STB REPORT #4 - FEBRUARY 16 - 28, 1998 ****************************************************************************** A compilation of decisions and notices published by the Surface Transportation Board. Includes information on track abandonments, ownership changes and trackage rights agreements. Condensed for readability. The full text is available at www.stb.dot.gov/ ****************************************************************************** SURFACE TRANSPORTATION BOARD DECISION STB SERVICE ORDER NO. 1518 JOINT PETITION FOR SERVICE ORDER This decision addresses the letter filed by the Railroad Commission of Texas (RCT) on December 17, 1997, asking us to reconsider and substantially revise, before the currently scheduled termination date of March 15, 1998, our service orders issued in the Service Order No. 1518 proceedings. RCT's request will be denied. The service orders in this proceeding have been issued under 49 U.S.C. 11123 to mitigate the rail transportation emergency in the western United States. The orders have been broad in scope and have been directed at a variety of service issues. As pertinent here, however, the orders concluded that the emergency began as a result of the congestion in and around the Houston area being experienced by the Union Pacific Railroad Company and the Southern Pacific Transportation Company (UP/SP), and they therefore sought to address the overall problem in the West by focusing on operational and service issues involving Houston. Thus, our orders, issued after two extensive public hearings, made some substantial changes to the way in which rail transportation is provided in the Houston area. We directed UP/SP to release shippers switched by Houston Belt & Terminal Railroad Company (HBT) or Port Terminal Railroad Association (PTRA) from their contracts so that they could immediately route traffic over Burlington Northern and Santa Fe Railway Company (BNSF) or The Texas Mexican Railway Company (Tex Mex), in addition to UP/SP. We directed UP/SP to permit BNSF and Tex Mex to modify their operations over UP/SP lines to minimize congestion over UP/SP's Sunset Route and to permit the two carriers to route traffic around Houston rather than going through it. To assure that carriers in the Houston area with additional service responsibilities will be in a position to have input into decisions about the movement of their trains, we directed UP/SP to provide representatives of BNSF and Tex Mex full access to UP/SP's Spring, TX, dispatching facility as neutral observers. Finally, we required extensive data reporting, designed to help us and affected parties evaluate the progress of the service recovery. However, we recognized that our authority in these proceedings is limited to temporary measures under the emergency provisions of section 11123, and that relief beyond that necessary to ameliorate the emergency would exceed our authority under those provisions. We also recognized that government cannot operate private businesses as well as private businesses can operate themselves, and that it would be counterproductive for us to impose a remedy that might unreasonably impede UP/SP's own efforts to mitigate the emergency, or that might unduly tax, to the detriment of shippers, the resources of other carriers that have their own capacity limitations. Thus, we focused our remedies on those areas where we could clearly do good, without doing harm. Our December 4 order expanding the initial service order and extending it until March 15, 1998, declined to adopt RCT's proposal formally submitted on December 1, 1997, because it would have overreached in a number of ways, because it would not have facilitated the resolution of the emergency, and because it contemplated long-term restructuring directed at perceived competitive issues rather than short-term solutions to the current service emergency. RCT's proposal is premised on the notion that the service emergency was caused by UP/SP's control of too much of the rail plant in Houston, and that shippers in Houston would be better served if there were more equally positioned competitors providing service. The proposal was patterned after the recommendations that RCT submitted to the Board in the UP/SP merger proceeding. There, RCT had argued, among other things, that the merger should be used as a means of injecting additional competitors into broad sectors of the western United States by ordering UP to divest, that is, give up through forced sale to other carriers, substantial segments of UP and SP property. Noting that any shipper that had competitive service provided by the merging carriers before the merger would continue to have it after the merger, the Board rejected RCT's divestiture proposal. After the service emergency began, RCT repackaged the portions of its original proposal that related to Houston and presented them to the Board as a solution to the service crisis. Essentially, the proposal, as presented, would have us force UP/SP to transfer various of its yards and substantial portions of its track to Tex Mex and to a switching railroad such as PTRA, basically dictating on a broad scale by government fiat how privately run railroads should operate their businesses. We rejected RCT's proposal in our decisions issued in this matter on October 31 and December 4, 1997. RCT's request for reconsideration presents nothing new that the Board has not heard, and addressed, before. RCT claims, without specific proof, that UP/SP's service problems were caused by a lack of competition, and that breaking up the UP/SP system around Houston and transferring parts of it to other railroads would facilitate the flow of commerce. RCT's unsupported proposal must be rejected because it does violence to every one of the guiding principles that we have appropriately followed throughout these emergency service proceedings. First, its forced transfer of a significant amount of private property without any guarantee of a resolution to the service problems would constitute an overreach. Second, its intended alteration of the competitive balance would represent a long-term proposal directed at perceived competitive issues rather than a short-term solution to the current service emergency. And finally, the new structure that it would establish would likely result in downgraded rather than improved infrastructure in Houston; it would not facilitate resolution of the emergency; and in fact, it could cause far more operational trouble than it would fix. We will address each point in turn. 1. The RCT's Forced Transfer of Private Property Would Overreach. Although RCT asserts that there is a short-term element to its proposal, and indeed suggests that a transfer of control without a transfer of title could meet the limitations of section 11123, it concedes that its only real objective is to take several UP/SP yards and several hundred miles of UP/SP track and permanently give the property to other carriers to achieve what it views as a more suitable competitive balance. We cannot conceive of how a restructuring of this magnitude, even with compensation for UP/SP, could possibly be permissible under section 11123, which authorizes us to issue emergency orders concerning the movement of traffic for a limited time, but does not permit us to order a carrier to permanently give its property to other carriers. Notwithstanding its failure to show a link between the competitive issues that it raises and the service emergency, RCT concludes that the radical relief it is seeking is appropriate here because the Board's action in approving the UP/SP merger, by refusing to alter the competitive balance in the way in which RCT has suggested, was the cause of the service emergency. Even if it were correct that improvident government action did cause the service problems in the West, a redistribution of private property of the sort envisioned by RCT could never be a permissible solution under section 11123. But in fact, the evidence does not lead to the conclusion that the Board is responsible for the emergency. A. Board Action Did Not Cause the Emergency. The testimony at the Board's hearings did not establish a single, specific cause of the emergency. At a minimum, however, the evidence indicates that the Board's action approving the UP/SP merger without ordering divestiture was plainly not the principal cause, and that merger-related operational integration issues may have played a role, but not the only role. The merger had not yet been implemented in Texas at the time the emergency began. Rather, as of last summer, UP's and SP's railroad systems were operated separately in Texas, and the operations of the two carriers have only recently and gradually begun to be integrated. That Texas had not as of last summer, and indeed has not as of yet, realized the benefits of the merger is understandable. Notwithstanding the simplistic assertions by some parties that opposed the merger that it has failed because its benefits have not yet materialized, the fact is that merger integration is and should be time-consuming and complex. It is well known that SP's physical plant in general was in a state of disrepair when UP took it over. It is also well known that two particular pieces of SP property were involved with the initial traffic slowdowns that ultimately mushroomed into the full-blown emergency: (1) the SP line running between Houston and New Orleans, which was being rehabilitated by UP/SP and BNSF, and which was thus unable to handle traffic at full capacity during the summer and fall of 1997; and (2) Englewood Yard, which was, and continues to be, an inadequate facility that, along with other parts of the system at Houston, will need substantial rehabilitation if it is to be a fully productive component of any modern railroad system. When traffic began to back up at the beginning of the emergency as a result of traffic surges and other circumstances, neither the Houston-New Orleans line nor the facility at Englewood Yard was able to perform adequately in moving traffic (and locomotives) into or out of the area. (UP/SP assigns responsibility for the initial congestion to several events: a surge in Gulf Coast traffic, and in private cars held in UP/SP yards, in April and May; severe washouts on SP mainlines in Texas and Arkansas, and damaging derailments on SP lines in Texas and Englewood Yard; the need to interrupt traffic flows to conduct urgent maintenance on SP lines in Texas and in the Houston-to-New Orleans Corridor; traffic backups in Texas as a result of the impact of Hurricane Danny on the CSX Transportation System in the Southeast; and backups of Mexico- bound traffic resulting from the privatization of the Mexican railroad system. Although certain of the participants in our proceedings have suggested that the emergency was caused by the merger, none has even sought to rebut UP/SP's explanation with specific facts.) It is true that UP had begun managing SP's Texas operations by the time congestion began to develop, and it is common knowledge that UP's management systems were quite different from those of SP. It is possible that with SP's management systems, facilities such as Englewood Yard may have responded differently -- perhaps better, perhaps worse -- during that time. And as SP had performed virtually no rehabilitation, it is certain that, but for the merger, the SP line between Houston and New Orleans would not have been in the process of being rehabilitated when the congestion became serious. But the fact that the Houston-to-New Orleans line was running slow due to rehabilitation, or that UP was not able to squeeze more out of Englewood Yard and other parts of the Houston facility when the congestion became serious, does not mean that our order approving the merger is responsible for the emergency. To the contrary, given the fact that many of the events that produced the initial congestion involved the inadequate SP plant, the service emergency may well have occurred even if the UP/SP merger had not been pursued. In any event, regardless of whether this particular emergency would have occurred had there been no merger, it is almost certain that some other service crisis, perhaps far more serious, would have developed from the continuing deterioration of the SP plant and the likely demise of the SP itself. The service emergency represents a convenient opportunity for parties unhappy with the merger decision to seek changes in its terms and conditions. But the evidence does not lead to the conclusion that approval of the merger was the cause of the service emergency, and there is no reason to believe that rail mergers, in and of themselves, result in systemic service problems. B. Capital Improvements and Upgraded Infrastructure Are Needed. As we have noted, the evidence shows that this emergency was caused in large measure by a transportation infrastructure in and around Houston that is not adequately equipped to deal with natural surges in a growing economy, or with temporary reductions in railroad capacity caused by derailments, weather, and so forth. To protect against future crises, and indeed to provide adequate service during normal periods, the physical plant in Houston will require major upgrading in order to meet the needs of shippers. In the UP/SP merger oversight proceeding, UP testified before the Board that its most recent capital spending plan calls for expenditures of more than $1.5 billion over 5 years (above and beyond what the carriers would have spent individually had the merger not occurred) to upgrade SP facilities, assemble more direct routes, build new terminals and yards, buy new locomotives, and improve service. In approving the UP/SP merger, we found that these and other planned improvements would be in the public interest. While no one can predict with certainty whether there might be another service crisis, the operating plan submitted by UP in connection with implementation of the merger is concrete and focuses on infrastructure needs that must be met for there to be any hope of averting future service problems; and UP/SP is in a position to invest in infrastructure so that service can be improved. RCT's proposal, by contrast, contains no operating plan and no plan for investment in physical plant, and will plainly act as a disincentive to UP/SP's investment in the Houston area. Thus, even if some variant of RCT's proposed transfer of UP/SP's property could, in theory, result in better service -- and there has been no showing that it might -- RCT's proposal as currently structured would not. Government action that would discourage private investment in infrastructure without providing alternative funding would degrade rather than improve service, and plainly would be irresponsible. Requiring the type of extensive and disruptive divestiture that the RCT proposal would envision is a draconian measure that may be pursued only if it is based on the right premise and is the only way to reach the intended result. The RCT proposal meets neither criterion: it is based on the unproven assumption that the service problems were caused by inadequate competition, and at least in its present form, it would undermine, rather than promote, the intended result of improved service. 