[Federal Register Volume 67, Number 188 (Friday, September 27, 2002)]
[Notices]
[Pages 61188-61194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24602]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[STB Finance Docket No. 34178]


Dakota, Minnesota & Eastern Railroad Corporation and Cedar 
American Rail Holdings, Inc.--Control--Iowa, Chicago & Eastern Railroad 
Corporation

AGENCY: Surface Transportation Board, DOT.

ACTION: Decision No. 2 in STB Finance Docket No. 34178; Notice of 
Acceptance of Primary Application and Related Filings; Issuance of 
Procedural Schedule.\1\

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    \1\ This decision covers: a railroad control application, which 
was filed in STB Finance Docket No. 34178, Dakota, Minnesota & 
Eastern Railroad Corporation and Cedar American Rail Holdings, 
Inc.--Control--Iowa, Chicago & Eastern Railroad Corporation; a 
terminal trackage rights application, which was filed in STB Finance 
Docket No. 34178 (Sub-No. 1), Dakota, Minnesota & Eastern Railroad 
Corporation--Terminal Trackage Rights--Union Pacific Railroad 
Company; and a trackage rights exemption notice, which was filed in 
STB Finance Docket No. 34178 (Sub-No. 2), Dakota, Minnesota & 
Eastern Railroad Corporation--Trackage Rights Exemption--Iowa, 
Chicago & Eastern Railroad Corporation and Iowa Northern Railway 
Company. The railroad control application filed in STB Finance 
Docket No. 34178 is referred to as the ``primary application.'' The 
terminal trackage rights application filed in STB Finance Docket No. 
34178 (Sub-No. 1) and the trackage rights exemption notice filed in 
STB Finance Docket No. 34178 (Sub-No. 2) are referred to 
collectively as the ``related filings.''
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SUMMARY: The Surface Transportation Board (Board) is accepting for 
consideration the DME-2 primary application and the undesignated 
related filings filed August 29, 2002, by Dakota, Minnesota & Eastern 
Railroad Corporation (DM&E), Cedar American Rail Holdings, Inc. 
(Holdings), and Iowa, Chicago & Eastern Railroad Corporation (IC&E).\2\ 
The primary application seeks Board approval and authorization under 49 
U.S.C. 11321-26 for DM&E's acquisition of indirect control of IC&E 
through ownership of IC&E's stock by Holdings, which is itself a wholly 
owned subsidiary of DM&E. The related filings seek related trackage 
rights relief contingent upon approval of the primary application. The 
Board finds that the transaction proposed in

[[Page 61189]]

the primary application is a ``minor transaction'' under 49 CFR 
1180.2(c).
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    \2\ DM&E, Holdings, and IC&E are referred to collectively as 
applicants.
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    The Board has considered applicants'' DME-3 petition for 
establishment of a procedural schedule, also filed August 29, 2002. 
With a modification to provide additional time for public comments, the 
Board is adopting the procedural schedule applicants have proposed 
(which, as modified, will allow the Board to issue a decision 29 days 
prior to the statutory deadline, assuming that no environmental review 
is required and further assuming that no oral argument is held). The 
Board's schedule provides for issuance of a decision on the 45th day 
after the close of the record.

DATES: The effective date of this decision is September 27, 2002. Any 
person who wishes to participate in this proceeding as a party of 
record must file, no later than October 15, 2002, a notice of intent to 
participate. All comments, protests, requests for conditions, and any 
other evidence and argument in opposition to the primary application 
and/or either or both of the related filings, including filings by the 
U.S. Department of Justice (DOJ) and the U.S. Department of 
Transportation (DOT), must be filed by November 14, 2002. Responses to 
comments, protests, requests for conditions, and other opposition, 
responses to comments of DOJ and DOT, and rebuttal in support of the 
primary application and/or either or both of the related filings must 
be filed by December 13, 2002. For further information respecting 
dates, see Appendix A (Procedural Schedule).

ADDRESSES: Send an original and 25 copies of all pleadings referring to 
STB Finance Docket No. 34178 to: Surface Transportation Board, 1925 K 
Street, NW., Washington, DC 20423-0001.\3\ In addition, one copy of all 
documents in this proceeding must be sent to: (1) Secretary of the 
United States Department of Transportation, 400 Seventh Street, SW, 
Washington, DC 20590; (2) Attorney General of the United States, c/o 
Assistant Attorney General, Antitrust Division, Room 3645, Department 
of Justice, Washington, DC 20530; (3) William C. Sippel, Esq., Fletcher 
& Sippel LLC, Two Prudential Plaza, Suite 3125, 180 North Stetson 
Avenue, Chicago, IL 60601-6721; and (4) David L. Knudson, Esq., 
Davenport, Evans, Hurwitz & Smith, L.L.P., 206 West 14th Street, Sioux 
Falls, SD 57104.
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    \3\ In order for a document to be considered a formal filing, 
the Board must receive an original and 25 copies of the document, 
which must show that it has been properly served. Documents 
transmitted by facsimile (FAX) will not be considered formal filings 
and are not encouraged because they will result in unnecessarily 
burdensome, duplicative processing. In addition, each formal filing 
must be accompanied by an electronic submission per our requirements 
as discussed in detail in this decision.
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    In addition to submitting an original and 25 copies of all paper 
documents filed with the Board, parties also must submit, on 3.5-inch 
IBM-compatible floppy diskettes (disks) or compact discs (CDs), copies 
of all textual materials, electronic workpapers, data bases and 
spreadsheets used to develop quantitative evidence. Textual materials 
must be in, or compatible with, WordPerfect 9.0. Electronic 
spreadsheets must be in, or compatible with, Lotus 1-2-3 Release 9 or 
Microsoft Excel 2002. A copy of each disk or CD submitted to the Board 
should be provided to any other party upon request. Further details are 
discussed below.

