June 21, 2022

Cynthia T. Brown

Chief, Section of Administration

Surface Transportation Board

Office of Proceedings

395 E Street, SW

Washington, DC 20423

Re: STB Docket No. FD 36500, Canadian Pacific Railway Limited, et al.— 

Control—Kansas City Southern, et al. 

Dear Ms. Brown:

Enclosed for e-filing in the above-referenced proceeding are the Comments of 

Commissioners Carl W. Bentzel, Louis E. Sola and Max M. Vekich

(“Commissioners”) of the Federal Maritime Commission reflecting their individual 

views as Commissioners on the above-referenced proceeding, and do not constitute 

an official position of the Federal Maritime Commission.

________________________________

Carl W. Bentzel

Louis E. Sola

Max M. Vekich

Commissioners

Federal Maritime Commission

800 North Capital St, NW

Washington, DC 20573

CC: All Parties of Record
BEFORE THE 

SURFACE TRANSPORTATION BOARD 

___________________________ 

 

FINANCE DOCKET NO. 36500 

___________________________ 

 

CANADIAN PACIFIC RAILWAY LIMITED, ET AL. 

—CONTROL— 

KANSAS CITY SOUTHERN, ET AL. 

___________________________ 

COMMENTS OF FEDERAL MARITIME COMMISSIONERS 

CARL W. BENTZEL, LOUIS E. SOLA, AND MAX M. VEKICH 

1. Introduction and Summary 

Pursuant to Decision No. 11 in this proceeding, Commissioners Carl W. Bentzel,

Louis E. Sola, and Max M. Vekich in their capacity as individual Commissioners, 

respectfully submit the following comment to the Surface Transportation Board 

(“Board” or “STB”) on the proposed consolidation of the railroad systems of 

Canadian Pacific Railway Limited (“CP”) and Kansas City Southern (“KCS”).

Commissioners Bentzel, Sola and Vekich respectfully urge the Surface 

Transportation Board to disapprove of the consolidation of the railroad systems of 

the CP and the KCS under the provisions of 49 U.S.C. § 11324 (d)(2). In our view,

the proposed consolidation does not ensure that “the anticompetitive effects of the 

transaction outweigh the public interest in meeting significant needs.” 

Specifically, the proposed merger will adversely impact U.S. ports and the primarily 

U.S.-based intermodal railway systems that serve our ports, and would 

disproportionately benefit Canadian ports and the primarily Canadian-based 

intermodal railway systems that service Canadian ports for transportation of U.S.-

bound cargo. Canadian policies supporting Canadian port use per capita is 

financially much more significant than similar policies in the United States, 

contributing to erosion of U.S. port and railroad market share for U.S.-bound cargo.
Further, we contend that while there might be economic benefits to certain shipper 

organizations and locations in the United States, that overall, there will be greater 

negative impacts relating to employment and long-term investment affecting 

intermodal shipments through U.S. ports. 

Finally, the macro-economic loss of intermodal market share of U.S.-bound 

containerized cargo shipments from U.S. ports would adversely harm U.S. 

longshore and rail labor, port trucking companies, U.S.-based intermodal railways 

servicing U.S. ports, warehousing and distribution centers servicing U.S. ports, and 

other entities that handle cargo bound through U.S. ports. Such economic losses 

will be far greater than any economic gain that might ensue as a result of a 

consolidation of the railroad systems of CP and KCS.

 

2. The Board has Broad Jurisdiction to Address the Effects of Mergers that Involve 

Cross-Border Transportation and Consider the Far-Reaching Impacts of the 

Proposed Transaction on Intermodal Rail Shipments through U.S. Ports as part of 

the Public Interest Determination. 

 

Commissioners Bentzel, Sola and Vekich urge that the STB consider the potential 

impacts of the proposed transaction on utilization of U.S. ports versus Canadian 

ports as heightened factors in the public interest determination. Such consideration 

is warranted because of the importance of facilitation of our Nation’s trade through 

U.S. ports. 

The Commissioners acknowledge that the proposed transaction could benefit 

certain U.S. shippers and ports, but that these benefits will be outweighed by the 

greater negative economic impact that would be visited upon U.S. longshoremen 

and other U.S. port and railroad workers, trucking and warehousing interests, and 

the primarily U.S.-based intermodal railroad systems servicing our ports. Further, 

the Commissioners contend that the primary purpose of the transaction is to 

provide greater access for Canadian railroads to provide transportation to U.S.-

destined intermodal cargo through Canadian ports where they are dominant 

carriers, as opposed to U.S. ports where U.S. railroads are dominant carriers.

a. Preferential Canadian Policies to Promote Canadian Port and Rail Usage for 

U.S.-Destined Cargo. 

 

U.S. and Canadian policies supporting intermodal shipments through respective 

domestic ports vary substantially. Geography and population have played a large 

role in the Canadian government supporting Canadian port development to a 

greater extent than in the United States. The lesser population density has allowed 

Canadian authorities to target financial support on fewer ports. Canada has two 

port complexes on the West Coast in Vancouver and Price Rupert Sound, and two 

on the East Coast, Halifax and Montreal that each handle over 250,00 TEU’s 
annually. By way of comparison, the United States has 15 port complexes scattered 

throughout the West Coast, Gulf Coast, and East Coast that handle over 250,00 

TEU’s. Because of population density, most U.S ports are confined to U.S.-destined 

cargo, whereas Canadian ports much more heavily rely on transshipment of U.S.-

destined cargo through Canadian ports.

