[Federal Register Volume 63, Number 64 (Friday, April 3, 1998)]
[Notices]
[Pages 16628-16631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8827]
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DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
[STB Finance Docket No. 32760 (Sub-No. 21) \1\]
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 Railroad Company; [Oversight]
AGENCY: Surface Transportation Board.
\1\ This decision embraces the proceeding in Finance Docket No.
32760, 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 Railroad Company.
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ACTION: Decision No. 12; Notice of oversight proceeding. Requests for
additional conditions to the UP/SP Merger for the Houston, Texas/Gulf
Coast area.
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[[Page 16629]]
SUMMARY: Pursuant to a petition filed February 12, 1998, by the Texas
Mexican Railway Company and the Kansas City Southern Railway Company
(Tex Mex/KCS) and a request filed March 6, 1998, by the Greater Houston
Partnership (GHP), the Board is instituting a proceeding as part of the
5-year oversight condition that is imposed 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, SCPSL Corp., and The Denver and Rio
Grande Western Railroad Company, Finance docket No. 32760 (UP/SP
Merger), Decision No. 44 (STB served Aug. 12, 1996), to examine their
requests, and others that may be made, for additional remedial
conditions to the UP/SP merger as they pertain to rail service in the
Houston, Texas/Gulf Coast region. The Board is establishing a
procedural schedule (attached) for the submission of evidence, replies,
and rebuttal. The Board requests that persons intending to participate
in this oversight proceeding notify the agency of that intent. A
separate service list will be issued based on the notices of intent to
participate that the Board receives.
DATES: The proceeding will commence on June 8, 1998. On that date, all
interested parties must file requests for new remedial conditions to
the UP/SP merger regarding the Houston/Gulf Coast area, along with all
supporting evidence. The Board will publish a notice of acceptance of
requests for new conditions in the Federal Register by July 8, 1998.
Notices of intent to participate in the oversight proceeding are due
July 22, 1998. All comments, evidence, and argument opposing the
requested new conditions are due August 10, 1998. Rebuttal in support
of the requested conditions is due September 8, 1998. The full
procedural schedule is set for at the end of this decision.
ADDRESSES: An original plus 25 copies \2\ of all documents, referring
to STB Finance Docket No. 32760 (Sub-No. 21), must be sent to the
Office of the Secretary, Case Control Unit, ATTN: STB Finance Docket
No. 32760 (Sub-No. 21), Surface Transportation Board, 1925 K Street,
N.W., Washington, DC 20423-0001.
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\2\ In order for a document to be considered a formal filing,
the Board must receive an original plus 25 copies of the document,
which must show that it has been properly served. As in the past,
documents transmitted by facsimile (FAX) will not be considered
formal filings and thus are not acceptable.
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Electronic Submissions
In addition to an original and 25 copies of all paper documents
filed with the Board, the parties shall also submit, on 3.5 inch IBM-
compatible diskettes or compact discs, copies all textual materials,
electronic workpapers, data bases and spreadsheets used to develop
quantitative evidence. Textual material must be in, or convertible by
and into, WordPerfect 7.0. Electronic spreadsheets must be in, or
convertible by and into, Lotus 1-2-3 97 Edition, Excel Version 7.0, or
Quattro Pro Version 7.0.
The data contained on the diskettes or compact discs submitted to
the Board may be submitted under seal (to the extent that the
corresponding paper copies are submitted under seal), and will be for
the exclusive use of Board employees reviewing substantive and/or
procedural matters in this proceeding. The flexibility provided by such
computer data is necessary for efficient review of these materials by
the Board and its staff. The electronic submission requirements set
forth in this decision supersede, for the purposes of this proceeding,
the otherwise applicable electronic submission requirements set forth
in our regulations. See 49 CFR 1104.3(a), as amended in Expedited
Procedures for Processing Rail Rate Reasonableness, Exemption and
Revocation Proceedings, STB Ex Parte No. 527, 61 FR 52710, 711 (Oct. 8,
1996), 61 FR 58490, 58491 (Nov. 15, 1996).\3\
\3\ A copy of each diskette or compact disc submitted to the
Board should be provided to any other party upon request.
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FOR FURTHER INFORMATION CONTACT: Joseph H. Dettmar, (202) 565-1600.
