[Federal Register Volume 87, Number 129 (Thursday, July 7, 2022)]
[Notices]
[Pages 40576-40578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14503]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36500]


Canadian Pacific Railway Limited, Canadian Pacific Railway 
Company; Soo Line Railroad Company; Central Maine & Quebec Railway US 
INC.; Dakota, Minnesota & Eastern Railroad Corporation; and Delaware & 
Hudson Railway Company, Inc.--Control--Kansas City Southern; The Kansas 
City Southern Railway Company; Gateway Eastern Railway Company; and The 
Texas Mexican Railway Company

AGENCY: Surface Transportation Board.

ACTION: Decision No. FD 36500; notice of acceptance of responsive 
applications.

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SUMMARY: The Surface Transportation Board (Board) is accepting for 
consideration the responsive applications filed by Canadian National 
Railway Company (CNR) and its rail carrier affiliate, Illinois Central 
Railroad Company (ICRR) (collectively, CN), on February 28, 2022, and 
amended on June 9, 2022, in Docket Nos. FD 36500 (Sub-No. 1), FD 36500 
(Sub-No. 2), FD 36500 (Sub-No. 3), and FD 36500 (Sub-No. 4); and by 
Norfolk Southern Railway Company (NSR), on February 28, 2022, and 
amended on June 9, 2022, in Docket No. FD 36500 (Sub-No. 5). The 
responsive applications relate to the primary application filed October 
29, 2021, by Canadian Pacific Railway Limited (Canadian Pacific), 
Canadian Pacific Railway Company, and their U.S. rail carrier 
subsidiaries, Soo Line Railroad Company, Central Maine & Quebec Railway 
US Inc., Dakota, Minnesota & Eastern Railroad Corporation, and Delaware 
& Hudson Railway Company, Inc. (collectively, CP) and Kansas City 
Southern and its U.S. rail carrier subsidiaries, The Kansas City 
Southern Railway Company (KCSR), Gateway Eastern Railway Company, and 
The Texas Mexican Railway Company (collectively, KCS) (CP and KCS 
collectively, Applicants).

DATES: The effective date of this decision is July 1, 2022. Comments 
regarding the responsive filings must be filed with the Board by July 
12, 2022. Rebuttal in support of the responsive filings must be filed 
with the Board by August 11, 2022. Briefs must be filed with the Board 
by September 20, 2022.

ADDRESSES: Any filing submitted in this proceeding must be filed with 
the Surface Transportation Board either via e-filing on the Board's 
website or in writing addressed to 395 E Street SW, Washington, DC 
20423-0001. In addition, one copy of each filing must be sent (and may 
be sent by email only if service by email is acceptable to the 
recipient) to each of the following: (1) Secretary of Transportation, 
1200 New Jersey Avenue SE, Washington, DC 20590; (2) Attorney General 
of the United States, c/o Assistant Attorney General, Antitrust 
Division, Room 3109, Department of Justice, Washington, DC 20530; (3) 
CP's representative, David L. Meyer, Law Office of David L. Meyer, 1105 
S Street NW, Washington, DC 20009; (4) KCS's representative, William A. 
Mullins, Baker & Miller PLLC, Suite 300, 2401 Pennsylvania Avenue NW, 
Washington, DC 20037; (5) any other person designated as a Party of 
Record on the service list in the primary Docket No. FD 36500 \1\; and 
(6) the administrative law judge assigned in this proceeding, the Hon. 
Thomas McCarthy, 1331 Pennsylvania Avenue NW, Washington, DC 20004-
1710, and at [email protected] and [email protected].
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    \1\ This decision embraces: Docket No. FD 36500 (Sub-No. 1), 
Illinois Central Railroad--Acquisition of a Line of Railroad Between 
Kansas City, Mo., & Springfield & East St. Louis, Ill.--Kansas City 
Southern Railway; Docket No. FD 36500 (Sub-No. 2), Illinois Central 
Railroad--Trackage Rights Between Airline Junction, Mo., & 
Grandview, Mo.--Kansas City Southern Railway; Docket No. FD 36500 
(Sub-No. 3), Canadian National Railway--Control--Gateway Eastern 
Railway; Docket No. FD 36500 (Sub-No. 4), Illinois Central 
Railroad--Assignment of KCS Trackage Rights Between Rock Creek 
Junction, Mo., & Airline Junction, Mo.--Union Pacific Railroad; and 
Docket No. FD 36500 (Sub-No. 5), Norfolk Southern Railway--Trackage 
Rights--Kansas City Southern.
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    In addition, one copy of all comments filed in these proceedings 
must be served on the responsive applicants' representatives: Raymond 
A. Atkins, Sidley Austin LLP, 1501 K Street NW, Washington, DC 20005 
(representing CN); and Carrie Mahan, Weil, Gotshal & Manges LLP, 2001 M 
Street NW, Suite 600, Washington, DC 20036 (representing NSR).