Canada’s constitution, the British North America Act of 1867, vested jurisdiction 

over Canadian ports to the federal government, and while modifications to the 

Canada Marine Act made at the turn of the century provided greater local control, 

Canadian ports under the Act are still classified as “agents of Her Majesty in the 

right of Canada.” The opposite is true in the United States where control over U.S. 

ports is diffused between state and municipal governments and the private sector. 

In the United States, in Gibbons v. Ogden, 22 U.S. 1 (1824), the Supreme Court 

held that the Commerce clause, Article I, section 8, clause 3 of the United States 

Constitution, grants the federal government the right to regulate navigation, an 

authority today delegated to the U.S. Coast Guard., However, this grant of 

authority has been restricted largely to navigational safety. The regulation of ports 

is explicitly dealt with under the provisions of the United States Constitution, 

Article I, Section 9, Clause 6, which provides in pertinent part that “No Preference 

shall be given by any Regulation of Commerce or Revenue to the Ports of one State 

over those of another.” This has been construed to confer either state or local control 

of U.S. ports to local authorities and constrained the level of federal support for U.S. 

port modernization and expansion.

The undersigned Commissioners contend that this fundamental difference between 

U.S. and Canadian policy works to the detriment of U.S. ports and in favor of 

Canadian ports attracting the transshipment U.S.-bound cargo. While Canada 

should not be constrained to adopt policies supporting utilization of their own ports, 

we must do all that we can to address the market inequity between Canada’s 

support of its ports and U.S efforts in the competition for U.S.-bound cargo.

In 2005, the Canadian federal government initiated the Asia Pacific Gateway and 

Corridors Initiative (APGCI) to provide infrastructure to benefit Western Canadian 

ports to increase Canada’s share of Asia-Pacific commerce. This in turn benefited 

the two Canadian railroads primarily providing service at these two ports. From 

2006-2018, the Government of Canada funding for the APGCI was C$17 billion. The 

bulk of this funding went to the Ports of Vancouver and Prince Rupert Sound for 

enhancements to terminal and affiliated rail and road intermodal systems. 

In 2017, the Canadian federal government established the National Transportation 

Corridors Fund to establish a merit-based program for facilitation of a similar 

program, and extended it throughout Canada for 11 years. Additional funding for 

artic programs and supplemental funds increased the total levels to C$4.2 billion.
The government further announced its intention to invest C$10.1 billion in trade 

and transportation projects, i.e., port and railroad intermodal projects, that are 

designed to further penetrate U.S.-bound shipment market share.

Canada’s initial targeted focus was on the development of the Port of Vancouver 

and the newly established Pacific Coast gateway Port in Prince Ruppert Sound by

drawing on dedicated federal resources. The success in Canada in capturing Pacific 

coast trade of U.S.-bound cargo is now being pursued in the Atlantic Coast trade. 

Major expansion plans are underway in both Canadian east coast ports, Montreal 

and Halifax, and the Canadian government has major investment plans for the port 

of St. John in New Brunswick. These expansion projects are aimed at taking U.S.-

destined cargo away from U.S. East Coast ports by enhancing intermodal services 

from Canadian ports to the inland railroad terminals in the U.S. 

As mentioned previously, Canada’s ability to focus federal resources for major port 

entry points is not only more favorable because of policies authorizing federal 

control, but also the result of smaller population and geography. For instance, 

Canada has only four ports that carry over 250,000 TEU’s on an annual basis, 

whereas, in the United States we have fifteen ports handling over 250,000 TEU’s 

annually. The result of Canadian levels of federal support and lesser density 

population/geography is that Canadian policies provide a decidedly proportionate 

advantage in favor of utilization of Canadian ports and utilization of Canadian 

railroads.

b. U.S. Federal Port Policy 

 

U.S. assistance to ports and intermodal goods movement facilities have, until just 

recently, been funded through generic highway trust funds and general allocations 

provided through surface transportation authorization such as TEA-21, SAFETEALU, MAP-21, and FAST ACT. These programs are largely formula based programs 

allocated directly to the states for allocation at the local level and are supplemented 

by discretionary grant award programs such as the TIGER-BUILD-RAISE, 

FASTLANE and INFRA grant programs. While U.S. ports are eligible for funding 

under many of these programs, ports compete for funding and awards are more 

limited and insufficient to finance substantial infrastructure upgrades necessary to 

make U.S. ports more competitive.

