Stefan Soloviev, Executor, Estate of Sheldon H. Solow-Continuance in Control Exemption-Colorado Pacific San Luis Railroad LLC, 92270-92272 [2024-27303]

Agencies

• Surface Transportation Board

[Federal Register Volume 89, Number 225 (Thursday, November 21, 2024)]
[Notices]
[Pages 92270-92272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27303]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36795]


Stefan Soloviev, Executor, Estate of Sheldon H. Solow--
Continuance in Control Exemption--Colorado Pacific San Luis Railroad 
LLC

    By petition filed on August 23, 2024, Stefan Soloviev, Executor, 
the Estate of Sheldon H. Solow (the Estate), seeks an exemption under 
49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 
11323-24 to continue in control of Colorado Pacific San Luis Railroad 
LLC (CXSL), upon CXSL's becoming a carrier in a related transaction. As 
discussed below, the Board will grant the exemption.

Background

    According to the petition, the Estate is a noncarrier that 
currently controls two rail carriers. The Estate controls Colorado 
Pacific Railroad LLC (CXR), a Class III rail carrier, through the 
Estate's control of KCVN, LLC (KCVN), a

[[Page 92271]]

noncarrier.\1\ (Pet. 2, 5.) The Estate also controls Colorado Pacific 
Rio Grande Railroad LLC (CXRG), a Class III rail carrier.\2\ (Pet. 3.) 
The rail carrier the Estate is seeking to control, CXSL, is a wholly 
owned subsidiary of Soloviev Investors LLC (Soloviev Investors), which 
is controlled by the Estate. (Id. at 2-3.) The exemption here would 
allow the Estate to control CXR, CXRG, and CXSL.\3\ (Id. at 5.)
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    \1\ According to the petition, CXR is a wholly owned subsidiary 
of KCVN. (Pet. 2 n.1.) In a letter filed with the Board on September 
16, 2024, the Estate clarified that the Estate and Stefan Soloviev 
each own 50% of KCVN. (Estate Letter 1.) Stefan Soloviev is the 
executor of the Estate. (Pet. 2-3.)
    \2\ See Colo. Pac. Rio Grande R.R.--Acquis. & Operation 
Exemption Containing Interchange Commitment--San Luis & Rio Grande 
R.R., FD 36656 (STB served Jan. 5, 2023) (granting CXRG authority to 
acquire and operate the assets of the San Luis Rio Grande Railroad 
(SLRG)); Soloviev ex rel. Solow--Continuance in Control Exemption--
Colo. Pac. Rio Grande R.R., FD 36662 (STB served Feb. 2, 2023) 
(granting the Estate authority to continue in control of CXRG). 
Subsequently, CXRG received authority to acquire and operate 
approximately 1.53 miles of additional SLRG track known as the 
Blanca Spur. See Colo. Pac. Rio Grande R.R.--Pet. for Exemption--
Acquis. & Operation of a Line of R.R. in Costilla Cnty., Colo., FD 
36694 (STB served Sept. 18, 2023).
    \3\ According to the Estate, it is intended that CXR, CXRG, and 
CXSL will all eventually be owned and controlled by the Soloviev 
Group, a noncarrier corporation headed by Stefan Soloviev. (Pet. 3 
n.3.) The petition states that such transition will be accompanied 
by the appropriate regulatory filings to the Board. (Id.)
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    On August 22, 2024, CXSL filed a verified notice of exemption 
pursuant to 49 CFR 1150.31 to acquire and operate a 13-mile line of 
railroad owned by the San Luis Central Railroad Company (SLC). See 
Colo. Pac. San Luis R.R.--Acquis. & Operation Exemption--San Luis Cent. 
R.R., FD 36794 (STB served Sept. 6, 2024). Notice of the exemption was 
served and published in the Federal Register on September 6, 2024 (86 
FR 72,920).\4\ Upon CXSL's acquisition of SLC's assets, which the 
Estate indicates occurred on October 1, 2024, CXSL became a rail 
carrier.\5\ As a result, the Estate needs authorization to continue in 
control of CXSL.
