[Federal Register Volume 81, Number 246 (Thursday, December 22, 2016)]
[Notices]
[Pages 94007-94010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30843]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36064]


Genesee & Wyoming Inc.--Acquisition of Control Exemption--
Providence and Worcester Railroad

    On September 1, 2016, Genesee & Wyoming Inc. (GWI), a non-carrier 
holding company, filed a petition under 49 U.S.C. 10502 and 49 CFR part 
1121 for exemption from the provisions of 49 U.S.C. 11323-24 to allow 
GWI to acquire control of Providence and Worcester Railroad Company 
(P&W), a Class III railroad. In a decision served September 20, 2016, 
and published in the Federal Register on September 23, 2016 (81 FR 
65,692), the Board provided notice of GWI's petition, instituted a 
proceeding, and set a reply deadline for comments on the petition. The 
Board received a number of comments in response to the petition.
    The Board will grant GWI's petition for exemption, subject to 
standard labor protective conditions and the condition that GWI will 
not interfere with the ability of Springfield Terminal Railway 
(Springfield Terminal) to interchange with CSX Transportation, Inc. 
(CSXT), in Worcester, Mass.

Background

    GWI is a publicly-traded non-carrier holding company that currently 
controls, through direct or indirect equity ownership, two Class II 
carriers and 106 Class III carriers operating in the United States. 
(Pet. 1.) P&W is a Class III carrier based in Worcester, Mass., that 
owns rail lines and permanent freight easements in Connecticut, Rhode 
Island, and Massachusetts. (Id. at 2.) It also operates on trackage 
rights in Connecticut, Massachusetts, Rhode Island, and New York. (Id.)
    In its petition, GWI states that it seeks to acquire control of P&W 
through a merger between P&W and Pullman Acquisition Sub Inc., a newly-
formed, wholly-owned non-carrier subsidiary of GWI.\1\ (Id.) Upon 
consummation, P&W will be the surviving entity and will become a 
wholly-owned subsidiary of GWI. (Id.) P&W connects with several 
railroads, including two GWI subsidiaries: New England Central 
Railroad, Inc. (NECR), and Connecticut Southern Railroad, Inc. (CSO). 
(Id. at 3.) GWI states that, although there are some commonly-served 
cities and towns, there are no customers that are served solely by NECR 
or CSO, on the one hand, and P&W, on the other, and that as such there 
will be no ``2-to-1 customers'' as a result of the proposed 
transaction. (Id. at 3.) GWI states that it does not contemplate any 
material changes to P&W's operations, maintenance, or service. (Id. at 
4.)
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    \1\ In its petition, GWI states that it anticipates closing the 
transaction in the fourth quarter of 2016. (Pet. 5.) GWI states 
that, in the event it does not have approval from the Board by the 
time its closing conditions have been met, it intends to close the 
transaction into a voting trust. On October 31, 2016, GWI submitted 
an executed Voting Trust Agreement pursuant to 49 CFR 1013.3 for 
receipt of the voting stock of P&W.
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    GWI also states that P&W and NECR are part of the ``Great Eastern 
Route'' strategic alliances. According to GWI, the Great Eastern 
alliances furnish P&W with pricing authority for service with Canadian 
National Railway Company (CN) through an arrangement by which NECR 
provides haulage for P&W between East Alburg, Vt. and Willimantic, 
Conn. on certain contractually-agreed commodities. GWI states that P&W 
expanded the Great Eastern Route by entering into an additional 
strategic alliance with Vermont Rail Systems (VRS), which furnishes P&W 
with pricing authority for service with Canadian Pacific Railway 
Limited (CP), through an arrangement by which VRS and NECR provide 
haulage for P&W between Whitehall, N.Y. and Willimantic, Conn. on 
certain contractually-agreed commodities. (Id. at 3.) GWI states that 
its present intention is to keep these strategic alliances, and the 
connections with CN and CP, in place. (Id.)

