[Federal Register Volume 81, Number 246 (Thursday, December 22, 2016)]
[Notices]
[Pages 94007-94010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30843]
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SURFACE TRANSPORTATION BOARD
[Docket No. FD 36064]
Genesee & Wyoming Inc.--Acquisition of Control Exemption--
Providence and Worcester Railroad
On September 1, 2016, Genesee & Wyoming Inc. (GWI), a non-carrier
holding company, filed a petition under 49 U.S.C. 10502 and 49 CFR part
1121 for exemption from the provisions of 49 U.S.C. 11323-24 to allow
GWI to acquire control of Providence and Worcester Railroad Company
(P&W), a Class III railroad. In a decision served September 20, 2016,
and published in the Federal Register on September 23, 2016 (81 FR
65,692), the Board provided notice of GWI's petition, instituted a
proceeding, and set a reply deadline for comments on the petition. The
Board received a number of comments in response to the petition.
The Board will grant GWI's petition for exemption, subject to
standard labor protective conditions and the condition that GWI will
not interfere with the ability of Springfield Terminal Railway
(Springfield Terminal) to interchange with CSX Transportation, Inc.
(CSXT), in Worcester, Mass.
Background
GWI is a publicly-traded non-carrier holding company that currently
controls, through direct or indirect equity ownership, two Class II
carriers and 106 Class III carriers operating in the United States.
(Pet. 1.) P&W is a Class III carrier based in Worcester, Mass., that
owns rail lines and permanent freight easements in Connecticut, Rhode
Island, and Massachusetts. (Id. at 2.) It also operates on trackage
rights in Connecticut, Massachusetts, Rhode Island, and New York. (Id.)
In its petition, GWI states that it seeks to acquire control of P&W
through a merger between P&W and Pullman Acquisition Sub Inc., a newly-
formed, wholly-owned non-carrier subsidiary of GWI.\1\ (Id.) Upon
consummation, P&W will be the surviving entity and will become a
wholly-owned subsidiary of GWI. (Id.) P&W connects with several
railroads, including two GWI subsidiaries: New England Central
Railroad, Inc. (NECR), and Connecticut Southern Railroad, Inc. (CSO).
(Id. at 3.) GWI states that, although there are some commonly-served
cities and towns, there are no customers that are served solely by NECR
or CSO, on the one hand, and P&W, on the other, and that as such there
will be no ``2-to-1 customers'' as a result of the proposed
transaction. (Id. at 3.) GWI states that it does not contemplate any
material changes to P&W's operations, maintenance, or service. (Id. at
4.)
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\1\ In its petition, GWI states that it anticipates closing the
transaction in the fourth quarter of 2016. (Pet. 5.) GWI states
that, in the event it does not have approval from the Board by the
time its closing conditions have been met, it intends to close the
transaction into a voting trust. On October 31, 2016, GWI submitted
an executed Voting Trust Agreement pursuant to 49 CFR 1013.3 for
receipt of the voting stock of P&W.
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GWI also states that P&W and NECR are part of the ``Great Eastern
Route'' strategic alliances. According to GWI, the Great Eastern
alliances furnish P&W with pricing authority for service with Canadian
National Railway Company (CN) through an arrangement by which NECR
provides haulage for P&W between East Alburg, Vt. and Willimantic,
Conn. on certain contractually-agreed commodities. GWI states that P&W
expanded the Great Eastern Route by entering into an additional
strategic alliance with Vermont Rail Systems (VRS), which furnishes P&W
with pricing authority for service with Canadian Pacific Railway
Limited (CP), through an arrangement by which VRS and NECR provide
haulage for P&W between Whitehall, N.Y. and Willimantic, Conn. on
certain contractually-agreed commodities. (Id. at 3.) GWI states that
its present intention is to keep these strategic alliances, and the
connections with CN and CP, in place. (Id.)
Discussion and Conclusions
Statutory Analysis
The acquisition of control of a rail carrier by a person that is
not a rail carrier but that controls any number of rail carriers
requires approval by the Board pursuant to 49 U.S.C. 11323(a)(5). Under
section 10502(a), however, we must exempt a transaction or service from
regulation if we find that: (1) regulation is not necessary to carry
out the rail transportation policy (RTP) of 49 U.S.C. 10101; and (2)
either the transaction or service is limited in scope, or regulation is
not needed to protect shippers from the abuse of market power.
