[Federal Register Volume 63, Number 157 (Friday, August 14, 1998)]
[Notices]
[Pages 43744-43751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21934]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board
[STB Finance Docket No. 33556] \1\


Canadian National Railway Company, Grand Trunk Corporation, and 
Grand Trunk Western Railroad Incorporated--Control--Illinois Central 
Corporation, Illinois Central Railroad Company, Chicago, Central and 
Pacific Railroad Company, and Cedar River Railroad Company

AGENCY: Surface Transportation Board.
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    \1\ This decision covers: (i) the primary application, which was 
filed in the STB Finance Docket No. 33556 lead docket; and (ii) one 
related filing, an application for terminal trackage rights in 
Springfield, IL, filed in the embraced docket, STB Finance Docket 
No. 33556 (Sub-No. 1), Canadian National Railway Company, Illinois 
Central Railroad Company, The Kansas City Southern Railway Company, 
and Gateway Western Railway Company--Terminal Trackage Rights--Union 
Pacific Railroad Company and Norfolk & Western Railway Company.

ACTION: Decision No. 6 in STB Finance Docket No. 33556; Notice of 
Acceptance of Primary Application and Related Filing; Issuance of Final 
Procedural Schedule.

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SUMMARY: The Board is accepting for consideration the primary 
application and related filing filed July 15, 1998, by Canadian 
National Railway Company (CNR), Grand Trunk Corporation (GTC), and 
Grand Trunk Western Railroad Incorporated (GTW),\2\ Illinois Central 
Corporation (IC Corp.), Illinois Central Railroad Company (ICR), 
Chicago, Central and Pacific Railroad Company (CCP), and Cedar River 
Railroad Company (CRRC).\3\ The primary application seeks Surface 
Transportation Board (Board) approval and authorization under 49 U.S.C. 
11321-26 for: (1) the acquisition of control, by CNR, through its 
indirect wholly owned subsidiary Blackhawk Merger Sub, Inc., of control 
of IC Corp. and through it of ICR and its railroad affiliates, and (2) 
for the resulting common control by CNR of GTW and its railroad 
affiliates and ICR and its railroad affiliates. The related filing, an 
application for terminal trackage rights,

[[Page 43745]]

seeks related relief contingent upon approval of the primary 
application.
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    \2\ CNR, GTC, and GTW, and their affiliates, are referred to 
collectively as CN.
    \3\ IC Corp., ICR, CCP, and CRRC, and their affiliates, are 
referred to collectively as IC. CN and IC are referred to 
collectively as applicants.
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    Having received public comments on the proposed procedural 
schedule, as modified by the Board, and applicants' reply to those 
comments, the Board is issuing a final procedural schedule. This 
schedule provides for the issuance of a final decision no later than 
May 11, 1999 (300 days after the primary application's filing date of 
July 15, 1998).

DATES: The effective date of this decision is August 14, 1998. Any 
party who wishes to participate in this proceeding as a party of record 
must file, no later than August 31, 1998, a notice of intent to 
participate. Descriptions of responsive (including inconsistent) 
applications, and petitions for waiver or clarification regarding those 
applications, must be filed by August 31, 1998. All comments, protests, 
requests for conditions, and any other evidence and argument in 
opposition to the primary application, including filings by the U.S. 
Department of Justice (DOJ) and U.S. Department of Transportation 
(DOT), and responsive (including inconsistent) applications must be 
filed by October 13, 1998. Response to comments, protests, requested 
conditions, and other opposition, response to comments of DOJ and DOT, 
rebuttal in support of the primary application and related application, 
and response to inconsistent and responsive applications, must be filed 
by November 27, 1998. For further information respecting dates, see 
Appendix A (Final Procedural Schedule).

ADDRESSES: Send an original and 25 copies of all pleadings referring to 
STB Finance Docket No. 33556 to: Surface Transportation Board, Office 
of the Secretary, Case Control Unit, 1925 K Street, NW., Washington, DC 
20423-0001.\4\ In addition, one copy of all documents in this 
proceeding must be sent to Administrative Law Judge David Harfeld, 
Federal Energy Regulatory Commission, Office of Administrative Law 
Judges, 888 First Street, N.E., Suite 11F, Washington, DC 20426 [(202) 
219-2514; FAX: (202) 219-3289] and to each of applicants' 
representatives: (1) Paul A. Cunningham, Esq., Harkins Cunningham, 1300 
19th Street, NW., Suite 600, Washington, DC 20036-1609; and (2) William 
C. Sippel, Esq., Oppenheimer Wolff & Donnelly, Two Prudential Plaza, 
45th Floor, 180 North Stetson Avenue, Chicago, IL 60601-6710.
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    \4\ In order for a document to be considered a formal filing, 
the Board must receive an original and 25 copies of the document, 
which must show that it has been properly served. In addition, each 
formal filing must be accompanied by an electronic submission per 
our requirements as discussed in detail in this decision. Parties 
must clearly label each formal filing with an identification acronym 
and number. See 49 CFR 1180.4(a)(2). Each disk or CD should be 
clearly labeled with the identification acronym and number of the 
corresponding paper document, and labeled as containing confidential 
or redacted materials. Documents transmitted by facsimile (FAX) will 
not be considered formal filings and are not encouraged because they 
will result in unnecessarily burdensome, duplicative processing.
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    In addition to submitting an original and 25 copies of all paper 
documents filed with the Board, parties also must submit, on 3.5-inch 
IBM-compatible floppy diskettes (disks) or compact discs (CDs), copies 
of all textual materials, electronic workpapers, data bases and 
spreadsheets used to develop quantitative evidence. Textual materials 
must be in, or convertible by and into, WordPerfect 7.0. Electronic 
spreadsheets must be in, or convertible by and into, Lotus 1-2-3 97 
Edition, Excel Version 7.0, or Quattro Pro Version 7.0. A copy of each 
disk or CD submitted to the Board should be provided to any other party 
upon request.\5\ Further details are discussed below.

