Canadian National Railway has reached a merger-linked access settlement with Union Pacific that would expand CN’s position in the U.S. Midwest and secure its neutrality toward Union Pacific’s planned acquisition of Norfolk Southern. The binding memorandum of understanding, announced on July 22, establishes a framework for CN to receive operating, customer and terminal access intended to offset reductions in railroad choice that could result from the combination. The concessions would take effect only if the U.S. Surface Transportation Board approves the merger and the transaction closes.

The agreement represents a significant shift in the competitive positioning surrounding the proposed creation of a coast-to-coast Union Pacific system. CN had raised concerns about the transaction’s implications for freight competition, gateway access and the balance of power among North America’s largest railroads. Under the settlement, CN will not oppose the Union Pacific-Norfolk Southern combination. The two companies also agreed to cooperate through the STB process to help ensure that the negotiated protections are incorporated and become effective.

The central provision would allow CN to serve shipper facilities where the number of available Class I railroads would be reduced from two to one or from three to two after the merger, provided access is commercially and operationally feasible. That commitment is designed to address one of the most consequential issues in railroad consolidation: whether customers that currently have competing carriers could become captive to a single railroad or face a materially narrower range of transportation alternatives.

The language gives CN a potential role as a replacement competitor at affected locations, but it also leaves implementation questions for the regulatory process. The companies did not publish a complete list of eligible facilities, specific service terms or the standards that will determine commercial and operational feasibility. Shippers and regulators are therefore likely to examine whether the access rights would be sufficiently broad, practical and enforceable to preserve competition under real operating conditions.

CN would also acquire Norfolk Southern’s ownership interests in the Kansas City Terminal Railway Company and the Terminal Railroad Association of St. Louis. Both terminal systems are important pieces of shared infrastructure in major freight hubs where multiple railroads exchange traffic, reach industrial customers and connect with regional networks. Transferring Norfolk Southern’s interests to CN would prevent the combined Union Pacific system from inheriting those stakes and potentially increasing its influence over critical terminal operations.

The physical access provisions would extend CN deeper into the central United States. CN would receive overhead rights between Tuscola and East St. Louis, Illinois, as well as rights to serve customers between St. Louis and Kansas City, Missouri. The railroad would also be allowed to use Union Pacific’s Neff Yard in Kansas City, giving CN what the companies described as its first operating footprint in the heart of that market.

Kansas City is strategically important because it serves as a major interchange point for east-west and north-south freight, including traffic connected to Mexico. A direct presence could improve CN’s ability to compete for agricultural products, automotive freight, chemicals, consumer goods and intermodal shipments moving across the continent. It could also reduce CN’s dependence on handoffs to other railroads when serving customers located beyond its existing network.

The merger settlement was announced alongside a separate binding memorandum covering broader network cooperation between CN and Union Pacific. Under that agreement, Union Pacific would receive expanded operating rights over CN’s Elgin, Joliet & Eastern Railway corridor around Chicago. CN, in return, would gain rights over Union Pacific’s network between Memphis, Tennessee, and Eagle Pass, Texas, supporting new Canada-to-Mexico freight movements.

The two agreements are related strategically but have different conditions. The Chicago and Canada-Mexico arrangement is intended to improve connectivity between the existing railroads, while the Midwest customer-access settlement is explicitly contingent on the Norfolk Southern transaction receiving approval and closing. Together, they establish a wider commercial relationship between CN and Union Pacific at a time when the structure of the North American freight industry is under close regulatory and customer scrutiny.

For Union Pacific, securing CN’s non-opposition gives the merger applicant an important argument as it seeks to demonstrate that the transaction can coexist with strong rival access. Union Pacific Chief Executive Jim Vena said the settlement supports the company’s position that the Norfolk Southern combination would preserve and enhance competitive options. The company can now point to a negotiated package that grants a major competitor additional customer rights, strategic terminal holdings and access to new Midwest markets.

The agreement does not, however, amount to regulatory approval or eliminate opposition from other railroads and customers. BNSF Railway, Canadian Pacific Kansas City and CSX have voiced concerns about the proposed combination, while shippers remain divided over whether a single-line transcontinental network would improve service or create excessive market concentration. Supporters emphasize faster routes and fewer interchange delays; critics focus on pricing power, service resilience and the potential loss of independent routing options.