In this case, an exemption from the prior approval requirements of
sections 11323-24 is consistent with the standards of section 10502.
Detailed scrutiny of the proposed transaction through an application
for review and approval under sections 11323-24 is not necessary here
to carry out the RTP. Approval of the transaction will result in a
change in ownership of P&W with no lessening of competition. An
exemption will promote the RTP by minimizing the need for federal
regulatory control over the transaction, section 10101(2); ensuring the
development and continuation of a sound rail transportation system that
will continue to meet the needs of the public, section 10101(4);
fostering sound economic conditions in transportation, section
10101(5); encouraging efficient management, section 10101(9); and
providing for the expeditious resolution of this proceeding, section
10101(15). Other aspects of the RTP will not be adversely affected.
Nor is detailed scrutiny of the proposed transactions necessary to
protect shippers from an abuse of market power. According to GWI, no
shipper will lose any rail options, and operations will not materially
change. (Pet. 9.) Although P&W connects with NECR and CSO, GWI states
that P&W also connects directly with a Class I
[[Page 94008]]
carrier (CSXT) and indirectly with three other Class I carriers (CP and
CN through the strategic alliances, and with Norfolk Southern Railway
Company (NSR) through NSR's affiliate, Pan Am Southern, LLC). (Id. at
10.) P&W also connects to Pan Am Railways, Inc., New York & Atlantic
Railway Company, and Housatonic Railroad Company, Inc., all regional
and shortline railroads. (Id.) In addition, GWI states that there will
be no 2-to-1 shippers as a result of the merger. (Id.) Accordingly,
based on the record, the Board finds that this transaction does not
shift or consolidate market power; therefore, regulation is not
necessary to protect shippers from the abuse of market power.\2\
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\2\ As there is no evidence that regulation is needed to protect
shippers from the abuse of market power, we do not need to determine
whether the transaction is limited in scope. See 49 U.S.C. 10502(a).
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Comments and Conditions
Many of the commenters support the petition and do not seek any
conditions.\3\ Other commenters support the petition but request
conditions, or express general reservations about the transaction. We
address those below.
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\3\ Supporting comments were filed by: Allnex USA Inc.; Atlantic
Forest Products; Baldwin Logistics Group, Inc.; BB&S Treated Lumber
of New England; Can-Am Trading & Logistics, LLC; Connecticut
Department of Transportation; Cushman Lumbar Company, Inc., CWPM,
LLC; Delaware Express Co.; Dennison Lubricants, Inc.; Eagle
Logistics Group, LLC; Gateway Terminal; Greater Boston Transload,
LLC; Intratransit Container, Inc.; Kloeckner Metals; Logistec USA;
Mann Distribution LLC; Maple Leaf Distribution Service, Inc.; Maine
Department of Transportation; New Hampshire Department of
Transportation; Northeast Treaters, Inc.; Resource Recovery, LLC;
Rymes Heating Oil & Propane; Safe Road Services, LLC; Saltine
Warrior, Inc.; Stella-Jones Corporation; Superior Plastics Extrusion
Co. Inc.; T-Branch, LLC; Tunnel Hill Partners, LP; Univar; Vermont
Rail System; and Vermont Agency of Transportation.
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Passenger Excursion
Several commenters support the petition, but ask the Board to
condition granting the petition on GWI's involvement in passenger
excursions run by the Blackstone Valley Tourism Council (BVTC) \4\ and/
or sought to be run by the Boston Surface Railroad Company (BSRC).\5\
The comments regarding these passenger services vary, but, generally,
the commenters \6\ request that the Board require that GWI continue
servicing BVTC and continue P&W's negotiations with BSRC.
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\4\ The record contains little information about the BVTC, other
than that it conducts a ``Polar Express'' excursion and serves over
20,000 passengers annually. (See State Rep. Stephen M. Casey Comment
1.)
\5\ BSRC is a privately funded and closely held company,
established to address the growing demand for quality alternatives
to driving for commuters between tightly coupled metropolitan
markets. BSRC has selected Worcester and Providence as the first
city pair for its pilot passenger rail program and has been in
negotiations with P&W to host this proposed service. (BSRC Reply 1.)
