STB REPORT #24 - DECEMBER 16 - 31, 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/ ****************************************************************************** DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Finance Docket No. 33683] Ogeechee Railway Company--Lease Exemption--Line of Central of Georgia Railroad Company The Ogeechee Railway Company, a Class III rail carrier, has filed a verified notice of exemption to lease from Central of Georgia Railroad Company (CGA), a subsidiary of Norfolk Southern Railroad Company, and operate approximately 42.6 miles of rail line. The rail line to be leased includes: a previously abandoned line of railroad between former milepost GF-152.0 near Vadalia, Toombs County, GA, and former milepost GF-171.0 near Kirby, Emanuel County, GA; and CGA's active line-of-railroad between milepost GF-171.0 near Kirby, GA, and the southern line of CGA's line of railroad between Millen and Tennille, GA, at milepost GF-194.6 near Midville, Burke County, GA. The earliest the transaction could be consummated was November 23, 1998. Decided: December 9, 1998. Service Date: December 16, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 31363 (Sub-No. 3) UNION RAILROAD COMPANY AND BESSEMER AND LAKE. ERIE RAILROAD COMPANY ARBITRATION REVIEW UNITED STEEL WORKERS OF AMERICA The United Steel Workers of America (USWA) has appealed the decision of Arbitrator Helen M. Witt entered on October 21, 1997, which imposed an implementing agreement under which the Union Railroad Company (URR) and the Bessemer and Lake Erie Railroad Company (B&LE) plan to consolidate functions currently performed by each Carrier's accounting department. We decline review of the arbitration decision. In 1988, the Interstate Commerce Commission exempted the transfer of control of URR, B&LE and five other rail carriers and one water carrier from USX Corporation to Transtar, Inc., a noncarrier holding company. (The other railroads are: Birmingham Southern Railroad Company; Duluth, Missabe, and Iron Range Railway Company; Elgin, Joliet and Eastern Railway Company; The Lake Terminal Railroad Company; and the McKeesport Connecting Railroad Company. The water carrier is the Warrior & Gulf Navigation Company). The transaction was subjected to the employee protective conditions in New York Dock. Under New York Dock, labor changes related to approved transactions are effected through implementing agreements negotiated before the changes occur. If the parties cannot agree, the issues are resolved by arbitration, subject to limited review by the Board. URR, B&LE, and the other rail carrier subsidiaries of Transtar had maintained separate accounting departments in different locations. The clerical employees for each carrier performed work solely for their own employer, under separate collective bargaining agreements. URR's accounting department employees are represented by USWA, while B&LE's accounting department employees are represented by the Transportation Communications International Union (TCU). Apparently, URR employees worked side-by-side with B&LE employees in the same facility in Monroeville, PA. According to the Carriers, Transtar formulated a plan to consolidate the accounting and clerical functions of all of its carrier subsidiaries into its Monroeville, PA facility to be managed by B&LE. The Carriers stated that the plan was part of the process for realizing benefits from Transtar's common control over its carrier subsidiaries. Apparently, implementing agreements have been negotiated with employee representatives of the other rail subsidiaries of Transtar, including B&LE. On September 3, 1996, URR and B&LE notified the USWA and TCU by letter that they wanted to coordinate work of their accounting departments. The letter indicated that the work performed by nine URR employees would be transferred to B&LE, and that B&LE would increase its staff by nine new clerical positions. The letter further stated that employees adversely affected by the coordination would be accorded benefits under New York Dock. On October 9, 1996, USWA advised the Carriers that it would not participate in negotiations under the New York Dock conditions to transfer URR work, contending that the coordination should be governed by the Railway Labor Act (RLA). USWA maintained that its collective bargaining agreement with URR precluded URR from assigning its clerical work to B&LE employees. USWA further asserted that it was not a party to any other agreement that would authorize URR's actions, such as the Washington Job Protection Agreement of 1936 (WJPA). Instead, the USWA informed the URR that it considered the Carriers New York Dock notice as a notice of intended change in agreements under section 6 of the RLA and that it would negotiate over those changes. On October 26, 1996, URR and B&LE informed USWA that they were submitting the dispute to arbitration under New York Dock. URR also submitted a proposed implementing agreement, under which the nine URR employees would be transferred to the B&LE. The proposed agreement further provided that the nine former URR employees would be represented by the TCU and would be covered by the B&LE-TCU collective bargaining agreement for accounting employees. In a letter dated November 1, 1996, the USWA informed the URR that it considered the Carriers invocation of the New York Dock arbitration procedures to be a unilateral and constructive termination of conferences under the RLA. USWA also advised URR that it would not participate in the selection of an arbitrator to hear the dispute under the New York Dock conditions. On November 4, 1996, the URR requested that the National Mediation Board (NMB) appoint a neutral referee to arbitrate the dispute. On November 19, 1996, USWA informed the NMB that it would not participate in the selection of a neutral referee. The NMB appointed Arbitrator Witt to sit as the neutral referee. A hearing was held before Arbitrator Witt on April 29, 1997, at Pittsburgh, PA. Despite USWA's objections, it participated in the arbitral proceeding. The arbitrator issued her award on October 21, 1997, in which she imposed an implementing agreement for the coordination of the Carriers accounting departments. The arbitrator noted that, under the proposed agreement submitted by the Carriers, individual employees who left their employment with URR would follow their work to become employees of B&LE. Current members of the craft or class of URR employees would be offered employment by B&LE, which they would be free to accept or refuse. The arbitrator indicated that those employees who accept employment would be covered by an agreement produced by the arbitration, but those employees who reject employment with B&LE would forfeit protection and could be furloughed. She noted that USWA had declined to submit a proposed implementing agreement. Therefore, she had to decide what modifications were needed, if any, to the Carriers proposed implementing agreement to fairly protect the URR employees. The arbitrator modified the implementing agreement to clarify the rights of URR clerical employees who decline to accept newly established B&LE positions. She also changed the timing for implementing the transaction. The arbitrator amended Paragraph 9 to provide that the implementing agreement would become effective upon 30 days notice to the USWA, rather than the 5 days notice which the proposed agreement provided for. Apparently, the Carriers accepted the arbitrator's modifications. On November 10, 1997, USWA filed an appeal of the arbitrator's decision and the Carriers replied on December 22, 1997. USWA initially questions whether the Board has jurisdiction to decide the dispute. USWA, noting that the issue was also being considered by the District Court, requested that arbitration be held in abeyance until the court determined whether the dispute should be resolved under New York Dock. The arbitrator declined the request. In its appeal, USWA continues to assert that the dispute is subject to the procedures in the RLA and that the Board lacks jurisdiction. Shortly after USWA filed its appeal of the arbitration decision, the District Court issued its decision and ruled that the Board, rather than the court, has exclusive jurisdiction to determine whether the New York Dock process was properly invoked to resolve the dispute. The decision relied on precedent which established that the Board's approval of a transaction automatically removes its implementation from the procedures of the RLA, and that the Board or arbitrators acting under authority delegated under New York Dock may exempt a transaction from the provisions of the RLA and may override collective bargaining agreements when necessary to realize public benefits of an approved transaction. USWA did not appeal the District Court's decision or raise any objections to the court's decision here. The court's decision confirms our jurisdiction to resolve this dispute under New York Dock and also upholds the arbitrator's authority to impose an implementing agreement under the New York Dock procedures. We generally do not overturn an arbitral award, unless it is shown that the award is irrational or fails to draw its essence from the imposed labor conditions or it is outside the scope of authority granted by the conditions. USWA asks us to consider whether the arbitrator exceeded her authority when she imposed an implementing agreement and whether the award failed to preserve the rights of affected employees. We find no reason to disturb the arbitrator's award under our standards. USWA has not shown egregious error or any other grounds requiring review of the arbitration award here. And, to the extent USWA is seeking to raise an issue of representation, such issues can be resolved only by the NMB. It is ordered: 1. To the extent USWA's appeal challenges the Board's jurisdiction to address the issues in this proceeding, it is denied. 2. We decline to review the award that is the subject of USWA's appeal. 3. The proceedings are discontinued. 4. This decision is effective 30 days after its service date. Decided: December 16, 1998 Service Date - December 17, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD Finance Docket No. 32760 [Decision No. 84] UNION PACIFIC CORPORATION, UNION PACIFIC RAILROAD COMPANY, AND MISSOURI PACIFIC RAILROAD COMPANY--CONTROL AND MERGER--SOUTHERN PACIFIC RAIL CORPORATION, SOUTHERN PACIFIC TRANSPORTATION COMPANY, ST. LOUIS SOUTHWESTERN RAILWAY COMPANY, SPCSL CORP., AND THE DENVER AND RIO GRANDE WESTERN RAILROAD COMPANY In Decision No. 44, served August 12, 1996, we approved the common control and merger of the rail carriers controlled by Union Pacific Corporation (Union Pacific Railroad Company and Missouri Pacific Railroad Company) and the rail carriers controlled by Southern Pacific Rail Corporation (Southern Pacific Transportation Company, St. Louis Southwestern Railway Company, SPCSL Corp., and The Denver and Rio Grande Western Railroad Company) (referred to as the UP/SP merger), subject to various conditions, including numerous environmental mitigation conditions. As pertinent here, environmental Condition Nos. 22a-22d required our Section of Environmental Analysis (SEA) to conduct a further, more focused study to arrive at a specific mitigation plan for Reno, NV, so as to assure that localized environmental issues unique to that community are effectively addressed. The Reno mitigation study was to be completed within 18 months of the consummation of the UP/SP merger. SEA issued a Preliminary Mitigation Plan for Reno on September 15, 1997. After comments on it were received, a Final Mitigation Plan for Reno was issued on February 11, 1998, as contemplated by Decision No. 44. By letter dated February 24, 1998, counsel for Reno requested that we toll all proceedings in the ongoing Reno mitigation study for a period of 8 months. In support of its request, Reno stated that it was actively pursuing a funding plan to implement a depressed trainway project through downtown Reno and was also engaged in good faith negotiations with UP/SP. By letter dated February 25, 1998, the Union Pacific Railroad Company (UP) advised us that it concurred with Reno's tolling request. Accordingly, we granted Reno's request in Decision No. 79, served March 2, 1998. By letter dated November 5, 1998, Reno and UP jointly requested an extension of the tolling period through January 31, 1999, to allow the parties more time for their negotiations, which had intensified and would be completed in coming weeks. We granted the joint request in Decision No. 83, served November 16, 1998. By petition filed December 9, 1998, Reno and UP stated that they have entered into an agreement and jointly request that we approve their agreement and prescribe it as a condition of our approval of the UP/SP merger in lieu of any other mitigation that could be imposed pursuant to Decision No. 44. We will grant the parties request and impose their agreement as a condition to the UP/SP merger. Reno and UP also make two other requests in their joint petition. First, they request that we remove all restrictions on the number of trains (including trains operated by UP, The Burlington Northern and Santa Fe Railway Company (BNSF), Amtrak and any other trackage rights operators) that pass through the City of Reno. The only restrictions we imposed apply to UP and BNSF as explained in Decision No. 44. Amtrak is specifically excluded from the restrictions, and no other trackage rights carriers are identified as being subject to Condition No. 22a. Because substitution of the Reno-UP agreement for Condition No. 22a as a condition to the UP/SP merger effectively removes all such restrictions that we have imposed, petitioners request is unnecessary. Finally, Reno and UP jointly request that we not make this decision effective unless and until the first issuance of bonds for the project covered by their agreement (construction of a depressed trainway through downtown Reno). To facilitate the agreement, we will grant this request, and we will require Reno and UP to notify us in writing that the issuance has occurred. Our actions in this decision resolve the pending environmental mitigation issues as to Reno. It is ordered: 1. The joint petition by Reno and UP is granted to the extent set forth above. 2. This proceeding is reopened. The settlement agreement on pending environmental mitigation issues entered into on December 1, 1998, between Reno and UP is approved, and the settlement agreement is prescribed as a condition of our approval of the UP/SP merger in lieu of any other mitigation that could be imposed pursuant to Decision No. 44, Appendix G, Condition Nos. 22a-22d. 3. At the request of UP and the City of Reno, this decision shall be effective on the date of the first issuance of bonds for the project covered by the agreement, and, at that time, the parties to the agreement shall notify the Board in writing that the action has taken place. Decided: December 16, 1998 Service Date - December 17, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 33388 Decision No. 108 CSX CORPORATION AND CSX TRANSPORTATION, INC., NORFOLK SOUTHERN CORPORATION AND NORFOLK SOUTHERN RAILWAY COMPANY--CONTROL AND OPERATING LEASES/AGREEMENTS-- CONRAIL INC. AND CONSOLIDATED RAIL CORPORATION By letter filed December 11, 1998, the State of Ohio parties (i.e., the State of Ohio, the Ohio Rail Development Commission, and the Public Utilities Commission of Ohio) have requested a 60-day extension of the deadline provided for in Environmental Condition 8(B), which requires applicants to complete any negotiations with the State of Ohio regarding highway/rail at-grade crossing improvements by December 20, 1998. The State of Ohio parties advise that, although applicants and the State of Ohio parties have made considerable progress in their negotiations and are committed to completing such negotiations as expeditiously as possible, the December 20th deadline has proved to be overly ambitious. The State of Ohio parties further advise that applicants concur in the request for a 60-day extension. The request for a 60-day extension is reasonable. The revised deadline contemplated by the State of Ohio parties will therefore be adopted. It is ordered: 1. Environmental Condition 8(B) is revised to read as follows: Applicants shall complete any negotiations with the State of Ohio regarding highway/rail at-grade crossing improvements by February 18, 1999. Decided: December 16, 1998 Service Date - December 17, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33522 CHICAGO SOUTHSHORE & SOUTH BEND RAILROAD -- PETITION FOR DECLARATORY ORDER-- STATUS OF TRACK AT HAMMOND, IN Chicago SouthShore & South Bend Railroad (CSS) filed a petition for a declaratory order seeking a determination that a certain segment of its track is exempt from the Board's regulatory jurisdiction, and, thus, that CSS need not obtain Board approval to abandon this track. By decision served January 28, 1998, a declaratory order proceeding was instituted, and CSS was directed to serve a copy of its petition and a copy of the decision on the shipper served by the track in question. On February 23, 1998, the shipper, Harbison-Walker Refractories Company (Harbison), filed a reply in opposition to the petition for declaratory order, and on March 5, 1998, CSS filed a statement in rebuttal. In addition, on March 13, 1998, Harbison filed a petition for leave to file reply argument to new evidence assertedly contained in CSS's rebuttal. The petition embraced the reply and on March 17, 1998, Harbison filed a supplement to that reply argument. After reviewing the record, we have determined that the relevant track segment is exempt track not subject to our jurisdiction. CSS's main line consists of approximately 77 miles of railroad line extending between milepost 0.9 near South Bend, IN, and milepost 75.55 near Kensington, IL. The total mileage includes a 2.3-mile branch line not involved here. The track in question is approximately 1.8 miles (9,520 feet) long and connects by a switch at milepost 64.2 to Parrish Siding, which in turn connects to CSS's main-line track at mileposts 63.8 and 64.9, at or near Hammond, IN. It appears, from a review of various maps, that the configuration of the subject track is unusual, proceeding initially in an eastward direction away from Harbison's facility and curving northward to cross over the Indiana Turnpike before returning westward to serve the facility. This configuration passes nearly every part of the South Shore Industrial District. It is not clear, though, whether the Harbison facility is within the industrial district or adjacent to it. The subject track is stub-ended, terminating inside Harbison's facility, and includes a run-around track, at or near Harbison's facility, whereby locomotives can move from one end of the cars to the other. According to CSS, the subject track has no mileposts or stations, has never been shown in railroad timetables, and was not specifically listed in the notice of exemption whereby CSS acquired its main line. CSS contends that no through freight trains have operated on the track since it was acquired and the only activity on the track since its purchase has been for CSS to switch cars for loading and unloading Harbison's freight. CSS submits that the track is in need of immediate repair, and that it has been embargoed because of poor conditions since September 17, 1997. According to CSS, the current main line was constructed by its predecessor in 1956. This construction was undertaken to relocate the main line, between current milepost 63.6 (east of Cline Avenue) and current milepost 67.9, from the former route along Chicago Avenue in Hammond to the current route parallel to and immediately south of Interstate Highway 90 (the Indiana Turnpike), a limited-access highway. The new main line bisected the South Shore Industrial District, a 270-acre tract that had been acquired in 1951 and 1952 for development as an industrial park. Harbison describes the subject track as a loop track extending from a seven- track yard located at the present location of Parrish Siding. CSS states, however, that although the seven-track yard was apparently planned, it was never constructed. Harbison's facility was constructed in 1957 for the manufacture of refractories, and its most recent use of the track has been primarily to receive shipments of magnesite used in the refractory manufacturing process. According to CSS, Harbison's facility shipped or received 150 carloads in 1995, generating gross revenue of $63,000; 189 carloads in 1996, generating gross revenue of $80,136; and 71 carloads, from January to August 1997, generating gross revenue of $30,104. CSS requests a declaratory order determination that this track is exempt from Board jurisdiction,as a spur, industrial, team, switching, or side track. Our authority to issue a declaratory order to terminate a controversy or remove uncertainty is discretionary. Harbison opposes the declaratory order on the grounds that abandonment of the track would cause it economic harm due to increased costs to deliver magnesite by truck rather than directly by rail; abandonment of the track outside of Board jurisdiction would preclude its acquisition for continued rail operation; and abandonment of the track would insulate CSS from complaint with respect to its allegedly wrongful embargo. Harbison argues that CSS should have filed either an abandonment application or a petition for exemption, together with a motion to dismiss on jurisdictional grounds. We disagree. There is no rule or requirement preventing a railroad from using a petition for declaratory order to seek a determination of this nature. Harbison also argues that in the absence of the filing of an application or petition for exemption seeking abandonment of the line, the exempt or nonexempt status of the trackage is an abstract question, and there is no active controversy. Once again, we disagree. If we find the trackage to be a line of railroad subject to our jurisdiction, CSS must comply with our regulations to terminate service. If we find otherwise, no regulatory permission is needed. Accordingly, there is an active controversy and the filing of a petition is a proper procedure for CSS to follow. There is no single test of what constitutes exempt track. Our analysis must focus on the disputed track's use, history, and physical characteristics, and we rely on a variety of indicia, including: the length of the track; whether it serves more than one shipper; whether it is stub- ended; whether it was built to invade the territory of another railroad; whether the shipper is located at the end of the track; whether there is regularly scheduled service; the volume of traffic moving over the track; who owns and maintains the track; whether the track was constructed with light weight rail; the condition of the track; what the track is used for (e.g., loading, unloading, switching); and whether there are stations on the track. The following indicia are not in dispute. The track is stub-ended. Prior to the embargo, there was no regularly scheduled service. Service was provided on an as-needed basis. CSS owns and maintains the track. There are no stations on the track. Harbison argues that the length and unusual physical configuration of the track indicate that it is a line of railroad, and not a spur. According to Harbison, a spur would tend to be much shorter and extend more directly to its facility. CSS submits maps that do not recognize the subject track as main-line track and notes that Parrish Siding, to which it connects, is believed to have been built at the time of or shortly after the rerouting of the main line. Although the length of the track is somewhat greater than is usual for an exempt siding, spur, or industrial track, some of this length might be explained by the manner in which the track must cross the Indiana Turnpike to reach the Harbison facility. Length of track, however, is not conclusive and Harbison has failed to provide concrete proof that the track was historically a line of railroad. Harbison contends that the circuitous routing of the track also indicates that it was evidently used to provide service to numerous other shippers. It also contends that the track in question was actually part of a longer line of railroad previously operated as a main line by the Indiana Harbor Belt Railroad Company (IHB). Harbison produces two undated maps of the area which it interprets as indicating that the relevant track was previously owned and/or operated by the IHB and actually extended north across the Grand Calumet River into East Chicago, IN. From this assumption, Harbison theorizes that the line must have been used to serve additional shippers (however, none is named and no tonnage information is supplied), as the area was heavily industrialized. Finally, Harbison submits photocopies of selected pages from a published history of CSS's predecessor stating that several industries were under construction in the South Shore Industrial District before a new East Chicago bypass was opened in 1956. CSS disputes Harbison's description of the extent of track within the industrial district and points out that, even though additional track was apparently planned to serve the industrial district, no additional track was ever built. It contends that the track was never part of any IHB rail line, that it did not acquire any portion of the track from IHB, and that the track was constructed by its predecessor at the time of the relocation of the main line. The maps and other evidence presented by Harbison are of questionable probative value and, accordingly, we find that there is no conclusive evidence that the track has ever been used to serve more than one shipper. This is illustrated by the fact that no other shipper has been specifically identified. Even if the track was constructed to serve an industrial district, it could still qualify as exempt, industrial track, based on its usage since being acquired by CSS. Harbison submits that CSS's rebuttal evidence establishes that this track was and is one of CSS's lines of railroad, because it was constructed into territory not theretofore served by CSS and already served by IHB. CSS counters by stating that this track did not extend into new territory, because the relocated main-line track runs through the industrial district. It also points out that Harbison's facility is located approximately equidistant between the CSS main line and IHB's line on the other side of the Grand Calumet River. We conclude that this track was not built to invade the territory of another railroad. When CSS's predecessor was authorized to relocate its main line, that authorization implicitly permitted construction of exempt sidings, spurs, and industrial track to serve industries located on the line. Because the new line ran through the middle of the new industrial district, we are persuaded that all sites in the industrial district are properly considered to be in CSS's own territory today, for they would certainly have been within the territory of CSS's predecessor at the time when the new main line was built. Harbison translates the 189 carloads that moved over the track in 1996 into 105 carloads per mile of track. According to Harbison, this is considered to be heavy usage not indicative of spur track. While the volume of traffic that moved over the track prior to the embargo is not insubstantial, it is but one factor to be considered and is not conclusive as to the jurisdictional status of the track. Harbison notes that the subject track is primarily constructed of 100-pound rail, which is heavier than commonly used in spur tracks. CSS points out, however, that rail salvaged from the old main line was used in construction of the subject track, that the new main line was constructed of 115-pound rail, and that no rail on CSS's entire system is constructed with less than 90-pound rail. Because the track was constructed with rail salvaged from the old main line, it is perhaps built of heavier rail than normal for a spur track, but not substantially heavier than the rail on CSS's other spurs and sidings. In the circumstances, we conclude that the rail weight is not inconsistent with the track being considered exempt track. CSS maintains that defective ties and erosion of shoulder ballast make rehabilitation of the line necessary if it is to be placed back in service. Harbison argues, however, that the track has not been shown to require rehabilitation, either for replacement of crossties or for application of ballast. Although the condition of the track is in dispute, suffice it to say that some rehabilitation work would be necessary to return this embargoed line into service. Harbison argues that the track is currently used for line-haul transportation rather than switching, including the line-haul transportation of trainloads of coal destined to Northern Indiana Public Service Company at Michigan City, IN. CSS acknowledges that Parrish Siding is used at times to hold trains waiting to be delivered to shippers at other locations, but neither the siding nor the subject track is used to provide access to those points, and the subject track is not used to provide service to other shippers. CSS insists that the subject track is used only to switch cars to and from Harbison's facility. We conclude that the track is used for switching cars to and from the Harbison facility for loading and unloading, and we find no probative evidence that it has ever been used for any other purpose. A review of the evidence presented indicates that the situation here resembles that in Finance Docket No. 32058 (STB served June 27, 1997, and Dec. 11, 1998) (Battaglia). In that case, the track in question was approximately 2,600 feet in length, served only one shipper, and was stub-ended. We concluded that it was unlikely the track had been constructed to invade another carrier's territory and noted that the sole shipper was located at the end of the track and received a relatively modest volume of traffic when the track was in service. The track there was constructed of 90-pound rail and was paved over in places, requiring rehabilitation, and it was asserted that the track was used for the sole purpose of switching cars to and from the shipper's facility, was not the type of track that could or would be used for through train service, and had never been used for branch or main line operations. No other industries along that track had showed any interest in using it, and the design of the track precluded efficient service to multiple businesses. There were no stations on that track. As we stated in Battaglia, Just as there is no single test for what constitutes a side track, there is no single characteristic related to its use, history, or physical characteristics that is dispositive in making a side track determination. Side track may be shorter or longer than the one at issue, branch lines may be stub ended, 90-lb. rail is not unusually light and lower weight rail has been used to construct branch lines, and the absence of a station may not be significant, depending on the location of the track. However, the overwhelming balance of factors relevant to this analysis supports a finding that the disputed track is side track. A similar conclusion is warranted here. A finding that the subject track is exempt is favored by the factors that the track is stub-ended, that the track was constructed to serve an industrial district through which the relocated main line passed, that the track was not built to invade the territory of another railroad, that there is no evidence that the track served more than one shipper, that the sole shipper is located at the end of the track, that there was no regularly scheduled service on the track, that the track was constructed using comparatively light-weight rail, that the track is used only for switching cars to and from the shipper's facility, and that there are no stations on the track. On the other hand, factors that may lead to the conclusion that the track is not exempt are the length of the track, the volume of traffic, and that it is owned and maintained by the railroad. On balance, the preponderance of relevant factors favors the conclusion that the track is exempt from Board jurisdiction. We are mindful that as a result of our decision the shipper will not have the opportunity to offer to buy the track for continued rail service under 49 U.S.C. 10904, which is contingent upon our authorizing abandonment. However, nothing in this decision forecloses the shipper from attempting to purchase the track from CSS and then seeking service from CSS. It is ordered: 1. The petition for leave to file reply argument, filed on March 13, 1998, is granted. The reply argument filed on that date, the supplement filed on March 17, 1998, and CSS's objection and rebuttal statement filed on March 26, 1998, are accepted for filing. 2. The petition for declaratory order is granted. 3. This proceeding is discontinued. Decided: December 16, 1998 Service Date - December 17, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33593 HARBISON-WALKER REFRACTORIES COMPANY v. CHICAGO SOUTHSHORE & SOUTH BEND RAILROAD On May 5, 1998, Harbison-Walker Refractories Company filed a complaint alleging that Chicago SouthShore & South Bend Railroad (CSS) has failed and refused to provide rail transportation on reasonable request. Harbison seeks a cease-and-desist order and an award of damages. CSS moves to dismiss the complaint. Harbison states that for approximately 40 years it has been serviced over track extending from CSS's main line to Harbison's plant. This track is approximately 1.8 miles (9,520 feet) long and connects by a switch at milepost 64.2 to Parish Siding, which in turn connects to CSS's main-line track at mileposts 63.8 and 64.9, at or near Hammond, IN. It terminates inside Harbison's facility. This service terminated, however, on September 17, 1997, when CSS embargoed the track claiming poor conditions on the track. Harbison contends that this embargo was unjustified and unwarranted and, accordingly, brings this action before the Board. In STB Finance Docket No. 33522 (STB served Dec. 17, 1998), a proceeding that was pending at the time the complaint was filed (and to which Harbison was a party), the Board issued a declaratory order finding that the track that serves Harbison is exempt trackage. In light of this finding, CSS is not required to obtain Board approval under 49 U.S.C. 10903 to abandon or otherwise end service over this track. As a consequence, the complaint is moot. Accordingly, the complaint will be dismissed. It is ordered: 1. CSS's motion to dismiss is granted and the complaint is dismissed. Decided: December 16, 1998 Service Date - December 17, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Finance Docket No. 33672] Central Kansas Railway, L.L.C.--Lease Exemption--Union Pacific Railroad Company Central Kansas Railway, L.L.C. (CKR), a Class III rail common carrier, has filed a notice to lease from Union Pacific Railroad Company (UP) and operate over the rail freight easement pursuant to an agreement between CKR and UP of approximately .73-miles of rail line between milepost 312.65 and milepost 313.38 in Wichita, KS. The transaction was scheduled to be consummated on or shortly after November 30, 1998. Upon consummation, CKR will become the exclusive operator of the rail line. The proposed transaction is part of the overall settlement between UP and the City of Wichita. Pursuant to the settlement agreement, UP will relocate its tracks through the center of Wichita and CKR will rehabilitate its line that connects with the .73-mile line that is the subject of this notice. With UP's track relocation, UP will no longer be able to serve the one shipper located on the .73-mile line. Therefore, CKR has agreed to serve that shipper pursuant to the rail freight easement until that shipper relocates its facilities. Decided: December 9, 1998. Service Date - December 17, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. AB-103 (Sub-No. 14)] The Kansas City Southern Railway Company Adverse Discontinuance Application A Line of Arkansas and Missouri Railroad Company On November 30, 1998, Arkansas and Missouri Railroad Company (AMR) filed an application requesting that the Surface Transportation Board find that the public convenience and necessity require and permit the discontinuance of trackage rights held by The Kansas City Southern Railroad Company (KCS) over a line of railroad owned by AMR, extending from AMR milepost 417.0 near the crossing of Navy Road in Fort Smith, AR, to AMR milepost 422.5 near the overpass of Arkansas Highway 540 in Fort Smith, AR, a distance of approximately 5.5 miles, in Sebastian County, AR, and LeFlore County, OK. The line includes the station of South Fort Smith, AR, at milepost 422.5. AMR states that it is filing this application because it contends that KCS has breached the terms of their trackage rights agreement by failing to properly maintain the line. It argues, however, that no service will be lost and that there will be no adverse impact on overhead shippers or communities because all bridge traffic formerly handled by KCS can be handled by AMR crews. In a decision served November 24, 1998, AMR was granted a waiver of certain filing requirements, except to the extent the filing requirements concern information about service to overhead shippers. In a separate decision served December 14, 1998, AMR's motion for a protective order covering certain traffic data and contractual terms was granted. In an application by a third party for a determination that the public convenience and necessity permits the discontinuance of operations over a line, the issue before the Board is whether the public interest requires that the service in question be retained. Decided: December 14, 1998. Service Date - December 18, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-406 (Sub-No. 6X) CENTRAL KANSAS RAILWAY, LIMITED LIABILITY COMPANY--ABANDONMENT EXEMPTION--IN MARION AND MCPHERSON COUNTIES, KS On September 25, 1997, Kevin Jost, Alvin Kroupa, Allen Schlehuber and the Citizens Association of Marion and McPherson Counties filed a petition to reopen the proceeding to reexamine decisions that authorized and extended the trail use negotiating period under a notice of interim trail use (NITU) issued pursuant to the National Trails System Act. Petitioners state that the individual petitioners are land owners over whose property the railroad right-of-way that is the subject of the NITU issued in this proceeding is or has been located, and that the Citizens Association of Marion and McPherson Counties is an association whose members are similarly situated landowners in Marion and McPherson Counties, KS. Central Kansas Railway, Limited (CKR) filed a reply to the petition. Petitioners also filed a supplement to their petition. CKR moved to strike the supplement, but also filed a reply to the supplement in the event that the supplement is accepted. Petitioners subsequently filed in opposition to the motion to strike. All pleadings will be accepted in the interest of a complete record. The petition to reopen will be denied. A notice of exemption was served on March 13, 1996, with respect to the abandonment by CKR of a 33.4-mile portion of its line of railroad known as the McPherson Subdivision from milepost 10 plus 2418 feet at or near Marion to milepost 43 plus 4505 feet at or near McPherson, in Marion and McPherson Counties, KS. The exemption was scheduled to become effective on April 12, 1996. A NITU was served on April 12, 1996, authorizing CKR and James D. Jennings, d/b/a Jennings & Co., to negotiate interim trail use/rail banking under the Trails Act and was subsequently extended. CKR and Jennings did not reach an agreement on interim trail use. On June 6, 1997, the date the extended negotiation period expired, the Central Kansas Conservancy, Inc. (CKC), filed a statement of willingness to assume financial responsibility for interim trail use and rail banking. In a pleading also filed on June 6, 1997, CKR indicated its willingness to negotiate with CKC over trail use/rail banking. Because CKR indicated its willingness to enter into negotiations, a NITU was issued and served June 16, 1997, modifying the April 12, 1996 decision to the extent necessary to permit CKR and CKC to negotiate an interim trail use/rail banking agreement and to provide a 180-day period for them to do so. CKC stated that it was aware that Jennings and CKR were in the process of negotiating for interim trail use on the same right-of-way. Jennings indicated that it supported the issuance of a NITU between CKC and CKR that would be concurrent with the existing NITU between itself and CKR. The trail use request was accepted by the Board, as CKR expressed its willingness to continue negotiations for an interim trail use/rail banking agreement and had not consummated the abandonment. Petitioners seek to have the prior decisions granting the NITU and its extension reopened based on allegedly inaccurate, incomplete and misleading information presented by CKR. Petitioners state that this proceeding should be reopened because: (1) several segments of the right-of-way allegedly were conveyed to landowners by quitclaim deed in September 1995, 5 months before CKR filed its notice of exemption; (2) CKR allegedly consummated the abandonment, removing rail, ties and ballast, before interim trail use negotiations could be authorized or extended under the Board's jurisdiction; and (3) CKC's ability to assume the financial responsibility for management of the right-of-way as required by the Trails Act is questionable. In support of these contentions, Petitioners argue that CKR conveyed land that was part of the right-of-way that was the subject of the notice of exemption to several landowners who they say own the underlying fee and have a right to full possession of the right-of-way when the land ceases to be used for railroad purposes. Petitioners also state that the railroad corridor cannot be reactivated for railroad purposes because CKR has conveyed parcels of land along the right-of-way. Petitioners have submitted letters and a resolution from the cities of Canton, Hillsboro, and Leigh, KS, opposing trail use. Moreover, Petitioners maintain that CKC does not have the financial capability to meet its substantial obligation as a responsible trail manager. By reply filed October 15, 1997, CKR contends that Petitioners have failed to establish grounds for reopening this proceeding. CKR maintains that Petitioners have not shown that interim trail use and the reinstitution of rail service on this right-of-way would not be possible. CKR supports its contentions with the verified statement of Clark A. Robertson, Vice President of Real Estate of CKR Affiliate, OmniTRAX, stating that a sufficient width of right-of-way was conveyed to CKC in all instances to permit trail use and to permit rail service to be reinstituted for the entire length of the Marion-McPherson right-of-way should there be occasion for reestablishment of such rail service in the future. CKR objects to Petitioners contention that CKC is not a qualified private organization . CKR asserts that CKC submitted the requisite statement of