2. RCT's Proposal Is Not a Short-Term Solution to the Service Crisis. In its request for reconsideration, RCT chides the Board for refusing to focus, in these proceedings, on the long- term structural changes that it asserts are necessary to promote more competition, and, it says, to avert service problems a year, or 5 years, or 10 years down the road. The language of the emergency service order provisions of the statute, however, does not permit the Board, in a section 11123 proceeding, to order the types of permanent changes to the railroad industry envisioned by RCT, even at Houston, in order to produce what RCT might characterize as a better railroad system. Rather, the statute permits remedies that are temporary and designed to ameliorate a particular emergency. RCT can seek, in a formal proceeding, the types of structural industry changes that it advances here, and indeed, it tells us that it intends to do just that in the context of the UP/SP merger oversight process. In this emergency proceeding, however, we can adopt only temporary remedies that will advance resolution of the immediate service crisis. RCT states in its request for reconsideration that, in fact, key elements of its proposal can be instituted on a short-term basis. However, it is obvious that the so-called short-term elements of RCT's proposal -- (1) the expansion of neutral switching in the Houston area and (2) the establish[ment of] a through route to be controlled by TexMex through Houston and on to Beaumont -- could not be implemented quickly enough to have an impact in the short term. As UP/SP points out in its response to RCT's request for reconsideration, to carry out RCT's proposal, PTRA would need to increase its locomotive fleet by at least 50 percent, and would need to upgrade its plant and technology to manage its new role. Moreover, in addition to the line improvements and connections that would be required to make the Tex Mex clear path workable, Tex Mex would likely need to establish an entirely new facility in Houston for dispatching, operations, crew control, and so forth. Even if Tex Mex and PTRA were able to do so -- and there is nothing in this record indicating that they are -- there is no reason to believe that Tex Mex could make such fundamental changes to its capabilities quickly, and PTRA could not possibly put itself into position to safely and efficiently carry out its new duties anytime in the reasonably near future. Indeed, it is clear that the proposal to expand PTRA could not be safely implemented on a short-term basis. One of the products of the RCT proposal will be the termination of most single- carrier service in the Houston area, and the substitution of multiple-carrier service for a majority of the movements. In its opposition to RCT's proposal, the United Transportation Union (UTU), which represents most of the affected employees, states that, even to perform its existing operations safely, UP/SP will need to conduct substantial hiring, and that each of the new hires will need extensive training. Under the RCT proposal, however, UTU states that PTRA would have to more than double its workforce, and train its new employees to perform switching, which UTU characterizes as the most difficult and dangerous of all railroad operations. RCT's proposal is clearly unworkable on a short-term basis: the necessary hiring and training could not possibly be completed, and thus the proposal, if instituted as a short-term fix -- particularly given the amount of hazardous materials moving through Houston -- would compromise safety. In summary, RCT's proposal is not intended to be short-term in nature and cannot be implemented safely or effectively in the short-term. Thus, we cannot adopt it under our emergency service order authority. 3. RCT Has Not Shown How Its Proposal Will Enhance Service. We do not see how the terminal railroad proposal or the clear path for Tex Mex outlined by the RCT, without more planning, financing, and execution details, could produce good service in Houston. By contrast, UP/SP's own operating plan, as presented in the merger proceeding, overall is in the public interest. We recognize that UP/SP has not yet been able to put its program fully into place, and, therefore, it has still not been completely tested. However, at least UP/SP's plan is on the table; generally it is theoretically sound; it is adequately financed; it is in the process of being implemented; and it is governed by service parameters whose benefits we can see. By contrast, RCT has not shown with concrete evidence how forcing a terminal railroad configuration over the entire Houston area, and fragmenting the rail system in Houston by setting aside a clear path for Tex Mex, will improve service. For that reason -- and because implementation of RCT's plan would substantially interfere with UP/SP's service recovery, would significantly reshuffle the provision of service in the Houston area without clear evidence that service would be improved, and hence would run the risk of further eroding the quality of service for shippers -- it is unlikely that the RCT's plan, as presented, will enhance service. Before the merger, the substantial majority of facilities in the Houston terminal area were owned by SP. Most line-haul service in the Houston area was performed by UP or SP, or, to a lesser extent, by BNSF. Many shipments were handled in single-line service, the major exceptions being those switched by PTRA or by the HBT. (Both PTRA and HBT are owned jointly by UP/SP and BNSF). After UP assumed control over the SP lines as a result of the merger, it became possible for one carrier to handle most Houston traffic in single-line service, and the need for intermediate switching diminished substantially. In addition, as part of our merger decision, BNSF was given access to shippers that were previously served by both UP and SP, and that, as a result of the merger, would have otherwise lost their only competitive rail option as a result of the merger. Thus, as of now, much of Houston can be served in single-carrier service by either UP/SP, BNSF, or both. RCT's PTRA proposal would defeat most single-carrier service, while its Tex Mex clear path proposal would seriously disrupt whatever remaining operations UP/SP and BNSF could perform. A. Transferring UP/SP's Property To PTRA. It is undisputed within both the railroad and shipping communities that single-carrier service provided directly to shipper locations tends to be more efficient and safer to perform than service involving switching by multiple carriers. Most shippers in the Houston area, as we have noted, can now be served in single-line service by UP/SP or BNSF. Notwithstanding the almost universal preference for single-line over multiple-carrier service, in some cities -- most notably, Chicago, Kansas City, and New Orleans -- the serving carriers got together many years ago to form what are commonly known as belt or terminal railroads. These cities were historically at the center of a confluence of rail lines operated by numerous line-haul carriers, which found it operationally infeasible to actually operate over each of the limited number of lines available in the city. Thus, to guarantee operational efficiency and safety -- not for competitive reasons, or to establish any sort of neutrality -- they jointly created terminal carriers to handle their switching responsibilities. These belt operations can be conducted over more or less circular railroad configurations that run around all or part of the outskirts of a city center. The belt line or terminal carrier switches local shippers and then delivers their traffic to (or receives it from) one of the respective line-haul carriers with which it connects; alternatively, it facilitates interchange between two line-haul carriers by allowing them to route through traffic outside of the congested city terminal facilities. Typically, belt and terminal carriers provide a way in which line-haul carriers can maintain access to shippers and to each other without overburdening the railroad infrastructure. Because Houston's infrastructure and topography are different from most other cities that lend themselves to a belt railroad arrangement, RCT's proposal to give UP/SP's property to PTRA, and expand PTRA's operations, would not facilitate safety or efficiency. In Houston, there is no existing track along the outskirts of the city that could be fed by a large number of line- haul carriers, and indeed, there is, and for many years has been, only a small number of line-haul carriers serving Houston. The former HBT track is belt-like in nature, but it does not encircle the city or the traffic-generating areas in which the majority of shippers are located. Nor would the expanded PTRA system that RCT envisions serve like a belt railroad either. Rather, it would simply operate over a series of discrete lines to serve Houston's industries, most of which are located in coastal areas just outside of the city, on stub-ended UP/SP lines -- essentially a series of dead-end streets -- each of which has only a single connection to the congested Houston rail complex. Thus, RCT's proposal to give substantial UP/SP properties to PTRA would not produce a switching arrangement that would give line-haul carriers access to shippers in a way that relieves the burden on Houston's already limited railroad capacity. Rather, RCT's proposal would simply give to PTRA UP/SP's lines serving Houston's industries, so that PTRA could then handle the same traffic that UP/SP currently handles, using the same lines over which UP/SP currently operates, into the same congested Houston infrastructure that UP/SP currently uses. The main difference between the RTC plan and UP/SP's current plan is that RCT's approach would require an additional, and, we believe, unnecessary carrier interface for most Houston shipments. As we have noted, turning single-carrier operations into multiple-carrier operations would not promote improved service. Moreover, by frustrating implementation of the merger around Houston, as it is obviously intended to do, RCT's plan would undermine better service in other ways. The main benefit of any merger found to be in the public interest is transportation efficiency, resulting from the opportunity to join two systems. The UP/SP merger, the BNSF merger, and every other approved railroad merger in recent history have sought such efficiencies: the establishment of single-line service; the elimination of unnecessary interchanges; and the centralization of traffic management, crew management, dispatching, equipment control, and customer service functions. The UP/SP's operating plan for its merger anticipated, over a period of time, many of these efficiency-enhancing operational changes. Notwithstanding the fact that UP/SP's attention and resources have been focused on addressing the service crisis, some such changes have been accomplished, while, as noted, many have not as yet. However, taking away critical UP/SP lines, and giving them to PTRA, or to Tex Mex, would nullify the planned improvements in these critical operational areas. Additionally, although RCT has presented no details about how its plan would work, given the concept it envisions, it would inevitably result in more switching, additional interaction between carriers, and increased handling time for each shipment. It would also require a high degree of coordination due to multiple hand-offs between dispatchers, all of which would have to be handled manually instead of electronically, thereby adversely affecting safety. These are areas of concern that UP/SP has already addressed with the establishment of its new dispatching facility for Houston at Spring, Texas. The RCT proposal, however, provides no basis on which we can even hope that the efficiencies already implemented will be sustained, or that those yet to be implemented will ever be realized. Indeed, although it asserts that the impact on UP/SP's ability to provide service would be minimal, RCT does not explain whether, or how, UP/SP could continue to provide service over whatever routes would be left for it. Thus, from the standpoint of improved service, it appears that the RCT proposal would substantially degrade present service. RCT states that an expanded PTRA is necessary because UP/SP's dominance of the rail infrastructure in Houston caused the service crisis. RCT's Supplemental Petition filed December 1, 1997, at 15. Injecting more carriers into the middle of a traffic jam, it asserts, will solve the current emergency and avert future emergencies: As soon as a shipper realizes he is being hurt by a particular carrier's inability to perform, he will simply divert his shipments to a competing carrier. While this assumption sounds plausible, it ignores operational reality. We do not mean to suggest that UP/SP was an uninvolved bystander with no role or responsibility as to the service crisis. But UP/SP did not manufacture the crisis to exploit some sort of dominant position in the market, or to obtain some sort of competitive advantage. To the contrary -- and we do not by this statement mean to sound insensitive to the financial losses that the crisis may have produced throughout the economy -- UP/SP's bottom line has suffered dramatically as a result of the crisis. If it could have broken the bottleneck by using different yards, or by routing traffic to a different part of the inadequate infrastructure, we presume that it would have done so. The fact is, however, that until the infrastructure is upgraded, regardless of which carrier operates what lines, the threat of a further crisis will continue. UP indicated, in its statements in connection with the merger, that it will infuse substantial capital into the Houston area to improve infrastructure and capacity. There is no way that it will do so, however, if its yards and many of its tracks are given to other carriers. Unless PTRA has sources of capital of which we have not been made aware, taking UP/SP's property and giving it to PTRA will downgrade rather than improve infrastructure and capacity in the Houston area. Rather than averting future service crises, the RCT plan could help provoke them. B. Transferring UP/SP's Property To Tex Mex. As noted, RCT has proposed taking UP/SP's property and giving it to Tex Mex to achieve its clear path through Houston proposal, a portion of which would involve the transfer of the Houston to Beaumont line. We do not understand how the proposal as presented would alleviate congestion in the Houston area. Under its clear path through Houston proposal, RCT would give Tex Mex control over the SP Harrisburg Line from West Junction to Katy Neck; the UP Houston Subdivision Line from Katy Neck to Congress Avenue Yard; and HBT West Belt Line from Congress Avenue Yard to Belt Junction. A portion of the clear path proposal, which we address separately as the Beaumont Subdivision proposal, would give Tex Mex control of the UP Beaumont Subdivision from Gulf Coast Junction to Beaumont. 