    \5\ In Decision No. 3 (served May 19, 1998, and published on May 
22, 1998, in the Federal Register at 63 FR 28442-44), we denied a 
petition for reconsideration of Decision No. 2, concerning the 
requirement that parties submit copies of all textual materials on 
disks or CDs, and stated that parties may individually seek a waiver 
from the disk-CD requirement.

FOR FURTHER INFORMATION CONTACT: Julia M. Farr, (202) 565-1613. [TDD 
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for the hearing impaired: (202) 565-1695.]

SUPPLEMENTARY INFORMATION: Applicants are seeking approval of a 
proposed transaction set forth in their primary application (CN/IC-6) 
filed on July 15, 1998. The proposed transaction involves the 
acquisition of control by CNR, through its indirect wholly owned 
subsidiary Blackhawk Merger Sub, Inc., of IC Corp., and through it of 
ICR and its railroad affiliates, and for the resulting common control 
by CNR of GTW and its railroad affiliates and ICR and its railroad 
affiliates.

The Applicants

    CN's rail network consists of approximately 1,150 route miles in 
the United States, and approximately 14,150 route miles in eight 
Canadian provinces. CN has principal routes to every major metropolitan 
area in Canada, and the major U.S. cities of: Buffalo, NY; Detroit, MI; 
Duluth, MN/Superior, WI; and Chicago, IL. The eastern terminus of CN's 
network is Halifax, Nova Scotia; the western termini are Prince Rupert 
and Vancouver, British Columbia; and the southern terminus is Chicago. 
CN's traffic, between Duluth/Superior and Chicago, is carried under 
haulage agreements over the lines of The Burlington Northern and Santa 
Fe Railway Company (BNSF) and Wisconsin Central Ltd. (WC).
    IC operates approximately 3,370 route miles of track running north-
south between Chicago and the Gulf of Mexico, and east-west between 
Chicago and Nebraska and Iowa. IC's main north-south route reaches 
every major metropolitan area on the Mississippi River, including 
Chicago, IL; St. Louis, MO; Memphis, TN; Jackson, MS; and New Orleans, 
LA. IC's east-west route extends from Sioux City and Council Bluffs, 
IA, in the West to Chicago in the East.
    The principal routes of the combined CN/IC rail system would be 
identical to those of the individual railroads. The southern terminus 
of CN's rail system, Chicago, is the northern terminus of IC's rail 
system. Applicants state that no track redundancies would be created by 
the transaction, and no abandonments or substantial rerouting would 
result from the combination of the two systems.

Tender Offer and Merger

    According to applicants, on February 10, 1998, CN, Blackhawk Merger 
Sub, Inc. (Merger Sub), and IC entered into an Agreement and Plan of 
Merger (as subsequently amended, the Merger Agreement). In accordance 
with the Merger Agreement, as of March 14, 1998, the CNR acquired 
46,051,761 shares (or approximately 75%) of the outstanding common 
stock of IC (the IC Common Shares), at a price of $39.00 per share 
6 through a cash tender offer (the Tender Offer) by Merger 
Sub. On June 4, 1998, CN consummated a second-step merger (the Merger) 
between IC and Merger Sub, with IC being the surviving corporation. In 
the Merger, the remaining 25% of outstanding IC Common Shares were 
exchanged for approximately 10.1 million common shares of CN, 
representing 10.3% of the outstanding common shares of CN after the 
Merger on a fully diluted basis. As a result of the Tender Offer and 
the Merger, CN became the indirect beneficial owner of all of the stock 
of IC.
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    \6\ Applicants stated that all monetary amounts listed in the 
application are stated in U.S. dollars, unless otherwise noted.
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Voting Trust

    Applicants state that, in accordance with the Merger Agreement, the 
shares acquired by CN in the Tender Offer and

[[Page 43746]]

in the Merger are held in a voting trust (the Voting Trust) pursuant to 
an agreement dated as of March 13, 1998, by and among CN, Merger Sub, 
and The Bank of New York, a voting trustee that is a banking 
corporation (the Trustee). The Trustee will act by written consent or 
will vote all IC stock held by the Voting Trust (the Trust Stock) in 
favor of any proposal necessary to effectuate the Merger pursuant to 
the Merger Agreement, and, generally so long as the Merger Agreement is 
in effect, against any other proposed merger, business combination, or 
similar transaction involving IC. On other matters, including the 
election or removal of officers, the Trustee generally will vote the 
Trust Stock in the Trustee's sole discretion unless the holder(s) of 
trust certificates, with the prior written approval of the Board, 
directs the Trustee as to any such vote. GTC, a wholly owned subsidiary 
of CN, currently holds the trust certificate for all IC stock in the 
Voting Trust.
    On February 25, 1998, CN received an informal opinion from the 
Board's staff to the effect that CN's use of the Voting Trust will be 
consistent with the Board's policies and will preclude unlawful control 
of IC by CN.

