Bessemer and Lake Erie Railroad Company-Acquisition and Operation-Certain Rail Lines of CSX Transportation, Inc. in Onondaga, Oswego, Jefferson, Saint Lawrence, and Franklin Counties, NY, 60468-60472 [2019-24438]

Agencies

• Surface Transportation Board

[Federal Register Volume 84, Number 217 (Friday, November 8, 2019)]
[Notices]
[Pages 60468-60472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24438]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36347]


Bessemer and Lake Erie Railroad Company--Acquisition and 
Operation--Certain Rail Lines of CSX Transportation, Inc. in Onondaga, 
Oswego, Jefferson, Saint Lawrence, and Franklin Counties, NY

AGENCY: Surface Transportation Board.

[[Page 60469]]


ACTION: Decision No. 1 in Docket No. FD 36347; notice of acceptance of 
application; issuance of Procedural Schedule.

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SUMMARY: The Surface Transportation Board (Board) is accepting for 
consideration the application filed on October 11, 2019, by Bessemer 
and Lake Erie Railroad Company (B&LE or Applicant).\1\ The application 
seeks Board approval for B&LE, an indirect wholly owned rail carrier 
subsidiary of Canadian National Railway Company (CNR), to acquire from 
CSX Transportation, Inc. (CSXT), and to operate approximately 236.3 
miles of rail line in New York. This proposal is referred to as the 
Transaction.
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    \1\ Applicant initially submitted its application on October 10, 
2019. On October 11, 2019, Applicant amended its original submission 
to correct a signature page that was inadvertently left blank. 
Accordingly, October 11, 2019 will be considered the filing date of 
the application for the purposes of this proceeding.
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    The Board finds that the application is complete and that the 
Transaction is a minor transaction based upon the preliminary 
determination that the Transaction clearly would not have any 
anticompetitive effects and that, if any such anticompetitive effects 
were found to exist, they would clearly be outweighed by the 
Transaction's anticipated contribution to the public interest in 
meeting significant transportation needs. The Board makes this 
preliminary determination based on the evidence presented in the 
application. The Board emphasizes that this is not a final 
determination and may be rebutted by subsequent filings and evidence 
submitted into the record for this proceeding. The Board will carefully 
consider any claims that the Transaction would have anticompetitive 
effects.

DATES: The effective date of this decision is November 8, 2019. Any 
person who wishes to participate in this proceeding as a Party of 
Record must file, no later than November 25, 2019, a notice of intent 
to participate. All comments, protests, requests for conditions, and 
any other evidence and argument in opposition to the primary 
application and related filings, including filings by the U.S. 
Department of Justice (DOJ) and the U.S. Department of Transportation 
(DOT), must be filed by December 9, 2019. Responses to comments, 
protests, requests for conditions, other opposition, and rebuttal in 
support of the primary application or related filings must be filed by 
January 8, 2020. See Procedural Schedule. A final decision in this 
matter will be served no later than February 21, 2020. Further 
procedural orders, if any, would be issued by the Board, if necessary.

ADDRESSES: Any filing submitted in this proceeding must be filed with 
the Board either via e-filing or in writing addressed to: Surface 
Transportation Board, 395 E Street, SW, Washington, DC 20423-0001. In 
addition, one copy of each filing must be sent (and may be sent by 
email only if service by email is acceptable to the recipient) to each 
of the following: (1) Secretary of Transportation, 1200 New Jersey 
Avenue SE, Washington, DC 20590; (2) Attorney General of the United 
States, c/o Assistant Attorney General, Antitrust Division, Room 3109, 
Department of Justice, Washington, DC 20530; (3) Applicant's 
representative, Claire M. Maddox, Dentons US LLP, 1900 K Street NW, 
Washington, DC 20006; and (4) any other person designated as a Party of 
Record on the service list notice. As explained below, the service list 
notice will be issued as soon after November 25, 2019, as practicable.

