[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Notices]
[Pages 3877-3879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1395]



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INTERSTATE COMMERCE COMMISSION

[Finance Docket No. 32640]


Canadian National Railway Company; Contract to Operate; Grand 
Trunk Western Railroad Inc. and Duluth, Winnipeg & Pacific Railway Co.

AGENCY: Interstate Commerce Commission.

ACTION: Notice of decision accepting application for consideration.

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SUMMARY: The Commission is accepting for consideration the application 
filed December 19, 1994, by Canadian National Railway Company (CN), the 
Grand Trunk Western Railroad Inc. (GTW), and the Duluth, Winnipeg and 
Pacific Railway Co. (DWP) (collectively, applicants), for approval of 
an agreement among the applicants under which CN will contract to 
operate the properties of GTW and DWP. Under 49 CFR part 1180, the 
Commission finds this to be a minor transaction.

DATES: Written comments must be filed with the Commission no later than 
February 17, 1995, and concurrently served on applicants' 
representatives, the United States Secretary of Transportation 
(Secretary of Transportation), and the Attorney General of the United 
States (Attorney General). Comments from the Secretary of 
Transportation and the Attorney General must be filed by March 6, 1995. 
The Commission will issue a service list shortly thereafter. Comments 
must be served on all parties of record within 5 days of the issuance 
of the service list and confirmed by certificate of service filed with 
the Commission indicating that all designated individuals and 
organizations on the service list have been properly served. 
Applicants' reply is due by March 20, 1995.

ADDRESSES: Send an original and 10 copies of all documents to: Office 
of the Secretary, Case Control Branch, Attn: Finance Docket No. 32640, 
Interstate Commerce Commission, Washington, DC 20423. In addition, 
concurrently send one copy of all documents to the Secretary of 
Transportation, the Attorney General, and applicants' representatives: 
(1) Docket Clerk, Office of Chief Counsel, Federal Railroad 
Administration, Room 8201, 400 Seventh St., SW, Washington, DC 20590; 
(2) Attorney General of the United States, United States Department of 
Justice, 10th St. & Constitution Ave., NW, Washington, DC 20530; and 
(3) John Will Ongman, John F. DePodesta, and George A. Lehner, Pepper, 
Hamilton & Scheetz, 1300 19th Street, NW, Washington, DC 20036.

FOR FURTHER INFORMATION CONTACT: Beryl Gordon, (202) 927-5610. [TDD for 
hearing impaired: (202) 927-5721.]

SUPPLEMENTARY INFORMATION: By application filed December 19, 1994, 
Commission approval is being sought under 49 U.S.C. 11343-45 for CN to 
contract to operate the properties of two wholly owned subsidiaries, 
GTW and DWP.\1\

    \1\Applicants simultaneously filed a petition for a finding of 
cause for a supplemental order under 49 U.S.C. 11351 and for 
procedural relief. In this petition, applicants alternatively 
request that we make a generic finding of cause under 49 U.S.C. 
11351 to enable us to exercise our power under that section to issue 
any order dealing with the matters raised by the contract to operate 
as pertains to Grand Trunk W.R. Co. Unification of Securities, 158 
I.C.C. 117 (1929) [Acquisition of Control By Canadian National 
Railway), Finance Docket No. 7320 (Sub-No. 1)]; and Norfolk & W. Ry. 
Co.--Control--Detroit, T.I.R. Co., 360 I.C.C. 498 (1979) [Grand 
Trunk Western Railroad--Control--Detroit, Toledo & Ironton Railroad 
Co. and Detroit, Toledo Shore Line Railroad Co., Finance Docket No. 
28676 (Sub-No. 1)]. They also request that a protective order be 
entered in a form which they provide, that their proposed procedural 
schedule be approved, and that clarification or waiver of the 
regulations requiring certain information be granted. We will deny 
the request for a generic finding of cause because applicants have 
not established a need for such a finding, and we will grant the 
remaining requests. The requested protective order will be issued 
simultaneously with or shortly after issuance of this notice.
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    CN is a Canadian Crown Corporation incorporated under a special act 
of the Parliament of Canada.\2\ GTW is a Delaware corporation and a 
class I railroad. DWP is a Minnesota corporation and a class II 
railroad. Grand Trunk Corporation (GTC) is a noncarrier holding company 
of CN's American rail properties, including GTW and DWP. CN connects 
with GTW at the St. Clair River Tunnel at Sarnia, Ontario and Port 
Huron, Michigan, and at the Detroit Tunnel at Windsor, Ontario and 
Detroit, Michigan. CN connects with DWP at Fort Francis/Rainy River, 
Ontario. Included in the application as an applicant carrier is the St. 
Clair Tunnel Co. (SCTC), a class III carrier. SCTC is 97% owned by the 
noncarrier, St. Clair Tunnel Construction Co. (SCTCC) and 3% owned by 
three of its directors. SCTCC is in turn 75% owned by GTC and 25% owned 
by CN.