\6\ Comments were submitted by: BSRC; the Honorable Lisa
Baldelli-Hunt, Mayor, City of Woonsocket, Rhode Island; the
Honorable Stephen M. Casey, State Representative, State of Rhode
Island and Providence Plantations; the Honorable Harriette L.
Chandler, State Senator, Commonwealth of Massachusetts; the
Honorable Marc A. Cote, State Senator, State of Rhode Island and
Providence Plantations; John Eno; the Honorable James R. Langevin
and the Honorable David N. Cicilline, United States Representatives,
Rhode Island; Massachusetts Bay Railroad Enthusiasts, Inc.; the
Honorable James P. McGovern, United States Representative,
Massachusetts; the Honorable Michael A. Morin, State Representative,
State of Rhode Island and Providence Plantations; the Honorable
David K. Muradian, Jr., State Representative, Commonwealth of
Massachusetts; National Association of Railroad Passengers; the
Honorable James J. O'Day, State Representative, Commonwealth of
Massachusetts; the Honorable Robert D. Phillips, State
Representative, State of Rhode Island and Providence Plantations;
Michael E. Traynor, Chief Development Officer, City of Worcester,
Massachusetts. BSRC also submitted a letter from Peter Alviti, Jr.,
Director of the Rhode Island Department of Transportation,
expressing general support for BSRC's passenger rail service.
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GWI states that, in the past, P&W and BVTC have made arrangements
for service on a year-by-year basis. (GWI Rebuttal 5.) GWI states that
P&W will fulfill all current agreements with BVTC, negotiate similar
agreements for 2017, and, as P&W has previously done, review further
plans for passenger excursion service on a year-to-year basis after
that. (Id. at 7.) GWI also states that there is currently a memorandum
of understanding between BSRC and P&W that includes a commitment to
negotiate in good faith. (Id. at 5-6.)
The Board will not impose a condition relating to BVTC or BSRC. The
Board has authorized BSRC to offer passenger rail service on any rail
line where P&W will allow the service. Bos. Surface R.R.--Pet. for
Partial Exemption from 49 U.S.C. Subtitle IV, FD 36043 (STB served
Sept. 15, 2016). However, authority from the Board is permissive only,
and in order to exercise that authority a carrier must obtain the
property or contractual right to do so under state law, which is not
within the Board's purview. See Ohio River Partners LLC--Acquis.
Exemption--Hannibal Dev., LLC, FD 35984, slip op. at 3 (STB served Apr.
1, 2016). A condition requiring GWI to negotiate with BSRC is therefore
inappropriate. In any event, GWI has stated that it will continue to
negotiate in good faith with BSRC and BVTC. (GWI Rebuttal 7.)
Springfield Terminal
Springfield Terminal filed a comment regarding its ability to
interchange traffic with CSXT at Barbers Station in Worcester, Mass.
(Springfield Terminal Comment 1.) Springfield Terminal states that GWI
has agreed that it will not take or fail to take action that would
adversely impact Springfield Terminal's ability to interchange traffic
with CSXT at Barbers Station. (Id.) Based on this representation,
Springfield Terminal states that it fully supports the petition.
Springfield Terminal also notes that GWI agreed to have Board
approval conditioned on GWI's commitment as reflected in Springfield
Terminal's letter, and in its rebuttal GWI confirms that its commitment
can be entered as a Board-imposed condition. (GWI Rebuttal 3.)
Accordingly, the Board will impose a condition requiring that GWI will
not take or fail to take any actions that would adversely impact the
ability of Springfield Terminal to interchange traffic with CSX
Transportation, Inc. at Barbers Station in Worcester, Massachusetts in
violation of applicable law or the P&W Grant of Trackage Rights, as
amended, dated June 30, 1989.
Other Concerns
The Massachusetts Department of Transportation (MassDOT) and
American Rock Salt (ARS) filed comments expressing reservations
regarding the transaction.
MassDOT states that it takes no position concerning the competition
aspect of GWI's petition, but it notes its interest in P&W continuing
its current high standards of track maintenance under a GWI regime. It
also indicates that service over a nearby GWI subsidiary line has
deteriorated, leading to passenger train service disruption. (MassDOT
Comment 1.) MassDOT seeks GWI's assurance that the P&W merger ``will
not compromise or delay steps that GWI will need to take going forward
to restore Amtrak service on another GWI railroad . . . .'' (Id.)
