[Federal Register Volume 60, Number 20 (Tuesday, January 31, 1995)]
[Proposed Rules]
[Pages 5890-5893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2288]



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INTERSTATE COMMERCE COMMISSION

49 CFR Parts 1105 and 1180

[Ex Parte No. 282 (Sub-No. 19)]


New Procedures in Rail Acquisitions, Mergers and Consolidations

AGENCY: Interstate Commerce Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is proposing to amend its regulations in order 
to establish more timely procedures for major and significant rail 
acquisitions, mergers and consolidations. The proposed rules will also 
shorten the timeframes for minor transactions where appropriate.

DATES: Written comments must be filed with the Commission by March 2, 
1995.

ADDRESSES: Send an original and 15 copies of comments to: Office of the 
Secretary, Case Control Branch, Attn: Ex Parte No. 282 (Sub-No. 19), 
Interstate Commerce Commission, 1201 Constitution Avenue, N.W., 
Washington, DC 20423.

FOR FURTHER INFORMATION CONTACT: Joseph H. Dettmar, (202) 927-5660. 
[TDD for the hearing impaired: (202) 927-5721.]

SUPPLEMENTARY INFORMATION: In response to criticisms that this agency's 
consideration of applications by railroads to acquire other carriers or 
to merge or consolidate with each other is too slow, we have reviewed 
our existing procedures for major and significant transactions,1 
our practices in implementing them, and the applicable statutory 
provisions.2 We have done so to determine whether these 
applications can be processed more quickly while preserving the 
opportunity for: (1) affected persons and the public at large to 
participate effectively in the process; (2) reasoned consideration of 
the arguments for and against an application; and (3) consideration of 
competing applications, proposed conditions, and amendments offered by 
the applicants to meet objections to proposed transactions.

    \1\A major transaction involves control or merger of two or more 
class I railroads. 49 CFR 1180.2(a). A significant transaction is 
defined at 49 CFR 1180.2(b).
    \2\Minor transactions are defined at 49 CFR 1180.2(c). Although 
we believe that our current rules provide for timely handling of 
this type of transaction, we do propose including minor transactions 
under many of our proposed changes to enhance the consistency of our 
rules and to improve further our ability to handle minor 
transactions in a timely and efficient manner.
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    Typically, we receive a proposed schedule from an applicant in a 
major or significant transaction, publish the schedule in the Federal 
Register, modify it based upon consideration of comments we receive, 
and adopt it. Most recently, for example, the applicants in Burlington 
Northern Inc. and Burlington Northern Railroad Company--Control and 
Merger--Santa Fe Pacific Corporation and The Atchison, Topeka and Santa 
Fe Railway Company, Finance Docket No. 32549, proposed a procedural 
schedule calling for the Commission to issue a decision in 430 days. We 
sought comments on the proposed schedule and adopted one calling for 
the issuance of a decision in 535 days.
    We have not always crafted a time line based on schedules proposed 
by the parties to transactions but that has generally been the practice 
in recent years. We applied that practice in establishing a schedule 
and then deciding the application of Rio Grande Industries to acquire 
the Southern Pacific Transportation Company (SPTC) in 185 days. In that 
case, Rio Grande Industries, et al.--Control--SPTC et al., 4 I.C.C.2d 
834 (1988) (Rio Grande-SP), the Commission processed an application 
that involved a competing application filed by Kansas City Southern 
Industries (KCSI), several requested conditions and a number of 
embraced abandonments, leases, trackage rights requests, requests for 
authority to control and other related transactions. We afforded an 
opportunity for all interested persons to comment on the application 
and the inconsistent application of KCSI and to propose conditions. We 
gave the applicants an opportunity to reply to all comments on the 
application, to respond to the inconsistent application, and to propose 
any modifications to the merger in response to the comments filed.
    We believe that the Rio Grande-SP case offers a useful model of a 
timely but fair process for rail mergers and consolidation proceedings. 
We propose [[Page 5891]] that process for consideration here. With that 
case in mind, the schedule we propose to adopt in all applications for 
merger and consolidation under 49 U.S.C. 11343-11345 is set out in 
Appendix A to this Notice. The proposed modifications to Parts 1105 and 
1180 are set out below. The proposed schedule calls for the issuance of 
a decision by the agency in both major and significant transactions 180 
days after an application is filed. In addition we propose to shorten 
the prefiling notification period from a minimum of 3 months for major 
transactions to 2 months, which we propose to apply to both major and 
significant transactions.
    In considering the Rio Grande-SP proceeding as a model, it is 
important to note that the case was unique in one respect. There we 
asserted jurisdiction not only pursuant to our authority to consider 
mergers but also because the sale represented an effort by Santa Fe 
Southern Pacific Corporation (SFSP), as the beneficial owner of the 
SPTC, to comply with our orders directing it to divest itself of SPTC 
following our denial of SFSP's application to acquire control of the 
carrier.
    We do not believe that factor precludes us from processing other 
applications for major and significant mergers and consolidations in a 
similar fashion. The issues that arose in that case are similar to 
those that would arise in any major merger. The only relevance of our 
divestiture jurisdiction in Rio Grande-SP is that we cited it as one of 
the bases for departing from the statutory procedures of 49 U.S.C. 
11345 in order to establish a more expedited schedule than that set out 
in the statute and in our regulations at 49 CFR 1180. But that is not 
the only basis for our authority to depart from our procedures.
    In proposing to modify the statutory schedule, we find authority in 
the exemption provisions of 49 U.S.C. 10505. We propose not only to 
modify our regulations at 49 CFR 1180.4 but also to grant an exemption 
for all major and significant acquisition, merger and consolidation 
proceedings from the procedural requirements of 49 U.S.C. 11344 and 
11345, and in their stead adopt the schedule set out in Appendix A and 
the procedures set out below.3 We rely upon the criteria to exempt 
transactions set out at 49 U.S.C. 10505:

