[House Report 110-893]
[From the U.S. Government Publishing Office]
110th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 110-893
======================================================================
TAKING RESPONSIBLE ACTION FOR COMMUNITY SAFETY ACT
_______
September 26, 2008.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Oberstar, from the Committee on Transportation and Infrastructure,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 6707]
The Committee on Transportation and Infrastructure, to whom
was referred the bill (H.R. 6707) to require Surface
Transportation Board consideration of the impacts of certain
railroad transactions on local communities, and for other
purposes, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Taking Responsible Action for
Community Safety Act''.
SEC. 2. EFFECT OF MERGERS ON LOCAL COMMUNITIES AND RAIL PASSENGER
TRANSPORTATION.
Section 11324 of title 49, United States Code, is amended--
(1) in subsection (a)--
(A) by striking the last sentence and inserting ``The
Board shall hold public hearings on the proposed
transaction, including public hearings in the affected
communities, unless the Board determines that public
hearings are not necessary in the public interest.'';
(2) in subsection (b)--
(A) by striking ``which involves the merger or
control of at least two Class I railroads,'' and
inserting ``with respect to a transaction that involves
at least one Class I railroad,'';
(B) by inserting ``the effect on the public interest,
including'' after ``the Board shall consider'';
(C) in paragraph (2), by striking ``on the public
interest'';
(D) by striking ``and'' at the end of paragraph (4);
(E) by striking the period at the end of paragraph
(5) and inserting a semicolon; and
(F) by adding at the end the following new
paragraphs:
``(6) the safety and environmental effects of the proposed
transaction, including the effects on local communities, such
as public safety, grade crossing safety, hazardous materials
transportation safety, emergency response time, noise, and
socioeconomic impacts; and
``(7) the effect of the proposed transaction on intercity
rail passenger transportation and commuter rail passenger
transportation, as defined by section 24102 of this title.'';
(3) by redesignating subsections (c), (d), (e), and (f) as
subsections (d), (e), (f), and (g) and inserting a new
subsection (c) as follows:
``(c) The Board shall approve and authorize a transaction under this
section when it finds the transaction is consistent with the public
interest. The Board shall not approve a transaction described in
subsection (b) if it finds that the transaction's impacts on safety and
on all affected communities, as defined under subsection (b), outweigh
the transportation benefits of the transaction. The Board may impose
conditions governing a transaction under this section, including
conditions to mitigate the effects of the transaction on local
communities.'';
(4) in subsection (d), as redesignated, by striking ``The
Board shall approve'' and all that follows through ``the
transaction, including'' and inserting ``The conditions the
Board may impose under this section include''; and
(5) in subsection (e), as redesignated, by striking ``the
merger or control of at least two Class I railroads, as defined
by the Board'' and inserting ``a transaction described in
subsection (b)''.
SEC. 3. EFFECTIVE DATE.
The amendments made in this Act shall be applied to all transactions
that have not been approved by the Board as of August 1, 2008.
Purpose of the Legislation
H.R. 6707, as amended, the ``Taking Responsible Action for
Community Safety Act'', requires the Surface Transportation
Board (``STB'') to consider the impacts of certain railroad
transactions on local communities.
Background and Need for Legislation
The main purpose of H.R. 6707 is to establish that when the
Surface Transportation Board (``STB'' or ``Board'') considers a
merger involving a Class I railroad and a Class II or III
railroad\1\ the Board has the power to disapprove the merger if
the Board finds that the adverse environmental effects of the
merger outweigh its transportation or other benefits. Under
current law, the Board has the authority to disapprove a merger
involving at least two Class I carriers if the transaction is
not consistent with the public interest, but has never
disapproved a Class I merger on environmental grounds. Some STB
staff believe that under existing law the Board also has
authority to disapprove a merger involving a Class II or Class
III rail carrier on environmental grounds. However, there is a
provision in existing law indicating that in a merger involving
a Class II or Class III rail carrier, the Board can only
disapprove the merger if it would have adverse competitive
effects. Additionally, it is not clear whether the Board
Members share the staff's view that they have authority under
existing law to disapprove a merger involving a Class II or
Class III rail carrier on environmental grounds. If the Board
did take this position, there is a substantial possibility that
a reviewing Court would not accept their interpretation of
existing law, for reasons discussed below.