The proposed transaction values Norfolk Southern at an enterprise value of approximately $85 billion and would create a combined enterprise valued at more than $250 billion based on the terms announced in July 2025. Union Pacific and Norfolk Southern have said their networks would connect more than 50,000 route miles across 43 states and approximately 100 ports. They argue that integrating Union Pacific’s western franchise with Norfolk Southern’s eastern network would create the first U.S. single-line transcontinental railroad.

The companies contend that eliminating interchange handoffs would shorten transit times, expand intermodal offerings and allow rail to compete more effectively against long-haul trucking. They have also projected approximately $2.75 billion in annualized synergies. Those financial and operating claims will be weighed against concerns about concentration in an industry already dominated by a small number of Class I carriers. According to Associated Press reporting, the combined railroad would control more than 40% of U.S. rail traffic.

The STB’s review remains at an early and procedurally sensitive stage. The board accepted the companies’ revised major-merger application for consideration on May 28 but placed the proceeding, including its environmental review, in abeyance. It ordered Union Pacific and Norfolk Southern to submit supplemental information by July 27 after finding that several parts of the revised filing remained unclear or underdeveloped. The original application submitted in December 2025 had previously been rejected as incomplete.

The CN settlement could become part of the applicants’ response to questions about customer access and competitive effects. The board is not required to accept private agreements as an adequate remedy, and it may impose additional conditions, modify proposed protections or conclude that the transaction does not meet the statutory standard. Major railroad mergers are reviewed under rules requiring applicants to show that a combination is in the public interest and enhances competition, rather than merely demonstrating that competitive harm can be limited.

Regulators are likely to test how the settlement would function across different categories of customers. Access to a nominally eligible facility may have limited value if CN cannot obtain suitable train paths, terminal capacity, switching arrangements, equipment availability or economically viable rates. Conversely, well-designed rights could create a credible alternative for customers that would otherwise lose a carrier, especially if the terms include durable service obligations and transparent dispute-resolution mechanisms.

The terminal ownership transfers may receive particular attention because Kansas City and St. Louis serve as gateways for several Class I and regional railroads. Shared terminal companies can influence switching, train movements and access to congested metropolitan infrastructure. Moving Norfolk Southern’s stakes to an independent competitor could reduce concerns that the enlarged Union Pacific system would gain disproportionate influence, although regulators will still need to assess governance rights and the resulting ownership structure.

For CN, the agreement offers growth opportunities without the capital commitment and integration burden associated with acquiring another major railroad. CN already operates a nearly 20,000-mile network connecting Canada’s Atlantic and Pacific coasts with the U.S. Midwest and Gulf Coast. New access through Missouri, Illinois and Union Pacific’s southbound corridor could strengthen the railroad’s ability to market cross-border services spanning Canada, the United States and Mexico.

The Memphis-to-Eagle Pass rights could be particularly important as manufacturers and logistics companies adjust supply chains around North American trade. Eagle Pass is a major rail gateway into Mexico, while Memphis is connected to CN’s established north-south franchise. A more direct commercial path between the Canadian network and the Mexican border could allow CN to offer additional routing choices even before considering the merger-contingent access in Kansas City and St. Louis.

Union Pacific would receive its own operating advantage from expanded rights over the EJ&E corridor, a route around Chicago that can help trains avoid portions of the city’s heavily congested terminal network. Chicago is North America’s largest rail interchange hub, and cross-city movements can add complexity and delay to long-distance shipments. Greater use of the bypass could improve network fluidity for Union Pacific while giving CN access to new southern routes and potential revenue streams.

Execution remains dependent on detailed operating arrangements, regulatory treatment and the ultimate closing of the Norfolk Southern acquisition. The merger agreement originally targeted completion by early 2027, but the STB’s request for supplemental information and the scale of the review create timing uncertainty. Environmental analysis, public comments, discovery and hearings could affect both the schedule and the conditions attached to any approval.

The July 22 settlement nevertheless marks a meaningful development in the contest over the future structure of U.S. freight rail. It converts one major rival from a potential opponent into a non-opposing party and gives Union Pacific a concrete response to some customer-choice concerns. At the same time, it provides CN with assets and rights that could make it a stronger competitor in strategically important Midwest and cross-border markets.

The broader question for the STB will be whether those negotiated benefits are sufficient when considered against the scale and permanence of the proposed consolidation. For customers, investors and competing railroads, the value of the CN agreement will ultimately depend less on its announcement than on its final terms, enforceability and operational performance. Until the board completes its review, the settlement should be viewed as a significant regulatory and commercial proposal rather than a definitive resolution of the merger’s competitive issues.