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Major Rail Consolidation Procedures
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: June 15, 2001 (Volume 66, Number 116)]
[Rules and Regulations]
[Page 32582-32590]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15jn01-21]
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DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
49 CFR Part 1180
[STB Ex Parte No. 582 (Sub-No. 1)]
Major Rail Consolidation Procedures
AGENCY: Surface Transportation Board, DOT.
ACTION: Final rules.
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SUMMARY: The Surface Transportation Board (STB or Board) adopts final
regulations governing proposals for major rail consolidations. These
new rules substantially increase the burden on applicants to
demonstrate that a proposed transaction would be in the public
interest, by requiring them, among other things, to demonstrate that
the transaction would enhance competition where necessary to offset
negative effects of the merger, such as competitive harm or service
disruptions.
EFFECTIVE DATE: These rules are effective July 11, 2001.
FOR FURTHER INFORMATION CONTACT: Julia M. Farr, (202) 565-1613. [TDD
for the hearing impaired: 1-800-877-8339.]
SUPPLEMENTARY INFORMATION: Additional information is contained in the
Board's decision. A printed copy of the Board's decision is available
for a fee by contacting: Da-To-Da Office Solutions, Room 405, 1925 K
Street, NW., Washington, DC 20006, telephone (202) 293-7776. The
Board's decision is also available for viewing and downloading on the
Board's website at ``www.stb.dot.gov.''
[[Page 32583]]
Small entities. The Board certifies that the revisions to our
regulations will not have a significant economic impact on a
substantial number of small entities within the meaning of the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). These rules have
created additional filing requirements only for Class I applicants,
which are very large rail carriers. At the same time we have given
increased weight to issues and concerns of smaller railroads and
shippers, a change that should benefit these small entities.
Environment. This action will not significantly affect either the
quality of the human environment or the conservation of energy
resources.
Board releases available via the Internet. Decisions and notices of
the Board, including this decision, are available on the Board's
website at ``www.stb.dot.gov.''
Authority: 49 U.S.C. 721, 11323-11325.
List of Subjects in 49 CFR Part 1180
Administrative practice and procedure, Bankruptcy, Railroads,
Reporting and recordkeeping requirements.
Decided: June 7, 2001.
By the Board, Chairman Morgan, Vice Chairman Clyburn, and
Commissioner Burkes. Chairman Morgan commented and dissented in part
with a separate expression. Vice Chairman Clyburn and Commissioner
Burkes commented with separate expressions.
Vernon A. Williams,
Secretary.
For the reasons set forth in the preamble, Title 49, Subtitle B,
Chapter X, Part 1180 of the Code of Federal Regulations is amended as
follows:
PART 1180--RAILROAD ACQUISITION, CONTROL, MERGER, CONSOLIDATION
PROJECT, TRACKAGE RIGHTS, AND LEASE PROCEDURES
1. The authority citation for part 1180 continues to read as
follows:
Authority: 5 U.S.C. 553 and 559; 11 U.S.C. 1172; 49 U.S.C. 721,
10502, 11323-11325.
2. Section 1180.0 is revised to read as follows:
Sec. 1180.0 Scope and purpose.
(a) General. The regulations in this subpart set out the
information to be filed and the procedures to be followed in control,
merger, acquisition, lease, trackage rights, and any other
consolidation transaction involving more than one railroad that is
initiated under 49 U.S.C. 11323. Section 1180.2 separates these
transactions into four types: Major, significant, minor, and exempt.
The informational requirements for these types of transactions differ.
Before an application is filed, the designation of type of transaction
may be clarified or certain of the information required may be waived
upon petition to the Board. This procedure is explained in Sec. 1180.4.
The required contents of an application are set out in Secs. 1180.6
(general information supporting the transaction), 1180.7 (competitive
and market information), 1180.8 (operational information), 1180.9
(financial data), 1180.10 (service assurance plans), and 1180.11
(transnational and other informational requirements). A major
application must contain the information required in Secs. 1180.6(a),
1180.6(b), 1180.7(a), 1180.7(b), 1180.8(a), 1180.8(b), 1180.9, 1180.10,
and 1180.11. A significant application must contain the information
required in Secs. 1180.6(a), 1180.6(c), 1180.7(a), 1180.7(c), and
1180.8(b). A minor application must contain the information required in
Secs. 1180.6(a) and 1180.8(c). Procedures (including time limits,
filing requirements, participation requirements, and other matters) are
contained in Sec. 1180.4. All applications must comply with the Board's
Rules of General Applicability, 49 CFR parts 1100 through 1129, unless
otherwise specified. These regulations may be cited as the Railroad
Consolidation Procedures.
(b) Waiver. We will waive application of the regulations contained
in this subpart for a consolidation involving The Kansas City Southern
Railway Company and another Class I railroad and instead will apply the
regulations in this subpart A in effect before July 11, 2001 and
contained in the 49 CFR, Parts 1000 to 1199, edition revised as of
October 1, 2000, unless we are shown why such a waiver should not be
allowed. Interested parties must file any objections to this waiver
within 10 days after the applicants' prefiling notification (see 49 CFR
Sec. 1180.4(b)(1)).
3. Section 1180.1 is revised to read as follows:
Sec. 1180.1 General policy statement for merger or control of at least
two Class I railroads.
