Norfolk Southern, the railroad company with the most famous derailment of this century near a small Ohio town, has agreed to an $85 billion buyout. What’s more, an unconventional personnel move by President Donald Trump could keep regulators from derailing the merger.
Buyer Union Pacific and Norfolk Southern announced the cash and stock deal in late July. It would connect over 50,000 “route miles” of track in 43 states, with links to about 100 U.S. ports. The result of this transaction, which could be finalized as early as 2027 with regulatory approval, would be the Union Pacific Transcontinental Railroad.
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Union Pacific is calling this merger the nation’s first truly transcontinental railroad, although for practical purposes, the first complete rail connection was completed 156 years ago. In fact, the presidents of the Central Pacific and, yes, Union Pacific railroads met in 1869 to drive the final ceremonial rail stake into the ground, connecting the east and west coasts.
That ceremonial joining finalized a continental connection that the U.S. government had long sought. It made cross-country rail travel possible, increased westward migration, and ultimately made America into a more cohesive and prosperous nation.
Now, Union Pacific is arguing for similar far-flung benefits of the new merger. It would “transform the U.S. supply chain, unleash the industrial strength of American manufacturing, and create new sources of economic growth and workforce opportunity that preserve union jobs,” the company said in a news release.
Union Pacific and Norfolk Southern’s stock prices averaged $223.57 and $277.70 a share, respectively, on July 29, when the merger was announced. As part of the deal, Union Pacific will pay a premium of $320 per share for the smaller railroad’s stock. That would put the combined company’s valuation at over $250 billion at present prices.
Trump fires rail regulator
One factor that may make that merger easier is Trump’s unusual move to fire Robert Primus from the Surface Transportation Board, rail’s chief regulator, in late August. Primus has expressed skepticism about rail mergers and would likely have been a thorn in the side of this rail merger.
Even if he couldn’t muster the votes to stop the Union Pacific Transcontinental Railroad, Primus could have slowed it down, asked embarrassing questions, and exacted concessions along the way.
Primus was originally appointed by Trump in 2020, technically, at the behest of Senate Democrats. Like several quasi-independent regulatory agencies in the executive branch, the STB consists of five partisan board members with staggered five-year terms who oversee a staff.
By precedent, though not by statute, when a Republican is in the White House, he gets three of those five chairs, eventually, as members cycle out. The other two seats are proposed and supported by the party out of the Oval Office: since late January, the Democrats.
Former President Joe Biden did not respect that arrangement. On his Inauguration Day, he terminated National Labor Relations Board general counsel Peter Robb, a Republican appointee. General counsel may sound like a lawyer, but it is actually the head of that regulatory agency.
President Donald Trump followed suit in his second, nonconsecutive term. He sacked not just Biden’s NLRB general counsel, Jennifer Abruzzo, but also Democratic board member Gwynne Wilcox, whose term was set to run into 2028. Wilcox challenged the dismissal. The case is currently winding its way through the courts.
Now, Trump has done the same thing with Primus at the STB. The president has given no cause for dismissal, but rather asserted he has the authority under the Constitution to fire any STB member. Primus simply “did not align” with Trump’s “America First agenda,” White House spokesman Kush Desai explained.
The courts now must decide whether current antidismissal statutes trump — no pun intended — the president’s constitutionally vested powers to broadly control the executive branch. In the meantime, Trump has sidelined an effective STB voice.
To see why this matters, consider a recent letter to the STB by Sens. Tammy Baldwin (D-WI) and Roger Marshall (R-KS), the day after the merger was announced.
Baldwin and Marshall expressed concern that a “merger of this magnitude would diminish options for industry to transport goods, increase costs, create more unreliable service for U.S. shippers, and reduce overall competition” in their July 30 warning.
“Should these railroads move forward with a merger and submit an application to the Surface Transportation Board for approval, we would urge you to consider these harms to rail shippers and consumers across the United States,” the two senators added.
By taking Primus out of commission, at least temporarily, Trump has ensured that there will be one fewer voice on the STB to amplify those concerns.
What about East Palestine?
At some point in the STB’s deliberations over the merger, the East Palestine, Ohio, derailment is bound to come up. In that case, a wheel bearing failed, overheated, and caught fire, and thus, a 38-car Norfolk Southern freight train derailed near the municipality of about 5,000 people on Feb. 3, 2023.
A few of the cars contained chemicals that were agitated by the wreck. At the railroad’s insistence, local authorities vented those chemical cars and did a controlled burn that was probably not strictly necessary. A black plume of hydrogen chloride and phosgene was released into the air. All nearby residents were forcefully evacuated for their own safety.
Though there were no fatalities or reported injuries from the derailment, that toxic plume was hard to miss. TV networks ran with it. Politicians, including Trump himself, between his two nonconsecutive stints in the White House, began visiting the town after the disaster. They brought supplies to the townsfolk and promised support and change.
Though reform legislation, including the Railway Safety Act, co-sponsored by then-Ohio Sen. JD Vance, ultimately stalled in Congress, that didn’t mean nothing happened for folks in East Palestine.
The Environmental Protection Agency oversaw a massive cleanup effort, for one. The railroad also greatly increased the number of external trackside sensors that it uses to monitor its trains. The hope is that early detection of problems can lead to fewer derailments in the future, for East Palestine and the rest of the country.
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The residents of East Palestine also received a whopping settlement of $600 million from a class-action lawsuit for their troubles. Payout tiers were based on proximity to the derailment. Those persons closest to the crash and burn, for instance, could receive north of $70,000 per person.
All told, Norfolk Southern shelled out well north of $1 billion in settlements, fines, and other fees to clean up in and around East Palestine. The railroad’s willingness to pay the bill, including slimming down its own office payroll to free up more funds, appears to have limited the reputational damage enough for serious merger talks to proceed on down the tracks.
Jeremy Lott is the author of several books, most recently The Three Feral Pigs and the Vegan Wolf.