    \2\CN does not generate sufficient revenues from its operations 
in the United States to achieve class I status. See Canadian 
National Railway Company--Trackage Rights Exemption--Grand Trunk 
Western Railroad Inc., Finance Docket No. 32499 (ICC served July 25, 
1994).
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    Applicants state that the purpose of the application is to seek 
Commission approval for the contract to operate the properties of GTW 
and DWP and the operating plan developed to implement the contract to 
operate. According to applicants, GTW and DWP currently operate as 
independent entities. The contract to operate and the operating plan 
will coordinate and integrate service and operations among GTW, DWP and 
CN under the trade name CN North America. It is intended to permit the 
applicants to provide the seamless, single-line service that shippers 

[[Page 3878]]
assertedly are seeking. Applicants state that this coordination and 
integration will enhance competition in the surface transportation 
industry; make GTW, in particular, a more efficient and viable 
property;\3\ and provide substantial transportation benefits to the 
shipping public.

    \3\Applicants predict that the transaction will result in a 
dramatic improvement in GTW's financial performance. They 
characterize GTW's current financial status as ``suffering massive 
losses, which prevent it from making much needed capital 
improvements and which--unless reversed--threaten its ability to 
provide transportation services in the future.''
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    Applicants characterize the proposed transaction as ``akin to an 
end-to-end merger in which connecting railroads whose routes do not 
overlap, but rather complement each other, join forces to create a 
stronger competitor in a highly competitive transportation market.'' 
They view the resulting change in the competitive balance as a positive 
one because ``CN North America will be able to offer greatly improved 
service that will make it a viable transportation alternative for many 
shippers.'' According to applicants, the proposed transaction ``will 
produce no results which suggest an adverse effect on competition, such 
as significantly higher rail rates to shippers or poorer rail service 
levels.'' To the contrary, applicants contend that the integration of 
CN and GTW and DWP will reduce costs and improve service.\4\

    \4\Applicants predict reduced transit times, improved service 
reliability, and economies of scale flowing from the consolidation 
of shops and administrative functions.
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    Applicants project that some traffic currently moving by other 
carriers will shift to CN North America as a result of the transaction, 
but that this does not signal harm to competition.\5\ Applicants state 
that the impact on its competitors will be limited and will certainly 
not affect their ability to provide essential transportation services. 
They also assert that no U.S. port will suffer a significant diversion 
of traffic to Canadian ports. Lastly, applicants argue that even if the 
transaction were to produce some anticompetitive effects, the public 
benefits would dramatically outweigh such effects.

    \5\Applicants' projections of volume growth in intermodal 
traffic include 101,000 units of traffic currently moving by truck 
and 67,000 units currently moving by rail. This projected growth in 
carload traffic includes 22,800 carloads diverted from other 
railroads.
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    Applicants state that the transaction will affect certain agreement 
and nonagreement employees. According to applicants, it is not possible 
for them to state precisely the ultimate impact of the integration 
transaction on labor, because in some instances this impact will occur 
only after fully integrated train service has been implemented. 
Applicants submit that if this transaction were among U.S. railroads 
and dealt with predominantly U.S. domestic traffic, the appropriate 
labor protection would be as prescribed in New York Dock Railway--
Control--Brooklyn Eastern District Terminal, 360 I.C.C. 60 (1979) (New 
York Dock).
    Applicants argue that to reflect the extraordinary circumstances 
involved in the integration of two U.S. railroads with a predominantly 
Canadian railroad, some adjustments to the standard New York Dock 
conditions should be made. This is because, according to applicants, 
Canadian immigration law will not permit most GTW and DWP employees to 
follow work transferred to Canada. Therefore, applicants propose the 
following modifications to the New York Dock conditions. First, modify 
Article I, section 6(d) to require dismissed employees to accept 
comparable positions in another craft or class at any location on the 
GTW and DWP. Such employees will receive the protective benefits of 
Article I, sections 5, 9, and 12 and Article II, regarding displacement 
allowances, moving expenses, reimbursement for losses on home removal, 
and, if necessary, retraining. Second, modify Article I, section 6(d) 
to require dismissed employees to make reasonable efforts to obtain 
employment with an employer in another industry, so long as such 
outside employment does not require a change in residence. (Applicants 
expand on what reasonable efforts include.) Third, impose on employees 
who may elect benefits of existing protection agreements under Article 
I, section 3, the same modified obligations to accept comparable 
employment described under the second modification. Fourth, clarify 
Article I, section 1 to provide for a 6-year protective period, with 
total labor protection costs capped at the cost of 4 years' protection 
multiplied by 1.19.
    On December 28, 1994, the Transportation Communications Union and 
the United Transportation Union (collectively, Unions) filed a protest 
to applicants' proposed procedural schedule and to their 
characterization of the transaction as minor. The Unions argue that 
this is a major transaction and, as such, that the prefiling 
notification under 49 CFR 1180.4(b) must be 3 to 6 months, with an 
additional 3 months added to make up for applicants' failure to comply 
with the allegedly applicable prefiling notification requirements. 
Also, on January 9, 1995, the Brotherhood of Locomotive Engineers (BLE) 
moved to dismiss or reject the application and replied to applicants' 
petition for a finding of cause. BLE submits that the application must 
be rejected or dismissed because there is no basis for the exercise of 
the Commission's authority under 49 U.S.C. 11343. According to BLE, CN 
already controls the GTW and DWP, and this control authority includes 
the authority to engage in the various marketing and operating 
coordinations proposed in the operating plan accompanying the operating 
agreement. BLE argues that the only other purpose stated in the 
application is to abrogate or modify the provisions in the existing 
labor agreements, which raises the question of whether this is a sham 
transaction. Applicants replied on January 12, 1995.
    At the outset, we note that under 49 U.S.C. 11347 the Commission is 
required to impose at least New York Dock conditions in 49 U.S.C. 11343 
transactions. While we may impose enchanced protection, applicants have 
not demonstrated why negotiations and dispute resolution procedures 
(including arbitration) under the provisions of New York Dock cannot 
effectively accommodate implementation of the transaction.
    Under 49 CFR 1180.4(b)(2)(iv), we must determine whether a proposed 
transaction is major, significant, minor or exempt. The proposal here 
does not involve the control or merger of two or more class I railroads 
and has no national significance. While the proposed transaction may 
have regional significance because it should increase the level of 
competition in the affected areas, it nevertheless concerns carriers 
that already are under common control and that arguably may accomplish 
much of what is sought here without need for our approval. The greatest 
impact of the transaction may well be on rail labor and management, but 
these concerns can be adequately addressed under New York Dock. 
Accordingly, we find the proposal to be a minor transaction as defined 
in 49 CFR 1180.2(c). See RR. Consolidation Proced. of Significant 
Transactions, 9 I.C.C. 2d 1198 (1993). Because the application complies 
with our regulations governing minor transactions, we are accepting it 
for consideration. We will deny the Union's request to amend the 
procedural schedule to conform it to a major transaction under 49 
U.S.C. 1180.2 et al. with an additional 60 days to address labor 
protective conditions. We will also deny BLE's motion to reject the 
application. The arguments raised by BLE in its alternative motion to 
dismiss are also denied but can be considered in 