1. The Clear Path. The basic proposal -- to give Tex Mex what RCT calls a clear path through Houston -- is apparently based on the same notion that we have just discussed, namely, that the service emergency was caused by UP/SP's control over most of the rail lines and yards in the Houston area. By taking some of those properties away from UP/SP and giving them to Tex Mex, RCT apparently reasons, Tex Mex can simply roll right past any congestion that might develop elsewhere in Houston, and provide its shippers with timely service even though other lines and other shippers in the Houston area may be in gridlock. Thus, RCT states, it is unlikely there will ever again be a situation where train operations in the Houston area become congested to the point of near immobility. The adverse effect on UP/SP, RCT asserts, would be minimal, because the properties that UP/SP would have to give up appear to be of marginal value to UP. As we have just discussed, the basis of the proposal -- that UP/SP's dominance caused the emergency -- has not been supported in the record. UP/SP may control the majority of the routes into Houston, but the rail network in Houston cannot be relegated to a series of separate lines that have no connection to each other and instead are divided by "clear paths." If the line that RCT would construct for Tex Mex -- presuming that Tex Mex were able to invest in the necessary connections for such a line -- could be used to breeze right by the congestion without compounding the situation at Houston, then UP/SP would be using it in that manner itself to help end the service crisis. Unfortunately, the fixed physical plant available for Houston's railroad operations does not lend itself to such easy fixes. Rather, a new rail "super highway" could be created through Houston only by slicing away important pieces of other lines. Thus, RCT's assumption that this particular forced transfer of private property would be inconsequential to UP/SP is completely unfounded. As UP/SP has pointed out, while the clear path through Houston proposal might aid Tex Mex, it would interfere with UP/SP's (and possibly BNSF s) ability to provide service for far more traffic, and thus would ultimately degrade service for many Texas shippers. Moreover, the clear path proposal, along with the proposal for an expanded PTRA, would replace a centralized, state-of-the-art traffic control center for Houston, including lines into and out of Houston, with a system in which the train movements of PTRA, UP/SP, BNSF, and Tex Mex would be required to compete for line space access throughout the complex Houston terminal area by the use of a fragmented dispatching control system. Such a patchwork system would be grossly inefficient (and potentially unsafe) in comparison to the centralized system now being employed by UP/SP for all of Houston. 2. The Beaumont Subdivision. RCT notes that UP/SP now controls two routes that can be used between Houston and Beaumont: the SP's "Sunset Route" from Houston to Beaumont and then to New Orleans, and the UP route from Houston to Beaumont and then to Baton Rouge and New Orleans. Therefore, it reasons, we ought to force UP/SP to simply give one of those routes to Tex Mex so that it can become part of the clear path for Tex Mex. By combining its Beaumont Subdivision proposal with its clear path proposal, RCT would give Tex Mex its own route connecting its Mexican owner (Transportacion Maritima Mexicana S.A. de C.V. ) on the south with its American owner (Kansas City Southern Railway Company) on the north. RCT's assumption that implementing this portion of the clear path proposal should have no negative operational impacts on the UP is shortsighted. The two lines, as part of UP/SP's planned merger-related efficiencies, are being used by UP/SP for its directional running program. The directional running program is one of UP/SP's more important planned improvements for the merged system, and one that the carrier is using to improve the flow of traffic to and from Houston. Handing one of the lines over to Tex Mex would defeat directional running, and would reduce operational flexibility, adversely affecting the operation of the remaining line and the movement of BNSF, UP/SP, and even Amtrak trains. RCT presents us with no valid service reason for dismantling the UP/SP directional running system, and depriving UP/SP and the shipping public of planned efficiencies, at Houston or elsewhere. C. RCT Has Not Shown How Its Proposal Can Work. Although it calls its plan a proposal, in fact RCT has given us nothing but a general idea of how the Houston railroad map might look. It has not shown us, however, that its proposed configuration -- even if it would somehow produce operational benefits -- could practically be put into place. It has not demonstrated that PTRA and Tex Mex will be able (financially or operationally) to manage their new and substantially expanded roles. It has not demonstrated where the capital necessary to improve the Houston infrastructure will come from, once UP/SP is taken largely out of the picture. It has not demonstrated how BNSF will handle its new role, which may be expanded in some ways, but which also will be diminished in others by its being required to give up track and traffic access, along with locomotives and crew, to PTRA. In short, RCT has presented a kind of a theory, but no clear demonstration of how that theory could be put into operation. RCT tells us that its proposal, which it concedes is really directed at perceived competitive rather than service issues, will be reintroduced in the context of the UP/SP merger oversight proceeding. In the UP/SP merger proceeding, various parties, including RCT, introduced divestiture proposals involving extensive UP and SP lines, without explaining in detail how the proposals would work, and what their effects would be. We rejected those proposals as overreaching in UP/SP, Decision No. 44, also finding that traffic studies, operating plans, and pro forma financial statements demonstrating the effects of major restructuring plans were necessary before we could consider adopting them. If RCT has a concrete plan, it should present it to us in a manner that will demonstrate how it will work and what its effects will be. Summary. In our prior decisions, we rejected RCT's proposal because it would have overreached in a number of ways, because it would not have facilitated the resolution of the emergency, and because it contemplated long-term restructuring directed at perceived competitive issues rather than short-term solutions to the current service emergency. RCT's request for reconsideration presents nothing new that would change our view. Therefore, the request will be denied. It is ordered: 1. RCT's petition for reconsideration is denied. Decided: February 17, 1998 Service Date: Late Release February 17, 1998 ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Finance Docket No. 33547] IMC Global Inc.--Acquisition of Control Exemption--Trona Railway Company and Hutchinson & Northern Railway Company IMC Global Inc. (IMC), a publicly-held company headquartered in Illinois, has filed a notice of exemption to acquire control of Trona Railway Company (Trona), a Class III rail carrier operating in California, and Hutchinson & Northern Railway Company (H&N), a Class III rail carrier, operating in Kansas, as part of its acquisition of Harris Chemical Group, Inc. (Harris), a privately-owned Delaware corporation headquartered in New York, which is the corporate parent of Trona and H&N. IMC's acquisition of Harris will be accomplished through a merger of IMC's subsidiary, IMC Merger Sub Inc. (Newco), with and into Harris, which controls, among other companies, the North American Chemical Company (NACC), which holds all of the outstanding shares of Trona, and the North American Salt Company (NASC), which holds all of the outstanding shares of N&H. Harris will continue, under the name IMC Inorganic Chemicals Inc., as the surviving corporation and wholly owned subsidiary of IMC, and the corporate existence of Newco will cease. IMC intends to consummate this transaction within 60 days of the February 4, 1998 filing date of this notice of exemption, but not earlier than the February 11, 1998 effective date of the exemption. Decided: February 10, 1998. Service Date: February 18, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION Docket No. AB-167 (Sub-No. 1165X) CONSOLIDATED RAIL CORPORATION--ABANDONMENT EXEMPTION--IN ST. JOSEPH COUNTY, IN On October 17, 1996, a decision and notice of interim trail use or abandonment (NITU) was served, authorizing a 180-day period for the City of South Bend, IN (City), to negotiate an interim trail use/rail banking agreement with Consolidated Rail Corporation (Conrail) for a 2.0+- mile portion of its line of railroad known as the Plymouth Industrial Track between milepost 179.00+ and railroad milepost 181.00+, in St. Joseph, IN. The initial 180-day negotiating period expired on April 15, 1997, but was extended through October 12, 1997, by decision served April 25, 1997. By letter filed January 15, 1998, the City requests that the negotiation period be extended for a one-year period, until October 11, 1998. The City states that Conrail has requested that it perform an appraisal of the right-of-way. However, the local appraisers were unable to submit quotes due to the heavy activity relative to other projects in the community. The City also states that the appraisers indicated that proper title of the right-of-way should be resolved, and that a local title company, familiar with railroad easements, has been unable to determine the form of ownership of the right-of-way. Finally, the City states that it is actively pursing a thorough search of alternative information sources to resolve the ownership question. By letter dated February 12, 1998, Conrail replied to the extension request, stating that it supports only a 180-day extension of the negotiation period. It is ordered: 1. The negotiating period under the NITU is extended to April 10, 1998. Decided: February 13, 1998 Service Date: February 19, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-491X R.J. CORMAN RAILROAD COMPANY/PENNSYLVANIA LINES ABANDONMENT EXEMPTION IN CAMBRIA COUNTY, PA REQUEST TO SET TERMS AND CONDITIONS By decision served December 12, 1997, R. J. Corman Railroad Company/Pennsylvania Lines (RJCP) was granted an exemption under 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 10903 to abandon a 9.6-mile line of railroad, known as the Blacklick Secondary. The line runs between milepost 6.4 at Ebensbury Junction and milepost 16, near Nanty Glo, in Cambria County, PA. The exemption was scheduled to become effective on January 11, 1998, unless an offer of financial assistance (OFA) was filed with RJCP and the Board by December 22, 1997. On December 22, 1997, the Cambria and Indiana Railroad Company (C&I), a rail carrier, filed an OFA to purchase a 4.05-mile segment of the line, between milepost 6.4 and milepost 10.45189, for $294,452. By decision served December 24, 1997, C&I was found financially responsible. (C&I states that it is a subsidiary of Bethlehem Steel Corporation.) The effective date of the exemption authorizing abandonment of the 4.05-mile segment was postponed to permit the OFA process under 49 U.S.C. 10904 and 49 CFR 1152.27 to proceed. The exemption authorizing abandonment of the remainder of the Blacklick Secondary became effective on January 11, 1998. The decision also noted that, on or before January 21, 1998, either party could request that the Board establish the terms and conditions for sale of the segment if no agreement was reached during negotiations. On January 21, 1998, the C&I requested that the Board established the conditions and amount of compensation. C&I reduced its offer and now contends that the fair market value of the segment is $241,622, consisting of $14,545 for the land and $227,077 for the net salvage value of track and materials. RJCP responds that the fair market value of the segment is $450,988, consisting of $14,545 for the land and $436,443 for the net salvage value of track and materials. We find the fair market value of the segment to be $341,774. Proceedings to set conditions and compensation are governed by the provisions of 49 U.S.C. 10904(d)-(f). Under section 10904(f)(1)(B), we may not set a price that is below the fair market value of the line. In the absence of a higher going concern value for continued rail use, the proper valuation standard in proceedings for offers to purchase under section 10904 is the net liquidation value (NLV) of the rail properties for their highest and best nonrail use. NLV includes the value of the real estate plus the net salvage value of track and materials (gross salvage value less removal costs). In proceedings to set terms, the burden of proof is on the offeror, the proponent of the requested relief. Placing the burden of proof on the offeror is particularly appropriate in these proceedings because the offeror may withdraw its offer at any time prior to its acceptance of terms and conditions established by the Board pursuant to a party's request. The rail carrier, on the other hand, is required to sell its line to the offeror at the price we set, even if the railroad views the price as too low. C&I's valuation is based on a verified statement from its chief engineer, Patrick R. Loughlin. RJCP's valuation is based on a verified statement of Gary B. Pettengill, its Vice President Operations. Mr. Loughlin and Mr. Pettengill indicate that they jointly inspected the line to determine the quantities of track, ties and other materials. Apparently, RJCP also provided C&I with unit prices it used for its NLV estimate. The parties agree that the land value of the segment is $14,545. They also agree on the types and quantities of material. However, they disagree on the price and quality of materials and removal costs. Apparently, there are at least 6 sizes of rail on the line ranging from 130-lb. to 155-lb. Mr. Loughlin values the rail at $160,637. He states that, although his inspection of the line did not show any 155-lb. or 152-lb. rail, he accepted the quantities that RJCP had provided to C&I. However, Mr. Loughlin indicates that RJCP overpriced 152-lb. and 155-lb. rail at $350 per ton. Mr. Loughlin prices the 152-lb. and 155-lb. rail at $175 per ton. He notes that 152-lb. and 155-lb. rail are not being made, and that there is almost none for sale on the market. Mr. Loughlin states that he was informed by a producer of rail that rail heavier than 140-lb. has not been made in at least eight years, indicating that there is no demand for these sizes of rail. He further maintains that RJCP would do well to realize $175 per ton, particularly since the rail is worn significantly. He values the 152-lb. and 155-lb. rail at a total of $31,192. Mr. Loughlin prices the 140-lb rail at $300 per ton, rather than the $350 per ton value used by RJCP. He claims that RJCP's unit cost is overstated because it does not adequately reflect wear. Mr. Loughlin values the 140-lb. rail at a total of $17,037. Mr. Loughlin prices the 130-lb. rail at $150 per ton, rather than the $175 per ton as claimed by RJCP, citing the limited market for 130-lb. rail. He notes that the most common types of rail being produced today are 115-lb. and 132-lb. While some new 130-lb. rail may be produced, he claims that the market is declining and quite limited. He notes that the 130-lb. rail was particularly worn, with wear in excess of one inch in depth at some locations and with wear on both sides. Mr. Loughlin values the 130-lb. rail at a total of $91,935. Mr. Loughlin accepts RJCP's price of $175 per ton for 131-lb., 132-lb. and 133-lb.rail. He agrees with RJCP that the total value for these sizes of rail is $20,473.25. Mr. Pettengill values the rail at a total of $209,991. He contends that his $350 per ton price for 155-lb., 152-lb., and 140-lb. rail is fair and reasonable. He states that RJCP currently uses 155-lb. and 152-lb. rail on other RJCP lines. According to Mr. Pettengill, RJCP plans to inventory the 155-lb., 152-lb. and 140-lb. rail salvaged from the line and reuse the rail on other RJCP lines, side tracks and yards. In addition, Mr. Pettengill states that the rail could be used by an RJCP affiliate for construction of industrial sidings and yard track. Mr. Pettengill values the 155-lb., 152-lb., and 140-lb. rail at a total of $82,260.50. Mr. Pettengill states that RJCP will not relay the 130-lb. rail, but would sell it for re-roll. He cites a recent issue of American Metal Market, indicating that the current market value for re- rolled