[Federal Register Volume 61, Number 230 (Wednesday, November 27, 1996)]
[Notices]
[Pages 60317-60320]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30290]


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DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
[STB Finance Docket No. 33286]


Norfolk Southern Corporation and Norfolk Southern Railway 
Company--Control--Conrail Inc. and Consolidated Rail Corporation

AGENCY: Surface Transportation Board, DOT.

ACTION: Decision No. 1; Notice of prefiling notification and request 
for comments.

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SUMMARY: Pursuant to 49 CFR 1180.4(b), Norfolk Southern Corporation 
(NSC) and Norfolk Southern Railway Company (NSR) 1 have notified 
the Surface Transportation Board (Board) of their intent to file an 
application seeking authority under 49 U.S.C. 11323-25 for: (1) The 
acquisition of control of Conrail Inc. (CRI) and Consolidated Rail 
Corporation (CRC) 2 by NSC; and (2) the resulting common control 
by NSC of Conrail and its subsidiaries, on the one hand, and NSR and 
its subsidiaries, on the other. The Board finds this to be a major 
transaction as defined in 49 CFR part 1180. The Board invites comments 
from interested persons on a proposed procedural schedule.

    \1\ NSC and NSR are referred to collectively as applicants.
    \2\ CRI and CRC are referred to collectively as Conrail.
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DATES: Written comments on the proposed schedule must be filed with the 
Board no later than December 13, 1996. Applicants' reply is due by 
December 23, 1996.

ADDRESSES: An original and 25 copies of all documents must refer to STB 
Finance Docket No. 33286 and must be sent to the Office of the 
Secretary, Case Control Branch, ATTN: STB Finance Docket No. 33286, 
Surface Transportation Board, 1201 Constitution Avenue, N.W., 
Washington, DC 20423.3

[[Page 60318]]

In addition, one copy of all documents in this proceeding must be sent 
to the applicants' representative: Richard A. Allen, Esq., Zuckert, 
Scoutt & Rasenberger, L.L.P., 888 Seventeenth Street, N.W., Washington, 
DC 20006-3939.

    \3\ In addition to submitting an original and 25 copies of all 
documents filed with the Board, the parties are encouraged to submit 
all pleadings and attachments as computer data contained on a 3.5-
inch floppy diskette which is formatted for WordPerfect 5.1 (or 
formatted so that it can be converted into WordPerfect 5.1) and is 
clearly labeled with the identification acronym and number of the 
pleading contained on the diskette [49 CFR 1180.4(2)]. The computer 
data contained on the computer diskettes submitted will be subject 
to the protective order that will be entered in a subsequent 
decision, and is for the exclusive use of Board employees reviewing 
substantive matters in this proceeding. The flexibility provided by 
such computer file data will facilitate expedited review by the 
Board and its staff.
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FOR FURTHER INFORMATION CONTACT: Julia M. Farr, (202) 927-5352. [TDD 
for the hearing impaired: (202) 927-5721.]

