[Federal Register Volume 82, Number 73 (Tuesday, April 18, 2017)]
[Notices]
[Pages 18340-18341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07828]


=======================================================================
-----------------------------------------------------------------------

SURFACE TRANSPORTATION BOARD

[Docket No. FD 36105]


Genesee & Wyoming Inc.--Acquisition of Control Exemption--
Atlantic Western Transportation, Inc. and Heart of Georgia Railroad, 
Inc.

    On February 27, 2017, Genesee & Wyoming Inc. (GWI), a noncarrier 
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 Atlantic Western Transportation, Inc. (AWT), 
a noncarrier holding company, and indirect control of AWT's wholly 
owned subsidiary Heart of Georgia Railroad, Inc. (HOG), a Class III 
railroad. The Board will grant GWI's petition for exemption, subject to 
standard labor protective conditions.

Background

    GWI is a publicly traded noncarrier holding company that currently 
controls, through direct or indirect equity ownership, two Class II 
carriers and 107 Class III carriers operating in the United States. 
(Pet. 1.) HOG is a Class III carrier based in Americus, Ga., that 
leases from the Georgia Department of Transportation (Georgia DOT) and 
operates approximately 221 miles of rail lines in Georgia and Alabama. 
(Id. at 2.)
    GWI states that it seeks to acquire control of HOG through the 
acquisition of the stock of AWT, the noncarrier parent company of 
HOG.\1\ (Id.) Upon consummation, GWI would acquire direct control of 
AWT, and, because HOG is a wholly owned subsidiary of AWT, GWI would 
acquire indirect control of HOG. (Id.) HOG connects with several 
railroads, including two GWI subsidiaries: Georgia Southwestern 
Railroad, Inc. (GSWR) and Georgia Central Railway, L.P. (GC). (Id. at 
3.) GWI states that, although there are some commonly served cities 
where the railroads connect, there are no customers that are served by 
GSWR or GC, on the one hand, and HOG, on the other, and that as such 
there would be no ``2-to-1 customers'' as a result of the proposed 
transaction. (Id.) GWI further states that the joint line movements 
(which already currently exist) between HOG and the GWI-affiliated 
railroads would not be used to foreclose vertical competition over 
efficient joint line routes with unaffiliated carriers. (Id.)
---------------------------------------------------------------------------

    \1\ GWI states that it and the individual shareholders of AWT 
have entered into a Stock Purchase Agreement dated February 7, 2017. 
(Pet. 2.) GWI further states that it expects to consummate the 
transaction after all of the closing conditions have been satisfied 
as set forth in the Stock Purchase Agreement, including the grant of 
this exemption from the Board, and that it hopes to consummate the 
transaction in the second fiscal quarter of 2017. (Id. at 5.)
---------------------------------------------------------------------------

    GWI states that it does not contemplate any material changes to 
HOG's operations, maintenance, or service, and that HOG would continue 
to operate as a separate railroad, though HOG's senior managers would 
report to a senior vice president of Genesee & Wyoming Railroad 
Services, Inc., an affiliate of GWI. (Id. at 3, 4.) GWI states that no 
shippers would lose access to direct or indirect Class I connections, 
nor to any short line connections, or lose any service options. (Id.) 
GWI states that, as a result of this proposed transaction, HOG and its 
shippers would benefit from greater coordination and efficiencies, 
enhanced financial resources, more robust management support for 
operations and safety, and a broader set of relationships with national 
customers. (Id. at 4.) Georgia DOT does not oppose the transaction and 
asks the Board to review and approve the transaction expeditiously. 
(Id. at Ex. D.) No shippers have filed comments.

Discussion and Conclusions

    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, the Board must exempt a transaction or 
service from regulation if it finds 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 would result in a 
change in ownership of AWT and control of HOG with no lessening of 
competition. An exemption would 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 would continue to meet the needs of the 
public, section 10101(4); fostering sound economic conditions in 
transportation, section 10101(5); reducing regulatory barriers to 
entry, section 10101(7); encouraging efficient management, section 
10101(9); and providing for the expeditious resolution of this 
proceeding, section 10101(15). Other aspects of the RTP would not be 
adversely affected.
    Nor is detailed scrutiny of the proposed transaction necessary to 
protect shippers from an abuse of market power. According to GWI, no 
shipper would lose any rail options, and operations would not 
materially change. (Pet. 9.) Although HOG connects with two GWI-owned 
carriers (GSWR and GC), GWI states that there would be no 2-to-1 
shippers as a result of the acquisition. (Id. at 10.) In addition, GWI 
states that HOG also connects directly with two Class I carriers (CSX 
Transportation, Inc. and Norfolk Southern Railway Company). (Id.) The 
Board will hold GWI to its statement that existing joint line movements 
between HOG and the GWI-affiliated railroads would not be used to 
foreclose vertical competition over efficient joint line routes with 
unaffiliated carriers. (See id. at 3.) 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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

Labor Conditions

    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 GWI currently controls 
two Class II carriers \3\ and numerous Class III carriers, 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). See 49 
U.S.C. 11326(a).
---------------------------------------------------------------------------

    \3\ Buffalo & Pittsburgh Railroad, Inc. and Rapid City, Pierre & 
Eastern Railroad, Inc. (Pet., Ex. A at 1.)
---------------------------------------------------------------------------

    GWI, acknowledging that New York Dock applies, seeks Board 
confirmation that neither GWI nor HOG need to commence negotiations or 
consummate implementing agreements prior to the

[[Page 18341]]

consummation of the control transaction. (Pet. 10-11.) 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.'').
    GWI states that it has not yet determined whether or which 
employees may be adversely affected, but acknowledges that it would be 
required to give 90-days' notice and negotiate before making changes in 
operations, services, facilities, or equipment,\4\ but that it would 
not immediately terminate or displace any HOG covered employees as a 
result of the proposed transaction, and that HOG would continue to 
honor all current employment terms and conditions. (Pet. 10-11.) The 
Board will hold GWI to these representations. 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. See also Genesee & Wyo., Inc.--Acquis. of Control 
Exemption--Providence & Worcester R.R., FD 36064, slip op at 7 (STB 
served Dec. 16, 2016).
---------------------------------------------------------------------------

    \4\ GWI states that none of HOG's 15 current employees are 
subject to collective bargaining agreements, and thus there are no 
unions with which to negotiate implementing agreements. (Id. at 10.) 
The Board notes that GWI will still be required to complete any New 
York Dock negotiations directly with affected HOG employees.
---------------------------------------------------------------------------

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.
    It is ordered:
    1. Under 49 U.S.C. 10502, the Board exempts GWI's acquisition of 
control of AWT and HOG 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. GWI must adhere to its statement that existing joint line 
movements between HOG and the GWI-affiliated railroads will not be used 
to foreclose vertical competition over efficient joint line routes with 
unaffiliated carriers.
    3. Notice will be published in the Federal Register.
    4. This exemption will be effective on May 18, 2017.

    Decided: April 12, 2017.

    By the Board, Board Members Begeman, Elliott, and Miller.
Rena Laws-Byrum,
Clearance Clerk.
[FR Doc. 2017-07828 Filed 4-17-17; 8:45 am]
 BILLING CODE 4915-01-P