Brookfield Asset Management, Inc. and DJP XX, LLC-Control Exemption-Genesee & Wyoming Inc., et al., 58798-58801 [2019-23956]
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Federal Register / Vol. 84, No. 212 / Friday, November 1, 2019 / Notices
The application states that the Sellers
collectively own all equity interests in
First Class and that Greg Rogers has a
100% equity ownership interest in
Sierra. (Id. at 5.) The application further
states that Jean Rogers and Jeff Rogers
have no direct or indirect ownership
interests in any interstate passenger
motor carrier other than First Class and
that Greg Rogers has no direct or
indirect ownership interest in any
interstate passenger motor carriers other
than First Class and Sierra. (Id.)
ARA represents that, through this
transaction, it will acquire direct control
of the interstate and intrastate passenger
motor carrier assets and operations of
First Class and Sierra. (Id. at 1; see also
id. at 7.) 6
Under 49 U.S.C. 4303(b), the Board
must approve and authorize a
transaction that it finds consistent with
the public interest, taking into
consideration at least: (1) The effect of
the proposed transaction on the
adequacy of transportation to the public;
(2) the total fixed charges that result;
and (3) the interest of affected carrier
employees. ARA has submitted the
information required by 49 CFR 1182.2,
including information to demonstrate
that the proposed transaction is
consistent with the public interest
under 49 U.S.C. 14303(b), see 49 CFR
1182.2(a)(7), and a jurisdictional
statement under 49 U.S.C. 14303(g) that
the aggregate gross operating revenues
of the ARA Affiliated Carriers, First
Class, and Sierra exceeded $2 million
during the 12-month period
immediately preceding the filing of the
application, see 49 CFR 1182.2(a)(5).
ARA asserts that the proposed
transaction is not expected to have a
material, detrimental impact on the
adequacy of transportation services
available to the public. (Appl. 8.) ARA
states that it anticipates that services to
the public will be improved by using
the business and financial management
skills of Tensile, as well as its capital,
to enhance and make operations more
efficient for First Class and Sierra in
their respective marketplaces, thereby
ensuring the continued availability of
authority, can be found in the application. (See
Appl. 7.)
6 ARA also states that, as part of the proposed
transaction, it will acquire the rolling stock assets
of RJR Leasing LLC (RJR), which owns and leases
vehicles to First Class and Sierra and is
headquartered in Houston. According to the
application, RJR, which is collectively owned by
Jean Rogers and the Estate of Lanny Gerald Rogers,
does not operate any motor coach or other ground
transportation service. (App. 1, 7.) Because RJR
does not engage in interstate transportation, RJR is
not subject to the Board’s jurisdiction, see 49 U.S.C.
13501, and the acquisition of RJR is not subject to
the Board’s acquisition authority, see 49 U.S.C.
14303.
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adequate transportation service for the
public. (Id. at 8, 11.) ARA further states
that the continued use of the assets and
work force of the Sellers will help
maintain a strong competitive bus
presence in the eastern Texas area; that
the proposed transaction includes the
right to use the ‘‘First Class’’ and
‘‘Sierra’’ names post-closing; and that
due to these strong brand names, ARA
may also seek approval from the
FMCSA to change its name to more
closely resemble First Class and/or
Sierra. (Id. at 8–9.)
ARA claims that neither competition
nor the public interest will be adversely
affected by the proposed transaction.
(Id. at 9–11.) ARA asserts that
competition is keen in the markets in
which First Class operates (i.e.,
passenger group charter motor coach
and shuttle services in the Houston area,
including charter transportation
between Houston and various Louisiana
casinos, and weekday park-and-ride
commuter services between The
Woodlands and points in Houston). (Id.
at 10.) Specifically, ARA states that the
competition in the charter and shuttle
services marketplaces consists of a large
number of competitors, ranging from
small charter operators to very large
corporate charter organizations. ARA
also states that special licensing is
required to provide direct service to
casinos located in Louisiana, and that at
least two other carriers operating from
within the Houston area have these
special permits.7 (Id.) According to
ARA, the marketplace of Sierra, like
First Class, is primarily passenger group
charter motor coach and shuttle services
in the Houston area. ARA explains that
in many instances, Sierra’s marketplace
is nearly identical to the marketplace of
First Class because Sierra often operates
under subcontract with First Class,
including charter transportation
between Houston and Louisiana casinos
and weekday park-and-ride commuter
services between The Woodlands and
Houston. (Id. at 10–11.) Additionally,
ARA states that there is little, if any,
overlap of market areas served by First
Class and Sierra with those served the
ARA Affiliated Carriers. (Id. at 11.)
ARA states that there are no
significant fixed charges associated with
the proposed transaction. (Id. at 9.)
Regarding the interests of employees,
ARA claims that the transaction will not
have a material impact on employees or
labor conditions, nor does ARA
anticipate a measurable reduction in
7 ARA also notes that the distance between
Houston and these casinos is short enough that
people may elect to drive themselves rather than
use a bus service. (Appl. 10.)
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force or changes in compensation levels
or benefits. (Id.) ARA states, however,
that staffing redundancies could result
in limited downsizing of back-office or
managerial-level personnel. (Id.)
The Board finds that the acquisition
as proposed in the application is
consistent with the public interest and
should be tentatively approved and
authorized. If any opposing comments
are timely filed, these findings will be
deemed vacated, and, unless a final
decision can be made on the record as
developed, a procedural schedule will
be adopted to reconsider the
application. See 49 CFR 1182.6(c). If no
opposing comments are filed by the
expiration of the comment period, this
notice will take effect automatically and
will be the final Board action.
This action is categorically excluded
from environmental review under 49
CFR 1105.6(c).
Board decisions and notices are
available at www.stb.gov.
