Notice2023-24818
Canadian Pacific Kansas City Limited and The Kansas City Southern Railway Company, d/b/a CPKC-Acquisition and Operation-Certain Rail Line of Meridian & Bigbee Railroad, L.L.C. in Lauderdale County, Miss., and Choctaw and Marengo Counties, Ala.
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 9, 2023
Effective
November 3, 2023
Issuing agencies
Surface Transportation Board
Abstract
The Surface Transportation Board (Board) is accepting for consideration the primary application (Application) filed October 6, 2023, by Canadian Pacific Kansas City Limited (CPKCL), a noncarrier, on behalf of itself and its wholly owned subsidiary, The Kansas City Southern Railway Company (KCS) d/b/a CPKC (collectively, Applicants). The Application seeks Board approval for KCS, a Class I rail carrier, to acquire from Meridian & Bigbee Railroad, L.L.C. (MNBR), a Class III rail carrier, and to operate approximately 50.4 route miles of rail line between Meridian, Miss., and Myrtlewood, Ala. (the Western Line). This proposal is referred to as the "Proposed Transaction." The Board is also accepting for consideration three related filings.
Full Text
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<title>Federal Register, Volume 88 Issue 216 (Thursday, November 9, 2023)</title>
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[Federal Register Volume 88, Number 216 (Thursday, November 9, 2023)]
[Notices]
[Pages 77409-77416]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-24818]
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SURFACE TRANSPORTATION BOARD
[Docket No. FD 36732]
Canadian Pacific Kansas City Limited and The Kansas City Southern
Railway Company, d/b/a CPKC--Acquisition and Operation--Certain Rail
Line of Meridian & Bigbee Railroad, L.L.C. in Lauderdale County, Miss.,
and Choctaw and Marengo Counties, Ala.
AGENCY: Surface Transportation Board.
ACTION: Decision No. 1; notice of acceptance of application; notice of
acceptance of related filings for consideration; issuance of procedural
schedule.
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SUMMARY: The Surface Transportation Board (Board) is accepting for
consideration the primary application (Application) filed October 6,
2023, by Canadian Pacific Kansas City Limited (CPKCL), a noncarrier, on
behalf of itself and its wholly owned subsidiary, The Kansas City
Southern Railway Company (KCS) d/b/a CPKC (collectively, Applicants).
The Application seeks Board approval for KCS, a Class I rail carrier,
to acquire from Meridian & Bigbee Railroad, L.L.C. (MNBR), a Class III
rail carrier, and to operate approximately 50.4 route miles of rail
line between Meridian, Miss., and Myrtlewood, Ala. (the Western Line).
This proposal is referred to as the ``Proposed Transaction.'' The Board
is also accepting for consideration three related filings.
DATES: The effective date of this decision is November 3, 2023.
Applicants are directed to supplement their Application as discussed in
this decision by November 21, 2023. Any person who wishes to
participate in this proceeding as a Party of Record must file, no later
than November 27, 2023, a notice of intent to participate. All
comments, protests, requests for conditions, and any other evidence and
argument in opposition to the Application and related filings,
including filings by the U.S. Department of Justice (DOJ) and the U.S.
Department of Transportation (DOT), must be filed by December 11, 2023.
Responses to comments, protests, requests for conditions, other
opposition, and rebuttal in support of the Application must be filed by
January 8, 2024. See Appendix (Procedural Schedule). A final decision
in this matter will be served no later than 45 days after the date on
which the evidentiary proceedings conclude, subject to the completion
of environmental review. Further procedural orders, if any, would be
issued by the Board.
[[Page 77410]]
ADDRESSES: Any filing submitted in this proceeding should be filed with
the Board via e-filing on the Board's website. In addition, one copy of
each filing must be sent (and may be sent by email only if service by
email is acceptable to the recipient) to each of the following: (1)
Secretary of Transportation, 1200 New Jersey Avenue SE, Washington, DC
20590; (2) Attorney General of the United States, c/o Assistant
Attorney General, Antitrust Division, Room 3109, Department of Justice,
Washington, DC 20530; (3) Applicants' representative, David F. Rifkind,
Stinson LLP, 1775 Pennsylvania Avenue NW, Suite 800, Washington, DC
20006; and (4) any other person designated as a Party of Record on the
service list.
FOR FURTHER INFORMATION CONTACT: Valerie Quinn at (202) 740-5567. If
you require an accommodation under the Americans with Disabilities Act,
please call (202) 245-0245.
SUPPLEMENTARY INFORMATION: Applicants seek the Board's prior review and
authorization pursuant to 49 U.S.C. 11323-25 and 49 CFR part 1180 for
KCS to acquire from MNBR and operate the Western Line, which comprises
approximately 50.4 route miles of rail line between milepost 0.0<plus-
minus> at Meridian and milepost 50.4<plus-minus> at Myrtlewood. (Appl.
1, 21-22.) According to the Application, KCS would also acquire all
operating rail property owned by MNBR on the Western Line, including
yards at Meridian; Naheola, Ala.; and Myrtlewood; as well as stations
at Meridian; Whynot, Miss.; Yantley, Ala.; Cromwell, Ala.; Jachin,
Ala.; Naheola; and Myrtlewood. (Id. at 22.) \1\
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\1\ This decision embraces the following dockets: CSX
Transportation, Inc.--Discontinuance of Trackage Rights Exemption--
in Marengo & Choctaw Counties, Ala. & Lauderdale County, Miss.,
Docket No. AB 55 (Sub-No. 814X); Alabama & Gulf Coast Railway--
Trackage Rights Exemption--Kansas City Southern Railway d/b/a
Canadian Pacific Kansas City, Docket No. FD 36731; and CSX
Transportation, Inc.--Trackage Rights Exemption--Kansas City
Southern Railway, Docket No. FD 36730.
