Carload Express, Inc.-Control Exemption-The Maryland and Delaware Railroad Company, 1220-1221 [2025-00068]

Agencies

• Surface Transportation Board

[Federal Register Volume 90, Number 4 (Tuesday, January 7, 2025)]
[Notices]
[Pages 1220-1221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00068]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36807]


Carload Express, Inc.--Control Exemption--The Maryland and 
Delaware Railroad Company

    By petition filed on October 30, 2024, Carload Express, Inc. 
(Carload), a noncarrier, seeks an exemption under 49 U.S.C. 10502 from 
the prior approval requirements of 49 U.S.C. 11323 to acquire control 
of The Maryland and Delaware Railroad Company (MDDE), a Class III rail 
carrier, through the purchase of the outstanding equity shares in MDDE 
from Old Line Holdings, Inc. (Old Line). As discussed below, the Board 
will grant Carload's petition for exemption.

Background

    MDDE, a wholly owned subsidiary of Old Line, is a Class III rail 
carrier that operates three unconnected rail lines between Delaware and 
Maryland: (1) the Centreville/Chesterton Line extending from milepost 
1.0 at Townsend, Del., to milepost 34.0 at Centreville, Md., and from 
milepost 0.0 (milepost 9.3 on the Centreville segment) at Massey, Md., 
to milepost 18.82 at Worton, Md.; (2) the Seaford Line extending from 
milepost 2.3 at Seaford, Del., to milepost 24.24 at Linkwood, Md.; and 
(3) the Snow Hill Line extending from milepost 39.0 at Frankford, Del., 
to milepost 65.7 at Snow Hill, Md., which MDDE also owns. (Id. at 3); 
see Md. & Del. R.R.--Acquis. Exemption--Snow Hill Shippers Ass'n, Inc., 
FD 33772 (STB served Feb. 24, 2000).
    Carload is a noncarrier holding company that currently controls 
three Class III rail carriers: two operating in southwestern 
Pennsylvania,\1\ and the Delmarva Central Railroad Company (DCR), which 
leases or operates approximately 187 miles of rail line on the Delmarva 
Peninsula in Delaware, Maryland, and Virginia. (Pet. 1-2.) According to 
Carload, DCR operates a rail line that connects with each of the rail 
lines operated by MDDE,\2\ and therefore the proposed control 
transaction does not qualify for the class exemption under 49 CFR 
1180.2(d)(2). (Pet. 1, 3.)
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    \1\ Carload controls Allegheny Valley Railroad Company and 
Southwest Pennsylvania Railroad Company. See Carload Express, Inc.--
Continuance in Control Exemption--Delmarva Cent. R.R., FD 36072 (STB 
served Dec. 2, 2016); see also Katahdin Railcar Servs. LLC--Change 
in Operators Exemption--Ohio Terminal Ry., FD 36487 (STB served Mar. 
30, 2021).
    \2\ According to Carload, MDDE and DCR connect at Townsend, 
Seaford, and Frankford, Delaware. (Pet. 3.)
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    Concurrent with Carload's petition, Old Line filed a verified 
notice of exemption to acquire from MDDE and operate an approximately 
23.7-mile portion of the Snow Hill Line (Snow Hill South Line). 
Verified Notice, Old Line Holding Co.--Acquis. & Operation Exemption--
Line of the Md. & Del. R.R., FD 36806. Notice of the exemption was 
served and published in the Federal Register on November 15, 2024 (89 
FR 90343). According to the petition, Old Line's acquisition of the 
Snow Hill South Line from MDDE would occur immediately prior to 
Carload's acquisition of MDDE from Old Line, pursuant to a purchase 
agreement dated August 1, 2024. (Pet. 1, 4.) The purchase agreement 
also contemplates that DCR would acquire from MDDE the remaining three-
mile portion of the Snow Hill Line (Snow Hill North Line).\3\ (Pet. 4.) 
In the petition, Carload explains that the structure of the 
transactions ``accommodates certain tax treatment of the Snow Hill 
North Line acquisition'' and would divide ownership of the Snow Hill 
Line between DCR and Old Line. (Id.) Carload states that, after it 
acquires control of MDDE, MDDE would continue operating the 
Centreville/Chesterton and Seaford Lines.\4\ (Pet. 4.)
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    \3\ DCR filed a verified notice of exemption for the proposed 
acquisition, and notice of the exemption was served and published in 
the Federal Register on October 4, 2024 (89 FR 80982). See Delmarva 
Cent. R.R.--Acquis. Exemption--Line of the Md. & Del. R.R., FD 
36805, slip op. at 1 (STB served Oct. 4, 2024) (noting DCR stated 
that it would operate the Snow Hill North Line). According to the 
petition, following DCR's proposed acquisition of the Snow Hill 
North Line and Old Line's proposed acquisition of the Snow Hill 
South Line, ``the current DCR-MDDE interchange at Frankford will be 
replaced by a DCR-Old Line interchange at Selbyville.'' (Pet. 4 
n.10.)
    \4\ Carload states that these lines are owned by the Maryland 
Transit Administration and are operated by MDDE pursuant to a 
modified certificate of public convenience and necessity. (Pet. 3); 
see Md. & Del. R.R.--Modified Rail Certificate, FD 29830 (ICC served 
Feb. 9, 1982).
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    According to Carload, upon consummation of the proposed 
transaction, the rail operations of MDDE and DCR would be closely 
coordinated and MDDE's operations would be supported by Carload and 
DCR. (Id. at 5.) Carload states that it does not anticipate service 
level changes on the Centreville/Chesterton and Seaford Lines. (Id.) 
Carload also states that the proposed transaction would not result in 
any shipper losing rail service or existing competitive options. (Id.) 
According to Carload, DCR serves as MDDE's sole physical link to the 
remainder of the national rail system and all traffic currently moving 
over MDDE also moves over DCR's rail line, which would continue after 
Carload acquires control of MDDE. (Id. at 3, 5.) Carload also states 
that the proposed transaction would not alter the arrangement that, as 
handling carriers for Norfolk Southern Railway Company (NSR), MDDE and 
DCR do not control pricing on interline traffic with NSR. (Id. at 4-5.)
    Carload states that the proposed transaction would ``bring to MDDE 
the strengths and resources of an established short-line operator'' 
while preserving MDDE's current service. (Id. at 7.) Carload further 
states that the proposed transaction would permit coordination between 
the rail carriers, thereby ``enhancing effective rail management and 
the economic benefits of MDDE's service.'' (Id.) According to Carload, 
the proposed transaction would not adversely impact competition, as 
MDDE and DCR do not serve common industries where they connect. (Id. at 
8.) Carload also states that the proposed transaction would not impact 
competitive options because all MDDE traffic would continue moving over 
DCR's rail line. (Id. at 5, 8.) According to Carload, ``MDDE will 
simply be incorporated into the Carload family of short-line 
carriers,'' and shippers may benefit from greater efficiencies as a 
result. (Id. at 8.)
    Carload seeks expedited consideration so that the proposed 
transaction--along with all related transactions involving Carload, 
DCR, MDDE, and Old Line--can be consummated no later than January 31, 
2025. (Id. at 10.) According to Carload, an expedited decision would 
allow the parties to avoid multiple closings. (Id.)