It is ordered:
1. The proposed transaction is
approved and authorized, subject to the
filing of opposing comments.
2. If opposing comments are timely
filed, the findings made in this notice
will be deemed vacated.
3. This notice will be effective
December 17, 2019, unless opposing
comments are filed by December 16,
2019.
4. A copy of this notice will be served
on: (1) The U.S. Department of
Transportation, Federal Motor Carrier
Safety Administration, 1200 New Jersey
Avenue SE, Washington, DC 20590; (2)
the U.S. Department of Justice, Antitrust
Division, 10th Street & Pennsylvania
Avenue NW, Washington, DC 20530;
and (3) the U.S. Department of
Transportation, Office of the General
Counsel, 1200 New Jersey Avenue SE,
Washington, DC 20590.
Decided: October 28, 2019.
By the Board, Board Members Begeman,
Fuchs, and Oberman.
Brendetta Jones,
Clearance Clerk.
[FR Doc. 2019–23901 Filed 10–31–19; 8:45 am]
BILLING CODE 4915–01–P
SURFACE TRANSPORTATION BOARD
[Docket No. FD 36326]
Brookfield Asset Management, Inc. and
DJP XX, LLC—Control Exemption—
Genesee & Wyoming Inc., et al.
Brookfield Asset Management, Inc.
(Brookfield), and DJP XX, LLC (DJP)
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Federal Register / Vol. 84, No. 212 / Friday, November 1, 2019 / Notices
(collectively, Applicants),1 filed a
verified notice of exemption under 49
CFR 1180.2(d)(2) to allow Applicants to
control Genesee & Wyoming Inc. (GWI)
and the 106 rail carriers controlled by
GWI that are subject to the jurisdiction
of the Board (GWI Railroads).2 As
discussed further below, the Board will
allow the exemption to become
effective. However, Applicants will
remain subject to the Board’s July 22,
2019 direction to provide periodic
updates regarding the status and
outcome of the review being conducted
by the Committee on Foreign
Investment in the United States
(CFIUS).
Background
On July 9, 2019, Applicants filed a
verified notice of exemption under 49
CFR 1180.2(d)(2) to control GWI, a
publicly traded noncarrier holding
company that controls, through direct or
indirect equity ownership, the GWI
Railroads. (Verified Notice 2.) As a
result of the proposed transaction, GWI
would become a privately held
company and a wholly owned
subsidiary of DJP. (Id.) According to the
verified notice, DJP would indirectly
control the GWI Railroads through DJP’s
direct control of GWI, and Brookfield
would indirectly control the GWI
Railroads through Brookfield’s control
of DJP and DJP’s control of GWI. (Id.)
Applicants state that Brookfield and DJP
are not rail carriers and do not own or
control any rail carriers in the United
States. (Id.) Applicants further state that
they each require Board authority
pursuant to 49 U.S.C. 11323(a)(4) to
consummate the transaction. (Id.)
Applicants represent that, pursuant to
49 CFR 1180.2(d)(2): (i) The GWI
Railroads do not connect with any rail
line owned or controlled by DJP or
Brookfield; (ii) the proposed transaction
is not part of a series of anticipated
transactions that would connect any
railroad owned or controlled by DJP or
Brookfield with any GWI Railroad, or
that would connect any of the GWI
Railroads with each other; and (iii) the
proposed transaction does not involve a
Class I carrier. (Id. at 2–3.) Applicants
acknowledge that, 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.
(Id. at 5.) Applicants further
acknowledge that because the
transaction involves the control of two
1 Brookfield controls DJP within the meaning of
49 U.S.C. 10102(3).
2 Two of the GWI Railroads are Class II carriers,
and the remainder are Class III carriers. (Verified
Notice, Ex. 1.)
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Class II carriers and more than one Class
III carrier, the transaction is subject to
the labor protection requirements of 49
U.S.C. 11326(a) and New York Dock
Railway—Control—Brooklyn Eastern
District Terminal, 360 I.C.C. 60 (1979).
(Verified Notice 5.)
By decision served on July 22, 2019,
and published in the Federal Register
on July 26, 2019 (84 FR 36157), the
effectiveness of the exemption was
postponed until further order of the
Board to allow sufficient time to
consider the issues presented. The
decision also directed Brookfield and
DJP to provide updates regarding CFIUS
review and the outcome of such review,
and it invited comments from the
Applicants and the public.
In response to its July decision, the
Board received numerous comments,
including opening and reply comments
from the Applicants. Most of the
comments relate to the Providence and
Worcester Railroad Company (P&W), a
Class III railroad controlled by GWI 3
that operates passenger and excursion
services between Rhode Island and
Massachusetts.4 The main interests of
the P&W Commenters are the
continuation of excursion service,
completion of a multi-use path, and the
need for strong communication and
collaboration with Applicants as the
prospective new owners of P&W. Some
of the P&W Commenters request that the
Board condition authorization of the
transaction on the Applicants working
cooperatively to accommodate
completion of the multi-use path. (See
BHC Comments 3; City of Woonsocket
Comments 1–2; National Park Service
Comments 1; Honorable Michael O.
Moore Comments 1; Town of Grafton
Comments 1; Town of Uxbridge
Comments 1.)
A comment in opposition to the
proposed transaction was received on
August 20, 2019, from Victoria
Dalrymple, who states that she is a
shareholder of GWI. (Dalrymple
Comments 1.) Dalrymple argues that the
exemption at 49 CFR 1180.2(d)(2) is not
applicable to the proposed transaction
because Brookfield’s management of
3 Genesee & Wyoming Inc.—Acquis. of Control
Exemption—Providence & Worcester R.R., FD
36064 (STB served December 16, 2016).