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\1\Rail carriers are grouped into three classes to determine their
accounting and reporting obligations. A Class I railroad has annual
operating revenues of more than $250 million, a Class II railroad has
annual operating revenues of between $20 million and $250 million, and
a Class III railroad has annual operating revenues of less than $20
million. These operating revenues are fixed on 1991 dollars and are
adjusted for inflation. (49 C.F.R. Part 1201, Subpart A, General
Instructions).
---------------------------------------------------------------------------
On September 26, 2007, the Canadian National Railway
(``CN''), which is a Class I railroad, and the U.S. Steel
Corporation (``U.S. Steel'') announced an agreement where CN
would acquire most of the Elgin, Joliet & Eastern Railway
Company (``EJ&E''), which is a Class II railroad that is a
wholly owned indirect subsidiary of U.S. Steel, for $300
million, subject to the regulatory approval of the STB. The
EJ&E's main line, known as ``Chicago's Outer Belt'', runs 198
miles and encircles the City of Chicago, from Waukegan,
Illinois, through Joliet, Illinois, to Gary, Indiana. This
acquisition will allow CN to bypass Chicago, Illinois, which CN
believes will allow it to significantly improve the efficiency
of CN's rail operations in the Chicago region. CN currently has
three lines that run into Chicago, and it plans to divert
traffic from these lines onto the EJ&E line, which would
increase the number of trains operating through the communities
along the EJ&E by approximately 15 to 24 trains per day.
Opponents of the transaction maintain that the CN
acquisition would impose a number of adverse impacts on the
people living in the 50 communities along the EJ&E line. The
STB's Section of Environmental Analysis (``SEA''), which is
responsible for undertaking environmental reviews of certain
STB actions, found that if CN increases train volumes on the
EJ&E rail line as proposed in its Operating Plan, the
acquisition would result in a projected 28 percent increase in
rail accidents on the EJ&E line; an increase in grade crossing
accidents on the EJ&E rail line of anywhere from 1.57 to 6.04
accidents annually; an increase in the number of ``major key
routes'' (rail segments where the volume of hazardous materials
transported would exceed 20,000 carloads annually) from 2 to 14
on the EJ&E rail line, with subsequent increases in reportable
hazardous material releases; an increase in air pollution; and
a substantial increase in noise and vibration in communities
and on public lands adjacent to the line, affecting 17 forest
preserves, natural areas and preserves, resource-rich areas,
and land and water reserves, 14 adjacent trails and scenic
corridors, 16 adjacent local parks, and 4 adjacent land and
water conservation fund properties. In addition, 15 grade
crossings on the EJ&E line would be ``substantially affected''
(meaning that train queue length would block a roadway that is
not blocked currently, the roadway would be at or over-
capacity, or delay for all delayed vehicles would be more than
40 hours per day), resulting in total traffic delays from about
one hour in West Chicago to about 165 hours in Joliet; and 11
fire and emergency medical service providers near the EJ&E rail
line could have substantial difficulties in coping with
emergencies as a result of the proposed transaction.
Proponents of the transaction maintain that the CN
acquisition would be beneficial to the region and help mitigate
freight rail congestion in the nation's freight rail
bottleneck. They also maintain that the transaction would
benefit communities along CN's current lines to and from
Chicago through decreased accidents, noise, congestion, and
delay as a result of a reduction in train traffic. The SEA
found that the transaction would reduce CN traffic in some
minority and low-income communities by eight trains per day.
The SEA also found that the transaction would not affect
existing Metra commuter rail service or Amtrak service on rail
lines in the area in which CN now operates, and it would not
preclude implementation of the proposed STAR line and Southeast
Service, but could introduce potential operating complexities.
In addition, the SEA found that while the total number of train
accidents on the EJ&E rail line is likely to increase by 28
percent, the likely number of rail accidents on the existing CN
rail lines would decline 77 percent, a change directly related
to the decrease in train-miles on CN's existing rail lines. The
SEA also found that the consequences of increased train traffic
on the EJ&E rail line would increase the risk for pedestrians
and bicycles at 21 train/rail crossings and decrease the risk
at 36 trail/rail crossings along existing CN lines.