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    \4\ The owners of SLC and Soloviev Investors executed an Asset 
Purchase Agreement on July 26, 2024, whereby the track assets and 
certain other assets of SLC were to be sold to Soloviev Investors or 
``its permitted assignee,'' and Soloviev Investors assigned all of 
its rights in the Asset Purchase Agreement to CXSL on July 31, 2024. 
See Colo. Pac. San Luis R.R.--Acquis. & Operation Exemption, FD 
36794, slip op. at 1.
    \5\ The Estate's continuance in control petition in this docket 
noted that CXSL's acquisition and operating authority granted in 
Docket No. FD 36794 could become effective and that transaction 
could close before the Board's decision on the Estate's continuance 
in control authority becomes effective. For that reason, the Estate 
indicated that it would enter into a voting trust agreement pursuant 
to 49 CFR part 1013 to permit CXSL to begin operations immediately 
upon receiving acquisition and operating authority, while ensuring 
that the Estate does not control CXSL until the continuance in 
control authority becomes effective. (Pet. 4.) The acquisition and 
operating authority granted in Docket No. FD 36794 became effective 
on September 22, 2024. On October 7, 2024, the Estate filed a copy 
of its voting trust agreement with the Board, as required by 49 CFR 
1013.3(b). The voting trust agreement, which was executed on October 
1, 2024, indicates that CXSL exercised its acquisition and operating 
authority on the same date. (Voting Trust Agreement 1.)
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    The Estate explains that because the SLC rail line acquired by CXSL 
connects to the CXRG mainline at Sugar Junction, Colo., the Estate 
cannot seek continuance in control authority pursuant to the class 
exemption at 49 CFR 1180.2(d)(2). (Pet. 4, 6); see 49 CFR 1180.2(d)(2) 
(requiring that the subject line not connect with any other rail lines 
in the corporate family). No additional rail carriers connect to the 
line that CXSL acquired from SLC. (See Pet., Ex. A.)
    In support of its petition, the Estate asserts that its proposed 
control of CXSL is part of an overall transaction that is intended to 
continue and enhance the rail service provided to shippers along the 
former SLC rail line. (Pet. 7.) In particular, the Estate states that 
its control would allow farmers along the rail line to increase their 
railroad shipments, as some of those shippers are currently shipping by 
truck due in part to the inability of SLC to meet their needs. (Id.) 
The Estate asserts that its control of CXSL would enable the infusion 
of resources and other support necessary to achieve these objectives. 
(Id.) Given these circumstances, the Estate argues that exempting it 
from the requirements of 49 U.S.C. 11323-24 is consistent with the rail 
transportation policy of 49 U.S.C. 10101 (RTP). (Id.)
    The Estate also asserts that the transaction is limited in scope, 
as it is confined to a 13-mile, stub-ended rail line, and that CXSL 
intends to continue rail service and try to expand it. (Id. at 8.) The 
Estate also claims that its control of CXSL would not result in an 
abuse of market power; instead, it asserts that no shipper along the 
CXSL line will lose rail service options because of the transaction and 
that efficiencies and improvements through CXSL's connection to CXRG 
should enhance existing service and incentivize use of the line by new 
shippers. (Id. at 8-9.)
    The Estate seeks expedited consideration of its petition. As noted, 
supra note 6, the Estate has placed its membership interest in CXSL 
into a voting trust until the control authority sought in this docket 
becomes effective. The Estate requests expedition to minimize the 
length of time the membership interest must remain in the voting trust. 
(Id. at 10.)