4 The following commenters focused on issues
pertaining to P&W: Blackstone Valley Tourism
Council; the Honorable Donald R. Grebien, Mayor
of Pawtucket, R.I.; Northern Rhode Island Chamber
of Commerce; Blackstone River Valley National
Heritage Corridor, Inc. (BHC); Town of North
Smithfield, R.I.; City of Woonsocket, R.I.; U.S.
Department of the Interior, National Park Service
(National Park Service); the Honorable Michael O.
Moore, Massachusetts State Senator; the Honorable
James A. Diossa, Mayor of City of Central Falls, R.I.;
Town of Grafton, Mass.; and Town of Uxbridge,
Mass. (collectively, P&W Commenters).
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58799
railroads in other countries, its pyramidcontrolled corporate structure, and
evidence of its past decapitalization of
rail assets suggest the possibility of
anticompetitive outcomes. (Id. at 1–4,
6–7.) Dalrymple also raises concerns
over the possibility of foreign entities—
a ‘‘Singapore sovereign wealth fund’’ 5
and Qatar, both of which have
relationships with Brookfield—
controlling key domestic infrastructure
assets. (Id. at 6.)
The Transportation Division of the
International Association of Sheet
Metal, Air, Rail and Transportation
Workers (SMART/TD) filed a notice of
intent to participate, and on September
5, 2019, Samuel J. Nasca, for and on
behalf of SMART/TD, New York State
Legislative Board (SMART/TD–NY),
filed reply comments asserting that the
notice of exemption should be rejected
or the exemption revoked because of,
among other things, the magnitude and
nature of the transportation involved.
(SMART/TD–NY Reply 3–4.) SMART/
TD–NY expresses concern regarding the
role of GIC, which it argues is required
to be an applicant in addition to
Brookfield and DJP, (id. at 4–5); asserts
that Brookfield controls rail investments
in Brazil, a country that produces
soybeans that compete globally with
U.S. soybeans, (id. at 5); and states that
GWI controls rail carriers that are
located in other countries and are not
subject to Board jurisdiction, (id. at 8).
SMART/TD–NY further comments that
SMART/TD employees may be
adversely affected by Applicants’
prospective management of GWI. (Id. at
6)
On September 5, 2019, Applicants
filed reply comments. Applicants
respond to the P&W Comments and
state that they intend to continue to
work with GWI, P&W, and the
communities and reiterate that they do
not plan to change the operations of
GWI or the GWI Railroads after
consummation of the proposed
transaction. (Applicants Reply 3, Sept.
5, 2019.) They further respond that the
imposition of conditions on the
transaction unrelated to competition
would be inappropriate in this case. (Id.
at 4.) Applicants assert that Dalrymple’s
comments are inaccurate and argue,
among other things, that the proposed
transaction will not have
anticompetitive impacts because there
5 Dalrymple appears to be referring to GIC Pte.
Ltd. (GIC). According to Applicants, GIC is a global
investment firm that manages Singapore’s foreign
reserves and, at closing of the proposed transaction,
GIC would have an approximately 27% equity
interest in DJP and the same percentage vote on the
DJP board of directors. (See Applicants Response 2
n.3; 2 n.4 & Verification, Sept. 9, 2019.)
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Federal Register / Vol. 84, No. 212 / Friday, November 1, 2019 / Notices
will be no change in relationships with
carriers outside the GWI corporate
family, or in patterns or types of service
by the GWI Railroads. (Id. at 5–6.)
Applicants argue that Dalrymple
mischaracterized Brookfield’s
ownership of an Australian railroad
company and that those claims have no
relevance to the applicability of the
class exemption process. (Id. at 7.)
Applicants also respond that no investor
in Brookfield’s private institutional
funds has the ability to exercise control
over those funds, no foreign government
has any influence over any Brookfieldcontrolled funds, and such concerns are
outside the Board’s purview in any
event. (Id. at 7–8.)
Applicants also filed a response to
SMART/TD–NY’s September 5 reply
comments on September 9, 2019,
asserting that its claims are without
merit.6 (Applicants Response 2, Sept. 9,
2019.) Applicants argue that GIC need
not obtain the Board’s control authority
because the proposed transaction will
not result in GIC controlling any of the
Applicants or GWI Railroads and that
GWI’s control of carriers in other
countries is not relevant to whether
Applicants qualify for the § 1180.2(d)(2)
exemption. (Id.) They also generally
assert that no valid competitive
concerns have been raised that would
warrant rejection of the notice or
revocation of the exemption. (Id.)
On September 24, 2019, Applicants
filed an update regarding the status of
the CFIUS review and a motion for
protective order.7 On September 26,
2019, Applicants filed a further update
regarding the status of the CFIUS
review.
Discussion and Conclusions
Under 49 U.S.C. 11323(a)(4), the
Board’s approval and authorization is
required for a transaction involving the
acquisition of control of at least two rail
carriers by a noncarrier. The class
exemption set forth at 49 CFR
1180.2(d)(2) provides an expedited
means of obtaining Board approval and
authorization provided that certain
required information is submitted and
three criteria are met: (i) The railroads
would not connect with each other or
6 Under 49 CFR 1104.13(c), a reply to a reply is
not permitted. However, in the interest of a more
complete record, the Board will accept into the
record Applicants’ September 9 response, as well as
a September 10, 2019 petition for leave to reply and
reply to Applicants’ response filed by SMART/TD–
NY, and an October 2, 2019 petition for leave to
reply and reply to Applicants’ September 5, 2019
response filed by Dalrymple, regarding Brookfield’s
corporate structure.
7 By decision served September 27, 2019,
Applicants’ motion for protective order was
granted.
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any railroads in their corporate family,
(ii) the acquisition or continuance in
control is not part of a series of
anticipated transactions that would
connect the railroads with each other or
any railroad in their corporate family,
and (iii) the transaction does not involve
a Class I carrier.