FOR FURTHER INFORMATION CONTACT: Amy Ziehm at (202) 245-0391. 
Assistance for the hearing impaired is available through the Federal 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: Applicant is an indirect wholly owned rail 
carrier subsidiary of CNR that owns and operates approximately 159 
miles of railroad lines in Ohio and Pennsylvania. (Appl. 1, 19.) CSXT 
is a Class I railroad that owns and operates approximately 21,000 miles 
of railroad lines. (Id. at 19.) Applicant seeks the Board's prior 
review and authorization pursuant to 49 U.S.C. 11323-25 to acquire and 
operate certain CSXT lines, collectively known as the Massena Lines, 
from Woodard, NY, to the U.S.-Canadian border near Fort Covington, NY. 
(Appl. 1-2.) More specifically, these lines consist of CSXT's St. 
Lawrence Subdivision between CSXT milepost QM 3.0 at or near Woodard 
and CSXT milepost QM 183.1 at or near Fort Covington, on the U.S.-
Canadian border, a distance of approximately 179.2 miles; CSXT's Fulton 
Subdivision between CSXT milepost QMF 7.2 at or near a connection to 
CSXT's St. Lawrence Subdivision near Woodard and CSXT milepost QMF 
37.95 at or near Fort Ontario, NY, a distance of approximately 31 
miles; CSXT's Balmat Industrial Track between CSXT milepost QMB 0 at or 
near a connection with CSXT's St. Lawrence Subdivision near CSXT 
milepost QM 107 and CSXT milepost QMB 9, a distance of approximately 9 
miles; CSXT's Rooseveltown Industrial Track between CSXT milepost QMR 
63 at or near a connection with the St. Lawrence Subdivision at Helena, 
NY, and CSXT milepost QMR 68 at or near Rooseveltown, NY, a distance of 
approximately 5 miles; and CSXT's Carthage Branch between CSXT milepost 
QMC 86.8 at or near a connection with CSXT's St. Lawrence Subdivision 
near Philadelphia, NY, and CSXT milepost QMC 74.7 at or near Regis, NY, 
a distance of approximately 12 miles and CSXT's connection with Mohawk, 
Adirondack, and Northern Railroad Corporation. (Id. at 21-22.) The 
Transaction is part of a larger purchase agreement, under which CNR and 
B&LE have agreed to acquire from CSXT approximately 278.1 miles of rail 
line (including the 236.3 miles that comprise the Massena Lines) 
between Beauharnois, Que., and Woodard, pursuant to a Purchase and Sale 
Agreement (PSA) \2\ that was executed on August 29, 2019.\3\ (Id. at 1-
2, 7 & Ex. 2, Purchase & Sale Agreement.)
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    \2\ Applicant submitted a copy of the PSA with its application 
and designated the PSA as ``highly confidential,'' thus subject to 
the provisions of the protective order issued by the Board on 
October 22, 2019.
    \3\ Applicant identifies CSX Intermodal Terminals, Inc., and St. 
Lawrence and Adirondack Railway Company, together with CSXT, as 
``CSX Parties'' to the PSA. (Appl. 7.)
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    Applicant states that more than 45% of current carload traffic on 
the Massena Lines is overhead traffic exchanged between the CN System 
\4\ and CSXT, for which the Massena Lines provide a direct connection 
and gateway. (Id. at 9.) By acquiring the Massena Lines, Applicant 
seeks to preserve the CN System's direct connection with CSXT for 
overhead traffic that currently moves over the Massena Lines and to 
ensure that traffic using the Massena Lines would continue to move 
directly between the two systems, rather than through an additional 
railroad. (Id.) Applicant also seeks to improve efficiencies of 
operations along the Massena Lines and work with customers on the 
Massena Lines to understand their rail service needs, develop efficient 
plans for rail operations to their facilities, and help them grow their 
future businesses. (Id. at 10.)
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    \4\ Applicant defines ``CN System'' as the rail system operated 
in Canada by CNR and in the United States by CN, which it defines as 
CNR's U.S. rail operating subsidies, including B&LE. (Appl. iv.)
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    Financial Arrangements. According to Applicant, no new securities 
would be issued in connection with the Transaction. Applicant states 
that the only relevant financial arrangement is the payment of the 
purchase price by CNR and B&LE, as provided in the PSA. (Id. at 11.)

[[Page 60470]]