Discussion and Conclusions

    Under 49 U.S.C. 11323(a)(5), prior approval by the Board is 
required for the acquisition of control over a rail carrier by a person 
that is not a rail carrier but that controls any number of rail 
carriers. Under 49 U.S.C. 10502(a), the Board, to the maximum extent 
consistent with 49 U.S.C. subtitle IV, part A, must exempt a 
transaction or service from regulation if it finds that: (1) regulation 
is not necessary to carry out the RTP; and (2) either (a) the 
transaction or service is limited in scope, or (b) regulation is not 
needed to protect shippers from the abuse of market power.
    In this case, an exemption from the prior approval requirements of 
49 U.S.C. 11323-25 is consistent with the standards of 49 U.S.C. 10502. 
Detailed scrutiny of the proposed transaction through an application 
for review and approval under 49 U.S.C. 11323-25 is not necessary to 
carry out the RTP. An exemption would promote the RTP by minimizing the 
need for federal regulatory control over the proposed transaction, 49 
U.S.C. 10101(2), by reducing regulatory barriers to entry, 49 U.S.C. 
10101(7), and by facilitating the honest and efficient management of 
railroads, 49 U.S.C. 10101(9). Granting the Estate an exemption to 
control CXSL would also allow it to make investments in the rail line 
and support a more efficient connection between it and the CXRG 
mainline; this would facilitate the development and continuation of a 
sound rail transportation system with effective competition to meet the 
needs of the public, 49 U.S.C. 10101(4), and foster sound economic 
conditions in transportation, 49 U.S.C. 10101(5). The exemption would 
also promote energy conservation by incentivizing the diversion to rail 
of traffic currently moving by truck, 49 U.S.C. 10101(14). Other 
aspects of the RTP would not be adversely affected.
    Regulation of the transaction is not needed to protect shippers 
from an abuse of market power.\6\ Because the line that CXSL has 
acquired connects only to CXRG, there is no risk that CXSL may 
foreclose interchange with other connecting carriers or that shippers 
will otherwise lose access to alternative rail service as a result of 
the transaction. And, as noted above, the transaction would enable 
improvements that could make the line a more attractive option for rail 
users. Moreover, no shipper (or

[[Page 92272]]

any other entity) has objected to this continuance in control 
transaction or CXSL's line acquisition authorized in Docket No. FD 
36794. Nevertheless, to ensure that the shippers are informed of our 
action, we will require the Estate to serve a copy of this decision on 
all shippers on the line that was acquired and is now operated by CXSL 
within five days of the service date of this decision and certify to 
the Board that it has done so.
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    \6\ Given this finding, the Board need not determine whether the 
transaction is limited in scope. See 49 U.S.C. 10502(a).
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    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. However, 49 U.S.C. 11326(c) 
does not provide for labor protection for transactions under 49 U.S.C. 
11324 and 11325 that involve only Class III rail carriers. Accordingly, 
the Board may not impose labor protective conditions here because all 
carriers involved are Class III carriers.
    The control transaction is exempt from environmental reporting 
requirements under 49 CFR 1105.6(c)(1)(i) because it would not result 
in any significant change in carrier operations. Similarly, the 
transaction is exempt from the historic reporting requirements under 49 
CFR 1105.8(b)(3), because it would not substantially change the level 
of maintenance of railroad properties.
    The Board also finds the Estate's request for expedited action on 
its petition for exemption to be reasonable under the circumstances 
and, therefore, the effective date of the exemption will be December 6, 
2024. See 49 CFR 1121.4(e) (``Unless otherwise specified in the 
decision, an exemption generally will be effective 30 days from the 
service date of the decision granting the exemption.''). Petitions for 
stay must be filed by November 29, 2024. Petitions to reopen will be 
due by December 11, 2024.
    It is ordered:
    1. Under 49 U.S.C. 10502, the Board exempts the transaction 
described above from the prior approval requirements of 49 U.S.C. 
11323-25.
    2. Notice of this control exemption will be published in the 
Federal Register.
    3. The Estate shall serve a copy of the decision on all shippers on 
the CXSL line and certify to the Board that it has done so, by November 
26, 2024.
    4. The control exemption will become effective on December 6, 2024. 
Petitions to stay must be filed by November 29, 2024. Petitions to 
reopen must be filed by December 11, 2024.

    Decided: November 18, 2024.

    By the Board, Board Members Fuchs, Hedlund, Primus, and Schultz.
Kenyatta Clay,
Clearance Clerk.
[FR Doc. 2024-27303 Filed 11-20-24; 8:45 am]
BILLING CODE 4915-01-P