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.
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.
(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.)
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
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 Start Printed Page 94008carrier (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.
Comments and Conditions
Many of the commenters support the petition and do not seek any conditions.
Other commenters support the petition but request conditions, or express general reservations about the transaction. We address those below.
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) 
and/or sought to be run by the Boston Surface Railroad Company (BSRC).
The comments regarding these passenger services vary, but, generally, the commenters 
request that the Board require that GWI continue servicing BVTC and continue P&W's negotiations with BSRC.
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 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.
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 Start Printed Page 94009from 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.
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.
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.
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.
Start Printed Page 94010
By the Board, Chairman Elliott, Vice Chairman Miller, and Commissioner Begeman.
[FR Doc. 2016-30843 Filed 12-21-16; 8:45 am]
BILLING CODE 4915-01-P