After considering the comments and
other information submitted into the
record, the Board will allow the
exemption to take effect. The comments
submitted do not undermine the
applicability of the 49 CFR 1180.2(d)(2)
class exemption process.
The P&W Commenters express
concerns regarding the excursion
services,8 and four of the P&W
Commenters request that the Board
impose a condition relating to
development of the multi-use path, but
none of the P&W Commenters oppose
the proposed transaction. Nor do the
P&W Commenters suggest that the
proposed transaction is not appropriate
for a notice of exemption or that it
would have anticompetitive effects. The
Board appreciates the information and
perspective of the P&W Commenters.
However, the P&W Comments have not
described how the requested condition
is relevant to the considerations under
49 CFR 1180.2(d)(2) nor have they
provided any legal basis for imposing
such a condition. The Board concludes
that the requested condition is not
warranted and, further, Applicants’
September 5 reply comments have
sufficiently addressed the concerns
expressed by the P&W Commenters.
(See Applicants Reply 2–4.)
Dalrymple asserts that § 1180.2(d)(2)
is inapplicable and suggests that the
proposed transaction would result in
anticompetitive outcomes, but she does
not explain how the assertions raised in
her comments (e.g., past
decapitalization of an Australian
railroad controlled by Brookfield and
various negative financial impacts in
that country, and concerns about
Brookfield’s corporate structure)
demonstrate that the class exemption
criteria are not met, or how the
assertions would support a finding of
anticompetitive effects. The proposed
transaction would change the
ownership of GWI, as opposed to
changing relationships with carriers
outside the GWI corporate family or
increasing common control of railroads
subject to the Board’s jurisdiction.9
8 The City of Woonsocket expressed interest in
the return of commuter rail service on P&W lines
but did not oppose the proposed transaction.
9 Regarding the applicability of § 1180.2(d)(2), the
control of another rail carrier outside the United
States is not within the Board’s jurisdiction and
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Similarly, SMART/TD–NY’s
comments about the magnitude and
nature of the transportation at issue do
not support rejection of the notice or
revocation of the exemption. SMART/
TD–NY asserts that the proposed
transaction ‘‘raises competitive
questions,’’ (SMART/TD–NY Reply 8–
9), but does not otherwise explain this
claim aside from a reference to
transportation of soybeans in Brazil for
sale in international markets. But see 49
U.S.C. 10501(a) (Board jurisdiction
applies to transportation in the United
States). Finally, except for an assertion
that ‘‘GIC is important’’ to the proposed
transaction, SMART/TD–NY does not
state why GIC should be required to be
an applicant.10 (SMART/TD–NY Reply
4–5.)
Accordingly, Applicants’ notice of
exemption will become effective on the
service date of this decision. Because
the overall transaction is also subject to
CFIUS approval,11 Applicants will
remain subject to the Board’s previous
direction to provide updates regarding
the status of CFIUS review and to
provide an update within seven days
after they are notified of the outcome of
such review.
It is ordered:
1. The exemption will become
effective on the service date of this
decision.
2. Notice of this decision will be
published in the Federal Register.
3. This decision is effective on its
service date.
Decided: October 28, 2019.
By the Board, Board Members
Begeman, Fuchs, and Oberman. Board
Member Oberman commented with a
separate expression.
BOARD MEMBER OBERMAN,
commenting:
Because this transaction meets the
requirements of 49 CFR 1180.2(d), and
because, as stated in the decision, the
comments submitted have not
undermined the applicability of the
class exemption process, I join in
approving the transaction’s going
forward as a class exemption.
Nevertheless, I write separately to
express my concerns with the use of the
class exemption process for transactions
of this magnitude.
does not make an entity a rail carrier. See 49 U.S.C.
10501(a); 49 U.S.C. § 11323(a).
10 As noted above, Applicants included in their
September 9 response a verification from James
Rickert, President of DJP, that, at closing of the
proposed transaction, GIC would have an
approximately 27% equity interest in DJP and same
percentage vote on the DJP board of directors.
(Applicants Response 2 n.4 & Verification, Sept. 9,
2019.)
11 (See Applicants Comment 12, Aug. 16, 2019.)
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GWI’s North American operations,
which will be acquired pursuant to the
proposed transaction, include 106 short
line and regional railroads subject to
Board jurisdiction, (Verified Notice 1),
and operations in 41 states with over
13,000 track miles. See Genesee &
Wyoming Inc., About Us, https://
www.gwrr.com/about_us (last visited
Oct. 28, 2019). GWI’s 2018 North
American operating revenues totaled
$1.36 billion. Genesee & Wyoming, Inc.,
2018 Annual Report 7 (2019). GWI’s
railroads are essential to serving a large
number of shippers and receivers and
constitute essential links in the national
rail network. Most or all of the country’s
Class I railroads could not serve many
of their customers without the service
provided by GWI’s railroads. Indeed, if
GWI were itself a rail carrier, its North
American operations would clearly
make it a Class I carrier.1 As it is, GWI
is a widespread presence throughout the
national rail network, in which it plays
an integral role. Thus, this is by far the
largest and most geographically diverse
collection of railroads impacting the
U.S. freight network ever to be
processed as a class exemption under
the Board’s existing regulations.2
For these reasons, in my opinion, this
proceeding raises significant questions
regarding whether transactions of this
magnitude were contemplated when the
class exemption regulations were
adopted, and therefore raises questions
as to whether it is appropriate for such
major transactions to be eligible under
those regulations in the first place.
While I agree that, under existing
regulations, this transaction may
proceed as a class exemption, I do think
the Board should consider in the future
whether the exemption process should
1 See Indexing the Annual Operating Revenues of
R.R.s, EP 748 (STB served June 14, 2019)
(calculating Class I revenue threshold at
$489,935,956).