[TDD for the hearing impaired: (202) 565-1695.]
SUPPLEMENTARY INFORMATION: In UP/SP Merger, Decision No. 44, served
August 12, 1996, the Board approved the common control and merger of
the rail carriers controlled by Union Pacific Corporation (Union
Pacific Railroad Company and Missouri Pacific Railroad Company) and the
rail carriers controlled by Southern Pacific Rail Corporation (Southern
Pacific Transportation Company, St. Louis Southwestern Railway Company,
SPCSL Corp., and the Denver and Rio Grande Western Railroad Company)
(collectively UP/SP), subject to various conditions. Common control was
consummated on September 11, 1996. The Board imposed a 5-year oversight
condition to examine whether the conditions imposed on the merger
effectively addressed the competitive concerns they were intended to
remedy, and retained jurisdiction to impose, as necessary, additional
remedial conditions if the Board determined that the conditions already
imposed were shown to be insufficient. In its initial oversight
proceeding, the Board concluded that, while it was still too early to
tell, there was no evidence at the time that the merger, with the
conditions that the agency had imposed, had caused any adverse
competitive consequences.\4\ Nevertheless, the Board indicated that its
oversight would be ongoing, and that it would continue vigilant
monitoring.\5\
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\4\ 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 Railroad Company, Finance Docket No. 32760
(Sub-No. 21), Decision No. 10 (STB served Oct. 27, 1997) (UP/SP
Oversight).
\5\ UP/SP Oversight, Decision No. 10, at 2-3.
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UP/SP has experienced serious service difficulties since the
merger, and the Board has issued a series of orders under 49 U.S.C.
11123, effective through August 2, 1998, to mitigate a rail service
crisis in the western United States caused, in large measure, by
severely congested UP/SP lines in the Houston/Gulf Coast region.\6\ In
acting to relieve some of the congestion, the Board made substantial
temporary changes to the way in which service is provided in and around
Houston.\7\ The Board found that, although merger implementation issues
were involved, a key factor in bringing about the service emergency was
the inadequate rail facilities and infrastructure in the region, and,
as such, also ordered UP/SP, BNSF, and
[[Page 16630]]
other involved railroads to submit to the Board their plans to remedy
these inadequacies.\8\
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\6\ STB Service Order No. 1518, Joint Petition for Service Order
(Service Order No. 1518) (STB served Oct. 31 and Dec. 4, 1997, and
Feb. 17 and 25, 1998).
\7\ The Board directed UP/SP to release shippers switched by the
Houston Belt & Terminal Railway Company (HB&T) or the Port Terminal
Railroad Association (PTRA) from their contracts so that they could
immediately route traffic over the Burlington Northern and Santa Fe
Railway Company (BNSF) or Tex Mex, in addition to UP/SP. The agency
also directed UP/SP to permit BNSF and Tex Mex to modify their
operations over UP/SP lines to minimize congestion over UP/SP's
``Sunset Line,'' to move traffic around Houston rather than going
through it, and to have full access to UP/SP's Spring, TX
dispatching facility as neutral observers. More generally, the Board
required UP/SP to cooperate with other railroads and to accept
assistance from other railroads able to handle UP/SP traffic.
UP/SP and BNSF recently have agreed to make other changes
designed to improve service. In particular, the carriers have agreed
to joint ownership of the Sunset Line between Avondale (New
Orleans), LA and Houston; joint dispatching in the Houston area; and
overhead trackage rights for UP/SP over the BNSF line between
Beaumont and Navasota, TX.
\8\ Service Order No. 1518, Feb. 17, 1998 decision, at 5-7; Feb.
25, 1998 decision, at 5. The railroads' plans are due May 1, 1998;
replies are due June 1.
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Recognizing the limitations on its authority under the emergency
service provisions of the law, the Board rejected proposals offered by
certain shipper, carrier, and governmental interests in the Service
Order No. 1518 proceeding to force UP/SP to transfer some of its lines
to other rail carriers and effect a permanent alteration of the
competitive situation in the Houston region; it adopted instead only
those measures designed to facilitate short-term solutions to the
crisis that did not further aggravate congestion in the area or create
additional service disruptions. The Board declared, however, that
interested persons could present proposals for longer-term solutions to
the service situation--including those seeking structural industry
changes based on perceived competitive inadequates--in formal
proceedings outside of section 11123, particularly in the UP/SP merger
oversight process.\9\ Tex Mex/KCS has now requested that we invoke our
oversight jurisdiction over the merger for the purpose of considering
such proposals, including the transfer to it of various UP/SP lines and
yards in Texas.\10\ GHP has also requested the Board's intervention to
provide for Houston's long-term rail service needs, including the
establishment of a neutral switching operation.
