[Federal Register Volume 62, Number 76 (Monday, April 21, 1997)]
[Notices]
[Pages 19390-19393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10337]
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DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
[STB Finance Docket No. 33388]
CSX Corporation and CSX Transportation, Inc., Norfolk Southern
Corporation and Norfolk Southern Railway Company--Control and Operating
Leases/Agreements-- Conrail Inc. and Consolidated Rail Corporation
AGENCY: Surface Transportation Board, DOT.
ACTION: Decision No. 2; Notice of prefiling notification and request
for comments.
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SUMMARY: Pursuant to 49 CFR 1180.4(b), CSX Corporation (CSXC), CSX
Transportation, Inc. (CSXT), Norfolk Southern Corporation (NSC),
Norfolk Southern Railway Company (NSR), Conrail Inc. (CRI), and
Consolidated Rail Corporation (CRC) 1 have notified the Surface
Transportation Board (Board) of their intent to file a joint
application seeking authority under 49 U.S.C. 11323-25 for: (1) The
acquisition of control, by CSX and NS, of CRI, which is to be jointly
owned by CSXC and NSC, by and through a special purpose limited
liability company (LLC) and LLC's wholly owned subsidiary, Green
Acquisition Corporation (Acquisition); and (2) as soon as practicable
after the authorization and exercise of such control, the division of
Conrail's assets into (a) certain assets which will continue to be held
by CRI and CRC or their subsidiaries and operated for Conrail's account
and that
[[Page 19391]]
of its stockholders; (b) certain assets which will be the subject of
separate long-term operating agreements, operating leases or other
operating arrangements with CSX and NS, respectively; and (c) certain
assets which will be separately owned by CSX and NS. In addition, as
part of the overall transaction, NSR will sell to CSXT a line of
railroad formerly owned by Conrail and now owned by NSR.
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\1\ CSXC and CSXT are referred to collectively as CSX. NSC and
NSR are referred to collectively as NS. CRI and CRC are referred to
collectively as Conrail. CSX, NS, and Conrail are referred to
collectively as applicants.
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The Board finds this to be a major transaction as defined in 49 CFR
part 1180. As requested by applicants, the Board also waives the
minimum 3-month prefiling notification requirement of 49 CFR
1180.4(b)(1), and invites comments from interested persons on
applicants' proposed procedural schedule.
DATES: Written comments on applicants' proposed schedule must be filed
with the Board no later than May 1, 1997. Applicants' reply is due by
May 8, 1997.
ADDRESSES: An original and 25 copies of all documents must refer to STB
Finance Docket No. 33388 and must be sent to the Office of the
Secretary, Case Control Unit, ATTN: STB Finance Docket No. 33388,
Surface Transportation Board, 1925 K Street, N.W., Washington, DC
20423-0001.2 In addition, one copy of all documents in this
proceeding must be sent to Administrative Law Judge Jacob Leventhal,
Federal Energy Regulatory Commission, 888 First Street, N.E., Suite
11F, Washington, DC 20426 [(202) 219-2538; FAX: (202) 219-3289] and to
each of applicants' representatives: (1) Dennis G. Lyons, Esq., Arnold
& Porter, 555 12th Street, N.W., Washington, DC 20004-1202; (2) Richard
A. Allen, Esq., Zuckert, Scoutt & Rasenberger, L.L.P., 888 Seventeenth
Street, N.W., Washington, DC 20006-3939; and (3) Paul A. Cunningham,
Esq., Harkins Cunningham, Suite 600, 1300 Nineteenth Street, N.W.,
Washington, DC 20036.
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\2\ 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 7.0 (or
formatted so that it can be converted into WordPerfect 7.0) 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 granted in Decision No. 1, served on April
16, 1997, 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.
FOR FURTHER INFORMATION CONTACT: Julia M. Farr, (202) 565-1613. [TDD
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for the hearing impaired: (202) 565-1695.]
SUPPLEMENTARY INFORMATION: In the notice of intent (CSX/NS-1) filed
April 10, 1997, applicants state that CSX and NS will participate
jointly in the acquisition of CRI consistent with CSX's and CRI's
October 14, 1996 Merger Agreement, as amended through and including a
Fourth Amendment dated April 8, 1997, and under agreements made between
CSX and NS. CSX and NS jointly, through LLC and Acquisition, will
acquire all CRI shares not already held by voting trusts of which CSX
and NS are beneficiaries, through a tender offer to be followed by the
merger of CRI with a subsidiary of Acquisition. The shares of CRI as
acquired will be placed in a voting trust subject to the Board's
regulations at 49 CFR part 1013.