2 Cf. Fortress Inv. Grp. LLC—Control Exemption—
RailAmerica, Inc., FD 34972 (STB served Dec. 22,
2006) (publishing notice for the acquisition of 30
rail carriers); Mont. Rail Link, Inc.—Exemption
Acquis. & Operation—Certain Lines of Burlington
N. R.R., FD 31089 (ICC served May 26, 1988)
(denying petitions for revocation of notice of
exemption permitting acquisition of two noncontiguous segments of rail line totaling 830.62
miles in length in Montana and Idaho); Wisc. Cent.
Ltd.—Exemption Acquis. & Operation—Certain
Lines of Soo Line R.R., FD 31102 (ICC served Oct.
8, 1987) (vacating stay and permitting
consummation of a class exemption for the
acquisition of 1,801 miles of rail line in Wisconsin
and parts of Michigan, Minnesota, and Illinois;
acquisition of 173.6 miles of trackage rights in
Wisconsin and parts of Minnesota and Illinois; and
assignment of 27.7 miles of trackage rights on thirdparty carriers in Wisconsin).
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19:23 Oct 31, 2019
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be applicable to transactions of such
scale.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2019–23956 Filed 10–31–19; 8:45 am]
BILLING CODE 4915–01–P
SURFACE TRANSPORTATION BOARD
[Docket No. FD 36326]
Brookfield Asset Management, Inc. and
DJP XX, LLC—Control Exemption—
Genesee & Wyoming Inc., et al.
Brookfield Asset Management, Inc.
(Brookfield) and DJP XX, LLC (DJP)
(collectively, Applicants), filed a
verified notice of exemption under 49
CFR 1180.2(d)(2) to allow Applicants to
control Genesee & Wyoming Inc. (GWI)
and the 106 rail carriers subject to the
jurisdiction of the Board that GWI
controls (GWI Railroads).1
According to the verified notice, GWI
is currently a publicly traded noncarrier
holding company that controls, through
direct or indirect equity ownership, the
GWI Railroads; Brookfield is an
alternative asset manager; DJP is a
limited liability company specially
formed to acquire GWI; and Brookfield
controls DJP within the meaning of 49
U.S.C. 10102(3). Applicants state that, at
consummation of the proposed
transaction, DJP’s wholly owned
subsidiary, MKM XXII Corp., will be
merged with and into GWI, which will
be the surviving corporation. As a result
of the proposed transaction,2 GWI
would become a privately held
company and a wholly owned
subsidiary of DJP. Therefore, the
proposed transaction would cause DJP
to indirectly control the GWI Railroads
through DJP’s direct control of GWI. The
proposed transaction would also cause
Brookfield to indirectly control the GWI
Railroads through Brookfield’s control
of DJP and DJP’s control of GWI.
Applicants state that Brookfield and DJP
are not rail carriers and do not own or
control any rail carriers in the United
States. Applicants further certify that
1 According to Applicants, two of the GWI
Railroads are Class II carriers, and the remainder are
Class III carriers. The GWI Railroads are located in
the following states: Alabama, Arizona, Arkansas,
California, Colorado, Connecticut, Florida, Georgia,
Illinois, Indiana, Kansas, Kentucky, Louisiana,
Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Nebraska, New
Hampshire, New Mexico, New York, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania,
Rhode Island, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia,
Washington, Wisconsin, and Wyoming.
2 A copy of the Agreement and Plan of Merger
was filed with the verified notice as Exhibit 2.
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
58801
the proposed acquisition does not
involve an interchange commitment.3
The verified notice states that the
proposed transaction is expected to
close by the end of 2019 or early 2020,
subject to customary closing conditions.
This exemption is now effective,
consistent with the Board’s decision
served October 29, 2019 in this
proceeding.
The verified notice states that: (i) The
GWI Railroads do not connect with any
rail line owned or controlled by DJP or
Brookfield; (ii) the proposed transaction
is not part of a series of anticipated
transactions that would connect any
railroad owned or controlled by
Applicants with any GWI Railroad or
connect any of the GWI Railroads with
each other; and (iii) the proposed
transaction does not involve a Class I
carrier. Therefore, the transaction is
exempt from the prior approval
requirements of 49 U.S.C. 11323. See 49
CFR 1180.2(d)(2).
Under 49 U.S.C. 10502(g), the Board
may not use its exemption authority to
relieve a rail carrier of its statutory
obligation to protect the interests of its
employees. Because the proposed
transaction involves the control of one
or more Class III rail carriers and two
Class II rail carriers, the transaction is
subject to the labor protective
requirements of 49 U.S.C. 11326(a) and
New York Dock Railway—Control—
Brooklyn Eastern District Terminal, 360
I.C.C 60 (1979).
If the verified notice contains false or
misleading information, the exemption
is void ab initio. Petitions to revoke the
exemption under 49 U.S.C. 10502(d)
may be filed at any time. The filing of
a petition to revoke will not
automatically stay the effectiveness of
the exemption.
All pleadings, referring to Docket No.
FD 36326, must be filed with the
Surface Transportation Board either via
e-filing or in writing addressed to 395 E
Street SW, Washington, DC 20423–0001.
In addition, a copy of each pleading
must be served on Applicants’
representatives, Anthony J. LaRocca and
Peter W. Denton, Steptoe & Johnson
LLP, 1330 Connecticut Avenue NW,
Washington, DC 20036.
According to Applicants, this action
is categorically excluded from
3 By decision served on July 22, 2019, and
published in the Federal Register on July 26, 2019
(84 FR 36,157), the effectiveness of the exemption
was postponed until further order of the Board to
allow sufficient time to consider the issues
presented. The decision also directed Brookfield
and DJP to provide updates regarding review by the
Committee on Foreign Investment in the United
States (CFIUS) and the outcome of such review, and
it invited comments from the Applicants and the
public.