willingness and states that there are multiple sources of funding for trail development and operation. CKR adds that there is no requirement that a trail be developed in any particular way, nor is there any time limit for how quickly a trail must be developed to its intended use. In their supplemental petition filed on November 4, 1997, Petitioners allege that CKR has attempted to negotiate new or revised transactions involving land that had previously been conveyed to landowners who are members of the Petitioner Citizens Association of Marion and McPherson Counties. Petitioners further claim that CKR unilaterally executed corrected quitclaim deeds when landowners declined to accept less land than what had previously been conveyed. CKR subsequently filed a motion to strike Petitioners supplement to their petition to reopen or to accept CKR's reply to the supplement. We will deny the motion to strike, but grant CKR's alternative request and accept its reply to the supplement. CKR's primary point in response is that, in issuing corrected quitclaim deeds, it was simply conforming those deeds to the intentions of the parties. We will deny the petition to reopen. A petition to reopen must state in detail the respects in which the proceeding involves material error, new evidence, or substantially changed circumstances. None of these criteria has been met in this case. CKR's discontinuance of service and removal of rails, ties and ballast at the same time as it was negotiating for trail use did not constitute consummation of the abandonment. To the contrary, as the court explained, while discontinued rail service, track salvage, and tariff cancellations are actions often taken in connection with abandonment, they also are fully consistent with the lesser action of temporary cessation of rail operations or trail use. Thus, they are entitled to little weight where, as here, the railroad's actions demonstrate an intent not to abandon by its continued willingness to negotiate and its statement that it has indeed conveyed the line to CKC for interim trail use. Under the circumstances, abandonment was not consummated and the trail use negotiating period was properly extended. Petitioners have not supported their claim that changed circumstances and new evidence make it appropriate that we examine CKC's ability to assume financial responsibility for the right-of-way under the interim trail use agreement. Petitioners claim that several local governmental entities have opposed interim trail use and make general arguments that their opposition would inhibit CKC's ability to raise funds to meet its obligations with respect to a trail. However, CKR has responded that there are multiple potential sources of funding for trail development and operation and that there has been no demonstration that CKC was relying for funding on those local government organizations that oppose interim trail use. As required by the statute and our implementing regulations, CKC submitted a statement of willingness to assume financial responsibility in which it agreed to assume full responsibility for the management of and legal liability arising out of the transfer of the right-of-way, and acknowledged that the right-of-way is subject to restoration or reconstruction for railroad purposes. Moreover, CKR agreed to negotiate with CKC and reports that it has already conveyed the property to CKC for interim trail use. The conveyance to CKC, effective September 19, 1997, was confirmed by a filing made in this proceeding on June 22, 1998. A railroad presumably would not agree to negotiate with a prospective trail sponsor unless that railroad believes the trail sponsor will be able to manage the right-of-way and assume legal liability and pay taxes. The function of a trail condition is to delay the railroad's right to consummate the abandonment for the period of any interim trail use. Pending an agreement with the proponent of any interim trail, or the consummation of the abandonment, the right-of-way remains the responsibility of the railroad. Thus, the carrier is the most appropriate party to determine whether any offer is likely to prove successful both in meeting the railroad's desires and in fulfilling the statutory and regulatory liability requirements of the Trails Act. Requiring the proponent of a trail to provide detailed financial information or to pass a fitness test whenever the Board issues a trail condition could deter or delay interim trail use, which would be contrary to Congress intent to facilitate and encourage rail banking and interim trail use on lines that otherwise would be abandoned. Furthermore, the primary purpose of a fitness test would be to protect a railroad from wasting its time negotiating with an unfit trail sponsor. However, the railroad already has the ability to protect itself from that result merely by refusing to consent to the issuance of the trail condition. Accordingly, we have never required detailed financial or other information from potential trail sponsors and railroads in Trails Act cases. Given our limited, ministerial role in administering the statute, and the fact that the railroad is the real party in interest, we can be assured that the Trails Act has been properly invoked and that its requirements will be met where, as here, (1) the prospective trail sponsor files the required statement of willingness and (2) the railroad that otherwise would be entitled to fully abandon the line voluntarily agrees to negotiate a Trails Act arrangement. If it is shown that the trail sponsor does not have the ability to continue to meet the financial and liability conditions of the statute, the trail condition would be involuntarily revoked. But there has been no specific showing here that the trail sponsor has not met, or likely will not be able to meet, its financial obligations regarding this trail. Petitioners suggestions that the trail sponsor may not have adequate resources presumes that CKC is under an affirmative duty to develop a trail for advanced recreational use. In fact, as we have frequently stated, the Trails Act does not require a trail to be developed in any particular way. Moreover, there is no absolute time limit for how quickly a trail must be developed to its intended level of use. Petitioners and CKR have made several rounds of filings addressed to the question of whether CKR's transfers by quitclaim deed of its property interests in certain parcels of land along the right-of-way have made interim trail use and rail banking impossible. However, CKR has refuted these allegations by submitting a verified statement specifically stating that a sufficient width of right-of-way was conveyed to CKC in all instances to permit trail use and to permit rail service to be reinstituted for the entire length of right-of-way should there be an occasion for reestablishment of such rail service in the future. Moreover, while all of the parties filings will be accepted into the record, we will not attempt to resolve all of the property issues that these filings raise. State courts appear to be the proper place for parties to resolve property disputes about the parties expectations and how much property has been transferred and how much has been retained. Should any court action or other developments demonstrate that, notwithstanding its verified statement, CKR has transferred property in such a way as to preclude a railroad's access to property necessary for the eventual reinstitution of active rail service at some future time, we would revisit the issues. Finally, if a landowner believes that trail use has resulted in a taking of his or her property, the landowner can seek compensation in the Court of Federal Claims, which has a 6- year statute of limitations. Also, because trails must be maintained according to state and local land use plans, zoning ordinances, and public health and safety legislation, abutting property owners allegedly harmed by improperly maintained trails can present their complaints to the appropriate state, regional, and local entities. In sum, no basis for reopening has been shown at this time, and the petition to reopen will be denied. It is ordered: 1. The petition to reopen is denied. 2. All materials submitted are accepted into the record and the motion to strike is denied. Decided: December 10, 1998 Service Date - December 18, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 33388 Decision No. 109 CSX CORPORATION AND CSX TRANSPORTATION, INC., NORFOLK SOUTHERN CORPORATION AND NORFOLK SOUTHERN RAILWAY COMPANY--CONTROL AND OPERATING LEASES/AGREEMENTS--CONRAIL INC. AND CONSOLIDATED RAIL CORPORATION STB Finance Docket No. 33388 (Sub-No. 69) RESPONSIVE APPLICATION--STATE OF NEW YORK, BY AND THROUGH ITS DEPARTMENT OF TRANSPORTATION, AND THE NEW YORK CITY ECONOMIC DEVELOPMENT CORPORATION This decision addresses the proposals, including the method of compensation, relating to the trackage/haulage rights that we imposed on behalf of the State of New York and the New York Department of Transportation (NYDOT) and the New York City Economic Development Corporation (NYCEDC) in connection with the transaction we authorized in Decision No. 89, served July 23, 1998. In our decision approving the primary transaction, we granted in part and denied in part the New York parties responsive application in Sub-No. 69. As pertinent here, in Decision No. 89, we stated: CSX must attempt to negotiate, with CP, an agreement pursuant to which CSX will grant CP either haulage rights unrestricted as to commodity and geographic scope, or trackage rights unrestricted as to commodity and geographic scope, over the east-of-the-Hudson Conrail line that runs between Selkirk (near Albany) and Fresh Pond (in Queens), under terms agreeable to CSX and CP, taking into account the investment that needs to continue to be made to the line. By letter filed November 10, 1998, Canadian Pacific Railway Company, Delaware and Hudson Railway Company, Inc., Soo Line Railroad Company, and St. Lawrence & Hudson Railway Company Limited (collectively CP) indicated that, because the parties have been unable to reach an agreement, CP was requesting that we institute a proceeding addressing the matter. After considering responses to CP's request, including responses from CSX and the New York parties, we established an expedited schedule requiring CP and CSX to submit simultaneous proposals with regard to the east-of-the-Hudson condition under shorter time frames than those advanced by the parties. In its proposal filed November 30, 1998, CP maintains that it should receive from CSX full-service trackage rights that includes access to all shippers, carriers, and yard facilities located on the east-of-the-Hudson line. On the north end, CP proposes trackage rights over three CSX line segments respectively serving: Rensselaer and Schenectady, NY (referred to as Route 1); the Selkirk Yard (referred to as Route 2); and the Albany/Rensselaer industrial area via CP's Kenwood Yard (referred to as Route 3). On the south, CP seeks a carrier interchange at Fresh Pond Junction, or other appropriate locations, as well as access to the Harlem River Yard, Oak Point Yard, and Hunts Point Terminal and all customers served by those facilities. CP states that it is separately negotiating with Metro-North Commuter Railroad in regard to trackage rights over that portion of the east-of-the-Hudson line owned by Metro-North between Poughkeepsie and High Bridge, NY. CP also indicates that it is separately negotiating with the State of New York for trackage rights on the Oak Point Link from High Bridge to CSX's Harlem River Yard. In conjunction with its trackage rights proposal over CSX, CP asks us to override any CSX claim of exclusive right to provide freight service over these line segments. CP contends that alternatives such as haulage rights will not permit it to obtain the operational efficiencies available from trackage rights. As regards compensation, CP proposes to pay the same car-mile rate and switching fee, i.e., $0.29 per car-mile and $250 per car fee, that applicants agreed to pay each other under their transaction agreement. CP maintains that, just as those rates enable applicants effectively to compete with each other, the same charges will allow CP to be an effective competitor with CSX on the line. CSX's proposal includes a grant of overhead trackage rights between Selkirk and Fresh Pond, NY, with access to shippers and rail facilities in the Bronx and Queens, NY, including an interchange with the New York & Atlantic Railroad (NYAR) at Fresh Pond Junction and access to the Oak Point Yard. CSX indicates that such trackage rights substantially conform to the relief sought by the New York parties in their responsive application. CSX describes its proposal for access by CP to shippers and rail yards in the Bronx and Queens as a terminal joint facility where CSX will be the operator of the facility, but CP will have equal access and be able to run its line haul trains to and from Oak Point Yard, the Harlem River Trailvan Terminal, and the interchange with NYAR at Fresh Pond Junction. In addition, CSX agrees to allow CP to terminate its financial obligations as to the joint facilities by giving CP the option of constructing its own terminal facilities in the metropolitan area. As compensation for CP's use of the trackage rights and applicant's rail facilities in the Bronx and Queens, CSX proposes that CP pay a variable fee based on usage and a fixed annual fee based on 50% of the condemnation value of the involved trackage and yard property. CSX proposes that CP pay in monthly installments an annual interest rental fee of one-half of 10% of the fair market value of its rail line and yard property, with the value to be determined by an independent appraiser jointly selected by the parties. CSX also seeks an override or cancellation of its October 20, 1997 settlement agreement with CP, on the ground that the settlement agreement is inconsistent with the additional relief CP will be obtaining in these proceedings. In its reply filed December 10, 1998, CP maintains that, to conform to the request by the New York parties for full-service rights on the line and the Board's imposition of such a condition, its trackage rights between Selkirk and Fresh Pond Junction should be local, rather than overhead as advanced by CSX. CP also contends that CSX's proposal for a single overhead route via the Selkirk Branch (corresponding generally to CP's Route 3) would deprive it of 20% of the available traffic on the line and prevent it from using the most efficient routings to Canadian and Southern United States markets. As regards operations at the south end of the line, CP complains that CSX would deny it direct access to Hunts Point Terminal, parts of the Harlem River Yard other than the Trailvan Terminal, and new interchanges other than at Fresh Pond Junction with NYAR. According to CP, the condemnation methodology for compensation proposed by CSX has no place in this proceeding, and that CP's proposal is based on established Board precedent and should be accepted. Finally, CP submits that CSX's effort to cancel the October 20, 1997 settlement agreement is unwarranted because CP has not breached any of its obligations thereunder and termination of the agreement would deprive CP of a number of pro- competitive rights that have nothing to do with the east-of-the-Hudson condition. In its reply, CSX contends that its condemnation method of compensation should be accepted because the CSX/NS/Conrail transaction did not cause a lessening of competition which CP's trackage rights were designed to cure and, therefore, it is an innocent party entitled to full constitutional reimbursement for the taking of its property, i.e., a one-half interest in the east-of- the-Hudson line and yard facilities in the Bronx and Queens. On the other hand, CSX complains that CP's proposed $0.29 per car-mile rate and $250 per car switching charge are not cost-based, nor are they mutually agreed to or reciprocal as in the case of charges applicants CSX and NS will assess each other. CSX further contends that CP's compensation proposal is deficient because it does not reimburse CSX for the loss of its exclusive freight rights over the portion of the line, between Poughkeepsie and Oak Point Link, owned by Metro-North. According to CSX, under the Final System Plan, Conrail acquired a fee remainder interest in Metro-North's 70-mile line, subject to a 60- to 90-year lease by New York Metropolitan Transportation Authority and its agent Metro-North. Although CSX argues that only the Special Court may determine whether Conrail's freight rights are exclusive, it concedes that the Board may override any rights Conrail may have in the line. If the Board overrides such rights, CSX insists that it should be fully compensated for the invasion of its exclusivity. CSX, however, asks that we first permit the parties to negotiate this matter and not exercise our override authority at this time. CSX submits that, because the east-of-the-Hudson condition is designed to inaugurate competitive rail service on behalf of New York City, CP should not be granted local access to shippers located north of the municipality, including the Albany area. CSX insists that its proposal, which would provide CP with local access to all shippers and rail facilities in the Bronx and Queens and interchange with NYAR in Long Island, fully satisfies the Board's purpose in imposing the condition. In addition, CSX criticizes CP's request for three access routes to the Hudson line by maintaining that the proposal is unwarranted, overreaching, and will cause operating problems in the Albany area by CP. Because of its concerns related to the three routes, CSX has offered CP two alternative routes: a route near CP's Kenwood Yard, but requiring the construction of a connection in the $1 million plus range; or a route currently used by CP, via the Chicago Line, that does not require any improvements or construction expenditure. NYCEDC and NYDOT submitted a joint reply. The New York parties support the proposal advanced by CP and find fault in CSX's proposal, arguing that the condition gives CP full service trackage rights and thus CP should have access to all shippers located on the Hudson line. The New York parties contend that CSX's compensation proposal would create excessive costs to CP and is based on erroneous premises that CSX is an innocent party and that CP will be a co-equal owner of the rail properties. Housatonic Railroad Company. In comments filed December 10, 1998, Housatonic Railroad Company, Inc. (HRC) indicates that it connects with Metro-North's portion of the Hudson Line at Beacon, NY. HRC states that it currently has a trackage rights agreement with Metro-North to interchange traffic with all freight carriers operating over the Hudson Line. To preserve its interchange opportunities, HRC asks the Board to require that CP's trackage rights agreement with CSX expressly permit an interchange between CP and HRC at Beacon, NY. Providence & Worcester Railroad Company. In a letter filed November 19, 1998, Providence & Worcester Railroad Company (P&W) requests that we assign an administrative law judge to supervise a mediation process relative to our requirement that CSX discuss with P&W the possibility of expanded P&W service over trackage or haulage rights on the line between Fresh Pond, NY, and New Haven, CT . . . . P&W complains that, other than mutually beneficial marketing proposals, CSX is unwilling to discuss substantive opportunities by P&W to compete with CSX over the New Haven route. Comments supporting P&W's request were filed by NYCEDC and NYDOT, in a joint reply, and by Congressmen Jerrold Nadler and Charles E. Schumer in a letter filed December 10, 1998, on behalf of the 24 member New York-Connecticut Congressional delegation. In a reply to P&W filed December 9, 1998, CSX contends that, in court and Board proceedings, P&W has repeatedly violated its August 6, 1997 settlement agreement with CSX. According to CSX, in exchange for valuable independent rate-making authority between New Haven and New York City, P&W pledged unconditional support for the Conrail transaction. Despite P&W's litigation, CSX states that it has continued to negotiate with P&W relative to mutually beneficial arrangements over the New Haven route. CSX asks the Board to clarify that unrestricted trackage rights on behalf of P&W, over CSX's objection, is not what the Board intended when it imposed the condition. Trackage Rights--Between Albany and New York City. The purpose of our east-of- the-Hudson condition is to restore to New York City some of the rail competition that was lost when Conrail was created. In imposing the condition, our focus was not on entities or shippers located in other parts of the state, including those in the Albany area. Nor did we intend to assist particular rail carriers (CP, P&W, and HRC) vis-a-vis the applicants in the Conrail transaction. Further, CP has not shown that a grant of local rights along the entire east-of-the-Hudson route would enhance its ability to efficiently provide service to shippers within New York City. Accordingly, consistent with our intention of enhancing the competitive presence of a second carrier for New York City traffic, CP's prospective trackage rights will be limited to overhead traffic between Albany and New York City, and local access to industries situated between those points will not be permitted. We are not granting the relief HRC seeks. It has not made the case that the traffic it contemplates carrying would pass through New York City, and thus its request for an interchange with CP is not proximately related to the remedy we sought to impose through the east-of-the-Hudson condition. We will also deny CP's request for three access routes to the Hudson Line at Albany. In view of CP's projected traffic volume (initially one train a day each way) and CP's existing extensive rail facilities in the Albany area, we do not believe that more than one access route is necessary. Should CP's traffic volume increase substantially, we will reexamine the carrier's routing requirements under our oversight jurisdiction. We will authorize CP to use Route 1, as proposed by CP, involving the use of the Chicago Main Line between Rensselaer and Schenectady. CSX takes no exception to this route. The route appears to make the best connection with the Hudson Line, does not involve Conrail's Selkirk Yard, and does not require complex switching movements or backward shoves as CSX witness Downing proposes. Its Schenectady connection makes use of CP's Mohawk Yard and provides CP with a direct connection for its northbound and southbound trains in handling New York Terminal traffic. It is a high-speed, double track line and, other than Amtrak trains, normally handles only Conrail local service trains. The forecast level of CP service of one train in each direction daily, even with the projection of a second train in Year Two, should not adversely affect Amtrak service. CP's access route in the Albany area will also be limited to overhead trackage rights. New York Terminal Operations. CSX has agreed to CP's request for access to all yards, terminals, other facilities and shippers, present and future, located in the Bronx and Queens, and an interchange with NYAR at Fresh Pond Junction. But, this agreement is conditioned on CP bearing one half of the full ownership costs of all the track and facilities that would be associated with CP's operations. As discussed below, CSX's compensation proposal is unacceptable. CP proposes that CSX provide it with traditional switching services where this would be the most efficient means of engaging in local service. CP also states that it needs to have the option of providing direct service to customers and facilities in the Bronx and Queens, so as to discipline the quality of switching services provided to CP by CSX. While CP has proposed a $250 per car switching fee that should adequately compensate CSX for this service, including the limited use by CP of Oak Point Yard, CP has not proposed suitable compensation arrangements that would become necessary if it were to make more extensive use of CSX's New York City track and terminal areas, as would be required if CP were to provide direct service to customers and facilities in the Bronx and Queens. CP will be permitted to access all shippers in the Bronx and Queens via a $250 per car switch performed by CSX, including the use of Oak Point Yard as necessary to efficiently perform this switching service. With respect to the contemplated interchange between CP and NYAR: (1) CSX may perform a switching service and bring cars from Oak Point to Fresh Pond or from Fresh Pond to Oak Point for the $250 basic switching fee; or (2) CP could use its trackage rights to interchange directly with NYAR at Fresh Pond, but only if CP enters into a suitable compensation arrangement with CSX for the use of the Fresh Pond yard. We will also grant CP's request that NYAR be given trackage rights from Fresh Pond to Oak Point for its interchange with CP, but only if CP enters into suitable compensation arrangements with CSX for this use of the Oak Point yard. CP failed to suggest any such compensation arrangements, other than the basic $250 switching fee, for its contemplated uses of the Fresh Pond or Oak Point facilities, even though its proposal to interchange with NYAR at Oak Point would apparently involve no compensation to (i.e., no switching by) CSX. Trackage or Haulage Rights- Between New Haven, CT, and New York City. P&W asks us to appoint an administrative law judge to supervise a mediation proceeding concerning the New Haven to New York condition we imposed. We are denying P&W's request because such a proceeding and the prospect of valuable commercial rights going to P&W, over CSX's opposition, are not what we intended when we asked the parties to negotiate the possibility of expanded P&W service over the New Haven route. Despite P&W's litigious posture, which might well be construed as a breach of the CSX/P&W settlement agreement, CSX has represented that, based on P&W's conduct to date, it will not cancel that agreement. The settlement agreement does comport with our pro-competitive goals and with our desire to have CSX and P&W negotiate mutually beneficial arrangements to increase competition. Accordingly, CSX will be bound to its commitment not to cancel the agreement based upon P&W's conduct up to this point. For the same reason, we are not granting CSX's request to cancel its October 20, 1997 settlement agreement with CP. Compensation. CSX's proposal that CP compensate it for the use of CSX's tracks between the Albany area and Fresh Pond, NY, and for all terminal facilities within the Bronx and Queens based on 50% of the ownership cost is unacceptable. As an initial matter, CP does not need, and we are not providing it with, physical access to, and use and control of, all of these facilities. CSX's proposal requiring CP to pay for 50% of the ownership cost would more than likely place either CP or CSX at a competitive disadvantage unless each carrier captured an equal share of the revenues available on the line. Any compensation established in this proceeding must put the tenant in the same competitive position as the owning carrier. In addition, as stated by CP, it appears that CSX is attempting to charge CP 50% of the ownership cost without giving CP all of the benefits associated with being an actual co-owner of the line, such as control of the facility, or full property rights in the assets. CP proposes that it: (1) pay a trackage rights fee of $0.29 per car-mile for the use of CSX's line between the Albany, NY area and Oak Point Yard and pay CSX $250 per car to perform switching; and (2) interline traffic with NYAR either at Oak Point Yard, allowing NYAR incidental trackage rights between Oak Point Yard and Fresh Pond at $0.29 per car-mile, or at Fresh Pond via trackage rights between Oak Point and Fresh Pond. CSX argues that both the $0.29 per car-mile rate and $250 switching fee, which CP adopted from Decision No. 89, were established based on reciprocity between CSX and NS. CSX argues correctly that no such reciprocity is applicable here. CP has not provided any specifics on its proposal to use CSX's facilities at Oak Point and Fresh Pond to interline traffic with NYAR. If CP desires to use CSX's yard facilities, it must first enter into a joint facilities agreement with CSX as indicated in this decision. CP's Trackage Rights Fee. To support its $0.29 number, CP developed a trackage rights fee of $0.27 per car-mile. We find that CP's calculation contains several errors. We have therefore restated CP's estimate of the trackage rights fee for use in this proceeding. The total trackage rights compensation per car-mile should be $0.71. The difference between the $0.71 trackage rights rental fee we have computed and the $0.29 fee CP was prepared to pay will amount to less than $30 per car for the segment of track over which CP will be operating as CSX's tenant. This small amount should not unduly impede CP's ability to compete for east-of- the-Hudson traffic. Of course, trackage rights compensation is based on a retrospective determination of pro- rata shares of traffic between the owning and tenant railroads. Thus, the $0.71 figure is merely a starting point for determining trackage rights compensation. Actual trackage rights compensation per car-mile should be adjusted periodically to reflect: (1) cost of capital rate for the specific period; (2) number of car-miles for the tenant and owning carriers for the specific time period; and (3) actual other below-the-wheel costs for the specific time period. In addition, we will permit CSX to seek reconsideration based on its critique of any of the evidence upon which we have relied. CP's Switching Fee. Absent any special studies of the actual switching cost per car in the New York Terminal Area, CP's $250 appears to be a reasonable starting point. Although CSX argues that CP's adoption of the $250 switching charge from Decision No. 89 is not appropriate because of the lack of reciprocity between CP and CSX, CSX has not provided any evidence that the $250 fee would not cover the total switching cost here. Further, CP shows that the average cost of 41 reciprocal switching fees it selected from CSX's Switching Tariff was $251 (ranging from $72 to $390). Because of the disagreement between the parties concerning this fee, and because CP's switching fee is not based on any specific cost relative to the actual operations in the New York Terminal Area, we will allow the parties, if either of them so desires, to invoke the right proposed by CP for a 6-month special switching study to determine a more precise switching cost. We reject, however, CP's proposed cap of $250 if the study shows the switching cost is higher. Moreover, at the end of 5 years, the parties must renegotiate the fee to reflect costs as they exist at that time. CSX claims that it has inherited exclusive rights to operate freight service over Metro- North. CSX says that Conrail and CSX interpret this as being an exclusive reservation of freight rights. CSX, however, cites no clear language from the Special Court decision or from the deed that requires or even supports that interpretation. In addition, Metro-North disputes CSX's claim by indicating that Conrail's trackage rights agreement with Metro-North clearly establishes that CSX will have no ownership or equity interest in the line. Although CP has asked us to exercise our preemption powers to override any exclusive freight rights claimed by CSX, it would not be appropriate or necessary for us to exercise that power at this time. Only if CSX is able to obtain a ruling from the Special Court that its freight rights were meant to be exclusive, and that Metro-North has contracted to give those rights to a second carrier, would preemption be necessary. With regard to compensation for these rights, we do not require compensation for the competitive or financial value of trackage rights, only the costs (including capital costs) of their use. No capital costs have been set forth by CSX for the portion of the track owned by Metro-North. It is ordered: 1. The CSX-170 motion to strike is denied. 2. The HRRC-14 request to require that CP's trackage rights include an interchange with HRC at Beacon, NY, is denied. 3. The request by P&W to assign an administrative law judge to supervise a mediation process is denied. 4. The trackage rights and terminal operation proposals by CSX and CP are adopted to the extent set forth in this decision. Decided: December 18, 1998 Service Date - Late Release December 18, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-33 (Sub-No. 117X) UNION PACIFIC RAILROAD COMPANY-ABANDONMENT EXEMPTION--IN LAKE COUNTY, CO On July 2, 1998, a decision and notice of interim trail use or abandonment (NITU) was served, authorizing a 180-day period for Lake County Board of County Commissioners to negotiate an interim trail use/rail banking agreement with Union Pacific Railroad Company for an approximately 1.8-mile portion of the Leadville Branch from milepost 274.3 near McWethy Drive to the end of the line at milepost 276.1 at the rail yard near U.S. Highway 24, in Leadville, Lake County, CO. The 180-day period under the NITU is scheduled to expire on December 31, 1998. On December 11, 1998, Lake County filed a request for an extension of the NITU negotiation period for an additional 180 days. Lake County states that it is actively negotiating with UP for acquisition of the rail segment and anticipates that the negotiations will be concluded successfully given the additional time. By facsimile dated December 15, 1998, UP agreed to the extension request. It is ordered: 1. The negotiating period under the NITU is extended to June 29, 1999. Decided: December 15, 1998 Service Date - December 21, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-468 (Sub-No. 2X) PADUCAH & LOUISVILLE RAILWAY, INC.--ABANDONMENT EXEMPTION--IN WHITE PLAINS AND ST. CHARLES, KY Paducah & Louisville Railway, Inc. (P&L), filed a notice to abandon approximately 8.50 miles of its line of railroad between milepost J-146.0 at White Plains and milepost J-154.5 near St. Charles, in Hopkins County, KY. Notice of the exemption was served on July 25, 1997. By decision and notice of interim trail use (NITU) served August 25, 1997, the exemption was conditioned on the requirement that P&L, concurrent with any sale of the right-of-way, consult with appropriate officials of the City of White Plains regarding access to the City's drainage system which is located along the P&L right-of-way. On December 3, 1998, P&L submitted a letter dated October 29, 1998, stating that the City of White Plains acknowledges that its concerns regarding the abandonment have been satisfactorily resolved. Accordingly, the proceeding will be reopened and the condition removed. It is ordered: 1. This proceeding is reopened. 2. Upon reconsideration, the condition imposed in the decision served on August 25, 1997, is removed. Decided: December 14, 1998 Service Date - December 21, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 32760 (Sub-No. 21) (Decision No. 13) UNION PACIFIC CORPORATION, UNION PACIFIC RAILROAD COMPANY, AND MISSOURI PACIFIC RAILROAD COMPANY--CONTROL AND MERGER--SOUTHERN PACIFIC RAIL CORPORATION, SOUTHERN PACIFIC TRANSPORTATION COMPANY, ST. LOUIS SOUTHWESTERN RAILWAY COMPANY, SPCSL CORP., AND THE DENVER AND RIO GRANDE WESTERN RAILROAD COMPANY [GENERAL OVERSIGHT] We discuss, in this decision, the conclusions we have reached in the second annual round of the UP/SP general oversight proceeding. We also discuss, in this decision, the conclusions we have reached with respect to certain related matters. UP/SP Merger Proceeding. In Merger Dec. No. 44 (served August 12, 1996), we approved the common control and merger of the rail carriers controlled by Union Pacific Corporation (Union Pacific Railroad Company and Missouri Pacific Railroad Company) and the rail carriers controlled by Southern Pacific Rail Corporation (Southern Pacific Transportation Company, St. Louis Southwestern Railway Company, SPCSL Corp., and The Denver and Rio Grande Western Railroad Company) subject to various conditions, including, among many others, a 5-year oversight condition and the terms of the BNSF agreement. The common control authorized in Merger Dec. No. 44 was consummated on September 11, 1996, and the mergers authorized in Merger Dec. No. 44 were completed on February 1, 1998. First Annual Round Of General Oversight Proceeding. In General Oversight Dec. No. 10 (served October 27, 1997), we addressed the issues that had been raised in the first annual round of the general oversight proceeding. We concluded that the UP/SP merger, subject to the conditions we had imposed, had not caused any substantial competitive problems, and that there was no necessity, at that time, for any major adjustments in the imposed conditions. Ex Parte No. 573 and Service Order No. 1518 Proceedings. Although we concluded that the UP/SP merger had not produced, as of mid-1997, any substantial competitive problems, it had become, by that time, evident that the UP rail system was experiencing serious service problems. In response to these problems, we took, in the STB Ex Parte No. 573 and STB Service Order No. 1518 proceedings, a range of actions, the most prominent of which were these: (1) we held, on October 27, 1997, a public hearing, at which interested persons reported on the status of UP rail service and discussed proposals for solving UP's service problems; (2) we issued, on October 31, 1997, a 30-day emergency service order (which went into effect on November 5, 1997), that, among other things, authorized The Texas Mexican Railway Company (Tex Mex), an affiliate of The Kansas City Southern Railway Company (KCS), to provide expanded service in the Houston area, and directed UP and BNSF to take specific steps to facilitate the operations of other carriers in that area; (3) we issued, on December 4, 1997, a decision extending the emergency service order to March 15, 1998, and modifying that order to address four additional matters (service involving Texas, California, western coal, and midwest agricultural shippers); (4) we issued, on February 25, 1998, a decision extending the emergency service order, as previously modified, to August 2, 1998 (the maximum time permissible); and (5) we issued, on July 31, 1998, a decision that, by denying a request that the emergency service order be continued or that a new one be issued, allowed the emergency service order to expire on August 2, 1998 (subject, however, to certain wind down arrangements that continued until September 17, 1998). Houston/Gulf Coast Oversight Proceeding. By decision served March 31, 1998, we instituted a proceeding to consider long-term proposals for additional remedial conditions pertaining to rail service in the Houston/Gulf Coast region. In that proceeding and related proceedings: requests for new remedial conditions were filed on or about July 8, 1998; we accepted these requests by decision served August 4, 1998; comments with respect to these requests were filed on or about September 18, 1998; rebuttal evidence in support of these requests was filed on or about October 16, 1998; and oral argument was held on December 15, 1998. This Decision: Comments Filed In The Second Annual Round Of The General Oversight Proceeding. We have considered, in this decision, the issues raised in the following pleadings that were filed in, or that should have been filed in, the second annual round of the general oversight proceeding: the UP/SP second annual report on merger and condition implementation and the UP/SP confidential appendices, both filed July 1, 1998, by UP; the BNSF quarterly progress report, filed July 1, 1998, by BNSF; the letter filed August 12, 1998, by the County Sanitation Districts of Los Angeles County (LACSD); the comments filed August 14, 1998, by BNSF; the comments filed August 14, 1998, by the American Forest & Paper Association (AF&PA); the comments filed August 14, 1998, by Public Service Company of Colorado (PSCo); the comments filed August 14, 1998, by the Colorado, Kansas & Pacific Railway Company (CK&PR); the comments filed August 14, 1998, by Cemex USA Management, Inc. (Cemex); the reply filed September 1, 1998, by the United States Department of Transportation (DOT); the comments filed September 17, 1998, by Champion International Corporation on behalf of itself and its Moscow, Camden & San Augustine Railroad (MC&SA) subsidiary; the comments filed September 21, 1998, by Angelina & Neches River Railroad Company (A&NR); and the reply filed September 30, 1998, by UP. This Decision: Related Matters. We have also considered, in this decision, issues respecting three related matters that were raised in the following pleadings: (1) the petition for modification of Merger Dec. No. 44 or, in the alternative, for an additional condition, filed October 23, 1997, by Entergy Services, Inc., and Entergy Arkansas, Inc. (referred to collectively as Entergy); and the reply to the Entergy petition, filed November 12, 1997, by UP; (2) the petition for an additional remedial condition, filed May 12, 1998, by the Arkansas, Louisiana and Mississippi Railroad Company (AL&M); the reply to the AL&M Petition, filed June 1, 1998, by BNSF; the reply to the AL&M Petition, filed June 1, 1998, by KCS; the two replies to the AL&M Petition, filed June 1, 1998, by Georgia-Pacific Corporation (G-P); the reply to the AL&M Petition, filed June 1, 1998, by International Paper Company (IP); the reply to the AL&M Petition, filed June 2, 1998, by UP; the supplement to the AL&M Petition filed June 26, 1998, by AL&M; the reply to the AL&M Supplement, filed July 16, 1998, by UP; the motion to strike the AL&M Supplement, filed July 16, 1998, by KCS; and the reply to the motion to strike, filed July 20, 1998, by AL&M; and (3) the petition for reconsideration filed August 20, 1998, by Cemex in STB Ex Parte No. 573 and in STB Service Order No. 1518; and the reply to the Cemex petition, filed September 11, 1998, by UP in STB Service Order No. 1518. The merger, while it has not proceeded as smoothly as we had hoped it would, has produced and will continue to produce benefits for the shipping public. In addition to the expansion of the number of single-line services and shorter routings, better equipment supply, reduced access fees, and broadened service coverage and competitive benefits for 2-1 shippers now being served by BNSF, UP estimates that the eliminations and reductions of switch charges that were produced by the UP/SP merger and by the BNSF agreement, as augmented by the CMA (Chemical Manufacturers Association) agreement, will amount to some $56 million during the first 2 post-merger years. UP also notes that, in February 1998, UP and BNSF entered into a new systemwide reciprocal switch fee agreement that superseded seven earlier agreements involving former constituent railroads of UP and BNSF, that produced further overall reductions in switch fees, and that greatly simplified switch fee administration on UP and BNSF. Nevertheless, we knew when we approved the merger that it would have potential competitive