The application for the CN to acquire the EJ&E is now
pending before the STB. Under current law, a rail carrier or
other entity may not consolidate, merge, or acquire control of
another rail carrier without authorization and approval from
the Board.
Existing law sets forth two different standards--depending
on the class of the rail carrier--that the STB must use in
considering applications for consolidation, merger, or
acquisition of control: the law gives the STB considerable
discretion to disapprove a transaction involving at least two
Class I rail carriers, and much less discretion to disapprove
transactions not involving at least two Class I rail carriers,
such as the CN acquisition of the EJ&E.
Prior to the Staggers Act of 1980, the criteria for
considering an application for a merger or control between
Class I rail carriers and Class II or Class III rail carriers
were identical. For all mergers and consolidations, the
Interstate Commerce Commission (``ICC'' or ``Commission'') was
required to consider: (1) The effect of the proposed
transaction on the adequacy of transportation to the public;
(2) the effect on the public interest of including, or failing
to include, other rail carriers in the area involved in the
proposed transaction; (3) the total fixed charges that result
from the proposed transaction; and (4) the interest of carrier
employees affected by the proposed transaction.The Commission
was required to approve and authorize such a transaction only when it
found that the transaction was consistent with the public interest. The
Commission was also authorized to impose conditions governing the
transaction.
However, Section 228 of the Staggers Act altered
considerably the standards for rail carrier consolidation
applications involving at least two Class I rail carriers filed
after October 1, 1980. A fifth factor was added to the list of
criteria that the Commission must consider: whether the
proposed transaction would have an adverse effect on
competition among rail carriers in the affected region.
However, the requirement that the five factors (outlined in the
above paragraph) be considered was limited to cases involving
at least two Class I railroads.
The Staggers Act added a new section to govern rail
consolidations not involving the merger or control of two or
more Class I railroads (such as CN-EJ&E). This section, now
found in section 11324(d) of Title 49, United States Code,
provides that the Board ``shall approve'' this type of
consolidation ``unless'' the Board finds that: (1) as a result
of the transaction, there is likely to be substantial lessening
of competition, creation of a monopoly, or restraint of trade
in freight surface transportation in any region of the United
States; and (2) the anticompetitive effects of the transaction
outweigh the public interest in meeting significant
transportation needs.
On its face, the new section would appear to take away the
Board's authority to disapprove mergers or consolidations of a
Class I rail carrier with a Class II or a Class III rail
carrier on general public interest grounds, such as adverse
effects on safety or the environment.
Some STB staff, however, maintain that the Board does have
the authority to disapprove transactions involving Class II or
Class III rail carriers because of adverse environmental
effects. The STB staff did not have any cases or legal memos to
support this interpretation. As Committee staff understands it,
STB staff's rationale is that although there is a specific
provision in the law requiring approval of mergers with Class
II or Class III rail carriers if they are not anti-competitive,
if we interpret the law ``as a whole'', the Board has authority
to disapprove a merger involving Class II or Class III rail
carriers on environmental grounds. In the view of STB staff,
the Board has authority to disapprove a merger involving two
Class I rail carriers on environmental grounds and it would not
make sense for the Board not to have the same power to
disapprove a merger between a Class I rail carrier and a Class
II rail carrier on environmental grounds. This type of merger
could be just as harmful to the environment as a merger
involving two Class I rail carriers.
STB staff further points to the fact that the draft
Environmental Impact Statement (``EIS''), prepared by staff,
for the proposed CN acquisition of the EJ&E states that the
Board ``will decide whether to approve the proposed
acquisition, deny it, or approve it with mitigating conditions,
including environmental conditions.'' The draft EIS also states
that Council on Environmental Quality regulations implementing
the National Environmental Policy Act require consideration of
a No-Action Alternative. Under the No-Action Alternative, CN
would not acquire control of the EJ&E land, rail line, and
related assets. Thus, by implication the draft EIS asserts the
Board's power to deny approval on environmental grounds.