SUPPLEMENTARY INFORMATION: In the notice of intent filed November 6, 
1996, applicants state that on October 23, 1996, NSC announced its 
intention to commence a public tender offer for equity securities of 
CRI. On October 24, 1996, NSC and its wholly owned subsidiary, Atlantic 
Acquisition Corporation (Acquisition), commenced the tender offer 
pursuant to an Offer to Purchase dated October 24, 1996. NSC and 
Acquisition have offered to purchase shares of common stock of CRI, 
subject to the conditions specified in the Offer to Purchase. Upon 
purchase of CRI shares by NSC, Acquisition, or their affiliates, such 
purchased shares will be deposited in an independent voting trust 
pending approval by the Board of the acquisition of control by NSC of 
Conrail.4 NSC is seeking to negotiate with CRI a definitive merger 
agreement pursuant to which CRI would, as soon as practicable following 
consummation of the Offer, consummate a merger or similar business 
combination with Acquisition or another direct or indirect subsidiary 
of NSC (the Merger). To avoid the acquisition of control by NSC of 
Conrail prior to approval by the Board, NSC intends to deposit all 
issued and outstanding common stock of Acquisition (which may become 
stock of the surviving corporation on consummation of the Merger) owned 
by NSC into the voting trust at or immediately prior to the Merger. 
Upon Board approval of the acquisition by NSC of control of Conrail, 
NSC will acquire control of Conrail through stock ownership of the 
voting trust.
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    \4\ Applicants filed a copy of a proposed voting trust agreement 
(VTA) on October 25, 1996, to be entered into by and between NS, 
Acquiror, and a Bank (to be named as Trustee) for use in a possible 
future NS acquisition of Conrail. An informal staff opinion letter 
was issued on November 1, 1996. On November 6, 1996, applicants 
submitted an alternative VTA proposed to be entered into by and 
between NS, Acquiror, and a Bank (to be named as Trustee), which 
would revise para. 4 of the VTA to reflect that, if a merger between 
Acquiror and Conrail Inc. takes place prior to Board approval of the 
control application and the common stock of the merged entity is 
deposited into the voting trust in accordance with VTA para. 3, the 
Trustee will have the authority from the outset to vote all shares 
of the Trust Stock on all matters except the enumerated matters in 
para. 4 ``in accordance with its best judgment concerning the 
interests of the Company.'' An informal opinion letter was issued on 
November 18, 1996.
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    Applicants state that they will use the year 1995 for purposes of 
their impact analysis to be filed in the application, and that they 
anticipate filing their application on or before May 1, 1997.
    The Board finds that this is a major transaction, as defined at 49 
CFR 1180.2(a), as it is a control transaction involving two or more 
Class I railroads. The application must conform to the regulations set 
forth at 49 CFR part 1180 and must contain all information required 
therein for major transactions, except as modified by any advance 
waiver.5 The carriers are also required to submit maps with 
overlays that show the existing routes of both carriers and their 
competitors.
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    \5\ The ICC Termination Act of 1995, Pub. L. No. 104-88, 109 
Stat. 803, requires that we consider the effect of the proposed 
transaction ``on competition among rail carriers in the affected 
region or in the national rail system.'' 49 U.S.C. 11324(b)(5). 
Applicants are reminded to include analysis on both of these 
criteria in their competitive analyses.
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    By petition filed November 8, 1996 (NSC-3), applicants requested a 
protective order to protect confidential, highly confidential, and 
proprietary information, including contract terms, shipper-specific 
traffic data, and other traffic data to be submitted in connection with 
the control application. Applicants' request for protective order will 
be addressed in a separate decision.
    Also on November 8, 1996, applicants filed a petition to establish 
a proposed procedural schedule (NSC-2). Applicants' proposed procedural 
schedule is as follows:

Applicants' Proposed Procedural Schedule

F--Primary application and related applications filed.
F + 30--Board notice of acceptance of primary application and related 
applications published in the Federal Register.
F + 45--Notification of intent to participate in proceeding due.
F + 60--Description of anticipated inconsistent and responsive 
applications due; petitions for waiver or clarification due with 
respect to such applications.
F + 120--Inconsistent and responsive applications due. All comments, 
protests, requests for conditions, and any other opposition evidence 
and argument due. Comments by U.S. Department of Justice (DOJ) and U.S. 
Department of Transportation (DOT) due.
F + 135--Notice of acceptance (if required) of inconsistent and 
responsive applications published in the Federal Register.
F + 150--Response to inconsistent and responsive applications due. 
Response to comments, protests, requested conditions, and other 
opposition due. Rebuttal in support of primary application and related 
applications due.
F + 165--Rebuttal in support of inconsistent and responsive 
applications due.
F + 185--Briefs due, all parties (not to exceed 50 pages).
F + 215--Oral argument (at Board's discretion).
F + 217--Voting conference.
F + 255--Date of service of final decision.