E:\FR\FM\01NON1.SGM
01NON1
]]>Agencies
[Federal Register Volume 84, Number 212 (Friday, November 1, 2019)]
[Notices]
[Pages 58798-58801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23956]
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SURFACE TRANSPORTATION BOARD
[Docket No. FD 36326]
Brookfield Asset Management, Inc. and DJP XX, LLC--Control
Exemption--Genesee & Wyoming Inc., et al.
Brookfield Asset Management, Inc. (Brookfield), and DJP XX, LLC
(DJP)
[[Page 58799]]
(collectively, Applicants),\1\ filed a verified notice of exemption
under 49 CFR 1180.2(d)(2) to allow Applicants to control Genesee &
Wyoming Inc. (GWI) and the 106 rail carriers controlled by GWI that are
subject to the jurisdiction of the Board (GWI Railroads).\2\ As
discussed further below, the Board will allow the exemption to become
effective. However, Applicants will remain subject to the Board's July
22, 2019 direction to provide periodic updates regarding the status and
outcome of the review being conducted by the Committee on Foreign
Investment in the United States (CFIUS).
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\1\ Brookfield controls DJP within the meaning of 49 U.S.C.
10102(3).
\2\ Two of the GWI Railroads are Class II carriers, and the
remainder are Class III carriers. (Verified Notice, Ex. 1.)
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Background
On July 9, 2019, Applicants filed a verified notice of exemption
under 49 CFR 1180.2(d)(2) to control GWI, a publicly traded noncarrier
holding company that controls, through direct or indirect equity
ownership, the GWI Railroads. (Verified Notice 2.) As a result of the
proposed transaction, GWI would become a privately held company and a
wholly owned subsidiary of DJP. (Id.) According to the verified notice,
DJP would indirectly control the GWI Railroads through DJP's direct
control of GWI, and Brookfield would indirectly control the GWI
Railroads through Brookfield's control of DJP and DJP's control of GWI.
(Id.) Applicants state that Brookfield and DJP are not rail carriers
and do not own or control any rail carriers in the United States. (Id.)
Applicants further state that they each require Board authority
pursuant to 49 U.S.C. 11323(a)(4) to consummate the transaction. (Id.)
Applicants represent that, pursuant to 49 CFR 1180.2(d)(2): (i) The
GWI Railroads do not connect with any rail line owned or controlled by
DJP or Brookfield; (ii) the proposed transaction is not part of a
series of anticipated transactions that would connect any railroad
owned or controlled by DJP or Brookfield with any GWI Railroad, or that
would connect any of the GWI Railroads with each other; and (iii) the
proposed transaction does not involve a Class I carrier. (Id. at 2-3.)
Applicants acknowledge that, 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. (Id. at
5.) Applicants further acknowledge that because the transaction
involves the control of two Class II carriers and more than one Class
III carrier, the transaction is subject to the labor protection
requirements of 49 U.S.C. 11326(a) and New York Dock Railway--Control--
Brooklyn Eastern District Terminal, 360 I.C.C. 60 (1979). (Verified
Notice 5.)
By decision served on July 22, 2019, and published in the Federal
Register on July 26, 2019 (84 FR 36157), the effectiveness of the
exemption was postponed until further order of the Board to allow
sufficient time to consider the issues presented. The decision also
directed Brookfield and DJP to provide updates regarding CFIUS review
and the outcome of such review, and it invited comments from the
Applicants and the public.
In response to its July decision, the Board received numerous
comments, including opening and reply comments from the Applicants.
Most of the comments relate to the Providence and Worcester Railroad
Company (P&W), a Class III railroad controlled by GWI \3\ that operates
passenger and excursion services between Rhode Island and
Massachusetts.\4\ The main interests of the P&W Commenters are the
continuation of excursion service, completion of a multi-use path, and
the need for strong communication and collaboration with Applicants as
the prospective new owners of P&W. Some of the P&W Commenters request
that the Board condition authorization of the transaction on the
Applicants working cooperatively to accommodate completion of the
multi-use path. (See BHC Comments 3; City of Woonsocket Comments 1-2;
National Park Service Comments 1; Honorable Michael O. Moore Comments
1; Town of Grafton Comments 1; Town of Uxbridge Comments 1.)
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\3\ Genesee & Wyoming Inc.--Acquis. of Control Exemption--
Providence & Worcester R.R., FD 36064 (STB served December 16,
2016).
\4\ The following commenters focused on issues pertaining to
P&W: Blackstone Valley Tourism Council; the Honorable Donald R.
Grebien, Mayor of Pawtucket, R.I.; Northern Rhode Island Chamber of
Commerce; Blackstone River Valley National Heritage Corridor, Inc.
(BHC); Town of North Smithfield, R.I.; City of Woonsocket, R.I.;
U.S. Department of the Interior, National Park Service (National
Park Service); the Honorable Michael O. Moore, Massachusetts State
Senator; the Honorable James A. Diossa, Mayor of City of Central
Falls, R.I.; Town of Grafton, Mass.; and Town of Uxbridge, Mass.
(collectively, P&W Commenters).
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A comment in opposition to the proposed transaction was received on
August 20, 2019, from Victoria Dalrymple, who states that she is a
shareholder of GWI. (Dalrymple Comments 1.) Dalrymple argues that the
exemption at 49 CFR 1180.2(d)(2) is not applicable to the proposed
transaction because Brookfield's management of railroads in other
countries, its pyramid-controlled corporate structure, and evidence of
its past decapitalization of rail assets suggest the possibility of
anticompetitive outcomes. (Id. at 1-4, 6-7.) Dalrymple also raises
concerns over the possibility of foreign entities--a ``Singapore
sovereign wealth fund'' \5\ and Qatar, both of which have relationships
with Brookfield--controlling key domestic infrastructure assets. (Id.
at 6.)
