Government to tighten rail merger reviews

WASHINGTON (AP) -- The federal Surface Transportation Board said Monday it will take a harder look at proposed railroad mergers.

The new rules cover railroads with revenues of more than $250 million annually.

The board, an arm of the Transportation Department, said it is going to make it more difficult for mergers to go through because there is no longer an oversupply of rail cars for cargo and because previous combinations have disrupted rail traffic. In 1996, for example, the prolonged service woes that followed Union Pacific's merger with Southern Pacific cost the U.S. economy an estimated $4 billion.

"Future merger applications will be required to bear a heavier burden to show that a major rail combination is consistent with the public interest," the board said in issuing the new rules.

The board said future mergers must enhance competition, which could include making special arrangements with other railroads. And the merged railroad must provide a plan for dealing with service problems that could result.

The STB, which regulates railroads, imposed a 15-month moratorium in March 2000 so it could study the impact of previous mergers and rewrite the rules.

That step blocked the pending merger between Canadian National and Burlington Northern. The railroads have since taken their case to federal court.