    Under applicants' proposal, immediately upon each evidentiary 
filing, the filing party shall place all documents relevant to the 
filing (other than documents that are privileged or otherwise protected 
from discovery) in a depository open to all parties, and shall make its 
witnesses available for discovery depositions. Access to documents 
subject to the protective order shall be appropriately restricted. 
Parties seeking discovery depositions may proceed by agreement. 
Relevant excerpts of transcripts will be received in lieu of cross-
examination, unless cross-examination is needed to resolve material 
issues of disputed fact. Discovery on responsive and inconsistent 
applications will begin immediately upon their filing. The 
Administrative Law Judge assigned to this proceeding will have the 
authority initially to resolve any discovery disputes.6
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    \6\  The process of assigning an ALJ to this proceeding is 
underway, and we will leave all discovery matters, including the 
adoption of any guidelines governing discovery initially, to the 
discretion of the ALJ. A decision naming that judge will be issued 
as soon as possible.
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    The proposed schedule is identical to the one requested by the 
applicants in STB Finance Docket No. 33220, CSX Corporation and CSX 
Transportation, Inc.--Control and Merger--Conrail Inc. and Consolidated 
Rail Corporation (CSX/CR), filed October 18, 1996 (CSX/CR-3), and is 
substantially similar to that adopted in Union Pacific Corporation, 
Union Pacific Railroad Company and Missouri Pacific Railroad Company--
Control and Merger--Southern Pacific Rail Corporation, Southern Pacific 
Transportation Company, St. Louis Southwestern Railway Company, SPCSL 
Corp. and The Denver and Rio Grande Western Railway Company (UP/SP), 
Finance

[[Page 60319]]

Docket No. 32760 (see Decision No. 6, ICC served Oct. 19, 1995; and 
Decision No. 9, ICC served Dec. 27, 1995).
    Applicants' proposal is one of the first major consolidation 
transactions presented to the Board under the ICC Termination Act of 
1995, Pub. L. No. 104-88, 109 Stat. 803 (ICCTA), enacted December 29, 
1995, and effective January 1, 1996. The Board is seeking comments from 
the public on applicants' proposed procedural schedule, as modified by 
us below to adhere more closely to the provisions of ICCTA. In ICCTA, 
Congress provided pursuant to 49 U.S.C. 11325(b) [emphasis added]:
    (b) If the application involves the merger or control of two or 
more Class I railroads, as defined by the Board, the following 
conditions apply:
    (1) Written comments about an application may be filed with the 
Board within 45 days after notice of the application is published [F + 
75 days] under subsection (a) 7 of this section. Copies of such 
comments shall be served on the Attorney General and the Secretary of 
Transportation, who may decide to intervene as a party to the 
proceeding. That decision must be made by the 15th day after the date 
of receipt of the written comments, and if the decision is to 
intervene, preliminary comments about the application must be sent to 
the Board by the end of the 15th day after the date of receipt of the 
written comments [F + 90 days].
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    \7\  Under 49 U.S.C. 11325(a), ``[t]he Board shall publish 
notice of the application under section 11324 in the Federal 
Register by the end of the 30th day after the application is filed 
with the Board * * *.''
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    (2) The Board shall require that applications inconsistent with an 
application, notice of which was published under subsection (a) of this 
section, and applications for inclusion in the transaction, be filed 
with it by the 90th day after publication of notice [F + 120 days] 
under that subsection.
    (3) The Board must conclude evidentiary proceedings by the end of 1 
year after the date of publication of notice under subsection (a) of 
this section. The Board must issue a final decision by the 90th day 
after the date on which it concludes the evidentiary proceedings.
    Specifically, we propose to modify applicants' proposed schedule to 
require parties intending to file comments, protests, requests for 
conditions, and any other opposition evidence and argument to file 
their submissions 75 days from the date the application is filed [F + 
75] as provided for under 49 U.S.C. 11325(b)(1), with comments from the 
U.S. Department of Justice (DOJ) and the U.S. Department of 
Transportation (DOT) due 90 days from the date the application is filed 
[F + 90 days] as provided for under 49 U.S.C. 11325(b)(1). If these due 
dates were to be established for comments in this proceeding, responses 
to comments, protests, requested conditions, and other opposition, and 
also rebuttal in support of the primary application and related 
applications would be due 30 days after the due date (i.e., on day F + 
105 for responses to commenters and parties other than DOJ and DOT; and 
on day F + 120 for responses to DOJ and DOT). We propose to keep 
inconsistent and responsive applications due 120 days from the date the 
application is filed [F + 120 days] as provided for under 49 U.S.C. 
11325(b)(2). Because there has not been a major merger in the East 
since the early 1980s, given our merger experience, we believe it would 
be prudent for us to factor in some additional time to accommodate 
possible unique issues that may arise. We propose extending applicants' 
proposed procedural schedule by 45 days allocated as follows: (1) 
adding 5 days to applicants' proposed period of time for parties to 
prepare their briefs, so that briefs would be due on F + 190 days; (2) 
adding 15 days to applicants' proposed period of time for parties to 
prepare for oral argument, so that oral argument would occur on F + 235 
days; (3) adding 3 days to applicants' proposed 2-day interval between 
the oral argument and the voting conference, so that a voting 
conference would occur on F + 240 days; and (4) adding 22 days to 
applicants' proposed period of time after the voting conference for the 
service of the Board's final decision on F + 300 days. In addition, we 
propose requiring applicants to file an environmental report, including 
all supporting documents, no later than 30 days prior to the filing of 
the primary application.8
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    \8\ While applicants need not file their actual operating plan 
due at the time of the filing of their application, the supporting 
documents must be completely consistent with their operating plan 
and contain sufficient information to allow immediate initiation of 
the environmental review process.
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Proposed Procedural Schedule as Modified by the Board 9