The United States enacted the Port Infrastructure Development Program (PIDP) in 

2010 to help U.S. ports with infrastructure projects. Unfortunately, this program 

remained unfunded from 2010 until 2018. The FY 2019 and FY 2020 budgets added 

$518 million for infrastructure development at all U.S. ports. The implementation 

of port specific infrastructure funding is a positive step towards parity with 

Canadian ports, but still needs to be viewed in the context of the larger volume of 

U.S. ports that share in PIDP funds.
c. Comparison of Federal Support and Canadian and U.S. West Coast Ports and 

Impacts 

 

Canadian federal port policies of support are still in the nascent phase on the East 

Coast, the West Coast provides a clearer picture of how Canadian port policies have

impacted competition between U.S. and Canadian ports. The most striking example 

of this is the Port of Prince Rupert. The Port of Prince Rupert has existed since 

1914, but primarily to service bulk commodities, and until 1975, was not considered 

a National Harbor. In 2005, it was announced that the Fairview Terminal would be 

transformed into an intermodal terminal, and by 2007, the terminal was completed 

with strong federal support for infrastructure. 

While it was initially only served by the Chinese government-controlled carriers, 

COSCO, and then China Shipping Company, the terminal has rapidly taken market 

share away from U.S.-based railroads for service to U.S.-destined markets,

including Chicago, Kansas City and Minneapolis. By 2018, a port that had not 

existed as a container terminal in 2005 exceeded the transport of over 1 million 

TEU’s. Notable in this growth was that in its early phases it was sustained by 

Chinese shipping and was only coordinated after COSCO shipping was denied the 

ability to develop the Long Beach naval shipyard in 2004.

Canadian federal assistance to major intermodal port gateways is greater and more 

focused at capturing U.S. intermodal market share than U.S. efforts have been to 

date. For instance, from 2005-2020, the Ports of Vancouver and Prince Rupert 

Sound received $1.3 billion. Seattle and Tacoma received $457 million and the 

California ports of Los Angeles, Long Beach, Oakland and to a lesser extent San 

Diego and Hueneme received a combined $840 million. Canada has treated West 

Coast ports as a national priority whereas U.S. policy has not explicitly favored or 

fostered development of our port system.1 Such funding levels do not include 

funding for the Gerald Desmond Bridge in California, which accounted for $726.6 

million, a large project impacting regional transportation needs. 

The financial support and focus on U.S. market penetration by Canadian federal 

authorities and transportation businesses has been successful in attracting U.S.-

bound intermodal cargo from U.S. ports where they are carried by U.S railroads to 

Canadian ports where they are carried by Canadian railroads. For example, in

2008, the total volumes of containers shipped from U.S. Northwest Pacific Ports or 

Canadian Pacific ports to the U.S. Midwest were decidedly in favor of U.S. ports by 

an 83 to 17% market share differential. Five years later, in 2013, the differential 

1 Davies Transportation Consulting Inc., in collaboration with, Hatch Consultants Inc., Canadian and U.S. Port 

Infrastructure Funding Policy Study Final Report, prepared for Northwest Seaport Alliance, Port of Long Beach, 

and Port of Oakland, October 27, 2021. https://www.nwseaportalliance.com/newsroom/port-competitiveness-studyreveals-canadian-federal-investments-more-double-us-west-coast
shrunk to 62 to 38% market share, and five years after that in 2018, Canadian ports 

were now carrying more U.S. Midwest from Canadian ports by a 60 to 40% market 

share margin. 

By 2021, Canadian port entry and transportation of U.S. Midwest cargo had turned 

decidedly in favor of Canadian ports and railroads, as they now carry 69 to 31% of 

this cargo. While not as severe, California ports have also suffered market share 

loss of U.S.-bound intermodal cargo to Canadian ports.

4. Conclusion 

 

In concluding, we would offer the following observations as you consider the merits 

of the proposed transaction:

1. The Canadian Constitution and policy have resulted in the development of 

national policy allowing the Canadian government to focus resources on 

intermodal trade at gateway ports. In contrast, the U.S. Constitution and 

policy has been more hands-off and allowed U.S. ports to be developed 

through their respective state or local governments.

2. Since 2005, the Canadian government has worked closely with and helped 

finance two Pacific gateway ports, and more recently with two Atlantic 

coast gateway ports to attract U.S.-bound cargo to benefit the Canadian 

ports and the Canadian railroads.

3. U.S. ports receive less proportionate support than their Canadian 

counterparts, and the evidence suggests that the greater levels of 

Canadian support seem to be paying off with greater market share of 

U.S.-bound cargo.

4. That the Canadian Pacific - Kansas City Southern proposed merger 

expansion is explicitly aimed at continuing to build on policies to use 

Canadian ports and Canadian railroads to carry U.S.-destined cargo.

5. Finally, while the proposed transaction will undoubtedly provide some 

benefits to different areas and segments of the U.S. shipping community, 

this benefit is outweighed by the potential economic loss to the U.S.-based 

intermodal industry. An industry which includes U.S. longshore and rail 

labor, port trucking companies, U.S.-based intermodal railways, and 

warehousing and distribution centers servicing U.S. ports, as well as 

other entities that handle cargo transiting through U.S. ports. 
The undersigned Commissioners’ wish to express their sincere appreciation of the

work of the Surface Transportation Board and consideration of these comments.

Respectfully submitted,

_________________________

Carl W. Bentzel

Louis E. Sola 

Max M. Vekich 

Commissioners 

Federal Maritime Commission

800 North Capital St, NW 

Washington, DC 20573