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\9\ Service Order No. 1518, Feb. 17, 1998 decision, at 8; Feb.
25, 1998 decision, at 4.
\10\ The Railroad Commission of Texas (RCT) has previously
announced its intent to seek similar relief. See Service Order No.
1518, Feb. 17, 1998 decision, at 8.
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That the service emergency in the Houston/Gulf Coast region remains
ongoing is well known.\11\ Given these circumstances, the Board will
invoke its oversight jurisdiction over the UP/SP merger to consider new
conditions to the merger of the kind proposed here, and others that may
be made. We note that no party as yet has seriously suggested that SP's
inadequate infrastructure would not have produced severe service
problems in the Houston/Gulf Coast area even if there had been no
merger. Nonetheless, the Board believes that, given the gravity of the
service situation, it should thoroughly explore anew the legitimacy and
viability of longer-term proposals for new conditions to the merger as
they pertain to service and competition in that region.
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\11\ In its progress report of March 9, 1998, US/SP announced
that it would take drastic action in 30 days--including the refusal
of new business and the transfer of existing business to its
competitors--if the steps it has taken to deal with the emergency
are not successful. On March 24, 1998, the carrier announced an
embargo of a significant portion of its southbound traffic destined
for the Laredo, TX gateway to clear a backlog of 5,500 cars waiting
to cross into Mexico.
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US/SP and BNSF argue that Tex Mex/KCS' request for conditions that
have been previously rejected, without any new evidentiary
justification, is insufficient grounds for the Board to begin a new
oversight proceeding. We disagree. Our 5-year oversight of the UP/SP
merger is not a static process, but a continuing one, so that the
Board's prior rejection of Tex Mex/KCS' or any other party's requested
conditions--whether in the Board's approval of the merger or in a
subsequent oversight proceeding--does not preclude their fresh
consideration now. Through our oversight condition, we have retained
jurisdiction to monitor the competitive consequences of this merger; to
re-examine whether our imposed conditions have effectively addressed
the consequences they were intended to remedy; and to impose additional
remedial conditions if those previously afforded prove insufficient,
including, if necessary, divestiture of certain of the merged carriers'
property.
The virtual shutdown of rail service in the Houston/Gulf Coast area
that occurred after the UP/SP merger--and which, after many months, has
yet to be normalized--is unprecedented. In our judgment, those
circumstances alone are sufficient for the Board to commence this
proceeding now. Clearly, our 5-year oversight jurisdiction permits us
to examine--and, if necessary, re-examine at any time during this
period--whether there is any relationship between the market power
gained by UP/SP through the merger and the failure of service that has
occurred here, and, if so, whether the situation should be addressed
through additional remedial conditions. UP/SP Merger, Decision No. 44,
at 100.
We caution, however, that we will not impose conditions requiring
UP/SP to divest property that would substantially change the
configuration and operations of its existing network in the region in
the absence of the type of presentation and evidence required for
``inconsistent applications'' in a merger proceeding; i.e., parties
must present probative evidence that discloses ``the full effects of
their proposals.'' UP/SP Merger, Decision No. 44, at 157. Divestiture
is only available ``when no other less intrusive remedy would
suffice,'' and we will impose it only upon sufficient evidentiary
justification. Id.
The Board will confine this proceeding under its continuing
oversight jurisdiction to examining requests for new conditions to the
merger relating to rail service in the Houston/Gulf Coast area. As we
have noted, the service crisis in this region, and its significant
impact on the regional economy, clearly warrant our discrete treatment
of these matters now. As a result, the procedures set forth here will
be separate from those in the more general oversight proceeding that,
pursuant to UP/SP Oversight, Decision No. 10, will begin July 1,
1998.\12\
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\12\ In Decision No. 10, at 18-19, the Board provided that
general oversight would commence July 1 upon the filing by UP/SP and
BNSF of their quarterly merger progress reports accompanied by
comprehensive summary presentations. We provided that, as part of
that proceeding, UP/SP and BNSF must make their 100% traffic tapes
available by July 15, 1998; that comments of interested parties
concerning oversight issues are due August 14, 1998; and that
replies are due September 1, 1998. The general oversight proceeding
will continue as planned.