    \3\The schedule set out in Appendix A will not apply to minor 
transactions. We are able to process those transactions more 
expeditiously using a more simplified schedule geared to the 
specific transaction. We will continue to establish procedural 
schedules for those transactions on a case-by-case basis. Our 
exemption, however, will extend to minor transactions for procedures 
set out below where applicable, except as noted below.

    [T]he Commission shall exempt . . . a transaction . . . when the 
Commission finds that the application of a provision of this 
subtitle--
    (1) is not necessary to carry out the transportation policy of 
section 10101a of this title; and
    (2) either (A) the transaction or service is of limited scope, 
or (B) the application of a provision of this subtitle is not needed 
to protect shippers from the abuse of market power.

The rail transportation policy (RTP) would be fostered by establishing 
a more timely procedure for these proceedings. Specifically, 49 U.S.C. 
10101a(2) states that it is the policy of the United States Government 
``. . . to require fair and expeditious regulatory decisions when 
regulation is required. . . .''
    We believe that the procedures we are modifying are of limited 
scope within the meaning of 49 U.S.C. 10505. Most of the statutory 
standards are deadlines that require actions to be taken within a 
certain period of time. Adopting more expedited procedures does not 
contravene those provisions. The chief effects of the proposed schedule 
on the procedures established in 49 U.S.C. 11345 are that written 
comments on the application would be due in 30 rather than 45 days, 
that the U.S. Department of Transportation and the U.S. Department of 
Justice would be subject to the same schedule as other Federal agencies 
and other parties, and that inconsistent applications would have to be 
filed in 75 days rather than 90 days. These are not major departures 
from the statutory procedures.
    The new procedure would also represent a departure from our 
existing regulations, which we may modify without invoking 49 U.S.C. 
10505. The existing regulations call for the completion of the 
evidentiary record within 24 months of accepting the application in 
major transactions and for the completion of the record within 180 days 
in significant transactions. To the extent that the statute sets 
maximum time limits of 24 months and 180 days, we may of course shorten 
those deadlines by rule. The proposed schedule calls for the completion 
of the record in 125 days of acceptance of an application. The proposed 
schedule gives the Commission 40 days to issue a decision after the 
close of the written record and 30 days after oral argument, if the 
Commission schedules an oral argument. That compares with the existing 
standards that provide that a final decision will be issued within 180 
days after the conclusion of the evidentiary proceeding in a major 
transaction and within 90 days after completion of the evidentiary 
phase in a significant transaction.
    A vital element in carrying out the proposed procedures is strict 
compliance with the Commission's environmental rules at 49 CFR Part 
1105. These rules ensure compliance with the National Environmental 
Policy Act (NEPA), the Endangered Species Act, the National Historic 
Preservation Act, the Coastal Zone Management Act, and other 
environmental statutes.
    Section 1105.6(b)(4) provides that environmental assessments will 
normally be prepared in those mergers, consolidations, or acquisitions 
of control under 49 U.S.C. 11343 that involve significant changes in 
operation or rail line abandonments and constructions. Mergers that do 
not involve abandonments and constructions or major operational changes 
are generally exempt from environmental review. However, if a merger is 
likely to significantly affect the environment, NEPA requires that the 
Commission prepare an environmental impact statement. As a result, we 
will not be able to apply the proposed schedule to these mergers, and 
will establish an alternate schedule that will permit compliance with 
NEPA without creating undue delay.
    To expedite the NEPA environmental review process, we are requiring 
that applicants consult with the Commission's Section of Environmental 
Analysis (SEA) with, or prior to, the filings of their prefiling 
notices for all mergers involving the preparation of environmental 
documentation. In the case of mergers requiring an environmental 
assessment, we are requiring that the applicant submit, with its 
application, a preliminary draft environmental assessment (PDEA). We 
encourage the use of independent third party contractors in preparing 
the PDEA. This document shall be based on consultations with SEA and 
the various agencies set forth in 49 CFR 1105.7(b) of our environmental 
rules. SEA will use the PDEA in preparing a draft environmental 
assessment for public comment.
    An equally vital element in enabling the parties and the Commission 
to adhere to a more timely schedule is the avoidance of protracted 
disputes involving discovery. Under our proposed procedures any 
applicant must establish a depository or other facility for making 
documents supporting the application available promptly to all 
interested parties subject to the appropriate protective orders. 
Immediately upon each evidentiary [[Page 5892]] filing, the filing 
party shall place all relevant documents in the depository.
    The new schedule is designed to provide a timely decision on 
whether a proposed acquisition, merger, or consolidation comports with 
sections 11343 and 11344. The Commission will also decide directly 
related applications, e.g., grants of trackage rights, leases, and 
similar transactions. We admonish applicants to structure their 
transactions so as to permit efficient processing of the application. 
If protests or other factors require that such applications or 
petitions be given more extensive consideration, they will be addressed 
in separate decisions that may be issued after the decision on the 
acquisition, merger, or consolidation.
    The only pending major consolidation proceeding where the record 
has not yet been developed is the BN-Santa Fe case. Because it is 
currently pending, we will serve a copy of this notice on all the 
parties on the service list in Finance Docket No. 32549. By this 
notice, we seek comments as to whether that case should be governed by 
the schedule originally adopted or the schedule proposed herein.4

