[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Proposed Rules]
[Pages 11802-11804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6826]



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DEPARTMENT OF TRANSPORTATION
49 CFR Parts 1002 and 1150

[STB Ex Parte No. 529]


Class Exemption for Acquisition or Operation of Rail Lines by 
Class III Rail Carriers Under 49 U.S.C. 10902

AGENCY: Surface Transportation Board.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The ICC Termination Act of 1995 (ICCTA) enacted a new 
provision for Class II and Class III rail carrier acquisitions or 
operations of rail lines. Pursuant to the request by the Regional 
Railroads of America (RRA) and The American Short Line Railroad 
Association (ASLRA), the Surface Transportation Board (Board) is 
proposing to institute a new class exemption procedure to apply to 
transactions in which Class III rail carriers seek to acquire 
additional rail properties. As proposed, the class exemption would be 
similar to the Board's existing rules for noncarrier transactions. 
Because the new statute precludes the Board from imposing labor 
protective conditions on Class III carriers receiving a certificate 
under 49 U.S.C. 10902, labor protection will not be provided under the 
proposed class exemption.

DATES: Comments are due on April 22, 1996.

ADDRESSES: Send comments (an original and 10 copies) referring to STB 
Ex Parte No. 529 to: Surface Transportation Board, Office of the 
Secretary, Case Control Branch, 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: The ICC Termination Act of 1995, Pub. L. No. 
104-88, 109 Stat. 803 (ICCTA), enacted on December 29, 1995, abolished 
the Interstate Commerce Commission (ICC). Responsibility for 
administering certain regulation over the rail industry was vested in a 
new Surface Transportation Board (Board) within the U.S. Department of 
Transportation. See ICCTA Section 101 (abolition of the ICC). See also 
new 49 U.S.C. 701(a) (establishment of Board), as enacted by ICCTA 
Section 201(a). The transfer took effect on January 1, 1996.
    In the ICCTA, Congress established a new provision--49 U.S.C. 
10902--that applies to the acquisition or operation of additional rail 
lines by Class II or Class III railroads. As enacted, subsection 
10902(c) requires the Board, after application by a Class II or III 
rail carrier, to issue a certificate authorizing the transaction 
``unless the Board finds that such activities are inconsistent with the 
public convenience and necessity.'' The new provision requires Class II 
rail carriers to provide adversely affected railroad employees a 
maximum of 1 year of severance pay--equal to the employee's earnings 
during the 12 months preceding the application filing date. The Board 
may not require labor protection from a Class III rail carrier. See 49 
U.S.C. 10902(d). The Board may approve the requested certificate as 
filed or may include conditions (other than labor protection 
conditions) the Board finds necessary in the public interest. See 49 
U.S.C. 10902(c).
    The criteria for approving a transaction under section 10902 are 
substantially the same as those found in section 10901, which requires 
that the Board approve the construction of rail lines and noncarrier 
acquisitions and operations. Noncarrier transactions under section 
10901 are subject to a class exemption found in 49 CFR 1150.31 through 
1150.35. See Class Exemption--Acq. & Oper. of R. Lines Under 49 U.S.C. 
10901, 1 I.C.C.2d 810 (1985), 4 I.C.C.2d 309 (1988), 4 I.C.C.2d 822 
(1988). Those rules have been carried forward by section 204 of the 
ICCTA as rules of the Board. Petitioners assert that the 10901 class 
exemption for noncarriers is beneficial in that it allows certainty in 
the timing of closing line sales, which is of critical importance to 
the financing of those transactions.
    RRA and ASLRA submit that a similar class exemption should apply to 
transactions by a Class III rail carrier under section 10902.1 
They contend that such a class exemption would not alter the 
competitive balance between rail carriers and shippers and thus the 
covered transactions would not result in an abuse of market power. 
Petitioners assert that the exemption will conform to the national rail 
transportation policy in 49 U.S.C. 10101, continue sound public policy, 
and make efficient use of the Board's limited resources.

