The Canadian National (CN) railroad announced last year that it had reached a deal to acquire the Iowa Northern Railway (IANR). The IANR comprises 275 track miles in North Central and East Central Iowa, and primarily serves agricultural and industrial shippers in the state. The merger, confirmed as a minor transaction by the Surface Transportation Board, would be beneficial to the Iowa economy for a number of reasons.
For starters, an acquisition by CN would engender benefits for Iowa shippers, although most Iowans may not notice any immediate changes. Essentially, the same trains will operate as before — albeit under a different name — with little or no effect on local neighborhoods. The CN is a multinational railroad, spanning from Canada through the Midwest to Mexico, and its size and connections to other railroads and export markets would allow it to operate the IANR’s lines much more cost-efficiently.
CN has done several acquisitions of short lines in the last few years, recently completing an acquisition of BC Rail in November of 2023.
The enhanced service to Iowa shippers will be a boon to the Iowa economy. Because of CN’s reach, the acquisition will provide a smoother, seamless service to the markets that consume Iowa’s agricultural products. For instance, Iowa produces 2 billion gallons of ethanol per year. With only about 7 percent of ethanol consumed in the state, a railroad directly connected to customers across the rest of the country and principal U.S. ports would reduce shipping costs, ultimately saving money for Iowa farmers and ethanol producers.
A single-railroad service is unambiguously faster and more reliable than a service that requires a hand-off between railroads — just as it is faster to fly direct to one’s destination rather than connect via an airport hub. However, the connection time is usually much greater with two railroads.
When railroads transfer a car from one to the other, the first railroad (say, IANR) picks up the car from the shipper and then drops it off at the interchange between railroads (CN in this example). The car may sit a day or more before the next appropriate CN train comes by for a pickup. Valuable time is lost in transit, connections are sometimes missed, and a stationary railcar is subject to risks that a moving one is not. But if the two railroads were a single entity, that railroad could take the car much farther without the need for a transfer. Since an additional drop-off costs time and money, avoiding it via an acquisition results in lower transportation costs.
Improving rail service is good for Iowa’s economy, which is heavily goods-based — grain and other agricultural products in particular — and the best way to ship these products is rail. The Iowa Department of Transportation observed that the transportation network is important to Iowa’s agricultural sector, which depends heavily on buyers outside the state and the country. Improving its connection to the world is essential to Iowa, and this acquisition does just that.
The rail industry transports 29 percent of all freight and 52 percent of bulk freight such as agricultural products. Shipping goods by rail is much better for the environment — trains emit much less smog or greenhouse gases than shipping via trucks — and fewer trucks on the road improve safety for the other drivers.
Removing hand-offs like the one between IANR and the CN is akin to removing a stoplight on the interstate; it is always better to keep traffic moving, and it effectively expands the capacity of the freight rail system in Iowa. Of course, CN hands off freight to all of the major railroads as well so the open access for Iowans to all U.S. railroads that go beyond CN’s territory will not change. Iowans will benefit from smoother rail service through their neighborhoods and additional access to funding for rail crossings and over- and underpass investment to improve motorist and pedestrian safety.
Railroads — and access to reliable transportation of goods more generally — are an integral component to Iowa’s future growth and prosperity, and this acquisition will help improve that reliability.