impacts, and so we imposed remedial conditions and a 5-year oversight requirement so that we could ensure that our conditions in fact ameliorated potential competitive harm. We will now address whether our conditions have achieved their purpose, and will then turn to various other issues that were raised during this phase of the oversight proceeding. We recognize that the service problems in the West have competitively injured a variety of shippers and carriers, including UP. However, the reports, comments, and replies that were filed in the second annual round of the general oversight proceeding establish that, notwithstanding from the effects of the service crisis, the UP/SP merger has not thus far caused any substantial competitive harm. The UP vs. SP competition that existed prior to the merger no longer exists; but, in its place, there now exists UP vs. BNSF competition, which appears to be at least as effective as the pre-merger UP vs. SP competition. The reports submitted July 1, 1998, by UP and BNSF demonstrate that BNSF is providing fully competitive train service in every major trackage rights corridor, and is handling large and continually increasing volumes of business using the rights it acquired in connection with the merger. The confidential appendices submitted with the UP report contain numerous examples of BNSF's success in gaining 2-to-1 traffic using its rights, and numerous examples too of the rate and service improvements UP has had to provide to shippers to retain a share of the 2-to-1 traffic. BNSF claims that most of the growth in its trackage rights traffic has come either from overhead business, from business moving to and from 2-to-1 shortlines, or from business where BNSF has had to commence its own switching operations for 2-to-1 customers. At the Houston/Gulf Coast oral argument, however, BNSF, although it indicated that it wanted to intensify its competitive presence, stated: "We think we have established a major presence at the 2-to-1 points. . . . We believe competition is working." In any event, the 2-to-1 shippers to which BNSF has access are shippers that, prior to the merger, had access both to UP and to SP (and to no other railroad); but such access did not necessarily mean that any such shipper actually enjoyed, day in and day out, simultaneous two- carrier service before the merger. One bar to simultaneous post-merger, two-carrier service cited by BNSF (the inability of many shippers to accommodate physical switches by two carriers in a 24-hour period) would also have barred pre-merger, two-carrier service. And the other bar cited by BNSF (duplication of scarce resources, i.e., power, crews, and infrastructure) would appear to be transitional in nature; if there is sufficient traffic to support simultaneous two-carrier service, BNSF should have an incentive to develop and make available the necessary resources. The confidential appendices also document post-merger reductions in UP's rates for 2-to-1 traffic, 3-to-2 traffic, Eastern Mexico gateway traffic, coal traffic, chemical traffic, plastics traffic, and grain traffic. The service problems that have occurred during implementation of the merger are well known, but they do not change the fact that there have been no discernible purely competitive problems caused by the merger. BNSF, of course, would like to be even more of a competitive force, but we conclude, based upon the reports, comments, and replies filed in the second annual round of the general oversight proceeding, that, at this time, no adjustment in the general conditions imposed in connection with the UP/SP merger is necessary. The UP service situation, although still not perfect, has improved considerably and all indications are that it will continue to improve. There is every reason to believe that the service problems will prove to have been a transitional phenomenon. Based on the record, we therefore see no reason to impose additional conditions on the merger, outside of the Houston/Gulf Coast area, that arise from the service problems. Of course, we will continue to retain jurisdiction over the merger, and to ensure through our periodic reporting requirements that our conditions are effective. In another decision served simultaneously with this one, we have adopted rules to address service inadequacies by establishing expedited procedures for shippers to obtain alternative rail service from another carrier when the incumbent carrier cannot properly serve shippers. Specific conditions that would fundamentally change the structure of the merger, however, are neither necessary nor appropriate. Although UP and DOT have interacted in a variety of ways concerning safety, DOT states that there are, at this time, no safety problems requiring action on our part in the context of the general oversight proceeding. The paper barrier issues raised by AF&PA are among the issues addressed in the broad Railroad Industry Agreement (the RIA) that was recently entered into by the Association of American Railroads (AAR) and the American Short Line and Regional Railroad Association (ASLRRA). A paper barrier is a contractual provision constraining the ability of a small railroad to interchange traffic with carriers other than the carrier from which its lines were originally purchased. Although the comprehensive agreement on the issue of paper barriers reached in the RIA did not eliminate all limitations on the scope of the services that can be provided by small railroads, it did provide new opportunities for smaller railroads to address some of the concerns that have been expressed over the past year by shippers. In any event, the paper barrier issues raised by AF&PA have no connection to the UP/SP merger, which neither rendered any shortline captive to UP nor created or extended any paper barrier. ENTERGY/CEMEX. Entergy and Cemex are 1-to-1 shippers, each of which was rail-served prior to the merger by a single railroad (the pre-merger UP) and each of which is rail-served today by a single railroad (the post-merger UP). The merger, therefore, had no adverse impact on the rail service options available to Entergy and Cemex. Entergy and Cemex insist, however, that, as a practical matter, the merger has had an adverse impact on their rail service options. Prior to the merger, they claim, UP rail service was adequate; subsequent to the merger, they argue, UP rail service has been inadequate. Entergy and Cemex, invoking both our UP/SP oversight jurisdiction and our directed service authority, have asked that we remedy their problems by granting BNSF access to their facilities. We will deny their requests. The service problems so many shippers have experienced have proven to be, for the most part, transitional problems that occurred in connection with merger implementation and that reflected, to a large degree, the inadequate state of the pre-merger SP infrastructure. These are problems that do not call for permanent solutions of the sort suggested here. We would not hesitate to grant relief to Entergy and Cemex, and to other similarly situated shippers, if, and to the extent that, we believed that UP's service problems were structural, i.e., had been created by the merger and were likely to endure as long as the merger endured. But all the evidence we have seen leads us to believe that UP's rapidly diminishing service problems are transitional and therefore temporary, not structural and therefore not permanent. Indeed, UP's recent, substantial infrastructure improvements to its lines in the New Braunfels, TX, area, and in the Central Corridor lines over which Cemex and Entergy traffic moves have spurred service improvements throughout the UP system. We do not mean to suggest that UP's service has yet reached its optimal levels. Merger implementation is a process, not an event; rehabilitation of inadequate infrastructure is similarly a process, not an event; and, in the nature of things, each such process is likely to take time. The problems that have arisen, and that have been and are continuing to be mitigated, might have been delayed if there had been no UP/SP merger. That alternative, however, would almost certainly have resulted, sooner or later, in the destruction of SP. The evidence indicated that SP's competitive, financial, and physical condition had been eroding for several years, and would continue to erode, because of SP's chronic inability to generate sufficient capital from its railroad operations. We do not mean to trivialize the transitional problems that Entergy and Cemex faced during the admittedly serious but now-over service emergency. Those problems have been serious, but no more serious than the problems faced by many other shippers. Yet, as we reviewed the service emergency, we concluded that we could not grant all allegedly adversely impacted 1-to-1 shippers access to another carrier, because to do so would surely have interfered with UP's own service recovery efforts, could have stressed the system of the carrier recruited to provide alternative service, and would ultimately have aggravated rather than ameliorated the service problems. Given the transitional nature of the service problems, which are abating, we see no basis on which to grant such access as a merger condition. We are today issuing regulations that provide expedited procedures for obtaining access to another carrier to remedy service failures by the incumbent carrier. Regardless of how the new procedures, had they been in effect during the service emergency, might have applied to the situations of Entergy or Cemex, or how they might apply to the situations of Entergy or Cemex in the future, it is clear that relief under either the service order or as a merger condition would have been inappropriate. The directional running patterns instituted by UP have increased the carrying capacity of UP's (formerly SP s) Houston-Fair Oaks line. CIC and A&NR do not suggest otherwise, but they insist that this directional running pattern (both UP and BNSF operate southbound trains on the Houston-Fair Oaks line), and the increased traffic thereby made possible, have impaired local service provided by UP to shippers like CIC and shortlines like A&NR. UP concedes that local service has not been entirely satisfactory, but contends that it has taken a number of steps to improve such service. We have previously said that there is no reason to believe that new post-merger traffic flows will cause service problems [on the Houston-Fair Oaks line]. We cannot now say for certain whether we were right or wrong. There has been no way to separate the local effects of UP's systemwide service problems from the local effects of directional running patterns. And, making matters more complicated, there appears to be no way to distinguish impacts of directional running from those that can be remedied without interfering with directional running. On the other hand, the service crisis has ended, and UP has indicated its intention to address local service issues. However, if it turns out that directional running does impair local service, it may be the kind of problem for which there is no easy solution. The first remedy suggested by CIC and A&NR (open interchange) would seem to be far too broad. The second remedy suggested by CIC and A&NR (requirements that affected shortlines receive daily local service and that local crews receive priority when on or crossing mainlines) is more narrowly tailored, but no less objectionable. A daily local service requirement might well require UP to engage in inefficient operations; and a local crew priority requirement would involve our micromanagement of operating decisions best left to the railroads. The best solution, for now, is to give UP's directional running arrangements time to develop and to permit UP, now that its systemwide service appears sustainably improved, to turn its full attention to correcting such local service problems. We are, however, prepared to entertain, in the third and subsequent annual rounds of the general oversight proceeding, renewed claims that the local service provided by UP to shippers such as CIC and shortlines such as A&NR remains adversely affected by the directional running patterns established by UP (and BNSF) in connection with the merger. We do not agree with A&NR's claim that the new facilities condition has created, for shortlines like A&NR, a disadvantage that we have an obligation to correct. The disadvantage cited by A&NR existed prior to the merger because, at that time, shippers could elect to locate new facilities at points served by both UP and SP, while an exclusively served shortline like A&NR (i.e., a shortline with only a single Class I connection) might not be able to offer a site open to rail competition. And, in any event, even if the merger did create the harm cited by A&NR, that harm is not the kind of harm that our conditioning power was meant to rectify. A&NR, after all, is not claiming that it has been made less competitive but that its Class I competitors have been made more competitive. AL&M is a 3-to-2 shortline that claims, in essence, that it should be regarded as a 2«-to- 1« shortline. UP, SP, and KCS were AL&M's pre-merger Class I connections; UP and KCS are AL&M's post-merger Class I connections. AL&M insists, however, that, with respect to traffic that is originated on AL&M's Fordyce-Monroe line, KCS is not, and cannot be, a fully competitive Class I connection. AL&M contends, in particular, that KCS has single-line access to a limited number of AL&M destinations, and that KCS's joint-line routings to all other AL&M destinations are not competitive with the single-line routings of the post-merger UP. In Merger Dec. No. 44, we granted relief only in limited circumstances where a shipper had pre-merger access to three railroads. Similarly, we have accorded relief in limited circumstances where a merger reduces the number of Class I connections for a shortline railroad, and hence the shippers it serves, from three to two. AL&M did not previously participate in the UP/SP merger proceeding or request that we impose a special condition for its benefit. Nor has it persuaded us that there is any reason for us to reopen the proceeding now for the purpose of imposing such a condition. It has been over 2 years since we approved the merger, and AL&M has failed to present any convincing, concrete evidence that the merger has resulted in competitive harm to shippers located on its line. It merely presents speculative evidence that it will be disadvantaged because KCS, one of its two remaining connections, will not be an effective competitor. This is not an appropriate basis for imposing additional relief in conjunction with this oversight process. Moreover, AL&M's arguments are without merit. KCS appears to be a fully effective Class I connection for traffic originated on AL&M's line. AL&M concedes the competitiveness of KCS's single-line routings to the AL&M destinations that are located on KCS's system and that are conveniently accessible in KCS single-line service, and the evidence of record demonstrates the competitiveness of KCS's joint-line routings (KCS-BNSF, KCS-IC, KCS-CSX, and KCS-NS) to the AL&M destinations that are located beyond KCS's system or that, though located on KCS's system, are not conveniently accessible in KCS single-line service. The KCS-BNSF, KCS-IC, KCS-CSX, and KCS-NS joint-line routings provide, for traffic originated by AL&M and interchanged with KCS at Monroe, non-circuitous access to destinations located throughout the United States, and the evidence we have seen indicates that these joint-line routings are indeed competitive with the single-line routings of the post-merger UP. AL&M's principal grievance respecting KCS's joint-line routings, and respecting in particular KCS-BNSF joint-line routings, is neither undue circuity (KCS-BNSF routings, as we have said, are not unduly circuitous) nor a UP bottleneck (UP is not a participant in any KCS-BNSF routings). AL&M's principal grievance, rather, is that the KCS-BNSF routings are joint-line routings, and, therefore, in AL&M's view, are, by their very nature, not fully competitive with UP single-line routings. It is the limited single system reach of the KCS that is the principal reason the Board should extend the Lake Charles condition to permit BNSF access to the AL&M at Fordyce. AL&M is arguing, in essence, that, at least with respect to traffic moving to certain points in the Far West, it has been adversely affected by the merger because, whereas it previously had two single-line options (UP and SP), it now has only one (UP). This argument, though of somewhat more force than a similar argument previously made by SPP/IDPC, is not sufficiently compelling. The KCS-BNSF joint-line routing should be, and indeed the traffic statistics cited by KCS and UP demonstrate that the KCS-BNSF joint-line routing is, quite competitive with the UP single-line routing. We realize that UP's service problems have adversely affected AL&M, not only with respect to traffic routed AL&M-UP but also, because of UP's delays in returning AL&M's cars, with respect to traffic routed AL&M-KCS. We expect, however, that UP's service problems will prove to have been a transitional phenomenon, and we think that, in these circumstances, and given the strength of the KCS competitive option now available to AL&M, the establishment of a permanent AL&M-BNSF interchange at Fordyce would not be an appropriate response. Finally, we recognize AL&M's argument, which G-P supports, that UP has raised certain rates from the levels charged by SP. Neither AL&M nor G-P, however, has shown that the rate structure that G-P negotiated with UP reflects any abuse of market power. Moreover, we should point out that SP's rate structure, which had to be at least one of the factors associated with the carrier's downward spiral, was not necessarily a model to which UP was forever bound. Indeed, in the underlying merger proceeding, there was substantial evidence that SP cut rates to attract new business, but that the strategy was unsuccessful because many shippers were unwilling to ship with a carrier in a weakened condition at unremunerative rates. The conditions requested by PSCo and CK&PR have largely been mooted by UP's decision to preserve the Tennessee Pass line and its continuity as a through route. Abandonment of this line has ceased to be a UP objective, and, if abandonment should ever again become a UP objective, UP will have to seek, outside the merger context, either approval or exemption for that abandonment. Particularly given the need for infrastructure in the railroad industry, which UP recognizes, we strongly encourage UP, if it ultimately determines that it does not intend to use this line, to make efforts to sell it to an entity that will use it in the transportation system. We will be vigilant as to this issue. The service problems complained of by LACSD appear to have been resolved, and, for this reason, further action on our part appears unnecessary. The third annual round of the general oversight proceeding will be conducted in mid- 1999, in accordance with the schedule indicated below. We anticipate that, following a review of the reports, comments, and replies filed in 1999, we will issue another decision concerning oversight issues. We reserve the right, however, to alter the filing schedule and/or to modify the reporting requirements, if and to the extent circumstances warrant. It is ordered: 1. Except as otherwise indicated, all requests for relief discussed in this decision, including but not limited to the requests contained in Entergy's petition filed October 23, 1997, AL&M's petition filed May 12, 1998, and Cemex's petition filed August 20, 1998, are denied. We have, as a practical matter, granted the PSCo request, and the similar (though differently worded) CK&PR request, that we continue in effect the condition, that permitted UP to discontinue service on, but not to abandon, the Tennessee Pass line. We have also, as a practical matter, granted the request, made by various parties, that we continue to maintain oversight of the UP/SP merger. 2. UP and BNSF shall continue to report quarterly, with comprehensive summary presentations included in their progress reports due on July 1, 1999. UP and BNSF shall make their 100% traffic tapes available by July 15, 1999. Decided: December 18, 1998 Service Date - Late Release December 21, 1998 APPENDIX A: SUMMARY OF PLEADINGS THE UP/SP-344 REPORT. The evidence, UP argues, demonstrates that, notwithstanding the congestion problems that have afflicted UP in the past year, both the UP/SP merger and the competitive conditions we imposed in Merger Dec. No. 44 have strengthened, and are continuing to strengthen, transport competition in the West. UP contends, in particular: that the merged UP/SP system is continuing to enhance its competitiveness by providing new single-line service and shorter routings, better equipment supply, and reduced switch charges; and that 2-to-1 shippers are continuing to benefit both from access to the comprehensive and expanded BNSF system and from the rate and service initiatives UP has had to undertake to meet BNSF competition. UP further contends that, as it has always predicted, the merger has not had adverse competitive effects on 3-to-2 traffic or on Utah and Colorado coal, Gulf Coast chemicals, or grain. THE BNSF-PR-8 REPORT AND THE BNSF-7 COMMENTS. BNSF contends that, although it is working aggressively to compete and to increase its volumes to the point where it can maintain viable long-term operations, its ability to provide effective and competitive service over the UP lines to which it gained access in connection with the merger is being thwarted both by certain structural deficiencies in the rights it received and by the disproportionate impact, whether intentional or not, of UP's congestion and service problems. BNSF further contends: that, on numerous occasions, UP operating practices have led to UP's trains being favored over BNSF's trains; that, on far too many occasions, UP has created blockages adverse to BNSF by dispatching a UP train over a trackage rights line when the crew for that train did not have sufficient time to allow it to complete the movement; that, in a number of lanes, BNSF trains have been handled more slowly than their UP counterparts; and that, in general, UP, by lack of cooperation, by discrimination, by neglect, and by manipulation of existing agreements, has forced BNSF into an inferior competitive position that fails to provide 2-to-1 shippers the competitive options they had prior to the merger. BNSF concedes that its traffic moved via the trackage rights lines has continued to grow, but insists that most of the growth has come either from overhead business, from business moving to and from 2-to-1 shortlines, or from business where BNSF has had to commence its own switching operations for 2-to-1 customers. As respects the Central Corridor, BNSF contends that, given the congestion along UP lines in this corridor, BNSF has been unable to be competitive with UP on a consistent basis. BNSF claims: that its service to and from shippers in Salt Lake City, using Utah Railway as its agent, has been adversely impacted by UP's practice of parking trains and blocking switching leads that are used by Utah Railway to service customers facilities; that, as long as the Central Corridor remains congested, UP trains will continue to be backed up, consuming track facilities such as the Salt Lake lines intended for use by BNSF; that BNSF trains are also being delayed by a lack of UP crews; and that, in addition, there has been a systemic mishandling by UP of BNSF shipments in haulage service. As respects the I-5 corridor and California, BNSF claims that there have been, and will continue to be, severe service problems in the Stockton area, in the Sacramento area, in the Los Angeles area, and on the Tehachapi line. BNSF indicates that, although it will continue to work with UP to resolve the problems it (BNSF) faces in providing competitive service, we may find it necessary to take additional steps to ensure competitive service if UP is unwilling or unable to correct its shortcomings. BNSF suggests, in this respect, that we might: require neutral switching supervision in certain geographic areas; require UP to allocate crews on a basis that would allow both UP and BNSF to provide equally competitive service; require the dispatching protocol to be formally modified to provide that, before a train is dispatched over a line, either the crew has sufficient hours of service to operate over the line or a replacement crew is in place to relieve the original crew; and require the establishment of a joint dispatching facility to dispatch certain lines (e.g., the Tehachapi line). UP/SP-361 Reply. UP acknowledges that congestion on its lines during its service crisis has adversely affected BNSF service over UP facilities. UP contends, however: that UP service suffered even more; and that BNSF's allegations of a lack of cooperation and neglect and outright discrimination and manipulation of existing agreements are outrageous falsehoods. The truth, UP insists, is that UP has bent over backwards to provide BNSF one unilateral concession after another, far beyond anything required by the BNSF agreement or the conditions imposed by the Board, to ensure that BNSF would be quickly and fully competitive using the rights it received in connection with the merger. UP contends, among other things: that, even though all of the BNSF trackage rights agreements became effective immediately upon UP's consummation of control on September 11, 1996, UP agreed to allow BNSF to serve shippers for an initial 6-month period pursuant to a blanket interim haulage agreement (which allowed BNSF to establish competitive service far more rapidly and at a much lower cost than it could have under the terms of the BNSF agreement); that, even though the interim haulage agreement contemplated that BNSF would commence trackage rights operations after the initial 6-month haulage period expired, UP, at BNSF's request, entered into still further agreements with BNSF, granting haulage rights in numerous locations for periods of up to 5 years (which have given BNSF a cost advantage in serving 2-to-1 shippers above what the BNSF agreement contemplated); that the haulage arrangements have allowed BNSF to employ trackage rights at the precise time when it was optimal to do so from an economic standpoint (which has enabled BNSF to choose on a case-by-case basis whether and when it was more efficient for it to use UP trains, crews, and facilities, or to mount its own trackage rights operations); that UP has also demonstrated extraordinary flexibility in allowing BNSF to switch between trackage rights and haulage rights without providing the notice expressly required under the parties agreements; that, when UP instituted directional running over its lines between Houston and Beaumont, it granted BNSF the additional trackage rights that were necessary to allow BNSF too to operate directionally over those lines; and that UP has also gone out of its way to provide BNSF with lower-cost access to New Orleans than it was required to provide under the BNSF agreement. As respects the Central Corridor, UP concedes that it has indeed experienced congestion in this corridor, but contends: that this congestion was temporary, and resulted from steps that will improve service both for UP and for BNSF; that, in any event, this congestion did not place BNSF at any competitive disadvantage; and that operations are now much more fluid throughout the Central Corridor. UP further contends: that BNSF's own data show that its Central Corridor traffic has been increasing dramatically; that UP has not discriminated against BNSF in dispatching the Central Corridor; and that there is no reason to believe that joint or coordinated dispatching control of the Central Corridor would improve BNSF's ability to compete. UP adds that it would be willing to discuss joint or coordinated dispatching arrangements with BNSF, but would expect BNSF to be equally receptive to coordinated dispatching of BNSF lines used by UP, such as Portland-Tacoma, Chicago-Kansas City, Daggett-Riverside CA, and the Powder River Basin Joint Line. And, with regard to BNSF's complaints respecting UP crews, UP: insists that, aside from a single occasion in early June, it has consistently provided BNSF with crews in accordance with standard priorities (i.e., high-priority intermodal trains have been crewed ahead of manifest trains); and suggests that, in any event, the matter will soon be moot, in view of BNSF's intention to use its own crews for its Central Corridor operations effective January 1, 1999. As respects the I-5 corridor and California, UP insists that it has implemented, and will continue to implement, effective methods to resolve problems in the Stockton area, in the Sacramento area, in the Los Angeles area, and on the Tehachapi line. And, UP adds, if it were inclined to bombard the Board with complaints about BNSF actions that have adversely affected UP service, it could. UP notes, in general, that every railroad using a joint facility regularly has issues to raise with its joint-facility partners, and UP notes, in particular, that, in its capacity as a tenant on various BNSF lines, it has its own ongoing menu of grievances with BNSF actions that have affected UP's ability to compete. UP stresses, however, that it is not asking the Board to address such grievances, and, in particular, that it is not asking the Board to reopen the BN/SF merger proceeding, even though (so UP claims) many of UP's grievances have more nexus to the BN/SF merger than the complaints BNSF has raised have to the UP/SP merger. THE AFPA-2 COMMENTS. AF&PA, the national trade association of the forest products and paper industry, asserts that the UP/SP merger has adversely impacted rail competition and rail service to shippers. AF&PA suggests that, within the context of this proceeding, we should seek to maximize routing options by increasing the opportunities for shortline rail carriers to participate in UP's rail traffic. AF&PA claims that shortlines: can provide reliable and efficient service on lower density rail lines that have been spun off by the larger Class I carriers; and, by connecting smaller and often more rural communities to the interstate network of the Class I carriers, can provide a vital service. AF&PA further claims, however, that paper barriers instituted in line sales agreements and in the pricing policies of the Class I carriers can severely restrict a shortline's ability to provide competitive, efficient, and profitable service. Paper barriers, AF&PA argues, can limit, either directly or indirectly, a shortline's ability to interchange traffic with other rail carriers, even where such routings and connections may be efficient. AF&PA therefore contends: that we should evaluate the degree to which paper barriers restrict the competitive service opportunities of the shortlines that connect to the UP system; and that, if such restrictions are found to be substantial, we should undertake to eliminate such restrictions, in whole or in part, in order to improve the quality of rail service provided to shippers and to enhance the competitive alternatives available to shippers. AF&PA argues that such action would serve the public interest by providing increased competitive options to shippers, by alleviating some of the burdens on the UP system, and by making available improved economic opportunities to the shortlines. DOT-3 Reply. DOT agrees that elimination of paper barriers would improve service and competition for shippers served by shortlines now subject to such barriers. DOT notes, however, that, because problems connected with paper barriers are not the result of the UP/SP merger, the relationship of the AF&PA proposal to the instant proceeding is unclear. DOT therefore suggests that it would be better to consider in the Ex Parte No. 575 proceeding the competitive access concerns raised by AF&PA in this proceeding. UP/SP-361 Reply. UP contends that the merger has generated a particularly wide array of benefits for forest products and paper shippers, which (UP claims): have benefitted from access to the merged system's greatly expanded fleets of centerbeam flatcars, bulkhead flatcars, and boxcars; have benefitted from the merged system's ability to use the combined UP/SP fleet more efficiently; have benefitted from the merged system's complete redesign and simplification of SP's lumber tariffs; have benefitted from reductions in the rates applicable to forest products; and have benefitted from the shorter routes and single-line routing options made possible by the merger. UP further contends, with respect to the shortline issues raised by AF&PA: that these issues have no connection to the UP/SP merger, which neither rendered any shortline captive nor created any paper barrier ; that, in any event, these issues have been addressed in a recent AAR/ASLRRA agreement; and that, furthermore, UP is in the process of instituting new, competitive through rates that will allow exclusively served shortlines to ship products to BNSF local points. THE PSC-9 COMMENTS. PSCo contends that UP's service in transporting PSCo and SPS coal trains over the Moffat Tunnel line has deteriorated markedly during the period of approximately 1 year since UP discontinued operations on the Tennessee Pass line and shifted to the Moffat Tunnel line the traffic (especially the eastbound coal traffic) that formerly used the Tennessee Pass line. PSCo contends that, following the discontinuance of operations on the Tennessee Pass line, the Moffat Tunnel line has experienced increased traffic, congestion, and delays, and associated service problems as well (round-trip cycle times, PSCo claims, have increased substantially over the past year and a half). And, PSCo fears, UP, although it has not been authorized to abandon the Tennessee Pass line, may be taking actions that will effectively disrupt the continuity both of the Tennessee Pass line and of the former UP line extending east from Pueblo, CO, that was used by SP to transport Colorado coal to Midwestern destinations. PSCo, which is concerned that the congestion problems UP is already experiencing on the Moffat Tunnel line may become worse in the future, asks that we: (1) preserve the Tennessee Pass line as a potential alternative through route for traffic moving between points west of Dotsero, CO, on the one hand, and, on the other hand, Pueblo, CO, by continuing in effect the condition permitting UP to discontinue service on, but not to abandon, the Tennessee Pass line; (2) order UP to continue to preserve the integrity and continuity of the Tennessee Pass line as a potential through route; and (3) revisit, in the next annual round of the general oversight proceeding, the level of service UP is providing on the Moffat Tunnel line. UP/SP-361 Reply. UP indicates that, because traffic growth is indeed pressing capacity on the Moffat Tunnel route, it has reconsidered its plans to abandon the Tennessee Pass route, and has determined that service on the Tennessee Pass route will be resumed if necessary to alleviate congestion on the Moffat Tunnel route. UP adds that the conditions requested by PSCo are not needed, given UP's own decision to preserve the Tennessee Pass route and its continuity as a through route. THE CK&PR COMMENTS. CK&PR was established for the purpose of acquiring and operating the Tennessee Pass line and the NA Junction-Towner line, but, to date, it has neither acquired nor operated either line. CK&PR contends: that it made a good faith effort to acquire the NA Junction-Towner line; that UP, however, did not make any particular effort to help CK&PR acquire that line; that, in fact, UP, after giving CK&PR little time to assemble certain complicated financing arrangements, kept CK&PR's good faith nonrefundable $100,000 deposit; but that CK&PR has not yet given up on its efforts to acquire the NA Junction-Towner line. CK&PR adds: that, in July 1998, the State of Colorado exercised its state-law right of first refusal to purchase the NA Junction-Towner line; that the State has indicated that it will request shortline operator bids once it takes possession of the line; and that, despite opposition from UP, CK&PR intends to submit a bid in response to that request. CK&PR further contends that, with respect to the Tennessee Pass line, UP has exercised a divide and conquer strategy by selling an 11.75-mile segment of the line to a newly established passenger excursion operator (Royal Gorge Express) and its shortline freight affiliate (Rock & Rail, Inc). CK&PR argues, in essence, that our focus on the narrow issue of the amount of local traffic moving over the NA Junction-Towner line led us to overlook the vital role this line has played as respects Central Corridor competitive options. CK&PR claims, in fact, that eradication of the former DRGW/MPRR Central Corridor routes and the competitive options they once offered is a top UP corporate priority that UP is determined to pursue even if it results in continued degradation of service over UP's other Central Corridor routes. CK&PR therefore asks that we scrutinize carefully UP's assertions regarding the Tennessee Pass line and competition in the Central Corridor. CK&PR asks, in particular: that we continue the condition barring UP from abandoning the Tennessee Pass line; and that we order UP to preserve the integrity and continuity of the Tennessee Pass line as a through route between Dotsero and Pueblo, until such time as it might sell the line in one piece to another rail carrier for continued service. CK&PR also urges that we ask UP whether it required Royal Gorge Express to pay fair value for the Parkdale-Ca¤on City segment or whether it sold that segment for a nominal consideration. UP/SP-361 Reply. UP claims: that CK&PR is a gathering of rail aficionados with dreams of operating excursion passenger trains throughout Colorado; that the State of Colorado, not UP, rejected as not viable CK&PR's bid to purchase the Tennessee Pass and NA Junction- Towner lines; that, following that rejection, UP, acting at the request of Colorado officials, attempted to work separately with CK&PR on a purchase of the NA Junction-Towner line; that this attempt failed, however, when it became clear that CK&PR had no financing to buy this line, and had misrepresented its financial resources both to UP and to Governor Romer; that, in July 1998, UP sold the NA Junction-Towner line to the State of Colorado; and that, in any event, the conditions requested by CK&PR are not needed, given UP's own decision to preserve the Tennessee Pass route and its continuity as a through route. UP adds that the price of the Parkdale-Ca¤on City segment paid by Royal Gorge Express was based on net liquidation value, the same method of valuation used in connection with the NA Junction-Towner line. THE CEMEX COMMENTS AND PETITION. Cemex, a cement and aggregates shipper with facilities in Dittlinger, TX (near New Braunfels, TX) is served by UP's Austin Subdivision, a heavily used mainline that carries most of UP's traffic to and from Mexico. Cemex insists, and UP has conceded, that Cemex has been adversely impacted by UP's service problems. Prior Decision. In our decision served July 31, 1998, we acknowledged Cemex's problems but nevertheless denied Cemex's request that we use our emergency authority to grant BNSF, which had overhead trackage rights over the Austin Subdivision that it was not then using, the right to provide local services in order to interchange with the Cemex-owned Western Rail Road (WRR, which operates inside Cemex's Dittlinger facility). We noted: that we were not inclined to impose remedies that might significantly impede UP's own service recovery plan, or create service problems for shippers elsewhere, or favor one shipper over another; that we were not convinced that BNSF could provide additional service to make up any current UP service shortfall without jeopardizing other operations over the line; that, furthermore, although it was possible that BNSF had sufficient excess capacity to serve Cemex, there was no indication that BNSF had sufficient capacity to serve the other nearby UP-served facilities that compete with Cemex; and that, in any event, although Cemex was still not receiving fully adequate service, UP's service for Cemex had already improved markedly and was likely to improve even further in the future. We noted that, beyond originating cement and aggregates shipments and transporting local traffic, the Austin Subdivision is also used to carry most of UP's through traffic to and from Mexico, and must be cleared several times each week to accommodate Amtrak passenger trains. We also noted: that, at the relevant points, the Austin Subdivision's single mainline track is used for a large portion of each day to switch traffic for adjacent shippers; that Cemex itself must be reached by a time-consuming and operation-delaying manual switch; and that Cemex apparently lacked enough track space to store the number of empty cars needed to sustain even its then present level of service. Cemex's Comments. In its comments filed in STB Finance Docket No. 32760 (Sub-No. 21), Cemex, which claims that the UP service improvements that have occurred have proven to be inadequate and unsustainable, asks that we impose a condition granting BNSF local service rights to all cement, stone, and sand bulk facilities in Texas located along the UP lines over which BNSF received, in connection with the UP/SP merger, overhead trackage rights. Cemex contends that the requested condition: is necessary to address UP's continuing systemic inadequacies in providing reliable service to cement, stone, and sand producers in Texas; is essential for the continuation of competition in bulk shipments in Texas; will ensure that BNSF can achieve sufficient traffic density to sustain the use of its trackage rights; and will result in minimal, if any, harm to UP, because UP is currently unable to provide adequate service to these shippers. Cemex further contends that the requested condition: is intended to mitigate the adverse impacts of the UP/SP merger; is designed to enable shippers to receive adequate service; would not create unreasonable operating or other problems for UP; and would not frustrate UP's ability to obtain the anticipated public benefits of the UP/SP merger. Cemex's Petition. In its petition filed in STB Ex Parte No. 573 and STB Service Order No. 1518, Cemex contends that we erred in denying, in our decision served July 31, 1998, Cemex's request for an emergency service order. Cemex contends, in particular: that we erred in stating that Cemex had acknowledged that UP was adequately transporting all of the cement loads that Cemex was offering; that we erred in stating that, in May 1998, UP transported more than 80% of its originally stated goal of 1,656 carloads per month; that we were not entirely accurate in our assessment that the cycle time for returning empty cars for reloading has substantially improved; that we erred in relying on UP's attempt to provide additional rail capacity by rehabilitating the previously abandoned 16.7-mile line segment near New