FOR FURTHER INFORMATION CONTACT: Valerie Quinn at (202) 245-0283. 
Assistance for the hearing impaired is available through the Federal 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: By application filed with the Board on 
October 29, 2021, the primary applicants seek approval and 
authorization under 49 U.S.C. 11321-26 for a proposed transaction that 
involves the acquisition of control by Canadian Pacific, through its 
indirect, wholly owned subsidiary Cygnus Merger Sub 2 Corp., of Kansas 
City Southern, and through it, of KCSR and its railroad affiliates, and 
for the resulting common control by Canadian Pacific of its U.S. 
railroad subsidiaries, and KCSR and its railroad affiliates 
(Transaction). In Decision No. 11, served November 23, 2021, and 
published in the Federal Register on November 26, 2021 (86 FR 67,571), 
the Board accepted for consideration the control application 
(Application) filed in this docket and established a procedural 
schedule for the proceeding. Canadian Pac. Ry.--Control--Kan. City S., 
FD 36500 (STB served Nov. 23, 2021).
    CN and NSR filed their respective responsive applications on 
February 28, 2022. On March 16, 2022, the Board suspended the 
procedural schedule and directed Applicants to address an apparent 
inconsistency in certain data they had submitted. Canadian Pac. Ry.--
Control--Kan. City S., FD 36500 et al., slip op. at 3 (STB served Mar. 
16, 2022). Thereafter, on April 27, 2022, the Board directed Applicants 
to amend their Application to further explain and support the analysis 
underlying the Application's Operating Plan, as well as address 
technical issues with the workpapers associated with the Operating 
Plan. Canadian Pac. Ry.--Control--Kan. City S. (Decision No. 17), FD 
36500 et al., slip op. at 5-6 (STB

[[Page 40577]]

