Union Pacific Railroad Merger Could Reshape U.S. Freight Network

Why It Matters

A proposed railroad merger and acquisitions deal announced last summer could reshape how goods move across the United States for decades to come. Union Pacific Railroad announced on July 29, 2025 that it had agreed to acquire Norfolk Southern Railway, a transaction that, if approved, would reduce the number of U.S. Class I railroads from six to five and create the first single carrier capable of offering uninterrupted coast-to-coast freight service in American history.

The Congressional Research Service (CRS) published a new report this month laying out what is at stake, who has the power to stop or approve it, and what Congress could do if it wants to act.

The Big Picture

The rail industry consolidation story began half a century ago. A merger wave spanning the 1970s through the 1990s collapsed what had been a fragmented national network into a handful of dominant carriers. That era left a legacy of service disruptions as railroads struggled to integrate overlapping networks, and it prompted the Surface Transportation Board (STB) to adopt stricter merger evaluation standards in a 2001 rulemaking.

The most recent major railroad acquisition before this one was the 2023 merger of Canadian Pacific Railway and Kansas City Southern Railway, which created the Canadian Pacific Kansas City (CPKC) Railroad. The deal was evaluated under the older, less stringent pre-2001 rules because Kansas City Southern had been granted a waiver years earlier on the grounds that it was small enough to pose limited anticompetitive risk. The STB approved the transaction even though the Department of Justice (DOJ) submitted comments outlining "serious concerns" about the deal.

The Union Pacific-Norfolk Southern (UP-NS) merger application is a different consideration, and one subject to the stricter post-2001 STB merger rules. Union Pacific, with $24.2 billion in annual operating revenue and 32,880 route miles, is the largest U.S. Class I railroad by both route and revenue. Norfolk Southern, with $12.1 billion in revenue and 19,154 route miles, is the second-largest Eastern carrier. Together, they would span both coasts, eliminating the transfer delays that currently occur when freight moves between Eastern and Western carriers at a limited number of interchange points near the Mississippi River.

UP and NS refer to this transfer zone as the "Watershed" region. Their application argues that eliminating the need to hand off freight between carriers at these Gateway cities would produce trip times competitive with both rival railroads and trucks, and that diverting freight from trucks to trains satisfies the STB's "public interest" and "enhanced competition" tests.

The STB, a five-member independent federal board, holds exclusive authority to approve or reject major railroad acquisitions. The process typically takes a year or more after an application is accepted. The board must weigh whether a transaction serves the public interest and can attach conditions, require divestitures, or impose ongoing oversight requirements. It can also reopen a case if circumstances change after approval.

The DOJ may submit recommendations, and the STB is directed by statute to give those recommendations "substantial weight," but they are purely advisory. The 2023 CP-KCS decision demonstrated that the board is willing to proceed over DOJ objections.

Support for the deal has come from intermodal shippers, including the Port of Los Angeles/Long Beach, which cited efficiency gains from a consolidated network. Opposition has come from a broad coalition of industrial shippers, including the American Chemistry Council, the American Farm Bureau Federation, the American Iron and Steel Institute, and the National Industrial Transportation League, all of whom have raised concerns about potential price increases and service disruptions.

Labor is divided on the issue. At least one major railroad union endorsed the transaction after reaching a job protection agreement with UP and NS. Other labor organizations have publicly opposed it or withheld judgment. The CRS report notes that some shippers may be reluctant to publicly criticize the deal out of concern that UP or NS could respond with higher freight rates or less reliable service.

Political Stakes

The proposed deal lands at an uncomfortable intersection for the Trump administration. The administration has broadly favored deregulation and reduced barriers to business consolidation, a posture that might suggest a permissive stance toward rail industry consolidation. But the industries most loudly opposing this deal, agriculture, steel, and chemicals, are constituencies with direct political significance to the administration's economic agenda.

A combined UP-NS railroad controlling coast-to-coast freight could raise shipping costs for farmers moving grain and manufacturers moving raw materials, cutting against the administration's stated goals of reducing costs for domestic producers and reshoring supply chains. The efficiency argument cuts the other way: a single-line transcontinental carrier could, in theory, lower costs and reduce supply chain friction.

The administration's DOJ has an advisory role in the STB proceeding but no binding authority. Whether the administration chooses to formally support, oppose, or stay silent on the transaction will send a signal about which set of priorities it is willing to trade off.

For Democrats, the opposition from farm bureaus and industrial manufacturers provides a ready-made argument about the dangers of unchecked consolidation in critical infrastructure. For Republicans representing agricultural and manufacturing districts, the shipper opposition creates a tension with any instinct to let the deal proceed.

The STB's independence means Congress and the White House cannot dictate an outcome, but they can shape the environment around it. Board appointments matter, and DOJ's posture in the proceeding matters.

The Bottom Line

The CRS report lays out three options for Congress. It could enact a moratorium on major rail transportation mergers while the policy implications are studied, similar to the STB's own 2000 moratorium that preceded its 2001 rulemaking. It could pass legislation making it easier for shippers to petition the STB for relief from poor service or market dominance abuses. Or it could do nothing and let the STB process play out.

The concern animating the first option is straightforward: if UP-NS is approved, it could trigger additional consolidation, potentially leaving the United States with only two or three Class I railroads controlling virtually all long-distance freight. The history of prior merger waves, and the service problems that followed them, gives that concern some grounding.

The STB review process will take time, and the outcome is not predetermined. But the decisions made in that proceeding, and whether Congress chooses to act before it concludes, will determine the structure of U.S. freight rail for a generation.

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