Related United Transportation Union (UTU) Filing

    On July 16, 1998, UTU filed a Motion to Dismiss and Comment on the 
Procedural Schedule (UTU-3). UTU is the designated representative for 
various crafts or classes of operating employees on ICR and GTW. The 
request for dismissal is based upon the ground that these carriers have 
violated 49 U.S.C. 11323 by effectively merging the properties of these 
two carriers into one corporation for the management and operation of 
the previously separately owned properties without the approval or 
authorization of the Board. UTU further states that IC and CN have 
violated section 11323 by beginning to coordinate the labor relations 
functions of these two large carriers without prior approval.
    On August 5, 1998, applicants filed a Reply to UTU's Motion to 
Dismiss (CN/IC-12). Applicants state that: (1) UTU has raised no issue 
supporting a conclusion that CN may have engaged in unlawful control of 
IC, and that, even if the particular conduct UTU alleges occurred, it 
would amount to no more than necessary and proper communication and 
coordination between merging railroads; (2) UTU has cited no legal 
authority for its basic premise that the exchange of information it 
alleges constitutes improper conduct or evidence of unlawful control, 
and that publicly held railroads negotiating a potential merger 
agreement are entitled to engage in appropriate due diligence inquiries 
about each other, as required by the Board's rules and decisions, and 
as contemplated by the Board's protective order; 7 and (3) 
even if UTU's motion alleged an arguable control violation, it would 
not warrant dismissal, and that such a violation could not warrant 
denial of the application unless it were so serious and substantial 
that it clearly outweighed other public interest factors, which UTU has 
not alleged or shown. Applicants request that the Board should deny 
UTU's motion as being substantively without merit, both factually and 
legally, and procedurally flawed.
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    \7\ Applicants note that the Board issued a protective order in 
Decision No. 1, served February 26, 1998, which provided that 
exchanges of data or other cooperative efforts between CN and IC for 
purposes of this proceeding will not be deemed a violation of 49 
U.S.C. 11323; UTU alleges that CN and IC filed together a notice of 
intent to file a joint application for CN control of IC. Applicants 
state that such joint notices of intent are common in control 
proceedings, and its use here is of no consequence.
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    The Board shares UTU's concerns that there not be management or 
operations in common between railroad entities absent our approval of 
the common management or operations. Here, however, the applicants have 
satisfactorily addressed the matters raised by UTU and the factors 
described do not demonstrate unlawful control. Nor does the structure 
of the proposed arrangement reflect unauthorized common control of two 
or more carriers. As previously mentioned, by letter dated February 25, 
1998, the Board's staff issued an informal opinion concerning a Voting 
Trust Agreement (VTA) proposed to be entered into by and between CNR, 
Merger Sub, and a Trustee, and found that the VTA provided for the 
placement, into an independent and irrevocable voting trust, of all of 
the common stock of IC Corp. acquired by CN or by any of its 
affiliates. In the staff opinion, it was found that the voting trust to 
be established under the VTA will effectively insulate CN and its 
affiliates from the violation of Subtitle IV of Title 49 of the United 
States Code and the policy of the Board that would result if CN were to 
acquire, without authorization, a sufficient interest in the carrier 
subsidiaries of IC Corp. as otherwise to result in control; and that, 
under the VTA, control of IC Corp. and its carrier subsidiaries can be 
exercised by CN and its subsidiaries only subsequent to approval by the 
Board of the CN/IC control application. We agree with the staff opinion 
and find that applicants' VTA conforms to Board regulations as well as 
long-standing Board and Interstate Commerce Commission precedent 
recognizing that beneficial ownership can be separated from control by 
an appropriate voting trust instrument.8 Thus, UTU's request 
for dismissal of the proceeding is denied at this time.9 
Should UTU or any other person obtain evidence of unauthorized common 
control, through breach of the VTA or otherwise, that person may submit 
that evidence for our review.
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    \8\ See CSX Corporation and CSX Transportation, Inc., Norfolk 
Southern Corporation and Norfolk Southern Railway Company--Control 
and Operating Leases/Agreements--Conrail Inc. and Consolidated Rail 
Corporation, STB Finance Docket No. 33388, Decision No. 89 (STB 
served July 23, 1998) (CSX/NS/CR No. 89), slip op. at 127.
    \9\ UTU states that the Board should dismiss the proceeding, or 
alternatively, impose the statutory procedural schedule set forth at 
49 U.S.C. 11325(b) to ensure proper review of the transaction.
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Labor Impact

    Applicants have submitted one Labor Impact Statement which shows 
the projected effects of the CN/IC merger on all categories of 
employment, including both agreement and nonagreement personnel of the 
combined CN/IC system. The Labor Impact Statement is organized by job 
classification, and for each classification, it reflects the location 
at which positions will be created, eliminated, or transferred, if 
applicable; the number of positions affected at each location; and 
whether positions will be moved to another location, abolished, or 
added. If a position is to be relocated, the Labor Impact Statement 
identifies the new location.
    As explained in the Joint Verified Statement submitted with the 
Labor Impact Statement,10 the number and percentage of 
adversely affected employees will be small in relation to the number of 
employees on the combined CN/IC system. The combined system will have 
approximately 26,000 employees, of which approximately 5,200 will be in 
the United States. Approximately 311 positions will be abolished, and 
approximately 138 other positions will be transferred within the United 
States. In this regard, applicants anticipate the following: (1) 
Impacts of the transaction will be mostly accommodated by normal 
attrition during the 3-year implementation period; (2) the transaction 
should have a positive effect on job opportunities; (3) some employees 
may be offered the option of receiving a severance package;

[[Page 43747]]

and (4) some adversely affected employees will refuse relocation offers 
and voluntarily forfeit their right to protective benefits.
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    \10\ See CN/IC-7 at 283-84, Joint Verified Statement of Richard 
J. Dixon, Joseph T. Torchia, and James M. Harrell.
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    Applicants anticipate that, if we approve the transactions proposed 
in the primary application and the related filing, we will impose on 
such transactions the standard labor protective conditions customarily 
imposed on similar such transactions. See CN/IC-7 at 283.