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CPKC's family of operating railroads in the United States includes
two Class I rail carriers (including KCS) and four Class II rail
carriers. (Id. at 23.) The CPKC system also includes operations in
Canada by the Canadian Pacific Railway Company (CPRC) and in Mexico by
the Kansas City Southern de M[eacute]xico, S.A. de C.V. (KCSM). (Id.)
Together, these railroad companies operate approximately 8,600 miles of
track in the United States, which connects with approximately 7,700
miles that CPRC operates in Canada and approximately 3,800 miles that
KCSM operates in Mexico. (Id.) KCS currently operates or possesses
property rights in Alabama, Arkansas, Illinois, Kansas, Louisiana,
Mississippi, Missouri, Oklahoma, Tennessee, and Texas. (Id. at 19.)
MNBR, a subsidiary of Genesee & Wyoming, Inc. (G&W), currently
operates approximately 168 miles of single-track mainline between
Meridian and Montgomery, Ala. (Id. at 21; id., Ex. 2 at 1.) MNBR owns
and is the sole operator on the Western Line, where it serves 11 local
customers. (Id., App. 2, V.S. Clements 6; id., Ex. 15, Operating Plan
2; id., Ex. 4, Env't Info. 37.) In addition to the Western Line, MNBR
operates a rail line known as the Eastern Line that connects to the
Western Line at Myrtlewood and extends east to Burkville, Ala.\2\ (Id.
at 21.) MNBR also operates between Burkville (the eastern end of the
Eastern Line) and Montgomery pursuant to overhead trackage rights. (Id.
at 21; id., Ex. 15, Operating Plan 2.) On the Western Line, MNBR
currently interchanges with CPKC and Norfolk Southern Railway Company
(NSR) at Meridian. (Id., Ex. 15, Operating Plan 3.) On the Eastern
Line, MNBR currently interchanges with Alabama & Gulf Coast Railway LLC
(AGR) \3\ at Linden, Ala., and with NSR at Selma, Ala. (Id.) MNBR also
interchanges with CSXT at Montgomery. (Id.)
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\2\ MNBR owns the line but leases the underlying right of way
from CSX Transportation, Inc. (CSXT). (Appl. 21; id., App. 4, V.S.
Walsh 2.) Applicants note that MNBR's lease is scheduled to expire
in November 2023. (Id. at 2.)
\3\ AGR is also a subsidiary of G&W. (Id. at 4.)
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Applicants state that KCS is acquiring the Western Line to
establish a direct interchange with CSXT at Myrtlewood, and that the
Proposed Transaction is contingent on CSXT acquiring and resuming
operations on the Eastern Line. (Id. at 2); see also CSX Transp.,
Inc.--Acquis. & Operation--Rail Line of Meridian & Bigbee R.R., Docket
No. FD 36727. According to Applicants, CPKC trains will handle overhead
traffic only and will not provide local service. (Appl., Ex. 4, Env't
Info. 37.) Applicants state that they expect to interchange one train
pair daily with CSXT, with an average volume of 70 cars per train, for
at least the first five years. (Id. at 13; id., Ex. 15, Operating Plan
8.) Applicants represent that, while CPKC intends to grow the volumes
served on this route, one train pair daily should provide sufficient
capacity to accommodate much of the growth in the first five to ten
years. (Id., Ex. 15, Operating Plan 8.)
According to the Application, MNBR would continue to provide local
and overhead rail service on the Western Line post-transaction much as
it does today, except that it would no longer act as an intermediate
bridge carrier for CPKC-CSXT traffic. (Id., Ex. 4, Env't Info. 37.)
Specifically, MNBR would retain exclusive trackage rights to operate
over the Western Line to (1) serve existing customers and (2)
interchange with, and handle freight rail traffic to and from, AGR at
or near Myrtlewood for interchange with CPKC and NSR at Meridian. (Id.,
Ex. 2, Retained Trackage Rights Agreement, art. 2.1.) MNBR would also
retain non-exclusive trackage rights to operate over the Western Line
to (1) interchange with, and handle freight rail traffic to and from,
CSXT at or near Myrtlewood for interchange with NSR at Meridian and (2)
if requested by CPKC, handle CPKC-CSXT overhead freight rail traffic
between Meridian and Myrtlewood. (Id.)
The Board finds that the Application is complete and that the
Proposed Transaction is a minor transaction based upon the preliminary
determination that the Proposed Transaction's anticipated contribution
to the public interest in meeting significant transportation needs
clearly outweighs any potential anticompetitive effects. 49 CFR
1180.2(b), (c). The Board makes this preliminary determination based
solely on the evidence presented in the Application. The Board
emphasizes that this is not a final determination and may be revisited
or rebutted by subsequent filings and evidence submitted into the
record for this proceeding. The Board also adopts a procedural schedule
for consideration of the Application and directs Applicants to file
certain supplemental information.
Finally, an Environmental Assessment (EA) will be prepared to
comply with the Board's obligations under the National Environmental
Policy Act, 42 U.S.C. 4321-4370m-11 (NEPA), and related environmental
laws.\4\
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\4\ The Board is required to accommodate NEPA's requirements in
its decision-making. Therefore, the Board will not issue a final
decision on the merits of the Application until the environmental
review is complete, including preparation of an EA and opportunity
for public comment and participation during the EA process. See
Environmental Matters section below.
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Financial Arrangements. According to Applicants, no cash is
involved in the Proposed Transaction and no new securities would be
issued in connection with the Proposed Transaction. (Id. at 14, 16.)
Applicants state that the only relevant financial arrangement is the
in-kind consideration paid by CPKC as provided in the draft purchase
agreement
[[Page 77411]]
(Transaction Agreement).\5\ (Id.) Applicants state that the parties
have agreed upon a valuation of the property rights that KCS would
acquire, and as consideration, MNBR's parent company, G&W, would
receive equivalent value in the form of rights with respect to two CPKC
operating properties in Canada. (Id. at 16.) Applicants further state
that the Transaction Agreement entitles G&W to receive additional
compensation under certain circumstances. (Id.)