rail is at least $160 per ton. He avers that prices on re-roll rail fluctuate significantly over short periods of time, and that RJCP would probably hold the rail until a higher price became available. He maintains that RJCP could realize $175 per ton and he submits a quote from Jersey Shore Steel Company for $175.00 per ton. He values the 130-lb. rail at a total of $107,257.50 We accept RJCP's valuation for the rail. C&I has not submitted any quotations or other market-based information in support of its unit prices for rail. It either makes downward percentage adjustments to the price of new rail or adjusts RJCP's estimates. As noted, RJCP has submitted a quote in support of its reroll rail price of $175 per ton for its 130-lb. rail and has not presented any support for other unit prices. But, C&I's price for the 155-lb. and 152-lb. rail at $175 per ton is the same unit price that RJCP uses for 130 to 133-lb. reroll rail. However, reroll rail is a lower quality rail than relay and therefore commands a lower price. While C&I fails to address whether the 155-lb. and 152-lb. rail can be used for relay purposes, RJCP claims that this rail can be relaid on its own system. Because C&I states that it did not observe either of these rail sizes during its inspection, it is not in a position to make a determination regarding condition. As a result, there is no evidence that the 155-lb. and l52-lb. rail should be considered as reroll quality and thus priced lower than relay rail. Therefore, we will consider 152 and 155-lb. rail as relay quality rail for valuation purposes. We agree that RJCP has established a need for 152 and 155-lb. rail sizes with affiliates elsewhere in its company. But the carrier has not indicated any near-term use of the rail, something we found in previous abandonments before accepting retail prices. RJCP does not indicate the source of its unit price of 152 and 155-lb. rail, even after C&I disputed this value figure in its initial offer. But C&I's price is not based on relay quality rail and we cannot accept its figure unless there is evidence indicating that the condition of the rail warrants this lower valuation. Lacking this evidence from C&I, we accept RJCP's price of $350 per ton for 152-lb. and 155-lb. rail. Because RJCP demonstrated that it had a use for the much heavier than usual 152-lb. and l55-lb. rail, we will accept the carrier's assertion that it also can use the slightly heavier than usual 140-lb. rail. Accepting RJCP's uncontroverted claim that it can relay this rail, we will accept the seller's argument that it should be valued at $350 per ton, rather than the per ton amount claimed by C&I. The parties agree that the value of 131, 132 and 133-lb. rail is $20,473.25. RJCP has supported its claim of $175 per ton for 130-lb. rail with an offer to purchase from Jersey Shore Steel Company. C&I's arguments that the price should be lower do not overcome this strong evidence. Consequently, we will use RJCP's reroll rail price for 130-lb. rail. Mr. Loughlin values ties at a negative $0.50. He states that he inspected the line and determined that 10% of the ties are relay quality, 30% are landscape quality, and 60% are scrap quality. He notes that almost all of the ties are deeply cut in the middle. Mr. Loughlin prices relay ties at $13,464, based on a price per tie of $12. He indicates that his price is derived from $20 per tie cost for new ties incurred by C&I and other Bethlehem Steel railroads. He estimates a total value for landscape ties at $10,101, based on a price per tie of $3. According to Mr. Loughlin, scrap ties do not have a positive value and may in fact cost more to remove and dispose of than they are worth; he prices scrap ties at a negative $23,565.50. Overall, Mr. Loughlin finds that the ties on the line have a negative value of $0.50. Mr. Pettengill responds that, based on his experience, there is no difference between the quality of ties on the subject line and those salvaged on other RJCP rail lines. He indicates that RJCP has been able to relay about 50% of the ties salvaged. He further estimates that 35% of the ties can be sold as landscape ties. He indicates, however, that he has not done a specific tie evaluation for the line. Mr. Pettengill estimates that the current market for relay ties is more than $14, citing what he claims is a recent sale of relay ties for $12.75 each, allegedly used in a construction project by an RJCP affiliate in Ohio. In addition, Mr. Pettengill submits a quote from another affiliate indicating that landscape ties were sold for at least $8.00 per tie. We accept C&I's determination of tie condition, because it is based on a detailed inspection of one mile of the line. RJCP has not done a tie evaluation. Therefore it has no basis on which to criticize C&I's evaluation. Neither party has submitted adequate supporting information for tie pricing. C&I has not presented any quotations to support Mr. Loughlin's estimate. RJCP's valuation of relay ties is based on a contract indicating the retail price of relay ties. However, while RJCP argues that it is its own source for relay ties and would have to buy them on the open market otherwise, we find that RJCP has not justified use of a retail valuation. Although we have accepted retail pricing of reclaimed material in certain isolated cases, it has always been linked to a specific size and near- term use. Neither of these conditions has been addressed by RJCP. In addition, if reclaimed material cannot be used in a short time, the opportunity cost of holding the material in stock will negate the difference between retail and wholesale pricing relatively quickly. Further, ties will continue to deteriorate while stored, while reclaimed rail will not. Without some indication of immediate need, we cannot accept RJCP's pricing of relay ties. We find that C&I's pricing of $12.00 per tie for relay ties is the better evidence, and we value relay ties at a total of $13,464. C&I's valuation of landscape ties at $3.00 per tie is not supported by any evidence. RJCP has submitted evidence to support an approximate $8.00 per tie value for landscape ties. Consequently, we accept the $8.00 valuation for landscape ties for a total value for landscape ties of $26,936. We reject C&I's negative value for scrap ties. Assets at a negative value are valued at zero. Moreover, Mr. Pettengill did not include a price for scrap ties in his valuation. Accordingly, we will value scrap ties at zero. The total value for all ties is $40,400. Other Track Material (OTM). Mr. Loughlin agrees with RJCP's prices for compromise bars, rail anchors and one turnout. He disagrees, however, with RJCP's price for tie plates and joint bars. Mr. Loughlin says that he discounted tie plates to reflect the estimated value of bent plates he says he detected during inspection. He discounted joint bars by 60% to reflect the age and wear and limited market for this material. Mr. Pettengill asserts that C&I does not indicate the extent of bent plates used in reducing its unit costs for tie plates and further asserts that there is no support for C&I's contention that there is a limited market for joint bars. He states that RJCR can reuse these materials on its other lines. Mr. Pettengill states that his prices are based on salvage projects carried out by an affiliated company. C&I does not dispute the price that RJCP claims to be reasonable for tie plates and joint bars. Rather, the buyer says that those prices should be discounted because the plates are bent and the bars are worn. But C&I offers no support for the discounted price it proposes. If a purchaser offers an alternative price to the one claimed by the carrier being forced to sell, it is incumbent on the buyer to provide support for the price it is asserting. This C&I has not done. We therefore find that C&I has not offered sufficient evidence or argument to justify our setting aside the value claimed by RJCP in favor of that asserted by C&I. Mr. Loughlin claims that the ballast on the line is contaminated with coal and earth and is not reusable. As a result, Mr. Loughlin has determined that the ballast can only be used for fill. He prices ballast at $21,542, based on $1.50 per ton. Mr. Pettengill asserts that the ballast on the subject line may be reused on RJCP's lines, but probably could not be resold. He states that, despite its condition, the carrier routinely reuses ballast on other lines. He values the ballast at $4.50 per ton for substitute ballast. RJCP's evidence does not support its ballast price of $4.50 per ton. It submitted a quotation ranging from $8.90 to $11.00 per ton for crushed stone ballast. But that quotation is not applicable to the subject line. Generally, ballast is not valued as a recoverable asset. In unusual cases, some value may be assigned to ballast in abandonments of main lines where there are significant amounts of ballast. Mr. Pettengill indicates RJCR may use ballast elsewhere in its system. But he does not indicate any recovery cost that RJCR would incur, an item that may have a significant impact on the overall valuation of the ballast. Because of the evidentiary deficiencies noted above, and because the ballast may not be suitable for resale purposes, we will accept C&I's value. C&I's Mr. Loughlin estimates that removal of tracks and ties would cost $42,768, based on $2.00 per track foot. He predicates this estimate on a system-wide average of actual costs on Bethlehem Steel railroads. The estimate includes the cost of labor without benefits. Mr. Loughlin also estimates the cost for restoring and repaving one grade crossing on the line at $5,000. He bases his estimate on his experience with 22 grade crossings on other abandoned C&I lines. Mr. Pettengill estimates removal cost of $19,693, based on $0.92 per track foot. He states that his estimate is derived from an affiliated salvage company which bids on railroad salvage and construction projects. He acknowledges that RJCP has not calculated actual costs per foot for track removal. Further, Mr. Pettengill argues that C&I's salvage bids on its abandoned lines are not relevant to this line. Mr. Pettengill also contends that C&I's grade crossing restoration cost is overstated because the estimate does not reflect the fact that the state usually grants a carrier 90% of grade crossing removal costs. Mr. Pettengill estimates that the grade crossing on the subject line would cost $1,000 to restore and that the net cost of removing the crossings after receipt of state aid would be $100. C&I's method of computing removal cost is based on a system-wide accumulation of actual costs, without overheads, and appears to be reasonable. On the other hand, RJCP's removal cost estimate is not based on actual track removal costs. RJCP also is speculating on whether the state will grant funds to remove the grade crossing on the line. Without assurance that the state will fund removal costs, we cannot assume that the state will do so. C&I's recent experience in the same state with an adjacent line indicates that the state does not necessarily assist with grade crossing restoration. As a result, we accept C&I's estimate of $47,768 for track removal costs. Accordingly, the net salvage value of the track and materials is $327,229. Summary. The purchase price for the sought right-of-way is $341,774, consisting of $14,545 for land and $327,229 for net salvage value of track and materials. To ensure an orderly transfer of the line, we will establish our typical terms: (1) payment will be made by cash or certified check; (2) closing will occur within 90 days of the service date of this decision; (3) RJCP shall convey all property by quitclaim deed; and (4) RJCP shall deliver all releases from any mortgage within 90 days of closing. The parties may alter any of these terms by agreement. It is ordered: 1. The purchase price for the portion of the segment is set at $341,774. Other terms of sale must comply with the provisions discussed above. 2. Within 10 days of the service date of this decision, C&I must accept or reject, in writing, the terms and conditions established here by notifying the Board and RJCP. 3. If C&I accepts the terms and conditions established by this decision, C&I and RJCP will be bound by this decision. C&I may not transfer or discontinue service on the line prior to the end of the second year after consummation of the sale, nor may it transfer the line, except to RJCP, prior to the end of the fifth year after consummation of the sale. 4. If C&I withdraws its offer or does not accept the terms and conditions with a timely written notification, the Board shall issue a decision within 20 days of the service date of this decision vacating the prior decision that postponed the effective date of the decision authorizing abandonment. Decided: February 19, 1998 Service Date: Late Release February 20, 1998 ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Finance Docket No. 33549] Pioneer Industrial Railway Co. Lease and Operation Exemption Peoria, Peoria Heights & Western Railroad Pioneer Industrial Railway Co. (PRY), a noncarrier, has filed a verified notice of exemption under 49 CFR 1150.31 to lease from Peoria, Peoria Heights & Western Railroad (PPHW) and to operate approximately 8.29 miles of rail line (line) in Peoria, Peoria County, IL, extending from approximately milepost 1.71 (E.P.S. 80 + 15, connecting with the Peoria & Pekin Union Railway Company) to approximately milepost 10.00 (E.P.S. 516 + 21, Pioneer Industrial Park Track). PPHW is jointly-controlled by the City of Peoria, IL, and the Village of Peoria Heights, IL. Peoria & Pekin Union Railway Company, the current lessee and operator of the line, has reportedly asked PPHW to find a new operator for the line. The parties report that they intend to consummate the transaction on or about February 17, 1998. The earliest the transaction can be consummated is February 16, 1998, the effective date of the exemption (7 days after the exemption was filed). This transaction is related to STB Finance Docket No. 33550, Pioneer Railcorp Continuance in Control Exemption Pioneer Industrial Railway Co.,wherein Pioneer Railcorp has concurrently filed a verified notice to continue in control of PRY upon its becoming a Class III rail carrier. Decided: February 11, 1998. Service Date: February 20, 1998 ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Finance Docket No. 33550] Pioneer Railcorp Continuance in Control Exemption Pioneer Industrial Railway Co. Pioneer Railcorp (Pioneer), a noncarrier holding company, has filed a notice of exemption to continue in control of Pioneer Industrial Railway Co. (PRY), upon PRY's becoming a carrier. Pioneer owns all of the outstanding stock of PRY. The transaction is scheduled to be consummated on February 17, 1998. This transaction is related to STB Finance Docket No. 33549, Pioneer Industrial Railway Co. Lease and Operation Exemption Peoria, Peoria Heights & Western Railroad, wherein PRY seeks to lease and operate 23.4 miles of rail line from Peoria, Peoria Heights & Western Railroad. Pioneer owns and controls twelve existing Class III shortline rail carriers: West Michigan Railroad Co., operating in Michigan; Fort Smith Railroad Co., operating in Arkansas; Alabama Railroad Co., operating in Alabama; Mississippi Central Railroad Co., operating in Mississippi and Tennessee; Alabama & Florida Railway Co., Inc., operating in Alabama; Decatur Junction Railway Co., operating in Illinois; Vandalia Railroad Company, operating in Illinois; Minnesota Central Railroad Co., operating in Minnesota; Keokuk Junction Railway, operating in Iowa and Illinois; Wabash & Western Railway Co., d/b/a Michigan Southern Railroad, operating in Michigan and Indiana; Rochelle Railroad Co., operating in Illinois; and Shawnee Terminal Railway Company, operating in Illinois. Decided: February 11, 1998. Service Date: February 20, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-493 (Sub-No. 3X) TRACK TECH, INC.