(a) General. To meet the needs of the public and the national
defense, the Surface Transportation Board (Board) seeks to ensure
balanced and sustainable competition in the railroad industry. The
Board recognizes that the railroad industry (including Class II and III
carriers) is a network of competing and complementary components, which
in turn is part of a broader transportation infrastructure that also
embraces the nation's highways, waterways, ports, and airports. The
Board welcomes private-sector initiatives that enhance the capabilities
and the competitiveness of this transportation infrastructure. Although
mergers of Class I railroads may advance our nation's economic growth
and competitiveness through the provision of more efficient and
responsive transportation, the Board does not favor consolidations that
reduce the transportation alternatives available to shippers unless
there are substantial and demonstrable public benefits to the
transaction that cannot otherwise be achieved. Such public benefits
include improved service, enhanced competition, and greater economic
efficiency. The Board also will look with disfavor on consolidations
under which the controlling entity does not assume full responsibility
for carrying out the controlled carrier's common carrier obligation to
provide adequate service upon reasonable demand.
(b) Consolidation criteria. The Board's consideration of the merger
or control of at least two Class I railroads is governed by the public
interest criteria prescribed in 49 U.S.C. 11324 and the rail
transportation policy set forth in 49 U.S.C. 10101. In determining the
public interest, the Board must consider the various goals of effective
competition, carrier safety and efficiency, adequate service for
shippers, environmental safeguards, and fair working conditions for
employees. The Board must ensure that any approved transaction would
promote a competitive, efficient, and reliable national rail system.
(c) Public interest considerations. The Board believes that mergers
serve the public interest only when substantial and demonstrable gains
in important public benefits--such as improved service and safety,
enhanced competition, and greater economic efficiency--outweigh any
anticompetitive effects, potential service disruptions, or other
merger-related harms. Although further consolidation of the few
remaining Class I carriers could result in efficiency gains and
improved service, the Board believes additional consolidation in the
industry is also likely to result in a number of anticompetitive
effects, such as loss of geographic competition, that are increasingly
difficult to remedy directly or proportionately. Additional
consolidations could also result in service disruptions during the
system integration period. Accordingly, to assure a balance in favor of
the public interest, merger applications should include provisions for
enhanced
[[Page 32584]]
competition, and, where both carriers are financially sound, the Board
is prepared to use its conditioning authority as necessary under 49
U.S.C. 11324(c) to preserve and/or enhance competition. In addition,
when evaluating the public interest, the Board will consider whether
the benefits claimed by applicants could be realized by means other
than the proposed consolidation. The Board believes that other private-
sector initiatives, such as joint marketing agreements and interline
partnerships, can produce many of the efficiencies of a merger while
risking less potential harm to the public.
(1) Potential benefits. By eliminating transaction cost barriers
between firms, increasing the productivity of investment, and enabling
carriers to lower costs through economies of scale, scope, and density,
mergers can generate important public benefits such as improved
service, more competition, and greater economic efficiency. A merger
can strengthen a carrier's finances and operations. To the extent that
a merged carrier continues to operate in a competitive environment, its
new efficiencies would be shared with shippers and consumers. Both the
public and the consolidated carrier can benefit if the carrier is able
to increase its marketing opportunities and provide better service. A
merger transaction can also improve existing competition or provide new
competitive opportunities, and such enhanced competition will be given
substantial weight in our analysis. Applicants shall make a good faith
effort to calculate the net public benefits their proposed merger would
generate, and the Board will carefully evaluate such evidence. To
ensure that applicants have no incentive to exaggerate these projected
benefits to the public, the Board expects applicants to propose
additional measures that the Board might take if the anticipated public
benefits fail to materialize in a timely manner. In this regard, the
Board recognizes, however, that applicants require the flexibility to
adapt to changing marketplace or other circumstances and that it is
inevitable that an approved merger may not necessarily be implemented
in precisely the manner anticipated in the application. Applicants will
be held accountable, however, if they do not act reasonably in light of
changing circumstances to achieve promised merger benefits.
(2) Potential harm. The Board recognizes that consolidation can
impose costs as well as benefits. It can reduce competition both
directly and indirectly in particular markets, including product
markets and geographic markets. Consolidation can also threaten
essential services and the reliability of the rail network. In
analyzing these impacts we must consider, but are not limited by, the
policies embodied in the antitrust laws.
(i) Reduction of competition. Although in specific markets
railroads operate in a highly competitive environment with vigorous
intermodal competition from motor and water carriers, mergers can
deprive shippers of effective options. Intramodal competition can be
reduced when two carriers serving the same origins or destinations
merge. Competition arising from shippers' build-out, transloading,
plant siting, and production shifting choices can be eliminated or
reduced when two railroads serving overlapping areas merge. Competition
in product and geographic markets can also be eliminated or reduced by
mergers, including end-to-end mergers. Any railroad combination entails
a risk that the merged carrier would acquire and exploit increased
market power. Applicants shall propose remedies to mitigate and offset
competitive harms. Applicants shall also explain how they would at a
minimum preserve competitive and market options such as those involving
the use of major existing gateways, build-outs or build-ins, and the
opportunity to enter into contracts for one segment of a movement as a
means of gaining the right separately to pursue rate relief for the
remainder of the movement.
(ii) Harm to essential services. The Board must ensure that
essential freight, passenger, and commuter rail services are preserved
wherever feasible. An existing service is essential if there is
sufficient public need for the service and adequate alternative
transportation is not available. The Board's focus is on the ability of
the nation's transportation infrastructure to continue to provide and
support essential services. Mergers should strengthen, not undermine,
the ability of the rail network to advance the nation's economic growth
and competitiveness, both domestically and internationally. The Board
will consider whether projected shifts in traffic patterns could
undermine the ability of the various network links (including Class II
and Class III rail carriers and ports) to sustain essential services.