[[Page 3879]]
the subsequent decision on the merits of the transaction based upon 
supplemental or further legal argument.
    The application and exhibits are available for inspection in the 
Public Docket Room at the Offices of the Interstate Commerce Commission 
in Washington, DC. In addition, copies may be obtained upon request 
from applicants' representatives named above.
    Any interested person, including government entities, may 
participate in the proceeding by submitting written comments. Any 
person who filed timely written comments shall be considered a party of 
record if the person's comments so request. In this event, no petition 
for leave to intervene need be filed.
    Consistent with 49 CFR 1180.4(d)(1)(iii), written comments must 
contain:
    (a) The docket number and title of the proceeding;
    (b) The name, address, and telephone number of the commenting party 
and its representative upon whom service shall be made;
    (c) The commenting party's position, i.e., whether it supports or 
opposes the proposed transaction;
    (d) A statement of whether the commenting party intends to 
participate formally in the proceeding or merely comment upon the 
proposal;
    (e) If desired, a request for oral hearing with reasons supporting 
this request; the request must indicate the disputed material facts 
that can only be resolved at a hearing; and
    (f) A list of all information sought to be discovered from 
applicant carriers.
    Because we have determined that this constitutes a minor 
transaction, no responsive applications will be permitted. We are 
adopting applicants' proposed schedule for processing this transaction. 
The proposed schedule cuts 60 days from the usual 180-day schedule set 
forth at 49 U.S.C. 11345(d) for processing minor transactions. See 49 
CFR 1180.4.
    Discovery may begin immediately. We admonish parties to resolve all 
discovery matters expeditiously and amicably.
    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.
    It is ordered:
    1. This application is accepted for consideration as a minor 
transaction under 49 CFR 1180.2(c). Applicants' alternative petition 
for a generic finding of cause for a supplemental order under 49 U.S.C. 
11351 is denied.
    2. The petition of the Unions for handling as a major transaction 
is denied, and the petition of BLE for rejection and its alternative 
motion to dismiss are denied except that supplemental or further 
argument may be submitted as to the latter.
    3. Applicants' request to waive the information requirements of 49 
CFR 1180.6 (a)(2)(v) and (a)(5), (6), and (7)(v) is granted with 
respect to the other specified carriers not directly related to the 
proposed transaction.
    4. The parties shall comply with all provisions stated above.

    Decided: January 13, 1995.

    By the Commission, Chairman McDonald, Vice Chairman Morgan, and 
Commissioners Simmons and Owen.
Vernon A. Williams,
Secretary.
[FR Doc. 95-1395 Filed 1-18-95; 8:45 am]
BILLING CODE 7035-01-P