Related Filing

    In STB Finance Docket No. 33556 (Sub-No. 1), CN, IC, Kansas City 
Southern Railway Company (KCS) and its affiliate Gateway Western 
Railway Company (GWWR), have filed an application for an order under 49 
U.S.C. 11102 permitting GWWR to use without restriction three short 
connected segments of terminal trackage in Springfield, IL. These 
segments are now owned by Union Pacific Railroad Company (UP) as 
successor to SPCSL Corp. (SPCSL), and Norfolk & Western Railway Company 
(N&W), an affiliate of Norfolk Southern Corporation (NS).11
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    \11\ Applicants in this sub-numbered docket have advised that 
they have contacted UP about securing consent for use of the 
trackage involved in order for GWWR and IC to be able to interchange 
traffic in Springfield without regard to the limitations of the 
Ridgely Yard agreement, and are willing to continue such discussions 
after the filing of this application. They will advise the Board if 
those discussions make it unnecessary to act on this application.
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    Applicants state that, without such relief, GWWR and IC will be 
unable to establish an efficient interchange necessary to serve 
effectively the new competitive traffic movements made possible by the 
CN/IC combination, as augmented by an agreement among CN, IC, and KCS 
dated April 15, 1998.12
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    \12\ Applicants state that this agreement creates a strategic 
alliance among the parties and provides for their cooperative 
undertakings to provide joint-line service in specified areas 
competitive with other rail carriers, and provides that the alliance 
will use Springfield as one of two main interchanges for designated 
traffic. The agreement also provides that the railroads will use 
their best efforts to remove any impediments to the full utilization 
of an efficient connection between IC and GWWR in the vicinity of 
Springfield.
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Acceptance of Primary Application and Related Filing

    We are accepting the primary application for consideration because 
it is in substantial compliance with the applicable regulations, 
waivers,13 and requirements. See 49 U.S.C. 11321-26; 49 CFR 
part 1180. We are also accepting for consideration the related filing, 
which is also in substantial compliance with the applicable regulations 
and requirements.14
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    \13\ In Decision No. 4, served June 23, 1998, we granted to the 
extent set forth in the decision, applicants' CN/IC-4 petition for 
waiver or clarification, and related relief.
    \14\ We reserve the right to require the filing of supplemental 
information from applicants or any other party or individual, if 
necessary to complete the record in this matter.
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Public Inspection

    The primary application and related filing, including the various 
accompanying exhibits, are available for inspection in the Docket File 
Reading Room (Room 755) at the offices of the Surface Transportation 
Board, 1925 K Street, N.W., in Washington, DC.

Procedural Schedule

    In Decision No. 5, served June 23, 1998, and published June 26, 
1998, in the Federal Register at 63 FR 34956-59, we issued a proposed 
procedural schedule, and invited all interested parties to submit 
written comments on the proposed procedural schedule by July 16, 1998, 
with applicants' reply due by July 27, 1998. In response, we received 
the following comments: (1) UTU-3, UTU's motion to dismiss and comment 
on procedural schedule; (2) The Fertilizer Institute's (TFI) comments; 
and (3) CN/IC-10, applicants' comments. Applicants also filed reply 
comments (CN/IC-11) on July 27, 1998 and Allied Rail Unions responded 
(ARU-2) on August 5, 1998, to that filing, and argued against 
shortening the proposed schedule . We have carefully reviewed and 
considered all of these comments.
    As we noted previously in our discussion of UTU's motion to 
dismiss, UTU requests that we dismiss the proceeding, or alternatively, 
impose the statutory procedural schedule set forth at 49 U.S.C. 
11325(b) to ensure proper review of the transaction. The statute allows 
16 months for the processing of major consolidation proceedings. Under 
49 U.S.C. 11325(b)(3), the Board must conclude the evidentiary stage of 
the proceeding within 13 months of the application's filing 
date,15 and must issue the final decision by the 90th day 
after the conclusion of the evidentiary stage.
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    \15\ Specifically, the statute requires the completion of the 
evidentiary stage within 12 months after publication of the Federal 
Register notice accepting the application. That publication is due 
no later than 30 days after the application is filed.
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    In their comments and reply comments, applicants request that we 
adopt their original 180-day proposed schedule or, at least, adopt a 
middle-ground schedule and a single filing date approach. Applicants 
further state that, while the CN/IC transaction is important, it does 
not compare in size and complexity to the recent control transactions 
in CSX/NS/CR, UP/SP, and BN/SF. TFI also urges that we adopt a schedule 
similar to the 180-day schedule proposed by applicants.
    Specifically, applicants request that we eliminate the proposed 
bifurcation and trifurcation of filings because it will create needless 
problems and burdens on all parties. TFI also urges the elimination of 
staggered filing dates for different parties. Applicants propose that 
all comments, protests, and requests for conditions, any other evidence 
or argument in opposition to the application by all parties, and any 
inconsistent or responsive applications, be due at the same date (F+90 
days under the Board's proposed schedule), and that applicants' 
rebuttal or other responses to those filings be due 30 days later 
(F+120 days). Applicants note that no major merger in this decade has 
been considered under a fragmented procedural format, and that there is 
nothing inherent in the CN/IC transaction to warrant such a departure 
from consistent prior practice.
    We will grant applicants' and TFI's request that we eliminate the 
staggered filing dates. As suggested by applicants, all comments, 
protests, and requests for conditions, any other evidence or argument 
in opposition to the application by all parties, and any inconsistent 
or responsive applications, will be due on the same date (F+90 days). 
Applicants' rebuttal and other responses to those filings will be due 
45 days later. Other relevant due dates are discussed in detail under 
our discussion of filing due dates.
    Few objections have been raised to the 10-month proposed procedural 
schedule. In light of UTU's concerns, we are reluctant at this time to 
reduce the time for processing the application. Earlier comments in 
opposition to applicants' 6-month proposed procedural schedule were 
filed by the Brotherhood of Maintenance of Way Employees (BMWE) on June 
2, 1998, and the UTU on June 8, 1998. Both BMWE and UTU had stated that 
applicants' 180-day proposed schedule was too short and urged the Board 
to adopt the statutory procedural schedule set forth at 49 U.S.C. 
11325(b). Alternatively, UTU urged the Board to adopt a 350-day 
schedule modeled upon the procedural schedule issued by the Board in 
CSX/NS/CR No. 6 (STB served May 30, 1997). We believe that a 10-month 
procedural schedule would not delay unnecessarily any benefits that 
would flow from the proposed integration of the CN and IC systems and 
is middle-ground schedule that would allow sufficient time to develop 
the record upon which the Board's