Discussion and Conclusions

Statutory Analysis

    The acquisition of control of a rail carrier by a person that is 
not a rail carrier but that controls any number of rail carriers 
requires approval by the Board pursuant to 49 U.S.C. 11323(a)(5). Under 
section 10502(a), however, we must exempt a transaction or service from 
regulation if we find that: (1) regulation is not necessary to carry 
out the rail transportation policy (RTP) of 49 U.S.C. 10101; and (2) 
either the transaction or service is limited in scope, or regulation is 
not needed to protect shippers from the abuse of market power.
    In this case, an exemption from the prior approval requirements of 
sections 11323-24 is consistent with the standards of section 10502. 
Detailed scrutiny of the proposed transaction through an application 
for review and approval under sections 11323-24 is not necessary here 
to carry out the RTP. Approval of the transaction will result in a 
change in ownership of P&W with no lessening of competition. An 
exemption will promote the RTP by minimizing the need for federal 
regulatory control over the transaction, section 10101(2); ensuring the 
development and continuation of a sound rail transportation system that 
will continue to meet the needs of the public, section 10101(4); 
fostering sound economic conditions in transportation, section 
10101(5); encouraging efficient management, section 10101(9); and 
providing for the expeditious resolution of this proceeding, section 
10101(15). Other aspects of the RTP will not be adversely affected.
    Nor is detailed scrutiny of the proposed transactions necessary to 
protect shippers from an abuse of market power. According to GWI, no 
shipper will lose any rail options, and operations will not materially 
change. (Pet. 9.) Although P&W connects with NECR and CSO, GWI states 
that P&W also connects directly with a Class I

[[Page 94008]]

carrier (CSXT) and indirectly with three other Class I carriers (CP and 
CN through the strategic alliances, and with Norfolk Southern Railway 
Company (NSR) through NSR's affiliate, Pan Am Southern, LLC). (Id. at 
10.) P&W also connects to Pan Am Railways, Inc., New York & Atlantic 
Railway Company, and Housatonic Railroad Company, Inc., all regional 
and shortline railroads. (Id.) In addition, GWI states that there will 
be no 2-to-1 shippers as a result of the merger. (Id.) Accordingly, 
based on the record, the Board finds that this transaction does not 
shift or consolidate market power; therefore, regulation is not 
necessary to protect shippers from the abuse of market power.\2\
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    \2\ As there is no evidence that regulation is needed to protect 
shippers from the abuse of market power, we do not need to determine 
whether the transaction is limited in scope. See 49 U.S.C. 10502(a).
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Comments and Conditions