It is not clear if the Board did disapprove a transaction
involving a Class I rail carrier and Class II rail carrier on
environmental grounds that the decision would survive a
judicial challenge. A U.S. Court of Appeals case dealing with
the Board's power over mergers with Class II and Class III rail
carriers points in the direction of not giving the Board power
to deny a merger on environmental grounds. However, this case
is not completely dispositive since it involved public interest
factors other than the environment. Moreover, the decision is
not binding on other Federal Courts of Appeal.
The case in point is People of the State of Illinois,
Illinois Commerce Commission and Patrick W. Simmons v.
Interstate Commerce Commission and United States of America
(687 F.2d 1047; 1982 U.S. App.), of the United States Court of
Appeals for the Seventh Circuit. The court affirmed a decision
of the ICC (predecessor of the STB) refusing to consider public
interest factors involving effects on employment of a Class I/
Class II merger which was not anticompetitive. The court ruled
that if there were not anti-competitive effects, the ICC was
required to approve the merger. The court found the Staggers
Act separated rail consolidation proposals into two distinct
groups: major rail consolidations, which involve the merger or
control of two or more Class I rail carriers, and minor rail
consolidations, which do not involve the consolidation of two
or more Class I rail carriers. The court concluded that a
careful reading of the law in its entirety ``discloses that the
broad public interest standard of [section 11324(c)] applies
only to consolidations of two or more Class I railroads whereas
the more limited criteria of (d) apply to all other rail
consolidations.''
The court also found ``the mandatory language `shall
approve' of [section 11324(d)] taken in context, denotes that
if the Commission finds no substantial anticompetitive effects
flowing from the proposed transaction, its analysis is at an
end. At that point, the Commission must approve the
transaction, and any finding about consistency with the public
interest would be superfluous. In other words . . . the words
`shall approve' in this context should be construed to require
approval of transactions where no substantial anticompetitive
effects are found.''
The court added, ``Although subsection (d) requires the
Commission to review public interest factors if it finds
substantial anticompetitive effects, that provision does not
require the agency to determine whether the transportation is
`consistent with the public interest'. Rather, if
anticompetitive effects are substantial, the Commission must
balance against those effects `the public interest in meeting
significant transportation needs.'''
The court's findings are echoed in the remarks included by
current STB Commissioner Buttrey in a July 25, 2008 decision
setting forth a schedule for completion of the environmental
review process in the proposed CN acquisition of the EJ&E. He
states, ``For a transaction like this that does not involve the
merger or control of at least two Class I railroads, the
statute provides that the Board shall approve the application
unless it finds serious anticompetitive effects that outweigh
the public interest.''
CN, the applicant in the CN/EJ&E case, appears to also
believe that the Board cannot disapprove the merger on
environmental grounds. Accordingly, CN would be likely to seek
judicial review of any STB decision disapproving the merger on
environmental grounds.
In a petition filed before the Board on August 14, 2008,
for expedited approval of the transaction, CN stated: ``ICCTA
requires the Board to approve any transaction not involving two
Class I railroads unless the Board finds both that (1) as a
result of the transaction, there is likely to be substantial
lessening of competition, creation of a monopoly, or restraint
of trade in freight surface transportation in any region of the
United States, and (2) the anticompetitive effects of the
transaction outweigh the public interest in meeting significant
transportation needs. Under thisstandard, if the Board is
unable to make either of these findings, approval of the proposed
transaction is mandatory.''
It is worth noting that, in People of the State of Illinois
v. Interstate Commerce Commission and United States of America,
the court stated that the law ``could benefit from more artful
draftsmanship'' on the question of public interest
considerations. In addition, on November 10, 1981, a little
more than one year after the Staggers Act was enacted, ICC
Chairman Reese H. Taylor, Jr. testified before the Surface
Transportation Subcommittee of the Senate Committee on
Commerce, Science, and Transportation that the interplay
between the two different sets of standards for considering
rail mergers and consolidations and the requirement for
considering the public interest was ``a problem area in the
legislation possibly in need of redrafting.''