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decision would be based. If, at some point in this proceeding (perhaps 
after Board receipt of filings due on F+90 days), it becomes clear that 
there are few contested issues to be resolved, we would be open to a 
reexamination of whether a shorter schedule and a more expeditious 
resolution can be accommodated.

Notice of Intent To Participate

    Any person who wishes to participate in this proceeding as a party 
of record (POR) must file with the Secretary of the Board, no later 
than August 31, 1998, an original and 25 copies of a notice of intent 
to participate, accompanied by a certificate of service indicating that 
the notice has been properly served on Judge Harfeld and on applicants' 
representatives. In addition, as previously noted, parties must submit 
one electronic copy of each document filed with the Board. Further 
details respecting such electronic submissions are provided below.
    We will serve, as soon as practicable after August 31, 1998, a 
notice containing the official service list (the service list notice). 
Each party of record will be required to serve upon all other parties 
of record, within 10 days of the service date of the service list 
notice, copies of all filings previously submitted by that party (to 
the extent such filings have not previously been served upon such other 
parties). Each party of record also will be required to file with the 
Secretary of the Board, within 10 days of the service date of the 
service list notice, an original plus five copies of a certificate of 
service, along with an electronic copy, indicating that the service 
required by the preceding sentence has been accomplished. Every filing 
made by a party of record after the service date of the service list 
notice must have its own certificate of service indicating that both 
Judge Harfeld and all PORs on the service list have been served with a 
copy of the filing. Members of the United States Congress (MOCs) and 
Governors (GOVs) are not parties of record (PORs), and therefore, need 
not be served with copies of filings, unless any such Member or 
Governor has requested to be, and is designated as, a POR.
    We will serve copies of our decisions, orders, and notices only on 
those persons who are designated on the official service list as either 
POR, MOC, or GOV. All other interested persons are encouraged to make 
advance arrangements with the Board's copy contractor, DC News & Data, 
Inc. (DC News), to receive copies of Board decisions, orders, and 
notices served in this proceeding. DC News will handle the collection 
of charges and the mailing and/or faxing of decisions, orders, and 
notices to persons who request this service. The telephone number for 
DC News is: (202) 289-4357.16
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    \16\  An interested person does not need to be on the service 
list to obtain a copy of the primary application or any other filing 
made in this proceeding. Our Railroad Consolidation Procedures 
provide: ``Any document filed with the Board (including 
applications, pleadings, etc.) shall be promptly furnished to 
interested persons on request, unless subject to a protective 
order.'' See 49 CFR 1180.4(a)(3), as recently amended in Railroad 
Consolidation Procedures--Modification of Fee Policy, STB Ex Parte 
No. 556, 62 FR 9714, 9717 (Mar. 4, 1997) (interim rules), 62 FR 
28375 (May 23, 1997) (final rules). Furthermore, DC News will 
provide, for a charge, copies of the primary application or any 
other filing made in this proceeding, except to the extent any such 
filing is subject to the protective order heretofore entered in this 
proceeding.
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Descriptions of, and Filings Respecting, Responsive (Including 
Inconsistent) Applications 17
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    \17\  An original and 25 copies of such descriptions, petitions 
for waiver or clarification, Responsive Environmental Reports, and 
Verified Statements must refer to STB Finance Docket No. 33556 (lead 
docket) and must be filed with the Surface Transportation Board, 
Office of the Secretary, Case Control Unit, 1925 K Street, N.W., 
Washington, DC 20423-0001. In addition, parties must submit one 
electronic copy of each document filed with the Board. Further 
details respecting such electronic submissions are provided below.
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    Because the transaction proposed by applicants constitutes a major 
transaction within the meaning of our rail consolidation rules (49 CFR 
part 1180) 18 parties intending to file responsive 
(including inconsistent) applications must submit descriptions of those 
applications by August 31, 1998. The description must state that the 
commenting party intends to file an application seeking affirmative 
relief that requires an application to be filed with the Board (e.g., 
divestiture, purchase, trackage rights, inclusion, construction, or 
abandonment) and must include a general statement of what that 
application is expected to include. This will be considered a prefiling 
notice without which the Board will not entertain applications for this 
type of relief.
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    \18\ See Decision No. 2, served March 13, 1998, and published 
that day in the Federal Register at 63 FR 12574-75.
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    Petitions for waiver or clarification by responsive (including 
inconsistent) applicants must be filed by August 31, 1998. Each 
responsive (including inconsistent) application filed and accepted will 
be consolidated with the primary application in this proceeding.
    Any responsive (including inconsistent) applicant must file by 
September 21, 1998, either: (1) a verified statement that the 
responsive (including inconsistent) application will have no 
significant environmental impact; or (2) a responsive environmental 
report (RER) that contains detailed environmental information regarding 
the responsive (including inconsistent) application.