    Many of the commenters support the petition and do not seek any 
conditions.\3\ Other commenters support the petition but request 
conditions, or express general reservations about the transaction. We 
address those below.
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    \3\ Supporting comments were filed by: Allnex USA Inc.; Atlantic 
Forest Products; Baldwin Logistics Group, Inc.; BB&S Treated Lumber 
of New England; Can-Am Trading & Logistics, LLC; Connecticut 
Department of Transportation; Cushman Lumbar Company, Inc., CWPM, 
LLC; Delaware Express Co.; Dennison Lubricants, Inc.; Eagle 
Logistics Group, LLC; Gateway Terminal; Greater Boston Transload, 
LLC; Intratransit Container, Inc.; Kloeckner Metals; Logistec USA; 
Mann Distribution LLC; Maple Leaf Distribution Service, Inc.; Maine 
Department of Transportation; New Hampshire Department of 
Transportation; Northeast Treaters, Inc.; Resource Recovery, LLC; 
Rymes Heating Oil & Propane; Safe Road Services, LLC; Saltine 
Warrior, Inc.; Stella-Jones Corporation; Superior Plastics Extrusion 
Co. Inc.; T-Branch, LLC; Tunnel Hill Partners, LP; Univar; Vermont 
Rail System; and Vermont Agency of Transportation.
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Passenger Excursion
    Several commenters support the petition, but ask the Board to 
condition granting the petition on GWI's involvement in passenger 
excursions run by the Blackstone Valley Tourism Council (BVTC) \4\ and/
or sought to be run by the Boston Surface Railroad Company (BSRC).\5\ 
The comments regarding these passenger services vary, but, generally, 
the commenters \6\ request that the Board require that GWI continue 
servicing BVTC and continue P&W's negotiations with BSRC.
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    \4\ The record contains little information about the BVTC, other 
than that it conducts a ``Polar Express'' excursion and serves over 
20,000 passengers annually. (See State Rep. Stephen M. Casey Comment 
1.)
    \5\ BSRC is a privately funded and closely held company, 
established to address the growing demand for quality alternatives 
to driving for commuters between tightly coupled metropolitan 
markets. BSRC has selected Worcester and Providence as the first 
city pair for its pilot passenger rail program and has been in 
negotiations with P&W to host this proposed service. (BSRC Reply 1.)
    \6\ Comments were submitted by: BSRC; the Honorable Lisa 
Baldelli-Hunt, Mayor, City of Woonsocket, Rhode Island; the 
Honorable Stephen M. Casey, State Representative, State of Rhode 
Island and Providence Plantations; the Honorable Harriette L. 
Chandler, State Senator, Commonwealth of Massachusetts; the 
Honorable Marc A. Cote, State Senator, State of Rhode Island and 
Providence Plantations; John Eno; the Honorable James R. Langevin 
and the Honorable David N. Cicilline, United States Representatives, 
Rhode Island; Massachusetts Bay Railroad Enthusiasts, Inc.; the 
Honorable James P. McGovern, United States Representative, 
Massachusetts; the Honorable Michael A. Morin, State Representative, 
State of Rhode Island and Providence Plantations; the Honorable 
David K. Muradian, Jr., State Representative, Commonwealth of 
Massachusetts; National Association of Railroad Passengers; the 
Honorable James J. O'Day, State Representative, Commonwealth of 
Massachusetts; the Honorable Robert D. Phillips, State 
Representative, State of Rhode Island and Providence Plantations; 
Michael E. Traynor, Chief Development Officer, City of Worcester, 
Massachusetts. BSRC also submitted a letter from Peter Alviti, Jr., 
Director of the Rhode Island Department of Transportation, 
expressing general support for BSRC's passenger rail service.
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    GWI states that, in the past, P&W and BVTC have made arrangements 
for service on a year-by-year basis. (GWI Rebuttal 5.) GWI states that 
P&W will fulfill all current agreements with BVTC, negotiate similar 
agreements for 2017, and, as P&W has previously done, review further 
plans for passenger excursion service on a year-to-year basis after 
that. (Id. at 7.) GWI also states that there is currently a memorandum 
of understanding between BSRC and P&W that includes a commitment to 
negotiate in good faith. (Id. at 5-6.)
    The Board will not impose a condition relating to BVTC or BSRC. The 
Board has authorized BSRC to offer passenger rail service on any rail 
line where P&W will allow the service. Bos. Surface R.R.--Pet. for 
Partial Exemption from 49 U.S.C. Subtitle IV, FD 36043 (STB served 
Sept. 15, 2016). However, authority from the Board is permissive only, 
and in order to exercise that authority a carrier must obtain the 
property or contractual right to do so under state law, which is not 
within the Board's purview. See Ohio River Partners LLC--Acquis. 
Exemption--Hannibal Dev., LLC, FD 35984, slip op. at 3 (STB served Apr. 
1, 2016). A condition requiring GWI to negotiate with BSRC is therefore 
inappropriate. In any event, GWI has stated that it will continue to 
negotiate in good faith with BSRC and BVTC. (GWI Rebuttal 7.)
Springfield Terminal
    Springfield Terminal filed a comment regarding its ability to 
interchange traffic with CSXT at Barbers Station in Worcester, Mass. 
(Springfield Terminal Comment 1.) Springfield Terminal states that GWI 
has agreed that it will not take or fail to take action that would 
adversely impact Springfield Terminal's ability to interchange traffic 
with CSXT at Barbers Station. (Id.) Based on this representation, 
Springfield Terminal states that it fully supports the petition.
    Springfield Terminal also notes that GWI agreed to have Board 
approval conditioned on GWI's commitment as reflected in Springfield 
Terminal's letter, and in its rebuttal GWI confirms that its commitment 
can be entered as a Board-imposed condition. (GWI Rebuttal 3.) 
Accordingly, the Board will impose a condition requiring that GWI will 
not take or fail to take any actions that would adversely impact the 
ability of Springfield Terminal to interchange traffic with CSX 
Transportation, Inc. at Barbers Station in Worcester, Massachusetts in 
violation of applicable law or the P&W Grant of Trackage Rights, as 
amended, dated June 30, 1989.
Other Concerns
    The Massachusetts Department of Transportation (MassDOT) and 
American Rock Salt (ARS) filed comments expressing reservations 
regarding the transaction.
    MassDOT states that it takes no position concerning the competition 
aspect of GWI's petition, but it notes its interest in P&W continuing 
its current high standards of track maintenance under a GWI regime. It 
also indicates that service over a nearby GWI subsidiary line has 
deteriorated, leading to passenger train service disruption. (MassDOT 
Comment 1.) MassDOT seeks GWI's assurance that the P&W merger ``will 
not compromise or delay steps that GWI will need to take going forward 
to restore Amtrak service on another GWI railroad . . . .'' (Id.) 
MassDOT, however, does not specifically ask the Board to impose any 
conditions.
    ARS states that it is a shipper that receives service from several 
other GWI subsidiaries. It states that GWI's growth over the past 20 
years has led to ARS being captive to GWI's rate structures, which 
impacts its market share. Although ARS has raised a number of concerns 
regarding service from other GWI subsidiaries, ARS does not ask that a 
specific condition be placed on this transaction. (See generally ARS 
Comment.)
    While the Board takes seriously the concerns expressed by MassDOT 
and ARS, neither party has suggested a condition or identified any harm 
arising

