How the presidential candidates handled the UP-SP merger

Brief by Central Staff

Politics & Transportation – November 1996 – Colorado Central Magazine

The UP-SP merger, and probable abandonment of the Royal Gorge-Tennessee Pass tracks, appears to be the federal decision in the recent past which will have the biggest effect on Central Colorado. By driving up transportation costs, the merger may crush any hope of economic diversity in our region.

It wasn’t a partisan issue. Colorado Gov. Roy Romer, a Democrat, supported it, as did Wyoming Gov. Jim Geringer, a Republican.

Opposing the merger were Texas Gov. George W. Bush, a Republican, and Missouri Gov. Mel Carnahan, a Democrat.

So neither major party had a position on the merger. What about their nominees for president?

Bill Clinton, to our knowledge, has never spoken of the merger. Bob Dole professed neutrality, but Dole wasn’t neutral. Without words, we have to look at actions.

The federal role in the UP-SP merger was up in the air at the end of 1995. At issue was an exercise in government downsizing — the elimination of the Interstate Commerce Commission, which had regulated railroad mergers since 1887.

Three options stood before Congress:

1) Just let the ICC die, along with its authority to regulate rail mergers. Jurisdiction would then pass to state laws and state courts.

2) Transfer rail merger oversight from the ICC to the Anti-Trust Division of the U.S. Department of Justice. This would make rail mergers, like other big-business mergers, subject to suits from the Justice Department.

3) Put rail mergers under the purview of a new body, the Surface Transportation Board, which had been set up to wind down pending ICC business.

Option 1, leaving oversight to the states, was never a contender. Big interstate companies like railroads prefer operating under one set of rules, made in Washington, rather than dozens of rules, made in various state capitals. Despite GOP talk about “devolving” power and responsibility to the states, that doesn’t happen if it might inconvenience big business.

Option 2, Anti-Trust oversight, was supported by the Clinton Administration. But it was opposed by those who wanted the merger because they feared Anti-Trust would oppose it. Drew Lewis, CEO of the Union Pacific, called the Justice Department, “anti-merger” and “pro-Clinton.”

That left Option 3, handing the merger to the Surface Transportation Board.

As the Wall Street Journal saw it, a vote in favor of Justice oversight would be a vote against the UP-SP merger, and a vote in favor of STB oversight would be a vote favorable to the merger. The UP and SP saw it that way too — they lobbied hard for STB oversight.

Now look at the campaign money behind the merger. Lewis, the UP’s CEO, once served as Secretary of Transportation under Ronald Reagan, and enjoys excellent Republican connections. Union Pacific employees contributed $45,452 to the Dole campaign (and $1,000 to Clinton’s) between Jan. 1, 1995, and March 31, 1996.

The UP’s PAC gave $410,393, 87% of it to Republicans, to congressional candidates during that same period — the heaviest flow came when the STB was under consideration.

Phil Anschutz, principal owner of the Southern Pacific, had contributed $163,380 to various Dole campaigns from 1979 to 1994, and also gave $100,000 to Dole’s Better America Foundation. And the Republican Party had received $546,000 in “soft money” from Union Pacific and the Anschutz Corp.

So, we’ve got Lewis and Anschutz, both handing out money to Republicans in general and Dole in particular. UP has 63 lobbyists at work and Anschutz has another 15. What did they want from the Republican Congress last year?

At the time, Robert Dole was a senator from Kansas, and the Senate majority leader, in charge of scheduling debates and votes on legislation.

And so, in November of 1995, Dole could have called for hearings on STB oversight — but he didn’t. Dole might have supported stronger anti-monopoly safeguards, as proposed by Sen. Kit Bond of Missouri, a fellow farm-state Republican — but he didn’t. Dole might have extended floor debate — but the entire discussion took just five hours.

In short, it appears that Dole did everything he could to get merger oversight transferred to the Surface Transportation Board, as desired by Lewis and Anschutz, two big campaign contributors.

And so it happened in late 1995. In 1996, Kansas farmers and other rail shippers examined the merger proposal, saw they could get a monopoly that might raise costs and reduce service, and turned to Dole for help before he resigned his office.

The Wichita Eagle reported that “Elected officials in Kansas from big Wichita to little Hoisington were … crying to Dole for help during the final months before he gave up his powerful position as majority leader.”

Dole responded with a speech to the senate on March 29, acknowledging that “I have been contacted by various groups and organizations regarding this merger. I realize that there are concerns regarding the effects of the merger …&http://quot;

However, “I also want to acknowledge that there are a number of individuals involved in the merger who are active supporters of my presidential campaign. In order to avoid any appearance of conflict of interest, this senator wants to make clear his intention not to become involved in any discussion related to the proposed merger.”

Dole professed neutrality — but four months earlier, he had helped put merger oversight under the STB, where Lewis and Anschutz wanted it, so the merger could proceed.

In other words, when there came a conflict between his constituents and his campaign contributors, Dole chose to serve his contributors.

Bill Stockwell, a transportation planner for the City of Wichita, recalled his response to Dole’s statement of neutrality. “Some of us said: `What? Conflict of interest? Between those guys and your constituents?’ We were flabbergasted.”

Another Kansas merger opponent was Bob Glynn, executive vice-president of the Hoisington Chamber of Commerce. He described himself as a Republican who’d vote for a garden rake before he’d vote for a Democrat, but after the merger, he said he’d never vote for Dole again. “You can’t trust him, not after what he let them do to us.”

Still, it’s curious that The Mountain Mail, which opposed the rail merger, announced it was supporting Dole for President since he had “integrity.”

The Clinton administration did oppose the merger, which put it on the same side as The Mail — so much for basing an endorsement on “the issues,” and Dole’s “integrity” didn’t seem to mean much when Kansans expected him to represent their concerns in the railroad merger.

Not that the Democratic party has done much better in distinguishing between the public interest and the campaign donors’ desires.

The real lesson seems to be that if you want a voice in American politics, especially at the national level, Bob Dylan said it best: “Money don’t talk, it screams.”

(The full text of the Surface Transportation Board decision on the UP-SP merger is available at the Salida Regional Library. It’s also on the Internet — you can find it at http://www.uprr.com)