MassDOT, however, does not specifically ask the Board to impose any
conditions.
ARS states that it is a shipper that receives service from several
other GWI subsidiaries. It states that GWI's growth over the past 20
years has led to ARS being captive to GWI's rate structures, which
impacts its market share. Although ARS has raised a number of concerns
regarding service from other GWI subsidiaries, ARS does not ask that a
specific condition be placed on this transaction. (See generally ARS
Comment.)
While the Board takes seriously the concerns expressed by MassDOT
and ARS, neither party has suggested a condition or identified any harm
arising
[[Page 94009]]
from the transaction that would necessitate imposing a condition. The
Board expects, however, that GWI will work with MassDOT and ARS to help
address any unforeseen service impacts, should they arise, following
the transaction's approval.\7\
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\7\ The Board reminds interested parties that they may contact
the Board's Rail Customer and Public Assistance Program (RCPA) if
they believe a rail carrier is not providing adequate service. The
RCPA Program provides informal assistance on a wide range of
matters, including informal dispute resolution through mediation.
The RCPA may be reached at (866) 254-1792; faxing to (202) 245-0461;
or by email at [email protected].
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Labor
Under 49 U.S.C. 10502(g), the Board may not use its exemption
authority to relieve a rail carrier of its statutory obligation to
protect the interests of its employees. Therefore, the Board will
impose a condition specifying that any employees adversely affected by
this transaction will be protected by the conditions set forth in New
York Dock Railway--Control--Brooklyn Eastern District Terminal (New
York Dock), 360 I.C.C. 60 (1979).
GWI, acknowledging that New York Dock applies, seeks Board
confirmation that it need not commence negotiations or consummate
implementing agreements prior to the consummation of the transaction
with P&W. (Pet. 10-11.) The Transportation Communications Union/IAM,
AFL-CIO (TCU/IAM) and the Transportation Division of the International
Association of Sheet Metal, Air, Rail and Transportation Workers
(SMART-TD) submitted comments disagreeing with GWI's position, arguing
that GWI must give notice and negotiate an implementing agreement prior
to consummation of the transaction. (See TCU/IAM Comment 3, 5-6; SMART-
TD Comment 3-5.)
New York Dock requires a railroad to give notice of ``proposed
changes to be effected by [a] transaction'' when a railroad is
``contemplating a change or changes in its operations, services,
facilities, or equipment as a result of a transaction'' that may affect
employees. 360 I.C.C. at 77. The requirement under New York Dock to
provide such notice presumes, however, that the carrier is capable of
making a ``full and adequate statement'' of the expected labor changes
before the transaction is consummated. Norfolk S. Ry--Joint Control &
Operating/Pooling Agreements--Pan Am S. LLC (Pan Am S.), FD 35147, slip
op. at 16-17 (STB served Mar. 10, 2009) (``Because we see no basis for
negotiation of an implementing agreement until Applicants decide to
implement labor changes that are related to the Transaction, we will
not require that Applicants commence negotiations now.'').
In its petition, GWI states that it has not yet determined whether
or which employees may be adversely affected, but acknowledges that it
will be required to give 90-days' notice, and negotiate, before making
changes in operations, services, facilities, or equipment. (Pet. 11.)
Further, in its rebuttal,
GWI specifically confirms that post-closing, P&W does not intend
to terminate or displace any P&W covered employees as a result of
the proposed transaction. P&W will continue to honor all current
[collective bargaining agreements (CBAs)], and to negotiate all
expired CBAs in good faith. For the foreseeable future, there will
be no adverse effect on P&W covered employees because work will
continue to be performed under existing CBAs by the same P&W covered
employees who are currently performing the work.
(GWI Rebuttal 9).
The Board will hold GWI to the representations regarding labor
protection that it has made on the record in this proceeding.