served Apr. 27, 2022). Applicants filed an amended Operating Plan, 
including amended workpapers, on May 13, 2022, and an errata on May 20, 
2022. On June 9, 2022, CN and NSR filed their respective amended 
responsive applications.\2\
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    \2\ In Decision No. 17, FD 36500 et al., the Board stated that 
the procedural schedule would resume upon the filing of amended 
comments and responsive applications. Decision No. 17, FD 36500 et 
al., slip op. at 7. Pursuant to the revised procedural schedule 
served on May 27, 2022, amended comments and responsive applications 
were due by June 9, 2022. Canadian Pac. Ry.--Control--Kan. City S., 
FD 36500 et al., slip op. at 3 (STB served May. 27, 2022).
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    Responsive Filings: Conditions Requested. In Docket Nos. FD 36500 
(Sub-No. 1), FD 36500 (Sub-No. 2), FD 36500 (Sub-No. 3), and FD 36500 
(Sub-No. 4), CN seeks, as a condition to any approval of the 
Transaction, approval of ICRR's acquisition of KCS's line between 
Kansas City, Mo., and Springfield and East St. Louis, Ill. 
Specifically, in Docket No. FD 36500 (Sub-No. 1), ICRR seeks approval 
for a line sale of KCS's Springfield Line \3\ to ICRR, as a condition 
on any merger approval. (CN Amended Responsive Appl. 6-7.) In 
connection with the line acquisition, ICRR also seeks acquisition of an 
8.33% ownership share of Kansas City Terminal Railway Company (KCT), 
which would enable ICRR to operate over KCT-controlled trackage in 
Kansas City, and a 50% ownership interest in KCS's International 
Freight Gateway terminal (IFG Terminal) south of Kansas City. (Id. at 
7.)
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    \3\ The Springfield Line consists of the following lines: (1) 
the line from milepost 192.4 at Cockrell (Springfield), Ill., 
through milepost 482.0 at Rock Creek Jct. (Kansas City), Mo. 
(milepost equation at Murrayville, Ill., where milepost 
221.7=milepost 226.7); (2) the line from milepost 68.2 at Roodhouse, 
Ill. (milepost 237.2 on the first segment) through milepost 287.2 at 
Church (East St. Louis), Ill., including KCS's interest in the Union 
Pacific Railroad Company (UP)/KCS Joint Facility between Godfrey, 
Ill., and Church (milepost equation at Godfrey where milepost 
28.0=milepost 252.1); (3) the Jacksonville Branch from milepost 
226.7 at Murrayville to milepost 216.3 at Jacksonville, Ill.; and 
(4) KCS's interest as lessor in the Fulton Branch from milepost 0.0 
to milepost 3.0 at Mexico, Mo., leased to Ozark Valley Railroad, 
Inc. (CN Amended Responsive Appl. 6-7.)
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    In Docket No. FD 36500 (Sub-No. 2), ICRR seeks overhead trackage 
rights on KCS's Pittsburg Subdivision, between milepost 5.6 
at Airline Junction in Kansas City, and milepost 29.5 near 
Grandview, Mo., to reach the IFG Terminal (in which ICRR would acquire 
a 50% ownership interest as part of the transaction in Docket No. FD 
36500 (Sub-No.1)). (Id. at 7, 22-23.) In Docket No. FD 36500 (Sub-No. 
3), CNR and ICRR seek authority to control by acquiring KCS's equity 
interest in the Gateway Eastern Railway Company (GWER), a KCS 
subsidiary that owns segments of the Springfield Line located in the 
East St. Louis terminal area.\4\ (Id. at 7-8.) In Docket No. FD 36500 
(Sub-No. 4), ICRR seeks acquisition by assignment of KCS's trackage 
rights over UP between Rock Creek Junction and Airline Junction, which 
enable KCS (and would enable ICRR) to reach the joint agency at Knoche 
Yard and the IFG Terminal from the Springfield Line.\5\ (Id. at 5, 8, 
23.) CN states that, to the extent those trackage rights are not 
assignable, ICRR requests that the Board override the assignment 
provision. (Id. at 8.)
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    \4\ CN states that, upon approval of the applications in the 
Sub-Nos. 1 and 3 dockets, ICRR will file a notice of intra-corporate 
family transaction pursuant to which ICRR will acquire trackage 
rights over GWER (i) between GWER's milepost 238.7 at or near Q 
Tower and GWER's milepost 236.8 at or near Willows in East St. 
Louis, (ii) between GWER's milepost 2.3 at or near Wann in East 
Alton, Ill., and GWER's milepost 0.91 at or near Olin Brass in East 
Alton, and (iii) from GWER's milepost 265.01 at or near Roxana in 
Wood River, Ill., ``to the change in ownership in the track with 
Shell Oil Company.'' (CN Amended Responsive Appl. 7-8.)
    \5\ Specifically, ICRR seeks the assignment of KCS's trackage 
rights agreement with UP relating to the 1.4-mile UP line, between 
milepost 276.8 at Rock Creek Junction and approximately milepost 