--ABANDONMENT EXEMPTION--IN EDDY COUNTY, ND By petition filed on November 6, 1997, Track Tech , Inc. (Track Tech) seeks an exemption under 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 10903 to abandon a line of railroad between Hamar, ND (milepost 98.0), and Warwick, ND (milepost 103.92), a distance of 5.92 miles in Eddy County, ND. We will grant the exemption, subject to an environmental condition and standard employee protective conditions. The line proposed for abandonment was formerly owned by Burlington Northern Railroad Company (BN). According to Track Tech, BN took the line out of service in 1994 due to the lack of rail customers and unsafe track conditions. BN sold the line to petitioner on November 27, 1996, but petitioner has never operated trains over it. Petitioner reports that there are no shippers located on the line, and that no local or overhead traffic has moved over the line for at least 3 years. Track Tech asserts that there is no possibility that operations over this line could be viable for local service needs because no traffic could reasonably be expected to be generated on the line in the future. Petitioner also acquired 5 other lines from BN in November 1996. Petitioner filed petitions for exemption to abandon the other lines in STB Docket No. AB-493 (Sub-Nos. 1X, 2X, 4X, 5X, and 6X). The petitions in Sub-Nos. 1X, 2X, and 5X were granted by decisions served on January 12, 1998. Petitioner states that alternative transportation service is available through other rail carriers and trucking companies that operate in the area. This alternate service includes a BN east-west line, which ends at Hamar, and Red River Valley and Western Railroad Company's north-south mainline, which is approximately 21 miles west of Warwick at Oberon, ND. SEA served an environmental assessment (EA) on January 9, 1998, in which it noted that the North Dakota Department of Health (NDDH) states that the environmental impacts from the proposed construction will be minor and can be controlled by proper construction methods. SEA further noted, however, that, in order to avoid any adverse impacts, NDDH recommends that care be taken during construction activity near any water of the state to minimize adverse effects on state waters, and has listed several requirements for minimizing or preventing any environmental degradation to a waterway as a result of construction activities at a site. Accordingly, SEA recommends that a condition be imposed on any grant of abandonment authority requiring Track Tech to consult with NDDH, Environmental Health Section, prior to salvaging the right-of-way. It is ordered: 1. Under 49 U.S.C. 10502, we exempt from the prior approval requirements of 49 U.S.C. 10903 the abandonment of the above-described line, subject to: (1) the employee protective conditions set forth in Oregon Short Line R. Co.--Abandonment--Goshen, 360 I.C.C. 91 (1979); and (2) the condition that Track Tech be required to consult with NDDH, Environmental Health Section, prior to salvaging the right-of-way. 2. An offer of financial assistance (OFA) under 49 CFR 1152.27(c)(1) to allow rail service to continue must be received by the railroad and the Board by March 6, 1998, subject to time extensions authorized under 49 CFR 1152.27(c)(l)(i)(C). 3. Provided no OFA has been received, this exemption will be effective on March 26, 1998. Petitions to stay must be filed by March 6, 1998, and petitions to reopen must be filed by March 16, 1998. 4. Pursuant to the provisions of 49 CFR 1152.29(e)(2), Track Tech shall file a notice of consummation with the Board to signify that it has exercised the authority granted and fully abandoned the line. If consummation has not been effected by Track Tech's filing of a notice of consummation by February 24, 1999, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. If a legal or regulatory barrier to consummation exists at the end of the 1-year period, the notice of consummation must be filed not later than 60 days after satisfaction, expiration or removal of the legal or regulatory barrier. Decided: February 23, 1998 Service Date: Late Release February 24, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION AND NOTICE OF INTERIM TRAIL USE OR ABANDONMENT STB Docket No. AB-493 (Sub-No. 4X) TRACK TECH, INC.--ABANDONMENT EXEMPTION--IN WARD COUNTY, ND By petition filed on November 6, 1997, Track Tech, Inc. (Track Tech) seeks an exemption under 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 10903 to abandon a line of railroad between Minot, ND (milepost 4.00), and Tatman, ND (milepost 16.70), a distance of 12.70 miles in Ward County, ND. A request for issuance of a notice of interim trail use (NITU) and imposition of a public use condition was filed by Minot Park District (MPD). We will grant the exemption, subject to trail use, public use, an environmental condition, and standard employee protective conditions. The line proposed for abandonment was formerly owned by Burlington Northern Railroad Company (BN). According to petitioner, BN took the line out of service in 1993 due to unsafe track conditions. Petitioner has operated no trains over the line since it acquired the line from BN on November 27, 1996. Petitioner reports that there are no shippers located on the line, and that no local or overhead traffic has moved over the line for at least 3 years . Track Tech asserts that there is no possibility that operations over this line could be viable for local service needs because no traffic could reasonably be expected to be generated on the line in the future. Petitioner states that alternative transportation service is available through other rail carriers and trucking companies that operate in the area, including a Burlington Northern and Santa Fe Railway Company east-west line that traverses and serves the Minot area, and a Canadian Pacific/Soo Line Railroad Company line, which is a north-south mainline through Minot. Our Section of Environmental Analysis (SEA) has examined the environmental report, verified the data it contains, analyzed the probable effects of the proposed action on the quality of the human environment, and served an environmental assessment (EA) on January 12, 1998. In the EA, SEA indicated that the North Dakota Department of Health (NDDH) states that the environmental impacts from the proposed construction will be minor and can be controlled by proper construction methods. SEA further indicated that, in order to avoid any adverse impacts, NDDH recommends that care be taken during construction activity near any water of the state to minimize adverse effects on state waters, and has listed several requirements for minimizing or preventing any environmental degradation to a waterway as a result of construction activities at a site. Accordingly, SEA recommends that a condition be imposed on any grant of abandonment authority requiring Track Tech to consult with NDDH, Environmental Health Section, prior to salvaging the right-of-way. MPD requests that interim trail use/rail banking be imposed under the National Trails System Act, 16 U.S.C. 1247(d) (Trails Act). It has submitted a statement of willingness to assume financial responsibility for the right-of-way, and has acknowledged that use of the right- of-way is subject to possible future reconstruction and reactivation for rail service as required under 49 CFR 1152.29. By letter filed January 26, 1998, Track Tech states that it has no objection to MPD's request. MPD's request complies with the requirements of 49 CFR 1152.29 and Track Tech is willing to enter into negotiations. Therefore, we will issue a NITU for the described line. The parties may negotiate an agreement during the 180-day period prescribed below. If an agreement is executed, no further Board action is necessary. If no agreement is reached within 180 days, Track Tech may fully abandon the line, subject to the conditions imposed below. SEA has indicated in its EA that the right-of-way may be suitable for other public use following abandonment. As noted above, MPD has also requested that a 180-day public use condition be imposed. MPD requests that Track Tech be precluded from: (1) disposing of the rail corridor, other than the tracks, ties and signal equipment, except for public use on reasonable terms; and (2) removing or destroying trail-related structures such as bridges, trestles, culverts, and tunnels. MPD states that the corridor would make an excellent recreational trail and conversion of the property to trail use is in accordance with the transportation master plan of the City of Minot. MPD indicates that the 180-day time period is needed to review title information or commence negotiations with Track Tech. We have determined that persons who file under the Trails Act may also file for public use under 49 U.S.C. 10905. When the need for both conditions is established, it is our policy to impose them concurrently, subject to the execution of a trail use agreement. MPD has met the public use criteria prescribed at 49 CFR 1152.28(a)(2) by specifying: (1) the condition sought; (2) the public importance of the condition; (3) the period of time for which the condition would be effective; and (4) justification for the period of time requested. Accordingly, an 180-day public use condition also will be imposed, commencing with the effective date of this decision and notice. It is ordered: 1. Under 49 U.S.C. 10502, we exempt from the prior approval requirements of 49 U.S.C. 10903, the abandonment by Track Tech of the above-described line, subject to the employee protective conditions set forth in Oregon Short Line R. Co.--Abandonment--Goshen, 360 I.C.C. 91 (1979), and the conditions that Track Tech shall: (1) leave intact all of the right-of-way, including bridges, trestles, culverts and tunnels (but not track and track materials) for a period of 180 days from the effective date of this decision and notice to enable any state or local governmental agency or any other interested person to negotiate the acquisition of the line for public use; (2) comply with the interim trail use/rail banking procedures set forth below; and (3) consult with NDDH, Environmental Health Section, prior to salvaging the right-of-way. 2. If an interim trail use/rail banking agreement is reached, it must require the trail user to assume, for the term of the agreement, full responsibility for management of, any legal liability arising out of the transfer or use of (unless the user is immune from liability, in which case it need only indemnify the railroad against any potential liability), and for the payment of any and all taxes that may be levied or assessed against, the right-of-way. 3. Interim trail use/rail banking is subject to the future restoration of rail service and to the user's continuing to meet the financial obligations for the right-of-way. 4. If interim trail use is implemented and subsequently the user intends to terminate trail use, it must send the Board a copy of this decision and notice and request that it be vacated on a specified date. 5. If an agreement for interim trail use/rail banking is reached by the 180th day after service of this decision and notice, interim trail use may be implemented. If no agreement is reached by that time, Track Tech may fully abandon the line, provided the conditions imposed above are met. 6. An offer of financial assistance (OFA) under 49 CFR 1152.27(c)(l) to allow rail service to continue must be received by the railroad and the Board by March 6, 1998, subject to time extensions authorized under 49 CFR 1152.27(c)(l)(i)(C). 7. Provided no OFA has been received, this exemption will be effective March 26, 1998. Petitions to stay must be filed by March 6, 1998, and petitions to reopen must be filed by March 16, 1998. 9. Pursuant to the provisions of 49 CFR 1152.29(e)(2), Track Tech shall file a notice of consummation with the Board to signify that it has exercised the authority granted and fully abandoned the line. If consummation has not been effected by Track Tech's filing of a notice of consummation by February 24, 1999, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. If a legal or regulatory barrier to consummation exists at the end of the 1-year period, the notice of consummation must be filed not later than 60 days after satisfaction, expiration, or removal of the legal or regulatory barrier. Decided: February 23, 1998 Service Date: Late Release February 24, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-493 (Sub-No. 6X) TRACK TECH, INC.--ABANDONMENT EXEMPTION--IN LUBBOCK COUNTY, TX By petition filed on November 6, 1997, Track Tech , Inc. (Track Tech) seeks an exemption under 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 10903 to abandon a line of railroad between milepost 351.15 and milepost 357.40, a distance of 6.25 miles in Lubbock County, TX. We will grant the exemption, subject to an environmental condition and standard employee protective conditions. The line proposed for abandonment was formerly owned by Burlington Northern Railroad Company (BN). According to petitioner, BN took the line out of service and embargoed it due to unsafe track conditions in 1992. Petitioner has operated no trains over the line since it acquired the line from BN on November 27, 1996. Petitioner reports that there are no shippers located on the line, and that no local or overhead traffic has moved over the line for at least 5 years. Track Tech asserts that there is no possibility that operations over this line could be viable for local service needs because no traffic could reasonably be expected to be generated on the line in the future. Petitioner states that alternative transportation service is available through other rail carriers and trucking companies that operate in the area, including a Burlington Northern and Santa Fe Railway Company mainline, which serves Lubbock. SEA served an environmental assessment (EA) on January 6, 1998, in which it noted that the National Geodetic Survey (NGS) has informed the Board that there are five historic geodetic station markers along the line that may be affected by the proposed abandonment. SEA further noted that NGS requests that it be given notification not less than 90 days in advance of any salvage activities that may disturb or destroy these markers so that plans can be made for their relocation. Accordingly, SEA recommends that a condition be imposed on any grant of abandonment authority requiring Track Tech to provide NGS with such notification. It is ordered: 1. Under 49 U.S.C. 10502, we exempt from the prior approval requirements of 49 U.S.C. 10903 the abandonment of the above-described line, subject to: (1) the employee protective conditions set forth in Oregon Short Line R. Co.--Abandonment--Goshen, 360 I.C.C. 91 (1979); and (2) the condition that Track Tech notify NGS not less than 90 days in advance of any salvage activities that may disturb or destroy the five historic geodetic station markers that NGS has identified along the line so that plans can be made for their relocation. 2. An offer of financial assistance (OFA) under 49 CFR 1152.27(c)(1) to allow rail service to continue must be received by the railroad and the Board by March 6, 1998, subject to time extensions authorized under 49 CFR 1152.27(c)(l)(i)(C). 