Colorado Pacific Rio Grande Railroad, LLC-Petition for Exemption-Acquisition and Operation of Line of Railroad in Costilla County, Colorado, 64020-64021 [2023-20072]

Agencies

• Surface Transportation Board

[Federal Register Volume 88, Number 179 (Monday, September 18, 2023)]
[Notices]
[Pages 64020-64021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20072]


=======================================================================
-----------------------------------------------------------------------

SURFACE TRANSPORTATION BOARD

[Docket No. FD 36694]


Colorado Pacific Rio Grande Railroad, LLC--Petition for 
Exemption--Acquisition and Operation of Line of Railroad in Costilla 
County, Colorado

    The Colorado Pacific Rio Grande Railroad, LLC (CP Rio Grande), a 
Class III carrier, filed a petition for exemption on June 20, 2023, 
seeking after-the-fact authority to acquire in bankruptcy and operate 
1.53 miles of track extending from milepost 0.0 in Blanca, Colo., to 
milepost 1.53 in McClintock, Colo. (the Blanca Spur).\1\ This petition 
follows CP Rio Grande's recent acquisition of substantially all assets 
of the San Luis & Rio Grande Railroad, Inc. (SLRG), in Colorado Pacific 
Rio Grande Railroad--Acquisition & Operation Exemption Containing 
Interchange Commitment--San Luis & Rio Grande Railroad, FD 36656 (STB 
served Jan. 5, 2023).
---------------------------------------------------------------------------

    \1\ Despite the name, the Blanca Spur is not excepted spur track 
but track over which the Board has licensing authority.
---------------------------------------------------------------------------

Background

    According to CP Rio Grande, the Blanca Spur was originally part of 
a 31-mile line completed in 1910 by the San Luis Valley Southern 
Railroad that ran from Blanca, Colo., to Jaroso, Colo., and connected 
to the tracks of the Denver & Rio Grande Railroad. (Pet. 3.) This line 
was acquired by the Southern San Luis Valley Railroad (the old SSLV) in 
1953, at the direction of the Interstate Commerce Commission, the 
Board's predecessor agency. (Id.) Over time, the old SSLV abandoned and 
sold off sections of the line, leaving only the Blanca Spur remaining, 
which the old SSLV ceased operating by the mid-1990s. (Id.) However, 
the old SSLV never sought abandonment authority for the Blanca Spur. 
(Id.) Instead, it sold the Blanca Spur and the underlying right-of-way 
in 2000 to Richard Vondrak of Conejos County, Colo., before dissolving 
as an entity shortly thereafter. (Id.)
    According to CP Rio Grande, Mr. Vondrak never sought or received 
Board approval to acquire or operate the Blanca Spur. (Id.) In 2007, he 
sold his interests in the Blanca Spur and the underlying right-of-way 
to Iowa Pacific Holdings, LLC (IPH), a railroad holding company and the 
parent of Permian Basin Railways (PBR), which in turn owned SLRG. (Id.) 
IPH did not seek authority for that transaction. Instead, in 2012, a 
newly formed Southern San Luis Valley Railroad, LLC (the new SSLV), 
filed a verified notice of exemption to acquire and operate the Blanca 
Spur from IPH, asking the Board to exempt IPH's 2007 transaction, 
arguing that there was no need for the Board to require IPH to 
``unscramble'' it. See S. San Luis Valley R.R.--Acquisition & Operation 
Exemption--Iowa Pac. Holdings, LLC, FD 35586, slip op. at 2 (STB served 
Feb. 10, 2012). In a related transaction, PBR sought an exemption to 
continue in control of the new SSLV upon SSLV's becoming a Class III 
carrier. See Iowa Pac. Holdings, LLC--Continuance in Control--S. San 
Luis Valley R.R., FD 35585 (STB served Feb. 10, 2012). The Board, 
considering the two proceedings together, rejected the new SSLV's 
request and denied PBR's request as moot due to the insufficiency of 
the record. S. San Luis Valley, slip op. at 3. The Board stated that 
should IPH wish to proceed with the contemplated transactions, it 
should trace the history of the Blanca Spur as well as it could, with 
supporting evidence, and request specific authority from the Board for 
this prior transaction, id., but IPH did not do so, (Pet. 4).
    CP Rio Grande further states that SLRG was placed into involuntary 
Chapter 11 bankruptcy in October 2019, with the order granting relief 
for the petition being entered on November 7, 2019. (Pet. 5.) In March 
2021, IPH filed for Chapter 7 bankruptcy, but it was dismissed on 
January 6, 2022. (Id.) As part of a litigation settlement agreement 
entered during those proceedings, the ownership of the Blanca Spur was 
transferred from IPH to SLRG's bankruptcy trustee, which the bankruptcy 
court approved on July 14, 2022. (Id.) SLRG's bankruptcy trustee 
conveyed the Blanca Spur to CP Rio Grande under a purchase and sale 
agreement in January 2023. (Id.) CP Rio Grande filed a notice of 
exemption in Colorado Pacific Rio Grande Railroad, Docket No. FD 36656, 
for the acquisition of most of SLRG's assets on December 20, 2022, and 
later filed this petition for exemption on June 20, 2023. (Pet. 5.)