(iii) Transitional service problems. Experience shows that
significant service problems can arise during the transitional period
when merging firms integrate their operations, even after applicants
take extraordinary steps to avoid those disruptions. Because service
disruptions harm the public, the Board, in its determination of the
public interest, will weigh the likelihood of transitional service
problems. In addition, under paragraph (h) of this section, the Board
will require applicants to provide a detailed service assurance plan.
Applicants also should explain how they would cooperate with other
carriers in overcoming serious service disruptions on their lines
during the transitional period and afterwards.
(iv) Enhanced competition. To offset harms that would not otherwise
be mitigated, applicants should explain how the transaction and
conditions they propose would enhance competition.
(d) Conditions. The Board has broad authority under 49 U.S.C.
11324(c) to impose conditions on consolidations, including requiring
divestiture of parallel tracks or the granting of trackage rights and
access to other facilities. The Board will condition the approval of
Class I combinations to mitigate or offset harm to the public interest,
and will carefully consider conditions proposed by applicants in this
regard. The Board may impose conditions that are operationally feasible
and produce net public benefits, but will not impose conditions that
undermine or defeat beneficial transactions by creating unreasonable
operating, financial, or other problems for the combined carrier.
Conditions are generally not appropriate to compensate parties who may
be disadvantaged by increased competition. The Board anticipates that
mergers of Class I carriers would likely create some anticompetitive
effects that would be difficult to mitigate through appropriate
conditions, and that transitional service disruptions might temporarily
negate any shipper benefits. To offset such potential harms and improve
the prospect that their proposal would be found to be in the public
interest, applicants should propose conditions that would not simply
preserve but also enhance competition. The Board seeks to enhance
competition in ways that strengthen and sustain the rail network as a
whole (including that portion of the network operated by Class II and
III carriers).
(e) Employee protection. The Board is required to provide a fair
arrangement for the protection of the rail employees of applicants who
are affected by a consolidation. The Board supports early notice and
consultation between management and the various unions, leading to
negotiated implementing agreements, which the Board strongly favors.
Otherwise, the Board respects the sanctity of collective bargaining
agreements and will look with extreme disfavor on overrides of
collective bargaining agreements except to the
[[Page 32585]]
very limited extent necessary to carry out an approved transaction. The
Board will review negotiated agreements to ensure fair and equitable
treatment of all affected employees. Absent a negotiated agreement, the
Board will provide for protection at the level mandated by law (49
U.S.C. 11326(a)), and if unusual circumstances are shown, more
stringent protection will be provided to ensure that employees have a
fair and equitable arrangement.
(f) Environment and safety. (1) The National Environmental Policy
Act, 42 U.S.C. 4321 et seq. (NEPA), requires the Board to take
environmental considerations into account in railroad consolidation
cases. To meet its responsibilities under NEPA and related
environmental laws, the Board must consider significant potential
beneficial and adverse environmental impacts in deciding whether to
approve a transaction as proposed, deny the proposal, or approve it
with conditions, including appropriate environmental mitigation
conditions addressing concerns raised by the parties, including
federal, state, and local government entities. The Board's Section of
Environmental Analysis (SEA) ensures that the agency meets its
responsibilities under NEPA and the implementing regulations at 49 CFR
part 1105 by providing the Board with an independent environmental
review of merger proposals. In preparing the necessary environmental
documentation, SEA focuses on the potential environmental impacts
resulting from merger-related changes in activity levels on existing
rail lines and rail facilities. The Board generally will mitigate only
those impacts that would result directly from an approved transaction,
and will not require mitigation for existing conditions and existing
railroad operations.
(2) During the environmental review process, railroad applicants
have negotiated agreements with affected communities, including groups
of communities and other entities such as state and local agencies. The
Board encourages voluntary agreements of this nature because they can
be extremely helpful and effective in addressing specific local and
regional environmental and safety concerns, including the sharing of
costs associated with mitigating merger-related environmental impacts.
Generally, these privately negotiated solutions between an applicant
railroad and some or all of the communities along particular rail
corridors or other appropriate entities are more effective, and in some
cases more far-reaching, than any environmental mitigation options the
Board could impose unilaterally. Therefore, when such agreements are
submitted to it, the Board generally will impose these negotiated
agreements as conditions to approved mergers, and these agreements
generally will substitute for specific local and site-specific
environmental mitigation for a community that otherwise would be
imposed. Moreover, to encourage and give effect to negotiated solutions
whenever possible, the opportunity to negotiate agreements will remain
available throughout the oversight process to replace local and site-
specific environmental mitigation imposed by the agency. The Board will
require compliance with the terms of all negotiated agreements
submitted to it during oversight by imposing appropriate environmental
conditions to replace the local and site-specific mitigation previously
imposed.
(3) Applicants will be required to work with the Federal Railroad
Administration, on a case-by-case basis, to formulate Safety
Integration Plans (SIPs) to ensure that safe operations are maintained
throughout the merger implementation process. As part of the
environmental review process, applicants will be required to submit:
(i) A SIP and
(ii) Evidence about potentially blocked grade crossings as a result
of merger-related traffic increases or operational changes.
(g) Oversight. As a condition to its approval of any major
transaction, the Board will establish a formal oversight process. For
at least the first 5 years following approval, applicants will be
required to present evidence to the Board, on no less than an annual
basis, to show that the merger conditions imposed by the Board are
working as intended, that the applicants are adhering to the various
representations they made on the record during the course of their
merger proceeding, that no unforeseen harms have arisen that would
require the Board to alter existing merger conditions or impose new
ones, and that the merger benefit projections accepted by the Board are
being realized in a timely fashion. Parties will be given the
opportunity to comment on applicants' submissions, and applicants will
be given the opportunity to reply to the parties' comments. During the
oversight period, the Board will retain jurisdiction to impose any
additional conditions it determines are necessary to remedy or offset
adverse consequences of the underlying transaction.
