[Federal Register Volume 77, Number 208 (Friday, October 26, 2012)]
[Notices]
[Pages 65446-65447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26371]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[Docket No. FD 35684]


Iowa Pacific Holdings, LLC and Permian Basin Railways--Control 
Exemption--Cape Rail, Inc. and Massachusetts Coastal Railroad, LLC

    Iowa Pacific Holdings, LLC (Iowa Pacific) and its wholly owned 
subsidiary, Permian Basin Railways (Permian), Cape Rail, Inc. (Cape), 
P. Christopher Podgurski (Podgurski), Andrew Reardon (Reardon), and 
Massachusetts Coastal Railroad, LLC (Mass Coastal) (collectively, 
applicants) have filed a verified notice of exemption for Iowa Pacific 
and Permian to acquire indirect control of Mass Coastal, a Class III 
rail carrier, through Permian's acquisition of an 80% stock interest in 
Cape, the parent company of Mass Coastal, from the two existing Cape 
shareholders, Podgurski and Reardon.\1\ As a result of the proposed 
transaction, Iowa Pacific and Permian will indirectly control Mass 
Coastal. Podgurski and Reardon will continue to own the remaining 20% 
of Cape's shares. Iowa

[[Page 65447]]

Pacific has created an independent voting trust to acquire and hold the 
Cape shares, and to provide for control of Mass Coastal, until Board 
approval is received through the notice of exemption procedure.\2\
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    \1\ On October 12, 2012, applicants filed a motion for 
protective order pursuant to 49 CFR 1104.14 to protect the exchange 
of information by the parties in this proceeding. That motion will 
be addressed in a separate decision.
    \2\ On October 9, 2012, applicants submitted a copy of the 
voting trust agreement to the Board for an informal, nonbinding 
opinion asking whether the voting trust would sufficiently insulate 
the applicants from unauthorized control of Cape and its 
subsidiaries, pending approval or exemption of the subject 
transaction by the Board. In a letter dated October 12, 2012, the 
Director of the Office of Proceedings informed the applicants that 
it is her informal opinion that the proposed voting trust agreement 
would effectively insulate the applicants from unauthorized control 
of Cape.
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    Through Permian, Iowa Pacific currently controls indirectly the 
following seven Class III rail carriers in the United States: Austin & 
Northwestern Railroad Company, Inc. (operating as the Texas-New Mexico 
Railroad), Chicago Terminal Railroad, Mount Hood Railroad, San Luis & 
Rio Grande Railroad, Saratoga & North Creek Railway, the West Texas & 
Lubbock Railway Company, and the Santa Cruz and Monterey Bay Railway 
Company. In addition, Iowa Pacific directly controls the Rusk, 
Palestine & Pacific Railroad. Cape currently owns Mass Coastal and Cape 
Cod Central Railroad (Cape Cod), an intrastate passenger excursion 
railroad.
    Mass Coastal operates a network of about 100 miles of track and 
trackage rights in southeastern Massachusetts and on Cape Cod. 
Applicants state that the purpose of the transaction is to improve the 
revenue base of Cape's two subsidiaries, Mass Coastal and Cape Cod, 
through access to Iowa Pacific's greater freight and passenger 
marketing resources, and to achieve economies of scale through 
centralization of administrative functions.
    Applicants state that they propose to consummate the transaction on 
or about November 12, 2012. The earliest this transaction can be 
consummated is November 11, 2012, the effective date of the exemption 
(30 days after the verified notice was filed).
    Applicants represent that: (1) The rail line to be operated by Mass 
Coastal does not connect with the rail lines of any other carriers 
controlled by Iowa Pacific through Permian or by Iowa Pacific directly; 
(2) the transaction is not part of a series of anticipated transactions 
that would connect the rail lines of the carriers; and (3) the 
transaction does not involve a Class I rail carrier. The proposed 
transaction is therefore exempt from the prior approval requirements of 
49 U.S.C. 11323 pursuant to 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. Section 11326(c), however, does 
not provide for labor protection for transactions under 11324 and 11325 
that involve only Class III rail carriers. Accordingly, the Board may 
not impose labor protective conditions here, because all of the 
carriers involved are Class III carriers.
    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 effectiveness of the 
exemption. Petitions for stay must be filed no later than November 2, 
2012 (at least seven days before the exemption becomes effective).
    An original and ten copies of all pleadings, referring to Docket 
No. FD 35684, 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 John D. Heffner, Strasburger & Price, LLP, 
1700 K Street NW., Suite 640, Washington, DC 20006.
    Board decisions and notices are available on our Web site at 
``www.stb.dot.gov.''

    Decided: October 23, 2012.

    By the Board, Rachel D. Campbell, Director, Office of 
Proceedings.
Derrick A. Gardner,
Clearance Clerk.
[FR Doc. 2012-26371 Filed 10-25-12; 8:45 am]
BILLING CODE 4915-01-P