FOR FURTHER INFORMATION CONTACT: Julia M. Farr, (202) 565-1655. 
[Assistance for the hearing impaired is available through the Federal 
Information Relay Service (FIRS) at 1-800-877-8339.]

SUPPLEMENTARY INFORMATION: The DM&E/IC&E common control for which 
applicants seek approval in the primary application involves the 
acquisition by DM&E of indirect control of IC&E through ownership of 
IC&E's stock by DM&E's Holdings subsidiary.

Dakota, Minnesota & Eastern Railroad Corporation

    DM&E, a Class II railroad, owns or operates approximately 1,103 
route miles of rail lines (including approximately 720 route miles of 
main lines and approximately 383 route miles of branch lines) in 
Wyoming, South Dakota, Nebraska, Minnesota, and Iowa. DM&E's principal 
route extends from Colony (Bentonite), WY, through Rapid City, SD, to 
Winona, MN. Branch lines extend from Rapid City to Crawford, NE, and 
Chadron, NE; from Blunt, SD, to Onida, SD; from Wolsey, SD, to 
Aberdeen, SD, via trackage rights on The Burlington Northern and Santa 
Fe Railway Company (BNSF); from Redfield, SD, to Mansfield, SD; from 
Waseca, MN, to Hartland, MN; and from Hartland, MN, to Mason City, IA, 
via trackage rights on Union Pacific Railroad Company (UP).\4\ DM&E 
also has a currently inactive branch line extending from Huron, SD, to 
Yale, SD, and currently inactive trackage rights on BNSF extending from 
Yale, SD, to Watertown, SD. DM&E also operates via trackage rights over 
Soo Line Railroad Company, d/b/a Canadian Pacific Railway (CP), between 
Minnesota City, MN, and Winona, MN, and via trackage rights over short, 
isolated segments of UP-owned trackage in Mankato, Owatonna, and 
Winona, MN.
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    \4\ DM&E's Hartland-Mason City trackage rights are restricted: 
to interchanging traffic with UP at Mason City; and to interchanging 
limited categories of traffic with Cedar River Railroad Company 
(CEDR) at Glenville, MN, and with Iowa Northern Railway Company 
(IANR) at Manly, IA.
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    DM&E's principal yard and terminal facilities are located at Waseca 
and Tracy, MN, and Huron, Pierre, and Rapid City, SD. DM&E interchanges 
traffic with UP at Winona and Mankato, MN, and at Mason City, IA; with 
CP at Minnesota City, MN; with BNSF at Wolsey, Aberdeen, and Redfield, 
SD, and Crawford, NE; and with Nebkota Railway, Inc., at Chadron, NE. 
DM&E can also conduct, via its overhead trackage rights on UP's 
Hartland-Mason City line, restricted interchanges with CEDR at 
Glenville, MN, and with IANR at Manly, IA. Although the lines of DM&E 
and IC&E cross at grade and connect in Owatonna, MN, DM&E and IC&E 
cannot (for the most part) interchange at that location due to 
restrictions on DM&E's trackage rights on the UP-owned ``island'' 
trackage through Owatonna.\5\
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    \5\ DM&E's overhead trackage rights on UP's Hartland-Mason City 
line do not allow DM&E to interchange with IC&E at Albert Lea, MN, 
or Mason City, IA, two points at which IC&E lines connect with UP's 
Hartland-Mason City Line.
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Iowa, Chicago & Eastern Railroad Corporation

    IC&E, a Class II railroad, owns or operates approximately 1,397 
route miles of rail lines (including approximately 786 route miles of 
main lines and approximately 611 route miles of secondary or branch 
lines) in Minnesota, Iowa, Kansas, Missouri, Wisconsin, and Illinois. 
All of these lines were recently acquired by IC&E from I&M Rail Link, 
LLC (I&M), in an asset acquisition transaction (the IC&E/I&M asset 
acquisition transaction).\6\ IC&E began rail operations on July 30, 
2002, upon consummation of the IC&E/I&M asset acquisition transaction. 
IC&E's principal routes extend from Chicago, IL, to Sabula Junction, 
IA, and from there both southwest to Kansas City, MO, and northwest to 
Minneapolis/St. Paul, MN. Significant secondary routes--known as the 
Corn Lines--extend across Southern Minnesota from Ramsey, MN, to 
Jackson, MN, and across Northern Iowa from Marquette, IA, to Sheldon, 
IA. Branch lines extend from Davis

[[Page 61190]]