Discussion and Conclusions

    The Board finds that CP Rio Grande has supplied information 
sufficient to grant this petition.\2\ The petition and supporting 
documents trace the ownership history of the Blanca Spur and do not 
reveal any extant dispute over CP Rio Grande's ownership of the Blanca 
Spur. The documents show that SSLV sold the Blanca Spur to Mr. Vondrak 
on July 14, 2000, (id., Ex. B), before he then sold it to IPH on May 
24, 2007, (id., Ex. B). During the bankruptcy

[[Page 64021]]

proceedings, the Blanca Spur was transferred from IPH to SLRG without 
Board authority, (id., Ex. C), before the bankruptcy trustee for SLRG 
sold the Blanca Spur to CP Rio Grande under a purchase and sale 
agreement in January 2023, also without prior Board authority as 
required by 11 U.S.C. 1172. (Id. at 5.)
---------------------------------------------------------------------------

    \2\ In situations requiring after-the-fact acquisition 
authority, the Board strongly encourages parties to file for such 
authority as soon as possible.
---------------------------------------------------------------------------

    CP Rio Grande indicates Mr. Vondrak cannot be located, and 
according to the Illinois Secretary of State's listing of businesses 
registered in Illinois, IPH was involuntarily dissolved on June 10, 
2022.\3\ There is no indication that any former IPH personnel are 
involved with CP Rio Grande. Similarly, PBR is listed as having been 
dissolved on October 8, 2021,\4\ and SLRG's bankruptcy was discussed in 
greater detail in Colorado Pacific Rio Grande Railroad, FD 36656, slip 
op. at 1-2 (STB served Jan. 5, 2023). Under these circumstances, the 
Board will not require any further action regarding the earlier 
acquisitions and transfers of the Blanca Spur.
---------------------------------------------------------------------------

    \3\ Business Entity Search, Ill. Sec'y of State, apps.ilsos.gov/businessentitysearch/ (click ``Name'' under ``Choose a Search 
Method'' and enter ``Iowa Pacific Holdings'' in the ``Search for'' 
box, click submit, then click the ``IOWA PACIFIC HOLDINGS, LLC'' 
entity which has ``INVOLUNTARY DISSOLUTION'' next to it) (last 
visited Sept. 5, 2023).
    \4\ Id. (click ``Name'' under ``Choose a Search Method'' and 
enter ``Permian Basin Railways'' in the ``Search for'' box, click 
submit, then click the ``PERMIAN BASIN RAILWAYS, INC.'' entity with 
``DISSOLVED'' next to it) (last visited Sept. 5, 2023).
---------------------------------------------------------------------------

    The acquisition of a rail line by a Class III carrier requires 
prior approval from the Board under 49 U.S.C. 10902(a). Under 49 U.S.C. 
10502(a), however, the Board must exempt a transaction or service from 
regulation upon finding that (1) the regulation is not necessary to 
carry out the rail transportation policy (RTP) under 49 U.S.C. 10101 
and (2) either the transaction or service is of limited scope or 
regulation is not needed to protect shippers from the abuse of market 
power.
    The Board finds that an after-the-fact exemption should be granted 
for CP Rio Grande's acquisition of the Blanca Spur. Detailed scrutiny 
of the proposed transaction through an application for review under 49 
U.S.C. 10902 is not necessary here to carry out the RTP, and an 
exemption would promote the RTP by minimizing the need for regulatory 
control over the transaction (49 U.S.C. 10101(2)), ensuring the 
development and continuation of a sound rail transportation system able 
to compete with other modes of transportation and meet the needs of the 
public and national defense (49 U.S.C. 10101(4)), minimizing the need 
for regulatory barriers for entry into and exit from the industry (49 
U.S.C. 10101(7)), encouraging honest and efficient management of 
railroads (49 U.S.C. 10101(9)), and providing for the expeditious 
handling and resolution of proceedings required or permitted to be 
brought under this part (49 U.S.C. 10101(15)). Other aspects of the RTP 
will not be adversely affected.
    Regulation of the transaction is not needed to protect shippers 
from an abuse of market power. CP Rio Grande purchased the Blanca Spur 
out of bankruptcy for the purpose of investing in the track and 
developing business for existing and new shippers. Granting the 
exemption would ensure that service along the Blanca Spur can continue 
because CP Rio Grande will have a common carrier obligation to provide 
service upon reasonable request along the track.
    Under 49 CFR 1105.6(c)(1), this action, which will not result in 
significant changes in carrier operations, is categorically excluded 
from environmental review. Similarly, under 49 CFR 1105.8(b)(1), no 
historic report is required because the subject transaction is for 
continued rail service, CP Rio Grande has indicated no plans to alter 
railroad properties 50 years old or older, and any future abandonment 
of the Blanca Spur would be subject to Board jurisdiction.
    It is ordered:
    1. Under 49 U.S.C. 10502, the Board exempts CP Rio Grande's 
acquisition and operation of the Blanca Spur from the prior approval 
requirements of 49 U.S.C. 10902.
    2. Notice of this exemption will be published in the Federal 
Register.
    3. This decision will be effective on October 18, 2023. Petitions 
for stay must be filed by September 28, 2023. Petitions to reopen must 
be filed by October 9, 2023.

    Decided: September 11, 2023.

    By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and 
Schultz.
Regena Smith-Bernard,
Clearance Clerk.
[FR Doc. 2023-20072 Filed 9-15-23; 8:45 am]
BILLING CODE 4915-01-P