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