Junction, IL, through Rockford, IL, and Beloit, WI, to Janesville, WI; 
from Mason City, IA, to Comus, MN; from Wells, MN, to Minnesota Lake, 
MN; from Davenport, IA, to Albany, IL, via trackage rights on BNSF; and 
from Davenport, IA, to Eldridge, IA. IC&E has overhead trackage rights 
over other railroads at a number of locations, including over CP 
between River Junction, MN, and Merriam Park, MN, and between Comus, 
MN, and Rosemount, MN; over IANR between Nora Springs, IA, and Plymouth 
Junction, IA (connecting two IC&E line segments); and over the Commuter 
Rail Division of the Regional Transportation Authority of Northeast 
Illinois, d/b/a Metra, between Pingree Grove, IL, and Cragin Junction 
in Chicago, IL.\7\
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    \6\ See Iowa, Chicago & Eastern Railroad Corporation--
Acquisition and Operation Exemption--Lines of I&M Rail Link, LLC, 
STB Finance Docket No. 34177 (STB served June 12, 2002, June 26, 
2002, and July 22, 2002) (IC&E Acquisition).
    \7\ Applicants indicate that IC&E will shortly commence 
operations into Chicago via the Pingree Grove-Cragin Junction line 
pursuant to a temporary detour agreement with Metra. Applicants add 
that, in the interim, IC&E traffic to/from the Chicago terminal has 
been handled via haulage arrangements with other railroads.
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    IC&E's principal yard and terminal facilities are located at 
Davenport, IA, Ottumwa, IA, Muscatine, IA, Marquette, IA, Mason City, 
IA, West Davenport, IA, Savanna, IL, and Davis Junction, IL. IC&E owns 
a non-controlling stock interest in the Kansas City Terminal Railway 
Company (KCT), a switching and terminal carrier in Kansas City, KS/MO. 
IC&E is also a joint owner with The Kansas City Southern Railway 
Company (KCS) of the ``Joint Agency'' yard facility in Kansas City, MO. 
IC&E interchanges traffic: with The Belt Railway Company of Chicago 
(BRC) at Cragin Junction/Clearing, IL; with BNSF at East Moline, IL, 
Moline, IL, Bettendorf, IA, Ottumwa, IA, Minneapolis/St. Paul, MN, and 
Kansas City, MO; with CEDR at Charles City, IA, and Lyle, MN; with 
Chicago, Central & Pacific Railroad Company at Dubuque, IA, and 
Rockford, IL; with the Chillicothe-Brunswick Rail Authority at 
Chillicothe, MO; with the Elgin, Joliet & Eastern Railway Company at 
Spaulding, IL; with Illinois RailNet, Inc., at Davis Junction, IL; with 
the Indiana Harbor Belt Railroad Company (IHB) at Franklin Park, IL; 
with Iowa Interstate Railroad Ltd. at Rock Island, IL, and Davenport, 
IA; with IANR at Nora Springs, IA, and Plymouth Junction, IA; with the 
Iowa Traction Railroad Company at Mason City, IA; with KCS at Kansas 
City, MO; with the Minnesota Commercial Railway Company at Minneapolis/
St. Paul, MN; with Norfolk Southern Railway Company at Birmingham, MO, 
and Kansas City, MO; with CP at Bensenville, IL, Minneapolis/St. Paul, 
MN, Northfield, MN, and River Junction, MN; with UP at Clinton, IA, 
Emmetsburg, IA, Mason City, IA, Sheldon, IA, Minneapolis/St. Paul, MN, 
Kansas City, MO, and Janesville, WI; and with Wisconsin & Southern 
Railway Company at Janesville, WI. IC&E also interchanges with all 
major line-haul carriers at Chicago, through intermediate switching 
services provided by BRC, IHB, and CP.\8\
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    \8\ IC&E's overhead traffic rights on CP's River Junction-Twin 
Cities line do not allow IC&E to interchange with DM&E at Minnesota 
City, MN, or Winona, MN, two points at which DM&E lines connect with 
CP's line.
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Cedar American Rail Holdings

    Holdings, a wholly owned noncarrier subsidiary of DM&E, is the 
beneficial owner of all of the outstanding common stock of IC&E. 
Applicants indicate, however, that, immediately prior to the 
consummation of the IC&E/I&M asset acquisition transaction, Holdings 
placed the stock of IC&E into an independent voting trust, where it 
will remain pending action by the Board on the primary application. 
Applicants further indicate that, although it is anticipated that, if 
the primary application is approved, Holdings would function as if it 
were a holding company for DM&E and IC&E (i.e., Holdings would oversee 
the management and coordination of operations on the DM&E/IC&E system 
and would perform marketing and administrative services for both DM&E 
and IC&E, as if each of DM&E and IC&E were a wholly owned subsidiary of 
Holdings), DM&E's capital structure did not easily allow for the 
creation of a holding company in the normal corporate chain position 
above DM&E. Holdings, applicants therefore assert, was created as a 
subsidiary of DM&E (i.e., positioned in the corporate chain between 
DM&E and IC&E).

The DM&E/IC&E Common Control Transaction: The Mechanics; Timing

    The DM&E/IC&E common control transaction proposed in the primary 
application contemplates the acquisition, by DM&E, of indirect control 
of IC&E through the termination of the voting trust in which the IC&E 
stock is currently held and the distribution of that stock to Holdings, 
DM&E's wholly owned subsidiary. Applicants indicate that, if and when 
control is consummated, Holdings would function as if it were the 
holding company for both DM&E and IC&E and would oversee the distinct 
but coordinated operations of DM&E and IC&E, which would remain 
separate entities and which would conduct their own operations with 
their own employees and would be responsible for their own 
transportation, mechanical, and engineering functions. Applicants 
further indicate that DM&E would consummate control of IC&E (through 
termination of the IC&E voting trust, which would allow Holdings to 
exercise control over the IC&E stock) as soon as a Board decision 
approving the primary application and authorizing the DM&E/IC&E common 
control transaction has become effective.

