Surface Transportation Board nominees Richard Kloster and Michelle Schultz assured senators on Thursday that they will judge Union Pacific’s proposed acquisition of Norfolk Southern on the merits — and will not allow politics to influence their decisions on the largest merger in railroad history.
Kloster and Schultz spoke during a hearing of the Senate’s Commerce, Science & Transportation committee, which is weighing their nominations to serve on the board. President Donald Trump earlier this year nominated Kloster to a first term and renominated Schultz for a second term on the board; both are Republicans.
Democrats on the committee said they were concerned that the Trump administration’s views on the merger (NYSE: UNP, NSC) might sway the STB.
Trump expressed support for the $85 billion deal after meeting with UP Chief Executive Jim Vena in September. The railroad also is among the corporations that have made donations to support construction of Trump’s privately funded $300 million White House ballroom.
“President Trump has stated that the merger sounds good to him even though it should be clear that a merger of this magnitude would increase costs, create more unreliable service for shippers, and reduce overall competition,” Sen. Tammy Baldwin (D-Wisc.) said. “When this merger comes before the board, do I have your commitment to act independently of political influence and base your decision on the merits and the merits alone, or do you plan to deliver the decision that the president wants?”
Kloster and Schultz both said they would take an independent, impartial look at the merger application once it’s filed and give it a rigorous review. The railroads are aiming to file the application with the board around Dec. 1.
“In every matter that comes before the board, I am guided by several core principles: the evidentiary record, the governing law, and the policy objectives set forth by congress in the rail transportation policy,” Schultz said in her opening remarks. “I am deeply aware of the impact that board decisions have on the parties who appear before us and on the broader public. I take seriously the trust placed in me by Congress and the president, and I approach each case with fairness, impartiality, and a steadfast commitment to applying the law on its merits, always mindful of what best serves the long-term health and vitality of the national rail network.”
Kloster, a consultant who has worked for Class I railroads and short lines as well as for railcar leasing companies, told the panel that he was committed to being objective while researching and analyzing matters that come before the board — including mergers.
“I’m here today to serve my country and the broader industry that has given me so much: the shippers, the railroads, and the supply chain,” he said in his opening statement. “So I hope you will have me and allow me to serve and dedicate myself to advancing the mission of the Surface Transportation Board.”
Sen. Tim Sheehy, a Montana Republican, was among the 18 senators — split evenly between Republicans and Democrats — who signed an Oct. 30 letter to the STB urging a comprehensive review of the merger. During the hearing he reiterated his concern about the merger’s potential to reduce rail competition for shippers of agricultural products and manufactured goods.
Schultz and Kloster both acknowledged the gravity of weighing the first transcontinental merger and said it will receive a thorough and impartial review grounded in the law.
Democratic senators also zeroed in on two things they viewed as evidence of political influence on the STB: The president’s dismissal of member Robert E. Primus and an email Chairman Patrick Fuchs sent to STB staff regarding the shutdown of the federal government.
The White House dismissed Primus — a Democrat and the only member of the board to vote against the 2023 Canadian Pacific-Kansas City Southern merger — without cause. Primus is challenging the dismissal in federal court, arguing that it was illegal.
On the eve of the Oct. 1 government shutdown, Fuchs, a Republican, sent an email to board employees that blamed the funding impasse on Democrats. Fuchs did not write the text of the email, which was identical to those that other federal agencies sent to their employees.
In public appearances, Fuchs has sought to emphasize the agency’s independence and the cordial, bipartisan atmosphere at the STB.
But Baldwin and Sen. Ben Ray Lujan (D-N.M.) questioned whether the board could operate effectively if it is subject to political interference and coercion. “It is unbecoming of an independent board, which is looking more like Donald Trump’s board,” Baldwin said of the email.
Schultz assured the senators that the board remains an independent agency and that politics has no place in any STB decision. She also noted that the shutdown email was sent across government agencies.
Schultz and Kloster were asked whether Primus’ firing was justified. Both declined to comment because the matter is before the courts.
Subscribe to FreightWaves’ Rail e-newsletter and get the latest insights on rail freight right in your inbox.
Find more articles by Stuart Chirls here.
Related coverage:
Rail intermodal down 6.4% in latest week
Why TRAC’s Florida East Coast Rwy. chassis deal matters for intermodal transport
Florida East Coast boosts Grupo Mexico’s earnings
BNSF earnings gain in Q3
The post STB nominees promise fair rail merger evaluation appeared first on FreightWaves.
