[Federal Register Volume 77, Number 87 (Friday, May 4, 2012)]
[Notices]
[Pages 26604-26605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-10813]
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DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
[Docket No. FD 35617]
Progressive Rail, Incorporated--Lease and Operation Exemption--
Rail Line of Union Pacific Railroad Company
Under 49 CFR 1011.7(a)(2)(x)(A), the Director of the Office of
Proceedings (Director) is delegated the authority to determine whether
to issue notices of exemption under 49 U.S.C. 10502 for lease and
operation transactions under 49 U.S.C. 10902. However, the Board
reserves to itself the consideration and disposition of all matters
involving issues of general transportation importance. 49 CFR
1011.2(a)(6). Accordingly, the Board revokes the delegation to the
Director with respect to issuance of the notice of exemption for lease
and operation of the rail line at issue in this case. The Board
determines that this notice of exemption should be issued, and does so
here.
Progressive Rail, Incorporated (PGR), a Class III rail carrier, has
filed a verified notice of exemption under 49 CFR 1150.41 to lease from
Union Pacific Railroad Company (UP) and operate a 37.3-mile line of
railroad between milepost 49.00 at or near Cameron and milepost 11.70
at or near Norma, in Barron and Chippewa Counties, Wis. (the Line).
According to PGR, PGR and UP have entered into a new Lease Agreement
(Agreement) for PGR to lease the Line from UP.\1\ The term of the lease
is 30 years.
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\1\ PGR previously obtained an exemption in 2004 to lease and
operate the Line. See Progressive Rail, Inc.--Lease & Operation
Exemption--Rail Line of Union Pac. R.R., FD 34597 (STB served Oct.
29, 2004). The new lease for which an exemption is sought in this
proceeding will replace the lease for which the prior exemption was
obtained.
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As required at 49 CFR 1150.43(h), PGR has disclosed that the
Agreement contains an interchange commitment in the form of an
adjustment in the amount of rent payable in each year, depending on the
percentage of total traffic transported over the Line that is
interchanged with UP in that year.\2\ Attached to PGR's notice of
exemption is the verified statement of David Fellon, President of PGR.
PGR states that a relatively high percentage of traffic interchanged
with UP would result in a relatively low amount of rent, and vice
versa. According to PGR, it believes that it can substantially grow its
outbound traffic if it is able to make significant improvements to the
Line. PGR states that the interchange commitment will enable it to make
``major renewals of main tracks, sidetracks, and bridges, and to
construct a number of new sidings and yard tracks to enable staging of
railcars for loading and to achieve efficiencies in railcar
switching,'' to the benefit of the shipping public. PGR also states
that (1) although there is a Canadian National Railway Company (CN)
line at Cameron, the CN line is officially out of service and would
require extensive rehabilitation to be made operable, and (2) there is
a CN line at Chippewa Falls, but the Line does not extend to Chippewa
Falls.
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\2\ Concurrently with its verified notice of exemption, PGR has
filed under seal, pursuant to 49 CFR 1150.43(h)(1)(ii), a
confidential, complete version of the Agreement.
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PGR certifies that its projected annual revenues as a result of
this transaction will not result in PGR becoming a Class I or Class II
rail carrier. PGR further certifies that its projected annual revenues
will not exceed $5 million.
The earliest the transaction can be consummated is May 18, 2012,
the effective date of the exemption (30 days after the exemption was
filed).
If the verified notice contains false or misleading information,
the exemption is void ab initio. Petitions to revoke the exemption
under 49 U.S.C. 10502(d) may be filed at any time. The filing of a
petition to revoke will not automatically stay the effectiveness of the
exemption. Stay petitions must be filed no later than May 11, 2012 (at
least 7 days before the exemption becomes effective).
An original and 10 copies of all pleadings, referring to Docket No.
FD 35617, must be filed with the Surface Transportation Board, 395 E
Street SW., Washington, DC 20423-0001. In addition, one copy of each
pleading must be served on Thomas F. McFarland, Thomas F. McFarland,
P.C., 208 South LaSalle Street, Suite 1890, Chicago, IL 60604-1112.
Board decisions and notices are available on our Web site at
``www.stb.dot.gov.''
It is ordered:
1. The delegation of authority to the Director of the Office of
Proceedings under 49 CFR 1011.7(a)(2)(x)(A) to determine whether to
issue a notice of exemption in this proceeding is revoked.
2. This decision is effective on the date of service.
Decided: May 1, 2012.
By the Board, Chairman Elliott, Vice Chairman Mulvey, and
Commissioner Begeman. Vice Chairman Mulvey dissented with a separate
expression.
Vice Chairman Mulvey, dissenting:
I disagree with the Board's decision to allow a transaction
containing a significant interchange commitment to be processed under
the Board's class exemption procedures at 49 CFR part 1150. In general,
the Board should be carefully scrutinizing transactions that include
interchange commitments before deciding whether to permit them to go
into effect.
The notice in this particular case does not allow me to conclude
summarily--without any examination--that the lease is consistent with
the public interest. 49 U.S.C. 10902(c). The notice asserts that there
really are no competitive interchange options for PGR because the CN
line that connects to the Line is not operational. Yet, disregarding
this claimed reality, the lease nonetheless contains an interchange
commitment with substantial economic rewards for PGR if it interchanges
with UP. One has to wonder why such an economic incentive is necessary
if there is little chance that PGR would interchange with CN in any
event. The lease term is 30 years, which is far longer than some other
recent transactions involving paper barriers. See e.g., Middletown &
New Jersey R.R.--Lease & Operation Exemption--Norfolk S. Ry., FD 35412
(STB served Sept. 23, 2011) (10-year lease term). Moreover, we do not
know how many shippers will be affected, what volume of traffic will be
affected, or whether CN has plans to rehabilitate its connecting line.
Nor do we know whether the 2004 lease that PGR and UP
[[Page 26605]]
are currently operating under also included an interchange commitment
and, if it did not, why such a provision became necessary eight years
later.
The Board needs to take a close look at long-term leases that have
the potential to control the competitive environment for shippers--thus
affecting rates and service--for years to come. At a time of far
different economic circumstances in the railroad industry, our
predecessor agency, the Interstate Commerce Commission, approved long-
term leases and sales involving interchange commitments with little or
no analysis. Years later, the Board is still grappling with the
economic and competitive consequences of those transactions.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2012-10813 Filed 5-3-12; 8:45 am]
BILLING CODE 4915-01-P