Public Interest Considerations: In General

    Applicants contend that the proposed DM&E/IC&E common control would 
strengthen the combined DM&E/IC&E system and improve both its operating 
and financial performance. Common control, applicants argue, would 
allow both railroads to serve their customers more effectively and to 
compete more effectively with Class I railroads, motor carriers, and 
barge transportation in the mid-American transportation market. 
Customers on both carriers, applicants maintain, would benefit from the 
better equipment coordination and utilization, improved service 
patterns, and other operating efficiencies made possible by common 
control. The larger and more diversified traffic base and greater 
financial resources of the combined DM&E/IC&E system, applicants argue, 
would provide a more stable and reliable environment for shippers on 
both railroads. Grain shippers on both DM&E and IC&E, applicants 
contend, would benefit from having access to a combined, coordinated 
system fleet of over 6,100 covered hopper cars. And, applicants 
maintain, common control would provide shippers and receivers on DM&E 
and IC&E with new, independent routing and service options and more 
efficient and competitive single-system access to significant new 
markets and gateways.
    Applicants maintain, with respect to DM&E, that common control 
would allow DM&E to gain independent access to major markets and 
gateways. Shippers on DM&E's lines, applicants claim, would benefit 
from new single-system rail access to the longer river shipping season 
at Mississippi River ports south of Winona, MN, and grain shippers 
would enjoy, for the first time, independent, single-system access to 
the major rail gateways of Chicago and Kansas City, new single-system 
routes to major grain processing plants on IC&E, new independent joint-
line routes to processors elsewhere in Iowa (such as on IANR in Cedar 
Rapids), and neutral interline access to significant long-haul 
destination markets in the south-central United States. And common 
control, applicants maintain, would guarantee that DM&E would have 
neutral eastern

[[Page 61191]]

routings for coal movements from the Powder River Basin (PRB) in 
Wyoming, if and when DM&E constructs its recently-approved line into 
the PRB.\9\
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    \9\ See Dakota, Minnesota & Eastern Railroad Corporation 
Construction Into The Powder River Basin, STB Finance Docket No. 
33407 (STB served Jan. 30, 2002) (PRB Construction), pet. for 
judicial review pending sub nom. Mid States Coalition for Progress 
et al. v. Surface Transportation Board et al., No. 02-1359 et al. 
(8th Cir. filed Feb. 7, 2002).
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    Applicants maintain, with respect to IC&E, that, after many years 
of doubt regarding the viability of the rail lines now owned by IC&E, 
common control of DM&E and IC&E would solidify the return of those 
lines as a stable, reliable, and essential component of the regional 
rail network in the north-central United States. Grain shippers on 
IC&E's lines, applicants argue, would gain potential new routes to the 
Pacific Northwest for export, while grain receivers on IC&E's lines and 
elsewhere in Iowa would be assured continued reliable, independent, and 
long-term access to grain from origins both on IC&E's Corn Lines and 
also on DM&E's lines in southern Minnesota and South Dakota. And, 
applicants assert, IC&E's largest customer, a steel manufacturing firm 
near Davenport, IA, would have single-system service for inbound scrap 
that currently originates on DM&E but must now be interchanged to an 
intermediate carrier for interchange to IC&E.

Public Interest Considerations: Competitive Impacts

    Applicants contend that the proposed DM&E/IC&E common control 
transaction, which they describe as completely ``end-to-end'' in 
nature, would have no adverse impact on competition. DM&E and IC&E, 
applicants state, serve no common industries today and do not currently 
interchange traffic at any location, and, therefore, common control 
would not result in any reduction in existing rail-to-rail competition 
at any point or in any market. No shipper, applicants maintain, would 
lose competitive rail service or access to any existing routing options 
as a result of common control. The combined DM&E/IC&E system, 
applicants assert, would face intense competition from the large Class 
I rail systems that would surround it. And common control, applicants 
argue, would have no adverse impact on the continuation of essential 
transportation services by DM&E, by IC&E, or by any other railroad, and 
diversions of traffic from other railroads, applicants maintain, would 
be minimal.\10\
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    \10\ Applicants anticipate that, as a result of common control, 
approximately 9,850 carloads of traffic would be diverted to the 
combined DM&E/IC&E system annually, generating annual revenues of 
approximately $8.1 million. Applicants indicate that, for the most 
part, these diversions would represent extensions of haul on 
existing DM&E traffic resulting from shippers favoring the single-
system service offerings of the combined DM&E/IC&E.
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Environmental Implications

    Applicants contend that, under 49 CFR 1105.6(c)(2)(i), the DM&E/
IC&E common control proposal is categorically excluded from 
environmental reporting requirements because (applicants maintain) 
common control would not result in changes in carrier operations that 
would exceed the thresholds established in 49 CFR 1105.7(e)(4) or (5). 
Applicants further contend: that common control would result in a minor 
increase (no more than several trains per week) in traffic over IC&E's 
rail line between Owatonna, MN, and Mason City, IA; that this, however, 
would be offset by a roughly corresponding decrease in train operations 
over DM&E's Waseca, MN-Hartland, MN, line and UP's Hartland, MN-Mason 
City, IA, line (which includes UP's ``Spine Line'' route between Albert 
Lea, MN, and Mason City, IA); and that anticipated traffic increases 
elsewhere on the combined DM&E/IC&E system would be handled in existing 
scheduled train movements.\11\
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    \11\ As we announced in our IC&E Acquisition decision served 
July 22, 2002 (at 16-17), we do not intend to consider the potential 
environmental impacts associated with the prospect of routing over 
former I&M lines traffic to or from the new line that we have 
approved for construction in PRB Construction unless and until DM&E 
is prepared to build that line. As we explained, deferring any such 
examination is appropriate given the current uncertainty as to 
whether that line will be built and, if built, what portion of the 
traffic to and from the new line would move over which I&M lines. 
Because the information we would not to assess the potential 
environmental impacts is not yet available, it would be premature to 
attempt to conduct such an assessment now. In the meantime, we have 
barred IC&E from handling over former I&M lines any trains moving to 
or from the new line until we conduct an appropriate environmental 
review of the cumulative impacts of the approvals that we issued in 
those two cases together with the approval that the applicants seek 
in this case.
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Historic Preservation Implications