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\5\ The Transaction Agreement is attached to the Application as
Exhibit 2.
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Passenger Service Impacts. Applicants assert that there would be no
impact on commuter or other passenger service because no commuter or
passenger service moves on the Western Line. (Id., Ex. 15, Operating
Plan 12.)
Discontinuances/Abandonments. According to Applicants, CPKC does
not anticipate seeking authority for any discontinuances of service or
rail line abandonments in relation to the Proposed Transaction. (Id.,
Ex. 15, Operating Plan 12.) Applicants state that CSXT has agreed to
seek authority to discontinue its overhead trackage rights on the
Western Line. (Id.); see also CSXT Notice, Oct. 6, 2023, CSX Transp.,
Inc.--Discontinuance of Trackage Rts. Exemption--in Marengo & Choctaw
Cntys., Ala. & Lauderdale Cnty., Miss., AB 55 (Sub-No. 814X).
Additionally, Applicants state that, in conjunction with CSXT's
proposed acquisition of the Eastern Line, CPKC anticipates that MNBR
will seek authority to discontinue its overhead trackage rights between
Burkville and Montgomery. (Appl., Ex. 15, Operating Plan 12); see also
MNBR Notice, Oct. 6, 2023, Meridian & Bigbee R.R.--Discontinuance of
Incidental Overhead Trackage Rts.--in Lowndes & Montgomery, Ala., AB
1335X.
Public Interest Considerations. Applicants assert that the Proposed
Transaction would enhance competition by establishing a direct,
efficient interchange with CSXT at Myrtlewood, thereby creating a new
east-west Class I freight rail corridor linking CPKC-served markets in
Mexico and the southwestern United States with CSXT-served markets in
the southeastern United States and beyond. (Appl. 2.) Applicants state
that a direct CPKC-CSXT routing would give CPKC and CSXT control over
the traffic between origin and destination, enabling them to deliver
``a reliable and consistent premium train service.'' (Id. at 11.)
According to Applicants, this new freight rail corridor would
provide a shorter and more efficient route for existing CPKC-CSXT
traffic and a new, highly attractive option for new customers. (Id.)
Applicants state that CPKC and CSXT intend to coordinate interchange to
minimize dwell and would operate utilizing run-through power. (Id. at
11-12.) Applicants further state that a direct CPKC-CSXT routing over
Myrtlewood would reduce the amount of traffic that CPKC currently
interchanges with intermediate carriers and would avoid areas such as
New Orleans that are difficult to traverse and susceptible to seasonal
weather disruptions. (Id. at 10-11, 14.) As a result, CPKC anticipates
that the Proposed Transaction would reduce the number of work events
and yard dwell time associated with existing CPKC-CSXT interline
traffic, and in turn reduce operational risks. (Id. at 14.)
Additionally, Applicants contend that the Proposed Transaction would
position CPKC to compete for the new traffic that it states will be
generated by several new automotive plants that are planned to open in
the southeastern United States in the next few years. (Id. at 11.)
Applicants also note that CPKC intends to invest approximately $46
million to upgrade the infrastructure of the Western Line to Class I
railroad standards \6\ and approximately $9 million on bridge repair
and improvements, elevating the Western Line from a lower-density line
to a competitive east-west corridor.\7\ (Id. at 12-13.)
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\6\ Applicants state that CPKC is planning an extensive track
maintenance and rehabilitation program to improve the track to
support operations at a sustained maximum speed of 25 MPH, with the
potential for additional improvements in the future. (Appl. 12.)
\7\ Applicants further note that CPKC intends to embark on a
multi-year bridge rehabilitation program, which it estimates will
cost over $100 million. (Id. at 12-13.)
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Time Schedule for Consummation. Applicants state that the Proposed
Transaction is scheduled to be consummated as soon as practicable after
the Board's decision approving the Application becomes effective and
upon satisfaction of all other conditions precedent to closing set
forth in the Transaction Agreement. (Id. at 9.)
Environmental and Historic Preservation Impacts. Applicants state
that they include with the Application the information required by 49
CFR 1180.6(a)(8) and 49 CFR part 1105. (Appl. 36.) As discussed below,
the Proposed Transaction would exceed the Board's thresholds for
environmental review. Therefore, the Board will prepare an EA. Based on
the available information, no historic review is required.
Labor Impacts. Applicants state that, as a result of the Proposed
Transaction, CPKC anticipates it would hire 12 new, full-time employees
in 2024, including one track inspector, one foreman, one machine
operator, one trackman, and eight Meridian-based train and engine
service employees. (Appl. 17; id., Ex. 15, Operating Plan 13.)
Applicants state that no CPKC employee will be adversely affected by
the Proposed Transaction. (Id. at 17; id., Ex. 15, Operating Plan 13.)
Applicants note that employees adversely affected by the Proposed
Transaction would be entitled to the employee protective conditions and
other procedures adopted in New York Dock Railway--Control--Brooklyn
Eastern District Terminal, 360 I.C.C. 60 (1979), aff'd sub nom. New
York Dock Railway v. United States, 609 F.2d 83 (2d Cir. 1979), as
modified by Wilmington Terminal Railroad--Purchase & Lease--CSX
Transportation Inc., 6 I.C.C.2d 799, 814-26 (1990), aff'd sub nom.
Railway Labor Executives' Association v. Interstate Commerce
Commission, 930 F.2d 511 (6th Cir. 1991). (Appl. 16.)
Related Filings. Three verified notices of exemption and an
application for acquisition and operation authority were filed in
connection with the Proposed Transaction.\8\
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\8\ Also, on September 28, 2023, Applicants filed a motion for
protective order in Docket No. FD 36732, which was granted by
decision served on October 11, 2023.
