[Federal Register Volume 77, Number 213 (Friday, November 2, 2012)]
[Notices]
[Pages 66217-66218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26883]


-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[Docket No. FD 35667]


Arkansas-Oklahoma Railroad, Inc.--Lease and Operation Exemption--
Lines of Union Pacific Railroad Company

    Under 49 CFR 1011.7(a)(2)(x)(A), the Director of the Office of 
Proceedings (Director) is delegated the authority to determine whether 
to issue notices of exemption under 49 U.S.C. 10502 for lease and 
operation 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 issuance of the notice of exemption for lease 
and operation of the rail lines at issue in this case. The Board 
determines that this notice of exemption should be issued, and does so 
here.
    According to Arkansas-Oklahoma Railroad, Inc. (AOK), a Class III 
rail carrier, AOK and Union Pacific Railroad Company (UP) have entered 
into a new Lease Agreement (Agreement). AOK has filed a verified notice 
of exemption under 49 CFR 1150.41 \1\ to continue to lease from UP and 
to operate approximately 12.58 miles of UP's rail lines between (1) 
milepost 364.96 and milepost 370.5 on UP's Shawnee Branch at or near 
McAlester, a distance of approximately 5.54 miles, and (2) the Krebs 
Industrial Lead from the clearance point of the mainline switch on UP's 
Cherokee Subdivision at milepost 0.0 in McAlester to the end of the 
track at milepost 7.04 in Krebs, a distance of approximately 7.04 
miles, both lines in Pittsburg County, Okla.\2\ AOK will continue to 
operate the lines as part of its existing rail line between McAlester 
and Howe, Okla.
---------------------------------------------------------------------------

    \1\ AOK originally filed its verified notice of exemption on 
September 25, 2012. On October 19, 2012, it filed an amended 
verified notice. Accordingly, October 19, 2012, will be considered 
the filing date of the verified notice.
    \2\ AOK previously obtained an exemption in 1997 to lease and 
operate the rail lines. See Arkansas-Oklahoma R.R.--Trackage Rights 
Exemption--Union Pac. R.R., FD 33440 (STB served Aug. 15, 1997).
---------------------------------------------------------------------------

    Pursuant to 49 CFR 1150.43(h), AOK states that, although the 
Agreement contains no direct restrictions on interchange, the lease fee 
is based upon the percentage of traffic AOK interchanges with UP. AOK 
states that this arrangement is unchanged from the original lease 
agreement covering the lines.\3\
---------------------------------------------------------------------------

    \3\ Concurrently with its verified notice of exemption, AOK has 
filed under seal, pursuant to 49 CFR 1150.43(h)(1)(ii), a 
confidential, complete version of the Agreement.
---------------------------------------------------------------------------

    AOK certifies that its projected annual revenues as a result of 
this transaction will not exceed those that would qualify it as a Class 
III rail carrier and will not exceed $5 million.
    AOK states that consummation of the transaction will occur on or 
about November 19, 2012. The earliest the transaction can be 
consummated is November 18, 2012, the effective date of the exemption 
(30 days after the verified notice 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 effectiveness of the 
exemption. Stay petitions must be filed no later than November 9, 2012 
(at least seven days before the exemption becomes effective).
    An original and 10 copies of all pleadings, referring to Docket No. 
FD 35667, 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 Daniel A. LaKemper, General Counsel, 
Arkansas-Oklahoma Railroad, Inc., P.O. Box 185, Morton, IL 61550.
    Board decisions and notices are available on our Web site at 
www.stb.dot.gov.
    It is ordered:
    1. The delegation of authority to the Director of the Office of 
Proceedings under 49 CFR 1011.7(a)(2)(x)(A) to determine whether to 
issue a notice of exemption in this proceeding is revoked.
    2. Notice of the exemption will be published in the Federal 
Register on November 2, 2012.
    3. This decision is effective on the date of service.
    Decided: October 29, 2012.
    By the Board, Chairman Elliott, Vice Chairman Mulvey, and 
Commissioner Begeman. Vice Chairman Mulvey dissented with a separate 
expression.
    Vice Chairman Mulvey, dissenting.
    According to AOK's notice, AOK has been leasing a line of railroad 
from UP since 1997 under an agreement that gives AOK a financial 
incentive to interchange its traffic with UP, rather than with Kansas 
City Southern (KCS). The shippers whose traffic was subject to the 
interchange commitment contained in the 1997 lease may or may not have 
been aware of it, given that the notice authorizing that lease made no 
mention of the presence of a special lease fee arrangement. See 
Arkansas-Oklahoma R.R.--Trackage Rights Exemption--Union Pac. R.R., FD 
33440 (STB served Aug. 15, 1997). Since that 1997 notice was filed, the 
Board has changed its rules to require the public disclosure of 
interchange commitments and the filing of a complete version of the 
agreement with the Board (under seal). See 49 CFR 1150.43.\1\
---------------------------------------------------------------------------

    \1\ I note that AOK's initial notice did not contain the 
information required under the Board's current rules. AOK 
subsequently amended its notice.
---------------------------------------------------------------------------

    In support of its desire to continue a lease credit arrangement 
encouraging interchange with UP rather than KCS--one that has already 
been in place for more than 15 years--AOK argues that the interchange 
commitment does not materially change its interchange practices. That 
argument, of course, begs the question as to why such a provision

[[Page 66218]]

is necessary at all. Presumably, sophisticated rail carriers such as 
AOK and UP would not include superfluous provisions in their lease. I 
am troubled by this disconnect as well by the lack of information the 
Board has regarding the interchange commitment's impact on competition 
and shippers. Accordingly, I believe that the Board should have 
rejected this notice as inappropriate for the notice of exemption 
process.
    On November 1, 2012, the Board announced that it was proposing new 
rules to require carriers to disclose more information when proposing 
transactions, such as this one, that contain an interchange commitment. 
See Information Required in Notices & Petitions Containing Interchange 
Commitments, EP 714 (STB served Nov. 1, 2012). While the comments in 
Docket No. EP 714 will come too late to inform the Board's actions 
here, I encourage both rail carriers and shippers to assist the Board 
in crafting a regime that provides appropriate scrutiny to these types 
of transactions.

Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2012-26883 Filed 11-1-12; 8:45 am]
BILLING CODE 4915-01-P