(h) Service assurance and operational monitoring. (1) The quality
of service is of vital importance. Accordingly, applicants must file,
with their initial application and operating plan, a Service Assurance
Plan identifying the precise steps they would take to ensure adequate
service and to provide for improved service. This plan must include the
specific information set forth at Sec. 1180.10 on how shippers,
connecting railroads (including Class II and III carriers), and ports
across the new system would be affected and benefitted by the proposed
consolidation. As part of this plan, applicants will be required to
provide service benchmarks, describe the extent to which they have
entered into any arrangements with shippers and shipper groups to
compensate for service failures, and establish contingency plans that
would be available to mitigate any unanticipated service disruption.
(2) The Board will conduct significant post-approval operational
monitoring to help ensure that service levels after a merger are
reasonable and adequate.
(3) The Board also will require applicants to establish problem
resolution teams and specific procedures for problem resolution to
ensure that any unanticipated post-merger problems related to service
or any other transportation matters, including claims, are promptly
addressed. These teams should include representatives of all
appropriate employee categories. Also, the Board envisions the
establishment of a Service Council made up of shippers, railroads,
passenger service representatives, ports, rail labor, and other
interested parties to provide an ongoing forum for the discussion of
implementation issues.
(4) Loss and damage claims handling. Shippers or shortlines who
have freight claims under 49 CFR part 1005 during merger implementation
shall file such claims, in writing or electronically, with the merged
carrier. The claimant shall provide supporting documentation regarding
the effect on the claimant, and the specific damages (in a determinable
amount) incurred. Pursuant to 49 CFR part 1005, the merged carrier
shall acknowledge each claim within 30 days and successively number
each claim. Within 120 days of carrier receipt of the claim, the merged
carrier shall respond to each claim by paying, declining, or offering a
compromise settlement. The Board will take notice of these claims and
their disposition as a matter of oversight. During each annual
oversight period, the merged carrier shall report on claims received,
their type, and their disposition for each quarterly period covered by
oversight. While shippers and shortlines may also contract with the
applicants for specific remedies with respect to claims, final
[[Page 32586]]
adjudication of contract issues as well as unresolved claims will
remain a matter for the courts.
(5) Service failure claims. Applicants must suggest a protocol for
handling claims related to failure to provide reasonable service due to
merger implementation problems. Commitments to submit all such claims
to arbitration will be favored.
(6) Alternative rail service. Where shippers and connecting
railroads require relief from extended periods of inadequate service,
the procedures at 49 CFR parts 1146 and 1147 are available for the
Board to review the documented service levels and to consider shipper
proposals for alternative service relief when other avenues of relief
have already been explored with the merged carrier in an effort to
restore adequate service.
(i) Cumulative impacts and crossover effects. Because there are so
few remaining Class I carriers and the railroad industry constitutes a
network of competing and complementary components, the Board cannot
evaluate the merits of a major transaction in isolation. The Board must
also consider the cumulative impacts and crossover effects likely to
occur as rival carriers react to the proposed combination. The Board
expects applicants to explain how additional Class I mergers would
affect the eventual structure of the industry and the public interest.
Applicants should generally discuss the likely impact of such future
mergers on the anticipated public benefits of their own merger
proposal. Applicants will be expected to discuss whether and how the
type or extent of any conditions imposed on their proposed merger would
have to be altered, or any new conditions imposed, should we approve
any future consolidation(s).
(j) Inclusion of other carriers. The Board will consider requiring
inclusion of another carrier as a condition to approval only where
there is no other reasonable alternative for providing essential
services, the facilities fit operationally into the new system, and
inclusion can be accomplished without endangering the operational or
financial success of the new company.
(k) Transnational and other informational issues. (1) All
applicants must submit ``full system'' competitive analyses and
operating plans--incorporating any operations in Canada or Mexico--from
which we can determine the competitive, service, employee, safety, and
environmental impacts of the prospective operations within the United
States, and explain how cooperation with the Federal Railroad
Administration would be maintained to address potential impacts on
operations within the United States of operations or events elsewhere
on their systems. All applicants must further provide information
concerning any restrictions or preferences under foreign or domestic
law and policies that could affect their commercial decisions.
Applicants must also address how any ownership restrictions might
affect our public interest assessment.
(2) The Board will consult with relevant officials, as appropriate,
to ensure that any conditions it imposes on an approved transaction are
consistent with the North American Free Trade Agreement and other
pertinent international agreements to which the United States is a
party. In addition, the Board will cooperate with those Canadian and
Mexican agencies charged with approval and oversight of a proposed
transnational railroad combination.
(l) National defense. Rail mergers must not detract from the
ability of the United States military to rely on rail transportation to
meet the nation's defense needs. Applicants must discuss and assess the
national defense ramifications of their proposed merger.
(m) Public participation. To ensure a fully developed record on the
effects of a proposed railroad consolidation, the Board encourages
public participation from federal, state, and local government
departments and agencies; affected shippers, carriers, and rail labor;
and other interested parties.
4. Section 1180.3 is amended by revising paragraphs (a) and (b) to
read as follows:
Sec. 1180.3 Definitions.
(a) Applicant. The term applicant means the parties initiating a
transaction, but does not include a wholly owned direct or indirect
subsidiary of an applicant if that subsidiary is not a rail carrier.
Parties who are considered applicants, but for whom the information
normally required of an applicant need not be submitted, are:
(1) In minor trackage rights applications, the transferor and
(2) In responsive applications, a primary applicant.