    \4\The procedural schedule adopted in Finance Docket No. 32549 
was suspended pending the outcome of the Santa Fe Pacific 
Corporation's shareholders' vote, which is scheduled to occur on 
February 7, 1995.
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    This action will not significantly affect either the quality of the 
human environment or conservation of energy resources.
    This action will have no significant effect on a substantial number 
of small entities. The revised rules should result in fewer required 
filings by parties in each of these proceedings and to that extent our 
action should benefit small entities.

List of Subjects

49 CFR Part 1105

    Environmental impact statements, Reporting and recordkeeping 
requirements.

49 CFR Part 1180

    Administrative practice and procedure, Bankruptcy, Railroads, 
Reporting and recordkeeping requirements.

    Decided: January 25, 1995.

    By the Commission, Chairman McDonald, Vice Chairman Morgan, and 
Commissioners Simmons and Owen.
Vernon A. Williams,
Secretary.

    For the reasons set forth in the preamble, title 49, chapter X, 
parts 1105 and 1180 are proposed to be amended as set forth below:

PART 1105--PROCEDURES FOR IMPLEMENTATION OF ENVIRONMENTAL LAWS

    1. The authority citation for part 1105 continues to read as 
follows:

    Authority: 49 U.S.C. 10321, 10505, 10901, 10903-10906, and 
11343; 16 U.S.C. 470f, 1451, and 1531; 42 U.S.C. 4332 and 6362(b); 
and 5 U.S.C. 553 and 559.
    2. Section 1105.7 is proposed to be amended by adding a sentence to 
the end of paragraph (a) to read as follows:


Sec. 1105.7  Environmental reports.

    (a) * * * An applicant for a rail acquisition, merger, or 
consolidation submitted under 49 CFR 1180.4 must consult with the 
Section of Environmental Analysis at the time of, or prior to, filing 
its notice, and must submit with, or prior to, its application a 
Preliminary Draft Environmental Assessment as described in 
Sec. 1105.13.
* * * * *


Sec. 1105.10  [Amended]

    3. Section 1105.10, paragraph (b), is proposed to be amended by 
adding to the end of the first sentence after ``1105.8'' the words 
``and a Preliminary Draft Environmental Assessment submitted by an 
applicant pursuant to Sec. 1105.13''.
    4. A new Sec. 1105.13 is added to read as follows:


Sec. 1105.13  Preliminary Draft Environmental Assessment.

    An applicant for a rail acquisition, merger, or consolidation 
submitted under 49 CFR 1180.4 must submit at the time of, or prior to, 
its application, a Preliminary Draft Environmental Assessment (PDEA) 
for transactions requiring an Environmental Assessment under 
Sec. 1105.6(b)(4). The PDEA must contain the information required in 
Sec. 1105.7 and Sec. 1105.8 and must be served on the parties 
designated in Sec. 1105.7(b). The PDEA must be based on consultations 
with the Section of Environmental Analysis (SEA) and the agencies 
specified in Sec. 1105.7(b). We encourage the use of third-party 
consultants in preparing the PDEA. SEA will use the PDEA in preparing a 
draft Environmental Assessment.