Braunfels; that we erred in emphasizing that Cemex must be reached by a time-consuming and operation- delaying manual switch; that we erred in stating that Cemex appears to lack enough track space to store the number of empty cars needed to sustain its present level of service, let alone that necessary for the additional carloadings it seeks; that we erred in concluding that there is too small a margin for error -- and too great a risk of harm -- to require the emergency service relief sought by Cemex; and that we erred in stating that BNSF access for Cemex would likely produce for Cemex an immediate competitive advantage over similarly situated shippers nearby. Cemex asks that we grant its petition for reconsideration, that we grant emergency service relief, and that we authorize BNSF to provide local service rights to Cemex's Dittlinger facility. UP's Reply To Cemex's Petition. In its reply to Cemex's petition, UP contends: that there is no longer an emergency situation in the Houston/Gulf Coast area; that, therefore, there is no basis for the emergency service relief sought by Cemex; that UP is working at addressing Cemex's operational concerns; that UP's service to Cemex continues to improve; and that, in any event, the particular relief sought by Cemex could not possibly accomplish Cemex's goal of increasing the total volume of rock transported over the Austin Subdivision. UP further contends: that the information submitted by UP, upon which we relied in our decision denying Cemex's request for an emergency service order, was accurate; and that our decision adequately explained our reasons for denying Cemex's request. UP/SP-361 Reply. In its reply to Cemex's comments, UP insists that Cemex has presented neither a plausible allegation of any defect in competition on the Austin Subdivision nor any other basis for what would amount to a permanent open access condition on that Subdivision. UP contends: that Cemex was exclusively-served both before and after the UP/SP merger; that Cemex's complaints derive from UP's inability to carry all the rock that Cemex wanted to ship in a sizzling construction market; that this was a problem of rail capacity, not a problem of inadequate competition; that UP is attempting to expand capacity by rehabilitating the previously abandoned segment near New Braunfels; that, over the past several months, the service UP has provided to Cemex has gotten progressively better, thanks (at least in part) to UP- initiated productivity enhancements, such as using longer trains to transport Cemex's products and working with receivers to unload cars more quickly; and that UP could transport even more shipments for Cemex if Cemex would build additional trackage at its facility, which would allow Cemex's WRR subsidiary to tender 90-car trains to UP without forcing UP to build trains on the Austin Subdivision mainline from Cemex's short tracks. UP further contends: that, even if BNSF were authorized to serve Cemex, track capacity in the relevant area is such that BNSF and UP combined could not move more trains than UP can move alone; and that, as a practical matter, the addition of BNSF would result in UP-BNSF coordination problems that would actually reduce the effective transportation capacity of the local track network. THE LACSD COMMENTS. The County Sanitation Districts of Los Angeles County claim that UP has been unable to consistently supply their wastewater treatment facilities with chlorine, a key component in disinfecting wastewater. The County Sanitation Districts, noting that the lack of a dependable chlorine supply could threaten their ability to provide adequate wastewater treatment for their customers, urge us to take all appropriate actions to restore normal rail service in order to protect the public health of citizens in the Los Angeles area. UP/SP-361 Reply. UP concedes that chlorine shipments in July and August suffered delays, and that one car in particular was badly mishandled, on account of congestion-spawned shortages of locomotives and crews throughout Southern California. UP contends, however, that its congestion problems in the Southern California area have been resolved, and that UP service in this area is now much more reliable. THE DOT-3 REPLY. DOT has addressed both safety issues and competitive issues. Safety Issues. DOT advises that UP safety issues have been studied intensively by the Federal Railroad Administration (FRA). DOT indicates: that FRA completed a comprehensive safety review of UP's operations, through a Safety Assurance and Compliance Program (SACP); that FRA's Final Safety Assurance and Compliance Report on UP, which was issued in February 1998, concluded that UP was making progress in remedying its safety deficiencies, but that continued effort and commitment would be needed to remedy UP's underlying problems; that, to address these problems, FRA conducted, in February 1998, a Senior Management Meeting, with representatives from UP management, UP labor, and FRA; that UP management has developed, in coordination with UP labor and FRA, a Safety Action Plan that details both long-term and interim measures to address UP's safety problems; that FRA has been working closely with UP to implement the Safety Action Plan; that, to assure continued progress, FRA has developed a detailed monitoring program; and that, as a result of all these efforts, significant results have already been achieved. DOT adds: that continued effort is needed to ensure that safety continues to receive the highest priority; and that, in pursuit of this goal, FRA will continue regular inspection activities, and will work with UP management and UP labor to develop additional initiatives to address any new safety concerns. Competitive Issues. DOT indicates that it continues to have reservations about BNSF's ability to provide competition via trackage rights for 2-to-1 shippers. DOT insists, in this regard: that BNSF's trackage rights service has been adversely affected by UP's service problems; that the effect on BNSF of any UP service problems would have been much less significant if BNSF had operated on its own tracks rather than as a tenant on UP's tracks; and that shippers likely would not have suffered to the same degree if they had had access to alternative landlord carriers. DOT adds, however, that UP's service problems have made a fair assessment of the competitive impacts of the merger impossible; a period of normal operations is necessary, DOT suggests, to determine the true impact of the merger. DOT therefore contends: that continued oversight will be necessary until such time as a more accurate assessment of the effectiveness of UP vs. BNSF competition is possible; and that, until that time, the reporting requirements currently in effect will have to be continued. We note that reporting requirements are, in fact, being continued. UP/SP-361 Reply. UP insists that its service problems have not made a fair assessment of the competitive impacts of the merger impossible. The fact of the matter, UP claims, is that the evidence demonstrates: that the conditions imposed in Merger Dec. No. 44 have been highly effective that the UP/SP merger has not caused any reduction in competition; and that, all things considered, the UP/SP merger has been entirely procompetitive. THE CIC-2 AND A&NR-2 COMMENTS. CIC, which produces paper, plywood, lumber, and forest products, has or formerly had four East Texas plants (at Corrigan, Sheldon, Camden, and Lufkin) that rely, either directly or via a shortline connection, on UP's (formerly SP s) Lufkin Subdivision (between Houston, TX, and Shreveport, LA). CIC claims that the UP/SP merger and the conditions we imposed in connection therewith have had a negative impact on CIC, its MC&SA subsidiary, and its A&NR affiliate. CIC contends: that both UP and BNSF are funneling southbound trains to Houston over the Houston-Fair Oaks line; that this directional running has impacted the local operation which serves CIC, MC&SA, and A&NR; that, on account of this directional running, there has been a severe reduction in the frequency of car pickups and set outs by UP and there have been increased transit times for movements via UP; and that CIC has incurred substantially increased costs related to shipping products by truck or other modes in order to meet the delivery schedules of its customers. A&NR, a shortline which interchanges with UP at Lufkin, handles an average of 5,000 rail cars a year for the several customers located on its lines. A&NR indicates that it has been negatively impacted by UP's service problems: it has experienced severe reductions in the frequency and reliability of local service; it has experienced a complete breakdown in communication with UP operating managers; it has experienced increased transit times for movements via UP; and it has experienced a 40% decline in rail traffic through the third quarter of 1998 as compared to the same period in 1997. A&NR claims: that directional running has added traffic and congestion over the mainline at the expense of local service to shortlines and their customers; and that the BNSF trackage rights have contributed to the additional congestion. CIC and A&NR have offered several suggestions with respect to the problems they have identified. (1) CIC and A&NR support what they call open interchange, i.e., the removal of service restrictions to shortlines by carriers granted overhead trackage rights. CIC and A&NR, which indicate that they support AF&PA's proposals respecting shortline routing options and paper barriers, suggest that the issue of open interchange should be addressed in a proceeding applicable to all railroads. (2) CIC and A&NR suggest that we should provide for specific daily local service to shortlines that interchange traffic with UP and/or BNSF on mainlines running into and out of Houston. Local crews, CIC contends, should get priority to travel over or across mainlines to switch local industries and to collect or deliver shipments and/or equipment to shortlines. (3) CIC and A&NR urge us to maintain continued and vigilant oversight of the UP/SP merger. A&NR has also suggested that the new facilities condition we imposed in Merger Dec. No. 44 has created an unintentional disadvantage for shortlines. Shortlines have little prospect of developing a larger shipper base on their existing lines, A&NR contends, when a shipper will enjoy access both to UP and to BNSF by locating a new facility on the UP mainline. A&NR, which suggests that shortlines should receive the same treatment as shippers in that BNSF (or any other railroad given trackage rights) should have access to shortlines that interchange with UP, urges us to seek comments from other shortlines concerning their ability to attract new customers since the imposition of the new facilities condition. UP/SP-361 Reply. UP concedes that local service on the Lufkin Subdivision has not been entirely satisfactory. UP contends, however, that it has taken a number of steps to improve local service on this line: it has doubled the frequency of local service between Shreveport and Lufkin provided by trains LEF60 and LEF61; it has relocated dispatching of the Lufkin Subdivision from Omaha, NE, to the Spring Dispatching Center in Spring, TX; it plans to assign locomotives to locals LEF52 and LEF53 between Houston and Lufkin so that they will not have to compete for power with other operations; and it has taken action to ensure that the trains are ready to go at Englewood Yard when the local crew comes on duty, thus eliminating situations where the crew consumes part of its service time waiting for its train to be prepared. With respect to the second suggestion advanced by CIC and A&NR (the suggestion that we should provide for specific daily local service to shortlines that interchange with UP and/or BNSF on mainlines running into and out of Houston, and that local crews should get priority to travel over or across mainlines to switch local industries and to collect or deliver shipments and/or equipment to shortlines), UP contends that CIC and A&NR have submitted no evidence: that such daily local service was guaranteed before the merger; that local crews had any such priority before the merger; or that any competitive impact of the merger, as opposed to specific local-train service issues on one line, has caused any reduction in UP's service to shortlines. And, UP further contends: a condition requiring daily local train service to every shortline in east Texas, or anywhere else, might require UP to provide uneconomic service; and a condition requiring priority for local crews would involve a government override of sensible day-to-day operating decisions in order to favor a particular group over others. With respect to A&NR's suggestion concerning the new facilities condition, UP contends: that, even if A&NR's contention as to relative disadvantage were true, this would be a circumstance that existed prior to the merger (because, at that time, shippers could elect to locate new facilities at points served by both UP and SP, while an exclusively-served shortline could not offer a site open to rail competition); but that, as a practical matter, there is every reason to conclude that A&NR's contention as to relative disadvantage is not true (because recent history has demonstrated that solely-served shortlines clearly can compete for new industries). And, UP adds, BNSF is already handling ample traffic volumes, and does not need more industry access to ensure its competitiveness. THE ESI-28 PETITION. Entergy's interests are focused on its White Bluff Steam Electric Station (White Bluff), which is located near Redfield, AR, and which uses coal originated at Powder River Basin (PRB) mines served by both UP and BNSF. Prior to the UP/SP merger, White Bluff, which lies on UP's line between North Little Rock and Pine Bluff, was rail-served exclusively by UP, which transported coal to White Bluff via a single-line routing from the PRB. Entergy insisted, however, that, in the context of the UP/SP merger, White Bluff had to be regarded as a 2-to-1 point, because a build-out to an SP line, located about 21 miles away at Pine Bluff, would enable White Bluff to enjoy a BNSF-SP joint-line routing from the PRB. Entergy therefore argued that the pre-merger status quo at White Bluff could be preserved only by granting trackage rights to BNSF (or another independent carrier) over SP's line between Pine Bluff (the point of connection with a White Bluff build-out) and West Memphis, AR (the point of connection with BNSF's own line), limited to the transportation of coal trains to/from White Bluff via the White Bluff-Pine Bluff build-out line. We granted the build-out preservation condition sought by Entergy vis-…-vis White Bluff, and thereby preserved the White Bluff build-out status quo, by requiring that the BNSF agreement be amended to allow BNSF to transport coal trains to and from White Bluff via the White Bluff-Pine Bluff build-out line, if and when that line is ever constructed by any entity other than UP/SP. We noted that, with this build-out relief, Entergy would continue to have the option of building out to an independent carrier and would continue to be able to use this option in its negotiations with the post-merger UP. Now, in its petition (filed October 23, 1997), Entergy contends that, on account of UP's service problems, UP has been unable to deliver all the coal White Bluff needs to meet its generation requirements, and, in consequence, the generation of electricity at White Bluff has had to be curtailed and Entergy has had to rely on more expensive power (by purchasing power from the grid and by generating power at its gas-fired plants). The situation, Entergy warns, is approaching near-critical proportions; UP, Entergy claims, is simply unable to provide Entergy with adequate rail transportation service for coal consumed at White Bluff. Entergy adds that the build-out preservation condition imposed for its benefit in Merger Dec. No. 44 is inadequate to protect it from competitive harm during the UP service crisis. Entergy, which expresses concern that UP will not be able to return to anything approaching normal service levels in the foreseeable future, asks that BNSF be allowed immediate interim access to White Bluff for the duration of the UP service crisis, and be permitted to serve White Bluff directly for a period of 3 years (the estimated time required to design, construct, and place in service a build-out line to Pine Bluff). Entergy suggests that we can award it the relief it seeks either by modifying the build-out preservation condition pursuant to the oversight jurisdiction we retained in the UP/SP merger proceeding or by issuing a directed service order pursuant to the directed service provisions. Entergy adds: that it has filed a breach of contract action in federal district court in Louisiana; that it seeks, in that action, the right to terminate its UP contracts; but that, unless we allow BNSF immediate interim access to White Bluff, Entergy may be unable to obtain, in the district court action, an effective remedy. UP/SP-328 Reply. UP, by reply filed November 12, 1997, urges denial of the ESI-28 petition. (1) UP argues that, in essence, the Entergy vs. UP dispute is a private contractual dispute; Entergy, UP claims, is seeking what amounts to a remedy for UP's supposed breach of the service commitments set forth in Entergy's UP contracts. The Board, UP insists, should not intervene in the resolution of private contractual disputes. And, UP adds, this point applies with particular force where, as here, Entergy is already pursuing, in a federal district court, its contract claim against UP. (2) UP argues that we impose conditions upon a merger only to rectify harms that the merger causes to competition or to another railroad's ability to provide essential services. Entergy, UP claims, has not seriously suggested that the condition it now seeks satisfies those standards. UP contends, in particular: that the service problems claimed by Entergy are not as severe as Entergy has suggested, and, in any event, were not caused by the UP/SP merger; and that the requested condition would expand rather than preserve Entergy's competitive options. (3) UP argues that, if Entergy's coal supplies are indeed threatened by UP's performance, Entergy has an efficacious remedy: it can readily move coal by rail to the Mississippi River, and then by barge to White Bluff. Decision Served July 31, 1998. By decision served July 31, 1998, we ruled that, although service at White Bluff might not be at the levels that Entergy would prefer, Entergy had not demonstrated an entitlement to emergency relief vis-…-vis White Bluff (i.e., access by BNSF to White Bluff for a period of 6 months). We noted: UP states that it has delivered more trains to Entergy's power plants during the first five months of 1998 than it did during the comparable months of 1997 when there were no service problems on the UP system. Moreover, unlike other utilities, Entergy has apparently refused to support operational changes to minimize congestion or pursue other UP-suggested transport alternatives that would have increased its coal deliveries. Finally, as UP notes, the imminent completion of its $400 million track improvements and capacity expansion in the Central Corridor over routes used for Entergy shipments will reduce cycle times and provide the increased capacity that Entergy seeks. THE AL&M PETITION. AL&M, a class III shortline that is wholly owned by Georgia-Pacific Corporation (G-P), operates over 109 miles of track extending in a generally north-south direction between its northern terminus at Fordyce, AR, and its southern terminus at Monroe, LA. The Fordyce, AR-Crossett, AR segment of the Fordyce, AR-Monroe, LA line is owned by the Fordyce & Princeton Railroad (F&P), an AL&M affiliate that, like AL&M, is wholly owned by G-P. AL&M's principal customers are: G-P, which produces pulp, paper, paperboard, lumber, plywood, other wood products, and chemical resins at plants at Fordyce and Crossett; International Paper Company (IP), which produces paper at its plant at Bastrop, LA; Geo Chemical Company; the Ouachita Fertilizer Company; the Shops Warehouse; Century Redi-Mix; and the Coating & Laminating Company. AL&M indicates that, by means of its Class I connections, the products of these shippers move outbound in various types of cars to destinations throughout the United States. Prior to the UP/SP merger, AL&M had three Class I connections: UP (at Monroe and Bastrop); SP (at Fordyce); and KCS (at Monroe). At present, however, AL&M has only two Class I connections: the post-merger UP (at Monroe, Bastrop, and Fordyce); and KCS (at Monroe). AL&M claims, in essence, that, although it appears to be a 3-to-2 shortline, its situation is more akin to that of a 2-to-1 shortline. AL&M contends: that the pre-merger UP and the pre-merger SP were able to provide, and the post-merger UP is able to provide, direct access to/from a wide range of destinations/origins; but that KCS was able to provide, and remains able to provide, direct access to/from a few points only. AL&M insists: that KCS directly reaches only a handful of the hundreds of destinations to which AL&M traffic was shipped in 1997; and that, although KCS is able to interline traffic to reach other destinations, these routings add circuity and cost, so that rates for KCS movements are typically higher than comparable UP rates. And, AL&M states: KCS routings tend to be circuitous, given that, at Monroe, traffic must move either west to Shreveport or east to Jackson before reaching a north-south line; and, because the AL&M-KCS connection is at the southern end of the Fordyce-Monroe line, traffic from/to the northern end of the line (e.g., traffic from/to G-P's Fordyce plant) requires a 109-mile haul on AL&M in addition to the already circuitous haul on KCS. AL&M asserts that it and its shippers have been seriously and adversely affected by the UP/SP merger, which (AL&M argues) eliminated the vigorous competition that had previously existed between UP and SP. Post-merger UP service, AL&M insists, has been poor, and, although there have been, from time to time, improvements, these improvements have been sporadic and episodic. UP rate increases, AL&M adds, have already occurred, and further UP rate increases are anticipated. And, AL&M alleges, UP has also imposed hidden rate increases by transferring operating costs from itself to AL&M and AL&M's customers. These impacts, AL&M states, are not simply by-products of UP's well-known service problems, but reflect, instead, the fact that UP lacks competitively-driven incentives to offer good service and reasonable rates. AL&M argues, in particular, that the KCS competitive option has not constrained UP from providing poor service and implementing substantial rate increases. AL&M therefore asks that we impose a condition allowing for the creation, at Fordyce, of a BNSF-AL&M interchange with respect to all traffic except traffic that can be handled by KCS direct to destination or direct from origin. This condition, AL&M contends, would remedy the competitive harm caused by the UP/SP merger and would restore to AL&M and its shippers the vigorous and effective competition that existed prior to the merger by ensuring that AL&M and its customers have access to two Class I connections (UP and BNSF) able to compete for AL&M traffic which KCS cannot directly serve. AL&M concedes that it did not request, in the UP/SP merger proceeding, the condition it has requested now; there then appeared to be, AL&M indicates, no precedent for remedial access by a third carrier where a merger would result in a 3-to-2 reduction in the number of available carriers. AL&M notes, however, that such a precedent exists now, because we created it in our decision approving the UP/SP merger. BNSF-6 Reply. BNSF, which supports the relief sought by AL&M, contends that, even if two carriers have access to a shipper's facilities, that shipper should be deemed a 2-to-1 shipper if route circuity or other service impediments effectively limit its commercially realistic, efficient, and competitively priced rail carrier options to one carrier. BNSF further contends that the same principle should be equally applicable to similarly situated shortlines such as AL&M. And, BNSF adds, it would be able to provide service to AL&M through a Fordyce interchange with minimal or no impact on UP operations. KCS Reply. KCS, which opposes the relief sought by AL&M, contends: that KCS, which handled over 8,600 cars in 1997 and over 2,600 cars during the first quarter of 1998 that were interchanged with AL&M, provides a significant competitive restraint vis-…-vis UP; that, during 1997, KCS handled traffic originated by AL&M and destined to dozens, if not hundreds, of destinations beyond the KCS system (from Vermont to Florida, and from California to Washington); and that KCS routings are preferable to many UP routings and to many prospective BNSF routings as well. KCS also contends that the lack of shipper support for the AL&M petition may indicate that the rate increases alleged by AL&M are not increases in the rates charged to shippers but, rather, increases in UP's division of such rates; the AL&M-UP dispute, KCS suggests, may really be a divisions dispute; but variations in the division of the revenues generated by the rates charged to shippers, KCS argues, should not, in and of itself, have an effect upon the rates that shippers are charged. KCS further contends: that the insufficiency of UP service complained of by AL&M is no different than that suffered by many, including KCS, as a result of UP's service problems; that, as respects AL&M, the effect of UP's service problems was exacerbated by UP's inability to maintain manageable levels of traffic in its Pine Bluff Yard; but that, because the problem at Pine Bluff Yard appears to have been cured, UP's service levels for AL&M traffic can be expected to improve. And, KCS adds, AL&M's analogy to the Lake Charles situation fails because that situation was entirely different: KCS's pre-merger routings at Lake Charles were largely KCS-UP joint line routings that competed against SP single-line routings; and an unconditioned merger would therefore have made the post-merger UP a participant in almost all post-merger KCS routings. KCS also claims that, even if BNSF were given access to AL&M at Fordyce, BNSF could not offer more effective competition to UP than KCS currently does: BNSF (KCS notes) would have to use UP lines to interchange with AL&M (and would therefore be subject to UP interference and UP's service problems), whereas KCS has its own independent lines; and, in any event, BNSF, just like KCS, would have to interline AL&M's traffic. G-P Replies. Georgia-Pacific indicates that the products it produces at its Fordyce and Crossett plants generally must move outbound by rail; truck and intermodal, G-P claims, are prohibitively expensive except in emergency situations. G-P contends: that, prior to the UP/SP merger, it had, through AL&M, a choice of service and rates from two major systems (UP and SP) and one regional system (KCS); that, since the merger, its choices have been limited to one major system (the post-merger UP) and one regional system (KCS); but that KCS, given its geographic limitations, cannot be fully competitive with the post-merger UP. G-P further contends that, because the KCS competitive option has not had a constraining effect on UP, G-P has experienced: excessive delays in obtaining, from UP, empty equipment for loading; substantially increased UP line-haul transit times for almost all movements; and increases in the rates charged by UP. And, G-P adds: it has had to ship products by truck or intermodal, at substantially increased cost, in order to meet delivery schedules; and it has experienced, as a result of this shift to non-rail modes, a reduction of business due to non-competitive costs. The inability of KCS to provide a fully effective competitive option vis-…-vis UP, G-P claims, is demonstrated by the fact that the KCS competitive option has not induced UP to offer better service, to provide adequate equipment, and to refrain from rate increases. Only BNSF, G- P contends, has the system reach to compete effectively with, and to provide an effective competitive constraint on the rates and service provided by, the post-merger UP. BNSF, G-P argues, can provide a fully competitive alternative to UP; KCS, G-P insists, cannot. G-P therefore supports the relief requested by AL&M. IP-21 Reply. In Merger Dec. No. 44, we considered International Paper's concerns that the UP/SP merger would adversely affect UP vs. SP (i.e., UP vs. AL&M-SP) competition at its Bastrop plant. IP argued: that the pre-merger SP, which had no incentive to discriminate against AL&M and in favor of the pre-merger UP, provided a friendly connection at Fordyce for traffic originated by AL&M; that the post-merger UP/SP, however, would have an incentive to treat AL&M less favorably than itself, and therefore would not provide a friendly connection at Fordyce for traffic originated by AL&M; and that, therefore, the UP vs. SP-AL&M competition that existed pre-merger would not exist post-merger. IP suggested that, in order to preserve UP vs. SP competition at its Bastrop plant and at certain other IP plants (with respect to traffic moving from those plants to SP-served points), we should require that UP/SP keep open all routes, at competitive rates with service no less favorable than would be accorded UP/SP traffic, via pre-merger KCS-SP junctions at Beaumont, Houston, Dallas, and Shreveport, on traffic to/from competitively served points (including AL&M originations and terminations at Bastrop). We denied IP's suggestion (this was IP's condition #2), stating: Conditions intended to keep open existing junctions are overly intrusive and could delay, in certain respects, implementation of the increased efficiencies expected from the merger, and would deny UP/SP the freedom to adapt to new developments. IP now contends: that, prior to the UP/SP merger, IP had three competitive options at Bastrop (an AL&M-SP routing via Fordyce, an AL&M-KCS routing via Monroe, and a UP routing), and, as a result, rail service was reliable and efficient, and rates were maintained at competitive levels; that, post-merger, IP has only two competitive options at Bastrop (an AL&M- KCS routing via Monroe, and a UP routing); but that, since July 1997, UP service at Bastrop has been grossly inferior, and IP has been forced to divert traffic to truck to meet its commitments and keep the plant open. IP further contends: that IP's efforts to shift traffic to the AL&M-KCS routing (for traffic headed to destinations in the Southwest, Midwest, and Far West) have been thwarted by a lack of cars on AL&M and KCS; that UP, facing no competitive constraint capable of tempering its conduct, has simultaneously reduced service and increased rates; and that UP, unless some such competitive constraint is brought to bear against it, is likely to allow service to deteriorate further and to raise rates even higher. IP, which supports the relief requested by AL&M, maintains that BNSF could replace the AL&M-SP Fordyce routing that was lost with the merger and could restore a competitive option that was available to IP prior to the merger; BNSF, IP claims, is willing to handle traffic routed AL&M-BNSF via Fordyce and to provide IP with the badly needed boxcars that would permit AL&M to receive its proper share of IP's business. UP/SP-343 Reply. UP, which opposes the relief sought by AL&M, concedes that, as respects traffic moving via an AL&M-UP routing, UP had serious service problems in the fall of 1997, and again in February and March of 1998 (as UP implemented, and then adjusted to, directional running on the line through Fordyce). UP claims, however, that its service has improved considerably in recent months, and that, to solidify those improvements, it has restructured its local operation in various respects. UP has also made three additional arguments in opposition to the open access relief sought by AL&M. (1) UP insists that it has not imposed substantial rate increases on G-P (AL&M's largest shipper). UP claims: that, since the merger, UP and G-P, to simplify G-P's rate spectrum, to bring G-P's rates into line with market conditions, and to expand G-P's marketing opportunities, have negotiated dozens of rate changes applicable throughout the West; that G-P's overall freight costs (i.e., its freight costs for all traffic handled by UP from all G-P origins) have remained flat, and, in fact, G-P has received, in many instances, substantial rate reductions; that UP has indeed made some upward rate adjustments (these apparently include the rate increases complained of by AL&M), but these adjustments have merely reflected market conditions; and that the assertion that UP has embarked on a campaign to raise SP rates that are too low is flatly untrue. (2) UP insists that the AL&M-KCS routing provides effective competition to the AL&M- UP routing. UP contends: that, if KCS did not provide effective competition, UP might have been expected to raise rates on traffic moving to, or via, the destinations and gateways KCS serves; that, however, AL&M has not complained of any UP rate increases to KCS gateways such as New Orleans, Dallas, Kansas City, Shreveport, Jackson, Meridian, or Beaumont; that, in fact, KCS is indeed effective to these gateways, and it provides effective competition to points beyond by using its connections (BNSF, Tex Mex, IC, CSX, and NS) at those gateways; and that the AL&M-KCS-BNSF routing, in particular, has been highly effective in taking business from UP. The Lake Charles precedent, UP adds, is not relevant here, because KCS single-line routes from/to Monroe are highly competitive, and because KCS joint-line routes from/to Monroe are also highly competitive (KCS, UP claims, has efficient direct routes to connections at key Eastern gateways, and has direct joint-line routes to important Western markets that are of comparable length to, or even slightly shorter than, UP routes). (3) UP insists that duplicate BNSF operations at Fordyce would reduce service quality for other shippers on the UP line that runs through Fordyce. UP contends: that, with the implementation of directional operations, the former SP line through Fordyce has become the southbound route for both UP and BNSF trains; that an AL&M-BNSF interchange at Fordyce would likely entail either stopping a BNSF southbound train at Fordyce or running a BNSF local on the UP line between Pine Bluff and Fordyce; that, with either scenario, delays would occur on account of the doubling of the amount of time the UP mainline at Fordyce is blocked (because, UP claims, there is no room to get off the mainline while switching); and that, with the BNSF local scenario (which would involve running a BNSF local train northbound against the flow of southbound traffic), even more delays would be likely. AL&M Supplement. The AL&M Supplement addresses arguments raised by KCS and UP in their replies to the AL&M Petition. (1) AL&M concedes that UP's G-P rate changes were negotiated by UP and G-P, but insists that the fact that such changes were negotiated does not mean that UP has not exercised the increased market power resulting from the UP/SP merger. The substantial rate increases applicable to AL&M traffic, AL&M contends, reflect the additional market power gained by UP as a result of the merger. AL&M also concedes that UP decreased its rates for other products moving from other G-P origins, but insists that these decreases are irrelevant to the matter at hand. The market at issue here, AL&M contends, is comprised of traffic moving to/from points on the AL&M line; movements of forest products to/from all points in the West, AL&M adds, constitute a different market. (2) AL&M concedes that the substantial rate increases UP imposed on G-P (as respects traffic originating at AL&M points) were partly offset by corresponding decreases in AL&M's revenues. AL&M maintains that it and G-P accepted the new contract despite the substantial UP revenue increases because they believed this was the best they could do. The fact that AL&M was forced to offset much of UP's revenue increase by decreasing its own revenue, AL&M adds, is further evidence of UP's increased post-merger market power. (3) AL&M insists that UP can be expected to continue to raise rates as other contracts expire. (4) AL&M insists that the injury of which it complains was not caused by the creation of a more efficient routing that bypassed its system or that made its service less valuable. The injury of which it complains, AL&M argues, was caused by the reduction in the head-to-head competition that formerly existed between UP and SP, which created increased UP market power by which UP can extract more monopoly rents at the expense of AL&M and its shippers. (5) AL&M, though it concedes that KCS has rendered valuable service to shippers seeking an alternative to UP during its service crisis, contends that, notwithstanding the competition supposedly offered by KCS, UP has been able to increase its rates above those that UP and SP charged G-P prior to the merger. The limitations of KCS's system and KCS's resources, AL&M maintains, are evident: KCS's routes most often are longer than UP s, and generally require KCS to interchange traffic; the points served by KCS are simply too few; KCS can reach most points only indirectly and through interchange with other carriers; and KCS cannot furnish a sufficient number of cars. (6) AL&M, which doubts that the restructuring announced by UP will fix UP's ever- changing service difficulties, insists that, contrary to UP's assertions, UP's service problems continued during June 1998. And, AL&M suggests, it is concerned that, unless we allow the creation of an AL&M-BNSF interchange at Fordyce, UP will have no incentive to continue to provide adequate service. (7) AL&M claims: that track capacity at Fordyce is adequate to support interchanges with both UP and BNSF; that AL&M is willing to perform the switching that would be required for an AL&M-BNSF interchange; and that the objection that an AL&M-BNSF interchange would delay through traffic on the mainline is vague and speculative, and echoes the objections UP has typically made whenever another railroad has sought to provide service over UP's lines. UP/SP-347 Reply. (1) UP claims that the results of recent UP/G-P contract negotiations demonstrate that UP did not gain market power as a result of the UP/SP merger. UP further claims: that G-P has in fact benefitted from UP efforts, aided by merger synergies, to make G-P lumber and G-P panel products more competitive throughout the Western marketplace; that, despite isolated instances involving high percentage rates of increase on small-volume flows, the overall impact of UP's rate changes has been only a minimal increase; and that, in the few instances in which G-P's rates were increased, the increases reflected the fact that existing rates had been in place for several years and were below market levels. (2) UP contends: that the relevant issue in determining whether KCS is an effective competitor is not UP's rate level but KCS's rates and how much traffic KCS has moved; that, despite AL&M's claim that KCS is not competitive because it must interchange its traffic with other railroads, almost all of the AL&M traffic that KCS moved in the first quarter of 1998 was destined to points that KCS does not serve directly; and that the evidence supports UP's assertion that KCS provides effective competition from AL&M points with efficient routes to both Eastern gateways and Western destinations. (3) UP insists that its service with respect to AL&M has improved substantially. And, UP adds, AL&M has offered no real response to UP's evidence that adding an AL&M- BNSF interchange at Fordyce would cause added congestion and train delays on UP's line. The reality, UP claims, is that, even if AL&M might benefit from an AL&M-BNSF interchange at Fordyce, other shippers using the UP line that runs through Fordyce would suffer. UP/SP-361 Reply. UP claims that, in the several months ending September 30, 1998, its service has improved markedly and cycle times are returning to normal. "The average cycle time for moves that UP interchanges with AL&M and that terminate at UP-served destinations has dropped from a February 1998 high of 26 days to 17 days in August, a level that is approaching normal. For movements to non-UP-served destinations, cycle times dropped from a February peak of 14 days to 7 days in August, at or close to normal." ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 32760 (Sub-No. 26) Decision No. 10 UNION PACIFIC CORPORATION, UNION PACIFIC RAILROAD COMPANY AND MISSOURI PACIFIC RAILROAD COMPANY CONTROL AND MERGER SOUTHERN PACIFIC RAIL CORPORATION, SOUTHERN PACIFIC TRANSPORTATION COMPANY, ST. LOUIS SOUTHWESTERN RAILWAY COMPANY, SPCSL CORP., AND THE DENVER AND RIO GRANDE WESTERN RAILWAY COMPANY [HOUSTON/GULF COAST OVERSIGHT] This decision reviews requests by various parties for conditions in the Houston/Gulf Coast oversight proceeding that would modify the way in which rail service is provided in the Houston area. The proceeding was initiated in connection with the recent rail service crisis in the western United States. Among other things, we have decided to adopt a so-called clear route condition to enhance efficiency and facilitate the smooth movement of railcars through the Houston Terminal. Under the clear route condition, the neutral and highly efficient joint Union Pacific Railroad Company (UP)/Burlington Northern Santa Fe Railway Company (BNSF) dispatching center at Spring, TX, will have the authority through its Joint Director to route traffic through Houston over any available route, even a route over which the owner of the train does not have operating authority. Thus, as a result of the Board's decision, a BNSF train may be permitted to operate over track of UP; a UP train may be permitted to operate over track of BNSF; and a Texas Mexican Railway Company (Tex Mex) train may be permitted to operate over track of either UP or BNSF. We do not, however, adopt the so-called Consensus Plan sponsored by a group of shippers that seek open access in Houston; two affiliated railroads that seek to increase their traffic and revenues through government directive; and the Railroad Commission of Texas (RCT), which, for some years, has wanted to undo the Union Pacific/Southern Pacific (UP/SP) merger for the Houston/Gulf Coast region and to use the merger proceeding as a way to provide many Houston shippers with more rail competitors than they had before the merger. While we understand and share Houston's interest in averting a future service crisis, we will not undo the merger in the way that has been proposed. We find that implementation of the merger has provided important solutions for the recent emergency, and the Consensus Plan, which would undo the merger in the Houston area, conflicts with our governing statute and with fundamental policies underlying it. 1. The Consensus Plan is premised on the idea that shippers should, wherever possible, be served by more than one railroad, even if, in order to produce such a system, railroads that own the majority of an area's rail infrastructure would be required to share their property with others that do not. Here, the conditions that the Consensus Plan Parties seek would add two new competitors BNSF and Tex Mex for numerous Houston-area shippers that were served by only one carrier before the merger, and that therefore did not lose competitive rail service as a result of the merger. Because we find that the Consensus Plan is not necessary to remedy any merger-related harm, it effectively constitutes open access. If we adopt the Consensus Plan, then there is no basis on which we could refuse to provide for open access throughout the rail system. Whether an open access regulatory scheme for the railroad industry is good for carriers, shippers, and the Nation, absent demonstrated merger-related harm open access as even a representative of the Consensus Plan Parties conceded at oral argument is not provided for in the statute that the Board currently administers, and thus, in our view, is a matter more appropriately debated in Congress. 