(b) Applicant carriers. The term applicant carriers means: any
applicant that is a rail carrier; any rail carrier operating in the
United States, Canada, and/or Mexico in which an applicant holds a
controlling interest; and all other rail carriers involved in the
transaction. Because the service provided by these commonly controlled
carriers can be an important competitive aspect of the transactions
that we approve, applicant carriers are subject to the full range of
our conditioning power. Carriers that are involved in an application
only by virtue of an existing trackage rights agreement with applicants
are not applicant carriers.
* * * * *
5. Section 1180.4 is amended by revising paragraph (a)(1) to read
as follows, by removing paragraph (a)(4), by adding new paragraphs
(b)(4) and (c)(6)(vi) to read as follows, and by revising paragraphs
(d), (e)(2), (e)(3), and (f)(2) to read as follows:
Sec. 1180.4 Procedures.
(a) * * * (1) The original and 25 copies of all documents shall be
filed in major proceedings. The original and 10 copies shall be filed
in significant and minor proceedings.
* * * * *
(b) * * *
(4) Prefiling notification. When filing the notice of intent
required by paragraph (b)(1) of this section, applicants also must
file:
(i) A proposed procedural schedule. In any proceeding involving
either a major transaction or a significant transaction, the Board will
publish a Federal Register notice soliciting comments on the proposed
procedural schedule, and will, after review of any comments filed in
response, issue a procedural schedule governing the course of the
proceeding.
(ii) A proposed draft protective order. The Board will issue, in
each proceeding in which such an order is requested, an appropriate
protective order.
(iii) A statement of waybill availability for major transactions.
Applicants must indicate, as soon as practicable after the issuance of
a protective order, that they will make their 100% traffic tapes
available (subject to the terms of the protective order) to any
interested party on written request. The applicants may require that,
if the requesting party is itself a railroad, applicants will make
their 100% traffic tapes available to that party only if it agrees, in
its written request, to make its own 100% traffic tapes available to
applicants (subject to the terms of the protective order) when it
receives access to applicants' tapes.
(iv) Applicants may also propose the use of a voting trust at this
stage, or at a later stage, if that becomes necessary. In each
proceeding involving a major transaction, applicants contemplating the
use of a voting trust must explain how the trust would insulate them
from an unlawful control violation and why their proposed use of the
trust, in the
[[Page 32587]]
context of their impending control application, would be consistent
with the public interest. Following a brief period of public comment
and replies by applicants, the Board will issue a decision determining
whether applicants may establish and use the trust.
(c) * * *
(6) * * *
(vi) The information and data required of any applicant may be
consolidated with the information and data required of the affiliated
applicant carriers.
(d) Responsive applications. (1) No responsive applications shall
be permitted to minor transactions.
(2) An inconsistent application will be classified as a major,
significant, or minor transaction as provided in Sec. 1180.2(a) through
(c). The fee for an inconsistent application will be the fee for the
type of transaction involved. See 49 CFR 1002.2(f)(38) through (41).
The fee for any other type of responsive application is the fee for the
particular type of proceeding set forth in 49 CFR 1002.2(f).
(3) Each responsive application filed and accepted for
consideration will automatically be consolidated with the primary
application for consideration.
(e) * * *
(2) The evidentiary proceeding will be completed:
(i) Within 1 year after the primary application is accepted for a
major transaction;
(ii) Within 180 days for a significant transaction; and
(iii) Within 105 days for a minor transaction.
(3) A final decision on the primary application and on all
consolidated cases will be issued:
(i) Within 90 days after the conclusion of the evidentiary
proceeding for a major transaction;
(ii) Within 90 days for a significant transaction; and
(iii) Within 45 days for a minor transaction.
* * * * *
(f) * * *
(2) Except as otherwise provided in the procedural schedule adopted
by the Board in any particular proceeding, petitions for waiver or
clarification must be filed at least 45 days before the application is
filed.
* * * * *
6. Section 1180.6 is amended by revising paragraphs (b)(1), (b)(2),
(b)(3), (b)(4), (b)(6), and (b)(8) to read as follows, and by adding
new paragraphs (b)(9), (b)(10), (b)(11), (b)(12), and (b)(13) to read
as follows:
Sec. 1180.6 Supporting information.
* * * * *
(b) * * *
(1) Form 10-K (exhibit 6). Submit: The most recent filing with the
Securities and Exchange Commission (SEC) under 17 CFR 249.310 made
within the year prior to the filing of the application by each
applicant or by any entity that is in control of an applicant. These
shall not be incorporated by reference, and shall be updated with any
Form 10-K subsequently filed with the SEC during the pendency of the
proceeding.
(2) Form S-4 (exhibit 7). Submit: The most recent filing with the
SEC under 17 CFR 239.25 made within the year prior to the filing of the
application by each applicant or by any entity that is in control of an
applicant. These shall not be incorporated by reference, and shall be
updated with any Form S-4 subsequently filed with the SEC during the
pendency of the proceeding.
(3) Change in control (exhibit 8). If an applicant carrier submits
an annual report Form R-1, indicate any change in ownership or control
of that applicant carrier not indicated in its most recent Form R-1,
and provide a list of the principal six officers of that applicant
carrier and of any related applicant, and also of their majority-owned
rail carrier subsidiaries. If any applicant carrier does not submit an
annual report Form R-1, list all officers of that applicant carrier,
and identify the person(s) or entity/entities in control of that
applicant carrier and all owners of 10% or more of the equity of that
applicant carrier.