Further, at the Committee on Transportation and
Infrastructure's September 9, 2008 hearing on H.R. 6707, the
``Taking Responsible Action for Community Safety Act'', STB
Chairman Nottingham acknowledged that the Board's authority to
disapprove a transaction on general public interest grounds was
``a legal issue of first impression that has not been addressed
by the Board or any court.''
Summary of the Legislation
Section 1. Short title
This section designates the title of the Act as the
``Taking Responsible Action for Community Safety Act''.
Section 2. Effect of mergers on local communities and rail passenger
transportation
This section makes a number of amendments to section
11324(a) of title 49, which governs the Board's consideration
of a proposed consolidation, merger, and acquisition of control
of a railroad. It amends subsection (a) to require the Board to
hold public hearings in the affected communities of a proposed
transaction, unless the Board determines that public hearings
are not necessary to the public interest.
It amends section 11324 that governs the Board's
consideration of a merger, consolidation, or acquisition of
control for a transaction involving at least two Class I
railroads to apply to any proposed transaction that involves at
least one Class I railroad.
This section adds two new factors to the current list of
five factors that the Board must consider in reviewing a
proposed transaction that involves at least one Class I
railroad. These new factors are: (1) The safety and
environmental effects of the proposed transaction, including
the effects on local communities, such as public safety, grade
crossing safety, hazardous materials transportation safety,
emergency response time, noise, and socioeconomic impacts; and
(2) the effect of the proposed transaction on intercity rail
passenger transportation and commuter rail passenger
transportation. The Board shall consider the effect on the
public interest that includes at least these seven factors.
Finally, this section requires the Board to approve and
authorize a transaction involving at least one Class I railroad
when the Board finds the transaction is consistent with the
public interest. This section prohibits the Board from
approving a transaction if it finds that the transaction's
impacts on safety and on the affected communities outweigh the
transportation benefits of the transaction. This section also
authorizes the Board to impose conditions governing the
transaction, including conditions to mitigate the effects of
the transaction on local communities.
Section 3. Effective date
The amendments made by H.R. 6707 are to be applied to all
transactions that have not been approved by the Board as of
August 1, 2008.
Legislative History and Committee Consideration
On July 31, 2008, Chairman James L. Oberstar introduced
H.R. 6707, the `Taking Responsible Action for Community Safety
Act''. This bill had not been introduced in previous
Congresses.
On September 9, 2008, the Committee on Transportation and
Infrastructure held a hearing entitled ``H.R. 6707, the Taking
Responsible Action for Community Safety Act.'''
On September 24, 2008, the Committee on Transportation and
Infrastructure met in open session to consider H.R. 6707. The
Committee adopted by voice vote a manager's amendment to the
bill. The manager's amendment clarified that the Board's
finding of public interest in a transaction involving at least
one Class I railroad must include consideration of safety and
environmental impacts of the proposed transaction and any
impacts on intercity passenger or commuter rail transportation.
The manager's amendment also clarified that the Board must
consider all of the impacts--both positive and negative--to
safety on all the affected communities when determining whether
the transaction's impacts outweigh the transportation benefits.
The Committee ordered the bill, as amended, reported favorably
to the House by voice vote with a quorum present.
Recorded Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires each committee report to include the
total number of votes cast for and against on each record vote
on a motion to report and on any amendment offered to the
measure or matter, and the names of those members voting for
and against. There were no recorded votes taken in connection
with consideration of H.R. 6707 or ordering the bill reported.
A motion to order H.R. 6707, as amended, reported favorably to
the House was agreed to by voice vote with a quorum present.
Committee Oversight Findings
With respect to the requirements of clause 3(c)(1) of rule
XIII of the Rules of the House of Representatives, the
Committee's oversight findings and recommendations are
reflected in this report.
Cost of Legislation
Clause 3(c)(2) is satisfied when a cost estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974 has been timely submitted prior to the filing of the
report and is included in the report. The Committee has not yet
received a cost estimate for H.R. 6707 from the Director of the
Congressional Budget Office. The Committee references the
Committee Cost Estimate, included below.