Once the CRI stock has been acquired, and contingent on and
following the Board's authorization and approval of control and the
other contemplated transactions, CSX and NS will assume control of
Conrail and, as soon as practicable thereafter, will cause Conrail to
be restructured into (a) certain assets and functions that will
continue to be operated and performed by Conrail for its own account
but for the benefit of NS and CSX, (b) certain fixed assets, to be
owned by Conrail or subsidiaries, which will be the subject of separate
long-term operating agreements, operating leases, or other arrangements
with CSX and NS, respectively, and (c) certain other assets of Conrail
which will be divided between CSX and NS and acquired and operated by
them. The surviving company will own and operate, directly or through
subsidiaries, among other things, certain track and other fixed rail
assets in the New York/New Jersey area, the Philadelphia, PA/South New
Jersey area and the Detroit, MI, area. Both CSX and NS will serve
shippers on the former Monongahela Railroad.
The subjects of the operating agreement or operating lease with CSX
will include, among other things, a north-south route between the New
York area and Philadelphia and a route from the New York area through
Albany, NY, Buffalo, NY, and Cleveland, OH, to St. Louis, MO. The
subjects of the operating agreement or operating lease with NS will
include, among other things, north-south routes from the New York area
to Washington, DC, and to Hagerstown, MD, a route westward from
Philadelphia, and a route westward from the New York area to Buffalo.
As part of the contemplated transaction, NSR will transfer to CSXT
its line of railroad (formerly a Conrail line) between Ft. Wayne, IN,
and the Chicago, IL, metropolitan area.
Applicants state that they will use the year 1995 as the base year
for purposes of their impact analysis to be filed in the application,
and that they anticipate filing their application on or before July 10,
1997.3
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\3\ Applicants propose to submit their primary application
approximately 2 months from the date of filing of their Notice of
Intent if the prefiling requirement is waived. As discussed below,
we will grant applicants' petition for waiver of the prefiling
requirement of 49 CFR 1180.4(b) and permit filing of the application
sooner than 3 months after the filing of the Notice of Intent.
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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.4 The carriers are also required to submit maps with
overlays that show their existing routes and those of their
competitors.
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\4\ 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 elements of this
criterion in their competitive analyses.
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Petition for Waiver
By petition filed April 10, 1997 (CSX/NS-2), applicants request
that the Board waive the requirements of 49 CFR 1180.4(b)(1) so that
they need not wait 3 months before filing their proposed primary
application. Applicants propose to submit their primary application
approximately 2 months from the date of filing of their Notice of
Intent. Applicants contend that the public has been afforded sufficient
notice of the proposed control proceeding. According to applicants, the
Notice of Intent that CSX filed on October 18, 1996, regarding a
proposed merger with Conrail, the Notice of Intent that NS filed on
November 6, 1996, regarding a competing proposed merger with Conrail,
and the substantial and continuous media coverage of the proposed
acquisition of Conrail and the negotiations leading to the current
agreement assure that the Board and all interested parties and members
of the public have had notice that an application will be filed, as
well as of the nature of the proposed transaction.
On April 16, 1997, Canadian National Railway Company (CN) filed
(CN-4) a response in opposition to applicants' CSX/NS-2 petition for
waiver.5 First,
[[Page 19392]]
CN argues that ``any waiver of the 3-month notice requirement would cut
into time needed by the Board and all parties to deal with a
transaction of the size and scope proposed in this proceeding.''
Second, CN argues that, ``if there is to be any expedition, it is
better that it come during the period when the application is being
prepared rather than during the period when the application is being
analyzed, responded to and acted upon by the agency with responsibility
to decide this matter.'' Accordingly, CN argues that any waiver of the
prefiling notification should not set a precedent for truncating the
365-day procedural schedule adopted earlier by the Board for
considering a proposed Conrail merger, and that the final procedural
schedule should take into account any shortening of the 3-month notice
requirement that may have been granted. Finally, CN argues that a
complete and open-ended waiver is inappropriate and prejudicial to all
other parties because it would create uncertainty for the Board and for
other parties, who could be faced with a ``surprise'' filing in 5 or 6
weeks.