2. The Houston/Gulf Coast Oversight proceeding was initiated in connection with the UP/SP merger. Well-established transportation law recognizes that some shippers are served by a single railroad. It also recognizes that such captive shippers may pay higher rates under demand-based differential pricing legal principles that govern the railroad industry, to reflect the economies of the railroad industry and the fact that some rail traffic is more captive and some more competitive. Because the railroad industry is not an open access industry, and because some shippers may pay more than others under the law that we administer, merger proceedings are not used as vehicles to equalize the competitive positions of shippers generally. The Board does adopt competitive conditions to ensure that a merger does not put shippers into a worse position than they were in before, and in this case it imposed several such conditions. But a well-established principle of rail merger law is that the conditions that the Board imposes in a merger proceeding are designed to ameliorate specific merger-related harm, not to simply add more competitors. 3. Another principle of transportation merger law is that the conditions adopted not be disproportionate. Here, the Board decided to ameliorate potential competitive harm through extensive trackage rights to BNSF. The Consensus Plan Parties argue that the BNSF trackage rights have not been adequate to achieve the Board's objectives. Rather than attempting to improve the less intrusive remedy that the Board adopted, however, the Consensus Plan would move immediately to the most extreme remedy possible. Even if there were additional harm that the initial conditions did not fully ameliorate, the Consensus Plan remedies which do not seek to improve the existing remedies, but rather to set up a series of far more drastic and intrusive ones would necessarily be disproportionate. In this regard, during the proceeding, the parties argued at some length about when a government-imposed merger condition constitutes a taking of property. The answer, of course, depends on the facts of the case. Narrowly tailored merger conditions imposed to address merger-related harm are not considered a taking, but overreaching, disproportionate conditions could become confiscatory, particularly where it is not clear that carriers will be fully compensated for the traffic and revenues they would lose. And once a merger has been consummated, and the carrier can no longer choose to walk away from it, the imposition of disproportionate new conditions becomes increasingly inconsistent with notions of commercial certainty and fairness. 4. Finally, during the proceeding, the Consensus Plan Parties argued that adding more competitors in Houston would be appropriate because carriers and the shippers they serve will, as a rule, invest in their businesses and in infrastructure only where there is competition. Thus, Dow Chemical and Formosa Plastics indicated that, if they obtain additional rail service, they would consider paying for infrastructure improvements, while Tex Mex indicates that it would consider investing in Houston infrastructure, but only if the restriction limiting the service it can provide for Houston shippers is removed. UP, in response to these arguments, points out that reducing its revenues by adding competitors for its more lucrative business (without providing it the opportunity to compete for other carriers more captive traffic) will undercut its ability to invest in infrastructure. Thus, UP argues, even if Dow, Formosa, and Tex Mex did make investments, which, as competent businesses, they would expect to recover in rate reductions (or in Tex Mex's case additional traffic), the net effect would be that UP would reduce its investment and that investment overall would be lower. UP has promised to invest $1.4 billion in Houston area infrastructure if the Consensus Plan is not adopted. There is no way to determine on this record whether the Consensus Plan would ultimately produce, for the Houston infrastructure, more, less, or the same level of investment. Indeed, more broadly, we cannot determine here, and do not need to determine here, how the railroad system would evolve if open access were adopted in Houston and, ultimately, the rest of the Nation: it could have unknown but significant effects on infrastructure, employment, and traffic patterns. Perhaps the plastics and chemicals shippers in Houston, with their high-volume, lucrative traffic, would indeed be net beneficiaries of an open access system, while small, lower-volume shippers in rural areas could lose their rail service entirely. Perhaps short-line railroads would step in to provide service to some shippers on lines that might be abandoned by the larger railroads. And perhaps the Federal government or state agencies would provide funds to augment infrastructure funding and to ensure that any such abandonments would not occur. Right now, however, we have a commitment from UP to make sizable and sorely needed investments in the Houston area infrastructure, which were not capable of being made by the financially weakened SP before UP took it over. Whatever the merits of the more-competitors- enhance-infrastructure-investment argument, they are more appropriately made in an open access debate before Congress involving the entire rail system than in this case. Although the parties argued this case against a backdrop of the service emergency that crippled railroads in the West for months with effects that, we recognize, were serious, and that must be avoided in the future in many respects it represents a continuation of the original merger proceeding. In that case, UP paid a substantial purchase price for the entire Southern Pacific Rail Corporation (SP) system, which had a poor infrastructure but an attractive shipper base, particularly in the Houston area. In the merger proceeding, several of those shippers, the RCT, and other railroads that could benefit from increased traffic sought to open up access. The Board, as noted, adopted several conditions to preserve competition, but it did not open up access as those parties sought. Many of those parties are now before us in this proceeding, seeking much of what they unsuccessfully sought in the merger proceeding. For that reason, some detailed background of the merger is needed to put this case into further perspective. By decision served August 12, 1996, the Board approved the common control and merger of the UP and SP rail systems. UP consummated its acquisition of common control on September 11, 1996, and it then began the lengthy and ongoing process of integrating these two systems. In evaluating the UP/SP merger, we followed policies long established by Congress that direct the Board to approve mergers that are consistent with the public interest. In carrying out this directive, we approve consolidations where we determine that the gains in operating efficiencies, cost savings, and marketing opportunities typically realized through rail mergers and the resulting benefits those gains confer upon the shipping public outweigh the potential harm to competition and essential services. We typically condition our approval of a merger to mitigate potential competitive harm, as we did in the UP/SP merger. We tailor our conditions, however, to ensure that they ameliorate harm resulting from a merger, are operationally feasible, and result in net public benefits. Moreover, we impose conditions commensurate with the competitive harm threatened and therefore do not, as a rule, use mergers as occasions to open a merged system's facilities to rail competitors for shippers that had none previously, or to restructure the competitive balance among railroads with unpredictable results. Using these established criteria, we approved the UP/SP merger, determining that the combined UP and SP networks would realize quantifiable public benefits of more than $627 million annually once the merger was fully implemented. As importantly, we also determined that the merger would place a deteriorating SP system within a larger and healthier UP system that, after absorbing SP, could better compete with the previously combined and strengthened BNSF network and provide shippers throughout the western United States with two balanced rail systems capable of offering efficient and competitive rail service. Our approval of the merger, however, was heavily conditioned to mitigate the competitive harm that we determined it otherwise would produce. Most significantly, we afforded BNSF trackage rights over almost 4,000 miles of the merged UP/SP network to replace competitive service lost by 2-to-1" shippers as a result of the merger those shippers that, before the merger, were served by both UP and SP. We also imposed a 5-year oversight condition to ensure that the BNSF trackage rights and other conditions that we imposed effectively addressed the competitive concerns they were designed to remedy, and we reserved jurisdiction to impose further conditions if those afforded previously proved insufficient. In each of our initial general oversight proceedings, including the most recent one reported today, we found that the merger, as conditioned, has thus far not produced any unanticipated, adverse competitive harm requiring further conditions. During the summer and fall of 1997, prior to UP's implementation of the merger in Texas, UP and SP lines in and around Houston became severely congested, leading to a lengthy and damaging service breakdown dramatically affecting rail transport throughout the West. To address this crisis, we issued a series of unprecedented service order decisions pursuant to our emergency authority, directing temporary changes to the way in which rail service was provided in the Houston area. To help divert traffic off of affected UP and SP lines and away from Houston, we authorized the Tex Mex to provide expanded service in and around Houston and directed UP to release certain Houston area shippers from their obligations under their transportation contracts so that they could use either Tex Mex or BNSF in addition to UP. We also permitted UP to modify some of its operations and directed it to cooperate with other carriers to help route traffic around Houston, and we required UP to provide, on a weekly basis, extensive data to help us assess the conditions on its lines, and, ultimately, the success of its service recovery. UP was also required to submit its plans to address the region's infrastructure needs. Our remedies under the service order were purposely measured, designed to help free up traffic in the Houston area without further aggravating the congestion or impeding UP's own efforts (including cooperative efforts with other carriers in the region) to work through the emergency and restore adequate service. This approach worked. Before the end of the service order period, operations in and around Houston became fluid, and service improved significantly. As a result, we denied requests for further emergency relief. During the service order proceeding, certain shipper, carrier, and governmental interests claimed that the service crisis was caused by inadequate competition that resulted from UP's control of too much of the rail plant in the Houston area a direct consequence, they claimed, of our approval of the UP/SP merger and they asked us to remedy the crisis by permanently restructuring the ownership and operation of UP's rail lines and facilities in and around Houston among UP and its competitors. We rejected those requests, finding that proposals to transfer line ownership or broadly permit other rail carriers access to the UP network would likely work not to resolve the immediate crisis, but to exacerbate it, and were therefore inconsistent with our limited authority. We also concluded, in any event, that the service crisis was caused not by inadequate competition resulting from the merger, but, more than anything, from an aging Houston infrastructure that was inefficiently configured, lacking in capacity, and particularly in the case of former SP lines and facilities in disrepair or inadequate to cope with unanticipated surges in demand. We provided, however, that permanent restructuring proposals could be presented in the UP oversight process, and, on March 31, 1998, we instituted a proceeding to consider requests for further conditions to the UP/SP merger for the Houston/Gulf Coast region. On July 8, 1998, various parties filed requests that we accepted for consideration. UP's opposition to the requested conditions and its supporting evidence, other opposition evidence, and comments by the U.S. Department of Transportation (DOT) were filed on September 18, 1998, and rebuttal evidence was filed on October 16, 1998. Numerous letters and statements, supporting and opposing the requested conditions, have also been filed by shipper interests, state and local government representatives, and members of Congress. The Board held oral argument on this matter on December 15, 1998. DISPOSITION OF THE REQUESTS FOR CONDITIONS We will impose a clear route through Houston condition to enhance efficiency and facilitate the smooth movement of traffic through the Houston Terminal, a condition that was sought by both BNSF and the Consensus Plan Parties. We believe that the Joint Dispatching Center in Spring, Texas, has the authority to exercise discretion in choosing the most efficient routing for traffic moving through the Houston Terminal. To ensure, however, that the Joint Center staff do not feel constrained from making decisions necessary to efficient operations in the Houston Terminal due to trackage rights or other operational limitations, we are imposing a condition directing the Joint Center carrier-participants to authorize the Joint Director to use the best judgment in selecting alternative routings for train operations by UP, BNSF, and Tex Mex through the terminal, particularly when customary routings are unavailable or congested. We will also grant Capital Metro Transit Authority's (CMTA) request to alter the BNSF trackage rights and interchange granted in the merger proceeding to connect with CMTA's operator Longhorn Railroad (Longhorn). BNSF's expanded trackage rights will be between Round Rock and McNeil so that BNSF can interchange with Longhorn at McNeil, instead of at Elgin, with BNSF and Longhorn making any necessary investments to make the service at McNeil practicable without interfering with existing main line operations. We are also imposing a reporting condition that will require UP to outline in a separate section of its annual report that starts our annual general oversight of the merger how it is carrying out its infrastructure plan for the Houston/Gulf Coast region as set forth in its report of May 1, 1998. There are also a number of situations, such BNSF's request for trackage rights over UP's Harlingen-Brownsville line, or the issue of PTRA membership, where parties are working to reach privately negotiated solutions. In these situations, we will not impose conditions at this time. Other situations in which potential disputes could arise are not ripe for our resolution at this time. For example, BNSF has asked that we make permanent its temporary overhead trackage rights on UP's Caldwell-Flatonia-San Antonio and Caldwell-Flatonia-Placedo lines, and it has requested a general go-with-the-flow condition, out of a concern over the types of operational changes that UP may make in the future, such as changes to its directional running program. We will not intervene at this time because UP has committed to give BNSF advance notice of its operational changes and to make all necessary accommodations to preserve the competitive presence that we expected BNSF to provide when we adopted the conditions. Additionally, BNSF has requested a neutral switching supervision condition on UP's Baytown and Cedar Bayou branches, but we believe that the private parties should attempt themselves to work out switching issues before bringing them to us for resolution. Finally, we note that BNSF has sought trackage rights over UP's San Antonio-Laredo line to resolve what is really a divisions dispute with Tex Mex; we will not grant those trackage rights, which could be devastating to Tex Mex, although we are prepared to prescribe divisions if, after negotiation, the parties cannot do so. We must, however, deny all other requested relief, including the central elements of the Consensus Plan: the modification of the current Tex Mex trackage rights condition that would permit that carrier access to certain Houston traffic without restriction, and, most significantly, the establishment of so-called neutral switching operations over UP track in a broadly defined area of the Houston Terminal. Notwithstanding the service crisis, the record establishes that BNSF, through the Board's trackage rights condition, has effectively replaced SP for 2-to-1" shippers in the Houston area that lost SP service as a result of the merger. The record also establishes that BNSF has effectively replaced SP for Mexico traffic moving via Tex Mex through the border crossing at Laredo, and that any losses Tex Mex may have incurred during the service crisis on Mexico traffic using its UP trackage rights rights that were designed to address the potential loss of competition at Laredo, not Houston are not likely to recur and otherwise do not threaten any essential services it provides. As a result, modification of a merger condition limiting Tex Mex's access at Houston is not justified. Further, the proposed neutral-switching condition would effectively add two additional new rail service options for many 1-to-1" shippers in Houston, particularly chemical and plastics shippers along the Houston ship channel. We previously determined that these shippers were not competitively harmed as a result of the merger, and the service crisis did not uncover additional or previously unaddressed competitive harm that would warrant the dramatic open access to UP's facilities in Houston that this condition would accomplish. If there was one factor that contributed most to the service crisis, it was that the crisis developed prior to the merger's implementation in Texas while UP and SP, though commonly managed by UP, were still operating separately. Those circumstances initially compromised UP's ability to quickly and effectively respond. Once UP did combine its Texas operations with those of SP and in light of SP's decline, that was a prime factor underlying our approval of the UP/SP merger the record supports the conclusion that the carrier's full implementation of the merger rather than exacerbating the service crisis by placing control of too much of the Gulf Coast area rail plant in UP's hands led to its solution. Even if some measure of competitive harm could be established, however, the Consensus Plan remedies would, at this juncture, be disproportionate to it. Throughout the service crisis, we were guided by the principle that UP's previous record of service suggested that it could manage its resources and operate its own business to solve this crisis better than the government, and we therefore directed relief that would support not undermine UP's own efforts, and its initiatives with other carriers in the region, to end the emergency. This approach worked, and the service crisis ended, although not without difficulty, mistakes along the way, or cost either to the Texas economy or to UP, which incurred over $1 billion in additional costs, lost significant traffic, and suffered losses in the hundreds of millions of dollars. Absent clear evidence of competitive harm at this time, and absent a basis for concluding that proposed conditions would work better than the increasingly successful operations in Houston that are now in place, we believe we should proceed in similar fashion in this proceeding. Thus, for example, even if the Consensus Plan's requested neutral dispatching condition might be considered to be one way to ensure UP's fair, non-discriminatory treatment of BNSF and Tex Mex trains through Houston, it would clearly not be the only way. The record describes the success and neutrality of the Spring Dispatching Center, and discloses no basis for us to disturb the ongoing UP-BNSF joint dispatching operations. UP continues to offer Tex Mex and its corporate affiliate KCS the opportunity to be equal partners in the Houston dispatching operations, on terms equal to those of BNSF, and, as such, we see no reason to consider at this time let alone impose a neutral dispatching condition for Houston prior to KCS/Tex Mex's acceptance of that offer and their good-faith effort to participate in those operations. The Board recognizes the damage caused by the now-ended rail service crisis, and we understand and share the desire of Houston area interests to avoid any similar crisis in the future. We should note that, in a decision served today, we have adopted new rules establishing procedures for individual shippers to obtain alternative rail service upon serious service failures of their incumbent carriers. We also should note that our oversight of the UP/SP merger, including our reservation of jurisdiction to impose further conditions in the Houston/Gulf Coast area and elsewhere, will continue for almost three years, and we intend to use it as a vehicle to review UP's Texas operations. The service crisis in Houston, however, was not a result of competitive failings, and, in the end, UP's implementation of the merger in Texas as difficult as it was, had more to do with resolving the crisis, than prolonging it. Thus, much of the relief sought by the Consensus Plan proponents, and by certain individual shippers, has not been shown to be justified at this time. In considering new conditions for the Houston/Gulf Coast area, we stated that we would examine whether there is any relationship between any market power gained by UP/SP through the merger and the failure of service that occurred in the region, and, if so, whether additional remedial conditions would be appropriate. UP and the Consensus Plan Parties quarrel over what this means, but our examination of this relationship was not intended as an isolated or independent test that would supplant our existing criteria for obtaining conditions. Rather, it was simply meant to put into context what even the Consensus Plan Parties concede is our entire focus here: whether the conditions that we imposed on the UP/SP merger are effectively addressing, for the Houston/Gulf Coast region, the harm we determined an unconditioned merger would produce. That focus remains particularly appropriate, because the overriding public benefits of the UP/SP merger are substantial most notably UP's absorption of SP's entire weakened system and the promise to shippers throughout the West of a second strong, efficient rail system as a competitor to BNSF. Even though our focus here is on the Houston area in the aftermath of a damaging service breakdown, this significant public benefit must not be compromised without a clear demonstration that our current conditions for that region are ineffective, that further conditions would work, and that they are narrowly tailored to address merger-created harm. I. THE CONSENSUS PLAN. The Consensus Plan parties The Chemical Manufacturers Association (CMA), RCT, the Society of the Plastics Industry (SPI), The Texas Chemical Council, KCS, and Tex Mex jointly request several new conditions. Most significantly, these parties, with support from Houston area business and governmental interests, seek a condition that would establish what they describe as neutral switching and dispatching operations by the Port Terminal Railroad Association (PTRA) throughout the Houston area over: (1) all industries and trackage formerly served by the Houston Belt & Terminal Railway Company (HBT); [Switching operations in the core of the Houston terminal area had historically been provided by HBT, created in 1905 and owned jointly by the numerous line-haul carriers then operating in Houston. Following the UP/SP merger, UP and BNSF, HBT's sole remaining owners, determined that they could provide switching services more efficiently and at reduced cost to the shippers by doing it themselves, and, through a series of trackage rights exemptions consummated on October 31, 1997, they assumed that role. In a decision reported today in Finance Docket No. 33461, we have denied a joint petition by KCS and Tex Mex to revoke these exemptions, as well as their joint complaint challenging those transactions] (2) all industries and trackage of PTRA; and (3) a broad area embracing industries and trackage stretching from Houston to Galveston, particularly numerous 1-to-1" plastics and chemical shippers south and east of Houston on the Strang/Bayport Loop and along the Houston ship channel that are served solely by UP and were solely served by either UP or SP before the merger. This area would include all shippers currently located on what was formerly SP's Galveston Subdivision between Harrisburg Jct. and Galveston, including those at Sinco, Pasadena, Deer Park, Strang, LaPorte, the Clinton Branch, the Bayport Loop and the Bayport area, including Barbours Cut and the Navigation Lead; all shippers at Galveston located on both the former SP and the former UP routes between Houston and Galveston; and the former SP yard at Strang and the UP yard at Galveston. Effecting this plan would require UP to broadly afford trackage rights to PTRA over UP tracks and necessary yards within the described neutral switching area. It would also require UP to afford terminal trackage rights to all other railroads serving Houston, so that PTRA could dispatch trains over the Terminal's most efficient routes. Although the Consensus Plan Parties state that UP would continue to own its property, and indeed be responsible for it, in practical terms the Consensus Plan would displace UP from the Houston Terminal in favor of PTRA. Together with the request that we permanently lift the restriction that limits Tex Mex's use of its UP trackage rights through Houston to traffic having a prior or subsequent movement over its Laredo-Corpus Christi line, the Consensus Plan's proposal for a neutral switching condition would, through PTRA's operations, provide three rail service options UP, BNSF, and Tex Mex for all Houston shippers within the neutral switching area, including 3-to-2" and 1-to-1" shippers that we previously determined had not been competitively harmed as a result of the merger. The Consensus Plan Parties claim that this extraordinary result is required because, by its elimination of independently operated and dispatched rail service through UP's complete control of Houston area rail plant, the merger deprived Houston rail shippers during the service crisis of a viable rail alternative and thereby exposed merger-created harm that the BNSF trackage rights and other conditions do not effectively address. For many reasons, we disagree. II. BNSF CONDITIONS. Trackage Rights. BNSF seeks various trackage rights that, it states, are meant only to fine-tune those that UP and BNSF negotiated as part of the BNSF settlement agreement that we imposed as a condition to the merger. At the oral argument, BNSF stated that, while it wanted to be even more of a competitive presence in Houston, it is, and will continue to be, a vigorous competitor, and that competition is working. Thus, through its trackage rights requests, BNSF generally seeks to address changes in UP operations that were largely prompted by efforts to resolve the service crisis. Because of those changes, BNSF argues that the effectiveness of some of its original trackage rights have been diminished. Certain of BNSF's proposed conditions those that would make permanent its temporary overhead trackage rights on UP's Caldwell-Flatonia-San Antonio and Caldwell-Flatonia-Placedo lines are responsive to potential changes in UP's directional running. UP is planning for directional running on the Caldwell-Flatonia-San Antonio route in order to reduce traffic on the San Marcos route, where BNSF has permanent trackage rights. In addition, UP plans to resume bi-directional running on the Caldwell-Flatonia-Placedo route, which will require BNSF to resume operations over the Brownsville Subdivision and its own Algoa line through Rosenberg. UP, however, has represented that it would not make those changes in its operations if it could not do so without adversely affecting existing service. And given UP's representations, which we take seriously, we do not see any reason to act at this time to address potential future disputes. As UP makes adjustments to its operations, we expect it to adjust, as appropriate and without Board intervention any existing BNSF's trackage rights from the settlement agreement that may be affected. If UP fails to do so, BNSF may seek the Board's intervention as it is needed. We will likewise not rule on BNSF's request for temporary trackage rights over both the UP line and the former SP line between Harlingen and Brownsville, TX and for the Brownsville & Rio Grande International Railroad (BRGI) to act as BNSF's agent for such service. UP does not object to most of the trackage rights that BNSF seeks, but it expresses concern with BNSF's use of BRGI, because of the possibility that, as a third carrier at Brownsville, BRGI will unduly complicate cross-border operations. At oral argument, however, both BNSF and UP indicated movement toward resolution, and we will not rule upon this matter now. If it remains unresolved, we can address it at a later date. BNSF also seeks current overhead trackage rights on UP's Taylor-Milano line. It appears that the primary rationale for this request is the establishment of a shorter route for BNSF to Beaumont. In addition to the fact that the Taylor-Milano line is directionally operated, there appears to be no overriding necessity for those rights because, other than to assert that the Taylor- Smithville-Sealy line is congested, BNSF has not shown that the rights we granted it to operate over that line have been ineffective or that it needs a substitute route to enable it to effectively provide the services contemplated by the Board. Finally, BNSF requests overhead trackage rights on UP's San Antonio-Laredo line. As indicated earlier, BNSF replaced SP as Tex Mex's interline partner via Robstown/Corpus Christi to provide the competition to UP at the Laredo gateway that SP-Tex Mex had provided. BNSF- Tex Mex interline traffic is now almost double that of SP, achieving our objective of preserving a strong competitive alternative to UP. However, BNSF complains that it is no longer able to take full advantage of its access to Laredo via Tex Mex, claiming that KCS influence over Tex Mex has made it difficult for BNSF and Tex Mex to reach a satisfactory division of revenues. We will not grant BNSF overhead rights on the San Antonio-Laredo line. In addition to jeopardizing Tex Mex's essential services by abruptly shifting most of its traffic, BNSF's proposed condition would add substantial levels of traffic to an already heavily utilized UP line, and in light of the significant increase in traffic on the BNSF-Tex Mex route, we do not find the condition justified. Moreover, none of the developments complained of by BNSF has caused any diminution of competition relative to the pre-merger period. Therefore, there is no basis for BNSF's request for a direct access to Laredo that SP never had. Regarding the matter of divisions, if BNSF cannot reach an agreement with Tex Mex on a satisfactory division of revenues, it may invoke the Board's jurisdiction to prescribe those divisions. Neutral Switching Supervision. BNSF also requests neutral switching supervision on the UP's Baytown and Cedar Bayou Branches east of Houston, on the ground that UP's handling of its shipments in haulage service has been unacceptable and subject to undue delays. Its complaints, however, are not fully developed and substantiated, and we see no justification, at this time, for imposing this kind of condition. We should note, however, that switching differences are inevitable for carriers that work together. Railroads regularly work out arrangements with each other without requiring government intervention, and we see no reason why BNSF and UP should not be able to work out the matter here as well. If for some reason BNSF continues to have complaints (or, for that matter, if UP has its own complaints about BNSF's activities in this regard) and either party wants us to intervene, it should submit detailed pleadings in support of its position. Clear Route. Finally, BNSF proposes that the Board award it the unrestricted right to use any route through Houston a so-called clear route condition. Numerous other parties, including the Consensus Plan sponsors, have also supported this concept. Proposals have ranged from suggestions that certain railroads should have an exclusive unencumbered route through Houston on which to move their traffic, to more modest proposals that would seek to improve the overall efficiency of the Houston terminal for all carrier users. At oral argument, there was almost universal agreement that the primary objective at Houston should be the efficient operation of the terminal. We agree. We believe that we can help produce efficiencies in the Houston Terminal by ensuring that trains are routed over the most efficient routes, even routes over track over which the carrier has no operating rights. In our view, the best vehicle for achieving that objective is the joint UP/BNSF dispatching center at Spring, Texas. The Board continues to believe that joint dispatching activities are an effective private-sector way to ensure neutrality and efficiency in train operations. As the Board indicated in its decision in the general UP/SP merger oversight proceeding, we continue to urge full utilization of the joint dispatching concept. Presently, the Spring Center, which we view as an excellent example of how proper dialogue can result in innovative solutions to complex problems, only houses the Joint Director and the UP and BNSF dispatchers and corridor managers. The Spring Center, however, is equipped to house dispatcher/managers for all carriers serving the Houston area, and, as indicated previously, in the interest of further improving the efficiency of Houston operations, carriers such as Tex Mex and KCS have been repeatedly invited to join. The Spring Center has contributed greatly to the improved efficiency of the Houston Terminal. Participants at the oral argument, however, expressed concern that the staff at Spring Center feels constrained at times from maximizing efficiency because of trackage rights or other operational conditions that may serve to limit a carrier's choice of routings. However, while trackage rights may be and, in our view, should be a real constraint to carrier-specified exclusive routings through Houston, it was generally agreed at the oral argument that such rights should not constrain the joint dispatching center from exercising its best judgement in routing trains. Good judgment, in our view, means that the joint dispatching center staff should be free to make choices for operations within the terminal that ensure the most efficient movement of trains moving through the terminal irrespective of line ownership. Accordingly, we impose a condition directing the carrier-participants of the Spring Center to ensure that the Joint Director has the authority to make such choices in routing traffic. This exercise of discretion assures not only the execution of the clear route concept; the joint center also affords the real neutrality that several parties have sought in this proceeding. In this regard, while much has been said about discriminatory dispatching in Houston, it is important to note that such allegations are made mostly by carriers not participating in the joint dispatching center. We believe that the operations, and the efficiency of the Houston terminal, can be improved by the participation in the Spring Center of all carriers utilizing the terminal and the areas governed by the Center. We urge carriers such as Tex Mex and KCS to join the Spring Center in the interest of the efficiency of operations they seek. III. OTHER CONDITIONS. A. Other Railroads. Requests for conditions were also filed by the Houston and Gulf Coast Railroad (HGC), a shortline that operates in the Wharton area, and Capital Metro Transit Authority (CMTA), which owns a line in the Austin area that is operated by the Longhorn Railroad (Longhorn). We will address each in turn. HGC. HGC seeks a variety of conditions: mandatory upgrade of UP's Rosenberg-to- Wharton track; trackage rights from Bay City to Algoa and from Rosenberg to Houston; access to Imperial Holly, a 2-1" shipper at Sugar Land; use of various UP yards and facilities; forced sale to HGC of lines between Houston and Galveston, along with forced interchange with HGC in Houston; and forced use by UP of HGC's facilities for storage-in-transit (SIT). HGC argues that its operations were adversely affected by the service problems, but that UP did not adequately utilize the assistance it offered to ameliorate the crisis. UP opposes the conditions that HGC has sought. HGC's extensive conditions cannot be granted in this proceeding, as there has been no showing that they would address any merger-related competitive problems, or that they are necessary to avert a future service crisis. However, capacity has been an issue in the rail industry in general, and in Texas in particular, and as HGC may provide the carriers operating in Texas with potential additional capacity, we urge them to consider utilizing this resource. In this regard, we note that, at the oral argument, UP stated that it was willing to enter into discussions with HGC to find better ways to work together. We expect UP to honor its commitment, and we strongly suggest that the other Class I carriers operating in Texas also enter into discussions with HGC to develop mutually beneficial arrangements. CMTA. As noted, CMTA owns a short line of railroad near the Austin Subdivision. At McNeil, TX, UP interchanges with Longhorn, CMTA's operator, which carries aggregates to Houston. Before the merger, SP also interchanged with CMTA's operator at Giddings, TX. Although SP's service at Giddings was sporadic at best, and indeed the line was out of service for some time, in the merger decision we considered the situation for CMTA to be a 2-to-1, and therefore required UP to permit BNSF step in and fill SP's shoes through trackage rights. Because CMTA, through its operator, did not want to interchange at Giddings, and because UP did not object to it, CMTA, through its operator, was ultimately permitted to interchange with BNSF at Elgin, TX. Asserting that it was severely disabled by the service crisis; that UP has caused further economic harm by abusing its market power and offering reduced rates for aggregates shipments moving over another route by the Georgetown Railroad; and that BNSF does not provide enough service at the interchange at Elgin to make Longhorn's operations profitable, CMTA now asks for a Longhorn interchange with BNSF at McNeil, and that BNSF be given approximately 4 miles of additional trackage rights to effect the interchange. CMTA argues that, without this change, Longhorn will go out of business. BNSF supports CMTA's request, arguing that the Elgin interchange is severely capacity constrained and hemmed in by its location in the center of Elgin, making any planned expansion to improve capacity difficult and limited. This proposal would overcome the service handicaps CMTA and Longhorn have raised concerning continued use of the Elgin interchange and permit Longhorn customers more effective access to BNSF. UP opposes this operational change. It notes that the service difficulties that hampered CMTA have ended, and that BNSF in fact interchanges substantial traffic with Longhorn at Elgin, which, it claims, is an adequate interchange point capable of supporting profitable service. It also expresses the view that the real reason CMTA requests the change is to relieve itself of certain of its line maintenance obligations, and to facilitate future passenger service in the area. Finally, UP expresses concern that an interchange between BNSF and Longhorn at McNeil could cause significant operating problems unless additional interchange trackage were laid. We recognize, as UP points out, that SP never served McNeil. We also reject as unsubstantiated CMTA's assertions of market power abuse on UP's part. Finally, we understand UP's concern that the change that CMTA wants could pose problems if it were to contribute to congestion on the Austin Subdivision. Nevertheless, CMTA indicates that the short-line service that Longhorn provides is important and about to fail, and that, through a modest condition change, we can give it a chance to succeed. Given our concern for the viability of short lines and the sometimes vulnerable shippers they serve, the modest nature of the change requested, and BNSF's position that the change will address existing capacity constraints at Elgin without creating other service problems over the Austin Subdivision, we will grant CMTA's request. BNSF will be given expanded trackage rights between Round Rock and McNeil so that it can interchange with Longhorn at McNeil, instead of at Elgin. Of course, we expect BNSF and Longhorn to make any necessary investments to make the service at McNeil practicable without interfering with existing main line operations. Additionally, we will monitor this situation closely, and, if it turns out that the change materially interferes with existing service over the Austin Subdivision, we will revisit it and consider eliminating the BNSF/McNeil interchange and returning the interchange to Elgin. B. Individual Shippers. Requests for new conditions were also filed by four individual shippers: The Dow Chemical Company (Dow); Formosa Plastics Corporation, U.S.A. (Formosa); E.I. DuPont de Nemours and Company (DuPont); and Central Power and Light Company (CPL). Dow, Formosa, and CPL were all served by a single railroad before the merger, and all continue to be served by a single railroad (UP) after the merger; yet, each has asked the Board to permit access by BNSF. DuPont was served by two carriers before the merger, and continues to be served by two carriers after the merger; yet DuPont has asked the Board to permit access by Tex Mex. Each of these requests will be denied. It is ordered: 1. As explained in this decision, the parties shall implement the concept of a clear route through Houston. 