    Applicants contend that, under 49 CFR 1105.8(b)(1) and (3), the 
DM&E/IC&E common control proposal is exempt from historic preservation 
reporting requirements. Applicants reason: that rail operations would 
continue after consummation of common control; that there would not be 
a substantial change in the level of maintenance of railroad property; 
that further Board approval would be required to abandon any service; 
and that there are no plans to dispose of or alter properties subject 
to Board jurisdiction that are 50 years old or older.

Labor Protection

    Applicants acknowledge that the applicable level of labor 
protection for the proposed DM&E/IC&E common control transaction would 
be that set forth in New York Dock Ry.--Control--Brooklyn Eastern 
Dist., 360 I.C.C. 60, 84-90 (1979). Applicants add, however, that they 
do not anticipate that any existing DM&E or IC&E employees would be 
adversely affected by DM&E/IC&E common control.

Related Filing: Terminal Trackage Rights Application

    In STB Finance Docket No. 34178 (Sub-No. 1), DM&E has filed, 
contingent upon approval of the DM&E/IC&E common control proposal, a 
``terminal trackage rights'' application for an order under 49 U.S.C. 
11102 that would permit DM&E to operate, without restriction, over 
approximately 3,700 feet of UP track in Owatonna, MN (extending between 
approximately MPs 88.6 and 87.9), in order to establish an unrestricted 
connection at Owatonna between DM&E and IC&E.
    DM&E explains: That, when it was created in 1986 as a spinoff from 
the Chicago & North Western Transportation Company (C&NW), it acquired 
from C&NW approximately 1,000 miles of rail lines and related trackage 
rights in South Dakota, Minnesota, and Iowa, extending in a generally 
west-east direction between Rapid City, SD, and Winona, MN; that, for 
the most part, DM&E acquired, in 1986, ownership of the Rapid City-
Winona line; that, however, DM&E did not acquire, in 1986, ownership of 
the 2.4-mile segment of that line that lies in Owatonna between 
approximately MPs 88.6 and 86.2, which included (at approximately MP 
87.9) a physical at-grade connection with a north-south CP line; that, 
as respects this 2.4-mile segment, DM&E acquired, in 1986, trackage 
rights that were both exclusive (C&NW did not retain the right to 
operate over the segment) and restricted (DM&E was allowed to use the 
trackage rights for overhead traffic, and for any DM&E/CP interchange 
traffic that originated or terminated either on the 2.4-mile segment or 
at industries in Owatonna served by CP and open to reciprocal 
switching); that C&NW retained ownership of the 2.4-mile segment and 
all ancillary trackage in Owatonna; and that the 2.4-mile segment was 
``carved out'' of the DM&E/C&NW asset acquisition transaction in order 
to preclude an unrestricted DM&E/CP interchange at Owatonna.

[[Page 61192]]

    DM&E further explains that, although C&NW's ownership interest in 
the 2.4-mile segment was acquired several years ago by UP, and although 
CP's (later I&M's) north-south line through Owatonna was recently 
acquired by IC&E, a restriction created in 1986 that precluded the 
movement, under DM&E's trackage rights, of most DM&E/CP interchange 
traffic continues to exist, and now bars the creation of a meaningful 
DM&E/IC&E interchange at Owatonna. This restriction continues to exist, 
DM&E adds, even though the 2.4-mile segment has not been used by C&NW 
(or UP) since 1986, and even though the 2.4-mile segment now exists as 
an ``island'' that is not connected to the rest of the UP system.\12\
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    \12\ The UP (formerly C&NW) north-south ``Spine Line'' between 
the Twin Cities and Kansas City passes under the 2.4-mile segment 
(at approximately MP 88.5) but does not connect with that segment.
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    DM&E contends that terminal trackage rights over an approximately 
0.7-mile portion of the 2.4-mile segment (i.e., over the portion of the 
2.4-mile segment that lies between approximately MPs 88.6 and 87.9) 
would be necessary to establish a direct connection and unrestricted 
interchange between DM&E and IC&E, which (DM&E notes) do not presently 
connect with each other at any location. DM&E further contends that, 
without such relief, DM&E and IC&E would be unable to effectuate the 
competitive traffic routings that would otherwise be made possible by 
the DM&E/IC&E combination. A DM&E/IC&E interchange at Owatonna, DM&E 
argues, would be essential for applicants to achieve many of the 
competitive and service benefits of DM&E/IC&E common control.
    DM&E asserts that a grant of the sought terminal trackage rights 
would also be necessary to allow DM&E to operate via trackage rights 
over IC&E's line between Owatonna, MN, and Mason City, IA, as 
contemplated by the trackage rights exemption notice filed in STB 
Finance Docket No. 34178 (Sub-No. 2). DM&E explains that the ability to 
operate over IC&E to Mason City would provide DM&E with efficient and 
unrestricted interchanges: with CEDR at Lyle, MN; with IANR at Plymouth 
Junction, IA, and Nora Springs, IA; and with IC&E at Mason City, IA.
    DM&E acknowledges that, in the recent PRB Construction decision, 
the Board granted DM&E authority to construct, just east of Owatonna, a 
1.7-mile ``loop'' connection between DM&E's west-east line (beginning 
at a point past the end of the 2.4-mile segment) and what was then 
I&M's (and is now IC&E's) north-south line. See PRB Construction, slip 
op. at 19, 41 (the 1.7-mile loop is ``Alternative O-4,'' which DM&E was 
authorized to construct if it could not reach an agreement with UP for 
a DM&E/I&M interchange at MP 87.9, referred to as ``Alternative O-5''). 
DM&E argues, however, that, as the Board itself has concluded, see PRB 
Construction, slip op. at 19, a MP 87.9 interchange would be 
``environmentally preferable'' to construction of the 1.7-mile loop. 
And, DM&E asserts, given that the only obstacle to a MP 87.9 
interchange is a 1986 restriction, construction of the 1.7-mile loop 
would be completely unnecessary and wasteful.
    DM&E therefore asks that we allow the establishment of an 
unrestricted DM&E/IC&E connection at Owatonna by granting its 
application for terminal trackage rights between approximately MPs 88.6 
and 87.9. DM&E further contends that, although 49 U.S.C. 11102(a) 
provides that compensation for use of terminal trackage rights ``shall 
be paid or adequately secured'' before a carrier may begin to use such 
rights, we should not require that the compensation be established 
before DM&E could begin use of the proposed STB Finance Docket No. 
34178 (Sub-No. 1) terminal trackage rights. Such a requirement, DM&E 
explains, would delay the public benefits of the proposed DM&E/IC&E 
common control.

