Railroad Mergers: How do they work?

Railroads serve as an essential component of American transportation infrastructure, moving freight and people across the nation. The nation’s railways transported over $17.7 billion of freight in May 2026 alone. Yet many people don’t know some of the basic policy or operational aspects of this mode of transport that – whether they know it or not – they depend on. With a pending marriage of two major railroad companies on the horizon, learn how the U.S. handles this business, policy, and infrastructure spectacle when it arises.

The Snapshot

The freight rail industry is divided into different classes, with its largest carriers operating extensive regional networks shaped by decades of competition and consolidation. On July 29, 2025, Union Pacific proposed a merger with Norfolk Southern to form the country’s first transcontinental railroad company, connecting both coasts. On May 28, 2026, the U.S. Surface Transportation Board accepted the companies’ revised application for consideration but paused the proceeding, including the environmental review, pending additional information.

The Board asked for more “supplemental information”, including market share projections and long-term effects on passenger rail. Union Pacific and Norfolk Southern announced on July 27 that they had completed their responses, leaving the Board to review the new material and determine when the formal proceeding will resume. The proposal offers a timely look at a regulatory process whose decisions can have significant impact on industry competition, employment, and the national economy.

The Process

How does a railroad company merger happen under the supervision of the U.S. Surface Transportation Board? The Board, itself the successor to the Interstate Commerce Commission, has regulatory oversight over all mergers between “Class I” railroad companies, those with revenue exceeding $1.095 billion when adjusted for inflation. The process follows federal regulations as ruled by the Transportation Department and the Board in 2001.

The process begins with a “pre-filing notification,” which informs the Board of an intent to submit a formal application for a merger. The Board will then post an official notice in the Federal Register. An example of this can be found in the notice for the pre-filing notification from Canadian Pacific and its intent to merge with Kansas City Southern in 2021. However, Because the Canadian Pacific-Kansas City Southern merger received a special exemption, the Union Pacific-Norfolk Southern proposal is the first major merger application evaluated under the stricter post-2001 rules.

Next, a formal application is submitted to the Board. Under the 2001 rules, applicants bear a heavier burden to demonstrate that a major merger would promote the public interest and enhance competition. The proposed merger must “assure a balance in favor of the public interest” to be accepted. The application must include multiple documents which detail the short and long-term effects of the merger, including in areas of competitive effects, service reliability, employees, safety, environmental impacts, national defense, and other concerns. If the application is not satisfactory, the Board may decline it, and the proposed merger will not continue. Acceptance for consideration begins the full review, but it does not constitute approval of the merger. In January 2026, the Board rejected Union Pacific and Norfolk Southern’s original application as incomplete, necessitating the May 2026 revised application.

Once the Board formalizes a schedule, the railroads, unions, government agencies, and members of the public will have the opportunity to submit evidence and comments for or against the merger. Those positions may also change as applicants negotiate with affected parties. For example, SMART-TD, a major union for rail workers, initially expressed opposition but later supported the merger after negotiating employment protections.

Union Pacific and Norfolk Southern announced on July 27, 2026 that they had completed their supplemental responses, which included expanded commitments concerning competition and oversight.

After supplementary information is submitted, the evidentiary record and environmental review are complete, and the opposition has made their concerns heard, the Board will consolidate all information, weigh the proposed benefits against potential harms, and make a final judgement to approve, reject, or impose additional conditions. The last approved merger was the 2023 Canadian Pacific-Kansas City Southern railroad merger, after a year and a half of applications and comments from interested parties. Because that transaction was reviewed under the earlier regulatory framework, however, it is not a perfect model for the Union Pacific-Norfolk Southern proceeding. For the Union Pacific-Norfolk Southern merger to succeed, the applicants will have to demonstrate that the merger is consistent with the public interest.

Even with an approval of the merger, there is one more step in the merger timeline: the oversight period. The merger will be monitored by the Board for a period to ensure that a safe, environmentally sound, and lawful merger occurs, continuing an oversight period for at least five years. The 2023 merger came with an “unprecedented seven-year oversight period and contains many conditions designed to mitigate environmental impacts, preserve competition, protect railroad workers, and promote efficient passenger rail.” The scale of the proposed merger could influence the Board’s oversight conditions. This new proposed merger, which would create the first transcontinental railroad in the United States, may have an even longer oversight period.

The major railroad merger process has evolved to ensure that consolidation serves more than just the interests of the companies involved. Because these mergers can affect competition, workers, communities, and the environment for decades, the Surface Transportation Board’s review is an important safeguard. The Union Pacific-Norfolk Southern merger is of unprecedented scale. It will provide the first major test of whether the Board’s post-2001 rules can deliver a fair process for everyone involved. If it all goes through, it may also reshape the safety, efficiency, and resilience of the nation’s supply chain.

Written by Francisco Gutierrez, Public Policy Intern