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CSXT Acquisition of Trackage Rights. In Docket No. FD 36730, CSXT
filed a verified notice of exemption under 49 CFR 1180.2(d)(7) to
acquire overhead trackage rights from KCS over approximately two miles
of rail line between milepost 50.4 and milepost 48.4 on the Western
Line. CSXT states that the trackage rights are related to its proposed
acquisition of the Eastern Line between Burkville and Myrtlewood in
Docket No. FD 36727. CSXT states that the overhead trackage rights
would allow CSXT to access a point on the Western Line to interchange
traffic with AGR and MNBR at Myrtlewood. CSXT states that it intends to
consummate this transaction on or shortly after the date it acquires
the Eastern Line from MNBR. As a condition to use of this exemption,
CSXT states that any employees adversely affected by the transaction
would be protected by the conditions set forth in Norfolk & Western
Railway--Trackage Rights--Burlington Northern, Inc., 354 I.C.C. 605
(1978), as modified in Mendocino Coast Railway--Lease & Operate--
California Western Railroad, 360 I.C.C. 653 (1980).
[[Page 77412]]
AGR Acquisition of Trackage Rights. In Docket No. FD 36731, AGR, a
Class II rail carrier, filed a verified notice of exemption under 49
CFR 1180.2(d)(7) to acquire overhead trackage rights from CPKC over
approximately 8.4 miles of rail line between milepost 50.4<plus-minus>
and milepost 42.0<plus-minus>. AGR currently holds incidental operating
rights from Linden to Myrtlewood over the Eastern Line for purposes of
interchange with MNBR. AGR intends to use the overhead trackage rights
sought in Docket No. FD 36731 for continued interchange with MNBR and
to interchange with CSXT at Myrtlewood following CSXT's acquisition of
the Eastern Line.\9\ AGR states that it intends to consummate the
agreement and commence operations either on the effective date of its
notice or upon the consummation of CPKC's acquisition of the Western
Line, whichever is later. As a condition to use of this exemption, AGR
states that any employees adversely affected by the transaction would
be protected by the conditions set forth in Norfolk & Western Railway--
Trackage Rights, 354 I.C.C. 605, as modified in Mendocino Coast
Railway--Lease & Operate, 360 I.C.C. 653.
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\9\ Applicants state that CPKC would grant AGR trackage rights
to Naheola Yard in order to give AGR the flexibility to interchange
with MNBR at Naheola Yard instead of Myrtlewood if operating
conditions warrant, e.g., if for some reason, the designated
Myrtlewood yard track cannot accommodate the volume of MNBR's and
AGR's interchange traffic. (Appl., Ex. 15, Operating Plan 8.)
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CSXT Discontinuance of Trackage Rights. In Docket No. AB 55 (Sub-
No. 814X), CSXT filed a verified notice of exemption under the class
exemption at 49 CFR part 1152, subpart F, to discontinue overhead
trackage rights over the entirety of the Western Line, including ``head
and tail operating room'' at both ends, for a total distance of
approximately 51 miles. CSXT states that it has not moved any traffic
over the line during the past two years and that it intends to
consummate its discontinuance authority on the same day that CPKC
consummates its proposed acquisition of the Western Line. As a
condition to the use of this exemption, CSXT states that any employees
adversely affected by the transaction would be protected by the
conditions set forth in Oregon Short Line Railroad--Abandonment Portion
Goshen Branch Between Firth & Ammon, in Bingham & Bonneville Counties,
Idaho, 360 I.C.C. 91 (1979).
CSXT is seeking this discontinuance authority under the Board's
two-year-out-of-service class exemption procedures, although another
carrier, MNBR, has been providing local service over the same line
during that two-year period. In Austin Area Terminal Railroad--
Discontinuance of Service Exemption--in Bastrop, Burnet, Lee, Llano,
Travis, & Williamson Counties, Tex., AB 578X (STB served Nov. 3, 2023),
the Board recently reaffirmed that to qualify for the two-year-out-of-
service class exemption a carrier must certify that no local traffic
has moved over the line for two years, not just its own traffic.
Accordingly, the Board upheld a prior decision that rejected a verified
notice because the required certification concerning the absence of
local traffic on the line was deficient. Id. at 1. The Board noted,
however, that carriers may petition the Board for individual exemptions
under 49 U.S.C. 10502(a) and granted on its own motion an individual
exemption authorizing the discontinuance. Id. at 4-5.
Although, per Austin Area Terminal Railroad, CSXT may not proceed
under the Board's two-year-out-of-service class exemption procedures,
the Board will nonetheless consider whether to grant an individual
exemption for this discontinuance authority on its own motion as it
considers the Proposed Transaction. To that end, CSXT may supplement
the record in Docket No. AB 55 (Sub-No. 814X) by November 21, 2023,
with any additional information and argument it would like the Board to
consider in determining whether the proposed discontinuance meets the
exemption standard of 49 U.S.C. 10502(a).
CSXT Acquisition of the Eastern Line. In Docket No. FD 36727, CSXT
seeks the Board's prior review and authorization pursuant to 49 U.S.C.