3. Provided no OFA has been received, this exemption will be effective on March 26, 1998. Petitions to stay must be filed by March 6, 1998, and petitions to reopen must be filed by March 16, 1998. 5. Pursuant to the provisions of 49 CFR 1152.29(e)(2), Track Tech shall file a notice of consummation with the Board to signify that it has exercised the authority granted and fully abandoned the line. If consummation has not been effected by Track Tech's filing of a notice of consummation by February 24, 1999, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. If a legal or regulatory barrier to consummation exists at the end of the 1-year period, the notice of consummation must be filed not later than 60 days after satisfaction, expiration or removal of the legal or regulatory barrier. Decided: February 19, 1998 Service Date: February 24, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION Finance Docket No. 32766 PORTLAND & WESTERN RAILROAD, INC.--LEASE AND OPERATION EXEMPTION--LINES OF BURLINGTON NORTHERN RAILROAD COMPANY In a decision served and notice published on January 5, 1996, the Interstate Commerce Commission granted a petition for exemption by Portland & Western Railroad, Inc. (PWR) to lease five unconnected line segments, totaling 53 miles, from Burlington Northern Railroad Company (BN). The lines are situated in northwestern Oregon, generally between Salem and Portland. As part of the transaction, BN also assigned to PWR 4.2 miles of overhead trackage rights over a line of the Port of Tillamook Bay Railroad that connects to the BN lines. Recently, in STB Finance Docket No. 33502 (notice of exemption served and published Nov. 24, 1997), PWR was authorized to acquire the five line segments involved here, along with other segments. The lease in question here was to terminate at the closing of the transaction, which was expected to be on November 25, 1997. John D. Fitzgerald, for and on behalf of United Transportation Union, General Committee of Adjustment (Fitzgerald), had opposed the petition. Fitzgerald subsequently filed a petition to reopen the decision, in which he questioned the bona fides of the transaction and argued that, under the lease agreement, PWR had become the agent of BN rather than its lessee. Fitzgerald raised significant questions regarding the extent of BN's influence over PWR under the terms of the lease. As the record contained insufficient evidence to enable us to find that the agreement between PWR and BN was bona fide, we reopened this proceeding in a decision served March 11, 1997, for the submission of supplemental evidence. Thereafter, on consideration of the supplemented record, we issued a decision on October 15, 1997, in which we denied the Fitzgerald petition and declined to revoke the exemption. In our decision, we found that the lease transaction had been motivated by a desire of the lessor and lessee to realize legitimate business goals. We were unpersuaded by arguments that the transaction and arrangement were anticompetitive. We noted that shippers had expressed satisfaction with PWR's service and that the pre-lease competitive setting essentially had been preserved. We also found no merit in Fitzgerald's arguments suggesting that revocation was warranted due to adverse impacts on employees. We saw no reason to revoke the exemption or to order the lease to be modified. On November 3, 1997, Fitzgerald filed a petition for reconsideration of the October 15 decision on grounds of material error and changed circumstances. On November 24, 1997, PWR replied. The petition will be denied. Fitzgerald argues, first, that we erred in treating his January 30, 1996 petition as a petition to revoke the exemption granted in the ICC's January 5, 1996 decision, rather than as a petition to reopen the decision. Second, Fitzgerald argues that we erred because we limited the issues upon which labor interests could seek review. Fitzgerald's first argument is without merit. In his January 30 petition, he asked us to reopen the case. By our decision served March 11, 1996, we reopened this proceeding pursuant to Fitzgerald's petition. In order to evaluate Fitzgerald's assertion that the lease between BN and PWR was a sham, we propounded a list of questions. Once we granted Fitzgerald's petition to reopen, the question arose as to the ultimate relief sought by the petitioner. He asked that we deny the petition filed by PWR. That is the relief sought when a petition for exemption is pending before the Board. That is the relief that Fitzgerald could have sought in his petitions filed on September 26, 1995, and October 5, 1995, when PWR's petition for exemption was pending. It is relief that we could have then granted because we had not yet acted on the petition for exemption. But after we granted PWR's petition for exemption in our January 5, 1996 decision, the exemption became effective (Fitzgerald did not ask the Board to stay the effectiveness of the January 5, 1996 decision or to otherwise prevent its becoming effective). Once an exemption becomes effective, the method provided by the statute to strike it down is revocation pursuant to 49 U.S.C. 10505. That is the standard that we correctly used in evaluating Fitzgerald's request for relief. Fitzgerald charged that we adopted an incorrect statutory standard, in lieu of the requirements for PWR to prove its case under 49 U.S.C. 10502(a). This statement overlooks the fact that PWR did prove its case, as noted in the January 5, 1996 decision granting the exemption PWR sought. Fitzgerald could have asked that the ICC deny the petition for exemption, but elected not to do so. Rather, Fitzgerald waited until we issued our decision before raising objections to the lease. At that point, revocation of the exemption was the statutorily prescribed remedy to provide Fitzgerald the relief he sought. Our action in construing his petition as seeking such relief benefitted Fitzgerald by construing his petition as a request for the only remedy available to him. Fitzgerald implies that we shifted the burden of proof from PWR to him by treating his petition to reopen as a petition for revocation, claiming that we thereby eliminated the requirements for PWR to prove its case under 49 U.S.C. 10502(a) . . . . That is not so. In a petition to reopen, pursuant to 49 CFR 1115.3, the petitioner has the burden of showing that the Board committed material error in the decision that the petitioner seeks to reopen, or that the decision will be materially affected by new evidence or changed circumstances. PWR sustained its burden of proof to support the grant of the exemption in our decision of January 5, 1996. The burden then shifted to Fitzgerald. Had we treated Fitzgerald's petition exclusively under the standards of section 1115.3, he would still have had to support a showing that the grant of an exemption to PWR should be overturned. Fitzgerald's second argument also fails. His assertion that we failed to consider the issues he raised because he represents labor fly in the face of the record in this proceeding. He argued that the lease from BN to PWR did not serve any commercial purpose but served only to transfer jobs from BN to PWR. We addressed those issues at length, both in our March 11, 1997 decision seeking additional evidence and in our October 15, 1997 decision on the merits. At no time did we decline to address an issue raised by Fitzgerald. Fitzgerald does not identify, much less elaborate on, any issues he believes he might have been precluded from raising. He merely notes the importance of competitive issues. Competitive impact was a focus of our October 15 decision. As noted above, we considered Fitzgerald's arguments that the transaction and arrangement between PWR and BN were anticompetitive, and we found those arguments unpersuasive. Petitioner also argues that there is a changed circumstance that supports reconsideration. The record in this proceeding shows that PWR operates rail lines under lease from Southern Pacific Transportation Company (SP), and that an affiliate of PWR, Willamette & Pacific Railroad, Inc., interchanges traffic with SP. Fitzgerald asserts that the recent consolidation of SP and Union Pacific Railroad Company (UP) is a changed circumstance that makes a [renewed] competitive analysis necessary. Petitioner does not, however, indicate the relevance to this proceeding of the SP/UP consolidation, and we do not see any. In sum, the petition fails to establish any basis for reconsideration of our prior decision. Accordingly, the petition will be denied. It is ordered: 1. The petition for reconsideration is denied. Decided: February 11, 1998 Service Date: February 24, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33529 CITY OF CHARLOTTE, NORTH CAROLINA ACQUISITION EXEMPTION CERTAIN ASSETS OF THE NORTH CAROLINA RAILROAD COMPANY Through a transaction that was the subject of a notice of exemption served on December 29, 1997, and published on December 30, 1997, the City of Charlotte, NC (the City), proposes to acquire from the North Carolina Railroad Company (NCRR) a 1.1-mile line of railroad, which is located between 2nd Street and 12th Street in Charlotte, Mecklenburg County, NC. The City states that it is purchasing the line to construct and operate a passenger rail transit system. The transaction was scheduled to be consummated after December 18, 1997, the effective date of the exemption. Concurrent with its filing of the verified notice invoking the exemption, the City filed a motion to dismiss the notice of exemption for lack of jurisdiction, asserting that the transaction is not subject to the Board's jurisdiction. We will grant the motion to dismiss. The City is acquiring the line subject to a preexisting lease between NCRR and the Norfolk Southern Railway Company (NS), whereby NS had provided all rail service on the line. (The lease was executed in 1895 by NCRR and Southern Railway Company). The City states that, under the proposed Purchase Agreement, it will acquire substantially all of NCRR's right, title and interest in the physical assets of the line. The parties will also enter into an agreement by deed that transfers NCRR's interest to the City, but retains for NCRR an exclusive rail freight operating easement on the line. Under these agreements, NS will assertedly continue all of its existing rights and obligations to provide rail service, and NCRR will allegedly retain its residual common carrier obligation. The parties state, however, that the City will obtain no rights or ability to conduct freight rail operations or provide freight service on the line. The City notes that no freight operations have been conducted on the line for over two years, and that no future freight operations are anticipated. The City expects that NS and NCRR will shortly seek authority under 49 U.S.C. 10903 for NS to discontinue service and NCRR to abandon the line, thus terminating their common carrier obligations. While the City will obtain an option to acquire the NCRR's freight easement, it states that it is unlikely that it would elect to exercise that option, considering that NCRR intends to abandon the line. The City asserts that the Purchase Agreement and deed show that, after the transaction is consummated, it will not conduct freight operations or hold itself out to the public to provide freight service. The question presented here is whether our regulatory approval is required for the proposed transfer of the NCRR's line to the City. The acquisition of an active rail line and the common carrier obligation that goes with it ordinarily requires Board approval under 49 U.S.C. 10901. We have declined to assert jurisdiction over the transfer of a right-of-way or other fixed assets to an entity when the railroad retains a permanent, unconditional easement to perform all of the common carrier freight operations over the line. In making a determination here, we will look to whether NCRR retained a permanent, unconditional easement and whether it has sufficient interest and control over the line so that it cannot be prevented from carrying out its common carrier obligation. Under the proposed Purchase Agreement, the City will acquire certain real property and track, but will not acquire the property and other contractual rights necessary to conduct freight operations or control common carrier freight operations on the line. The Purchase Agreement also specifies that property to be transferred is subject to the prior lease with NS. The deed transferring the property states that NCRR will retain a perpetual, exclusive easement over an[d] across the real property . . . which is conveyed by this Deed . . . for the purposes of providing common carrier rail freight service to or from or along any of the Property. These documents show that NCRR will retain the property and contractual rights as lessor of the line and that NS will, in turn, retain all rights necessary to meet its common carrier obligation as lessee. After acquiring the physical assets of the line, the City will not acquire any right or ability to provide or control rail freight transportation. Nor does it not appear that the City could unreasonably interfere or interrupt any freight rail operations by NS. Moreover, no freight service is currently being performed on the line, none is expected in the future, and the parties say that NCRR and NS will seek Board authority to abandon and discontinue service. We see no basis for finding that our approval is required for the transaction or finding that the City will become a rail carrier under our jurisdiction. After the City acquires the physical assets of the right-of-way, NS may continue to provide rail common carrier freight service over the line and NCRR will continue to have the residual common carrier obligation. The record shows that the City does not intend to provide freight rail service. Nor does the record show that the City intends to interfere with or impede the ability of NS and NCRR to provide service if requested. Accordingly, we will grant the motion to dismiss the notice of exemption. It is ordered: 1. The City's motion to dismiss its notice of exemption is granted. Decided: February 11, 1998 Service Date: February 24, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-55 (Sub-No. 521X) CSX TRANSPORTATION, INC.--ABANDONMENT EXEMPTION-- IN FULTON COUNTY, GA STB Docket No. AB-55 (Sub-No. 555X) CSX TRANSPORTATION, INC.