The RER

    The RER should comply with all requirements for environmental 
reports contained in our environmental rules at 49 CFR 1105.7. The RER 
should be based on consultations with the Board's Section of 
Environmental Analysis (SEA) and the various agencies set forth in 49 
CFR 1105.7(b). In addition, the information in the RER should be 
organized as follows: Executive Summary; Purpose and Need for Agency 
Action; Description of the Inconsistent or Responsive Application and 
Related Operations; Description of the Affected Environment; 
Description of Alternatives; Analysis of the Potential Environmental 
Impacts; Proposed Mitigation; and Appropriate Appendices that include 
correspondence and consultation responses, bibliography, and a list of 
preparers.
    The purpose of an RER is to provide us the information we need to 
assess the potential environmental impacts of all inconsistent and 
responsive applications in the context of the overall merger proposal. 
After an RER is received, SEA will verify the information contained in 
the document. If the RER is acceptable, SEA will include the RER with 
the Draft Environmental Assessment (Draft EA) for the entire merger 
that will be served and made available for public comment.
    In order to ensure timely, consistent, and appropriate 
environmental documentation, inconsistent and responsive applicants 
must consult with SEA as early as possible. If an RER is insufficient, 
we may require additional environmental information or reject the 
inconsistent or responsive application.

A verified statement of no significant impact

    If an action proposed under an inconsistent or responsive 
transaction would typically fall within 49 CFR 1105.6(c)(2), an RER 
would not be required because such an action is generally exempt from 
environmental review. In such a case, the inconsistent or responsive 
applicant would be required to file only a verified statement. The 
verified statement must demonstrate that the inconsistent or responsive 
application meets the exemption criteria of 49 CFR 1105.6(c)(2). Again, 
anyone desiring to file an inconsistent application or responsive 
application must consult

[[Page 43749]]

with SEA as early as possible regarding the appropriate environmental 
documentation.
    SEA will review the verified statements. If a verified statement is 
insufficient, we may require additional environmental information or 
reject the inconsistent or responsive application. The verified 
statements, like the RERs, will be included in the Draft EA, which will 
be available for public review and comment.

Comments, Protests, Requests for Conditions, and Other Opposition 
Evidence and Argument, Including Filings by DOJ and DOT; Responsive 
(Including Inconsistent) Applications

    Any interested persons, including the U.S. Attorney General and the 
U.S. Secretary of Transportation, may file written comments, protests, 
requests for conditions, and any other opposition evidence and 
argument, as well as responsive (including inconsistent) applications 
no later than October 13, 1998. This deadline applies to comments, 
etc., addressing the primary application or the related filing 
submitted with the primary application.
    Parties filing comments, protests, requests for conditions, and any 
other opposition evidence and argument (including filings by DOJ and 
DOT) must submit an original and 25 copies of such documents, referring 
to STB Finance Docket No. 33556 (lead docket). Parties filing 
responsive (including inconsistent) applications must contact the 
Office of the Secretary, Case Control Unit, at (202) 565-1681 to obtain 
docket numbers for their respective applications, and must submit an 
original and 25 copies of each responsive (including inconsistent) 
application, referring to the assigned sub-docket number for that 
application and must accompany such application with the appropriate 
filing fee. All submissions must be filed with the Surface 
Transportation Board, Office of the Secretary, Case Control Unit, 1925 
K Street, NW., Washington, DC 20423-0001. In addition, as previously 
noted, parties must submit one electronic copy of each document filed 
with the Board. Further details respecting such electronic submissions 
are provided below.
    Written comments, etc., must be concurrently served by first class 
mail on the U.S. Attorney General and the U.S. Secretary of 
Transportation, Judge Harfeld, applicants' representatives, and all 
other parties of record.
    Written comments, etc., must include: (1) the docket number and 
title of the proceeding; (2) the name, address, and telephone number of 
the commenting party and its representative upon whom service shall be 
made; (3) the commenting party's position, i.e., whether it supports or 
opposes the proposed transaction; (4) a list of any specific protective 
conditions sought; and (5) an analysis of the issues with particular 
attention to our general policy statement for the merger or control of 
at least two Class I railroads (49 CFR 1180.1), the statutory criteria 
(49 U.S.C. 11324), and antitrust policy.
    Protesting parties are advised that, if they seek either the denial 
of the primary application or the imposition of conditions upon any 
approval thereof, on the theory that approval without imposition of 
conditions will harm either their ability to provide essential services 
and/or competition, they must present substantial evidence in support 
of their positions. See Lamoille Valley R.R. Co. v. ICC, 711 F.2d 295 
(D.C. Cir 1983).