11323-25 and 49 CFR part 1180 to acquire from MNBR and to operate the
Eastern Line. The Eastern Line consists of two segments totaling
approximately 93.68 miles: (1) extending from milepost XXB 189.00 near
Burkville to milepost XXB 222.00 at Western Junction, a distance of
approximately 30.22 miles; \10\ and (2) extending from a connection
with the first segment at Western Junction, milepost OOR 716.25 to
milepost ORS 779.71 near Myrtlewood, a distance of approximately 63.46
miles. The Eastern Line includes Selma Yard, at Selma, and the
following stations: Myrtlewood, Linden, Thomaston, Safford, Orville,
Beloit, Selma, Industrial Lead, Tyler, Benton, Whitehall, and
Burkville. Together with the Proposed Transaction, CSXT's proposed
acquisition of the Eastern Line would create a direct CPKC-CSXT
interchange at Myrtlewood. While CPKC states in the Application that
the Proposed Transaction is contingent on CSXT acquiring and resuming
operations on the Eastern Line, CSXT states in its application that its
acquisition of the Eastern Line could proceed regardless of whether the
CPKC acquires the Western Line.\11\
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\10\ By decision served November 3, 2023, in Docket No. FD
36727, CSXT has been asked to confirm the total distance of the
Burkville to Western Junction segment. See CSX Transp., Inc.--
Acquis. & Operation--Rail Line of Meridian & Bigbee R.R., FD 36727
et al., slip op. at 3 n.3 (STB served Nov. 3, 2023).
\11\ On October 25, 2023, NSR filed a request (NSR's Request)
for the Board to consolidate this proceeding with the proceeding in
Docket No. FD 36727 regarding the CSXT's acquisition of the Eastern
Line (and all of the related filings in both dockets) and to hold
the consolidated proceeding in abeyance, including the Board's
determination of whether to designate the transactions as minor or
significant, until such time that CSXT and CPKC provide certain
additional information, primarily regarding the potential effects of
changes in CPKC-CSXT traffic flows on other traffic. On October 27,
2023, Applicants replied in opposition to NSR's request, arguing
that the Proposed Transaction builds upon but is not part of CSXT's
proposed acquisition of the Eastern Line and is properly classified
as a minor transaction. (CPKC Reply 4-6, Oct. 27, 2023.) Applicants
further argue that the Application appropriately addresses the
cumulative effects of the Proposed Transaction against the backdrop
of CSXT's proposed transaction. (Id. at 6-10.) On October 31, 2023,
Illinois Central Railroad Company filed in support of NSR's request
for consolidation, and CPKC responded the same day. For the reasons
given above, the current record supports a minor designation. The
Board will not order the parties to submit a consolidated
application at this time, though as discussed below, the Board's
Office of Environmental Analysis (OEA) has determined that it is
appropriate to prepare one EA to encompass both the Western Line and
the Eastern Line. The Board may further address the consolidation
issue in a subsequent decision. Additionally, the Board will not
hold the proceedings in abeyance, as the Board is requiring
Applicants to supplement the record as discussed further in this
decision.
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Primary Application and Related Filings. The Board finds that the
Proposed Transaction would be a ``minor transaction'' under 49 CFR
1180.2(c), and the Board accepts the Application for consideration
because it is in substantial compliance with the applicable regulations
governing minor transactions. See 49 U.S.C. 11321-26; 49 CFR part 1180.
Additionally, the Board is accepting for consideration the related
filings in Docket Nos. FD 36730 and FD 36731, which are also in
compliance with the applicable regulations.\12\ As discussed below, the
Board will require Applicants to
[[Page 77413]]
supplement the record and reserves the right to require further
supplemental information as necessary to complete the record.
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\12\ In Docket No. FD 36727, the Board accepted for
consideration CSXT's application to acquire the Eastern Line. See
CSX Transp., Inc.--Acquis. & Operation, FD 36727 et al., slip op. at
8. Additionally, as discussed above, CSXT's verified notice of
exemption in Docket No. AB 55 (Sub-No. 814X) does not qualify for
the class exemption procedures under which it was filed; however,
the verified notice will be accepted as evidence bearing on
consideration of whether to grant CSXT an individual exemption on
the Board's own motion.
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When a transaction does not involve the merger or control of two or
more Class I railroads, the Board's treatment differs depending upon
whether the transaction would have ``regional or national
transportation significance.'' 49 U.S.C. 11325. Under 49 CFR 1180.2, a
transaction that does not involve two or more Class I railroads is to
be classified as ``minor''--and thus not having regional or national
transportation significance--if a determination can be made that
either: (1) the transaction clearly will not have any anticompetitive
effects, or (2) any anticompetitive effects of the transaction will
clearly be outweighed by the transaction's anticipated contribution to
the public interest in meeting significant transportation needs. A
transaction not involving the control or merger of two or more Class I
railroads is to be classified as ``significant'' if neither of these
determinations can be made. (Id.)
The Board finds the Proposed Transaction to be a ``minor
transaction'' because it appears from the face of the Application that
the efficiency and other public interest benefits would clearly
outweigh the potential anticompetitive effects of the transaction. The
Proposed Transaction, in conjunction with CSXT's acquisition of the
Eastern Line, would create a new, direct Class I to Class I connection
that could provide potential improvements in the efficient movement of
existing and future intermodal, automotive, and other interline traffic
between the Southeastern United States and the Southwestern United
States and Mexico. (See Appl. 5.) A direct CPKC-CSXT route has the
potential to offer faster transit times and more efficient and reliable
service, (see id., App. 3, V.S. Wahba 6), giving CPKC a new ability to
compete effectively against existing interline routing options. It
could also reduce the amount of traffic that CPKC currently
interchanges with intermediate carriers--including with the MNBR at
Meridian--and allow certain movements to avoid areas such as New
Orleans that are difficult to traverse and susceptible to seasonal
weather disruptions. (See id. at 14.) Diverting existing traffic to the
new Myrtlewood gateway from congested gateways such as New Orleans
could improve the efficiency of operations at those existing gateways.
Moreover, adding a new gateway would provide redundancy in the national
network and could reduce the economic impact of future outages in other
areas (e.g., if rail infrastructure in the New Orleans area becomes
unusable for a prolonged period due to flooding). The shorter transit
times could also benefit shippers by lowering equipment costs and
inventory carrying costs. (See id., App. 3, V.S. Wahba 2.)
