[Federal Register Volume 72, Number 144 (Friday, July 27, 2007)]
[Notices]
[Pages 41386-41387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14310]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[STB Finance Docket No. 35064]


Watco Companies, Inc., and Watco Transportation Services, Inc.--
Continuance in Control Exemption--Michigan Central Railway, LLC

    Watco Companies, Inc. (Watco Companies) and its wholly owned 
subsidiary, Watco Transportation Services, Inc. (Watco Transportation) 
(collectively, Watco), both noncarriers, jointly have filed a verified 
notice of exemption to continue in control of Michigan Central Railway, 
LLC (Michigan Central), upon Michigan Central's becoming a Class II 
rail carrier through its proposed acquisition and operation of certain 
rail lines in Michigan and Indiana. Michigan Central will be controlled 
directly by Watco Transportation, with a 67% membership interest, and 
indirectly by Watco, while Norfolk Southern Railway Company (NSR) will 
have a noncontrolling 33% membership interest.\1\
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    \1\ Watco has filed a copy of the First Amended and Restated 
Agreement into which Watco Transportation, NSR, and Michigan Central 
will enter in connection with the consummation of the proposed 
control transaction and related transactions referenced in this 
notice. The agreement provides for the independent management of 
Michigan Central, according to Watco, under Watco's control.
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    This transaction is related to a petition for exemption for the 
acquisition and operation of these rail lines concurrently filed in STB 
Finance Docket No. 35063, Michigan Central Railway, LLC--Acquisition 
and Operation Exemption--Lines of Norfolk Southern Railway Company. In 
that proceeding, Michigan Central seeks an exemption under 49 U.S.C. 
10502 from the prior approval requirements of 49 U.S.C. 10901 to 
acquire and operate some 299 miles of rail line owned and operated by 
NSR, and some 85.5 miles of trackage rights, in Michigan and 
Indiana.\2\ In the proposed acquisition, NSR will contribute these 
rails lines, trackage rights, and related assets to Michigan Central, 
subject to certain traffic restrictions, in exchange for its 33% 
interest. Watco Transportation will contribute over time $18 million in 
cash and locomotives to Michigan Central in exchange for its 
controlling 67% interest.\3\
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    \2\ In STB Finance Docket No. 35063, Michigan Central also has 
filed a petition to revoke the otherwise applicable class exemption 
at 49 CFR 1150.31 for the acquisition and operation of rail lines by 
a noncarrier and a proposed procedural schedule.
    \3\ A redacted version of the Transaction Agreement by and among 
NSR, Michigan Central and Watco Transportation was filed with the 
petition for exemption in STB Finance Docket No. 35063. The full 
version of the Transaction Agreement was concurrently filed under 
seal along with a motion for protective order.
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    This transaction also is related to a concurrently filed verified 
notice of exemption in STB Finance Docket No. 35065, Norfolk Southern 
Railway Company--Trackage Rights Exemption--Michigan Central Railway, 
LLC. There, Michigan Central has agreed to grant limited local trackage 
rights to NSR in Michigan and Indiana.
    The parties intend to consummate the transaction after the Board 
has issued a final decision granting the petition for exemption in STB 
Finance Docket No. 35063.
    Watco currently controls 16 Class III rail carriers: South Kansas 
and Oklahoma Railroad Company, Palouse River & Coulee City Railroad, 
Inc., Timber Rock Railroad, Inc., Stillwater Central Railroad, Inc., 
Eastern Idaho Railroad, Inc., Kansas & Oklahoma Railroad, Inc., 
Pennsylvania Southwestern Railroad, Inc., Great Northwest Railroad, 
Inc., Kaw River Railroad, Inc., Mission Mountain Railroad, Inc., 
Mississippi Southern Railroad, Inc., Yellowstone Valley Railroad, Inc., 
Louisiana Southern Railroad, Inc., Arkansas Southern Railroad, Inc., 
Alabama Southern Railroad, Inc., and Vicksburg Southern Railroad, 
Inc.\4\
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    \4\ A former Watco Class III railroad, the Appalachian & Ohio 
Railroad, Inc., was acquired by Four Rivers Transportation, Inc. See 
Four Rivers Transportation, Inc.--Control Exemption--Appalachian & 
Ohio Railroad, Inc., STB Finance Docket No. 34856 (STB served May 
23, 2006).
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    Watco represents that: (1) The rail lines to be acquired by 
Michigan Central do not connect with any other railroads in the Watco 
corporate family; (2) these continuance in control is not part of a 
series of anticipated transactions that would connect these railroads 
with each other or any other railroad in the Watco corporate family; 
and (3) the transaction does not involve a Class I rail carrier. 
Therefore, the transaction is exempt from the prior approval 
requirements of 49 U.S.C. 11323. See 49 CFR 1180.2(d)(2).
    Under 49 U.S.C. 10502(g), the Board may not use its exemption 
authority to relieve a rail carrier of its statutory obligation to 
protect the interests of its employees. Because the transaction 
involves the control of one Class II and one or more Class III rail 
carriers, the exemption is subject to the labor protection requirements 
of 49 U.S.C. 11326(b).
    If the notice contains false or misleading information, the 
exemption is void ab initio. Petitions to revoke the exemption under 49 
U.S.C. 10502(d) may be filed at any time. The filing of a petition to 
revoke will not automatically stay the effectiveness of the exemption. 
Petitions for stay must be filed no later than August 3, 2007 (at least 
7 days before the exemption becomes effective).
    An original and 10 copies of all pleadings, referring to STB 
Finance Docket No. 35064, must be filed with the Surface Transportation 
Board, 395 E Street, SW., Washington, DC 20423-0001. In addition, one 
copy of each pleading must be served on Karl Morell, Of Counsel, Ball 
Janik, LLP, Suite 225, 1455 F Street, NW., Washington, DC 20005.
    Board decisions and notices are available on our Web site at: 
http://www.stb.dot.gov.

    Decided: July 19, 2007.


[[Page 41387]]


    By the Board, David M. Konschnik, Director, Office of 
Proceedings.
Vernon A. Williams,
Secretary.
[FR Doc. E7-14310 Filed 7-26-07; 8:45 am]
BILLING CODE 4915-01-P