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\5\ Our merger rules specifically do not allow replies to
petitions for waiver. See 49 CFR 1180.4(f)(3). Under the
circumstances, however, we will accept the CN-4 pleading.
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We believe that the public has been afforded sufficient notice of
the proposed control proceeding, and we disagree that a waiver of the
prefiling notice requirement would create uncertainty or be prejudicial
to any party. Parties will be given an opportunity to comment on
applicants' proposed expedited procedural schedule, and these comments
will be considered by the Board in determining a fair and reasonable
final procedural schedule. We find that waiver of the prefiling
requirement set forth at 49 CFR 1180.4(b)(1) is appropriate, and
therefore grant applicants' CSX/NS-2 petition.
Petition for Protective Order
By petition also filed April 10, 1997 (CSX/NS-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. In Decision No. 1, served
April 16, 1997, applicants' petition for a protective order was granted
and Administrative Law Judge Jacob Leventhal was assigned to handle all
discovery matters and the initial resolution of all discovery disputes
in this proceeding.6
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\6\ CN filed a reply that was received by the Board after
issuance of Decision No. 1.
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Petition to Establish a Procedural Schedule
Also on April 10, 1997, applicants filed a petition to establish a
proposed procedural schedule (CSX/NS-4). Applicants' proposed
procedural schedule is as follows:
Proposed Procedural Schedule
F-30 Preliminary Environmental Report provided to Section of
Environmental Analysis.
F Primary application (including the Environmental Report) and
related applications filed.
F+30 Board notice of acceptance of primary application and related
applications, [petitions, and notices] published in the Federal
Register, including notice of any transaction-related abandonment
proposals.
F+45 Notification of intent to participate in proceeding due,
including notice of intent to participate in abandonment proceedings.
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 arguments due. Comments by U.S. Department of Justice (DOJ) and
U.S. Department of Transportation (DOT) due. Opposition submissions,
requests for public use conditions, and Trails Act requests due for all
transaction-related abandonment proposals.
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. Rebuttal [and] responses to requests for public use
and Trails Act conditions for transaction-related abandonments due.
F+165 Rebuttal in support of inconsistent and responsive
applications due.
F+185 Briefs due, all parties (not to exceed 50 pages), except
that CSX and NS may file separate briefs, each not to exceed 50 pages.
F+200 Oral argument (at Board's discretion).
F+205 Voting conference.
F+255 Date of service of final decision.
Under applicants' proposal, immediately upon each evidentiary
filing, the filing party will 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 (except that CSX
and NS may maintain separate depositories), and will make its witnesses
available for discovery depositions. Access to documents subject to
protective order will 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.
Applicants also request that, as in recent merger proceedings, the
Board indicate that it will require appeals of ALJ decisions to be
filed within 3 working days and responses to appeals or to any
procedural motion filed with the Board also to be filed within 3
working days.
Applicants' proposed schedule 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 Docket No. 32760 (see
Decision No. 6, ICC served Oct. 19, 1995; and Decision No. 9, ICC
served Dec. 27, 1995).
Applicants are proposing that any applications, petitions, or
notices 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 proceedings in accordance with the overall merger
procedural schedule, rather than applying the procedures found at 49
U.S.C. 10903-04, which is similar to the 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
[[Page 19393]]
applicants' request for waiver under 49 CFR 1152.24(e)(5) to permit
modifications of the procedures and timetables for handling abandonment
applications prescribed in 49 CFR 1152.26 7 to be consistent with
the procedural schedule subsequently adopted in this proposed merger
proceeding.8
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\7\ Applicants' CSX/NS-4 petition sought waiver of the Board's
rules to permit ``departures from the procedures and timetables
prescribed in 49 [CFR] 1152.25(d) (6) and (7).'' Those references
are to rules no longer in effect.
8 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. 10903-04 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
applicants' proposed procedural schedule. Comments must be filed by May
1, 1997. Applicants' reply is due by May 8, 1997.
This action will not significantly affect either the quality of the
human environment or the conservation of energy resources.
Decided: April 16, 1997.
By the Board, Chairman Morgan and Vice Chairman Owen.
Vernon A. Williams,
Secretary.
[FR Doc. 97-10337 Filed 4-18-97; 8:45 am]
BILLING CODE 4915-00-P