Two Democratic leaders of the House Transportation and Infrastructure Committee have urged the Surface Transportation Board (STB), the federal agency that rules on rail mergers, to reject Canadian Pacific Railway's (CP) proposed $27 billion acquisition of U.S. railroad Norfolk Southern Corp., saying the deal would solely benefit CP, its shareholders, and other investors at the expense of shippers and workers.

Reps. Peter DeFazio (D-Ore.), the committee's ranking member, and Mike Capuano (D-Mass.), ranking member of the Railroads, Pipelines, and Hazardous Materials Subcommittee, told the STB in a letter late yesterday that the proposed deal does not meet the criteria for public interest benefits set forth in the STB's 2001 rules, which raised the bar for merger approval. The lawmakers added that they "have significant concerns with CP's proven track record of boosting profits at the expense of its workforce" and that "further consolidation of an already healthy industry is unwarranted."

Calgary-based CP has made three buyout proposals to the Norfolk, Va.-based railroad. NS' board has rejected each proposal, the last time being two days before Christmas. A CP-NS combination would be the first transcontinental rail merger in North American history.

CP said it would place itself in a voting trust and have its current CEO, E. Hunter Harrison, run NS while the STB evaluates the combination, a process that could take up to 22 months. The trust would be overseen by a trustee, who would insulate CP from taking unlawful control of NS during the STB's evaluation period.

In an effort to allay concerns that the combination would reduce shippers' options, CP has proposed that if the combined company failed to provide adequate service or competitive rates, it would allow another carrier to operate from a connecting point on the combined company's tracks and into its terminals. CP also said it would end a practice in the U.S. under which an origin railroad dictates where it interchanges a customer's freight with another carrier, even if other interchange points are more advantageous to the shipper.

In an e-mailed statement, CP spokesman Martin Cej said CP has "proposed a combination that creates a true coast-to-coast railway, enhances competition, improves customer service, and better supports the North American economy. We look forward to discussing our ideas in detail with all key stakeholders in the coming weeks." CP has not publicly responded to NS' board's rejection of its third proposal.