Compliance With House Rule XIII
1. With respect to the requirement of clause 3(c)(2) of
rule XIII of the Rules of the House of Representatives, and
308(a) of the Congressional Budget Act of 1974, the Committee
references the Committee Cost Estimate, included below.
2. With respect to the requirement of clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, the
performance goals and objectives of this legislation are to
require the Surface Transportation Board to consider the
impacts of certain railroad transactions on local communities.
3. With respect to the requirement of clause 3(c)(3) of
rule XIII of the Rules of the House of Representatives and
section 402 of the Congressional Budget Act of 1974, a cost
estimate from the Director of the Congressional Budget Office
is not available.
Committee Cost Estimate
H.R. 6707 clarifies the factors that must be considered by
the Surface Transportation Board when approving or disapproving
a merger involving at least one Class I rail carrier. It does
not authorize or make available any new budget authority, nor
does it cause any increase in direct spending or decrease in
revenues. Therefore, the Committee estimates that enacting H.R.
6707 would have no significant impact on the Federal budget.
The Committee will file a supplemental report containing a
cost estimate prepared by the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act when it
becomes available.
Compliance With House Rule XXI
Pursuant to clause 9 of rule XXI of the Rules of the House
of Representatives, H.R. 6707, as amended, does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI
of the Rules of the House of Representatives.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, committee reports on a bill or joint
resolution of a public character shall include a statement
citing the specific powers granted to the Congress in the
Constitution to enact the measure. The Committee on
Transportation and Infrastructure finds that Congress has the
authority to enact this measure pursuant to its powers granted
under article I, section 8 of the Constitution.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act (Public Law 104-4).
Preemption Clarification
Section 423 of the Congressional Budget Act of 1974
requires the report of any Committee on a bill or joint
resolution to include a statement on the extent to which the
bill or joint resolution is intended to preempt State, local,
or tribal law. The Committee states that H.R. 6707 does not
preempt any State, local, or tribal law.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act are created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act (Public Law
104-1).
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 49, UNITED STATES CODE
* * * * * * *
SUBTITLE IV--INTERSTATE TRANSPORTATION
* * * * * * *
PART A--RAIL
* * * * * * *
CHAPTER 113--FINANCE
* * * * * * *
SUBCHAPTER II--COMBINATIONS
* * * * * * *
Sec. 11324. Consolidation, merger, and acquisition of control:
conditions of approval
(a) The Board may begin a proceeding to approve and authorize
a transaction referred to in section 11323 of this title on
application of the person seeking that authority. When an
application is filed with the Board, the Board shall notify the
chief executive officer of each State in which property of the
rail carriers involved in the proposed transaction is located
and shall notify those rail carriers. [The Board shall hold a
public hearing unless the Board determines that a public
hearing is not necessary in the public interest.] The Board
shall hold public hearings on the proposed transaction,
including public hearings in the affected communities, unless
the Board determines that public hearings are not necessary in
the public interest.
(b) In a proceeding under this section [which involves the
merger or control of at least two Class I railroads,] with
respect to a transaction that involves at least one Class I
railroad, as defined by the Board, the Board shall consider the
effect on the public interest, including at least--
(1) * * *
(2) the effect [on the public interest] of including,
or failing to include, other rail carriers in the area
involved in the proposed transaction;
* * * * * * *
(4) the interest of rail carrier employees affected
by the proposed transaction; [and]
(5) whether the proposed transaction would have an
adverse effect on competition among rail carriers in
the affected region or in the national rail system[.];
(6) the safety and environmental effects of the
proposed transaction, including the effects on local
communities, such as public safety, grade crossing
safety, hazardous materials transportation safety,
emergency response time, noise, and socioeconomic
impacts; and
(7) the effect of the proposed transaction on
intercity rail passenger transportation and commuter
rail passenger transportation, as defined by section
24102 of this title.
(c) The Board shall approve and authorize a transaction under
this section when it finds the transaction is consistent with
the public interest. The Board shall not approve a transaction
described in subsection (b) if it finds that the transaction's
impacts on safety and on all affected communities, as defined
under subsection (b), outweigh the transportation benefits of
the transaction. The Board may impose conditions governing a
transaction under this section, including conditions to
mitigate the effects of the transaction on local communities.