    \1\  RRA and ASLRA indicate that they intend to file subsequent 
rulemaking requests for a class exemptions governing Class II 
acquisitions under section 10902 and a class exemption for Class III 
consolidations or transactions under section 11323.
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    Petitioners' proposed rules, unlike those adopted by the ICC 
establishing the class exemption for transactions under section 10901, 
do not distinguish between small and large transactions. We believe 
that it is necessary for Class III railroads that wish to make more 
significant acquisitions of rail line--acquisitions that would produce 
projected revenues following the acquisition that would result in the 
applicant qualifying as a Class II or I railroad--to provide additional 
information in their filings. We also believe that these exemptions 
should not become effective until 21 days after they are filed, rather 
than in 7 days as is the case under the proposed rules for the 
acquisition of smaller lines. These requirements are similar to those 
currently imposed by the rules for the class exemption from section 
10901 at 49 CFR 1150.35.2

    \2\  We note that our proposal for differing requirements 
depending on whether the transaction would result in the applicant's 
becoming a Class II or I railroad is consistent with Congressional 
intent as evidenced by the different handling under the ICCTA, 
including section 10902, of many transactions according to the class 
of railroad involved.
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    We are also proposing that verified notices of exemption and 
caption summaries be submitted on diskette in

[[Page 11803]]
addition to the written submission. The diskette would be required to 
be a 3.5-inch floppy diskette formatted for WordPerfect 5.1, or 
formatted so that it can be readily converted into WordPerfect 5.1.
    Petitioners propose that the fee for filing under the proposed 
section 10902 class exemption be the same as the fee for filing under 
the current class exemption under section 10901, i.e., $950. 
Petitioners note that this fee would be subject to change as part of 
the Board's periodic updating of its filing fees, to reflect the 
Board's experience in handling requests under the new procedure. Our 
rulemaking incorporates this fee proposal while noting that the Board 
is currently reviewing its filing fees and that fee increases may be 
required in the near future.
    Finally, petitioners ask that their proposal be implemented 
immediately as interim rules pending the Board's review of comments and 
publication of the final rules. We will not grant this request because 
we want to wait for the comments of the public on the proposed rules 
before putting them into effect.3 Rather, we will handle section 
10902 Class III applications on a case-by-case basis in the interim, 
and we will attempt to meet individual requests for expedited handling 
where sufficiently justified. Once we receive and review the comments 
from the public on these proposed rules, we intend to issue final rules 
and make them effective in as timely a manner as possible.

    \3\  United Transportation Union (UTU), on March 4, 1996, 
submitted a statement in opposition to the proposed rules. UTU 
contends that the new procedure does not provide adequate notice to 
employees and that the filing fee is too low. UTU suggests a 60-day 
notice period before the exemption becomes effective and a minimum 
filing fee of $5000. In this document, we are merely giving notice 
and seeking comments on the proposal submitted by RRA and ASLRA, as 
amended to conform to the current rules upon which the proposal is 
based. In determining final rules for this class of transactions, we 
will give full consideration to UTU's comments along with all other 
comments we receive. We invite comments on UTU's requests as well.
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Request for Comments

    We invite comments on all aspects of the proposed regulations. 
Written comments (an original and 10 copies) are due on April 22, 1996.
    We encourage comments on a 3.5-inch floppy diskette formatted for 
WordPerfect 5.1, or formatted so that it can be readily converted into 
WordPerfect 5.1. Any diskette submission (one diskette will be 
sufficient) should be in addition to the written submission.

Small Entities
    The Board certifies that this rule, if adopted, would not have a 
significant effect on a substantial number of small entities. If 
anything, the proposed class exemption should lessen the economic 
burden on such entities by expediting regulatory decisions affecting 
Class III railroads and by minimizing the cost of complying with the 
ICCTA and the Board's implementing rules.

Environment
    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.
List of Subjects
49 CFR Part 1002

    User Fees.
49 CFR Part 1150

    Administrative practice and procedure, Railroads.

    Decided: March 11, 1996.