Applicants represent that there would be no two-to-one shippers as
a result of the Proposed Transaction, i.e., no shipper would lose
access to a second rail carrier. (See id. at 14-15.) They further
assert that, given MNBR's retained trackage rights (including pricing
authority) with no limitations on interchange, existing shippers on the
Western Line could receive the same rail service and have the same rail
options currently available. (See id. at 2, 14; id., Ex. 2, Transaction
Agreement, Sec. 2.06(a).) Indeed, it appears that, given Applicants'
anticipated investments in the Western Line, customers of both
Applicants and MNBR would benefit from more efficient service over
upgraded and safer facilities. (See id. at 12-13, 15.) There is a
potential that traffic currently interchanged with other carriers may
be diverted to the Myrtlewood interchange post-transaction (as
discussed in the section below), and this has implications for
competition, including a potential increase in competition to the
benefit of shippers. The Board finds, at least preliminarily, that the
potential risks of anticompetitive effects are clearly outweighed by
the Proposed Transaction's anticipated benefits.
For these reasons, based on the information provided in the
Application, the Board finds the Proposed Transaction to be a minor
transaction under 49 CFR 1180.2(c). This determination should not be
read to mean that the Proposed Transaction is insignificant or of
little importance. Indeed, after the record is fully developed, the
Board will conduct a careful review before making a final determination
as to whether the Proposed Transaction would substantially lessen
competition, create a monopoly, or restrain trade, and whether any
anticompetitive effects would be outweighed by the public interest. See
49 U.S.C. 11324(d)(1)-(2). The Board may also consider imposing
conditions on the Proposed Transaction.
Supplemental Information. The Board notes that the Proposed
Transaction, in conjunction with CSXT's proposed acquisition of the
Eastern Line, may result in shifts to traffic flows, including traffic
currently interchanged with a third-party carrier. For example, post-
transaction, CPKC anticipates being able to use the new connection at
Myrtlewood to interchange directly with CSXT automotive traffic moving
between KCSM-served locations in Mexico and CSXT-served locations on
the East Coast, (see id., App. 3, V.S. Wahba 5-7), whereas today, KCSM
interchanges that traffic with a bridge carrier at Laredo, Tex., which
carries the traffic to/from CSXT interchanges at East St. Louis,
Memphis, and New Orleans, (id., App. 3, V.S. Wahba 5 (``The available
direct links between the CPKC and CSXT networks generally do not
provide competitive options for this traffic category . . . .'')). In
order to assist the Board in its consideration of the Application and
in making the determination of what--if any--conditions might be
warranted, Applicants will be directed to supplement the Application by
November 21, 2023, with certain additional information. See 49 CFR
1180.4(c)(2)(v) (``The applicant shall submit such additional
information to support its application as the Board may require.'').
In CPKC's reply to NSR's Request, CPKC maintains that it is ``bound
by KCSR's 2004 commitment not to close the Laredo gateway,'' and hence
that ``UP will continue to have the opportunity to compete to
participate in flows of traffic between Mexico and CSXT destinations in
the U.S. Southeast via Laredo and New Orleans.'' (CPKC Reply 5 n.3,
Oct. 27, 2023.) CPKC also states, ``[t]he newly invigorated rail
service that CPKC is pursuing via this transaction is an outgrowth of
the Board's approval of the CP/KCS transaction, which for example
enabled the combined CPKC system to offer improved transportation
solutions--and thereby to compete more effectively against its much
larger rivals--for traffic of automotive manufacturers and parts
suppliers.'' (Id. at 2-3.) In making its preliminary determination
here, the Board recognizes the effects of the conditions it imposed on
the merger between Canadian Pacific Railway and Kansas City Southern
Railway regarding gateways and related data reporting requirements. See
Can. Pac. Ry.--Control--Kan. City S. (CPKC Approval Decision), FD 36500
et al, slip op. at 12-13 (STB served Mar. 15, 2023). These conditions
decrease the likelihood of any substantial lessening of
competition.\13\ Nonetheless, in a supplemental filing, CPKC will be
directed to describe in detail the scope
[[Page 77414]]
of ``KCSR's 2004 commitment not to close the Laredo gateway,'' the
intersection between the 2004 commitment and the conditions imposed in
CPKC Approval Decision, FD 36500 et al., and the commitment's potential
implications on the Board's final analysis of the competitive effects
of the Proposed Transaction.
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\13\ The Board notes that CPKC states that there is not ``some
secret overarching agreement between CPKC and CSXT that has not been
put before the Board and that somehow implicates the competitive
landscape.'' (CPKC Reply 5-6, Oct. 27, 2023.)
---------------------------------------------------------------------------
Additionally, in its supplement, to further inform the Board's
analysis, CPKC additionally shall provide a list of all origination/
destination areas,\14\ including gateways, for the projected diverted
and new traffic; identify any interchange partners participating in
current movements of this traffic as well as projected diverted and new
movements (if applicable); \15\ and provide the associated volumes by
origination/destination areas for projected diverted and new traffic.
The Board recognizes that CPKC was recently required to produce
substantial information about its network and the markets it serves in
Canadian Pacific Railway--Control--Kansas City Southern, Docket No. FD
36500 et al. Some of the work involved with that production may be
relevant to the Proposed Transaction, potentially lowering the burden
on CPKC of producing the information requested here, which the Board
recognizes goes beyond what is generally required for a minor
transaction under 49 CFR 1180.4 (and therefore, not necessarily
applicable to future minor transactions).
---------------------------------------------------------------------------
\14\ Origination/destination areas may be as broad as a state or
group of states. CPKC shall provide a justification for whatever
grouping metric it uses for its analysis and shall specify the
gateway(s) used by traffic for the origination or destination areas.
\15\ Information should include the total count of cars
interchanged, categorized by two-digit Standard Transportation
Commodity Code and broken out by interchange partner.
