Brookfield Asset Management, Inc. and DJP XX, LLC-Control Exemption-Genesee & Wyoming Inc., et al., 58798-58801 [2019-23956]

Download as PDF 58798 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. VerDate Sep<11>2014 19:23 Oct 31, 2019 Jkt 250001 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.) PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 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) E:\FR\FM\01NON1.SGM 01NON1 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.) VerDate Sep<11>2014 19:23 Oct 31, 2019 Jkt 250001 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). PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 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.) E:\FR\FM\01NON1.SGM 01NON1 58800 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. VerDate Sep<11>2014 19:23 Oct 31, 2019 Jkt 250001 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 PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 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.) E:\FR\FM\01NON1.SGM 01NON1 Federal Register / Vol. 84, No. 212 / Friday, November 1, 2019 / Notices 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). VerDate Sep<11>2014 19:23 Oct 31, 2019 Jkt 250001 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]


-----------------------------------------------------------------------

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).
---------------------------------------------------------------------------

    \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.)
---------------------------------------------------------------------------

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.)
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.)
---------------------------------------------------------------------------

    \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.)
---------------------------------------------------------------------------

    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.)
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

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.)
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.)
---------------------------------------------------------------------------

    \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.)
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \11\ (See Applicants Comment 12, Aug. 16, 2019.)
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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