(4) Annual reports (exhibit 9). Submit: The two most recent annual
reports to stockholders by each applicant, or by any entity that is in
control of an applicant, made within 2 years of the date of filing of
the application. These shall not be incorporated by reference, and
shall be updated with any annual or quarterly report to stockholders
issued during the pendency of the proceeding.
* * * * *
(6) Corporate chart (exhibit 11). Submit a corporate chart
indicating all relationships between applicant carriers and all
affiliates and subsidiaries and also companies controlling applicant
carriers directly, indirectly or through another entity (with each
chart indicating the percentage ownership of every company on the chart
by any other company on the chart). For each company: include a
statement indicating whether that company is a noncarrier or a carrier;
and identify every officer and/or director of that company who is also
an officer and/or director of any other company that is part of a
different corporate family that includes a rail carrier. Such
information may be referenced through notes to the chart.
* * * * *
(8) Intercorporate or financial relationships. Indicate whether
there are any direct or indirect intercorporate or financial
relationships at the time the application is filed, not disclosed
elsewhere in the application, through holding companies, ownership of
securities, or otherwise, in which applicants or their affiliates own
or control more than 5% of the stock of a non-affiliated carrier,
including those relationships in which a group affiliated with
applicants owns more than 5% of the stock of such a carrier. Indicate
the nature and extent of any such relationships, and, if an applicant
owns securities of a carrier subject to 49 U.S.C. Subtitle IV, provide
the carrier's name, a description of securities, the par value of each
class of securities held, and the applicant's percentage of total
ownership. For purposes of this paragraph, ``affiliates'' has the same
meaning as ``affiliated companies'' in Definition 5 of the Uniform
System of Accounts (49 CFR part 1201, subpart A).
(9) Employee impact exhibit. The effect of the proposed transaction
upon applicant carriers' employees (by class or craft), the geographic
points where the impacts would occur, the time frame of the impacts
(for at least 3 years after consolidation), and whether any employee
protection agreements have been reached. This information (except with
respect to employee protection agreements) may be set forth in the
following format:
Effects on Applicant Carriers' Employees
------------------------------------------------------------------------
------------------------------------------------------------------------
Current Location................................................ ......
Jobs Classification............................................. ......
Jobs Transferred to............................................. ......
Jobs Abolished.................................................. ......
Jobs Created.................................................... ......
Year............................................................ ......
------------------------------------------------------------------------
(10) Conditions to mitigate and offset merger-related harms.
Applicants are expected to propose measures to mitigate and offset
merger-related harms. These conditions should not simply preserve, but
also enhance, competition.
(i) Applicants must explain how they would preserve competitive
options for shippers and for Class II and III rail carriers. At a
minimum, applicants must explain how they would preserve the use of
major existing gateways, the potential for build-outs or build-ins, and
[[Page 32588]]
the opportunity to enter into contracts for one segment of a movement
as a means of gaining the right separately to pursue rate relief for
the remainder of the movement.
(ii) Applicants should explain how the transaction and conditions
they propose would enhance competition and improve service.
(11) Calculating public benefits. Applicants must enumerate and,
where possible, quantify the net public benefits their merger would
generate (if approved). In making this estimate, applicants should
identify the benefits that would arise from service improvements,
enhanced competition, cost savings, and other merger-related public
interest benefits, and should discuss whether the particular benefits
they are relying upon could be achieved short of merger. Applicants
must also identify, discuss, and, where possible, quantify the likely
negative effects approval would entail, such as losses of competition,
potential for service disruption, and other merger-related harms. In
addition, applicants must suggest additional measures that the Board
might take if it approves the application and the anticipated public
benefits identified by applicants fail to materialize in a timely
manner.
(12) Downstream merger applications. (i) Applicants should
anticipate whether additional Class I mergers are likely to be proposed
in response to their own proposal and explain how, taken together,
these mergers, if approved, could affect the eventual structure of the
industry and the public interest.
(ii) Applicants are expected to discuss whether any conditions
imposed on an approval of their proposed merger would have to be
altered, or any new conditions imposed, if the Board should approve
additional future rail mergers.
(13) Purpose of the proposed transaction. The purpose sought to be
accomplished by the proposed transaction, such as improving service,
enhancing competition, strengthening the nation's transportation
infrastructure, creating operating economies, and ensuring financial
viability.
* * * * *
7. Section 1180.7 is revised to read as follows:
Sec. 1180.7 Market analyses.
(a) For major and significant transactions, applicants shall submit
impact analyses (exhibit 12) describing the impacts of the proposed
transaction--both adverse and beneficial--on inter-and intramodal
competition with respect to freight surface transportation in the
regions affected and on the provision of essential services by
applicants and other carriers. An impact analysis should include
underlying data, a study of the implications of those data, and a
description of the resulting likely effects of the proposed transaction
on the transportation alternatives that would be available to the
shipping public. Each aspect of the analysis should specifically
address significant impacts as they relate to the applicable statutory
criteria (49 U.S.C. 11324(b) or (d)), essential services, and
competition. Applicants must identify and address relevant markets and
issues, and provide additional information as requested by the Board on
markets and issues that warrant further study. Applicants (and any
other party submitting analyses) must demonstrate both the relevance of
the markets and issues analyzed and the validity of their methodology.
All underlying assumptions must be clearly stated. Analyses should
reflect the consolidated company's marketing plan and existing and
potential competitive alternatives (inter- as well as intramodal). They
can address: city pairs, interregional movements, movements through a
point, or other factors; a particular commodity, group of commodities,
or other commodity factor that would be significantly affected by the
transaction; or other effects of the transaction (such as on a
particular type of service offered).
