[Federal Register Volume 75, Number 179 (Thursday, September 16, 2010)]
[Notices]
[Pages 56653-56654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-23147]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[Docket No. FD 35412]


Middletown & New Jersey Railroad, LLC--Lease and Operation 
Exemption-Norfolk Southern Railway Company

    Under 49 CFR 1011.7(b)(10), the Director of the Office of 
Proceedings (Director) is delegated the authority to determine whether 
to issue notices of exemption for lease transactions under 49 U.S.C. 
10902. However, the Board reserves to itself the consideration and 
disposition of all matters involving issues of general transportation 
importance. 49 CFR 1011.2(a)(6). Accordingly, the Board revokes the 
delegation to the Director with respect to the issuance of this notice 
of exemption. The Board determines that this notice of lease and 
operation exemption should be issued, and does so here.
    Middletown & New Jersey Railroad, LLC (M&NJ), a Class III rail 
carrier, has filed a verified notice of exemption under 49 CFR 1150.41 
to lease certain rail lines from Norfolk Southern Railway Company 
(NSR). In conjunction with the lease of the NSR rail lines, M&NJ states 
that it will also sublease connecting track owned by New York, 
Susquehanna & Western Railway (NYS&W) and receive incidental trackage 
rights. Pursuant to the Lease Agreement and other agreements, M&NJ will 
lease the following rail lines from NSR: (1) The Hudson Secondary 
located between mileposts LX 2.1 and LX 20.6 (18.5 miles in length); 
(2) the Walden Secondary located between mileposts DJ5.0-DJ 10.5 and WI 
29.1-WI 32.9 (9.3 miles in length); (3) the Maybrook Industrial Track 
located between mileposts RT 1.3 and RT 7.5 (6.2 miles in length); (4) 
the Greycourt Industrial Track located between mileposts IL 52.5 and IL 
53.4 (1.0 mile in length); and (5) the EL Connection Track located 
between mileposts QK 0.0 and QK 0.8 (0.8 mile in length). In 
conjunction with the lease of these lines, NSR is: (1) Granting M&NJ 
incidental overhead trackage rights over NSR's rail line located 
between mileposts JS 67.50 and 63.14 (4.36 miles in length); (2) 
subleasing to M&NJ NSR's lease operations over the connecting track 
owned by the NYS&W located between milepost JS 63.14, at Hudson Jct., 
NY, and milepost LX 2.1, at Hudson Jct. (approximately .35-miles in 
length); and (3) partially assigning to M&NJ all of NSR's rights under 
the NYS&W Trackage Rights Agreement for NYS&W's continued trackage 
rights operations over the Hudson Secondary track between Hudson Jct. 
and Warwick, NY. The Lease Agreement will expire on December 31, 2020. 
As required at 49 CFR 1150.43(h), M&NJ has disclosed that the Lease 
Agreement contains a provision that would provide for a ``Lease 
Credit'' whereby M&NJ may reduce its annual lease payments by receiving 
a credit for each car interchanged with NSR. M&NJ notes that NSR 
initially proposed a fixed rental payment with no option to reduce the 
rent, but M&NJ insisted on a lease credit option to provide an 
opportunity for M&NJ to earn a lower rental payment so it would be able 
to invest in improvements on the lease lines to increase traffic 
levels. According to M&NJ, the affected interchange point is Campbell 
Hall, NY.
    M&NJ certifies that the projected annual revenues as a result of 
the proposed transaction will not result in M&NJ becoming a Class II or 
Class I rail carrier, and that its projected annual revenues will not 
exceed $5 million.
    M&NJ states that it expects to consummate the transaction on or 
shortly after October 1, 2010, which is subsequent to the effective 
date of the exemption (30 days after the exemption was filed).
    If the verified 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 transaction. 
Petitions for stay must be filed not later than September 23, 2010 (at 
least 7 days before the exemption becomes effective).
    An original and 10 copies of all pleadings, referring to Docket No. 
FD 35412, must be filed with the Surface Transportation Board, 395 E 
Street, SW., Washington, DC 20423-0001. In addition, a copy of each 
pleading must be served on Karl Morell, Ball Janik LLP, 1455 F Street, 
NW., Suite 225, Washington, DC 20005.

[[Page 56654]]

    Board decisions and notices are available at our Web site at http://www.stb.dot.gov.
    It is ordered:
    1. The delegation of authority of the Office of Proceedings, under 
49 CFR 1011.7(b)(10), to determine whether to issue a notice of 
exemption in this proceeding is revoked.
    2. This decision is effective on the date of service.
    Decided: September 13, 2010.
    By the Board, Chairman Elliott, Vice Chairman Mulvey, and 
Commissioner Nottingham. Vice Chairman Mulvey dissented with a separate 
expression.
    Vice Chairman Mulvey, dissenting:

    Once again, I must disagree with the Board's decision to allow a 
transaction containing a significant interchange commitment to be 
processed under the Board's class exemption procedures at 49 CFR 
1150.41. I believe that it is incumbent for the Board to take a 
close look at interchange commitments before permitting them to 
become effective, particularly when they contain outright bans on 
interchange with third-party carriers or, as here, economic 
incentives that can only be evaluated with the provision of 
additional information.
    Here, M&NJ seeks authorization to lease or sublease 
approximately 36 miles from NSR. As disclosed in the M&NJ's Verified 
Notice of Exemption, the lease agreement contains an interchange 
commitment that gives M&NJ a ``credit'' toward its annual lease 
payment for every car that it interchanges with NSR at Campbell 
Hall, NY. But the notice of exemption and supporting documents do 
not explain (1) whether the ``credit'' is so large vis a vis the 
projected carloads and annual lease payment as to eliminate any 
incentive by M&NJ to interchange with a third-party carrier, (2) how 
many shippers and carloads will be impacted by the interchange 
commitment, (3) and what competitive routing options are being 
foreclosed during the term of the lease.\1\ I believe that all of 
this information, which would be obtained through the Board's more 
detailed application or a petition for exemption procedures, is 
necessary to understand the impact of this new lease.
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    \1\ Indeed, M&NJ's Verified Notice of Exemption does not even 
indicate how long the proposed lease would be in effect. The Board 
has included that information in its decision.
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    The trickle of transactions with interchange commitments since 
the Board's 2008 interchange commitment disclosure rules were 
adopted has turned into a steady drip.\2\ Although the disclosure 
rules were an important first step to regulating interchange 
commitments, I urge my colleagues to closely scrutinize newly 
proposed long-term leases that will shape competition in the rail 
industry for years to come.
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    \2\ E.g., Northern Plains R.R.--Lease Exemption--Soo Line R.R., 
FD 35382 (STB served Aug. 6, 2010) (Mulvey, dissenting); Washington 
& Idaho Ry.--Lease and Operation Exemption--BNSF Ry., FD 35370 (STB 
served Apr. 23, 2010) (Mulvey, commenting). See disclosure rules at 
Disclosure of Rail Interchange Commitments, EP 575 (Sub-No. 1) (STB 
served May 29, 2008).

Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2010-23147 Filed 9-15-10; 8:45 am]
BILLING CODE 4915-01-P