    Passenger Service Impacts. Applicant states that the Transaction 
would have no impact on commuter or other passenger rail service, 
because no such services are provided on the Massena Lines, nor have 
there been any such services on the lines since at least the 
establishment of the National Railroad Passenger Corporation (Amtrak) 
in 1971. (Id., Ex. 15 at 10.)
    Discontinuances/Abandonments. Applicant states that it does not 
plan to abandon or discontinue service on rail lines in the United 
States as a result of the Transaction. (Id., Ex. 15 at 10.) As 
discussed below, Applicant states that, before closing, it plans to 
seek formal discontinuance of its inactive 1989 trackage rights on 
CSXT's St. Lawrence Subdivision between Fort Covington and Massena, NY, 
under the Board's class exemption procedures at 49 CFR 1152.50 for 
trackage rights that have not been utilized within the past two years. 
(Id. at 10-11.)
    Public Interest Considerations. Applicant asserts that the 
Transaction would not result in the lessening of rail competition, 
creation of a monopoly, or restraint of trade in freight surface 
transportation in any region of the United States. (Appl. at 12.) 
Applicant states that the transaction is an end-to-end line 
acquisition, with a ``principal effect'' being the relocation of an 
interchange point between the CN System and CSXT from Huntingdon, Que., 
to Woodard, extending the length of the CN System's haul and shifting 
operations on the Massena Lines from CSXT to B&LE. (Id.) Applicant 
notes that the Transaction would not render other trackage duplicative 
or redundant and that the CN System and CSXT have no network overlap in 
the United States in the vicinity of the Massena Lines. (Id.)
    Applicant asserts that the Transaction would maintain the 
competitive status quo. According to the Applicant, customers on the 
Massena Line currently receive direct service from a single carrier, 
CSXT, and they would not see a reduction in the number of competitive 
rail options available by substituting direct B&LE service for direct 
CSXT service. (Id. at 12.) Applicant states that, in 1989, CNR retained 
trackage rights over the main line between Fort Covington and Massena 
in connection with the purchase by Consolidated Rail Corporation 
(Conrail) of what was previously CNR's line between Massena and 
Huntingdon. (Id. at 12-13.) As part of that line sale, CNR retained 
certain limited trackage rights to exclusively serve ``present 
industries [as of 1989] and their successors''; Conrail obtained the 
exclusive right (held by CSXT since 1999) to serve new industries. 
Thus, no individual industry on that line segment has ever been served 
by more than one carrier. (Id.) The 1989 trackage rights also permitted 
CNR to interchange with the Massena Terminal Railroad Company (MSTR) at 
Massena. (Id. at 13.) However, Applicant asserts that CNR has neither 
operated to Massena nor conducted any interchange with MSTR for at 
least 14 years and that the substitution of B&LE for CSXT as the owner 
of the Massena Lines would effectuate no meaningful change in the 
interchange and handling of traffic with MSTR at Massena. (Id. at 14 & 
V.S. Drysdale 7-8.) As noted above, Applicant states that, before 
closing, CNR plans to seek formal discontinuance of its inactive 1989 
trackage rights under the Board's class exemption procedures at 49 CFR 
1152.50. (Id. at 13-14.)
    Moreover, Applicant asserts that the Transaction would cause no 
reduction in the number of transloading or intermodal service options. 
(Id. at 14.) Applicant states that, by maintaining the existing CN 
System-CSXT gateway over the Massena Lines, without the need for an 
added interchange with a third rail carrier, the Transaction would 
preserve existing levels of competition for rail transportation to and 
from the northeastern United States. (Id. at 15.)
    Applicant further states that, following B&LE's acquisition of the 
Massena Lines, it would have opportunities to improve the efficiencies 
of operations along the Massena Lines, such as eliminating two CSXT 
transfer assignments now operating between Massena and Huntingdon. (Id. 
at 10.) Applicant contends that elimination of these two transfer 
assignments would avoid delays and improve overall efficiency of 
operations by reducing estimated total transit time by approximately 24 
hours. (Id.)
    Time Schedule for Consummation. Applicant states that the 
Transaction is scheduled to be consummated immediately upon 
satisfaction of all conditions precedent set forth in the PSA, 
including Board approval of B&LE's application and the Board's approval 
decision becoming effective. (Id. at 8.)
    Environmental Impacts. Applicant states that, pursuant to 49 CFR 
1105.6(c)(1), the Transaction is exempt from environmental reporting 
requirements because the environmental impacts of the Transaction fall 
below the thresholds established in 49 CFR 1105.7(e)(4) and (5). (Id. 
at 23-25.)
    Historic Preservation Impacts. Applicant states that no historical 
reporting is required under 49 CFR 1105.8, as rail operations would 
continue after Applicant's purchase of the Massena Lines, and Applicant 
has no plans to dispose of or alter properties subject to the Board's 
jurisdiction that are 50 years old or older. (Id. at 25.)
    Labor Impacts. Applicant states that CSXT currently employs 50 
employees on the Massena Lines who may be adversely affected by the 
Transaction. (Id. at 17.) Applicant states that no current CN employees 
in the United States would be adversely affected by the Transaction. 
(Id.) B&LE states that it does not have employees in New York and would 
therefore be hiring an estimated 53 employees to operate the Massena 
Lines. (Id., Ex. 15 at 11.) B&LE plans to offer priority hiring 
consideration to CSXT employees working on the Massena Lines in New 
York. (Id. at 17 & Ex. 15 at 11.)
    Applicant states that any employees adversely impacted by the 
Transaction would be entitled to labor protective conditions in 
accordance with New York Dock Railway--Control--Brooklyn Eastern 
District Terminal, 360 I.C.C 60, aff'd New York Dock Railway v. United 
States, 609 F.2d 83 (2d Cir. 1979), as modified by Wilmington Terminal 
Railroad--Purchase & Lease--CSX Transportation Inc., 6 I.C.C. 2d 799, 
814-26 (1990), aff'd sub nom. Railway Labor Executives' Ass'n v. ICC, 
930 F.2d 511 (6th Cir. 1991).
    Primary Application and Related Filings Accepted. The Board finds 
that the proposed Transaction would be a ``minor transaction'' under 49 
CFR 1180.2(c), and the Board accepts the application for consideration 
because it is in substantial compliance with the applicable regulations 
governing minor transactions. See 49 U.S.C. 11321-26; 49 CFR pt. 1180. 
The Board reserves the right to require the filing of supplemental 
information as necessary to complete the record.
    When a transaction does not involve the merger or control of two or 
more Class I railroads, the Board's treatment differs depending upon 
whether the transaction would have ``regional or national 
transportation significance.'' 49 U.S.C. 11325. Under 49 CFR 1180.2, a 
transaction that does not involve two or more Class I railroads is to 
be classified as ``minor''--and thus not having regional or national 
transportation significance--if a determination can be made that 
either: (1) The transaction clearly will not have any anticompetitive 
effects; or (2) any anticompetitive effects will clearly be outweighed 
by the transaction's