(b) For major transactions, applicants shall submit ``full system''
impact analyses (incorporating any operations in Canada or Mexico) from
which they must demonstrate the impacts of the transaction--both
adverse and beneficial--on competition within regions of the United
States and this nation as a whole (including inter- and intramodal
competition, product competition, and geographic competition) and the
provision of essential services (including freight, passenger, and
commuter) by applicants and other network links (including Class II and
Class III rail carriers and ports). Applicants' impact analyses must at
least provide the following types of information:
(1) The anticipated effects of the transaction on traffic patterns,
market concentrations, and/or transportation alternatives available to
the shipping public. Consistent with Sec. 1180.6(b)(10), these would
incorporate a detailed examination of any competition-enhancing aspects
of the transaction and of the specific measures proposed by applicants
to preserve existing levels of competition and essential services;
(2) Actual and projected market shares of originated and terminated
traffic by railroad for each major point on the combined system.
Applicants may define points as individual stations or as larger areas
(such as Bureau of Economic Analysis statistical areas or U.S.
Department of Agriculture Crop Reporting Districts) as relevant and
indicate the extent of switching access and availability of terminal
belt railroads. Applicants should list points where the number of
serving railroads would drop from two to one and from three to two,
respectively, as a result of the proposed transaction (both before and
after applying proposed remedies for competitive harm);
(3) Actual and projected market shares of revenues and traffic
volumes for major interregional or corridor flows by major commodity
group. Origin/destination areas should be defined at relevant levels of
aggregation for the commodity group in question. The data should be
broken down by mode and (for the railroad portion) by single-line and
interline routings (showing gateways used);
(4) For each major commodity group, an analysis of traffic flows
indicating patterns of geographic competition or product competition
across different railroad systems, showing actual and projected
revenues and traffic volumes;
(5) Maps and other graphic displays where helpful in illustrating
the analyses in this section;
(6) An explicit delineation of the projected impacts of the
transaction on the ability of various network links (including Class II
and Class III rail carriers and ports) to participate in the
competitive process and to sustain essential services; and
(7) Supporting data for the analyses in this section, such as the
basis for projections of changes in traffic patterns, including shipper
surveys and econometric or other statistical analyses. If not made part
of the application, applicants shall make these data available in a
repository for inspection by other parties or otherwise supply these
data on request, for example, electronically. Access to confidential
information will be subject to protective order. For information drawn
from publicly available published sources, detailed citations will
suffice.
(8) If necessary, an explanation as to how the lack of reliable and
consistent data has limited applicants' ability to satisfy any of the
requirements in this paragraph (b).
(c) For significant transactions, specific regulations on impact
analyses are not provided so that the parties will have the greatest
leeway to develop the
[[Page 32589]]
best evidence on the impacts of each individual transaction. As a
general guideline, applicants shall provide supporting data that may
(but need not) include: current and projected traffic flows; data
underlying sales forecasts or marketing goals; interchange data; market
share analysis; and/or shipper surveys. It is important to note that
these types of studies are neither limiting nor all-inclusive. The
parties must provide supporting data, but are free to choose the
type(s) and format. If not made part of the application, applicants
shall make these data available in a repository for inspection by other
parties or otherwise supply these data on request, for example,
electronically. Access to confidential information will be subject to
protective order. For information drawn from publicly available
published sources, detailed citations will suffice.
8. Section 1180.8 is amended by redesignating paragraphs (a) and
(b) as paragraphs (b) and (c), respectively, and by adding a new
paragraph (a) to read as follows:
Sec. 1180.8 Operational data.
(a) Applications for major transactions must include a full-system
operating plan--incorporating any prospective operations in Canada and
Mexico--from which they must demonstrate how the proposed transaction
would affect operations within regions of the United States and on a
nationwide basis. As part of the environmental review process,
applicants shall submit:
(1) A Safety Integration Plan, prepared in consultation with the
Federal Railroad Administration, to ensure that safe operations would
be maintained throughout the merger implementation process.
(2) Information on what measures they plan to take to address
potentially blocked crossings as a result of merger-related changes in
operations or increases in rail traffic.
* * * * *
9. A new Sec. 1180.10 is added to subpart A to read as follows:
Sec. 1180.10 Service assurance plans.
For major transactions: Applicants must submit a Service Assurance
Plan, which, in concert with the operating plan requirements,
identifies the precise steps to be taken by applicants to ensure that
projected service levels would be attainable and that key elements of
the operating plan would improve service. The plan shall describe with
reasonable precision how operating plan efficiencies would translate
into present and future benefits for the shipping public. The plan must
also describe any potential area of service degradation that might
result due to operational changes and how instances of degraded service
might be mitigated. Like the Operating Plan on which it is based, the
Service Assurance Plan must be a full-system plan encompassing:
(a) Integration of operations. Based on the operating plan, and
using appropriate benchmarks, applicants must develop a Service
Assurance Plan describing how the proposed transaction would result in
improved service levels and how and where service might be degraded.
This description should be a precise route level review, but not a
shipper-by-shipper review. Nonetheless, the plan should be sufficient
for individual shippers to evaluate the projected improvements and
changes, and respond to the potential areas of service degradation for
their customary traffic routings. The plan should inform Class II and
III railroads and other connecting railroads of the operational changes
or changes in service terms that might affect their operations,
including operations involving major gateways.
(b) Coordination of freight and passenger operations. If Amtrak or
commuter services are operated over the lines of applicant carriers,
applicants must describe definitively how they would continue to
facilitate these operations so as to fulfill existing performance
agreements for those services. Whether or not the passenger services
are operated over lines of applicants or applicants' operations are on
the lines of passenger agencies, applicants must establish operating
protocols ensuring effective communications with Amtrak and/or regional
rail passenger operators to minimize any potential transaction-related
negative impacts.