278.2, in the vicinity of Airline Junction in Kansas City, Mo. (CN 
Amended Responsive Appl. 23.)
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    CN asserts that its responsive application should be classified as 
a minor transaction because the proposed divestiture transaction 
``clearly will not have any anticompetitive effects.'' \6\ (Id. at 4.) 
CN contends that the divestiture would be procompetitive, as no shipper 
would lose transportation options, and many customers would gain 
transportation options, as ICRR would give CP-KCS haulage access to all 
current and future customers on the Springfield Line. (Id.)
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    \6\ While CN asserts that its responsive application should be 
classified as a minor transaction, it submitted all the information 
required for significant transactions in both its original and 
amended responsive applications.
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    In Docket No. FD 36500 (Sub-No. 5), as a condition to any Board 
approval of the proposed Transaction, NSR seeks certain contingent 
trackage rights for overhead movement on KCS's line, between the 
connection of KCS with the Meridian Speedway,\7\ at Shreveport, La., at 
or near milepost V-169.85, and the Wylie Intermodal Terminal, in Wylie, 
Tex., at or near milepost T-197.8. (NSR Amended Responsive Appl. 4, 9.) 
NSR states that the contingent trackage rights would apply only to 
intermodal traffic originating or terminating at the Wylie Intermodal 
Terminal. (Id. at 4.) NSR further notes that these trackage rights 
would only be exercisable after NSR purchases the Wylie Intermodal 
Terminal, pursuant to the terms of the Dallas Terminal Marketing 
Agreement,\8\ and in the event of a ``Major Service Standard Failure,'' 
as defined under the NSR-MSLLC Joint Use Agreement.\9\ (Id. at. 8-9; 
see also NSR Amended Comment 46-47.) NSR requests that its responsive 
application be treated as a minor transaction under 49 CFR 1180.2(c), 
because the contingent trackage rights ``clearly would not have any 
anticompetitive effects.'' (NSR Amended Responsive Appl. 5-6.) Rather, 
NSR maintains that, in requesting the contingent trackage rights, it 
seeks to maintain existing routes that intermodal shippers utilize 
today and to mitigate the potential harm that may flow from the primary 
Transaction. (Id. at 6.)
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    \7\ Meridian Speedway is a line owned by Meridian Speedway, LLC 
(MSLLC), connecting Meridian, Miss., and Shreveport, La. NSR states 
that KCS and NSR are the sole members of MSLLC.
    \8\ NSR states that its option to purchase the Wylie Intermodal 
Terminal would become exercisable during a ``Notice Trigger 
Period,'' which is assumed to begin in May 2024 pursuant to an 
agreement with KCS. (NSR Amended Responsive Appl. 8.) See KCS Notice 
of Exemption, Ex. J, Dallas Terminal Marketing Agreement, Jan. 17, 
2006, Kan. City S.--Exemption for Transactions Within a Corp. Fam., 
FD 34822.
    \9\ See KCS Notice of Exemption, Ex. C, NSR-MSLLC Joint Use 
Agreement, Jan. 17, 2006, Kan. City S.--Exemption for Transactions 
Within a Corp. Fam., FD 34822. NSR states that the same contingent 
trackage rights for the same category of intermodal traffic, subject 
to the same service disruption trigger, apply to its traffic on the 
Meridian Speedway. (NSR Amended Responsive Appl. 9.)
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    On March 22, 2022, CSX Transportation, Inc. (CSXT), filed a motion 
to reject NSR's responsive application, asserting that the responsive 
application is not a minor transaction and does not address ``the 
significant potential competitive harms that would come from extending 
NSR's exclusive rights over the Meridian Speedway to NSR's Wylie 
Intermodal Traffic, should NSR exercise its option to purchase the 
Wylie Intermodal Terminal.'' (CSXT Motion 2.) CSXT also argues that NSR 
did not provide all the information required for a minor transaction. 
On March 29, 2022, NSR replied, asserting that its responsive 
application was properly filed as a minor transaction and that it had 
provided all of the information required for a minor transaction. In 
its amended responsive application, NSR maintains that its responsive 
application is complete and further addresses CSXT's allegations.\10\
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    \10\ On June 22, 2022, Bartlett Grain Co., LP, filed a comment 
in support of the primary Transaction and urging the Board to reject 
CN's application to divest the Springfield Line.
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    Responsive Filings Accepted. The Board finds the responsive 
applications