2. CMTA's request to modify the trackage rights used by BNSF and to change the interchange used by Longhorn from Elgin to McNeil is granted. 3. UP shall include an infrastructure report in its annual oversight filings. 4. UP shall work with BNSF and other carriers that have trackage rights over its lines when it makes operational changes. 5. The private parties shall make good faith efforts to resolve the various other issues addressed in this decision. 6. Except as otherwise indicated, all requests for relief discussed in this decision, including but not limited to the requests of the Consensus Plan and the individual parties seeking relief, are denied. 7. This decision is effective immediately. Decided: December 18, 1998 Service Date - Late Release December 21, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33461 SOUTHERN PACIFIC TRANSPORTATION COMPANY TRACKAGE RIGHTS EXEMPTION THE HOUSTON BELT & TERMINAL RAILWAY COMPANY STB Finance Docket No. 33462 UNION PACIFIC RAILROAD COMPANY TRACKAGE RIGHTS EXEMPTION THE HOUSTON BELT & TERMINAL RAILWAY COMPANY STB Finance Docket No. 33463 THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY TRACKAGE RIGHTS EXEMPTION THE HOUSTON BELT & TERMINAL RAILWAY COMPANY STB Finance Docket No. 33507 THE TEXAS MEXICAN RAILWAY COMPANY AND KANSAS CITY SOUTHERN RAILWAY COMPANY v. THE HOUSTON BELT & TERMINAL RAILWAY COMPANY, THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY, UNION PACIFIC RAILROAD COMPANY, AND SOUTHERN PACIFIC TRANSPORTATION COMPANY Following the merger of the Union Pacific Railroad Company (UP) and the Southern Pacific Transportation Company (SP), the Texas Mexican Railway Company and Kansas City Southern Railway Company (Tex Mex/KCS) on October 31, 1997, filed a petition for an emergency cease and desist order and complaint in STB Finance Docket No. 33507 alleging that UP, SP (collectively, UPSP), and The Burlington Northern and Santa Fe Railway Company (BNSF), using the trackage rights notices of exemption issued in STB Finance Docket Nos. 33461, 33462, and 33463, are unlawfully leasing and/or acquiring joint use of the properties of their subsidiary, The Houston Belt & Terminal Railway Company (HBT). Additionally, Tex Mex/KCS alleged that HBT is unlawfully abandoning and/or discontinuing service in violation of the prior approval requirements. Pending an investigation, Tex Mex/KCS requested that we suspend the UPSP/BNSF plan that they claim will improperly divide HBT's assets, assume HBT's operations, and dissolve HBT as a carrier. UPSP and BNSF filed replies and consummated the trackage rights transactions on October 31, 1997. On February 3, 1998, Tex Mex/KCS filed an amendment to its complaint in which it further alleged that UP and SP, or, in the alternative, that UPSP, jointly with BNSF, are exercising unlawful control over HBT in violation of the prior approval requirements. With respect to the three trackage rights notices of exemption, Tex Mex/KCS simultaneously filed a petition for consolidation, to declare the exemptions void, and to revoke the exemptions (February 3 petition). On February 23, 1998, UPSP and BNSF filed replies embracing both the amended complaint and the February 3 petition. On March 16, 1998, Tex Mex/KCS filed a reply to UPSP's February 23 reply, and UPSP responded on March 23, 1998, with a comment. Finally, on May 18, 1998, Tex Mex/KCS submitted a copy of a letter Port Terminal Railroad Association (PTRA) sent notifying all tenants in the Union Station building, where HBT is the lessee and PTRA is a subtenant, that on or about June 30, 1998, the [HBT] will cease operations and have no presence in the building. We find that Tex Mex/KCS have failed to establish that the three trackage rights notices of exemption violated the provisions of 49 CFR 1180.2(d)(7) or that the use of the class exemption was otherwise improper or unlawful. Additionally, we find that Tex Mex/KCS has failed to establish that the challenged transactions resulted in an unlawful abandonment or discontinuance and has otherwise failed to present adequate reason for revoking the trackage rights exemptions under the rail transportation policy (RTP). HBT, a terminal railroad serving the heart of the Houston terminal area, was incorporated on August 31, 1905. Subsequently, as part of the joint control that was approved in 1950, HBT's stock was divided among its five owning carriers, subject to the so-called 1948 HB&T Operating Agreement . The 1948 Agreement was the culmination of a series of interrelated transactions that included leases, constructions, operating agreements, and stock issuances; its general object and purpose was to provide for the enlargement of the facilities of the [HBT] and . . . to unify the Houston terminal facilities and operations of the parties hereto. HBT was to own and/or operate openly and impartially a number of lines and terminal facilities for the benefit of the 5 stock owning, and 2 non-stock owning railroads, and all 7 railroads had equal rights of use. The 1948 Agreement was to continue in effect indefinitely, but provided for its termination on or after January 1, 2007, by any Using Line serving 6-months written notice of its intent to terminate on the other Using Lines. As a result of several mergers, and most recently that of UP and SP, UPSP and BNSF are now HBT's two remaining shareholders. Historically, HBT operated: (1) a north-south running West Belt mainline between T&NO Junction, MP 11.1, on the south side of Houston just below New South Yard, its primary classification yard where it switches its own and BNSF's traffic, and the point on the north side of Houston, MP 0.0, near its connection to UPSP and BNSF north and west of Belt Junction, MP 2.3; (2) an East Belt mainline that circles the center of Houston on the east and extends from Double Track Junction, MP 14.3, in the south to Belt Junction, MP 3.4 (MP 2.3 on the West Belt); and (3) the Columbia Tap, a 9.2-mile line that is not connected to either the East or West Belt, extending from an SP line at Pierce Junction. HBT also operates several industrial support yards to handle shipments originating or terminating on its track. The principal ones include Congress Yard on the West Belt in central Houston and the nearby Dallerup and Basin Yards on the East Belt. Additionally, HBT dispatched trains and handled more than 100 daily movements including its own switching and interchange movements and through train movements for UPSP, BNSF, and Tex Mex. HBT switched every movement to or from the industries on its lines and provided intermediate switching services. All HBT-served industries were open to UPSP, BNSF, and Tex Mex/KCS for a switch fee of $235 per car. On September 5, 1997, after approval of the merger, UP and SP, together owning 50% of HBT's stock, and BNSF, owning the other 50% of HBT's stock, entered into the challenged Houston, Texas Trackage Rights Agreement (Trackage Rights Agreement) which gave them nonexclusive, unrestricted local and overhead trackage rights over HBT's entire operation, as the first part of a planned restructuring of the Houston terminal. At the time the Trackage Rights Agreement was entered into, UP had consummated its control of SP, but SP had not yet merged operationally with UP in Texas. Thus, Tex Mex/KCS challenged the actions of UP and SP separately and collectively in their petition to revoke and complaint. After February 1, 1998, however, SP ceased to exist as a separate, independent entity and, as a result, we are only considering Tex Mex/KCS's challenge to the actions of UPSP and BNSF. On October 31, 1997, UPSP, BNSF, and HBT entered into a Management, Control, Switching and Maintenance Agreement (Management Agreement) under which they agreed to exercise the trackage rights granted them over specific portions of HBT's lines and to serve the shippers on those lines as HBT's agents. BNSF was to operate both the Old and New South Yards (the first Houston yard space under its control) and serve the shippers on the portion of old Rock Island from Belt Junction, MP 3.4 on East Belt, west to MP 0.0, its northwest connection to HBT, and all but two shippers south of the Galveston, Houston, and Henderson Railroad Company (GH&H) line (MP 7.2 on the West Belt and MP 12.5 on the East Belt). UPSP was to operate the remainder of HBT's industrial support yards and serve the Columbia Tap as well as all other shippers on HBT's lines. The Management Agreement also called for HBT's and UPSP's Houston area dispatchers to be consolidated into a new, centralized Houston control center at Spring, TX, where they would work along side each other and, for the first time, share advance information on incoming train movements. UPSP claims, and BNSF concurs, that consolidated dispatching will permit the dispatchers to plan and coordinate movements on HBT track within the Houston terminal with incoming and outgoing UPSP and BNSF movements. Eliminating HBT dispatchers, as a separate middle layer, and HBT, as a switching carrier, according to UPSP, will end many of the delays and much of the congestion that began in the summer of 1997, allowing UPSP and BNSF to serve HBT's shippers better, coordinate their movements more effectively, and operate more efficiently. UPSP also claims that resulting operating cost savings will be substantial and will permit the switching fees paid by shippers to be reduced from $235 to $200 a car. UPSP states that it will no longer need HBT's dispatchers to transfer traffic between its own dispatchers, and that one of the three switches along with the second classification that HBT performed at New South Yard for every shipment that originated or terminated on its lines will be eliminated. For example, inbound UPSP or BNSF traffic will be classified and switched into blocks for movement to either the UPSP or BNSF Houston support yards, as appropriate, for a second switch and delivery. Before the restructuring, their inbound traffic was classified and switched into blocks for movement to HBT's New South Yard where there was a second classification and a switch into blocks for movement to an HBT support yard, for a third switch and delivery. By eliminating the extra switching, UPSP estimates that as much as 2-days transit time will be saved on virtually every car, loaded or empty, shipped or received by most of HBT's shippers. Additionally, UPSP claims that by eliminating the second classification several hundred cars a day will be removed from the New South Yard, which is already operating at capacity. In turn, UPSP claims that BNSF will be able to operate New South Yard more efficiently, reducing the need to hold traffic outside the yard and, as a consequence, the frequency of mainline traffic blockages. New South Yard is just to the north of T&NO Junction where there is a connection to: (1) the BNSF line that carries BNSF traffic to and from nearby Texas ports, including Galveston, and Corpus Christi, TX, via UPSP trackage rights, and UPSP traffic to and from Corpus Christi and Brownsville; and (2) the UPSP line that carries UPSP and Tex Mex traffic to and from Laredo and Robstown, TX. UPSP states that the planned restructuring was public knowledge for months. It claims that the arrangement was described to many Houston-area chemical shippers in a presentation to the Chemical Manufacturers Association on June 12, 1997. UPSP also claims that rail labor knew about the arrangement long before it was implemented and was closely involved in the planning with the understanding that: (1) HBT employees will follow their work and their employment will be protected; and (2) that every HBT operating craft employee on the affected lines will be hired by UPSP. Tex Mex/KCS argue that the proposed restructuring of HBT's operations by UPSP and BNSF resulted in an exclusive use arrangement that was more akin to a lease and/or a joint use of HBT's property than to trackage rights and, therefore, was entered into without the Board's prior approval. Tex Mex/KCS contend that the trackage rights class exemption is premised on the fact that trackage rights: (1) generally give a carrier the right to operate over the lines of the owning carrier while the owning carrier continues to provide service; (2) tend to maintain the status quo or result in increased competition with respect to shippers services and other rail carriers markets; and (3) are unlikely to alter existing market shares and operational systems because a landlord carrier ordinarily would not allow a tenant carrier to exert a high degree of control (performing maintenance, operation, and dispatching) in the market. Tex Mex/KCS argue that the challenged transactions contain none of those fundamental elements. Rather, they claim that the transactions are leases in substance because BNSF and UPSP obtained exclusive use of HBT's lines as well as control over all significant HBT functions (e.g., maintenance, operations, and dispatching) related to them. As a result, they argue that HBT's continued existence as a corporate shell and retention of the underlying common carrier obligation is meaningless because the fundamental characteristics of trackage rights are missing. They contend that: (1) HBT, as landlord, no longer conducts its own operations; (2) the status quo was significantly altered; (3) a neutral terminal carrier was effectively dissolved; and (4) the tenant has taken from the landlord the latter's control over the maintenance, operation, and dispatching of its lines. Tex Mex/KCS argue that a trackage rights class exemption may not be used when lease authority is required. Whether intentional or not, they assert that, by filing the trackage rights class exemptions, UPSP and BNSF failed either to disclose the actual lease-type nature of the arrangement, including the change in operations and dispatching, or to discuss its impact, particularly in light of the nature and extent of control being exerted over HBT. Thus, they argue that the notices of exemption were false and misleading and that other railroads and the affected public were deprived of meaningful notice and a full opportunity to comment. As a consequence, they assert that the trackage rights notices of exemption are void and must be revoked. We disagree. As the rightful and only successors to the five original railroads that jointly owned HBT, UPSP and BNSF already owned HBT's assets, and the right granted in the Trackage Rights Agreement, to operate anywhere on HBT's lines, was a right they already had. Thus, the use of the trackage rights class exemption was appropriate; the notices of exemption may not be declared void or rejected for being other than what they purported to be. Similarly, we find no merit to Tex Mex/KCS's arguments that the trackage rights/ restructuring arrangement involve an acquisition of joint use of HBT's properties, that was subject to the prior approval requirements or that prior approval otherwise was required. To acquire joint ownership in, or the joint use of a, railroad line, prior Board approval is required if the railroad line is owned or operated by another rail carrier [or carriers]. HBT could not be considered another rail carrier under the terms of the statute because UPSP and BNSF, as the only successors to the original carrier applicants, already were jointly authorized to control HBT and to use HBT's facilities. Thus, prior Board approval was not necessary for UPSP and BNSF to enter into the challenged trackage rights/restructuring arrangement for their joint use of HBT's railroad lines. Additionally, it has long been the rule that when a carrier controls another carrier, meaningful competition is precluded and regulatory approval is not needed for the controlling carrier to increase its ownership interest in the controlled carrier or consolidate the controlled carrier into its own system. We also disagree with Tex Mex/KCS's claim that UPSP lacked authority to usurp HBT's dispatching responsibilities. The HBT/Tex Mex trackage rights agreement specifies that the terms and rights granted Tex Mex may not be assigned in whole or in part without HBT's consent, but HBT may assign the terms without restriction and the assignment shall be binding on the successors and assigns. Nor is there is anything in Decision No. 44, Service Order No. 1518, or the 1948 Agreement that specifically precludes, or is otherwise inconsistent with, the transfer of HBT's dispatching obligations to UPSP as its agent. Further, the Management Agreement continues HBT's general obligation under the 1948 Agreement to operate openly and impartially with respect to its members traffic. Thus, UPSP and BNSF are mutually obligated to operate openly and impartially, and this obligation was carried forward in the Dispatching Protocols that are a part of the Management Agreement. Additionally, as HBT's agent with responsibility for dispatching, UPSP is obligated to treat BNSF's traffic impartially, as required of HBT in the 1948 Agreement, and may not discriminate against Tex Mex's traffic moving under the terms of the HBT/Tex Mex trackage rights agreement negotiated pursuant to Decision No. 44. Moreover, UPSP and BNSF agreed to operate the Spring dispatching center, and are doing so, as equal partners, and Tex Mex was invited to participate as well. Finally, Tex Mex/KCS's contention, that the notices of exemption must be declared void and revoked because they contain false and misleading information, must be rejected as well. Tex Mex/KCS do not dispute that the notices of exemption contain adequate and accurate information as to the trackage rights agreements themselves. Rather, they argue that the notices of exemption disguised and/or failed to disclose the full nature of the restructuring (operational and dispatching). The record, on the other hand, shows that the public and rail labor were given advance information. However, even if this were not the case, UPSP and BNSF were only obligated to publish an accurate description of the trackage rights agreements. They were not obligated to describe the broader transaction of which the trackage rights agreements were a part. As a consequence, the notices of exemption were valid and cannot be declared void or revoked on this basis, either. We also reject Tex Mex/KCS's other arguments that the trackage rights notices of exemptions must be revoked because HBT failed to seek or obtain Board approval for its resulting discontinuance of operations, and because they resulted in UPSP, acting alone or with BNSF, exercising unlawful control or joint control over HBT without seeking or obtaining prior Board approval. Tex Mex/KCS originally alleged that HBT was being dissolved. They now argue that HBT discontinued providing rail service in violation of the prior approval requirements, presumably because HBT apparently has continued to exist as a corporate entity. Indeed, HBT claims that UPSP and BNSF are acting as its agents and that it retains the residual common carrier obligation. The leases, trackage rights, and similar operational arrangements that rail carriers enter into do not extinguish the granting carrier's common carrier obligation. The grantor retains the underlying common carrier obligation and becomes obligated to provide service or enter into new arrangements for others to provide service when these arrangements terminate. The common carrier obligation to serve continues indefinitely; it may be suspended only if formal discontinuance authority or an exemption is granted, and it may be extinguished only if formal abandonment authority or an exemption is granted. Because there is no suspension of the grantor's common carrier obligation to serve in these kinds of transactions, there is no discontinuance, and, as a result, no need for the grantor to seek discontinuance authority or an exemption. The Board is simply approving an arrangement that will result in a change of operators, not in a termination of the common carrier obligation. We are not aware of a single instance where authority or an exemption to discontinue service was sought by a grantor in connection with leases, trackage rights, or other Board approved arrangements of this nature. Here, HBT ceased operations upon entering into the trackage rights arrangements with UPSP and BNSF. There was no discontinuance with respect to HBT's common carrier obligation; the services it was responsible for providing continued to be provided by its agents without interruption, and it retained the underlying obligation. As a consequence, HBT did not need to obtain discontinuance authority. By exercising exclusive control over HBT's operations and facilities and by subsequently eliminating HBT as the neutral train dispatcher for the Houston terminal area and relocating its dispatching services to UPSP's Spring dispatching center, Tex Mex/KCS contend that UPSP individually, or UPSP and BNSF jointly, obtained unlawful control of HBT in violation of the prior approval requirements. They also claim that the elimination of HBT as a neutral terminal switching carrier effectively destroyed the basis for all prior ICC decisions that had granted common control approval to the UPSP and BNSF predecessors. We disagree. Unlike the many cases Tex Mex/KCS rely on, UPSP and BNSF were jointly in control of HBT prior to entering into the challenged trackage rights/restructuring arrangement. As the rightful, and indeed the only, successors to the original railroads that jointly owned HBT, UPSP and BNSF each owned a 50% interest in HBT. Thus, they jointly possessed full and effective control over HBT, and, with that control, they jointly retained full authority to restructure HBT's operations (operational switching and dispatching) without need for prior Board approval. As we previously stated, once control authority exists, carriers do not need regulatory approval to make structural changes to the operations of the entities they control. Accordingly, we find no merit to Tex Mex/KCS's claim that UPSP and BNSF violated the prior approval requirements when they restructured HBT's operations. Nor does the restructuring undermine the basis for the previous ICC decisions that granted common control approval to the predecessors of UPSP and BNSF. The Houston decision did not restrict the owning carriers exercise of control authority over HBT, and, as long as HBT's obligations under the common carrier provisions are being met, UPSP and BNSF, as the only remaining joint owners, are not restricted in the exercise of their control authority. Tex Mex/KCS note that the Board afforded Tex Mex trackage rights over UPSP lines as a merger condition to ensure the continuation of an effective alternative to UPSP's routing into the border crossing at Laredo and to protect the essential service Tex Mex provides to the more than 30 shippers located on its line. They claim that these objectives have been undermined by the recent congestion and service problems in Houston and by the elimination of competition that resulted from UPSP becoming the dominant carrier in the Houston market. They maintain that Tex Mex and Houston's shippers are experiencing significant negative impacts as a result of UPSP's dominance; that, instead of the benefits predicted for Tex Mex's through train operations, Tex Mex's traffic is being handled in an inefficient and discriminatory manner on a daily basis; and that, as a direct result of the delays and/or discrimination, Tex Mex has incurred more than $800,000 of additional expenses in conducting trackage rights operations under its agreement with HBT. Accordingly, Tex Mex/KCS argue that the trackage rights exemptions should be revoked because the HBT restructuring violates those aspects of the RTP that are intended: (1) to ensure the development and continuation of a sound rail transportation system with effective competition among rail carriers; (2) to foster sound economic conditions in transportation and ensure effective competition and coordination between rail carriers; (3) to encourage honest and efficient management of railroads; and (4) to avoid undue concentrations of market power and prohibit unlawful discrimination. No credible evidence has been submitted in this proceeding to establish that UPSP has been handling Tex Mex's traffic over HBT lines in an intentionally inefficient and/or discriminatory manner or that the HBT restructuring is responsible for the alleged behavior. Similarly, the record does not establish a substantive connection between the HBT restructuring and the congestion and service related problems experienced by Tex Mex and Houston's shippers. To the contrary, the record suggests that the HBT restructuring: (1) was intended, and appears to have been reasonably designed, to facilitate the more efficient movement of traffic within and through the Houston terminal; (2) has allowed a reduction in switching charges; and (3) was not calculated to have, and does not appear to be having, an adverse effect on competition. Further, in Service Order No. 1518, Supplemental Order No. 1 (STB served Dec. 4, 1997), we directed UPSP to give BNSF and Tex Mex representatives full access to the Spring dispatching center as neutral observers. It is not contested that UPSP and BNSF made a similar offer to Tex Mex and KCS with respect to the joint dispatching operations they subsequently established at Spring. The record indicates that Tex Mex/KCS generally have not taken advantage of these opportunities, and UPSP has denied that Tex Mex was subjected to discrimination or suffered in any way as a direct result of the restructuring. To the contrary, UPSP claims that Tex Mex has benefitted from the HBT restructuring; it obtained access at reduced fees to all HBT shippers via UPSP and BNSF switching, and a more efficient connection with PTRA via UPSP intermediate switching, notwithstanding that it had no contractual or other right to the connection. Accordingly, the evidence of record does not support the requested revocation of the trackage rights notices of exemption and/or regulation of the transactions to carry out the RTP. The evidence here simply does not establish that the problems experienced in the Houston-Gulf Coast area are attributable to, or that Tex Mex was subjected to discrimination or suffered in any way as a direct result of, the trackage rights on, or the restructuring of, HBT. While we have thoroughly analyzed each Tex Mex/KCS argument offered in these proceedings because of our concern about service in and around Houston, we must observe that the type of operational and dispatching changes over already jointly owned or controlled properties as we have here would not normally trigger extensive regulatory oversight. It is ordered: 1. Tex Mex/KCS's February 3, 1998 petition to consolidate STB Finance Docket Nos. 33461, 33462, and 33463 is granted. 2. Tex Mex/KCS's February 23, 1998 reply and UPSP's March 23, 1998 comment are accepted into the record. 3. Tex Mex/KCS's motion to compel discovery is denied. 4. Tex Mex/KCS's petition to declare the trackage rights notices of exemption issued in these proceedings void ab initio and/or revoke them is denied, and their complaint in STB Finance Docket No. 33507 is discontinued. Decided: December 18, 1998 Service Date - Late Release December 21, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD FINANCE DOCKET NO. 33652 DRAFT ENVIRONMENTAL ASSESSMENT UNION PACIFIC RAILROAD COMPANY - ACQUISITION AND OPERATION EXEMPTION - MID MICHIGAN RAILROAD, INC. (RAIL LINE BETWEEN SAINT JOSEPH, MISSOURI AND UPLAND, KANSAS) The Surface Transportation Board, Section of Environmental Analysis (SEA), prepared this Draft Environmental Assessment to identify and evaluate the potential environmental impacts of the acquisition by Union Pacific Railroad (UP) of a rail line between St. Joseph, Missouri and Upland, Kansas from the Northeast Kansas and Missouri Railroad (NEKM), a subsidiary of MidMichigan Railroad, Inc. SEA has identified potential environmental impacts in four environmental issue areas (air quality, noise, freight rail operations safety, and highway/rail at-grade crossing safety) and has recommended mitigation measures to address these potential impacts. SEA concludes that if the mitigation it recommends is imposed, the proposed Acquisition would not have any significant adverse environmental impacts. UP filed a Petition with the Board on August 25, 1998, seeking exemption for the acquisition and operation of an approximate 107-mile long NEKM rail line from Mid-Michigan Railroad, Inc. The Board will decide whether to grant or deny UP's petition and will address potential environmental issues associated with the proposed Acquisition. It may impose any environmental conditions it deems appropriate. UP states that the acquisition of the NEKM rail line would be an integral part of its Service Recovery program to add additional capacity to its Central Corridor. UP would use the NEKM rail line primarily to route westbound empty coal trains from the Kansas City, Kansas area to their destination in the Powder River Basin in Wyoming. The rerouting of the empty coal trains would relieve capacity constraints on UP's mainline track between Kansas City, Topeka and Upland, Kansas - thereby reducing train delay and improving freight delivery reliability and rail operations efficiency. UP also states that the proposed Acquisition would improve market access to shippers on the NEKM rail line. The proposed Acquisition would allow UP to acquire the NEKM rail line between St. Joseph, Missouri and Upland, Kansas. NEKM currently operates approximately one train per day on its system, serving agricultural and other customers along its approximate 107-mile length. UP would use the NEKM rail line to reroute westbound empty coal trains, over the NEKM rail line between Hiawatha, Kansas and Upland, Kansas. These coal trains currently use two routes to move between Kansas City, Kansas and Gibbon, Nebraska, as follows: ù Approximately 5.7 empty coal trains per day move north from Kansas City, Kansas through Hiawatha, Kansas to Omaha, Nebraska. At Omaha, these trains head west to Gibbon, Nebraska. ù Approximately 9.3 empty coal trains per day move west from Kansas City, Kansas to Topeka, Kansas. At Topeka, these trains head north through Upland and Marysville, Kansas then on to Gibbon, Nebraska. The rerouting of the empty coal trains would increase the train traffic by approximately 9.3 trains per day on UP's existing mainline between Kansas City, Kansas and Hiawatha, Kansas. Train traffic would increase by 15 trains per day between Hiawatha, Kansas and Upland, Kansas. There would be no change in train traffic on the NEKM rail line between St. Joseph, Missouri and Hiawatha, Kansas. In its environmental review, SEA carefully assessed the extent and potential significance of adverse effects related to the proposed Acquisition. Based on its analysis, SEA developed a set of preliminary recommended mitigation measures that address potential adverse effects. SEA believes that it has developed reasonable and practical preliminary environmental mitigation recommendations that would address potential adverse environmental effects associated with the proposed Acquisition. SEA's preliminary recommended mitigation falls within the scope of the Board's jurisdiction and is consistent with the Board's practice of mitigating only those environmental effects that directly result from the proposed action (for example, grade crossing safety impacts that result from increases in train traffic). SEA also evaluated the construction of a proposed 820-foot rail line connection that is related to the proposed Acquisition. SEA reviewed this construction project for potential adverse environmental effects that may occur outside of railroad right-of-way. In its environmental review, SEA determined that the proposed Acquisition would have positive effects on the environment. These benefits would occur on a regional basis, primarily through providing increased efficiency on existing routes. These potential benefits include reductions in fuel consumption, emissions, and freight rail accidents because of a reduction in train-miles traveled by trains that would use the shorter NEKM route. UP stated that a number of benefits relate directly to the proposed Acquisition of the NEKM, including the following: ù Reduced train delay on UP's mainline between Kansas City, Topeka, and Upland, Kansas, as a result of diverting westbound empty coal trains over the NEKM line. ù Better utilization of freight cars, locomotives, and train crews to reduce operating costs, maintenance, and delays. ù Reduced fuel consumption (and corresponding reductions in emissions) because the NEKM route is shorter than the current routes used by the empty coal trains. ù Improved market access opportunities for shippers along the NEKM line. UP has stated that the proposed Acquisition would result in train traffic increases on three rail line segments in Kansas that would exceed the Board's thresholds for environmental analysis. Specifically, rail traffic on UP's existing Kansas City-Atchison and Atchison-Hiawatha rail lines would increase by approximately 9.3 trains per day. Traffic would increase on a portion of the NEKM rail line (which UP proposes to acquire) between Hiawatha, Kansas and Upland, Kansas by approximately 15 trains per day. The portion of the NEKM rail line that UP would acquire between St. Joseph, Missouri and Hiawatha, Kansas would not experience train traffic increases. Normally, the Board's environmental review is limited to an assessment of anticipated environmental effects of the specific actions pending before the Board (i.e., the proposed Acquisition). An existing railroad can increase its level of operations without Board approval andwithout limitation. Thus, if UP had not filed a Petition for Exemption with the Board to acquire the NEKM rail line, UP could increase the number of trains operating on its existing Kansas City-Atchison and Atchison-Hiawatha rail line segments to any level it considered appropriate. However, in this case, UP proposes to change rail traffic volumes on its Kansas City-Atchison and Atchison-Hiawatha rail line segments as a direct result of its proposed acquisition of the NEKM rail line. The portion of the NEKM rail line between Hiawatha, Kansas and Upland, Kansas would provide UP with a more direct alternative route for empty coal trains operating between Kansas City, Kansas and Gibbon, Nebraska. Because the proposed Acquisition would directly affect rail traffic changes on the Kansas City-Atchison and Atchison-Hiawatha rail line segments, SEA concluded that its environmental analysis should include potential effects of operational changes on these rail two rail line segments. As part of its environmental review of air quality and freight rail operations safety, SEA estimated potential regional effects of changes in train traffic levels that would result from the proposed Acquisition. In this case, the regional review includes all rail line segments between Kansas City, Kansas and Gibbon, Nebraska that would experience Acquisition-related changes (i.e., increases and decreases) in rail traffic. SEA believes that the regional analysis of air quality and freight rail operations safety shows some important benefits of the proposed Acquisition, which SEA also considers when developing its preliminary recommended mitigation measures for any significant localized effects of the proposed operational changes. The NEKM rail line that UP proposes to acquire operates between St. Joseph, Missouri and Upland, Kansas, a distance of approximately 107 miles. The NEKM rail line traverses the counties of Doniphan, Brown, Nemaha, and Marshall in the State of Kansas and Buchanan County in the State of Missouri. NEKM also has trackage rights on an existing UP rail line segment from Upland, Kansas to Marysville, Kansas, a distance of approximately 7 miles in Marshall County, Kansas. NEKM currently operates approximately one local train per day between St. Joseph, Missouri and Marysville, Kansas , providing a means for local shippers of agricultural products to interchange with UP rail lines at Hiawatha and Marysville, Kansas and St. Joseph, Missouri. NEKM's local traffic is seasonal in nature - most of the freight activity occurs in the early summer and late fall harvest periods. The NEKM train is limited to a maximum speed of 25 miles per hour on its mainline track. The NEKM local train makes a round trip between St. Joseph, Missouri and Hiawatha, Kansas every other day; the following day, the train makes a round trip between Marysville, Kansas and Hiawatha, Kansas. UP currently operates more than 36,000 miles of rail lines in 23 states, including about 2,618 miles of rail lines in Kansas. Approximately 15 empty coal trains leave Kansas City, Kansas each day toward the Powder River Basin in Wyoming. UP currently routes approximately 9.3 of these empty coal trains over its existing mainline track that runs west from Kansas City, Kansas through Topeka, Kansas and then north through Marysville, Kansas to Gibbon, Nebraska. This route covers a distance of about 281 miles between Kansas City, Kansas and Gibbon, Nebraska. The other approximate 5.7 empty coal trains per day use UP's existing mainline that runs from Kansas City, Kansas north to Omaha, Nebraska. From Omaha, Nebraska, these trains continue west to Gibbon, Nebraska. The northern route between Kansas City, Omaha and Gibbon, Nebraska covers a distance of approximately 365 miles. UP has stated that the proposed Acquisition would be part of its Service Recovery program to add additional capacity to UP's Central Corridor and to provide service to shippers served by the NEKM rail line. The proposed Acquisition would allow UP to reroute westbound empty coal trains between Kansas City, Kansas and Gibbon, Nebraska over part of the acquired NEKM rail line between Hiawatha, Kansas and Upland, Kansas. The rerouting of these empty coal trains would relieve capacity constraints on UP's mainline between Kansas City, Topeka, and Upland, Kansas. The Kansas CityTopeka rail line segment is a critical link in UP's rail corridor between the Midwest and Los Angeles, California. UP has stated that the proposed Acquisition would improve its rail operation between the Midwest and Los Angeles, California. The rerouting of the westbound empty coal trains would increase the train traffic by approximately 9.3 trains per day on the existing UP mainline between Kansas City, Kansas and Hiawatha, Kansas. Train traffic would increase by approximately 15 trains per day between Hiawatha, Kansas and Upland, Kansas. The route between Kansas City, Kansas and Gibbon, Nebraska via the NEKM rail line covers a distance of about 293 miles. The route to Gibbon, Nebraska over the NEKM rail line would be about 12 miles longer than UP's current route via Topeka, Kansas and about 71 miles shorter than UP's current route via Omaha, Nebraska. UP plans to upgrade portions of the Hiawatha-Upland segment of the NEKM rail line to Class III track, which would allow trains to travel over the upgraded portions at speeds up to 40 miles per hour (versus the current maximum speed of 25 miles per hour). The upgrade work would consist of track, wood tie, and anchor replacement plus the addition of ballast along the upgraded rail line. UP also plans to evaluate and, as necessary, rebuild public and private highway/rail at-grade crossings along the Hiawatha-Upland rail line segment. The improvements at these highway/rail at-grade crossings would not include modification of existing crossing protection devices. UP does not plan to upgrade the portion of the NEKM rail line between St. Joseph, Missouri and Hiawatha, Kansas. UP proposes to construct a connection between the existing UP mainline track and the NEKM mainline track in Hiawatha, Kansas. The proposed connection would begin approximately 900 feet north of Miami Street in Hiawatha. UP would construct the approximate 820-foot long connection entirely on existing railroad right-of-way. If the proposed Acquisition is not completed, UP would continue to route its empty westbound coal trains via the Kansas City-Topeka-Gibbon corridor and the Kansas City-Omaha-Gibbon corridors. The total miles that trains would travel via the current routes would be greater than the total miles via the NEKM route and the benefits associated with a reduction in total train-miles (i.e., fuel consumption, emissions, and freight rail operations safety benefits) would not occur. In addition, UP would have to upgrade its rail line between Kansas City and Marysville, Kansas to relieve current capacity constraints and to accommodate future growth in train volume. This would involve the construction of a second mainline track between Topeka, Kansas and Marysville, Kansas, and expansion of UP's rail yard in Topeka, Kansas. Based on information provided by UP, the following rail line segments would exceed the Board's thresholds for environmental analysis: ù Kansas City, Kansas to Atchison, Kansas, where UP estimates that rail traffic would increase by approximately 9.3 trains per day. ù Atchison, Kansas to Hiawatha, Kansas, where UP estimates that rail traffic would increase by approximately 9.3 trains per day. ù Hiawatha, Kansas to Upland, Kansas, where UP estimates that rail traffic would increase by approximately 15 trains per day. UP also proposes to construct a connection between the existing UP and NEKM rail lines in Hiawatha, Kansas. The proposed connection would allow northbound empty coal trains to be rerouted west over the NEKM rail line to Upland, Kansas. SEA completed a preliminary environmental review of the proposed connection at Hiawatha to determine if the connection would disturb only railroad property. SEA determined that the proposed connection would be built within the existing right-of-way; therefore, SEA's review focused on the project's potential to individually or cumulatively affect the environment beyond the existing right-ofway and to determine whether any aspect of the proposed activity warranted detailed environmental review. Under the no-action alternative, UP would continue its current rail operations with empty coal trains routed between Kansas City, Kansas and Gibbon, Nebraska via two routes: (1) Kansas City west to Topeka, Kansas then north through Upland and Marysville, Kansas, then to Gibbon, Nebraska; and (2) Kansas City north through Hiawatha, Kansas and Omaha, Nebraska, then west to Gibbon, Nebraska. Under the no-action alternative, environmental effects would remain as they are today for the existing traffic on these rail line segments. The rail line corridor between Kansas City, Topeka and Upland is currently capacity-constrained and UP estimates that it would remain constrained due to the anticipated growth in train volumes and ongoing scheduled maintenance outages along this route. Furthermore, the Kansas City-to-Topeka rail