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\5\ Dalrymple appears to be referring to GIC Pte. Ltd. (GIC).
According to Applicants, GIC is a global investment firm that
manages Singapore's foreign reserves and, at closing of the proposed
transaction, GIC would have an approximately 27% equity interest in
DJP and the same percentage vote on the DJP board of directors. (See
Applicants Response 2 n.3; 2 n.4 & Verification, Sept. 9, 2019.)
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The Transportation Division of the International Association of
Sheet Metal, Air, Rail and Transportation Workers (SMART/TD) filed a
notice of intent to participate, and on September 5, 2019, Samuel J.
Nasca, for and on behalf of SMART/TD, New York State Legislative Board
(SMART/TD-NY), filed reply comments asserting that the notice of
exemption should be rejected or the exemption revoked because of, among
other things, the magnitude and nature of the transportation involved.
(SMART/TD-NY Reply 3-4.) SMART/TD-NY expresses concern regarding the
role of GIC, which it argues is required to be an applicant in addition
to Brookfield and DJP, (id. at 4-5); asserts that Brookfield controls
rail investments in Brazil, a country that produces soybeans that
compete globally with U.S. soybeans, (id. at 5); and states that GWI
controls rail carriers that are located in other countries and are not
subject to Board jurisdiction, (id. at 8). SMART/TD-NY further comments
that SMART/TD employees may be adversely affected by Applicants'
prospective management of GWI. (Id. at 6)
On September 5, 2019, Applicants filed reply comments. Applicants
respond to the P&W Comments and state that they intend to continue to
work with GWI, P&W, and the communities and reiterate that they do not
plan to change the operations of GWI or the GWI Railroads after
consummation of the proposed transaction. (Applicants Reply 3, Sept. 5,
2019.) They further respond that the imposition of conditions on the
transaction unrelated to competition would be inappropriate in this
case. (Id. at 4.) Applicants assert that Dalrymple's comments are
inaccurate and argue, among other things, that the proposed transaction
will not have anticompetitive impacts because there
[[Page 58800]]
will be no change in relationships with carriers outside the GWI
corporate family, or in patterns or types of service by the GWI
Railroads. (Id. at 5-6.) Applicants argue that Dalrymple
mischaracterized Brookfield's ownership of an Australian railroad
company and that those claims have no relevance to the applicability of
the class exemption process. (Id. at 7.) Applicants also respond that
no investor in Brookfield's private institutional funds has the ability
to exercise control over those funds, no foreign government has any
influence over any Brookfield-controlled funds, and such concerns are
outside the Board's purview in any event. (Id. at 7-8.)
Applicants also filed a response to SMART/TD-NY's September 5 reply
comments on September 9, 2019, asserting that its claims are without
merit.\6\ (Applicants Response 2, Sept. 9, 2019.) Applicants argue that
GIC need not obtain the Board's control authority because the proposed
transaction will not result in GIC controlling any of the Applicants or
GWI Railroads and that GWI's control of carriers in other countries is
not relevant to whether Applicants qualify for the Sec. 1180.2(d)(2)
exemption. (Id.) They also generally assert that no valid competitive
concerns have been raised that would warrant rejection of the notice or
revocation of the exemption. (Id.)
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\6\ Under 49 CFR 1104.13(c), a reply to a reply is not
permitted. However, in the interest of a more complete record, the
Board will accept into the record Applicants' September 9 response,
as well as a September 10, 2019 petition for leave to reply and
reply to Applicants' response filed by SMART/TD-NY, and an October
2, 2019 petition for leave to reply and reply to Applicants'
September 5, 2019 response filed by Dalrymple, regarding
Brookfield's corporate structure.
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On September 24, 2019, Applicants filed an update regarding the
status of the CFIUS review and a motion for protective order.\7\ On
September 26, 2019, Applicants filed a further update regarding the
status of the CFIUS review.
---------------------------------------------------------------------------
\7\ By decision served September 27, 2019, Applicants' motion
for protective order was granted.
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Discussion and Conclusions
Under 49 U.S.C. 11323(a)(4), the Board's approval and authorization
is required for a transaction involving the acquisition of control of
at least two rail carriers by a noncarrier. The class exemption set
forth at 49 CFR 1180.2(d)(2) provides an expedited means of obtaining
Board approval and authorization provided that certain required
information is submitted and three criteria are met: (i) The railroads
would not connect with each other or any railroads in their corporate
family, (ii) the acquisition or continuance in control is not part of a
series of anticipated transactions that would connect the railroads
with each other or any railroad in their corporate family, and (iii)
the transaction does not involve a Class I carrier.
After considering the comments and other information submitted into
the record, the Board will allow the exemption to take effect. The
comments submitted do not undermine the applicability of the 49 CFR
1180.2(d)(2) class exemption process.
The P&W Commenters express concerns regarding the excursion
services,\8\ and four of the P&W Commenters request that the Board
impose a condition relating to development of the multi-use path, but
none of the P&W Commenters oppose the proposed transaction. Nor do the
P&W Commenters suggest that the proposed transaction is not appropriate
for a notice of exemption or that it would have anticompetitive
effects. The Board appreciates the information and perspective of the
P&W Commenters. However, the P&W Comments have not described how the
requested condition is relevant to the considerations under 49 CFR
1180.2(d)(2) nor have they provided any legal basis for imposing such a
condition. The Board concludes that the requested condition is not
warranted and, further, Applicants' September 5 reply comments have
sufficiently addressed the concerns expressed by the P&W Commenters.
(See Applicants Reply 2-4.)
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\8\ The City of Woonsocket expressed interest in the return of
commuter rail service on P&W lines but did not oppose the proposed
transaction.