--ABANDONMENT EXEMPTION-- IN ALACHUA COUNTY, FL By decision served November 21, 1997, in STB Docket No. AB-55 (Sub-No. 521X), the Board granted CSX Transportation, Inc. (CSXT), an exemption under 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 10903 to abandon a 0.58-mile portion of its railroad line known as the Atlanta Terminal Subdivision, extending from milepost 864.04 near Wheeler Street to milepost 864.62 at the end of the track at Simpson Street, in Fulton County, GA. The exemption became effective on December 21, 1997. On December 17, 1997, the Board served a decision and notice of interim trail use or abandonment (NITU) in this proceeding which established a 180-day period for the City of Atlanta to negotiate an interim trail use/rail banking agreement with CSXT and also imposed a concurrent 180-day public use condition. On January 26, 1998, CSXT filed a letter stating that the line had been abandoned subject only to negotiations with the City of Atlanta for the use of this right-of-way for trail purposes. In STB Docket No. AB-55 (Sub-No. 555X), CSXT filed a notice of exemption under 49 CFR 1152 Subpart F--Exempt Abandonments to abandon approximately 1.41 miles of its line of railroad between milepost AR-716.89 and milepost AR-715.48, in High Springs, Alachua County, FL. Notice of the exemption was served and published in the Federal Register on November 24, 1997, and the exemption became effective on December 24, 1997. On January 8, 1998, the Board served a NITU in this proceeding which established a 180-day period for the City of High Springs to negotiate an interim trail use/rail banking agreement with CSXT and also imposed a concurrent 180-day public use condition. On January 26, 1998, CSXT filed a letter stating that the line had been abandoned [e]xcept to the extent that CSXT is negotiating with the City of High Springs, Florida for the use of the right-of-way for interim trail purposes. . . . The Board's regulations include a provision that is designed to provide clear evidence of when an authorized abandonment has been consummated and thus is designed to avoid litigation over whether or not a line has been abandoned. The trail use and public use conditions imposed in these proceedings are regulatory barriers to consummation and, accordingly, CSXT's letters cannot provide valid notice of the consummation of the proposed abandonments. Therefore, the letters will be rejected. It is ordered: 1. The letters filed on January 26, 1998, in STB Docket No. AB-55 (Sub-No. 521X) and STB Docket No. AB-55 (Sub-No. 555X), respectively, are rejected. Decided: February 23, 1998 Service Date: February 25, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION AND NOTICE OF INTERIM TRAIL USE OR ABANDONMENT STB Docket No. AB-477 (Sub-No. 3X) OWENSVILLE TERMINAL COMPANY, INC.--ABANDONMENT EXEMPTION-- IN EDWARDS AND WHITE COUNTIES, IL AND GIBSON AND POSEY COUNTIES, IN On November 7, 1997, Owensville Terminal Company, Inc. (OTC) filed a petition for an exemption under 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 10903 to abandon a line of railroad known as the Browns-Poseyville line, between milepost 205.0 at or near Browns, IL, and milepost 227.5 near Poseyville, IN, a distance of 22.5 miles in Edwards and White Counties, IL, and Gibson and Posey Counties, IN. The Board published a notice in the Federal Register on November 28, 1997, instituting an exemption proceeding. A request for issuance of a notice of interim trail use (NITU) and for imposition of a public use condition was filed by Indiana Trails Fund, Inc. (Indiana Trails), on December 5, 1997. A request for imposition of a public use condition was also filed by the Indiana Department of Transportation, through approval of the Indiana Transportation Corridor Planning Board (INDOT), on December 30, 1997. We will grant the exemption, subject to trail use, public use, an historic preservation condition, environmental conditions, and standard employee protective conditions. Rail lines extend in three directions from Poseyville. The line involved in this proceeding, formerly owned by Evansville Terminal Company, Inc. (ETC), extends southeasterly from a point near Browns to a point near Poseyville, and connects with Norfolk Southern Railroad Company (NS). A second rail line, currently owned by ETC, extends approximately 19 miles southeasterly from Poseyville to Evansville, IN (Poseyville-Evansville line), and connects with CSX Transportation, Inc. (CSXT), and with NS, via an intermediate switch over CSXT at Evansville. The third line extends approximately 12 miles northeasterly from Poseyville to Owensville, IN (Poseyville-Owensville line), and is owned by OTC. OTC and ETC acquired the above-described lines in 1996. After the acquisition, shippers on the Poseyville-Owensville line began to route their shipments over ETC's Poseyville-Evansville line instead of over the Browns-Poseyville line, including shipments to be interchanged with NS at Evansville. On September 12, 1996, assertedly due to poor track conditions, ETC embargoed rail service on the Browns-Poseyville line. Because OTC had financed ETC's acquisition, OTC agreed to acquire the line from ETC in early 1997 with the intent to seek the abandonment at issue. OTC states that no traffic has originated or terminated on this line for approximately 6 years, and that there are no reasonable prospects for traffic on the line. OTC describes the communities along the rail line as small, and avers that the surrounding area is dominated by grain producers whose product has long been transported by truck. According to OTC, there are no indications that anyone desires to transport grain using the line. OTC states that all overhead traffic was rerouted from the line over a year ago. Specifically, OTC asserts that the interests of Continental Grain Company (CGC), which opposed OTC's earlier attempt to abandon this line in STB Docket No. AB-477 (Sub-No. 1X), have now been satisfied. OTC says that CGC has agreed not to oppose this abandonment. OTC also asserts that all of CGC's grain has been moving by truck in recent years. OTC estimates the line's net liquidation value at $1,301,000 and claims that OTC would incur an opportunity cost of $98,941 per year if it were to continue to own the line. OTC further claims that it would cost $521,964 to rehabilitate the line to Federal Railroad Administration Class 1 safety standards, and that that amount could not be recovered from rail line operating revenues. OTC argues that abandonment of the Browns-Poseyville line is justified in that: (1) there is no public need for the involved rail service and no reasonable prospect of such need in the foreseeable future; (2) continued ownership of the line would cause OTC to incur a substantial opportunity cost; (3) reinstitution of rail service would not be possible without a very substantial expenditure for track rehabilitation, which could not be recovered from operating revenues; and (4) abandonment of the line would not significantly harm shippers or communities. In the EA, SEA indicated that: (1) the U.S. Fish and Wildlife Service (FWS) in Marion, IL, has stated that the abandonment is not likely to adversely affect any known threatened or endangered species; however, since FWS is implementing conservation agreements to protect the copperbelly watersnake, it recommends that the killing of any snakes encountered during salvage operations be prohibited; (2) FWS in Bloomington, IN, has recommended nine specific mitigation measures to minimize adverse impacts on fish and wildlife resources; (3) the National Geodetic Survey (NGS) has identified one geodetic station marker along the rail line and requests 90 days notice to plan relocation of any markers that may be disturbed or destroyed; (4) the Indiana SHPO has identified Bridge Nos. 215.67 and 221.4 as eligible for listing in the National Register of Historic Places; (5) the Indiana Department of Environmental Management (IDEM) has raised concerns about impacts on ambient air quality in the project area, specifically, disposal of organic debris from land clearing and fugitive dust; IDEM has also expressed concern regarding disposal of contaminated soils; and (6) the Illinois Department of Natural Resources (ILDNR) has noted that the federally endangered Clubshell mussel is located in White County, IL; consequently, while the abandonment is not likely to result in adverse impacts to this species, if the rail line, including ties, bridges, and other structures were to be removed, ILDNR states that further coordination would be necessary with both it and FWS. SEA, therefore, recommends that the following conditions be imposed on any decision granting abandonment authority: (1) OTC shall consult with the FWS in Marion, IL, concerning measures that OTC may take to protect the copperbelly watersnake during salvage operations; (2) OTC shall, prior to salvaging or disposing of the entire right-of-way, consult with the FWS office in Bloomington, IN, to implement specific mitigation measures to minimize adverse impacts on fish and wildlife resources; (3) OTC shall consult with NGS and provide it with 90 days notice prior to disturbing or destroying any geodetic markers; (4) OTC shall retain its interest in and take no steps to alter the historic integrity of Bridge Nos. 215.67 and 221.4 until completion of the section 106 process of the National Historic Preservation Act, 16 U.S.C. 470f; (5) OTC shall, prior to salvaging or disposing of the entire right-of-way, consult with IDEM to implement mitigation measures to minimize adverse impacts on air quality and to address disposal of contaminated soils; and (6) if OTC intends to remove the rail line (including ties, bridges, and other structures), it shall consult with ILDNR and FWS to further assess potential impacts on the Clubshell mussel. Indiana Trails requests that interim trail use/rail banking be imposed under the National Trails System Act, 16 U.S.C. 1247(d) (Trails Act). Indiana Trails has submitted a statement of willingness to assume financial responsibility for the right-of-way, and acknowledged that use of the right-of-way is subject to possible future reconstruction and reactivation of the right-of-way for rail service as required under 49 CFR 11542.29. By letter filed December 30, 1997, OTC states that it is agreeable to negotiating with Indiana Trails for interim trail use. OTC also states that it and Indiana Trails have signed a contract for purchase of the right-of-way in the event of approval of the abandonment. Indiana Trails request complies with the requirements of 49 CFR 1152.29 and OTC is willing to enter into negotiations. Therefore, we will issue a NITU for the described line. The parties may negotiate an agreement during the 180-day period prescribed below. If an agreement is executed, no further Board action is necessary. If no agreement is reached within 180 days, OTC may fully abandon the line, subject to the conditions imposed below. SEA has indicated in its EA that the right-of-way may be suitable for other public use after abandonment. As noted, Indiana Trails has also requested that a 180-day public use condition be imposed. Indiana Trails requests that OTC be precluded from: (1) disposing of the rail corridor, other than the tracks, ties and signal equipment, except for public use on reasonable terms; and (2) removing or destroying trail-related structures such as bridges, culverts, and tunnels. Indiana Trails states that the corridor traverses some of Indiana's most scenic topography, for which trail use would afford an excellent chance to increase the local tourism economy, and that the right-of- way provides a necessary transportation role as a bridge connection over the Wabash River linking both Indiana and Illinois. Indiana Trails also states that the bridges, culverts and tunnels have considerable value for, and would certainly enhance the use of, recreational trails. Indiana Trails indicates that the 180-day period is needed in order for it to coordinate efforts with local interest groups and to commence negotiations with the railroad. Also as noted, INDOT has requested imposition of a public use condition for a portion of the right-of-way between the Indiana State line, including the Wabash River Bridge, at approximately milepost 216.5 and milepost 227.5. INDOT indicates that the 180-day time period is needed to review opportunities for state action related to the proposed abandonment and to reach an agreement with the railroad. The public use criteria prescribed at 49 CFR 1152.28(a)(2) have been met by Indiana Trails and INDOT specifying: (1) the condition sought; (2) the public importance of the condition; (3) the period of time for which the condition would be effective; and (4) justification for the period of time requested. Accordingly, a 180-day public use condition also will be imposed, commencing with the effective date of this decision and notice. If a trail use agreement is reached on a portion of the right-of-way, OTC must keep the remaining right-of-way intact for the remainder of the 180-day period to permit public use negotiations. Also, we note that a public use condition is not imposed for the benefit of any one potential purchaser. Rather, it provides an opportunity for any interested person to acquire a right-of-way that has been found suitable for public purposes, including trail use. Therefore, with respect to the public use condition, OTC is not required to deal exclusively with Indiana Trails and INDOT, but may engage in negotiations with other interested persons. On February 3, 1998, OTC filed a request that this decision be made effective on 15 days notice rather than the customary 30 days. In anticipation that the Board would grant this unopposed petition, OTC states that it would like to commence salvage operations promptly in order to complete them before the spring thaw, when local roads are posted against significant truck weights. In support of its petition, OTC cites what it represents to be situations where abandonment exemptions were made effective on 15 days notice under similar circumstances involving weather conditions in STB Docket No. AB-497 (Sub-No. 2X), Minnesota Northern Railroad, Inc.--Abandonment Exemption--Between Redland Junction and Fertile, In Polk County, MN (STB served Nov. 14, 1997), and STB Docket No. AB-497 (Sub-No. 1X), Minnesota Northern Railroad, Inc.--Abandonment Exemption--in Red Lake and Polk Counties, MN (STB served Nov. 14, 1997). Because the petition is unopposed and because OTC has provided a sufficient justification to support the request, we will make this decision effective in 15 days. It is ordered: 1. INDOT's late-filed request for a public use condition under 49 U.S.C. 10905 is accepted. 2. Under 49 U.S.C. 10502, we exempt from the prior approval requirements of 49 U.S.C. 10903 the abandonment by OTC of the above-described line, subject to the employee protective conditions set forth in Oregon Short Line R. Co.--Abandonment--Goshen, 360 I.C.C. 91 (1979), and the conditions that: (1) OTC shall leave intact all of the right-of-way, including bridges, trestles, culverts and tunnels (but not track and track materials) for a period of 180 days from the effective date of this decision and notice, to enable any state or local government agency or any other interested person to negotiate the acquisition of the line for public use; (2) OTC shall comply with the interim trail use/rail banking procedures set forth below; (3) OTC shall consult with the U.S. Fish and Wildlife Service in Marion, IL, concerning measures that OTC may take to protect the copperbelly watersnake during salvage operations; (4) OTC shall, prior to salvaging or disposing of the entire right-of-way, consult with the U.S. Fish and Wildlife Service in Bloomington, IN, to implement specific mitigation measures to minimize adverse impacts on fish and wildlife resources; (5) OTC shall consult with the National Geodetic Survey and provide it with 90 days notice prior to disturbing or destroying any geodetic markers; (6) OTC shall retain its interest in and take no steps to alter the historic integrity of Bridge Nos. 215.67 and 221.4 until completion of the section 106 process of the National Historic Preservation Act, 16 U.S.C. 470f; (7) OTC shall, prior to salvaging or disposing of the entire right-of-way, consult with the Indiana Department of Environmental Management to implement mitigation measures to minimize adverse impacts on air quality and to address disposal of contaminated soils; and (8) if OTC intends to remove the rail line (including ties, bridges, and other structures), it shall consult with the Illinois Department of Natural Resources and the U.S. Fish and Wildlife Service to further assess potential impacts on the Clubshell mussel. 