[[Page 94009]]

from the transaction that would necessitate imposing a condition. The 
Board expects, however, that GWI will work with MassDOT and ARS to help 
address any unforeseen service impacts, should they arise, following 
the transaction's approval.\7\
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    \7\ The Board reminds interested parties that they may contact 
the Board's Rail Customer and Public Assistance Program (RCPA) if 
they believe a rail carrier is not providing adequate service. The 
RCPA Program provides informal assistance on a wide range of 
matters, including informal dispute resolution through mediation. 
The RCPA may be reached at (866) 254-1792; faxing to (202) 245-0461; 
or by email at [email protected].
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Labor
    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. Therefore, the Board will 
impose a condition specifying that any employees adversely affected by 
this transaction will be protected by the conditions set forth in New 
York Dock Railway--Control--Brooklyn Eastern District Terminal (New 
York Dock), 360 I.C.C. 60 (1979).
    GWI, acknowledging that New York Dock applies, seeks Board 
confirmation that it need not commence negotiations or consummate 
implementing agreements prior to the consummation of the transaction 
with P&W. (Pet. 10-11.) The Transportation Communications Union/IAM, 
AFL-CIO (TCU/IAM) and the Transportation Division of the International 
Association of Sheet Metal, Air, Rail and Transportation Workers 
(SMART-TD) submitted comments disagreeing with GWI's position, arguing 
that GWI must give notice and negotiate an implementing agreement prior 
to consummation of the transaction. (See TCU/IAM Comment 3, 5-6; SMART-
TD Comment 3-5.)
    New York Dock requires a railroad to give notice of ``proposed 
changes to be effected by [a] transaction'' when a railroad is 
``contemplating a change or changes in its operations, services, 
facilities, or equipment as a result of a transaction'' that may affect 
employees. 360 I.C.C. at 77. The requirement under New York Dock to 
provide such notice presumes, however, that the carrier is capable of 
making a ``full and adequate statement'' of the expected labor changes 
before the transaction is consummated. Norfolk S. Ry--Joint Control & 
Operating/Pooling Agreements--Pan Am S. LLC (Pan Am S.), FD 35147, slip 
op. at 16-17 (STB served Mar. 10, 2009) (``Because we see no basis for 
negotiation of an implementing agreement until Applicants decide to 
implement labor changes that are related to the Transaction, we will 
not require that Applicants commence negotiations now.'').
    In its petition, GWI states that it has not yet determined whether 
or which employees may be adversely affected, but acknowledges that it 
will be required to give 90-days' notice, and negotiate, before making 
changes in operations, services, facilities, or equipment. (Pet. 11.) 
Further, in its rebuttal,

    GWI specifically confirms that post-closing, P&W does not intend 
to terminate or displace any P&W covered employees as a result of 
the proposed transaction. P&W will continue to honor all current 
[collective bargaining agreements (CBAs)], and to negotiate all 
expired CBAs in good faith. For the foreseeable future, there will 
be no adverse effect on P&W covered employees because work will 
continue to be performed under existing CBAs by the same P&W covered 
employees who are currently performing the work.