Response to Comments, Protests, Requested Conditions, and Other 
Opposition, Including DOJ and DOT; Rebuttal in Support of Primary 
Application and Related Application

    Parties submitting responses to comments, protests, requested 
conditions, and other opposition, including DOJ and DOT, and rebuttal 
in support of the primary application and related application, must be 
filed with the Board by November 27, 1998.

Other Dates

    The procedural schedule adopted in this decision further provides: 
(1) that applicants must file a Safety Integration Plan on August 14, 
1998, as they have proposed; (2) that responses to any responsive 
(including inconsistent) applications must be filed by November 27, 
1998; (3) that rebuttal in support of responsive (including 
inconsistent) applications must be filed by December 28, 1998; (4) that 
briefs must be filed by February 5, 1999; (5) that oral argument will 
be heard on March 8, 1999; (6) that, at the discretion of the Board, a 
voting conference will be held on March 15, 1999; and (7) that the 
final written decision, addressing the primary application and the 
related filing, and also addressing any responsive (including 
inconsistent) applications will be served on May 11, 1999.

Discovery

    In Decision No. 2, served March 13, 1998, this proceeding was 
assigned to Judge Harfeld for the handling of all discovery matters and 
the initial resolution of all discovery disputes. Parties wishing to 
engage in discovery must consult with Judge Harfeld, who is designated 
to handle discovery matters and disputes. Judge Harfeld has the 
authority to rule on discovery matters but not to modify the procedural 
schedule.

Deadlines Applicable to Appeals and Replies

    Any appeal to a decision issued by Judge Harfeld must be filed 
within 3 working days of the date of his decision; any response to such 
appeal must be filed within 3 working days of the date of filing of the 
appeal; and any reply to any motion filed with the Board itself in the 
first instance must be filed within 3 working days of the date of 
filing of the motion.

Environmental Review Process

    SEA has determined that preparation of an Environmental Assessment 
(EA) is appropriate in this proceeding. This approach is consistent 
with the Board's environmental rules at 49 CFR 1105.6(b)(4), which call 
for an EA in a merger or acquisition such as this one. In making its 
determination to prepare an EA, SEA considered the nature and scope of 
environmental issues that could arise in this proceeding, as well as 
its consultation with applicants and its evaluation of the information 
to date, including the operating plan and associated environmental data 
that CN/IC submitted with their primary application filed on July 15, 
1998. We agree with SEA that an EA is warranted in this proceeding.
    The procedural schedule that we are adopting will permit us to take 
a hard look at environmental issues required by the National 
Environmental Policy Act (NEPA) and related regulations of the Council 
on Environmental Quality, and will provide the necessary time to enable 
us to prepare an EA and to include public participation by federal, 
state, and local agencies, as well as other concerned parties. If SEA 
determines that this proceeding has the potential for significant 
environmental impacts, then SEA may prepare an Environmental Impact 
Statement, as required by NEPA.
    The EA will address potential environmental impacts of activities 
associated with the proposed merger, including rail line traffic 
density increases and decreases, rail yard and intermodal facility 
activity changes, and new construction. Specifically, the EA will 
address potential environmental impacts on safety, transportation 
systems, land use, energy, air quality, noise, biological resources, 
water resources, historic and cultural resources, environmental 
justice, and socioeconomic effects directly related to

[[Page 43750]]

changes in the environment, and will also include SEA's recommendations 
for environmental mitigation.
    Applicants originally proposed to file an environmental report 30 
days after they filed their application. In a letter dated June 18, 
1998, however, applicants requested that SEA conduct a modified 
environmental review process in this proceeding. SEA concurs with this 
approach. Under this approach, applicants provided, with their 
application and operating plan, an environmental overview rather than 
an environmental report. See CN/IC-6, Environmental Data--Exhibit 4, at 
22-34. This is consistent with the Board's environmental rules at 49 
CFR 1105.10(d), which waive the requirement for an environmental report 
for applicants that retain an independent third-party contractor to 
work under SEA's direction to prepare the necessary environmental 
documentation. For this proceeding, applicants have retained the 
requisite independent third-party contractor.
    With direction and guidance from SEA, applicants will prepare and 
submit to SEA a Preliminary Draft Environmental Assessment (PDEA). 
Preparation of a PDEA is consistent with the Council on Environmental 
Quality regulations at 40 CFR 1506.5(b) that permit preparation of an 
environmental assessment by an applicant. Upon receipt of applicants' 
PDEA, SEA will review and verify the environmental information provided 
by applicants in this document. SEA will then prepare a Draft EA for 
public review and comment. The Draft EA will include SEA's independent 
preliminary recommendations for mitigation to address potentially 
adverse environmental impacts.
    As part of the environmental review process, applicants will also 
submit a Safety Integration Plan, which will fully describe the 
extensive plans they have for maximizing the safe operation of the 
combined system.
    After reviewing all of the public comments on the Draft EA and 
conducting additional analyses, SEA will prepare a Final Environmental 
Assessment (Final EA).
    The Final EA will include SEA's final recommendations for 
environmental mitigation. The Board will consider all public comments, 
the Draft EA and Final EA, and SEA's environmental recommendations in 
making its final decision in this proceeding.
    For additional information on preparation of the EA, contact SEA's 
Project Manager for the proposed CN/IC Acquisition, Michael Dalton, at 
(202) 565-1530.