3. OTC is directed to serve a copy of this decision on the shippers on the line within 5 days after the service date of this decision and to certify to the Board that it has done so. 4. If an interim trail use/rail banking agreement is reached, it must require the trail user to assume, for the term of the agreement, full responsibility for management of, any legal liability arising out of the transfer or use of (unless the user is immune from liability, in which case it need only indemnify the railroad against any potential liability), and for the payment of any and all taxes that may be levied or assessed against, the right-of-way. 5. Interim trail use/rail banking is subject to the future restoration of rail service and to the user's continuing to meet the financial obligations for the right-of-way. 6. If interim trail use is implemented and subsequently the user intends to terminate trail use, it must send the Board a copy of this decision and notice and request that it be vacated on a specified date. 7. If an agreement for interim trail use/rail banking is reached by the 180th day after service of this decision and notice, interim trail use may be implemented. If no agreement is reached by that time, OTC may fully abandon the line, provided the conditions imposed above are met. 8. An OFA under 49 CFR 1152.27(c)(l) to allow rail service to continue must be received by the railroad and the Board by March 6, 1998, subject to time extensions authorized under 49 CFR 1152.27(c)(l)(i)(C). 9. Provided no OFA has been received, this exemption will be effective March 12, 1998. Petitions to stay must be filed by March 9, 1998, and petitions to reopen must be filed by March 23, 1998. 10. Pursuant to the provisions of 49 CFR 1152.29(e)(2), OTC shall file notice of consummation with the Board to signify that it has exercised the authority granted and fully abandoned the line. If consummation has not been effected by OTC's filing of a notice of consummation by February 25, 1999, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. If a legal or regulatory barrier to consummation exists at the end of the 1-year period, the notice of consummation must be filed not later than 60 days after satisfaction, expiration, or removal of the legal or regulatory barrier. Decided: February 23, 1998 Service Date: February 25, 1998 ----------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB SERVICE ORDER NO. 1518 JOINT PETITION FOR SERVICE ORDER STB EX PARTE NO. 573 RAIL SERVICE IN THE WESTERN UNITED STATES In these proceedings, we have addressed the transportation emergency in the western part of the United States in several ways. In the Ex Parte No. 573 proceeding, we initiated a general inquiry into the service problems in the West, and we held oral hearings on October 27 and December 3, 1997, at which we received testimony from a broad spectrum of interests. In the Service Order No. 1518 proceeding instituted following the October 27 hearing, we issued two unprecedented emergency service orders that, among other things, made substantial changes to the way in which service is provided in and around the Houston area. Additionally, in the UP/SP Oversight proceeding, we reviewed a variety of competitive issues associated with the merger of the Union Pacific Railroad Company and the Southern Pacific Transportation Corporation (UP/SP) that some parties view as relevant to the way in which service is provided in the West. This decision will address three issues: (1) the extension of the service order; (2) other short- or long-term proposals to address service in the West; and (3) the question of the adequacy of the rail infrastructure and capacity in and around the Houston area. A. Extension of the Service Order. Our service orders in these proceedings, which currently run through March 15, 1998, essentially sought to relieve some of the pressure on rail service to Houston in general, and on UP/SP in particular, without interfering with UP/SP's own service recovery efforts or otherwise detrimentally impacting service already being provided to shippers by the other carriers enlisted to help with the service emergency. In particular, our orders directed UP/SP to release shippers switched by Houston Belt & Terminal Railroad Company (HBT) or Port Terminal Railroad Association (PTRA) from their contracts so that they could immediately route traffic over Burlington Northern and Santa Fe Railway Company (BNSF) or The Texas Mexican Railway Company (Tex Mex), in addition to UP/SP. They directed UP/SP to permit BNSF and Tex Mex to modify their operations over UP/SP lines to minimize congestion over UP/SP's Sunset Line and to move traffic around Houston rather than going through it. More generally, we required UP/SP to cooperate with other railroads and to accept assistance from other railroads able to handle UP/SP traffic. To assure that carriers in the Houston area with additional service responsibilities will be in a position to have input into decisions about the movement of their trains, we directed UP/SP to provide representatives of BNSF and Tex Mex full access to UP/SP's Spring, TX, dispatching facility as neutral observers.Additionally, we required extensive data reporting by UP/SP and BNSF, designed to help us and affected parties evaluate the progress of the service recovery. To supplement the data reporting by UP/SP and BNSF, we requested, and received, comparable performance reports from shipper groups and others. The information provided by the shipper groups, which is confirmed by the carrier- supplied data, indicates that, although the service crisis has eased in some areas, it continues to persist in others. Therefore, we have decided to extend the order issued on December 4, 1997. The shipper comments have suggested extending the order, some for the maximum time permissible under the statute, that is, until August 2, 1998. UP/SP has asked that the order be extended for only 60 days, and that we hold a hearing in early May to determine the extent to which the various measures it is undertaking to correct its service problems have produced improvements. We would hope that UP/SP's optimism in requesting only a 60-day extension is borne out. However, shippers must have some certainty as to the transportation alternatives that will be available to them in the immediate future to manage their transportation needs effectively, and a series of short extensions of the service order would not provide this needed certainty. Furthermore, given the gravity of the emergency, which is not yet close to being resolved, we must continue the order for an extended period of time to ensure maximum impact. Thus, we will continue the order until August 2, 1998. If in fact UP/SP's remedial measures relieve the crisis sooner, UP/SP may petition to have the service order terminated. Some of the shipper comments assert that the emergency measures that we have taken in our service orders have not done enough, and that they ought to be expanded. Our view is that the impact of our emergency measures -- particularly those allowing movements around problem areas such as Houston and the Sunset Line -- has been positive. In our February 17, 1998 decision in the Service Order No. 1518 proceeding, we found that certain proposals to open up the Houston area to additional service opportunities, beyond those that the service orders provided for BNSF and Tex Mex, would not likely resolve the emergency in the form in which they were presented, and could interfere with existing railroad efforts to ameliorate the situation. Therefore, we will not modify at this time the substantive terms of the existing service order. Rather, we will continue the service order in effect essentially in its current form until August 2, 1998. The length of this extension will not preclude us from amending the terms of the service order, or taking any other action that may be appropriate, at any time during the duration of the order. One aspect in which we will change our service order is in terms of the reporting required of UP/SP. Although we have observed, through our review of UP/SP's data, improvements in certain aspects of the carrier's operations outside of the Houston area, recent setbacks reflected in several of the weekly reporting categories concern us. For example, notwithstanding the apparent increase in locomotive power available on the system, the most recent report indicates reduced levels of performance in several areas. To facilitate our understanding of the progress of the recovery overall, we will require UP/SP, in its future weekly reports, to explain in detail whether, and why, performance as reflected by the following indicators has met, exceeded, or fallen short of UP/SP's expectations: cars offered to UP/SP in interchange which were refused; reported transit time for loaded grain cars from Kansas to the Gulf; number of cars on the UP/SP system; car terminal dwell time; sidings and main lines blocked for the system, and in particular, sidings blocked Kansas City south; trains held for power, crews, and congestion; and finally, congestion in terminals. B. Other Short- or Long-Term Proposals to Address Service in the West. Although we will not at this time provide for open access in Houston, we will continue to entertain and examine other options for addressing the service problems in the West. As UP/SP notes in its letter dated February 19, 1998, the carrier is completing its transition to directional running between various points in the Southwest, and it has recently initiated steps to improve local switching and customer service in the Houston/Gulf area. Additionally, UP/SP and BNSF have recently agreed to several important measures -- joint ownership involving the Sunset Line between Avondale (New Orleans), LA and Houston; joint dispatching in the Houston area; and overhead trackage rights for UP/SP over the BNSF line between Beaumont and Navasota, TX, as a way of routing around Houston -- that are designed to relieve the congestion in Houston. UP/SP and BNSF should be able to implement much of their agreement without any Board approval, and we urge them to do so expeditiously. We understand that UP/SP and BNSF will soon be seeking the necessary approval to change the ownership of the line between Houston and New Orleans. We anticipate their filing in this regard. Finally, we are aware of the reported negotiations between BNSF and Tex Mex concerning operational changes that may further facilitate the movement of traffic. We encourage these private sector solutions, and any other private sector solutions that the carriers, hopefully in collaboration with their shippers, can develop. To the extent that private parties cannot agree on solutions, however, we encourage them to submit their proposals to us for review. In this regard, we note that the Greater Houston Partnership is preparing a report, which is to be submitted around March 5, 1988, providing its assessment of the situation in Houston. We look forward to its submission. C. Infrastructure and Capacity In and Around Houston. Our February 17 decision found that the service emergency was not caused by an inadequate competitive climate in the West produced by the UP/SP merger, as some parties had asserted. The decision identified a variety of factors that may have contributed to the emergency, concluding that the emergency was caused in large measure by the inadequate infrastructure in the Houston area: the rail system in Houston has limited capacity, antiquated facilities, and an inefficient configuration unable to cope with surges in demand. Thus, once the surge in the economy took place and congestion began, UP/SP was unable to stem it, and indeed still has been unable to stem it. Our service orders, along with the private-sector arrangements among railroads, we hope, will continue to be successful in helping to alleviate some of the congestion in Houston, but we are not optimistic that the Houston railroad service problems will be finally resolved for the long term until infrastructure is addressed in a meaningful way. Indeed, it appears that the infrastructure throughout the West may be growing increasingly incapable of handling growing traffic volumes. Data reported by class I railroads indicate that the major western railroads had significantly greater growth in ton-miles than did their eastern counterparts for the 10-year period ending in 1996. And while we cannot say for certain the extent to which the entire UP/SP and BNSF systems are overtaxed -- and whether systemic capacity problems are responsible for the disappointing pace of the service recovery overall -- we do note that ton-mile growth on the SP system over that 10-year period was 71 percent, while revenue growth was only 18 percent during the corresponding period. It would appear that this profitless growth contributed heavily to the inadequacy of SP's Houston area infrastructure because there were few funds available to invest in the infrastructure. In any event, although an overall review of infrastructure throughout the West may well be in order in the near future, at this point we will limit our focus to the inadequate infrastructure in the Houston area. UP/SP has announced that it intends to make some substantial investments in facilities, and that it is commissioning a study of longer-range infrastructure needs. Those are good first steps. However, given the serious nature of the service problems in and around Houston, we believe that these infrastructure initiatives need to be all-inclusive and pursued in a timely and focused manner. Thus, we direct UP/SP, the railroad with the majority of facilities in the Houston terminal, to immediately convene meetings with involved railroads, principally BNSF and KCS/Tex Mex; involved shippers; and any other interested parties to discuss the upgrading of the Houston facility and the appropriate role in this effort of each group represented. As the necessary infrastructure upgrading in the Houston area will take time, money, planning, and coordination among all affected parties, UP/SP is to report to the Board on May 1, 1998, as to the results of such meetings and as to plans for addressing the Houston infrastructure. In particular, UP/SP should explain what changes are needed; if changes beyond those for which UP/SP has already committed funds will be required, how much the additional changes will likely cost; how the additional changes can and should be funded; how the various shippers can facilitate infrastructure or operational changes that may assist in the movement of traffic; what corresponding rail system capacity changes (e.g., equipment, labor, crews) should be made to ensure maximum utilization of the Houston area infrastructure and improved service; and how implementation of such changes can be undertaken with minimal disruption to the flow of commerce in the Houston area. BNSF and KCS/Tex Mex may, if they choose, file by May 1, 1998, their own proposals for infrastructure improvements in the Houston area as well. Interested parties may respond to these filings by June 1, 1998. After reviewing the filings, we will pursue further action as appropriate. It is ordered: 1. Service Order No. 1518, as extended by our order issued on December 4, 1998, is further extended until August 2, 1998. 2. UP/SP shall, and BNSF and Tex Mex may, file reports addressing infrastructure in Houston by May 1, 1998. 3. Replies to the infrastructure reports may be filed by June 1, 1998. 4. UP/SP will augment its weekly reports by explaining in more detail the indicators identified in this decision. Decided: February 25, 1998 Service Date: Late Release February 25, 1998 ----------------------------------------------------------------------- SURFA