    By the Board, Chairman Morgan, Vice Chairman Simmons, and 
Commissioner Owen.
Vernon A. Williams,
Secretary.
    For the reasons set forth in the preamble, the Board proposes to 
amend title 49, chapter X, parts 1002 and 1150 of the Code of Federal 
Regulations, as follows:
PART 1002--FEES
    1. The authority citation for part 1002 is proposed to be revised 
to read as follows:

    Authority: 5 U.S.C. 552(a)(4)(A), and 553, 31 U.S.C. 9701 and 49 
U.S.C. 721(a).

    2. Section 1002.2 is proposed to be amended by adding a new 
paragraph (f) (36) to read as follows:


Sec. 1002.2  Filing fees.

* * * * *
    (f) * * *

------------------------------------------------------------------------
                       Type of proceeding                          Fee  
------------------------------------------------------------------------
                                                                        
                  *        *        *        *        *                 
(36) Notice of exemption under 49 CFR 1150.41-1150.45..........     $950
                                                                        
                  *        *        *        *        *                 
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PART 1150--CERTIFICATE TO CONSTRUCT, ACQUIRE, OR OPERATE RAILROAD 
LINES

    3. The authority citation for part 1150 is proposed to be revised 
to read as follows:

    Authority: 5 U.S.C. 553 and 559; 49 U.S.C. 721(a), 10901, 10902, 
and 10502.

    4. The heading for subpart D is revised to read as follows:

Subpart D--Exempt Transactions Under 49 U.S.C. 10901

    5. A new subpart E, consisting of Secs. 1150.41-1150.45, is added 
to read as follows:
Subpart E--Exempt Transactions Under 49 U.S.C. 10902 for Class III Rail 
Carriers
1150.41  Scope of exemption.
1150.42  Procedures and relevant dates for small line acquisitions.
1150.43  Information to be contained in notice for small line 
acquisitions.
1150.44  Caption summary.
1150.45  Procedures and relevant dates--transactions under 49 U.S.C. 
10902 that involve creation of Class I or Class II carriers.

Subpart E--Exempt Transactions Under 49 U.S.C. 10902 for Class III 
Rail Carriers


Sec. 1150.41  Scope of exemption.

    Except as indicated below, this exemption applies to acquisitions 
and operations by Class III rail carriers under 49 U.S.C. 10902. This 
exemption also includes:
    (a) Acquisition by a Class III rail carrier of rail property that 
would be operated by a third party;
    (b) Operation by a Class III carrier of rail property acquired by a 
third party;
    (c) A change in operators on the line; and
    (d) Acquisition of incidental trackage rights. Incidental trackage 
rights include the grant of trackage rights by the seller, or the 
acquisition of trackage rights to operate over the line of a third 
party that occur at the time of the purchase.


Sec. 1150.42  Procedures and relevant dates for small line 
acquisitions.

    (a) This exemption applies to the acquisition of rail lines with 
projected annual revenues which, together with the acquiring carrier's 
projected annual revenue, do not exceed the annual revenue of a Class 
III railroad. To qualify for this exemption, the Class III rail carrier 
applicant must file a verified notice providing details about the 
transaction, and a brief caption summary, conforming to the format in 
Sec. 1150.44, for publication in the Federal Register. In addition to 
the written submission, the notice and summary must be submitted on a 
3.5-inch diskette formatted for WordPerfect 5.1.
    (b) The exemption will be effective 7 days after the notice is 
filed. The Board, through the Director of the Office of Proceedings, 
will publish a notice in the Federal Register within 30 days of the 
filing. A change in operators would

[[Page 11804]]

follow the provisions at Sec. 1150.44, and notice must be given to 
shippers.
    (c) If the notice contains false or misleading information, the 
exemption is void ab initio. A petition to revoke under 49 U.S.C. 
10502(d) does not automatically stay the exemption.
    (d) Applicant must preserve intact all sites and structures more 
than 50 years old until compliance with the requirements of section 106 
of the National Historic Preservation Act, 16 U.S.C. 470f, is achieved.