line segment is a critical link in UP's Midwest-to-Los Angeles rail corridor. If empty coal trains are not diverted from this route, capacity constraints would continue to affect service on UP's existing rail system. The existing UP and NEKM rail lines converge near the south end of Hiawatha, Kansas; run parallel to each other for approximately 2 miles through Hiawatha; then separate north of Hiawatha with the NEKM line running west to Upland, Kansas and the UP line running north to Omaha, Nebraska. Thus, reasonable build alternatives for the proposed connection would have to be located within the 2 mile corridor through Hiawatha. UP's proposed new connection is at the northern end of this 2 mile corridor. SEA considered a potential build alternative south of UP's proposed connection, but still within the 2 mile corridor. The build alternative would require modifying an existing crossover connection between the UP rail line and the NEKM rail line near Iowa Street in Hiawatha, south of UP's proposed new connection. This crossover connection is controlled by a manual switch. For northbound UP trains to use the crossover connection, the trains would have stop on UP's mainline, operate the manual switch, then continue on the NEKM line through Hiawatha. Because the trains would come to a stop, this process would create congestion on UP's mainline track. There would also be increased congestion at highway/rail at-grade crossings in Hiawatha because the trains would not be up to track speed when they use the highway/rail at-grade crossings. Also, by connecting to the NEKM rail line at this location, UP's trains would use the main rail line serving the NEKM's Hiawatha Yard and commercial customers in Hiawatha. This would create difficulties for local trains to fully utilize the Hiawatha Yard tracks and to serve customers in Hiawatha. UP therefore rejected converting the manual-operated switch to a power-operated switch, which would reduce the track congestion problem but would not solve the local service issues. Environmental effects of the build alternative would be minimal for the installation of a power-operated switch. If the switch were not power-operated, adverse effects could result from slower trains and increased congestion in the Hiawatha area. SEA did not consider this build alternative to be feasible because, at a minimum, local service would be adversely affected. UP proposes to construct a rail line connection in the Town of Hiawatha, Brown County, Kansas to allow UP's trains to travel between the existing UP and NEKM lines at Hiawatha. The proposed connection would provide an alternate route for westbound empty coal trains traveling between Kansas City, Kansas and the Powder River Basin in Wyoming. Hiawatha is located in northeastern Kansas, approximately 80 miles northwest of Kansas City, Kansas. The UP and NEKM lines traveling from the south (UP) and east (NEKM) meet, but do not connect, at the south end of Hiawatha. The two rail lines run adjacent to each other through Hiawatha, approximately 40 feet apart. Approximately 1 mile north of Hiawatha, the two lines separate and travel north (UP) and west (NEKM). UP proposes to construct a rail line connection on the north side of Hiawatha, near Miami Street. The proposed connection would enable UP trains to connect to the NEKM line and travel west to Upland, Kansas, where they would connect to another UP line to Marysville, Kansas and travel north to Gibbon, Nebraska. UP has proposed this alternate route because its current route for empty coal trains (Kansas City-Topeka-Upland) is capacity-constrained and is expected to remain constrained due to anticipated growth in the volume of freight trains on this mainline rail segment. The proposed 820-foot connection would be constructed between the UP line on the east and the NEKM line on the west. The connection would be constructed entirely within the existing railroad right-ofway, beginning approximately 900 feet north of Miami Street on the north side of Hiawatha. Approximately 375 feet of the connection would be located within the Hiawatha city limits and the remainder located north of the city boundary. UP estimates that construction of the proposed connection would require approximately 6 weeks to complete. UP estimates that an average of 16 trains per day would operate over the new connection following the proposed Acquisition. SEA concluded that construction of the proposed connection at Hiawatha, Kansas would not have potentially adverse environmental effects outside of the existing railroad right-of-way; therefore, mitigation is not warranted. SEA's PRELIMINARY ENVIRONMENTAL MITIGATION RECOMMENDATIONS Based on its independent analysis of all the information available at this time, SEA concludes that the proposed Acquisition would not significantly affect the quality of the human environment if the recommended mitigation measures set forth in this document are implemented. The preliminary mitigation recommendations are as follows: Safety: Freight Rail Operations Condition 1. UP shall comply with the requirements in the Federal Railroad Administration's (FRA) Proposed Rule for "gross ton-mile based" inspections on the following rail line segments in Kansas: ù Kansas City-Atchison. ù Atchison-Hiawatha. ù Hiawatha-Upland. FRA's Proposed Rule includes a provision that specifically requires railroads to conduct track inspections to detect rail flaws on a rail line segment at least once every 40 million gross tons per track mile or annually, whichever is more frequent. If FRA's Final Rule imposes a different inspection standard, then UP shall comply with the standard in the Final Rule. Safety: Highway/Rail At-grade Crossings Condition 2. UP shall upgrade the highway/rail at-grade crossing warning device at 6th Street in Sabetha, Kansas and 5 Street in Seneca, Kansas from crossbucks to flashing lights. Condition 3. UP shall consult with state and local officials to find suitable approaches for mitigating the adverse noise effects in the following communities on the Hiawatha-Upland rail line segment in Kansas: ù Hamlin ù Morrill ù Sabetha ù Oneida ù Seneca ù Baileyville ù Axtell ù Beattie ù Home Mitigation for a specific community may include a combination of: (1) eliminating highway/rail atgrade crossings, (2) installing safety measures that meet future FRA requirements for no-horn quiet zones, or (3) other measures as UP and affected community may negotiate. Monitoring and Enforcement Condition Condition 4. If there is a material change in the facts or circumstances upon which the Board relied in imposing specific environmental mitigation conditions in this Decision, and upon petition by any party who demonstrates such material changes, the Board may review the continuing applicability of its final mitigation, if warranted. Service Date - December 21, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD ENVIRONMENTAL ASSESSMENT NO. AB-290 (SUB-NO. 203X) Norfolk Southern Railway Company Abandonment Between Madison, IL and Sorento, IL in Madison and Bond Counties, Illinois In this proceeding, the Norfolk Southern Railway Company has filed a petition in connection with the abandonment of its railroad line located between Milepost TS- 406.6 at Sorento and Milepost TS-445.7 in Madison, IL, a distance of 39.1 miles known as the Madison Branch in Madison and Bond Counties, Illinois. This line is located in a primarily rural area. There is one local shipper on the line, Richards Brick Company, at Edwardsville, IL, who currently moves approximately 11 carloads per week via this rail line. According to NS, this shipper could use truck transportation. Alternative rail transportation is available in the area, including another NS line in Edwardsville, located approximately two miles away. In 1997, 542 carloads of local traffic comprising brick and slate moved on this line. If freight currently moving over this rail line is diverted to truck, there would be an attendant increase of truck traffic on highways paralleling the affected rail line. NS states that 542 carloads moved in 1997. Assuming a truck to rail diversion of 4 to 1, this would mean a total increase of 2168 trucks on all affected roadways. The number of total rail cars diverted to truck is well below the Board's threshold of 1,000 carloads, and would result in no significant environmental impact. Region 5, U.S. EPA has commented that the railroad should employ soil erosion and stormwater runoff mitigation practices, including revegetating the affected area with native flora, during abandonment activities. In addition, removed rail equipment should be stored away from wetlands and waterbodies. As a result of EPA's comments, we recommend that the following condition be imposed: While conducting salvage activities, Norfolk Southern Railway shall employ appropriate soil erosion and stormwater runoff measures and shall ensure that removed rail equipment be stored away from wetlands and waterbodies. The National Geodetic Survey has identified one station marker, E 113, than may be affected by abandonment of this line. We therefore recommend imposition of the following condition: Norfolk Southern Railway shall provide the National Geodetic Survey with at least 90 days prior notice before undertaking any activities which may disturb or destroy station marker E 113. Service Date - December 22, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. AB-557X] Trustees of the Cincinnati Southern Railway--Abandonment Exemption--in Hamilton County, OH [STB Docket No. AB-290 (Sub-No. 187X)] The Cincinnati, New Orleans & Texas Pacific Railway Company--Discontinuance of Service Exemption--in Hamilton County, OH Trustees of the Cincinnati Southern Railway (CSR) and The Cincinnati, New Orleans & Texas Pacific Railway Company (CNO&TP) have filed a notice of exemption for CSR to abandon and CNO&TP to discontinue service over a 1.2-mile line of railroad between Stations 722+19 and Stations 71+11 in Cincinnati, Hamilton County, OH. Provided no formal expression of intent to file an offer of financial assistance (OFA) has been received, this exemption will be effective on January 21, 1999, unless stayed pending reconsideration. CSR 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 CSR's filing of a notice of consummation by December 22, 1999, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. Decided: December 15, 1998. Service Date - December 22, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB EX PARTE NO. 573 RAIL SERVICE IN THE WESTERN UNITED STATES In a decision served on July 31, 1998, we declined to issue a further emergency service order requiring Union Pacific Railroad Company (UP) to give up traffic to other carriers in the Houston, TX, region, because of the significant improvements in rail service in that area since the issuance of an earlier emergency service order. Nevertheless, we determined that data reporting by UP and Burlington Northern and Santa Fe Railway Company (BNSF) continued to be necessary and appropriate at that time. There have been significant further improvements in rail service in the Western United States subsequent to our July 31 decision. Additionally, we note that, as a result of shipper- railroad discussions suggested by the Board, the U.S. and Canadian Class I carrier members of the Association of American Railroads have agreed to start issuing a series of weekly reports in January 1999, that will contain information similar to, and in some respects, more expansive than that contained in the reports we have required from UP and BNSF. Accordingly, we believe that elimination of the continued reporting and discontinuance of the Ex Parte No. 573 proceeding is now appropriate. The performance data contained in the Class I carrier reports should be useful over the longer term, as they will include additional carriers and terminals, and more specific breakdowns of certain of the data. As an example, the reports that we have required from UP have included a single measurement for average train speed, whereas the Class I carrier reports will include average train speed for each railroad by type of train (such as coal, grain, intermodal, and manifest). We applaud the carriers efforts to provide more data regarding their performance and to otherwise improve communications with shippers. We believe that these efforts will benefit day- to-day shipper-carrier relations and provide information needed to ensure early recognition of any service problems that may begin to develop in the future. In light of the industry-wide data and the service improvement in the West, we are eliminating the reporting required in this proceeding effective after the first weekly industry reports are issued by the Class I carriers. We believe that it is preferable that performance measures for Class I carriers be reported on an industry-wide basis to encourage a uniform basis for the reported data. Nevertheless, we will not hesitate to impose selective reporting requirements in the future when we have reason to believe that such requirements are needed in the public interest. Furthermore, we urge the Class I carriers to add to the industry-wide reporting that will be made available in January 1999, grain car loading data similar to what the Board has required in this proceeding. It is ordered: 1. The reporting requirements imposed on UP and BNSF are terminated upon the issuance of the first Class I carrier weekly performance reports discussed in this decision. 2. This proceeding will be discontinued effective February 1, 1999. Decided: December 18, 1998 Service Date - December 22, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION Finance Docket No. 21510 (Sub-No. 5) NORFOLK AND WESTERN RAILWAY COMPANY AND NEW YORK, CHICAGO AND ST.LOUIS RAILROAD COMPANY--MERGER, ETC. On October 13, 1998, 11 former employees of the former Akron, Canton and Youngstown Railroad Company (AC&Y) filed a petition to reopen this proceeding, alleging material error, new evidence, and substantially changed circumstances. On November 2, 1998, Norfolk Southern Railway Company (NS), successor by merger to Norfolk and Western Railway Company (NW), filed a reply. We will deny the petition. By decision served on May 25, 1995, the former Interstate Commerce Commission (ICC) affirmed an arbitral decision arising from NW's sale of the property of the former AC&Y, together with portions of other property, to the Wheeling Acquisition Corporation (referred to as Wheeling and Lake Erie Railway Company), an unaffiliated company. The sale included the petitioners entire seniority district. Petitioners were protected under the Merger Agreement employee protective conditions that the ICC had imposed in 1964 when it approved the merger of NW with the former New York, Chicago and St. Louis Railway Company (Nickel Plate) and the acquisition of stock control over both the former Wabash Railroad Company and AC&Y. In the Nickel Plate merger, the ICC adopted and imposed the expanded Merger Agreement conditions negotiated by NW and its labor unions. The most important of these benefits was the attrition protection that provided for working-lifetime wage guarantees. It specified that no employee of any of the carriers involved in the Nickel Plate merger could be placed in a worse position with respect to compensation, rules, working conditions, fringe benefits, or rights or privileges at any time during that employee's employment. In return for lifetime economic protection, NW received the right to transfer the work of the protected employees throughout the merged system. To facilitate NW's exercise of this transfer right, labor was directed to enter into implementing agreements that would allow employees to follow their transferred work voluntarily or, if they declined, to be reassigned in the general locality of their last employment. Approximately three years after NW sold the former AC&Y property, NW required petitioners to report to work at its Cleveland, OH, Nickel Plate District, which they did under protest. Upon reporting to the Cleveland district, petitioners were given new hire seniority dates by NW ranging from September 8, 1992, to September 17, 1993, despite the fact that, in 1964 when NW had acquired the AC&Y, petitioners had established seniority dates with AC&Y ranging between May 14, 1956, and June 15, 1964. The United Transportation Union (UTU), the successor to the four original labor organization signatories to the Merger Agreement, opposed the transfer and argued that the affected employees were not required either to accept the new assignments or to lose their benefits under the Merger Agreement. Pursuant to the terms of the Merger Agreement, the dispute was submitted to arbitration. An arbitral decision was issued on July 9, 1993. The arbitrator addressed whether NW violated the Merger Agreement conditions applying to these protected employees when it required them to accept trainmen assignments in different seniority districts in Cleveland and Lima, OH. He found that the obligations under the Merger Agreement are bilateral in that NW is obligated to guarantee wages and benefits, and the employees, in turn, are obligated to make themselves available to work. The arbitrator further found that the positions made available constituted comparable employment in the same general locality because the jobs are all in the same craft or class and did not require a change in residence. Subject to the negotiation of an implementing agreement, the arbitrator found that NW held the right to assign employees to comparable positions in Cleveland and Lima, as a condition to maintaining their compensatory benefits under the Merger Agreement. The arbitrator then directed that an implementing agreement be negotiated within 90 days of the date of his award. He stated that an implementing agreement was necessary because the reassigned employees were put on the bottom of the seniority list as new employees, thereby placing them in a less advantageous positions than they would have been had they remained in their old seniority district. Also, he expressed concern that placing the employees on the Nickel Plate seniority list might subject these employees to reassignments in areas substantially beyond a normal and reasonable commute from the Cleveland and Lima areas. The implementing agreement was to address these concerns. UTU sought review of the arbitrator's decision, arguing that he had exceeded his jurisdiction, committed egregious error, and misinterpreted the labor protective conditions imposed by the ICC on the Nickel Plate merger by: (1) permitting NW to compel the transfer of employees to a location where they held no seniority at the time of the merger; and (2) permitting NW to negotiate an after-the-fact implementing agreement. In seeking review of the arbitration award, UTU also argued that it was impossible to develop an implementing agreement integrating the seniority of the former AC&Y seniority district employees into the new seniority district. By decision served on May 25, 1995, the ICC reviewed the arbitration award and affirmed it. Specifically, the ICC found that NW had the right, as a precondition to the continued receipt of protective benefits under the Merger Agreement, to assign employees to available positions off their former seniority district and that, while NW should have negotiated an implementing agreement before the reassignment took place, the arbitrator's requirement for the parties to reach an implementing agreement after the fact constituted an appropriate solution. The ICC disagreed with UTU that it was impossible to develop an implementing agreement that protected the seniority of eight of the petitioners and sought to ensure that the former AC&Y employees would not be reassigned to a point beyond the general locality of their prior positions that would necessitate a change in residence. Accordingly, under the terms of the arbitration award, NW and UTU were required to negotiate an implementing agreement. Subsequently, the parties were unable to reach a voluntary agreement and the matter was resubmitted to arbitration. In a Supplemental Opinion and Award issued on January 2, 1996, petitioners won protection from reassignments from their new positions that might necessitate a change in their residences, but their seniority that they had established with AC&Y (as it had stood prior to their reassignment) was not integrated into their new seniority district. While the supplemental arbitration was pending, petitioners filed a lawsuit in the United States District court for the Northern District of Ohio (Eastern Division) against NW and UTU. Petitioners sought a judgment that NW had violated their rights under the Nickel Plate Merger Agreement and under the AC&Y collective bargaining agreement between NW and UTU, and sought damages from UTU for alleged breaches of UTU's duties of fair representation under the Railway Labor Act during the Merger Agreement arbitration proceedings and for UTU's failure to seek judicial review of the ICC's May 25, 1995 decision, as well as for UTU's alleged deficient handling of petitioners grievances concerning working conditions at Cleveland. On September 2, 1997, the district court granted summary judgment to NW for all claims asserted against it, directed judgment for UTU for all claims asserted by two of the petitioners here, and dismissed all other claims asserted against UTU except for claims alleging a breach of duty of fair representation by UTU concerning local grievances at Cleveland after April 30, 1995. On May 7, 1998, the jury, considering only petitioners claims concerning UTU's handling of local grievances at Cleveland, returned a verdict in favor of nine of the petitioners. The jury awarded damages in the aggregate amount of $32,500. On June 9, 1998, the district court judge entered a judgment against UTU and awarded the damages. Petitioners now argue that the January 2, 1996 Supplemental Award is in non-compliance with the May 12, 1995 ICC decision and that the Supplemental Award must be set aside with an order directing that UTU and NS enter into an implementing agreement integrating the former AC&Y employees AC&Y date of hire seniority into the Cleveland Nickel Plate District roster. They argue that the arbitration award of July 9, 1993, recognized that this integration is a requirement, that the ICC's decision affirmed it, and that UTU understood its obligation to obtain an integrated roster when it entered into the supplemental arbitration process, but that this was not done. Because the January 2, 1996 Supplemental Award did not integrate or protect the petitioners seniority, petitioners allege that it does not comply with the ICC decision and warrants reopening of this proceeding. In reply, NS argues that a petition to reopen should not be used as a vehicle for review of an arbitration decision because a specific procedure for such review is provided under 49 CFR 1115.8, which allows an appeal of right to be filed within 20 days of a final arbitration decision. NS points out that petitioners had actual knowledge of the Supplemental Award upon its issuance, petitioners were represented by counsel at the time the Supplemental Award was issued and elected not to file a petition for review by the Board, and petitioners do not state why they did not file a timely petition for review. Accordingly, NW argues that the petition to reopen cannot be viewed as an appeal of right under section 1115.8 because such an appeal is now time-barred. NS argues further that UTU's petition to reopen does not meet the criteria of 49 CFR 1115.4 because it does not state in detail in what respects the proceeding involves material error, new evidence, or substantially change circumstances. NS contends that petitioners mere assertion that the Supplemental Award is in non-compliance with the May 25, 1995 ICC decision does not demonstrate any of these standards. We accord deference to arbitrators decisions and will not review issues of causation, calculation of benefits, or the resolution of factual questions in the absence of egregious error. Review of arbitral decisions has been limited to recurring or otherwise significant issues of general importance regarding the interpretation of our labor conditions. We generally do not overturn an arbitral award, unless it is shown that the award is irrational or fails to draw its essence from the imposed labor conditions or it is outside the scope of authority granted by the conditions. Petitioners apparently recognize that an appeal of right to the Supplemental Award is precluded by 49 CFR 1115.8 and have chosen to file a petition to reopen this proceeding under 49 CFR 1115.4, generally alleging that new evidence, material error and substantially changed circumstances warrant reopening. They have failed to meet this standard. We disagree with petitioners argument that the Supplemental Award fails to comply with the part of the ICC's 1995 decision that attaches importance to the arbitrator's findings concerning the integration of seniority. The ICC affirmed the arbitrator's decision and expressed its disagreement with UTU's position that seniority of petitioners could not be integrated with the Cleveland seniority district, but it did not order that the seniority of the former AC&Y employees be integrated into the Cleveland Nickel Plate District in any particular way nor did it preclude the result reached in the Supplemental Award. Essentially, the arbitrator consolidated seniority by placing employees new to the situation at the bottom, one recognized way of consolidating seniority in the rail industry. Consequently, we find that the Supplemental Award is in compliance with the ICC's decision. The ICC's 1995 decision affirmed that the parties should negotiate an implementing agreement. This was accomplished through the Supplemental Award, which protects petitioners from being required to take jobs at locations away from the Cleveland area but does not integrate seniority in the manner sought by petitioners. The integration of seniority districts is a matter that has historically been decided by arbitrators under the Washington Job Protection Agreement of 1936 and subsequently under our labor protective conditions. With the approval of the courts, we have traditionally deferred to the judgments of arbitrators on these matters in the absence of egregious error. The Supplemental Award protects petitioners right to be employed within a reasonable distance of their residences, presumably the ICC's main concern with regard to their seniority rights. And it is not a decision that could be vacated even if it had been timely appealed. Accordingly, the petition to reopen will be denied. It is ordered: 1. The petition to reopen this proceeding, filed on October 13, 1998, is denied. 2. This decision is effective on January 21, 1999. Decided: December 18, 1998 Service Date - December 22, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 32964 BROTHERHOOD OF MAINTENANCE OF WAY EMPLOYEES AND SOO LINE SYSTEM DIVISION, BROTHERHOOD OF MAINTENANCE OF WAY EMPLOYEES v. SOO LINE RAILROAD COMPANY AND WISCONSIN CENTRAL LTD. STB Finance Docket No. 32964 (Sub-No. 1X) WISCONSIN CENTRAL LTD. LEASE EXEMPTION SOO LINE RAILROAD COMPANY D/B/A CP RAIL SYSTEM By complaint filed May 10, 1996, and amended June 17, 1996, the Brotherhood of Maintenance of Way Employees and the Soo Line System Division Brotherhood of Maintenance of Way Employees (jointly referred to as BMWE) seek a finding that the Soo Line Railroad Company d/b/a CP Rail System and Wisconsin Central Ltd. (WCL) entered into a lease transaction on October 5, 1995, without obtaining prior approval or an exemption from the Interstate Commerce Commission. Alternatively, complainants argue that the transaction is subject to the Board's jurisdiction. By pleading filed June 10, 1996, defendants replied to the complaint. Complainants filed opening statements on September 6, 1996, defendants replied on September 30, 1996, and complainants filed a rebuttal on October 10, 1996. By letters filed October 23, 1996, and October 24, 1996, WCL and Soo, respectively, responded to certain matters addressed in the rebuttal. We will grant the complaint to the extent it seeks a finding that the parties should have obtained prior ICC approval for the temporary lease, and will grant a corresponding exemption on our own motion, subject to the employee protective conditions that would have been imposed had WCL/Soo sought approval of the transaction in 1995. The exemption will be designated as STB Finance Docket No. 32964 (Sub-No. 1X). WCL acquired approximately 1,801 miles of rail line from Soo in Finance Docket No. 31102 (ICC served Sept. 11, 1987, Oct. 8, 1987, and July 28, 1988). As pertinent to this complaint, Soo retained a temporary right to continue its operations at the Schiller Park, IL intermodal facility, located north of Forest Park, IL, until it either relocated the facility or discontinued its use. The carriers also exchanged operational control of tracks in the Schiller Park rail yard so that WCL could operate on Soo's Gauntlet Track along the west side of the yard as a part of its main line route, and Soo assumed control of WCL's main line Tracks 6 and 7 through the yard. Although WCL acquired the right to operate over all rail facilities in the yard, all of the rail facilities, except the Gauntlet Track, remained under Soo's control and management. As a part of the transaction, WCL purchased an additional 206.7 miles of line approved for abandonment by Soo but did not seek authority to operate over the line. WCL also was granted trackage rights over 173.6 miles of Soo lines, and Soo assigned 27.7 miles of related trackage rights on lines of third party carriers. In turn, WCL granted Soo three separate parcels of trackage rights over approximately 209 miles of line. In 1995, WCL/Soo negotiated an agreement with the Commuter Rail Division of the Regional Transportation Authority, a division of an Illinois municipal corporation doing business as Metra, that allowed Metra to institute commuter rail service on WCL's line between Chicago and Antioch, IL. To implement the agreement, WCL needed to construct a second main line parallel to, easterly, and within 75 feet of the Gauntlet Track, and upgrade and realign the Gauntlet Track to accommodate Metra's passenger service. Because the second main line could not be constructed before Metra's service was due to commence, WCL assertedly sought a bypass or overflow routing through the Schiller Park yard. WCL subsequently entered into an agreement with Soo dated October 5, 1995 (1995 agreement), which allowed WCL to lease Soo's Tracks 17 and 18, together with lead tracks and connections, and upgrade them to temporarily perform the main line function of the Gauntlet Track. Tracks 17 and 18 are each approximately 3,300 feet in length, and are located approximately 90 feet from the Gauntlet Track. Unlike the prior agreement between Soo and WCL, which merely permitted WCL to use these tracks for switching purposes subject to Soo's control, the new agreement gave WCL exclusive control, and it was understood that WCL would use such tracks as its main line. The lease was due to expire on the earlier of the completion of construction of WCL's new main line or December 1, 1997. WCL/Soo did not seek ICC approval for the temporary lease. The parties subsequently transferred ownership of the Gauntlet Track from Soo to WCL and Tracks 6 and 7 from WCL to Soo, to conform ownership of those lines with their existing operations. WCL temporarily retained the right to operate on a portion of Track 7 as part of a bypass route while the Gauntlet Track was being upgraded. BMWE argues that, although Soo will receive no rent or other monetary compensation for WCL's lease of its tracks, Soo will receive consideration in the form of a substantial improvements to tracks 17 and 18 when they once again revert back to Soo's use and control. BMWE also contends that, under a BMWE-Soo collective bargaining agreement, all work performed on the Soo Track is reserved for BMWE-represented Soo employees (except in circumstances not applicable here). Therefore, BMWE asserts that the approximately 3,000 man hours spent by WCL's employees upgrading Tracks 17 and 18 should have been performed by its workers. Moreover, BMWE alleges that in late fall of 1995, Soo furloughed over 70 maintenance way employees who could have been assigned to, and could have performed, this rehabilitation and upgrade work. BMWE asks that the Board: (1) find that the 1995 lease agreement required prior approval from the ICC; (2) order WCL to return operational management and control of the tracks to Soo; and (3) apply the employee protective conditions in New York Dock to the transaction. Moreover, because all work on Soo track is allegedly reserved for BMWE employees under a collective bargaining agreement with Soo, they also request that we find that BMWE's employees should be compensated for the work opportunities lost as a direct and proximate result of the lease agreement. Complainants contend that, because both Soo and WCL are rail carriers, the 1995 agreement required the ICC's approval. In the alternative, BMWE contends that the transaction was subject to 49 U.S.C. 10901 as a transaction involving construction of a line of railroad. In response, defendants argue that the lease did not grant new operating rights to WCL because both WCL and Soo had the right to use all tracks and rail facilities in the Schiller Park yard since 1987, and the only difference is that the 1995 agreement simply facilitated use of those existing rights by transferring operational and maintenance control over Tracks 17 and 18 to WCL while preserving Soo's ongoing rights to use the tracks. WCL argues that Track 17 is generally used only if the Gauntlet Track is occupied or otherwise unavailable, and its use is nothing more than a temporary railroad bypass arrangement, not unlike a short shoo-fly or a temporary detour arrangement. According to WCL, Track 17 handles 5-6 through-freight trains per day through the yard while Track 18 is used only to switch and hold cars. Soo/WCL argue that there has been no shift in either of their services and they will do precisely what they have always done in the Schiller Park yard; Soo will continue to operate its intermodal facility, and WCL will continue to operate the same through trains and provide the same local service it has in the past. Assertedly, the only difference under the lease is that WCL, rather than Soo, will dispatch and maintain Tracks 17 and 18. Also, defendants claim that this case is similar to previous situations where the ICC held that the mere relocation of a carrier's operations onto new trackage, without any effect on service to shippers or penetration into new markets, is not subject to the agency's jurisdiction. Moreover, they contend agency jurisdiction under section 10901 is required only if the operations in question involve an extension into a new territory. Finally, defendants claim that the relevant track is exempt trackage and, therefore, no ICC approval for the 1995 agreement was required. They state that prior to the 1995 agreement, there is no question here that tracks 17 and 18 were yard trackage properly classified as spur, industrial, team, switching, or side tracks. They further argue that, because the 1995 agreement expressly provided for joint use of the tracks, the trackage is exempt as a joint use of exempt trackage. BMWE submits that, according to ICC precedent, when a tenant's use is different from the use made by the railroad owning the track, the tenant's use is the controlling factor in determining the character of the track. Although Soo may have used the tracks as exempt yard track, BMWE argues that WCL's use is the controlling factor in determining the status of the track for jurisdictional purposes. Therefore, because WCL used the tracks to operate its through-freight trains, BMWE argues that the lease required ICC approval. Prior approval by the ICC was required for a rail carrier to lease the property of another rail carrier. However, 49 U.S.C. 10907(a) contained an exception to permit rail carriers to enter into arrangements for the joint ownership or joint use of spur, industrial, team, switching, or side tracks without ICC approval. It is well settled that, in deciding whether approval of a lease of railroad property is required, it is the tenant's use, and not the preexisting owner's use, that determines whether the track usage is subject to jurisdiction or exempt. It is clear from the record here, that WCL used the track as a part of its main line. Moreover, Soo and WCL evidently considered the change in their arrangement and in WCL's use to be sufficiently distinct from their prior agreement as to warrant entry into a separate lease. Accordingly, we conclude that, as to WCL, the track subject to the lease was not, during the term of the lease, exempt yard track, and we will grant the complaint to the extent it seeks a finding that defendants should have obtained prior approval for the temporary lease from the IC. Although WCL states that Track 18 was being used only to switch and hold cars, the lease itself does not restrict the use of either track. Both tracks apparently have been rehabilitated to Federal Railroad Administration class 1 standards. Therefore, for the purposes of this decision, we conclude that the entire transaction required ICC approval. The record indicates that the transaction was consummated in 1995 and has expired on its own terms. WCL's failure to obtain prior approval from the ICC appears to be inadvertent and predicated on the mistaken belief that, because the tracks were exempt yard trackage for Soo, and because they had the right to use them for switching purposes, no approval of the temporary lease was required. However, requiring WCL/Soo to file an application or exemption request for the temporary lease at this time would only serve to further delay relief for employees that may have been adversely affected by the now apparently expired transaction. Therefore, in order to facilitate implementation of employee benefits, we find that there is sufficient information on the record before us to grant on our own motion, an exemption. Exemption authority cannot be used to relieve a carrier of its obligations to protect the interest of employees. However, although BMWE argues that the New York Dock employee protective conditions should be imposed on the transaction, the conditions in Mendocino Coast have been found to satisfy the statutory requirements of 49 U.S.C. 11347 for the protection of employees affected by lease transactions. Accordingly, as a condition to granting this retroactive exemption, we will impose the standard employee protective conditions in Mendocino Coast. Normally, however, employee protective conditions are imposed prior to some action to be taken by a railroad following Board authorization. Here, any protective action will necessarily be undertaken retroactively and must address harm that might have occurred because lease approval was not sought. Accordingly, the parties should be able to determine which, if any, employees have been adversely affected by the transaction and what protection in the form of compensation is warranted. If the parties cannot agree on what compensation, if any, should apply, they should submit their dispute to arbitration. It is ordered: 1. BMWE's motion to amend its complaint is granted. 2. WCL's and Soo's pleadings filed October 23, 1996 and October 24, 1996. respectively, are accepted for filing. 3. The motions to strike discussed above are denied. 4. Except to the extent granted above, the complaint in STB Finance Docket No. 32964 is denied. 5. In STB Finance Docket No. 32964 (Sub-No. 1X), under 49 U.S.C. 10505, we exempt, nunc pro tunc, from the prior approval requirements of 49 U.S.C. 11343-45, the lease by WCL of the above-described track segments, subject to the employee protective conditions in Mendocino Coast Ry., Inc. Lease and Operate, 354 I.C.C. 732 (1978) and 360 I.C.C. 653 (1980). 6. Notice of the exemption in STB Finance Docket No. 32964 (Sub-No. 1X) will be published in the Federal Register on December 30, 1998. 