Canadian National will not oppose the Union Pacific-Norfolk Southern rail merger under a sweeping set of deals that gives both railroads critical route access, according to FreightWaves. The settlement grants Union Pacific rights over CN's Elgin, Joliet & Eastern (EJ&E) route—CN's crown jewel—providing a congestion-free bypass around Chicago to reach Norfolk Southern's Chicago Line to the East Coast. In exchange, CN gains operating rights over UP between Memphis and the Eagle Pass, Texas, gateway to Mexico, sharpening its competitive edge against CPKC's single-line Canada-Mexico service.
Why this matters: The EJ&E is the fastest route around Chicago, offering transit times of 12 hours or less compared to the average Chicago-area time of 35 hours, UP CEO Jim Vena noted in a statement. Vena, who served as CN's chief operating officer from 2013 to 2016, said, "I've seen the benefits first-hand of what the EJ&E route around Chicago can do for a railroad, and we look forward to having access to the quickest way around Chicago."
Operational Impact on Rail Freight
| Aspect | Before Settlement | After Settlement |
|---|---|---|
| Chicago bypass access | CN exclusive | UP gains rights to EJ&E |
| Mexico gateway | CN limited to own network | CN gains operating rights Memphis-Eagle Pass |
| Kansas City presence | CN lacked access | CN to acquire NS interests in KCT and TRRA, use UP's Neff Yard |
The settlement immediately improves fluidity for UP's interchange in Chicago and opens a new north-south corridor for CN to Mexico. Freight forwarders using rail should expect reduced dwell times in Chicago and more competitive single-line options from CN to Mexico.
Trade Lanes Affected
The key lanes impacted are:
- Chicago bypass (EJ&E): UP gains access to CN's route encircling Chicago, cutting transit time by up to 23 hours for trains moving between the West and East Coasts.
- Memphis-Eagle Pass Corridor: CN obtains operating rights over UP's line, creating a direct route from the U.S. Midwest to Mexico's industrial heartland. This strengthens CN's position against CPKC's existing single-line service.
- Midwest connectivity: CN gets new overhead rights between Tuscola, Ill., and East St. Louis, Ill., plus rights to serve customers between St. Louis and Kansas City, Mo., via UP. CN also gains access to shipper facilities where Class I railroad options would be reduced, "where commercially and operationally feasible."
Shipper and Operator Implications
Shippers can expect greater competition on the Canada-Mexico corridor as CN now has a more direct route without relying on host railroads. The enhanced Chicago bypass will improve velocity for UP trains, potentially lowering demurrage and storage costs for importers/exporters moving through the Chicago hub. CN CEO Tracy Robinson said, "We are thrilled to have an agreement with Union Pacific to expand CN's access to Mexico. This is a natural extension of our north-south franchise and will open new routes for customers, provide greater choice and strengthen connections between Canada and Mexico."
However, the Mexico and EJ&E deals are not contingent on the UP-NS merger approval, so they can move forward quickly. Other elements—including CN's acquisition of Norfolk Southern ownership interests in the Kansas City Terminal Railway (KCT) and the Terminal Railroad Association of St. Louis (TRAA), plus the overhead rights—depend on UP and NS closing their merger and are subject to Surface Transportation Board (STB) approval.
Watch List
- STB regulatory review: The Surface Transportation Board must approve the settlement's competitive conditions. Any delays could postpone CN's access to Kansas City and the Midwest overhead rights.
- UP-NS merger timeline: The Norfolk Southern merger's fate directly controls CN's additional access gains (KCT, TRRA, St. Louis-Kansas City rights). If the merger is challenged or withdrawn, those benefits may not materialize.
- CPKC response: CN's improved Mexico access could trigger countermeasures from CPKC, potentially including rate adjustments or service investments on its own Canada-Mexico single-line route.
- Chicago congestion: While UP gains EJ&E access, total traffic volumes on the bypass could increase, but the route's 12-hour transit time advantage should still offer significant relief versus the 35-hour Chicago average.
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