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As set forth in the attached schedule, parties that wish to request
new remedial conditions to the UP/SP merger as they pertain to the
Houston/Gulf Coast region must file them, along with their supporting
evidence, by June 8, 1998.\13\ The Board will publish a notice in the
Federal Register accepting such requests by July 8, 1998. Any person
who intends to participate actively in this facet of oversight as a
``party of record'' (POR) must notify us of this intent by July 22,
1998. In order to be designated a POR, a person must satisfy the filing
requirements discussed above in the ADDRESSES section. We will then
compile and issue a final service list.
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\13\ Tex Mex/KCS stated that it would file its supporting
evidence 45 days after its petition. Petition at 5. If it does so,
it need not file its evidence anew on June 8th, although it may
supplement its filing as appropriate. We decline, however,
petitioner's request (Petition at 11 n. 6) to incorporate by
reference its pleadings in Finance Docket Nos. 33507, 33461, 33462,
and 33463 (titles omitted). In those proceedings, Tex Mex/KCS has
complained that, after the merger, UP/SP (either singly or jointly
with BNSF) unlawfully acquired control of HB&T in violation of 49
U.S.C. 11323, and has petitioned that a series of exemptions the
carriers filed to restructure HB&T's operations leading to that
control should be voided and/or revoked. We will proceed to consider
the discrete matters in those cases--including Tex Mex/KCS' petition
for consolidation and motion to compel discovery, and UP/SP's motion
to dismiss--separately from our consideration in the oversight
proceeding of requests by Tex Mex/KCS and others for new remedial
conditions to the merger.
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Copies of decisions, orders, and notices will be served only on
those persons designated as POR, MOC (Members of Congress), and GOV
(Governors) on the official service list. Copies of filings must be
served on all persons who are designated as POR. We note that Members
of the United States Congress and Governors who are
[[Page 16631]]
designated MOC and GOV are not parties of record and they need not be
served with copies of filings; however, those who are designated as a
POR must be served with copies of filings. All other interested persons
are encouraged to make advance arrangements with the Board's copy
contractor, DC News & Data, Inc. (DC News), to receive copies of Board
decisions, orders, and notices served in this proceeding. DC News will
handle the collection of charges and the mailing and/or faxing of
decisions to persons who request this service. The telephone number for
DC News is: (202) 289-4357.
A copy of this decision is being served on all persons designated
as POR, MOC, or GOV on the service list in Finance Docket No. 32760
(Sub-No. 21). This decision will serve as notice that persons who were
parties of record in the previous oversight proceeding (leading to
Decision No. 10) will not automatically be placed on the service list
as parties of record for this facet of oversight unless they notify us
of their intent to participate further.
Finally, while the requested remedial conditions (and those
reasonably anticipated from other parties) could, if imposed, result in
a transfer of ownership of certain UP/SP rail property or changes in
the way that such properties are operated, they appear unlikely to
produce the kind of significant operational changes that, under 49 CFR
1105.6(b)(4), requires the filing of a preliminary draft environmental
assessment (PDEA).
This action will not significantly affect either the quality of the
human environment or the conservation of energy resources.
Decided: March 30, 1998.
By the Board, Chairman Morgan and Vice Chairman Owen.
Vernon A. Williams,
Secretary.
Procedural Schedule
June 8, 1998: Requests for new remedial conditions (with supporting
evidence) filed.
July 8, 1998: Board notice of acceptance of requests for new conditions
published in the Federal Register.
July 22, 1998: Notice of intent to participate in proceeding due.
August 10, 1998: All comments, evidence, and argument opposing requests
for new remedial conditions to the merger due. Comments by U.S.
Department of Justice and U.S. Department of Transportation due.
September 8, 1998: Rebuttal evidence and argument in support of
requests for new conditions due.
The necessity of briefing, oral argument, and voting conference
will be determined after the Board's review of the pleadings.
[FR Doc. 98-8827 Filed 4-2-98; 845 am]
BILLING CODE 4915-00-M