Sec. 1150.43  Information to be contained in notice for small line 
acquisitions.

    (a) The full name and address of the Class III rail carrier 
applicant;
    (b) The name, address, and telephone number of the representative 
of the applicant who should receive correspondence;
    (c) A statement that an agreement has been reached or details about 
when an agreement will be reached;
    (d) The operator of the property;
    (e) A brief summary of the proposed transaction, including:
    (1) The name and address of the railroad transferring the subject 
property to the Class III rail carrier applicant;
    (2) The proposed time schedule for consummation of the transaction;
    (3) The mile-posts of the subject property, including any branch 
lines; and
    (4) The total route miles being acquired;
    (f) A map that clearly indicates the area to be served, including 
origins, termini, stations, cities, counties, and states; and
    (g) A certificate that applicant's projected revenues following the 
transaction do not exceed those that would qualify it as a Class III 
rail carrier.


Sec. 1150.44  Caption summary.

    The caption summary must be in the following form. The information 
symbolized by numbers is identified in the key in this section as 
follows:

DEPARTMENT OF TRANSPORTATION--Surface Transportation Board

Notice of Exemption

STB Finance Docket No. (1)--Exemption (2)--(3)

    (1) Has filed a notice of exemption to (2) (3)'s line between 
(4). Comments must be filed with the Board and served on (5). (6). 
Key to symbols:
    (1) Name of carrier acquiring or operating the line, or both.
    (2) The type of transaction, e.g., to acquire, operate, or both.
    (3) The transferor.
    (4) Describe the line.
    (5) Petitioner's representative, address, and telephone number.
    (6) Cross reference to other class exemptions being used. The 
notice is filed under 49 CFR 1150.41. If the notice contains false or 
misleading information, the exemption is void ab initio.
    The filing of a petition to revoke will not automatically stay 
the transaction.


Sec. 1150.45  Procedures and relevant dates--transactions under 49 
U.S.C. 10902 that involve creation of Class I or Class II carriers.

    (a) To qualify for this exemption, applicant must serve a notice of 
intent to file a notice of exemption no later than 14 days before the 
notice of exemption is filed with the Board.
    (b) The notice of intent must contain all the information required 
in Sec. 1150.43 plus:
    (1) A general statement of service intentions; and
    (2) A general statement of labor impacts.
    (c) The notice of intent must be served on:
    (1) The Governor of each state in which track is to be sold;
    (2) The state(s) Department of Transportation or equivalent agency;
    (3) The national offices of the labor unions with employees on the 
affected line(s); and
    (4) Shippers representing at least 50 percent of the volume of 
local traffic and traffic originating or terminating on the line(s) in 
the most recent 12 months for which data are available (beginning with 
the largest shipper and working down).
    (d) Applicant must also file a verified notice of exemption 
conforming to the requirements of paragraph (b) of this section and of 
Sec. 1150.44, and certify compliance with Sec. 1150.45 (a), (b), and 
(c), attaching a copy of the notice of intent. In addition to the 
written submission, the notice must be submitted on a 3.5-inch diskette 
formatted for WordPerfect 5.1.
    (e) The exemption will be effective 21 days after the notice is 
filed. The Board, through the Director of the Office of Proceedings, 
will publish a notice in the Federal Register within 30 days of the 
filing.
    (f) If the notice contains false or misleading information, the 
exemption is void ab initio. A petition to revoke under 49 U.S.C. 
10502(d) does not automatically stay the transaction. Stay petitions 
must be filed within 7 days of the filing of the notice of exemption. 
Replies will be due 7 days thereafter. To be considered, stay petitions 
must be timely served on the applicant.
    (g) Applicant must preserve intact all sites and structures more 
than 50 years old until compliance with the requirements of section 106 
of the National Historic Preservation Act, 16 U.S.C. 470f, is achieved.

[FR Doc. 96-6826 Filed 3-21-96; 8:45 am]
BILLING CODE 4915-00-P