Related Filing: Trackage Rights Exemption Notice

    In STB Finance Docket No. 34178 (Sub-No. 2), DM&E has filed, 
contingent upon approval of both the DM&E/IC&E common control 
transaction and the Sub-No. 1 terminal trackage rights application,\13\ 
a notice of exemption pursuant to 49 CFR 1180.2(d)(7) to obtain 
overhead trackage rights: (1) on the IC&E line between Owatonna, MN (at 
approximately MP 101.9), and Mason City, IA (at approximately MP 0.0), 
a distance of approximately 72.4 miles;\14\ and (2) on the IANR line 
between Plymouth Junction, IA (at approximately MP 219.5), and Nora 
Springs, IA (at approximately MP 210.7), a distance of approximately 
8.8 miles. The Sub-No. 2 trackage rights, which are being sought with 
the approval of IC&E and IANR, would allow DM&E to interchange traffic: 
with IC&E at Austin, MN, and Mason City, IA; with UP at Mason City, IA; 
with CEDR at Lyle, MN; and with IANR at Plymouth Junction and Nora 
Springs, IA. DM&E indicates that the Sub-No. 2 trackage rights would 
facilitate the effective movement of trains and interchange of traffic 
between DM&E and IC&E, would expand routing and service options with 
other rail carriers, and would reduce trackage rights fees paid to UP 
in connection with DM&E's existing route to Mason City. DM&E 
acknowledges that the applicable level of labor protection for the Sub-
No. 2 trackage rights would be that set forth in Norfolk and Western 
Ry. Co.--Trackage Rights--BN, 354 I.C.C. 605, 610-15 (1978), as 
modified in Mendocino Coast Ry., Inc.--Lease and Operate, 360 I.C.C. 
653, 664 (1980).
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    \13\ DM&E indicates that, although the notice of exemption 
(filed August 29, 2002) respecting the exempt trackage rights 
transactions in STB Finance Docket No. 34178 (Sub-No. 2) would 
become effective prior to the effective date of a Board decision on 
the primary application and Sub-No. 1 terminal trackage rights 
application, consummation of the Sub-No. 2 trackage rights 
transactions is contingent on approval of both the primary 
application and the Sub-No. 1 terminal trackage rights application.
    \14\ At Ramsey, MN (an intermediate point between Owatonna and 
Mason City), there is a milepost equation at which MP 72.5=MP 43.0.
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Primary Application and Related Filings Accepted

    We agree with applicants that the DM&E/IC&E common control 
transaction proposed in the primary application is a ``minor 
transaction'' under 49 CFR 1180.2(c), and we are accepting the primary 
application for consideration because it is in substantial compliance 
with the applicable regulations governing minor transactions. See 49 
U.S.C. 11321-26; 49 CFR part 1180. We are also accepting for 
consideration the two related filings, which are also in compliance 
with the applicable regulations.\15\
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    \15\ We reserve the right to require the filing of supplemental 
information from applicants or any other party or individual, if 
necessary to complete the record in this matter.
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Public Inspection

    The application and the related filings are available for 
inspection in the Docket File Reading Room (Room 755) at the offices of 
the Surface Transportation Board, 1925 K Street, NW., in Washington, 
DC. In addition, they may be obtained from applicants' representatives 
(Mr. Sippel, for DM&E and Holdings; Mr. Knudson, for IC&E) at the 
addresses indicated above.