Accordingly, GWI will be required to proceed in good faith under the
notification and negotiation provision of Article I, section 4 of the
New York Dock conditions before implementing employment changes but it
need not commence those negotiations until it is capable of making a
full and adequate statement of the expected changes. See Pan Am S., FD
35147, slip op. at 16-17.\8\
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\8\ TCU/IAM and SMART-TD cite other cases in support of their
position that New York Dock negotiations must occur prior to the
consummation of a consolidation transaction. The Board, however,
finds these cases unpersuasive. First, TCU/IAM cites Norfolk
Southern Railway--Acquisition & Operation--Certain Rail Lines of the
Delaware & Hudson Railway (Delaware & Hudson), FD 35873 (STB served
May 15, 2015). (TCU/IAM Comment 2.) The labor discussions in
Delaware & Hudson, however, focus almost entirely on how to
categorize the underlying transaction and what level of labor
protection applies. Delaware & Hudson, FD 35873, slip op. at 28 (STB
served May 15, 2015). Here, there is no dispute that New York Dock
protections apply (see Pet.; TCU/IAM Comment; SMART-TD Comment).
Thus, Delaware & Hudson is inapposite.
Next, SMART-TD points to R.J. Corman Railroad/Memphis Line--
Acquisition--CSX Transportation Line Between Warwick & Uhrichville,
FD 31388 (ICC served Mar. 2, 1989). (SMART-TD Comment 3.) In that
case, however, CSXT acknowledged that some of its employees would be
adversely affected, which is not the case here. R.J. Corman R.R.,
slip op. at 2.
SMART-TD also challenges GWI's reliance on Atlantic Richfield
Co. & Anaconda Co.--Control--Butte, Anaconda & Pacific Railway &
Tooele Valley Railroad, 5 I.C.C. 2d 934 (1989), and Mid Michigan
Railroad--Lease & Operation Exemption--Missouri Pacific Railroad, FD
31646 (ICC served Aug. 17, 1990), though neither case is cited by
GWI. (SMART-TD Comment 4.) Atlantic Richfield states that minimum
New York Dock protections are warranted even when assurances are
made that there will be no adverse effects to employees. Atlantic
Richfield, 5 I.C.C. 2d at 942 n.9. Here, however, GWI is not
suggesting that the New York Dock requirements do not apply.
Finally, Mid Michigan examines the differing requirements between
New York Dock and New York Dock as modified by Wilmington Terminal
Railroad--Purchase & Lease--CSX Transportation, Inc., 6 I.C.C. 2d
799 (1990), a discussion not at issue here. See generally Mid
Michigan, FD 31646.
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Environmental and Historical Reporting
This transaction is categorically excluded from environmental
review under 49 CFR 1105.6(c)(2)(i) because it will not result in any
significant change in carrier operations. Similarly, the transaction is
exempt from the historic reporting requirements under 49 CFR
1105.8(b)(3) because it will not substantially change the level of
maintenance of railroad properties.
Expedited Action
GWI requests expedited action on its petition for exemption. (Pet.
12; see generally GWI Letter, Dec. 7, 2016.) It seeks action on or
before the date P&W shareholder approval is obtained, and in the event
that such approval is not obtained before shareholder approval,
expedited action to avoid a prolonged period of interim control of
operations via a voting trust. Based on the record, the Board finds
GWI's request to be reasonable. Accordingly, our grant of the exemption
will be effective immediately.
It is ordered:
1. Under 49 U.S.C. 10502, the Board exempts GWI's acquisition of
control of P&W from the prior approval requirements of sections 11323-
24 subject to the employee protective conditions in New York Dock
Railway--Control--Brooklyn Eastern District Terminal, 360 I.C.C. 60
(1979).
2. The exemption is further conditioned on GWI's assurance that it
will not take or fail to take any actions that would adversely impact
the ability of Springfield Terminal to interchange traffic with CSX
Transportation, Inc. at Barbers Station in Worcester, Massachusetts in
violation of applicable law or the P&W Grant of Trackage Rights, as
amended, dated June 30, 1989.
3. Notice will be published in the Federal Register.
4. This exemption will be effective December 16, 2016.
[[Page 94010]]
By the Board, Chairman Elliott, Vice Chairman Miller, and
Commissioner Begeman.
Tammy Lowery,
Clearance Clerk.
[FR Doc. 2016-30843 Filed 12-21-16; 8:45 am]
BILLING CODE 4915-01-P