[(c) The Board shall approve and authorize a transaction
under this section when it finds the transaction is consistent
with the public interest. The Board may impose conditions
governing the transaction, including] (d) The conditions the
Board may impose under this section include the divestiture of
parallel tracks or requiring the granting of trackage rights
and access to other facilities. Any trackage rights and related
conditions imposed to alleviate anticompetitive effects of the
transaction shall provide for operating terms and compensation
levels to ensure that such effects are alleviated. When the
transaction contemplates a guaranty or assumption of payment of
dividends or of fixed charges or will result in an increase of
total fixed charges, the Board may approve and authorize the
transaction only if it finds that the guaranty, assumption, or
increase is consistent with the public interest. The Board may
require inclusion of other rail carriers located in the area
involved in the transaction if they apply for inclusion and the
Board finds their inclusion to be consistent with the public
interest.
[(d)] (e) In a proceeding under this section which does not
involve [the merger or control of at least two Class I
railroads, as defined by the Board] a transaction described in
subsection (b), the Board shall approve such an application
unless it finds that--
(1) * * *
* * * * * * *
[(e)] (f) No transaction described in section 11326(b) may
have the effect of avoiding a collective bargaining agreement
or shifting work from a rail carrier with a collective
bargaining agreement to a rail carrier without a collective
bargaining agreement.
[(f)] (g)(1) * * *
* * * * * * *
MINORITY VIEWS
This legislation will have dramatic consequences on
railroad merger and acquisition transactions.
It will enlarge the universe of transactions subject to the
full STB environmental review by requiring close analysis for
even the most minor Class I transactions. This is likely to
discourage railroads from engaging in transactions that would
enhance underutilized infrastructure controlled by smaller
railroads.
This legislation also creates a new balancing test whereby
the Board will be required to weigh the transportation benefits
of a transaction versus the effects on communities impacted by
the transaction. It is likely that the creation of a new
balancing test in the STB merger review process will make it
more difficult, costly, and time consuming for railroad mergers
and acquisitions to be approved.
Additionally, this legislation will have a retroactive
impact on railroad transactions entered into months or even
years ago. Retroactive Congressional action must be taken with
great care, or confidence in the regulatory regime is
undermined. This legislation has the potential to affect not
only the CN/EJ&E transaction, it could impact other pending
deals before the Board, including Norfolk Southern's planned
Patriot Corridor, and Canadian Pacific's merger with Dakota,
Minnesota & Eastern. All parties involved in these proposed
transactions have incurred significant expenses in the review
process that is now being changed midstream. CN in particular
expects to spend up to $25 million in environmental review
expenses for their proposed EJ&E acquisition.
It is also unclear if this legislation addresses the root
concern of the communities that would be affected by the CN/
EJ&E transaction, which is an increase in train traffic. Even
if this legislation results in the cancellation of this
transaction, it is possible that the communities will see an
increase in traffic with the existing owner. Nothing in this
legislation would prevent the EJ&E from increasing the number
of trains it runs on its own property. Further, CN is offering
at least $40 million to communities to mitigate the effects of
an increase in traffic if they become the owner, funds which
will not be available if the current ownership remains in
place.
Also, STB staff has expressed concern that this legislation
was drafted without their input, and could have unintended
consequences if passed into law. For instance, STB staff has
stated that by explicitly requiring environmental review and
``balancing'' of impacts versus benefits on Class I
transactions, Congress is implicitly stating that no such
review is required for transactions involving Class II and
Class III railroads (not involving a Class I). Class II and III
transactions can, in some cases, have much greater
environmental impacts than Class I railroad's acquisition of a
short branch line, for example.
Goals of rail transportation policy, as set forth at 49
U.S.C. Section 10101 include ensuring the development of a
sound rail transportation system to meet the needs of the
public, and providing for the expeditious handling and
resolution of required STB proceedings. For the above reasons,
the minority is concerned that this legislation will result in
focus away from these goals by discouraging parties from
entering into mergers and acquisitions.
Bill Shuster.