Procedural Schedule

    Applicants have indicated that they desire to consummate the DM&E/
IC&E common control transaction as soon after January 1, 2003, as 
possible. They have therefore proposed a procedural schedule that 
provides for issuance of a decision by the Board by January 3, 2003, 
and if the application is granted,

[[Page 61193]]

with an effective date of January 15, 2003.
    We will adopt a 151-day procedural schedule that provides some 
additional time to that proposed by applicants for comments by 
interested parties, but still provides for less total time than the 
180-day procedural schedule (30 days + 105 days + 45 days) provided by 
the deadlines set forth at 49 U.S.C. 11325(a), (d)(2). Under the 
schedule we are adopting: all comments, protests, requests for 
conditions, and any other evidence and argument in opposition to the 
primary application and/or either or both of the related filings, 
including comments of DOJ and DOT, will be due on November 14, 2002; 
\16\ responses to comments, protests, requests for conditions, and 
other opposition, responses to comments of DOJ and DOT, and rebuttal in 
support of the primary application and/or either or both of the related 
filings will be due on December 13, 2002; and our decision will be 
issued by January 27, 2003 (the 45th day after the close of the 
record). If we determine that an Environmental Assessment or 
Environmental Impact Statement is required, we will adjust the 
procedural schedule as necessary. Also, if oral argument is held, our 
decision will be issued within 45 days after the oral argument.\17\
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    \16\ DOT, in its DOT-1 pleading filed September 18, 2002, has 
asked that we modify the procedural schedule to accommodate its past 
practice of filing comments not only in response to the application 
itself but also in response to the comments filed by other parties. 
As in past proceedings, we will allow DOT to file its comments in 
response to other parties' comments on the reply due date (here, 
December 13, 2002) should DOT decide to file such a response, with 
the understanding that applicants, if they feel the need, will be 
allowed to late-file (as quickly as possible) a reply to DOT's 
responsive comments. In this manner, we will not extend the 
procedural schedule unnecessarily.
    \17\ If we ultimately decide to approve the DM&E/IC&E common 
control transaction, we will give consideration at that point to 
applicants' request that we shorten the usual 30-day period between 
the service date of an approval decision and the effective date of 
that decision. See DME-3 at 3 (applicants ask that any such approval 
become effective on the 12th day after the service date of our 
decision).
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Notice of Intent To Participate

    Any person who wishes to participate in this proceeding as a party 
of record (POR) must file with the Board, no later than October 15, 
2002, an original and 25 copies of a notice of intent to participate, 
accompanied by a certificate of service indicating that the notice has 
been properly served on the Secretary of the United States Department 
of Transportation, the Attorney General of the United States, and 
applicants' representatives. In addition, as previously noted, parties 
must submit one electronic copy of each document filed with the Board. 
Further details respecting such electronic submissions are provided 
below.
    We will serve, as soon as practicable, a notice containing the 
official service list (the service list notice). Each party of record 
will be required to serve upon all other parties of record, within 10 
days of the service date of the service list notice, copies of all 
filings previously submitted by that party (to the extent such filings 
have not previously been served upon such other parties). Each party of 
record also will be required to file with the Board, within 10 days of 
the service date of the service list notice, an original plus 10 copies 
of a certificate of service, along with an electronic copy, indicating 
that the service required by the preceding sentence has been 
accomplished. Every filing made by a party of record after the service 
date of the service list notice must have its own certificate of 
service indicating that all PORs on the service list have been served 
with a copy of the filing. Members of the United States Congress (MOCs) 
and Governors (GOVs) are not parties of record (PORs), and therefore, 
need not be served with copies of filings, unless any such Member or 
Governor has requested to be, and is designated as, a POR.
    We will serve copies of our decisions, orders, and notices only on 
those persons who are designated on the official service list as either 
POR, MOC, or GOV. All other interested persons are encouraged to make 
advance arrangements with the Board's copy contractor, Da2 Da Legal 
Copy Service, to receive copies of Board decisions, orders, and notices 
served in this proceeding. Da 2 Da Legal Copy Service will handle the 
collection of charges and the mailing and/or faxing of decisions, 
orders, and notices to persons who request this service. The telephone 
number for Da 2 Da Legal Copy Service is (202) 293-7776.\18\
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    \18\ An interested person does not need to be on the service 
list to obtain a copy of the primary application or any other filing 
made in this proceeding. Our Railroad Consolidation Procedures 
provide: ``Any document filed with the Board (including 
applications, pleadings, etc.) shall be promptly furnished to 
interested persons on request, unless subject to a protective 
order.'' See 49 CFR 1180.4(a)(3). The primary application and other 
filings in this proceeding will also be available on the Board's 
website at ``www.sbt.dot.gov'' under ``Filings.'' Furthermore, Da 2 
Da Legal Copy Service will provide, for a charge, copies of the 
primary application or any other filing made in this proceeding, 
except to the extent any such filing is subject to the protective 
order previously entered in this proceeding.
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Comments, Protests, Requests for Conditions, and Other Opposition 
Evidence and Argument, Including Filings by DOJ and DOT