[[Page 60471]]

anticipated contribution to the public interest in meeting significant 
transportation needs. A transaction not involving the control or merger 
of two or more Class I railroads is to be classified as ``significant'' 
if neither of these determinations can be made.
    Nothing in the record thus far suggests that the Transaction would 
have anticompetitive effects. The Transaction is an end-to-end 
acquisition involving approximately 236.3 miles of rail line in the 
state of New York. As Applicant notes, the Board has held that end-to-
end transactions are unlikely to raise competitive concerns. See 
Norfolk S. Ry.--Joint Control & Operating/Pooling Agreements--Pan Am S. 
LLC, FD 35147 et al., slip op. at 5 (STB served Mar. 10, 2009). The 
application indicates that the Transaction would maintain the 
competitive status quo, as local customers located on the Massena Lines 
are exclusively served by CSXT now and would be exclusively served by 
B&LE following the Transaction. Additionally, it appears that the 
Transaction would not cause a reduction in the number of transloading 
or intermodal service options.
    Moreover, if anticompetitive effects resulting from the Transaction 
should later be shown to be likely, they would appear, from the face of 
the application, to be clearly outweighed by the Transaction's 
contribution to the public interest in meeting significant 
transportation needs. As noted in the application, CSXT announced in 
June 2018 that it was rationalizing its system by selling several 
lines, including the Massena Lines, that CSXT identified as not being 
core to its business and that could be more valuable to other operators 
well positioned to further improve the lines and better serve local 
customers. (See Appl. 8-9.) With B&LE acquiring the Massena Lines, the 
Transaction would ensure that overhead traffic currently moving over 
the Massena Lines between the CN System and CSXT would continue to move 
directly between the two systems on that route, rather than via a 
third, bridge carrier on that route or via a different direct CN 
System-CSXT gateway that likely would be longer and less efficient than 
the current route.
    Therefore, based on the information provided in the application, 
the Board finds the proposed Transaction to be a minor transaction 
under 49 CFR 1180.2(c). Such a categorization does not mean that the 
proposed Transaction is insignificant or not of importance. Indeed, 
after the record in the proceeding is fully developed, the Board will 
carefully review the proposed Transaction to make certain that it does 
not substantially lessen competition, create a monopoly, or restrain 
trade and that any anticompetitive effects are outweighed by the public 
interest. See 49 U.S.C. 11324(d)(1)-(2). The Board may also impose 
conditions to mitigate or eliminate any anticompetitive impacts of the 
transaction.
    Procedural Schedule. The Board has considered Applicant's motion 
for a procedural schedule, filed October 10, 2019. Applicant's proposed 
procedural schedule provides 30 days for comments from all parties on 
the application and 32 days for the concurrent filing of replies to 
comments and rebuttal in support of the application. The proposed 
procedural schedule then provides 85 days after the close of the 
evidentiary period for the Board to issue its final decision. The Board 
will adopt a procedural schedule that will allow 31 days for comments 
on the application and 30 days for replies to comments and rebuttal in 
support of the application. The Board is required to issue ``a final 
decision by the 45th day after the date on which it concludes the 
evidentiary proceedings,'' 49 U.S.C. 11325(d)(2), and will do so 
here.\5\
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    \5\ This notice will be published in the Federal Register on 
November 8, 2019; all subsequent deadlines will be calculated from 
this date. Deadlines for filings are calculated in accordance with 
49 CFR 1104.7(a).
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    For further information regarding procedural dates, see the 
Procedural Schedule to this decision.
    Notice of Intent to Participate. Any person who wishes to 
participate in this proceeding as a Party of Record must file with the 
Board, no later than November 25, 2019, a notice of intent to 
participate, accompanied by a certificate of service indicating that 
the notice has been properly served on the Secretary of Transportation, 
the Attorney General of the United States, and Applicant's 
representative.
    If a request is made in the notice of intent to participate to have 
more than one name added to the service list as a Party of Record 
representing a particular entity, the extra name(s) will be added to 
the service list as a ``Non-Party.'' Any person designated as a Non-
Party will receive copies of Board decisions, orders, and notices but 
not copies of official filings. Persons seeking to change their status 