(GWI Rebuttal 9).
    The Board will hold GWI to the representations regarding labor 
protection that it has made on the record in this proceeding. 
Accordingly, GWI will be required to proceed in good faith under the 
notification and negotiation provision of Article I, section 4 of the 
New York Dock conditions before implementing employment changes but it 
need not commence those negotiations until it is capable of making a 
full and adequate statement of the expected changes. See Pan Am S., FD 
35147, slip op. at 16-17.\8\
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    \8\ TCU/IAM and SMART-TD cite other cases in support of their 
position that New York Dock negotiations must occur prior to the 
consummation of a consolidation transaction. The Board, however, 
finds these cases unpersuasive. First, TCU/IAM cites Norfolk 
Southern Railway--Acquisition & Operation--Certain Rail Lines of the 
Delaware & Hudson Railway (Delaware & Hudson), FD 35873 (STB served 
May 15, 2015). (TCU/IAM Comment 2.) The labor discussions in 
Delaware & Hudson, however, focus almost entirely on how to 
categorize the underlying transaction and what level of labor 
protection applies. Delaware & Hudson, FD 35873, slip op. at 28 (STB 
served May 15, 2015). Here, there is no dispute that New York Dock 
protections apply (see Pet.; TCU/IAM Comment; SMART-TD Comment). 
Thus, Delaware & Hudson is inapposite.
    Next, SMART-TD points to R.J. Corman Railroad/Memphis Line--
Acquisition--CSX Transportation Line Between Warwick & Uhrichville, 
FD 31388 (ICC served Mar. 2, 1989). (SMART-TD Comment 3.) In that 
case, however, CSXT acknowledged that some of its employees would be 
adversely affected, which is not the case here. R.J. Corman R.R., 
slip op. at 2.
    SMART-TD also challenges GWI's reliance on Atlantic Richfield 
Co. & Anaconda Co.--Control--Butte, Anaconda & Pacific Railway & 
Tooele Valley Railroad, 5 I.C.C. 2d 934 (1989), and Mid Michigan 
Railroad--Lease & Operation Exemption--Missouri Pacific Railroad, FD 
31646 (ICC served Aug. 17, 1990), though neither case is cited by 
GWI. (SMART-TD Comment 4.) Atlantic Richfield states that minimum 
New York Dock protections are warranted even when assurances are 
made that there will be no adverse effects to employees. Atlantic 
Richfield, 5 I.C.C. 2d at 942 n.9. Here, however, GWI is not 
suggesting that the New York Dock requirements do not apply. 
Finally, Mid Michigan examines the differing requirements between 
New York Dock and New York Dock as modified by Wilmington Terminal 
Railroad--Purchase & Lease--CSX Transportation, Inc., 6 I.C.C. 2d 
799 (1990), a discussion not at issue here. See generally Mid 
Michigan, FD 31646.
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Environmental and Historical Reporting

    This transaction is categorically excluded from environmental 
review under 49 CFR 1105.6(c)(2)(i) because it will not result in any 
significant change in carrier operations. Similarly, the transaction is 
exempt from the historic reporting requirements under 49 CFR 
1105.8(b)(3) because it will not substantially change the level of 
maintenance of railroad properties.

Expedited Action

    GWI requests expedited action on its petition for exemption. (Pet. 
12; see generally GWI Letter, Dec. 7, 2016.) It seeks action on or 
before the date P&W shareholder approval is obtained, and in the event 
that such approval is not obtained before shareholder approval, 
expedited action to avoid a prolonged period of interim control of 
operations via a voting trust. Based on the record, the Board finds 
GWI's request to be reasonable. Accordingly, our grant of the exemption 
will be effective immediately.
    It is ordered:
    1. Under 49 U.S.C. 10502, the Board exempts GWI's acquisition of 
control of P&W from the prior approval requirements of sections 11323-
24 subject to the employee protective conditions in New York Dock 
Railway--Control--Brooklyn Eastern District Terminal, 360 I.C.C. 60 
(1979).
    2. The exemption is further conditioned on GWI's assurance that it 
will not take or fail to take any actions that would adversely impact 
the ability of Springfield Terminal to interchange traffic with CSX 
Transportation, Inc. at Barbers Station in Worcester, Massachusetts in 
violation of applicable law or the P&W Grant of Trackage Rights, as 
amended, dated June 30, 1989.
    3. Notice will be published in the Federal Register.
    4. This exemption will be effective December 16, 2016.


[[Page 94010]]


    By the Board, Chairman Elliott, Vice Chairman Miller, and 
Commissioner Begeman.
Tammy Lowery,
Clearance Clerk.
[FR Doc. 2016-30843 Filed 12-21-16; 8:45 am]
 BILLING CODE 4915-01-P