---------------------------------------------------------------------------
To assist the Board in evaluating the Proposed Transaction, in
conjunction with CSXT's proposed acquisition of the Eastern Line, the
Applicants will be directed to provide additional operational
information. As NSR notes, the Application does not include an analysis
of the potential operational impacts to shippers or Amtrak passengers
on rail segments outside the Eastern Line and Western Line. (NSR Reply
12-13.) Accordingly, the Board directs Applicants to detail any impacts
anticipated on other rail operations, including (1) potential impacts
on any passenger rail operations that involve crossing the Western Line
and (2) delays that may be occasioned because a line is scheduled to
handle increased traffic due to route consolidations or traffic
diversions. Applicants also shall provide a description of the effect
of any deferred maintenance or delayed capital improvements on the
subject lines and associated equipment. This should include the
schedule for eliminating such deferrals, details of general system
rehabilitation (including rehabilitation relating to the transaction,
such as proposed yard and terminal modifications), and how these
activities will lead to service improvements or operating economies
anticipated from the transaction.
Procedural Schedule. Applicants are directed to supplement their
Application as discussed in this decision by November 21, 2023. Any
person who wishes to participate in this proceeding as a Party of
Record must file a notice of intent to participate no later than
November 27, 2023; all comments, protests, requests for conditions, and
any other evidence and argument in opposition to the Application,
including filings by DOJ and DOT, must be filed by December 11, 2023;
and responses to comments, protests, requests for conditions, and other
opposition on the transportation merits of the Proposed Transaction
must be filed by January 8, 2024.\16\ The Board is required to issue
``a final decision by the 45th day after the date on which it concludes
the evidentiary proceedings,'' 49 U.S.C. 11325(d)(2), and will do so
here, subject to the completion of environmental review.\17\ The Board
reserves the right to adjust the schedule as circumstances may warrant.
The adopted procedural schedule is in the Appendix to this decision.
---------------------------------------------------------------------------
\16\ Applicants propose a round of briefs due on the same day
that the evidentiary record is statutorily required to close. (Appl.
8); see also 49 U.S.C. 11325(d)(2). But they provide no explanation
as to the intent or necessity of these additional briefs, which are
not contemplated by the governing statute or the Board's
regulations. See 49 U.S.C. 11325(d)(2); 49 CFR 1180.4(e)(2).
Accordingly, the Board has not included the proposed briefs in the
procedural schedule adopted here.
\17\ This notice will be published in the Federal Register on
November 9, 2023, and all subsequent deadlines will be calculated
from this date. Deadlines for filings are calculated in accordance
with 49 CFR 1104.7(a).
---------------------------------------------------------------------------
Notice of Intent To Participate. Any person who wishes to
participate in this proceeding as a Party of Record must file with the
Board, no later than November 27, 2023, a notice of intent to
participate, accompanied by a certificate of service indicating that
the notice has been properly served on the Secretary of Transportation,
the Attorney General of the United States, and Applicants'
representative.
If a request is made in the notice of intent to participate to have
more than one name added to the service list as a Party of Record
representing a particular entity, the extra name(s) will be added to
the service list as a ``Non-Party.'' Any person designated as a Non-
Party will receive copies of Board decisions, orders, and notices but
not copies of official filings. Persons seeking to change their status
must accompany that request with a written certification that they have
complied with the service requirements set forth at 49 CFR 1180.4 and
any other requirements set forth in this decision.
Discovery. Discovery may begin immediately. The parties are
encouraged to resolve all discovery matters expeditiously and amicably.
Service on Parties of Record. Each Party of Record will be required
to serve upon all other Parties of Record, within 10 days of the
service date of this decision, 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 will also be
required to file with the Board, within 10 days of the service date of
this decision, a certificate of service 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 this decision must
have its own certificate of service indicating that all Parties of
Record on the service list have been served with a copy of the filing.
Members of the United States Congress and Governors are not Parties of
Record and need not be served with copies of filings, unless any Member
or Governor has requested to be, and is designated as, a Party of
Record.
Environmental Matters. NEPA requires that the Board take
environmental considerations into account in its decision-making. Under
the Board's environmental regulations, an acquisition under 49 U.S.C.
11323 generally requires the preparation of an EA where certain
thresholds would be exceeded. See 49 CFR 1105.6(b)(4). The thresholds
for assessing environmental impacts from increased rail traffic on rail
lines in acquisitions are an increase in rail traffic of at least 100%
(measured in gross ton miles annually) or an increase of at least eight
trains per day. 49 CFR 1105.7(e)(5). For air quality impacts, rail
lines located in areas classified as being in ``nonattainment'' areas
under the Clean Air Act (42 U.S.C. 7401-7671q) are also assessed if
they would experience an increase in rail traffic of at least 50%
(measured in gross ton miles annually) or an increase of at least three
trains per day. 49 CFR 1105.7(e)(5)(ii).
In the Application, Applicants submitted environmental information,
[[Page 77415]]
including estimated volume increases on the Western Line by track
segment (Exhibit 4). The estimated volume for each segment includes
transaction-related projections for five years (through 2029), as well
as no-action projections (traffic including increases that would occur
without the Proposed Transaction). CPKC states that there would be a
transaction-related increase of one train a day in each direction on
the Western Line, an overall addition of two trains per day, which
would result in an increase in gross-ton miles in excess of 100%.
(Appl., Ex. 4, Env't Info. 41-42.) According to Applicants, the
Proposed Transaction would not result in traffic being diverted to
other transportation systems or modes. (Appl., Ex. 4, Env't Info. 40.)