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Dalrymple asserts that Sec. 1180.2(d)(2) is inapplicable and
suggests that the proposed transaction would result in anticompetitive
outcomes, but she does not explain how the assertions raised in her
comments (e.g., past decapitalization of an Australian railroad
controlled by Brookfield and various negative financial impacts in that
country, and concerns about Brookfield's corporate structure)
demonstrate that the class exemption criteria are not met, or how the
assertions would support a finding of anticompetitive effects. The
proposed transaction would change the ownership of GWI, as opposed to
changing relationships with carriers outside the GWI corporate family
or increasing common control of railroads subject to the Board's
jurisdiction.\9\
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\9\ Regarding the applicability of Sec. 1180.2(d)(2), the
control of another rail carrier outside the United States is not
within the Board's jurisdiction and does not make an entity a rail
carrier. See 49 U.S.C. 10501(a); 49 U.S.C. Sec. 11323(a).
---------------------------------------------------------------------------
Similarly, SMART/TD-NY's comments about the magnitude and nature of
the transportation at issue do not support rejection of the notice or
revocation of the exemption. SMART/TD-NY asserts that the proposed
transaction ``raises competitive questions,'' (SMART/TD-NY Reply 8-9),
but does not otherwise explain this claim aside from a reference to
transportation of soybeans in Brazil for sale in international markets.
But see 49 U.S.C. 10501(a) (Board jurisdiction applies to
transportation in the United States). Finally, except for an assertion
that ``GIC is important'' to the proposed transaction, SMART/TD-NY does
not state why GIC should be required to be an applicant.\10\ (SMART/TD-
NY Reply 4-5.)
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\10\ As noted above, Applicants included in their September 9
response a verification from James Rickert, President of DJP, that,
at closing of the proposed transaction, GIC would have an
approximately 27% equity interest in DJP and same percentage vote on
the DJP board of directors. (Applicants Response 2 n.4 &
Verification, Sept. 9, 2019.)
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Accordingly, Applicants' notice of exemption will become effective
on the service date of this decision. Because the overall transaction
is also subject to CFIUS approval,\11\ Applicants will remain subject
to the Board's previous direction to provide updates regarding the
status of CFIUS review and to provide an update within seven days after
they are notified of the outcome of such review.
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\11\ (See Applicants Comment 12, Aug. 16, 2019.)
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It is ordered:
1. The exemption will become effective on the service date of this
decision.
2. Notice of this decision will be published in the Federal
Register.
3. This decision is effective on its service date.
Decided: October 28, 2019.
By the Board, Board Members Begeman, Fuchs, and Oberman. Board
Member Oberman commented with a separate expression.
BOARD MEMBER OBERMAN, commenting:
Because this transaction meets the requirements of 49 CFR
1180.2(d), and because, as stated in the decision, the comments
submitted have not undermined the applicability of the class exemption
process, I join in approving the transaction's going forward as a class
exemption. Nevertheless, I write separately to express my concerns with
the use of the class exemption process for transactions of this
magnitude.
[[Page 58801]]
GWI's North American operations, which will be acquired pursuant to
the proposed transaction, include 106 short line and regional railroads
subject to Board jurisdiction, (Verified Notice 1), and operations in
41 states with over 13,000 track miles. See Genesee & Wyoming Inc.,
About Us, https://www.gwrr.com/about_us (last visited Oct. 28, 2019).
GWI's 2018 North American operating revenues totaled $1.36 billion.
Genesee & Wyoming, Inc., 2018 Annual Report 7 (2019). GWI's railroads
are essential to serving a large number of shippers and receivers and
constitute essential links in the national rail network. Most or all of
the country's Class I railroads could not serve many of their customers
without the service provided by GWI's railroads. Indeed, if GWI were
itself a rail carrier, its North American operations would clearly make
it a Class I carrier.\1\ As it is, GWI is a widespread presence
throughout the national rail network, in which it plays an integral
role. Thus, this is by far the largest and most geographically diverse
collection of railroads impacting the U.S. freight network ever to be
processed as a class exemption under the Board's existing
regulations.\2\
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\1\ See Indexing the Annual Operating Revenues of R.R.s, EP 748
(STB served June 14, 2019) (calculating Class I revenue threshold at
$489,935,956).
\2\ Cf. Fortress Inv. Grp. LLC--Control Exemption--RailAmerica,
Inc., FD 34972 (STB served Dec. 22, 2006) (publishing notice for the
acquisition of 30 rail carriers); Mont. Rail Link, Inc.--Exemption
Acquis. & Operation--Certain Lines of Burlington N. R.R., FD 31089
(ICC served May 26, 1988) (denying petitions for revocation of
notice of exemption permitting acquisition of two non-contiguous
segments of rail line totaling 830.62 miles in length in Montana and
Idaho); Wisc. Cent. Ltd.--Exemption Acquis. & Operation--Certain
Lines of Soo Line R.R., FD 31102 (ICC served Oct. 8, 1987) (vacating
stay and permitting consummation of a class exemption for the
acquisition of 1,801 miles of rail line in Wisconsin and parts of
Michigan, Minnesota, and Illinois; acquisition of 173.6 miles of
trackage rights in Wisconsin and parts of Minnesota and Illinois;
and assignment of 27.7 miles of trackage rights on third-party
carriers in Wisconsin).
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For these reasons, in my opinion, this proceeding raises
significant questions regarding whether transactions of this magnitude
were contemplated when the class exemption regulations were adopted,
and therefore raises questions as to whether it is appropriate for such
major transactions to be eligible under those regulations in the first
place. While I agree that, under existing regulations, this transaction
may proceed as a class exemption, I do think the Board should consider
in the future whether the exemption process should be applicable to
transactions of such scale.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2019-23956 Filed 10-31-19; 8:45 am]
BILLING CODE 4915-01-P
