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Norfolk Southern/ Flickr

More than two dozen shippers and legislators expressed skepticism about the bid from Canadian Pacific Railway Ltd. to acquire Norfolk Southern Corp. That skepticism was seen in recent letters to the Surface Transportation Board, which signaled that it would take a hard look at the deal if it’s ever presented to the agency.

The letters posted on STB’s website, voicing outright opposition to Canadian Pacific’s $30 billion plan, spanned U.S. senators and representatives, state officials and trade groups. On the state level, criticism from West Virginia, Indiana and South Carolina businesses and politicians predominated.

Canadian Pacific responded last week with a “white paper,” saying its plan was the best way to foster future rail industry growth.

Canadian Pacific has made three acquisition proposals since Nov. 17. Norfolk Southern rejected each version, citing financial and regulatory shortcomings. Canadian Pacific has said it’s considering its next steps, including a proxy fight.

In a letter to Rep. Bob Goodlatte (R-Va.), chairman of the House Judiciary Committee, the agency signaled its intention to do a more rigorous review of corporate merger structures, where one of the two companies involved is put into a voting trust during the proceeding.

“Should CP pursue a voting trust arrangement with NS in connection with a request for merger approval, the board would consider issues related both to unlawful pre-approval control and to the public interest,” said Commissioners Daniel Elliott, Deb Miller and Ann Begeman.

Canadian Pacific has proposed moving CEO Hunter Harrison to Norfolk Southern with the intent of improving profits there as he has at Canadian Pacific and previously at two other railroads. The Canadian carrier’s plan calls for placing itself into the voting trust while a merger is considered.

In its Jan. 12 statement, Canadian Pacific said, “Some have voiced opposition to further industry consolidation, which raises the question: What are we to do? The status quo is not the answer to this question.”

Canadian Pacific maintained that more efficient operations, such as those that Harrison instituted since 2012, are the best way to increase future rail capacity in light of local opposition to building more track.

“The CP proposal will enhance competition, not diminish it, which is good for customers and competitors alike,” its statement said. “The fact is, merger-related disruptions are not inevitable. Without industry consolidation, future disruptions are a certainty.”

STB’s letters to members of Congress also noted that the correspondence contained general guidance and was not meant to judge the merits of a merger proposal.

“We do not believe this acquisition, or hostile takeover if CP chooses to go in that direction, is in the public interest, nor will it benefit rail shippers, workers and the standards set forth in the board’s 2001 rulemaking on mergers and acquisitions,” Transportation and Infrastructure Committee Chairman Rep. Bill Shuster (R-Pa.) and ranking member Rep. Peter DeFazio (D-Ore.) wrote in their letter. “Further consolidation of this already healthy industry is unwarranted.”

“Further consolidation will substantially enhance the already significant leverage of the rail industry, reduce service options for shippers and increase rates,” said the joint filing from the Alliance of Automobile Manufacturers and the Global Automakers group, which together represent all companies selling vehicles in the United States. “There do not appear to be any benefits to this merger that cannot be achieved by lesser means.”

The automakers also disputed the potential benefits of Canadian Pacific’s proposal to fulfill a merger requirement to increase competition by allowing a second railroad to reach shippers now served by just one carrier. The automakers said that approach won’t add to competition because two railroads could “tacitly agree” not to create competition where it doesn’t exist now.

Norfolk Southern offered no comment about the letters sent to the agency.

The letters from state officials and trade groups all say that “Norfolk Southern has been a great partner” and list the number of workers in the state as well as stressing the potential for job cuts like the 30% headcount reduction at Canadian Pacific since Harrison became CEO.

The West Virginia Coal Association said that “coal service disruptions would be inevitable as physical plant and other assets are ‘rationalized’ by CP out of West Virginia and its coalfields.”

South Carolina’s Chamber of Commerce told STB that Canadian Pacific’s unilateral move did not demonstrate the required “compelling benefit to freight customers.”