The NEPA Process. OEA has reviewed the data provided by Applicants,
including their traffic projections through 2029. Based on the current
record, neither the 8-trains-per-day nor the 3-trains-per-day
thresholds for environmental review will be exceeded as a result of the
Proposed Transaction. However, because there will be an increase in
gross-ton miles in excess of 100% on the line segments involved in the
Proposed Transaction, the gross-ton mile threshold will be exceeded and
therefore, OEA will prepare an EA. See 49 CFR 1105.7(e)(5)(i);
1105.10(b). For expediency and efficiency, OEA has determined that it
is appropriate to prepare one EA to encompass both the Western Line and
the Eastern Line (including the Burkeville-Montgomery segment) because
these transactions involve contiguous segments of the same rail line;
indeed, CPKC's acquisition of the Western Line is contingent on CSXT's
acquisition of the Eastern Line, and both CPKC and CSXT provided volume
forecasts showing exceedance of the gross-ton mile thresholds based on
each transaction being authorized and implemented. (Appl., Ex. 4, Env't
Info. 38); see also CSXT Appl., Ex. 4, Env't Info. 6-7, Oct. 6, 2023,
CSX Transp., Inc.--Acquis. & Operation--Rail Line of Meridian & Bigbee
R.R., FD 36727. In addition, the environmental impacts from both
transactions are expected to be very similar and both applications were
filed at the same time, allowing environmental review of the two
transactions to proceed simultaneously.
The EA process will address potential environmental impacts of
activities associated with both the Western Line and the Eastern Line,
including changes in rail line traffic and rail yard activity. OEA will
prepare a Draft EA and issue it for public comment. Following the close
of the comment period, OEA will prepare a Final EA. The Final EA will
address the comments received on the Draft EA, present OEA's final
conclusions regarding the potential environmental impacts of the
transactions, and set forth OEA's final recommendations to the Board,
including recommended environmental mitigation measures.\18\ The Board
then will consider the entire record, including the record on the
transportation merits, the Draft EA, the Final EA, and all public
comments received. In its final decision, the Board will decide whether
the Proposed Transaction should be authorized and, if so, what
conditions, including environmental mitigation conditions, to impose.
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\18\ The Board's general practice has been to mitigate only
impacts resulting directly from a proposed transaction, and not to
require mitigation for existing conditions and existing railroad
operations. See 49 CFR 1180.1(f)(1).
---------------------------------------------------------------------------
Historic Review. The Board's regulations provide that historic
review normally is not required for acquisitions where there would be
no significant change in operations and properties 50 years old and
older would not be affected. See 49 CFR 1105.8. Based on the current
record, no historic review is required.
Service of Decisions, Orders, and Notices. The Board will serve
copies of its decisions, orders, and notices on those persons who are
designated on the service list as a Party of Record or Non-Party. All
other interested persons are encouraged to obtain copies of decisions,
orders, and notices via the Board's website at <a href="http://www.stb.gov">www.stb.gov</a>.
Access to Filings. Under the Board's rules, 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. 49 CFR 1180.4(a)(3). The Application and other
filings in this proceeding will be furnished to interested persons upon
request and will also be available on the Board's website at
<a href="http://www.stb.gov">www.stb.gov</a>. In addition, the Application may be obtained from
Applicants' representative at the address indicated above.
It is ordered:
1. The Application filed in Docket No. FD 36732 and the related
filings in Docket Nos. FD 36730 and FD 36731 are accepted for
consideration.
2. Applicants shall file the supplemental information described
above by November 21, 2023.
3. The filing in Docket No. AB 55 (Sub-No. 814X) is accepted to the
extent discussed above. CSXT may file supplemental evidence and
argument in support of an individual exemption in that docket by
November 21, 2023.
4. The parties to this proceeding must comply with the procedural
schedule shown in the Appendix to this decision and the procedural
requirements described in this decision.
5. NSR's request to hold this proceeding in abeyance in denied.
6. This decision is effective on November 3, 2023.
Decided: November 3, 2023.
By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and
Schultz. Board Member Schultz, joined by Board Member Fuchs, concurred
with a separate expression.
Board Member Schultz, with whom Board Member Fuchs joins,
concurring:
I agree that the Proposed Transaction should be classified as minor
and that the record at this stage of the proceeding indicates that any
anticompetitive effects of the Proposed Transaction will clearly be
outweighed by the Proposed Transaction's anticipated contribution to
the public interest in meeting significant transportation needs. On
this record, I would not order Applicants to submit this extensive
amount of supplemental information at this stage in the proceeding.
While the Board has the authority to require the filing of supplemental
information, the better course here would have been to assess whether
any supplemental information is necessary after full analysis of all
comments and requests for conditions and again after responses to those
comments and requests, when the Board would benefit from the full views
of shippers, railroads, and the broader public.
Jeffrey Herzig,
Clearance Clerk.
[[Page 77416]]
Appendix
Procedural Schedule
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
October 6, 2023..................................... Application filed.
November 3, 2023.................................... Board notice of acceptance of application served.
November 21, 2023................................... Applicants' supplemental information due.
November 27, 2023................................... Notices of intent to participate in this proceeding due.
December 11, 2023................................... All comments, protests, requests for conditions, and any
other evidence and argument in opposition to the
application, including filings of DOJ and DOT, due.
January 8, 2024..................................... Responses to comments, protests, requests for conditions,
and other opposition due. Rebuttal in support of the
application due.
TBD................................................. Record closes.
No later than 45 days after close of the record..... Date by which a final decision will be served.\1\
30 days after service............................... Board's decision becomes effective.
----------------------------------------------------------------------------------------------------------------
\1\ Under 49 U.S.C. 11325(d)(2), the Board must issue its final decision within 45 days of the close of the
evidentiary record. However, under NEPA, the Board may not issue a final decision until after the required
environmental review is complete. In the event the environmental review process is not able to be concluded in
sufficient time for the Board to meet the 45-day provision in section 11325(d)(2), the Board will issue a
final decision as soon as possible after that process is complete.
[FR Doc. 2023-24818 Filed 11-8-23; 8:45 am]
BILLING CODE 4915-01-P
</pre></body>
</html>Indexed from Federal Register on November 9, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.