Discussion and Conclusions

    Under 49 U.S.C. 11323(a)(5), prior approval by the Board is 
required for the

[[Page 1221]]

acquisition of control of 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), however, the Board shall, to the maximum extent consistent 
with U.S. Code Title 49, subtitle IV, part A, exempt a transaction from 
regulation if it finds that (1) regulation is not necessary to carry 
out the rail transportation policy (RTP) of 49 U.S.C. 10101, 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 sections 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); ensuring the continuation of a sound rail 
transportation system that would continue to meet the needs of the 
public, 49 U.S.C. 10101(4); fostering sound economic conditions in 
transportation, 49 U.S.C. 10101(5); reducing regulatory barriers to 
entry into and exit from the industry, 49 U.S.C. 10101(7); encouraging 
efficient management of railroads, 49 U.S.C. 10101(9); and providing 
for the expeditious resolution of this proceeding, 49 U.S.C. 10101(15). 
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.\5\ MDDE and DCR do not serve common 
industries where they connect at Townsend, Seaford, and Frankford. 
(Pet. 8.) Further, the common control of MDDE and DCR would not reduce 
competitive options for shippers, as all MDDE traffic currently moves 
over DCR's line and would continue to do so following Carload's 
acquisition of MDDE. (Id. at 5, 8.) Indeed, because DCR is MDDE's 
``sole physical link'' to the remainder of the interstate rail network, 
there is no risk that Carload may foreclose interchange between MDDE 
and other connecting carriers. (Id. at 3, 8 n.12; see also id., Ex. A 
(showing MDDE interchanges).) Shippers may also benefit from improved 
coordination between MDDE and DCR. Moreover, no shipper (or any other 
entity) has objected to the proposed control transaction. Nevertheless, 
to ensure that the shippers are informed of our action, we will require 
Carload to serve a copy of this decision on all shippers on the 
Centreville/Chesterton, Seaford, and Snow Hill North Lines and certify 
to the Board that it has done so within five days of the service date 
of this decision.
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    \5\ 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 carrier of its statutory obligation to protect 
the interests of employees. Section 11326(c), however, does not provide 
for labor protection for transactions under sections 11324 and 11325 
that involve only Class III rail carriers. Therefore, because all the 
carriers involved in the proposed transaction are Class III carriers, 
the Board may not impose labor protective conditions.
    The control transaction is exempt from environmental reporting 
requirements under 49 CFR 1105.6(c)(1)(i) because it will 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 will not substantially change the level of 
maintenance of railroad properties.
    As indicated above, Carload seeks to be able to consummate this 
transaction and other related transactions together by no later than 
January 31, 2025. The Board finds that Carload's request is reasonable. 
Accordingly, the effective date of the exemption will be January 31, 
2025. 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.''). Petitions for stay must be filed by 
January 16, 2025. Petitions to reopen will be due by January 27, 2025.
    It is ordered:
    1. Under 49 U.S.C. 10502, the Board exempts from the prior approval 
requirements of 49 U.S.C. 11323-25 Carload's acquisition of control of 
MDDE through the purchase of the outstanding equity shares in MDDE from 
Old Line.
    2. Notice of the exemption will be published in the Federal 
Register.
    3. Carload shall serve a copy of the decision on all shippers on 
the Centreville/Chesterton, Seaford, and Snow Hill North Lines and 
certify to the Board that it has done so, by January 7, 2025.
    4. The exemption will become effective on January 31, 2025. 
Petitions for stay must be filed by January 16, 2025. Petitions to 
reopen must be filed by January 27, 2025.

    Decided: December 31, 2024.

    By the Board, Board Members Fuchs, Hedlund, Primus, and Schultz.
Zantori Dickerson,
Clearance Clerk.
[FR Doc. 2025-00068 Filed 1-6-25; 8:45 am]
BILLING CODE 4915-01-P