Monthly Federal Legislative & Regulatory Reports

IANA tracks important legislative and regulatory issues that affect the intermodal freight transportation industry. The status of these issues will be added as needed.

Legislative

Congress Passes Stopgap Funding Bill and HTF Extension After Temporary Lapse

Regulatory

KCS and CP Prepare Application for Merger

On August 31, the Surface Transportation Board rejected the use of a voting trust agreement for the proposed merger between Canadian National Railway and Kansas City Southern. In a unanimous decision, STB concluded the use of a voting trust in this transaction would not be consistent with the public interest. The decision asserted KCS and CN failed to “affirmatively demonstrate” the public benefits of the proposed combination to the extent required by the current, more stringent merger rules for Class I railroads.

Following STB’s determination, Canadian Pacific Railway reaffirmed its August 10 updated offer to acquire KCS in a stock and cash transaction valued at an estimated $31 billion. KCS subsequently announced that its Board of Directors decided the revised merger proposal submitted by CP constitutes a “Company Superior Proposal” as defined by the agreement between KCS and CN. KCS therefore terminated its agreement with CN and entered into a “definitive Agreement and Plan of Merger” with CP.

On September 15, KCS and CP submitted an amended notice of intent to file an application for transaction approval to CP. In this filing, KCS and CP noted the new agreement is nearly identical to the terms reached in March 2021, including the use of a voting trust, which was approved by STB in May. Furthermore, the parties will file their application under the previous Class I merger regulations. After implementing new requirements for the review of Class I railroad mergers in 2001, STB granted a waiver to allow transactions involving KCS to remain subject to the previous regulations due to its comparatively smaller size and annual revenue. In a decision served on April 23, STB determined the KCS waiver should apply in CP’s proposed acquisition of KCS. STB noted that, if approved, the combined railroad would remain the smallest Class I based on U.S. operating revenues. STB further concluded that a merger of the CP and KCS networks would result in the fewest overlapping routes when compared to a merger between KCS and any other Class I carrier, limiting concerns regarding reduced competition.

On September 30, issued a notice stating the previously granted approval of the CP/KCS voting trust will apply to the amended prefiling notice, concluding that the new voting trust “is substantively identical to that approved by the Board and the modified financial terms of CP’s offer would not impact the operation of the voting trust.” STB Member Pribus dissented, arguing STB now has an additional opportunity to thoroughly review the proposed merger, the new financial terms, voting trust, and their potential impacts. He noted the proposed merger between KCS and CN was subject to the new Class I transaction regulations and that STB rejected their voting trust. Pribus asserted the CP/KCS merger should be considered under these same, more stringent, requirements and called for a more comprehensive review.

CP and KCS plan to submit their application for merger on or shortly after October 20, 2021.

STB Seeks Comments on FMLM Service Issues

The Surface Transportation Board issued a request for comment on September 8 regarding first-mile/last-mile service issues. Shippers and other stakeholders, including the Rail Customer Coalition, the American Chemistry Council, the Association of American Railroads, the Freight Rail Customer Alliance, and the National Industrial Transportation League have raised concerns with STB in the past year about FMLM service. Among other issues, these stakeholders have contacted STB about local service failures, gaps in service data, and a lack of transparency, prompting the agency to seek comments on FMLM service issues, the design of potential metrics to measure such service, and the associated burdens or trade-offs with any recommendations provided by stakeholders.

Specifically, STB encourages shippers to provide information pertaining to the frequency of FMLM service issues and the reasons they occur, as well as the operational, facility/production, workforce, and financial impacts of these issues. STB also asks stakeholders to detail changes due to precision scheduled railroading and available remedies. Additionally, STB is soliciting comments on issues related to missed or inconsistent switches, modified service plans at local yards, car delivery, extended dwell times at railroad facilities local to shipper/receiver locations, and discrepancies in information between the railroad and the rail customer as to the location of cars between the local yard and the shipper’s facility. Finally, STB requests feedback on the design of metrics collected by STB or carriers to measure FMLM service, FMLM data currently tracked by Class I carriers, and any associated burdens or trade-offs.

STB initially set a deadline of October 18 for comments and November 16 for replies. However, the American Chemistry Council, the Fertilizer Institute, AAR, and the American Short Line and Regional Railroad Association requested additional time to prepare substantive responses to STB’s questions. STB granted the motions to extend the comment deadlines. Comments are now due December 17, 2021, and replies are due February 17, 2022.

USDOT Requests Information to Aid Supply Chain Review

On September 16, the U.S. Department of Transportation issued a request for information seeking comments on the development of the supply chain review ordered by President Biden’s February Executive Order addressing supply chain efficiency. The EO directs several federal agencies, including USDOT, to conduct a review of U.S. supply chains within one year. As part of this review, USDOT must prepare a report addressing the role of transportation systems in supporting existing supply chains and risks associated with those transportation systems, as well as the risks posed by climate change.

To guide the development of USDOT’s report on transportation industrial base supply chains, the agency is seeking comments and solutions to improve supply chain resilience from stakeholders. Specifically, USDOT requests information on major infrastructure or operational bottlenecks and chokepoints across the freight and logistics supply chain; chassis and shipping container availability; warehouse capacity and availability; risks to resilience within the freight and logistics sector; the impact of climate change; technology issues; workforce considerations; current barriers inhibiting supply chain performance; and the expected future availability of critical assets to the sector.

USDOT also solicits policy recommendations or suggested executive, legislative, or regulatory changes to enhance freight supply chain efficiency and resiliency. Moreover, USDOT invites stakeholders to recommend actions by non-federal entities, including state and local governments and the private sector, that USDOT and other federal agencies should encourage.

Comments are due October 18, 2021.