PART 1180--RAILROAD ACQUISITION, CONTROL, MERGER, CONSOLIDATION 
PROJECT, TRACKAGE RIGHTS, AND LEASE PROCEDURES

    5. The authority citation for part 1180 continues to read as 
follows:

    Authority: 49 U.S.C. 10321, 10505, 11341, 11343-11346; 5 U.S.C. 
553 and 559; and 11 U.S.C. 1172.

    6. Section 1180.4 is amended as follows:
    a. Paragraph (a)(4) is revised.
    b. Paragraph (b)(1)introductory text, the first sentence is revised 
and a new sentence is added after the first sentence.
    c. Paragraph (b)(2) introductory text, the words ``30 days'' are 
revised to read ``15 days''.
    d. Paragraphs (c)(2)(v) through (c)(2)(vii) are redesignated as 
paragraphs (c)(2)(vi) through (c)(2)(viii) and a new paragraph 
(c)(2)(v) is added.
    e. Paragraphs (c)(7)(i) and (c)(7)(ii), the words ``30 days'' are 
revised to read ``15 days''.
    f. Paragraph (d)(1)(i) is revised.
    g. In paragraphs (d)(1)(iii)(H) and (d)(1)(iii)(I)(3), the first 
two words ``An initial'' are removed and the word ``A'' is added in 
their place.
    h. Paragraph (d)(2) is removed.
    i. Paragraph (d)(3) is removed.
    j. Paragraph (d)(4) is redesignated as paragraph (d)(2) and 
redesignated paragraphs (d)(2)(i) and (d)(2)(iv) are revised.
    k. Paragraph (e)(2) is revised.
    l. Paragraph (e)(3) is revised.
    7. The additions and revisions read as follows:


Sec. 1180.4  Procedures.

    (a) * * *
    (4) The Commission shall issue a list of all parties to the 
proceeding within 40 days of the application's acceptance.
    (b) * * *
    (1) Between 2 to 4 months prior to the proposed filing of an 
application in a major or significant transaction, applicants shall 
file a notice with the Commission. The applicant shall initiate 
consultations with the Section of Environmental Analysis upon, or prior 
to, the filing of this notice. * * *
* * * * *
    (c) * * *
    (2) * * *
    (v) For transactions requiring an environmental assessment (EA) 
under 49 CFR 1105.6(b)(4), the applicant shall submit to the Commission 
a Preliminary Draft Environmental Assessment (PDEA) as described in 49 
CFR 1105.13.
* * * * *
    (d) * * *
    (1) * * *
    (i) Time to file. Written comments and proposed conditions must be 
filed no later than 30 days after an application's acceptance.
* * * * *
    (2) * * *
    (i) All responsive applications shall be filed 60 days after 
acceptance of the primary application. No responsive 
[[Page 5893]] applications shall be permitted to minor transactions.
* * * * *
    (iv) Any petitions for waiver, clarification, extension of time, or 
for leave to file an incomplete application, or to rebut the 
presumption of a significant transaction, must be filed at least 30 
days in advance of the filing of the responsive application.
* * * * *
    (e) * * *
    (2) The evidentiary proceeding will be completed in 125 days after 
the primary application is accepted for a major or a significant 
transaction and in 105 days for a minor transaction.
    (3) A final decision on the primary application and all 
consolidated cases will be issued in 40 days after the conclusion of 
the evidentiary record.
* * * * *
    Note: This appendix will not be published in the CFR.

Appendix A--Proposed Schedule for Major Rail Acquisition, Merger and 
Consolidation Applications Under the Interstate Commission Act

    Discovery begins immediately.

D             Date Application filed.                                   
D+15          Notice of the application published in the Federal        
               Register.                                                
D+20          Discovery conference on application held.                 
D+45          Comments and protests due on the application; requested   
               conditions due; description of anticipated inconsistent  
               and responsive applications due.                         
D+50          Discovery conference on comments, protests and conditions 
               held.                                                    
D+75          Inconsistent and responsive applications due. Response to 
               comments, protests, conditions and rebuttal in support of
               primary application due.                                 
D+80          Discovery conference on inconsistent applications held.   
D+90          Notice of acceptance (if required) of inconsistent and    
               responsive applications published in the Federal         
               Register.                                                
D+105         Response to inconsistent and responsive applications due. 
               Rebuttal in support of comments, protests, and conditions
               to the primary application due.                          
D+115         Rebuttal in support of inconsistent and responsive        
               applications due.                                        
D+125         Briefs due, all parties.                                  
D+140         Oral Argument (at Commission's discretion).               
D+150         Voting Conference (at Commission's discretion).           
D+180         Date for service of decision.                             
                                                                        

[FR Doc. 95-2288 Filed 1-30-95; 8:45 am]
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