[[Page 40578]]

filed by CN and NSR to be in substantial compliance with the 
regulations under which they were filed \11\ and finds no basis for 
rejecting them.\12\ The Board reserves the right to require 
supplemental information, if necessary. The Board further finds that it 
is not necessary to designate the proposed transactions as minor or 
significant. Although the agency has typically made such a 
determination for responsive applications, neither the statute nor the 
Board's regulations require that such a determination be made for 
responsive applications that are not inconsistent with the primary 
application. Section 11325 of title 49, which provides that control 
applications be published in the Federal Register with a determination 
of whether a merger is major, significant, or minor, (see 49 U.S.C. 
11325(a)), does require that inconsistent applications (a type of 
responsive application) and applications for inclusion in major mergers 
be filed within 90 days of the notice of the primary application, (see 
49 U.S.C. 11325(b)(2)), and the applicable merger regulations provide 
that responsive applications inconsistent with the primary application 
will be classified as major, significant, or minor, (see 49 CFR 
1180.4(d)(4)(ii)). But the regulations make no such reference with 
regard to responsive applications that are not inconsistent with the 
primary application.\13\ Although the Board previously indicated that 
it would classify the responsive applications filed in this proceeding 
as minor or significant, see Canadian Pac. Ry.--Control--Kan. City S. 
(Decision No. 13), FD 36500 et al., slip op. at 3-4 (STB served Feb. 
18, 2022), based on the analysis discussed above, we now find that such 
a determination is not necessary.\14\ Notice of the responsive 
applications will be published in the Federal Register to ensure that 
all parties are aware of them.
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    \11\ The Board notes that NSR amended its responsive application 
to address the criticisms raised by CSXT. As discussed, the Board 
finds the amended responsive application to be in substantial 
compliance with the applicable regulations.
    \12\ Based on the environmental information submitted by CN 
regarding its responsive application, it appears that the thresholds 
triggering an environmental review under the Board's regulations at 
49 CFR 1105.6(b)(4) and 1105.7(e)(5) would be reached or exceeded. 
Therefore, the Board's Office of Environmental Analysis (OEA) will 
conduct an environmental and historic review of CN's responsive 
application that will be separate from, but conducted concurrently 
with, OEA's ongoing environmental and historic review of the 
Transaction. NSR's responsive application seeking trackage rights is 
categorically excluded from environmental and historic review under 
49 CFR 1105.6(c)(3) and 1105.8(b)(3).
    \13\ This is consistent with another regulatory provision that 
appears to recognize that a minor/significant determination will not 
be required for every responsive application. See 49 CFR 
1180.4(d)(4)(v) (``Each responsive application filed and accepted 
(if required) is considered consolidated with the primary 
application.'')
    \14\ As the Board has previously explained, the definition of 
``minor'' and ``significant'' transaction set out in 49 CFR 1180.2 
is tied to the substantive approval standard at 49 U.S.C. 11324(d). 
See Decision No. 13, FD 36500 et al., slip op. at 3 n.5 (citing R.R. 
Consol. Procs.: Definition of, & Requirements Applicable to, 
``Significant'' Transactions, 9 I.C.C.2d 1198, 1199 (1993).) But 
whether the Board imposes the relief sought in a responsive 
application as a condition to this merger between two Class I 
railroads turns not on whether the proposed conditions meet the 
standard at 49 U.S.C. 11324(d), but on whether they are justified 
and should be approved under the Board's conditioning authority at 
49 U.S.C. 11324(c). See Decision No. 13, FD 36500 et al., slip op. 
at 4 (setting forth the criteria for imposing conditions to remedy 
competitive harm of the primary transaction).
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    Access to Filings. Under the Board's rules, any document filed with 
the Board (including applications, pleadings, etc.) shall be promptly 
furnished to interested persons on request, unless subject to a 
protective order. 49 CFR 1180.4(a)(3) (2000). The responsive 
applications and other filings in this proceeding will be furnished to 
interested persons upon request and will also be available on the 
Board's website at www.stb.gov. In addition, the responsive filings may 
be obtained upon request from the responsive applicants' 
representatives named above.
    Proceedings Consolidated. The responsive filings in Docket Nos. FD 
36500 (Sub-No. 1), FD 36500 (Sub-No. 2), FD 36500 (Sub-No. 3), FD 36500 
(Sub-No. 4), and FD 36500 (Sub-No. 5) are consolidated for disposition 
with the primary application in Docket No. FD 36500.
    Comments may be Submitted. Interested persons may participate 
formally by submitting written comments regarding any or all of these 
responsive filings, subject to the service requirements specified 
above. Such comments must be filed with the Board by July 12, 2022. 
Comments must include the following: the commenter's position in 
support of or in opposition to the transaction proposed in the 
responsive filing; any and all evidence, including verified statements, 
in support of or in opposition to the proposed transaction; and 
specific reasons why approval of the proposed transaction would or 
would not be in the public interest.
    Requests for Affirmative Relief will not be Accepted. Because the 
responsive applications accepted for consideration in this decision 
contain proposed conditions to approval of the primary application in 
Docket No. FD 36500, the Board will not entertain requests for 
affirmative relief with respect to these responsive applications. 
Parties may only participate in direct support of or in direct 
opposition to these responsive applications as filed.
    It is ordered:
    1. The responsive applications in Docket Nos. FD 36500 (Sub-No. 1), 
FD 36500 (Sub-No. 2), FD 36500 (Sub-No. 3), FD 36500 (Sub-No. 4), and 
FD 36500 (Sub-No. 5) are accepted for consideration and are 
consolidated for disposition with the primary application in Docket No. 
FD 36500.
    2. This decision is effective on its service date.

    By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and 
Schultz.
Raina White,
Clearance Clerk.
[FR Doc. 2022-14503 Filed 7-6-22; 8:45 am]
BILLING CODE 4915-01-P