Congress defends Norfolk Southern: Update
Lawmakers from at least seven states have written the regulatory body in charge of reviewing the merger to express concern about the deal.
The latest example: Members of the West Virginia delegation, led by senator Joe Manchin (D), told the Surface Transportation Board (STB) in a 27 January letter that the merger could lead to job losses and hurt the state's coal industry.
NS operates in 22 states in total, and the money it invests in communities gives it a natural constituency in Congress. The railroad also has cultivated relationships through political donations and an active lobbying network of former congressional aides.
NS spent at least \\$2.4mn to lobby Congress and the administration in 2015, according to federal records.
Records do not show any lobbying money spent by Alberta-based CP.
NS' political action committee (PAC) has also donated thousands of dollars to lawmakers' re-election campaigns. Since 2014, NS' PAC has contributed \\$97,000 to 16 Democrats and Republicans who have written STB to caution against the merger, according to data from opensecrets.org, which tracks campaign giving.
"It is a standard Washington technique that the corporate lobbyists make contributions," industry consultant Larry Kaufman said. "The door will be open when they feel the need to communicate with the member."
The STB, an independent regulatory body, has authority over mergers.
But members of Congress can write letters or hold hearings to raise concern in an effort to influence the board's decisions.
"Congress can have a great deal of influence over regulatory agencies, and Norfolk Southern Corp. is playing that card quite well," said Craig Holman, a lobbyist for Public Citizen, a public interest group based in Washington.
"Congressional letters to regulators can be very persuasive – and sometimes intimidating," particularly if the lawmakers are members of committees that oversee the agencies, Holman said.
STB chairman Daniel Elliott has said he will not prejudge the outcome or the board's review. He has said that under more stringent merger guidelines adopted in 2001, major railroad mergers must improve service.
NS' board has rejected three merger offers from CP.
West Virginia lawmakers in their letter said CP chief executive Hunter Harrison was overly focused on short-term profits and may sacrifice jobs or service as a consequence.
"The state of West Virginia has invested millions in public-private partnerships with Norfolk Southern because we believe in building things and investing in our people," the letter said. "West Virginia cannot afford a corporate partner more focused on short-term gains for stockholders than the hard-working men and women who show up to work every day."
Harrison has promised that the merger would increase efficiency by creating a new transcontinental railroad, as well as bolster competition and reduce Chicago congestion.
Railroad companies have been hurt by the decline in the coal market, which has lowered volumes from a critical customer. Norfolk Southern this week announced it would cut 1,200 jobs this year and stop operating on some rail lines.
West Virginia lawmakers are strong supporters of the state's large but struggling coal industry that relies on NS to deliver its products.
Manchin and senator Shelley Moore Capito (R-West Virginia) are also among the group of lawmakers who have received campaign donations from NS' PAC. Manchin got \\$6,000 for the 2014 cycle. Capito has collected \\$2,500 so far in 2016.
Manchin called for the Senate Commerce Committee to hold a hearing on the proposal. The committee has not yet granted that request.
NS declined to comment. CP did not respond to a request for comment.
Lawmakers from other states question merger
Lawmakers from Illinois, Virginia, South Carolina, Indiana, and Georgia have also all written STB to express concerns about the merger. Unions, coal interests and manufacturing groups also oppose CP's takeover plans.
The worries include the effect on jobs, coal deliveries, and congestion in Chicago, one of the nation's most active freight hubs.
The US House of Representatives' Judiciary Committee chairman Bob Goodlatte (R-Virginia), and Tom Marino (R-Pennsylvania), the chairman of the panel's regulatory reform and antitrust subcommittee, wrote STB in late December to express their concerns about the merger.
Goodlatte's campaign committee has received \\$15,000 from NS since 2014. Marino's received \\$5,000 in 2014.
Concerns are raised about voting trust structure
Representative Tammy Duckworth (D-Illinois), meanwhile, on 20 January urged STB to do a formal review of the use of voting trusts in major rail mergers. She expressed concern about "unlawful control" of the newly formed railroad before the merger is approved. Duckworth received \\$2,500 from NS in 2014.
STB did not respond to a request for comment on whether it plans to do such a review.
Harrison has proposed a voting trust structure for the NS bid, in which shareholders' legal titles to stock and voting rights are transferred to a trustee for a pre-determined duration.
Duckworth asked the agency to provide the subcommittee on transportation and public assets, where she is ranking member, with a briefing on the voting trust issue.
"Any threat to the STB's authority and independence deserves careful scrutiny," Duckworth said.
On 21 January Harrison said that lawmakers were making assumptions about the merger that are incorrect.
He said the political pressure is forcing CP to change its strategy, but he was not specific about what the railroad's response would be.
So far, CP has said it is content with letting the process work through the STB.
But he added that, "we are moving away from that model. And now there is more political pressure, if you will. And I would only say there is more to come on that."
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