Electronic Submissions

    As already mentioned, in addition to submitting an original and 25 
paper copies of each document filed with the Board, parties must 
submit, on disks or CDs, copies of all textual materials, electronic 
workpapers, data bases and spreadsheets used to develop quantitative 
evidence. Data must be submitted on 3.5 inch IBM-compatible floppy 
disks or CDs. Textual materials must be in, or convertible by and into, 
WordPerfect 7.0. Electronic spreadsheets must be in, or convertible by 
and into, Lotus 1-2-3 97 Edition, Excel Version 7.0, or Quattro Pro 
Version 7.0. Each disk or CD should be clearly labeled with the 
identification acronym and number of the corresponding paper document, 
see 49 CFR 1180.4(a)(2), and a copy of such disk or CD should be 
provided to any other party upon request. Also, each disk or CD should 
be clearly labeled as containing confidential or redacted materials. 
The data contained on the disks and CDs submitted to the Board will be 
subject to the protective order granted in Decision No. 1, served 
February 26, 1998, and will be for the exclusive use of Board employees 
reviewing substantive and/or procedural matters in this proceeding. The 
flexibility provided by such computer data will facilitate timely 
review by the Board and its staff.19
---------------------------------------------------------------------------

    \19\  The electronic submission requirements set forth in this 
decision supersede, for the purposes of this proceeding, the 
otherwise applicable electronic submission requirements set forth in 
our regulations. See 49 CFR 1104.3(a), as amended in Expedited 
Procedures for Processing Rail Rate Reasonableness, Exemption and 
Revocation Proceedings, STB Ex Parte No. 527, 61 FR 52710, 52711 
(Oct. 8, 1996), 61 FR 58490, 58491 (Nov. 15, 1996).
---------------------------------------------------------------------------

    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.

It is ordered

    1. UTU's motion to dismiss is denied.
    2. The primary application in STB Finance Docket No. 33556, and the 
related filing in the embraced docket, STB Finance Docket No. 33556 
(Sub-No. 1), are accepted for consideration.
    3. Parties must comply with the Final Procedural Schedule adopted 
by the Board in this proceeding as shown in Appendix A.
    4. Parties must comply with the procedural requirements described 
in this decision.
    5. Any appeal to a decision issued by Judge Harfeld must be filed 
within 3 working days of the date of his decision, and any response to 
any such appeal must be filed within 3 working days of the date of 
filing of the appeal.
    6. Any reply to any motion filed with the Board itself in the first 
instance must be filed within 3 working days of the date of filing of 
the motion.
    7. This decision is effective on August 14, 1998.

    Decided: August 10, 1998.

    By the Board, Chairman Morgan and Vice Chairman Owen.
Vernon A. Williams,
Secretary.

Appendix A: Final Procedural Schedule

July 15, 1998
    Primary application and related application filed.
August 14, 1998
    Board notice of acceptance of primary application and related 
application published in the Federal Register.
August 14, 1998
    Safety Integration Plan due.
August 31, 1998
    Notification of intent to participate due.
August 31, 1998
    Description of anticipated inconsistent and responsive 
applications due; petitions for waiver or clarification due with 
respect to such applications.
September 21, 1998
    Responsive Environmental Report and Environmental Verified 
Statements for inconsistent and responsive applicants due.
October 13, 1998
    All comments, protests, requests for conditions, and any other 
evidence and argument in opposition to the primary application due, 
including filings of the U.S. Department of Justice (DOJ) and the 
U.S. Department of Transportation (DOT). Inconsistent and responsive 
applications due.
November 2, 1998
    Notice of acceptance (if required) of inconsistent and 
responsive applications published in the Federal Register.
November 27, 1998
    Response to comments, protests, requested conditions, and other 
opposition due. Response to comments of DOJ and DOT due. Rebuttal in 
support of primary application and related applications due. 
Response to inconsistent and responsive applications due.
December 28, 1998
    Rebuttal in support of inconsistent and responsive applications 
due.
February 5, 1999
    Briefs due, all parties (not to exceed 50 pages for applicants 
and not to exceed 25 pages for all other parties).
March 8, 1999
    Oral argument (close of record).
March 15, 1999
    Voting conference (at Board's discretion).
May 11, 1999
    Date of service of final decision.

    Immediately upon each evidentiary filing, the filing party will 
place all documents relevant to the filing (other than documents 
that are privileged or otherwise protected

[[Page 43751]]

from discovery) in a depository open to all parties, and will make 
its witnesses available for depositions. Access to documents subject 
to protective order will be appropriately restricted. Discovery 
relating to applications and other filings (including responsive and 
inconsistent applications), where permitted, will begin immediately 
upon their filing. The Administrative Law Judge (ALJ) assigned to 
this proceeding will have the authority initially to resolve any 
discovery disputes.
[FR Doc. 98-21934 Filed 8-13-98; 8:45 am]
BILLING CODE 4915-00-P