F---30--Environmental report, including all supporting documents due.
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    \9\ Emphasis added to indicate the proposed changes made by the 
Board.
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F--Primary application and related applications filed.
F + 30--Board notice of acceptance of primary application and related 
applications published in the Federal Register.
F + 45--Notification of intent to participate in proceeding due.
F + 60--Description of anticipated inconsistent and responsive 
applications due; petitions for waiver or clarification due with 
respect to such applications.
F + 75--All comments, protests, requests for conditions, and any other 
opposition evidence and argument due.
F + 90--Comments by U.S. Department of Justice (DOJ) and U.S. 
Department of Transportation (DOT) due.
F + 105--Responses to comments, protests, requested conditions, and 
other opposition due. Rebuttal in support of primary application and 
related applications due in response to filings on day F + 75.
F + 120--Inconsistent and responsive applications due. Rebuttal in 
support of primary application and related applications due in response 
to filings of DOJ and DOT on day F + 90.
F + 135--Notice of acceptance (if required) of inconsistent and 
responsive applications published in the Federal Register.
F + 150--Response to inconsistent and responsive applications due.
F + 165--Rebuttal in support of inconsistent and responsive 
applications due.
F + 190--Briefs due, all parties (not to exceed 50 pages).
F + 235--Oral argument (close of record).
F + 240--Voting conference.
F + 300--Date of service of final decision.

    Applicants are proposing that any applications for authority for, 
or for exemption of, merger-related abandonments, and any supporting 
verified statements, be filed with the primary application, and be 
treated as related applications, with any opposition evidence, 
comments, rebuttal and briefing on those applications to be submitted 
in accordance with the same schedule as the primary application. We 
agree that we should process any merger-related abandonment 
applications in accordance with the overall merger procedural schedule, 
rather than applying the procedures found at 49 U.S.C. 10903, which is 
similar to our process we used in the UP/SP proceeding. See UP/SP 
(Decision No. 9) (ICC served Dec. 27, 1995), slip op. at 9-10. 
Therefore, we will grant applicants' request for waiver under 49 CFR 
1152.24(e)(5) to permit modifications of the procedures and

[[Page 60320]]

timetables prescribed in 49 CFR 1152.25(d) (6) and (7) to be consistent 
with the procedural schedule subsequently adopted in this proposed 
merger proceeding.10
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    \10\ Applicants indicate that they intend to file shortly a 
petition for waiver or clarification of Railroad Consolidation 
Procedures, and related relief. As in UP/SP, applicants should also 
seek an exemption under 49 U.S.C. 10502 from any statutory 
procedural requirements at 49 U.S.C. 10903 necessary to allow the 
Board to process the merger-related abandonment applications under 
the procedural schedule ultimately adopted. See UP/SP (Decision No. 
3) (ICC served Sept. 5, 1995), slip op. at 7-10.
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    We invite all interested persons to submit written comments on the 
procedural schedule we are proposing here. Comments must be filed by 
December 13, 1996. Applicants may reply by December 23, 1996.
    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.

    Decided: November 21, 1996.

    By the Board, Chairman Morgan, Vice Chairman Simmons, and 
Commissioner Owen.
Vernon A. Williams,
Secretary.
[FR Doc. 96-30290 Filed 11-26-96; 8:45 am]
BILLING CODE 4915-00-P