin Cej said in an e-mail.

CSX did not respond to a request for comment about Klobuchar's concerns.

The Wall Street Journal on Sunday reported that an initial merger offer by Canadian Pacific to CSX was spurned. But on Thursday, the newspaper cited anonymous sources close to the situation who said the possibility of merger discussions remains alive.

Unless federal law changes, the U.S. Justice Department lacks the ability to block railroad mergers that it believes create anticompetitive markets that allow businesses to exploit customers. If passed, Klobuchar's bill would require both the Justice Department and the Surface Transportation Board to approve railroad mergers.

The board is currently investigating competition in the railroad industry.

"As I travel across Minnesota I continue to hear from agricultural producers and energy consumers who are experiencing significant delays in service," Klobuchar wrote. "This has led to lost sales, involuntary shutdowns at processing facilities, and disruption to agriculture markets."

Since the crude oil production boom in North Dakota began filling the rails with oil trains, farmers in Minnesota have complained about delays in rail shipments of supplies like fertilizer and of crops being sent to market. Some farmers believe competition from other railroads could improve the situation.

Minnesota's major carriers — Canadian Pacific and BNSF Railway — say they are catching up after a difficult 2013-14 winter.

Jim Spencer • 1-202-383-6123