must accompany that request with a written certification that he or she 
has complied with the service requirements set forth at 49 CFR 1180.4 
and any other requirements set forth in this decision.
    Service List Notice. The Board will serve, as soon after November 
25, 2019, as practicable, a notice containing the official service list 
(the service list notice). Each Party of Record will be required to 
serve upon all other Parties of Record, within 10 days of the service 
date of the service list notice, copies of all filings previously 
submitted by that party (to the extent such filings have not previously 
been served upon such other parties). Each Party of Record will also be 
required to file with the Board, within 10 days of the service date of 
the service list notice, a certificate of service indicating that the 
service required by the preceding sentence has been accomplished. Every 
filing made by a Party of Record after the service date of the service 
list notice must have its own certificate of service indicating that 
all Parties of Record on the service list have been served with a copy 
of the filing. Members of the United States Congress and Governors are 
not Parties of Record and need not be served with copies of filings, 
unless any Member or Governor has requested to be, and is designated 
as, a Party of Record.
    Service of Decisions, Orders, and Notices. The Board will serve 
copies of its decisions, orders, and notices on those persons who are 
designated on the official service list as a Party of Record or Non-
Party. All other interested persons are encouraged to secure copies of 
decisions, orders, and notices via the Board's website at www.stb.gov.
    Access to Filings. Under the Board's rules, any document filed with 
the Board (including applications, pleadings, etc.) shall be promptly 
furnished to interested persons on request, unless subject to a 
protective order. 49 CFR 1180.4(a)(3). The application and other 
filings in this proceeding will be furnished to interested persons upon 
request and will also be available on the Board's website at 
www.stb.gov. \6\ In addition, the application may be obtained from 
Applicant's representative at the address indicated above.
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    \6\ Applicant has submitted a public version and highly 
confidential version of its application. The public version is 
available on the Board's website. The highly confidential version 
may be obtained subject to the provisions of the protective order 
issued by the Board on October 22, 2019.
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    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.

[[Page 60472]]



                                               Procedural Schedule
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October 10, 2019....................................  Motion for Protective Order and Motion for Establishment
                                                       of Procedural Schedule filed.
October 11, 2019....................................  Application (amended) filed.
November 8, 2019....................................  Board notice of acceptance of application served and
                                                       published in the Federal Register.
November 25, 2019...................................  Notices of intent to participate in this proceeding due.
December 9, 2019....................................  All comments, protests, requests for conditions, and any
                                                       other evidence and argument in opposition to the
                                                       application, including filings of DOJ and DOT, due.
January 8, 2020.....................................  Responses to comments, protests, requests for conditions,
                                                       and other opposition due. Rebuttal in support of the
                                                       application due.
February 21, 2020...................................  Date by which a final decision will be served.
March 22, 2020.\7\..................................  Date by which a final decision will become effective.
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    It is ordered:
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    \7\ The final decision will become effective 30 days after it is 
served.
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    1. The application is accepted for consideration.
    2. The parties to this proceeding must comply with the procedural 
schedule adopted by the Board in this proceeding as shown in this 
decision. The parties to this proceeding must comply with the 
procedural requirements described in this decision.
    3. This decision is effective on November 8, 2019.

    Decided: November 4, 2019.

    By the Board, Board Members Begeman, Fuchs, and Oberman.
Kenyatta Clay,
Clearance Clerk.
[FR Doc. 2019-24438 Filed 11-7-19; 8:45 am]
 BILLING CODE 4915-01-P