Rail company Canadian Pacific said it made an offer to U.S. rival Norfolk Southern Corp. to join forces to create a new transcontinental transit entity.

Canadian Pacific said it was "proposing a business combination that would create a transcontinental railroad with the scale and reach to deliver improved levels of service to customers and communities while enhancing competition and creating significant shareholder value."

Merging the two rail companies would create a network stretching to the southern U.S. border and across most of Canada.

The industry, following its peers in the oil and gas pipeline sector, has faced challenges because of a decrease in coal shipments and changing needs for oil and gas transit.

Last week, industry research group Genscape said leasing rates for rail car model CPC-1232, designated for crude oil transport, dropped from $2,000 per month in early 2014 to $475 month because of lower crude oil prices and a general weakening in the energy sector.

For Canada, research from the U.S. Energy Information Administration found rail could fill part of the vacuum left by the refusal of TransCanada's permit for the Keystone XL cross-border pipeline, designed to carry more than 800,000 barrels of oil per day.

Canadian Pacific said it's the shipper of record for crude oil taken from Alberta. For Bakken crude oil in North Dakota, the company said it's the only rail carrier with a network reaching markets in the northeast United States.

Canadian Pacific offered no financial terms for its offer other than to say it "includes a sizable premium in cash and stock offered to Norfolk Southern shareholders." Norfolk Southern confirmed it received "an unsolicited, low-premium, non-binding, highly conditional indication of interest" from its rival.