    All comments, protests, requests for conditions, and any other 
evidence and argument in opposition to the primary application and/or 
either or both of the related filings, including filings by DOJ and 
DOT, must be filed by November 14, 2002.
    Parties (including DOJ and DOT) filing such comments, etc., must 
submit an original and 25 copies thereof. Each such submission: must be 
filed with the Surface Transportation Board, 1925 K Street, NW., 
Washington, DC 20423-0001; must refer to STB Finance Docket No. 34178; 
and must be clearly labeled with an identification acronym for that 
party and number for the submission by that party (e.g., the primary 
application was labeled ``DME-2''), see 49 CFR 1180.4(a)(2). In 
addition, as previously noted, parties must submit one electronic copy 
of each document filed with the Board. Further details respecting such 
electronic submissions are provided below.
    Comments, etc., must be concurrently served by first class mail on 
the U.S. Attorney General and the U.S. Secretary of Transportation, 
applicants' representatives, and all other parties of record, and 
should include: the docket number and title of the proceeding and the 
name, address, and telephone number of the commenting party and its 
representative upon whom service shall be made.
    Because we have determined that the DM&E/IC&E common control 
transaction proposed in the primary application is a minor transaction, 
no responsive applications will be permitted. See 49 CFR 1180.4(d)(1).
    Protesting parties are advised that, if they seek either the denial 
of the primary application or the imposition of conditions upon any 
approval thereof, on the theory that approval without imposition of 
conditions will harm either their ability to provide essential services 
and/or competition, they must present substantial evidence in support 
of their positions. See Lamoille Valley R.R. Co. v. ICC, 711 F.2d 295 
(D.C. Cir. 1983).

Responses to Comments, Protests, Requests for Conditions, and Other 
Opposition, Including DOJ and DOT; Rebuttal in Support of Primary 
Application

    Responses to comments, protests, requests for conditions, and other 
opposition submissions, responses to comments of DOJ and DOT, and 
rebuttal

[[Page 61194]]

in support of the primary application and/or either or both of the 
related filings must be filed by December 13, 2002.

Discovery

    Discovery may begin immediately. We encourage the parties to 
resolve all discovery matters expeditiously and amicably.

Electronic Submissions: In General

    As already mentioned, in addition to submitting an original and 25 
paper copies of each document filed with the Board, parties must 
submit, on 3.5-inch IBM-compatible floppy diskettes (disks) or on 
compact discs (CDs), copies of all textual materials, electronic 
workpapers, data bases, and spreadsheets used to develop quantitative 
evidence.\19\ Textual materials must be in, or compatible with, 
WordPerfect 9.0. Electronic spreadsheets must be in, or compatible 
with, Lotus 1-2-3 Release 9 or Microsoft Excel 2002. Each disk or CD 
should be clearly labeled with the identification acronym and number of 
the corresponding paper document, see 49 CFR 1180.4(a)(2), and a copy 
of such disk or CD should be provided to any other party upon request. 
Also, each disk or CD should be clearly labeled as containing 
confidential or redacted materials. The data contained on the disks and 
CDs submitted to the Board will be subject to the protective order 
granted in Decision No. 1, served August 14, 2002, 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 will facilitate timely review by the Board and its 
staff.\20\
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    \19\ Parties unable to comply with the electronic submission 
requirements can seek a waiver from the Board.
    \20\ 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.
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Electronic Submissions: Workpapers, Data Bases, and Spreadsheets

    In the past, we have encountered problems with the ``links'' in 
spreadsheets functioning properly when the spreadsheets are installed 
on desktop computers or network servers. To avoid such problems, 
parties submitting electronic workpapers, data bases, and/or 
spreadsheets should use naming and linking conventions that will permit 
the spreadsheets to operate on the Board's computers.\21\ Electronic 
data bases should be compatible with the Microsoft Open Database 
Connectivity (ODBC) standard.\22\ The Board currently uses Microsoft 
Access 2000, and data bases submitted should be either in this format 
or another ODBC-compatible format. Otherwise, submitters should explain 
why it is not possible to submit the data base in this format and seek 
a determination as to whether it is feasible for us to accept the data 
base in another format.
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    \21\ We will not specify a particular naming and linking 
convention. It is incumbent upon the submitter to use generic naming 
and linking conventions that will permit the spreadsheets to operate 
on desktop computers or from a network server. Questions concerning 
naming and linking matters and/or compatibility with our computers 
can be addressed to William H. Washburn, Office of Economics, 
Environmental Analysis, and Administration, at (202) 565-1550.
    \22\ ODBC is a Windows technology that allows a data base 
software package, such as Microsoft Access, to import data from a 
data base created using a different software package. All data bases 
must be supported with adequate documentation on data attributes, 
SQL queries, programmed reports, etc.
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    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.
    It is ordered:
    1. The primary application in STB Finance Docket No. 34178 and the 
related filings in STB Finance Docket No. 34178 (Sub-Nos. 1 and 2) are 
accepted for consideration.
    2. The parties to this proceeding must comply with the Procedural 
Schedule adopted by the Board in this proceeding as shown in Appendix 
A.
    3. The parties to this proceeding must comply with the procedural 
requirements described in this decision.
    4. This decision is effective on September 27, 2002.

    Decided: September 19, 2002.

    By the Board, Chairman Morgan and Vice Chairman Burkes.
Vernon A. Williams,
Secretary.

Appendix A: Procedural Schedule

August 29, 2002: Primary application, related filings, and petition 
for establishment of procedural schedule filed.
September 27, 2002: Board notice of acceptance of primary 
application and related filings published in the Federal Register.
October 15, 2002: Notices of intent to participate due.
November 14, 2002: All comments, protests, requests for conditions, 
and any other evidence and argument in opposition to the primary 
application and/or either or both of the related filings, including 
filings of the U.S. Department of Justice (DOJ) and the U.S. 
Department of Transportation (DOT), due.
December 13, 2002: Responses to comments, protests, requests for 
conditions, and other opposition due. Responses to comments of DOJ 
and DOT due. Rebuttal in support of primary application and/or 
either or both of the related filings due.
January 27, 2003: Date of service of final decision (if no 
environmental review is required and no oral argument is held).

[FR Doc. 02-24602 Filed 9-26-02; 8:45 am]
BILLING CODE 4915-00-P