(c) Yard and terminal operations. The operational fluidity of yards
and terminals is key to the successful implementation of a transaction
and effective service to shippers. Applicants must describe how the
operations of principal classification yards and major terminals would
be changed or revised and how these revisions would affect service to
customers. As part of this analysis, applicants must furnish dwell time
benchmarks for each facility described in this paragraph, and estimate
what the expected dwell time would be after the revised operations are
implemented. Also required will be a discussion of on-time performance
for the principal yards and terminals in the same terms as required for
dwell time.
(d) Infrastructure improvements. Applicants must identify potential
infrastructure impediments (using volume/capacity line and terminal
forecasts), formulate solutions to those impediments, and develop time
frames for resolution. Applicants must also develop a capital
improvement plan (to support the operating plan) for timely funding and
completion of the improvements critical to transition of operations.
They should also describe improvements related to future growth, and
indicate the relationship of the improvements to service delivery.
(e) Information technology systems. Because the accurate and timely
integration of applicants' information systems is vitally important to
service, applicants must identify the process to be used for systems
integration and training of involved personnel. This must include
identification of the principal operations-related systems, operating
areas affected, implementation schedules, the realtime operations data
used to test the systems, and pre-implementation training requirements
needed to achieve completion dates. If such systems will not be
integrated and on line prior to implementation of the transaction,
applicants must describe the interim systems to be used and the
adequacy of those systems to ensure service delivery.
(f) Customer service. To achieve and maintain customer confidence
in the transaction and to ensure the successful integration and
consolidation of existing customer service functions, applicants must
identify their plans for the staffing and training of personnel within
or supporting the customer service centers. This discussion must
include specific information on the planned steps to familiarize
customers with any new processes and procedures that they may encounter
in using the consolidated systems and/or changes in contact locations,
telephone numbers, or communication mode.
(g) Labor. Applicants must furnish a plan for reaching necessary
labor implementing agreements. Applicants must also provide evidence
that sufficient qualified employees would be available at the proper
locations to effect implementation.
(h) Training. Applicants must establish a plan for providing
necessary training to employees involved with operations, train and
engine service, operating rules, dispatching, payroll and timekeeping,
field data entry, safety and hazardous material compliance, and
contractor support functions (e.g., crew van service), as well as
training for other employees in functions that would be affected by the
acquisition.
[[Page 32590]]
(i) Contingency plans for merger-related service disruptions. To
address potential disruptions of service that could occur, applicants
must establish contingency plans. Those plans, based upon available
resources and traffic flows and density, must identify potential areas
of disruption and the risk of occurrence. Applicants must provide
evidence that contingency plans would be in place to promptly restore
adequate service levels. Applicants must also provide for the
establishment of problem resolution teams and describe the specific
procedures to be utilized for problem resolution.
(j) Timetable. Applicants must identify all major functional or
system changes/consolidations that would occur and the time line for
successful completion.
(k) Benchmarking. Specific benchmarking requirements may vary with
the transaction. The minimum for benchmarking will be the 12 monthly
periods immediately preceding the filing date of the notice of intent
to file the application. Benchmarking is intended to provide an
historic monthly baseline against which actual post-transaction levels
of performance can be measured. Benchmarking data should be
sufficiently detailed and encompassing to give a meaningful picture of
operational performance for the newly merged system. Applicants will
report in a matrix structure giving the historic monthly (benchmark)
data and provide for the reporting of actual monthly data during the
monitoring period. It is important that data reflect uniformly
constructed measures of historic and post-transaction operations.
Minimum benchmark data include:
(1) Corridor performance benchmarking. Benchmarks will consist of
route level performance information including flow data for traffic
moving on the applicants' systems. These data will encompass flows to
and from major points. A major point could be a Bureau of Economic
Analysis (BEA) statistical area, or it can be a railroad-created point
based on an operational grouping of stations or interchanges, or it
could be another similar construction. It will be necessary for
applicants to define traffic points used to establish benchmarks for
purposes of monitoring. A sufficient number of corridor flows must be
reported so as to fully represent system flows, including interchanges
with short lines and other Class I's, and internal traffic of the
respective applicants before the transaction. In addition to
identifying traffic flows by areas, they also must be identified by
commodity sector (for example, merchandise, intermodal, automotive,
unit coal, unit grain etc.). Data for each flow must include: traffic
volume in carloads (units), miles (area to area), and elapsed time in
hours. Only loaded traffic need be included.
(2) Yard and terminal benchmarking.
(i) Terminal dwell. Terminal dwell for major yards will be
calculated in hours for cars handled, not including run-through and
bypass trains or maintenance of way and bad order cars.
(ii) On time originations by major yard. On time originations are
based on the departure of scheduled trains originating at a particular
yard.
(3) System benchmarking.
(i) Cars on line.
(ii) Average train velocity, by train type.
(iii) Locomotive fleet size and applicable bad order ratios.
(iv) Passenger train performance for commuter and intercity
passenger services.
10. A new Sec. 1180.11 is added to subpart A to read as follows:
Sec. 1180.11 Transnational and other informational requirements.
(a) For applicants whose systems include operations in Canada or
Mexico, applicants must explain how cooperation with the Federal
Railroad Administration would be maintained to address potential
impacts on operations within the United States of operations or events
elsewhere on their systems.
(b) All applicants must assess whether any restrictions or
preferences under foreign or domestic law or policies could affect
their commercial decisions, and discuss any ownership restrictions
applicable to them.
[FR Doc. 01-14984 Filed 6-14-01; 8:45 am]
BILLING CODE 4915-00-P