7. This decision will be effective on January 29, 1999. Decided: December 21, 1998 Service Date - December 22, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 33388 Decision No. 110 CSX CORPORATION AND CSX TRANSPORTATION, INC., NORFOLK SOUTHERN CORPORATION AND NORFOLK SOUTHERN RAILWAY COMPANY --CONTROL AND OPERATING LEASES/AGREEMENTS--CONRAIL INC. AND CONSOLIDATED RAIL CORPORATION This decision resolves the anticompetitive problems posed by the two contracts referenced in Decision No. 106. In Decision No. 89, we approved the acquisition of control of Conrail Inc. (CRR) and Consolidated Rail Corporation (CRC), and the division of the assets thereof, by (1) CSX Corporation (CSXC) and CSX Transportation, Inc. (CSXT), and (2) Norfolk Southern Corporation (NSC) and Norfolk Southern Railway Company (NSR). In approving the CSX/NS/CR transaction, we noted our expectation that the transaction would result in the creation of head-to-head two-railroad competition in several corridors in which the pre-transaction Conrail had no Class I competition. One of these corridors links Chicago, IL, and Northern New Jersey. Prior to the CSX/NS/CR transaction, Conrail was the only Class I railroad operating over the length of this corridor. On Day One, however, two railroads -- CSX and NS -- will operate between Chicago and Northern New Jersey. In a petition filed December 2, 1998, CSX brought to our attention two contracts that, if allowed to continue in effect past Day One, would weaken the CSX vs. NS competition we intended to create in the Chicago-Northern New Jersey corridor. CSX contends: that, some years ago, its intermodal affiliate, CSX Intermodal, Inc. (CSXI), entered into contracts with Conrail and NS respecting the movement of traffic between Chicago and Northern New Jersey, via Buffalo, NY; that these contracts contain volume and trainset commitments, which are expressed as percentages of the total traffic handled by CSXI in this corridor; and that these contracts also provide for liquidated damages, which are applicable in the event CSXI fails to comply with its contractual commitments. CSX asks that we declare that, effective on Day One, the volume and trainset requirements contained in the two CSXI contracts will be null and void, and unenforceable by Conrail and NS. The traffic moves between Chicago and Buffalo on Conrail (under the Conrail contract) and on NS (under the NS contract). The traffic moves between Buffalo and Northern New Jersey on the New York, Susquehanna and Western Railroad (NYS&W). In our decision directing NS to file an expedited reply to the CSX petition, we encouraged NS to address, in its reply, a question that will arise if we decide to order CSX not to comply with the requirements provisions in the two CSXI contracts: What then will become of the liquidated damages provisions? Perhaps, we suggested, the future handling of this matter could reflect the way it might have been handled if these contracts had been on the table during the negotiation of the CSX/NS/CR Transaction Agreement and had been subject, at that time, to the general give-and-take that accompanied the negotiation of that agreement. In its reply filed December 17, 1998, NS argues, in essence, that, if we take action to eliminate the anticompetitive problems posed by the two CSXI contracts that were referenced in the CSX petition, we should also take action to eliminate the anticompetitive problems posed by two Conrail/APL arrangements that were not mentioned in the CSX petition. We agree with CSX that the two CSXI contracts had prior to the Control Date, and continue to have in the interim period between the Control Date and Day One, no anticompetitive impacts, because CSX did not in the past, and does not now, operate between Chicago and Northern New Jersey. We further agree with CSX that the two CSXI contracts, if allowed to continue in effect without modification, would have anticompetitive impacts commencing on Day One. The CSX vs. NS competition that would otherwise exist on Day One would be thwarted by the continued existence of these contracts, which would require CSXI to ship most of its Chicago-Northern New Jersey intermodal movements on NS (under the NS contract) or under a 50-50 pooling arrangement with NS (under the Conrail contract, as modified by the terms of the CSX/NS/CR Transaction Agreement). We realize, of course, that the anticompetitive impacts of the two CSXI contracts, if allowed to continue, would last for only six months or some period not much longer than six months; but even six months is unacceptable. We had in mind, when we issued Decision No. 89, that CSX vs. NS competition would begin in the Chicago-Northern New Jersey corridor on Day One, not on some day some months after Day One. It is, therefore, necessary to take action to assure that CSX vs. NS competition begins in the Chicago-Northern New Jersey corridor on Day One, as we contemplated in Decision No. 89. The requirements provisions of the two CSXI contracts, if allowed to continue in effect past Day One, would have anticompetitive impacts and would operate as impediments to our intention that full competition exist in the Chicago-Northern New Jersey corridor from Day One. We will, therefore, override these requirements provisions, making them (effective on Day One) null and void, and unenforceable by Conrail and NS. We will not explicitly override the liquidated damages provisions, but only because an explicit override is not necessary; the requirements provisions having been nullified, CSXI cannot breach such provisions by failing to comply with them; and, therefore, our explicit override of the requirements provisions effectively nullifies, by implication, the liquidated damages provisions. NS contends that, if the two CSXI contracts had been on the table during the negotiation of the CSX/NS/CR Transaction Agreement, and if NS had known then what it knows now regarding Conrail's intermodal contracts, NS would have insisted on linking, for purposes of negotiation, the two CSXI contracts and the two Conrail/APL arrangements. NS therefore argues that, if CSX is granted relief from the operation of the volume commitment contained in either of the CSXI contracts, we should relieve APL from its volume commitment in the Conrail/APL contract and the tie of such commitment to the Conrail/APL lease (i.e., we should allow APL to continue to have the benefit of the Conrail/APL lease even if APL elects to terminate, effective on the 180th day after Day One, the Conrail/APL contract). NS recognizes that we are already familiar with the Conrail/APL arrangements. Indeed we are. We are, in fact, sufficiently familiar with the Conrail/APL arrangements to realize that NS arguments respecting such arrangements appear to be identical to the APL arguments referenced in Decision Nos. 78, 91, and 96. And our response, therefore, is also identical: We remain unpersuaded that APL should be afforded special relief because the exercise of such a clause [i.e., an antiassignment clause] in the Conrail/APL transportation contract may result in the termination of APL's lease of a portion of Conrail's South Kearny, NJ, yard. NS claims, in essence, that it would be unfairly disadvantaged if we were to grant the relief sought by CSX vis-…-vis the two CSXI contracts without also granting the relief now sought by NS (and previously sought by APL) vis-…-vis the two Conrail/APL arrangements. We think that NS is overreaching in its attempt to link the two CSXI contracts and the two Conrail/APL arrangements, particularly given that the very relief now sought by NS vis-…-vis the two Conrail/APL arrangements was previously sought by APL. It does not suffice to contend that, when the Transaction Agreement was negotiated, NS did not know (although CSX may perhaps have known) of the tie between the Conrail/APL contract and the Conrail/APL lease. NS learned of the tie in advance of Decision No. 89, and could have indicated, on the record, its support for the arguments advanced by APL. Nor does it suffice to contend that CSX has initiated an arbitration proceeding that (in NS view) threatens to deprive Conrail, as the operator of the North Jersey Shared Assets Area, of the facilities necessary to enable both NS and CSX to serve the APINY facility. NS should pursue its remedies in the arbitration proceeding; and, if arbitration (either in this matter or in any of the other matters referenced by NS) produces a result that, in NS view, threatens to nullify the procompetitive environment we attempted to secure in our decision approving the CSX/NS/CR transaction, NS should petition for relief under the auspices of our oversight jurisdiction. For the reasons stated herein, we reject NS request to consider the two Conrail/APL arrangements in conjunction with the two CSXI contracts. The relief we are ordering vis-…-vis the two CSXI contracts is intended to operate prospectively from Day One, and is not intended to have any effect with respect to traffic that moved, or that should have moved, prior to Day One. This decision has no bearing on any claims arising under either of the two CSXI contracts with respect to traffic that moved prior to Day One or that should have moved prior to that day. It is ordered: 1. The requirements provisions of the two CSXI contracts are overridden as an impediment to our intention that full competition exist in the Chicago-Northern New Jersey corridor from Day One. 2. The override provided for in ordering paragraph 1 is intended to operate prospectively from Day One. Decided: December 21, 1998 Service Date - December 22, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33424 PORTLAND & WESTERN RAILROAD, INC.--ACQUISITION AND OPERATION EXEMPTION--THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY On July 3, 1997, Portland & Western Railroad, Inc. (PWR), filed a verified notice of exemption to acquire and operate approximately 91.66 miles of line owned by The Burlington Northern and Santa Fe Railway Company (BNSF), known as the Astoria Branch, between milepost 5.22 near Willbridge, OR, and milepost 96.88 near Tongue Point, OR. As part of the same transaction, BNSF granted incidental trackage rights to PWR over a 1.92-mile line between milepost 5.22 and milepost 3.30 near Willbridge Yard. The exemption became effective on July 10, 1997. Also on July 10, 1997, John D. Fitzgerald, on behalf of the United Transportation Union--General Committee of Adjustment (UTU-GCA), filed a petition to reject, to revoke, and to stay the exemption, to which PWR replied. Notice of the exemption was served on July 22, 1997. On August 1, 1997, UTU-GCA filed an appeal to the publication of the notice of exemption, arguing that the notice should have been rejected or stayed. PWR replied to the appeal. By decision served July 6, 1998, we denied UTU-GCA's petition to revoke the exemption and its appeal. On July 27, 1998, UTU-GCA filed a petition for reconsideration, alleging new evidence and material error. On August 17, 1998, PWR replied. We see no basis on which to grant UTU-GCA's most recent petition. UTU-GCA submits that the agreement between BNSF and PWR, which was submitted in PWR's reply, filed July 30, 1997, to UTU-GCA's petition to revoke constitutes new evidence, but it is not new. Indeed, UTU-GCA points out that a confidential copy of the agreement was submitted to the Board, citing PWR's August 1, 1997 letter to the Board's Secretary. The agreement was considered when we issued our July 6 decision denying UTU-GCA's petition to revoke the exemption. UTU-GCA's remaining arguments that the transaction is not within the class exemption are essentially the same as its previous arguments, which we rejected in our July 6 decision where we found that UTU- GCA failed to demonstrate that regulation of this transaction is necessary or that any substantive basis exists for revocation of the exemption. Our previous review of this transaction demonstrated that it qualifies as a 49 U.S.C. 10902 transaction and falls within the class exemption at 49 CFR 1150.41. Accordingly, for the reasons stated in our July 6 decision, we will deny UTU-GCA's petition for reconsideration. It is ordered: 1. UTU-GCA's petition for reconsideration is denied. Decided: December 17, 1998 Service Date - December 22, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION Docket No. AB-167 (Sub-No. 1132X) CONSOLIDATED RAIL CORPORATION--ABANDONMENT--BETWEEN BURGETTSTOWN, WASHINGTON COUNTY, PA, AND COLLIERS, BROOK COUNTY, WV By decision and notice of interim trail use or abandonment (NITU) served March 7, 1994, a 180-day period was authorized for National Pike Trail Council (NPTC) to negotiate an interim trail use/rail banking agreement with Consolidated Rail Corporation (Conrail) for its 9-mile right- of-way between milepost 26.7+/- near Burgettstown, PA, and milepost 35.7+/- near Colliers, WV. At the request of NPTC, and with Conrail's consent, the negotiation period was subsequently extended by decisions served on August 3, 1994, February 10, 1995, July 21, 1995, December 28, 1995, August 20, 1996, January 8, 1997, July 10, 1997, January 9, 1998, and July 10, 1998. On December 11, 1998, NPTC filed a request for another 180-day extension of the trail use negotiating period. NPTC states that a final agreement is imminent, but that it is unrealistic to expect the parties to settle prior to January 5, 1999, when the most recent extension will expire. NPTC states that the additional time is needed to finalize negotiations, sign documents, and complete the sales transaction. Conrail supports the 180-day extension request. It is ordered: 1. NPTC's request to extend the negotiation period under the NITU for an additional 180 days is granted. 2. The NITU negotiating period is extended through July 4, 1999. Decided: December 18, 1998 Service Date - December 23, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-406 (Sub-No. 7X) CENTRAL KANSAS RAILWAY, LIMITED LIABILITY COMPANY --ABANDONMENT EXEMPTION-- IN BARTON, ELLSWORTH AND RICE COUNTIES, KS By decision served July 1, 1997, the Board issued a NITU which authorized a 180-day period for James D. Jennings of Jennings & Co. to negotiate an interim trail use/rail banking agreement with CKR for the right-of-way. That negotiating period expired on December 28, 1997. On January 26, 1998, Jennings submitted a fax transmittal indicating that he was no longer interested in negotiating for interim trail use/rail banking in this proceeding. On January 29, 1998, a decision and notice of interim trail use or abandonment (NITU) was served, authorizing a 180-day period for Iowa Trails Council (ITC) to negotiate an interim trail use/rail banking agreement with Central Kansas Railway, Limited Liability Company (CKR) for a 53.2-mile portion of CKR's Little River Subdivision from milepost 577.1 near Lyons to milepost 594.1 near Lorraine, then from milepost 20.7 near Lorraine to milepost 56.9 near Galatia, in Barton, Ellsworth and Rice Counties, KS. In a decision served on July 6, 1998, the negotiating period was extended to December 23, 1998. By letter dated December 16, 1998, ITC requested an extension of the negotiating period for an additional 180 days. ITC states that the extension of time will allow the parties to finalize an agreement to acquire the subject right-of-way for the purpose of converting it to a recreation and energy efficient transportation trail. Also, by letter filed on December 18, 1998, CKR states that it is agreeable to an extension of the NITU for an additional 180-day period. It is ordered: 1. The request to extend the interim trail use negotiating period is granted. 2. The negotiating period under the NITU is extended for a period of 180 days from December 23, 1998, or until June 21, 1999. Decided: December 21, 1998 Service Date - December 23, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 33388 Decision No. 111 CSX CORPORATION AND CSX TRANSPORTATION, INC., NORFOLK SOUTHERN CORPORATION AND NORFOLK SOUTHERN RAILWAY COMPANY--CONTROL AND OPERATING LEASES/AGREEMENTS--CONRAIL INC. AND CONSOLIDATED RAIL CORPORATION In Decision No. 89, in addition to approving the primary application, the Board imposed a condition requiring applicants to provide Indianapolis Power & Light Company (IP&L) a competitive rail routing into IP&L's Stout plant via a new interchange between NS and Indiana Southern Railroad, Inc. (ISRR) at milepost 6.0 on ISRR. In response to complaints from IP&L and ISRR that milepost 6.0 is not a practical interchange point, the Board subsequently directed applicants, ISRR, and IP&L to attempt to negotiate a mutually satisfactory solution to this interchange issue and report back to the Board in 60 days. In separate letters filed December 18, 1998, applicants indicate that the parties have discussed the issue, but have been unable to reach a mutually satisfactory solution. Applicants therefore request a 30-day extension to negotiate an agreement. By letter filed December 18, 1998, IP&L indicates that CSX has not discussed the interchange issue with it and requests that, because CSX has not been responsive to communications sent by IP&L to CSX, and the applicable tariff in question, Conrail Tariff No. 4611, expires in February 1999, the extension should be conditioned on removal of the expiration date of that tariff. The requested extension is reasonable and will be granted. This decision takes no action on IP&L's request for removal of the expiration date of Conrail Tariff No. 4611. IP&L may renew that request if an agreement has not been reached by January 19, 1999. It is ordered: 1. The extension request is granted. The parties should attempt to negotiate a mutually satisfactory solution respecting any milepost 6.0 interchange problems and advise us of the status of their negotiations by January 19, 1999. Decided: December 22, 1998 Service Date - December 23, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-31 (Sub-No. 33) GRAND TRUNK WESTERN RAILROAD INCORPORATED--ABANDONMENT-- IN MACOMB AND OAKLAND COUNTIES, MI By an application filed September 8, 1998, and supplemented on September 18, 1998, Grand Trunk Western Railroad Incorporated (GTW) seeks authority to abandon a line of railroad extending from milepost 19.5 near Washington Station (#55532 at MP 19.9) in Washington, MI, to milepost 37.7 near Pontiac Station (#55610 at MP 25.8 on the Holly Subdivision) in Pontiac, MI, a distance of 18.2 miles in Macomb and Oakland Counties, MI. The line is a portion of GTW's Romeo Subdivision. On September 28, 1998, the Board served notice of the filing of the application. The City of Auburn Hills, MI (City or protestant), filed a protest. The United Transportation Union filed a letter requesting the imposition of labor protective conditions on any grant of authority. Michigan Governor John Engler filed a letter supporting the application, as supplemented. Applicant filed a reply. Upon review of the record, we conclude that the application should be granted, subject to standard employee protective, environmental, and historic preservation conditions. Our analysis follows. The City, which opposes abandonment only with respect to that portion of the line extending between milepost 28.5 and milepost 37.7 (the so-called Western Subsegment ), requests that the Board perform two analyses before considering the application. First, it argues that the Board should examine the impact that abandonment of the eastern portion of the line (between milepost 19.5 and milepost 28.5) would have on the viability of an upgraded Western Subsegment. Second, with regard to the valuation of the right-of-way, the City asserts that the Board should analyze the nature of the adjacent landowners properties along the Western Subsegment, and the feasibility of incorporating the land underlying the right-of-way into those properties. The City contends that time to undertake the analyses is available because applicant has committed to operate on the Western Subsegment until an area shipper relocates its facilities or until December 31, 1999, and has requested that the due date for filing a notice of consummation be extended. The request will be denied. Regarding the first sought analysis, GTW is not obligated to reinvest the assets freed from one part of its line in another part of that line. Moreover, as will be seen below, the record as made supports the conclusion that the Western Subsegment cannot be viably operated even following an abandonment of the remainder of the line. As to the second sought analysis, the record shows that GTW has evaluated the line's right-of-way in accordance with the Board's approved across-the-fence (ATF) methodology. The City's apparent claim that applicant was bound to analyze the feasibility of incorporation of the right-of-way with each individual adjacent parcel is unsupported. The City could have performed its own real estate appraisal and presented its own conclusions regarding the utility of the right-of-way to adjacent landowners, but it did not do so. In any event, the record supports the conclusion that, even discounting land values in their entirety, applicant would incur substantial losses were it to continue to operate the Western Subsegment. The City of Pontiac, MI, on the due date for protests, filed a letter requesting an extension of time to file a protest. The Board's staff contacted City Planner Richard Hahn, who filed the letter on behalf of Pontiac, and advised him to submit a protest as soon as possible along with a motion for leave to late file. Applicant states that it timely served Mr. Hahn with a copy of its environmental and historic reports, the application, and subsequent filings, and that it also agreed to serve Pontiac with an additional copy of the application materials when requested to do so. Nevertheless, Pontiac has not filed a protest. Accordingly, we must proceed to a decision without its participation. The subject line, as noted, is a portion of GTW's Romeo Subdivision. The Romeo Subdivision (at milepost 38.5) extends off of GTW's Pontiac Belt Line (at milepost 2.49) which, in turn, connects with the railroad's Holly Subdivision in Pontiac. The line runs east-west, traversing relatively flat land in both rural and urban areas. The line is stub-ended on the east because of GTW's recent abandonment of the portion of its Romeo Subdivision between milepost 19.5 and milepost 0.42. GTW historically has maintained the line at a level consistent with that required to provide low-volume, as-needed service. The line condition is generally poor. The rail is rusty due to low traffic volume and infrequent use. Applicant has deferred maintenance on the line for over 2 years because, it asserts, the revenue from the traffic on the line could not support even routine maintenance costs. In April 1998, the railroad reclassified the line from Federal Railroad Administration (FRA) Class 1 status to excepted track status. The railroad currently maintains the line as excepted track with a maximum operating speed of 10 miles per hour. On July 9, 1998, GTW placed an embargo on the line between milepost 28.5 and milepost 19.5 because the track had become impassable. Applicant provides service on the line on a bi-weekly basis, with additional trips as required. GTW made 125 round trips during its base year (July 1, 1997, through June 30, 1998). GTW states that traffic levels on the line have varied between 175 and 219 carloads a year over the past 2« years, with traffic levels on the Western Subsegment ranging between 135 and 180 carloads during that period. During the base year, applicant handled 200 carloads of traffic for customers on the line, as follows: GTW carried 16 carloads of dry fertilizer for Washington Elevator Company, 152 carloads of plastic resin for Letica Corporation, 2 carloads of lumber for Wickes Lumber Company, 29 carloads of lumber for Church s, and 1 carload of beverages for Hubert Distributors, Inc. All of the shippers except Washington are situated on the Western Subsegment. Applicant indicates that the amount of fertilizer moving over the line during the base year is lower than the historical level due to track washouts in December 1997. It adds, however, that fertilizer traffic could increase in the event of removal of the current embargo. Regarding service for Hubert, applicant states that this shipper only recently has become an active customer, having received 4 carloads in June, July, and August 1998 after having received none since 1995. Applicant adds that another customer on the line, Custom Paper Group, has not received any traffic since January 1997, and that its side track agreement with applicant was terminated effective June 20, 1998. There is no overhead traffic on the line. During the base year, GTW earned revenues of $216,782 from handling traffic on the subject line and $24,327 from easements for a total of $241,109. The railroad projects the same figures for its forecast and subsidy years. Applicant also presents figures attributable to the Western Subsegment alone. Those figures show that, during the base year, GTW earned revenues of $196,478 from handling traffic on the Western Subsegment and an additional $12,300 from easements, for a total of $208,778. Applicant projects the same figures for its forecast and subsidy years. Applicant asserts that, although it has earned an operating profit on the line during the base year, the profit is due solely to the fact that it has deferred maintenance. According to applicant, the rehabilitation costs that it would be required to incur in order to restore the line to FRA Class 1 condition, or even to maintain it at excepted track status, are substantial. Applicant contends that the volume of traffic on the line, and the revenues derived from it, are insufficient to warrant such expenditures. Applicant adds that the same conclusion is reached when considering the Western Subsegment alone. Avoidable costs are costs that GTW will cease to incur if it abandons the line. GTW has submitted data showing avoidable on-branch costs for the base, forecast, and subsidy years. These include: (1) maintenance-of-way and structures (MOW); (2) maintenance-of-equipment (including depreciation); (3) transportation expense; and (4) freight car costs. Applicant's total avoidable on-branch costs are shown as $40,764 for the base year, $399,220 for the forecast year, and $26,220 for the subsidy year. For the Western Subsegment alone, applicant shows total avoidable on-branch costs of $35,953 for the base year, $143,361 for the forecast year, and $21,361 for the subsidy year. GTW also shows avoidable off-branch costs for the line totaling $108,259 for the base year and $109,654 for the forecast and subsidy years. For the Western Subsegment alone, applicant shows off-branch costs of $99,231 for the base year and $99,496 for the forecast and subsidy years. Protestant does not provide any avoidable cost data. Our conclusions regarding costs differ slightly from applicant's figures. On examining the evidence, we conclude that on-branch and off-branch avoidable costs for the subject line total $288,374 ($178,720 plus $109,654) for the forecast year and $135,874 ($26,220 plus $109,654) for the subsidy year. For the Western Subsegment alone, we conclude that total avoidable costs are $198,957 ($99,461 plus $99,496) for the forecast year and $120,857 ($21,361 plus $99,496) for the subsidy year. The City, as noted above, opposes abandonment of the Western Subsegment, the portion of the line extending between milepost 28.5 and milepost 37.7. The major portion of the Western Subsegment passes through the City, and the major customers on the line are situated either in the City or in Rochester Hills, which adjoins the City. Protestant notes that applicant's evidence shows that the Western Subsegment operates at a profit. The City believes that proceeds from the disposition of the eastern section of the subject line could be used to upgrade the Western Subsegment, thereby enabling applicant to retain that profitable portion of the line. Protestant also argues that applicant's opportunity costs for the Western Subsegment are seriously inflated. The City believes that additional revenue from increased traffic and from use of the line by the Trust might justify rehabilitation and continued operation of the Western Subsegment. The Trust indicates that it plans to build and operate a rail museum, and that it has been dealing with the City to select a building site within the City along the Western Subsegment. It is the Trust's intention to negotiate a contract with GTW to operate a steam locomotive on the Western Subsegment in conjunction with museum activities. The Trust is willing to pay a fair share of the cost of continued maintenance of the Western Subsegment. The City has also submitted a statement by William R. Church, president of Church s, identified above as one of applicant's shippers. Mr. Church indicates that Church's expects to increase carloads in the coming years, especially if service on the line can be improved. He asserts that abandonment would create a hardship for his business. The City also submits a copy of a resolution by the City Council of Rochester Hills supporting protestant's efforts to oppose the application. In reply, GTW asserts that the City has not contradicted the railroad's estimates for the maintenance and rehabilitation required to return the line and the Western Subsegment to FRA Class 1 condition. GTW avers that the level of traffic and associated freight revenues simply do not justify such substantial expenditures. Without these expenditures, applicant asserts, the line and the Western Subsegment cannot continue to remain operational. GTW adds that the City has provided no basis for revising applicant's real estate appraisal. Regarding the statement of Mr. Church, applicant notes Church's has made no forecast or guarantee of any specific traffic volumes in the future. GTW also asserts that Church's has not countered applicant's evidence that the shipper's lumber can be moved directly by truck or by rail/truck transload as a satisfactory alternative to applicant's service. Applicant replies further that the Trust has not committed to any particular contribution for its anticipated use of the Western Subsegment. Applicant questions the Trust's financial ability to carry out its proposals, and GTW also queries how the Trust's proposed use of the line for a steam locomotive operation would be consistent with freight operations on the line. Applicant asserts that speculative future use of the line with unspecified compensation for such use does not justify continued operation. Applicant asserts that all of the active customers on the line have available alternatives to its rail service. Specifically, applicant claims that Washington can receive its fertilizer by motor carrier via rail/truck transload from Richmond, MI, and that Church's and Wickes can receive their lumber by rail/truck transload or by direct motor carrier service from the point of origin. Applicant avers that Hubert can obtain its supplies by rail/truck transload or directly by truck, as it presumably has done during the long period when it was not receiving deliveries from applicant. Finally, according to applicant, Letica can receive its plastic resin by rail/truck transload through applicant's Cargo Flo facility in Warren, MI, or it can use truck service. The statutory standard governing an abandonment or discontinuance is whether the present or future public convenience and necessity permit the proposed abandonment or discontinuance. In implementing this standard, we must balance the potential harm to affected shippers and communities against the present and future burden that continued operations could impose on the railroad and on interstate commerce. The Board must determine whether the burden on the railroad from continued operation is outweighed by the burden on the shippers and public parties from the loss of rail service. This involves a question of whether, and to what degree, shippers will be harmed if rail service is no longer available. The fact that shippers are likely to incur some inconvenience and added expense is insufficient by itself to outweigh the detriment to the public interest of continued operation of uneconomic and excess facilities. Protestants must show that the harm to shippers and communities outweighs the demonstrated harm to the railroad and interstate commerce resulting from continued operation. In determining whether to grant or deny an abandonment or discontinuance application, we consider a number of factors, including operating profit or loss, other costs the carrier may experience (including rehabilitation and economic costs), and the effects on shippers and communities. No one factor is conclusive. Here, the factors weigh in favor of a grant of the application in its entirety. The record shows that continued operation of the line, or even of the Western Subsegment alone, would impose a substantial economic burden on GTW. The forecast year operating loss for the line is $47,265, and the line requires rehabilitation expenditures of $1,685,000. While figures for the forecast year show that operation of the Western Subsegment would result in an operating profit of $9,821, rehabilitation expenses of $875,900 would be required to bring the Western Subsegment into conformity with FRA Class 1 safety standards, and expenses of $122,000 would be required to bring the line into conformity with excepted track status. The record does not reveal any concrete prospects for increased traffic levels in the future, and there is nothing to demonstrate that the Trust's contribution to the line, even if feasible, would substantially improve the financial picture. Thus, even without considering opportunity costs, we must conclude that continued operation of the line or the Western Subsegment would impose a substantial economic burden on applicant. When opportunity costs are considered, the line and the Western Subsegment show even greater losses. In considering the potential harm to shippers, we note that we have heard opposition from only one actual user of the line, Church s. This shipper accounted for only 29 of the 200 carloads applicant handled on the line during the base year. Church's projects increased traffic, but it provides no specifics. Moreover, with one exception, the record also lacks any evidence contradicting applicant's assertion that shippers have available feasible alternative truck or rail/truck transload services. Although Letica has contradicted applicant's alternative service claims as to it, we note that that shipper is in the process of relocating off the line and has reached a service agreement with GTW. The Trust's proposals, as applicant contends, are speculative and lacking specificity. There really is nothing before us to suggest that the Trust's use of the Western Subsegment, even if feasible, and even if viewed in the light of some increased traffic from shippers, would justify continued operations. Finally, we note that the sole protestant here does not argue, and there is nothing in the record to suggest, that there exist concrete proposals for increased traffic and revenues sufficient to justify continued operations. On balance, we conclude that any harm to shippers and the community from the abandonment of service over the line is outweighed by the demonstrated harm to GTW and the burden on interstate commerce through continued operation of the line. The Board is also required to consider the environmental and energy impacts of the proposed abandonment. In the EA, SEA noted that the National Geodetic Survey (NGS) has identified 33 geodetic markers along the rail line and has requested 90 days notice to plan relocation of any markers that may be disturbed or destroyed. SEA therefore recommends that the following condition be imposed on any grant of abandonment authority: GTW shall consult with the National Geodetic Survey (NGS) and provide NGS with 90 days notice prior to disturbing or destroying any geodetic markers. SEA also indicated that the Michigan State Historic Preservation Officer has identified the bridge located at milepost 34.57 as eligible for the National Registry of Historic Places. Therefore, SEA recommends that the following condition be imposed on any grant of abandonment authority: GTW shall retain its interest in and take no steps to alter the historic integrity of the bridge located at milepost 34.57 until completion of the section 106 process of the National Historic Preservation Act. We agree with SEA's recommended conditions and, having considered the comment filed, conclude that they should remain unchanged. Hence, we will adopt SEA's recommendations. A railroad that receives authority from the Board to abandon a line must, within 1 year of the service date of the decision permitting the abandonment, file a notice of consummation with the Board to signify that it has exercised the authority granted and fully abandoned the line. Here, GTW indicates that it has committed to continue serving shipper Letica until that shipper completes relocation of its facilities or until December 31, 1999, whichever comes first. Therefore, applicant requests an extension of time until March 31, 2000, to file the required notice of consummation. The request is reasonable and will be granted. We find: 1. The present or future public convenience and necessity permit the abandonment of the above-described line, subject to the employee protective conditions in Oregon Short Line R. Co. --Abandonment--Goshen, 360 I.C.C. 91 (1979), and the conditions that GTW: (1) consult with the National Geodetic Survey (NGS) and provide NGS with 90 days notice prior to disturbing or destroying any geodetic markers; and (2) retain its interest in and take no steps to alter the historic integrity of the bridge located at milepost 34.57 until completion of the section 106 process of the National Historic Preservation Act. 2. Abandonment of the line will not have a serious, adverse impact on rural and community development. 3. The line may be suitable for other public purposes. 4. As conditioned, this action will not significantly affect either the quality of the human environment or the conservation of energy resources. It is ordered: 1. The application for abandonment of the above-described line is granted, subject to the conditions specified above. 2. GTW must promptly provide the City and any other interested persons the information they require in order to formulate an offer of financial assistance (OFA) to acquire or subsidize the line. 3. Provided no OFA has been received, this decision will be effective January 23, 1999. 4. GTW must 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 GTW's filing of a notice of consummation by March 31, 2000, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. If any legal or regulatory barrier to consummation exists at the end of the specified time 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: December 23, 1998 Service Date - Late Release December 24, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD ENVIRONMENTAL ASSESSMENT NO. AB-55 (SUB-NO. 567X) CSX Transportation, Inc.-- Abandonment Exemption -- Allegheny County, PA In this proceeding, the CSX Transportation, Inc. (CSXT) has filed a petition in connection with the abandonment of a portion of its railroad line, part of its Baltimore Service Lane, located between (1) MP 0.00 and MP 0.85, and (2) a 0.15 mile connecting track joining its Lower Allegheny Branch to a Conrail rail line, a total distance of 1.00 mile in Allegheny County, PA. CSXT presently maintains a branch known as the Lower Allegheny Branch, which is accessed over trackage rights from Conrail's Etna Yard in Pittsburgh and Conrail's Preble Avenue Industrial Track. The Line formerly served one patron, Allegheny County Sanitary Authority (Alcosan). Since January 16, 1998, Alcosan has exclusively utilized tank trucks to receive its inbound shipments and it makes no outbound shipments. Conrail has a line adjacent to the Alcosan facility which could provide rail service to this patron in the event rail service is required in the future. We recommend that no environmental conditions be placed on any decision granting abandonment authority. Service Date - December 24, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. AB-57 (Sub-No. 44X)] Soo Line Railroad Company--Abandonment Exemption--in St. Louis County, MN Soo Line Railroad Company has filed a notice to abandon an approximately 1.18+/-mile portion of the West Duluth Line between milepost 464.25+/ and milepost 465.43+/ in West Duluth, St. Louis, County, MN. Provided no formal expression of intent to file an offer of financial assistance (OFA) has been received, this exemption will be effective on January 23, 1999, unless stayed pending reconsideration. Soo 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 Soo's filing of a notice of consummation by December 24, 1999, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. Decided: December 17, 1998. Service Date - December 24, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. AB-437 (Sub-No. 2X)] Kansas Southwestern Railway, L.L.C.--Abandonment Exemption--in Reno, Pratt and Stafford Counties, KS Kansas Southwestern Railway, L.L.C. (KSW) has filed a notice to abandon an approximately 64.27-mile line of railroad on the Iuka Branch between milepost 609.97, at Olcott and milepost 630.13 at Iuka, and the portion of its Stafford Branch between milepost 610.0, at Olcott and milepost 654.11 at Radium, in Reno, Pratt and Stafford Counties, KS. Provided no formal expression of intent to file an offer of financial assistance (OFA) has been received, this exemption will be effective on January 27, 1999, unless stayed pending reconsideration. KSW 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 KSW's filing of a notice of consummation by December 28, 1999, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. Decided: December 14, 1998. Service Date - December 28, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Finance Docket No. 33692] Adrian & Blissfield Rail Road Company--Acquisition Exemption--Grand Trunk Western Railroad Incorporated Adrian & Blissfield Rail Road Company (ADBF), a Class III rail carrier, has filed a notice to acquire (by purchase) approximately 2.27 miles of rail line owned by Grand Trunk Western Railroad Incorporated (GTW) (known as the Dequindre Line) between (1) milepost 1.77 and milepost 4.04 in Wayne County, MI (the Holly subdivision). ADBF will operate the property. The transaction was scheduled to be consummated on or shortly after December 15, 1998. Decided: December 17, 1998. Service Date - December 28, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD ENVIRONMENTAL ASSESSMENT NO. AB-33 (SUB-NO.128X) UNION PACIFIC RAILROAD COMPAN -ABANDONMENT EXEMPTION-IN SAN ANTONIO, BEXAR COUNTY, TX (AUSTIN SUBDIVISION OLD MKT MAIN LINE ) In this proceeding, the Union Pacific Railroad Company has filed a petition in connection with the abandonment of its railroad line located between milepost 136.47 near South St. Marys Street to the end of the line at milepost 138.63 near Durango Street, in San Antonio, a distance of 2.16 miles in Bexar County, Texas. One active shipper, Judson Atkinson Candies, has used the line to receive shipments of corn syrup. Traffic handled consisted of eleven carloads in 1996, nine carloads in 1997 and three carloads in 1998. The last shipment was in June 1998. The Line was formerly known as the old MKT Main Line. The property is generally flat and is located in downtown San Antonio. The right-of-way of the Line consists of approximately 20.1475 acres, of which 1.8001 acres are reversionary and 18.3474 acres are non-reversionary. The National Geodetic Survey (NGS) has identified 3 geodetic station markers along the rail line and requests 90 days notice to plan relocation of any markers which may be disturbed or destroyed. Therefore, we recommend that the following condition be imposed on any decision granting abandonment authority: The Union Pacific Railroad Co. shall consult with the National Geodetic Survey and provide NGS with 90 days notice prior to disturbing or destroying any geodetic markers. The Texas State Historic Preservation Officer has identified Bridge No. 137.5 (Steel girder underpass, Nogalitos St., San Antonio, Bexar Co., TX) as eligible for listing in the National Register of Historic Places. We recommend that a condition be placed on any decision granting abandonment authority requiring the railroad to retain its interest in and take no steps to alter the historic integrity of Bridge No. 137.5 until completion of the Section 106 process of the National Historic Preservation Act. Service Date - December 29, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD ENVIRONMENTAL ASSESSMENT NO. AB-33 (SUB-NO. 129X) UNION PACIFIC RAILROAD COMPANY --ABANDONMENT EXEMPTION-- IN DALLAS AND GUTHRIE COUNTIES, IA In this proceeding, the Union Pacific Railroad Company (UP) has filed a petition in connection with the abandonment of two connected portions its railroad lines known as the Perry Branch and the Yale Spur (collectively referred to here as the line . The line to be abandoned is located between milepost 369.0 near Dawson and milepost 374.2 near Herndon (the portion on the Perry Branch) a distance of 5.2 miles, and between milepost 54.3 at Herndon and milepost 48.1 at Yale (the Yale Spur), a distance of 6.2 miles, for a total distance of 11.4 miles in Dallas and Guthrie Counties, IA. UP states that in 1996, there were two active shippers on the line one accounting for 7 carloads of traffic, and the other for 274 carloads. In 1997, only one shipper used the line and shipped 65 carloads. In the first seven months of 1998, the same shipper accounted for 13 carloads. The traffic handled has consisted of fertilizer, corn and soybeans. Service on the Perry Branch portion of the line is provided once weekly, and the Yale Spur has service on an as-needed basis. On the basis of comments received from the National Geodetic Survey, we recommend that a condition be placed on any decision granting abandonment authority requiring the railroad to notify the U.S. Department of Commerce, National Geodetic Survey, 90 days in advance of salvage operations if the following four geodetic survey markers will be disturbed or destroyed by salvage operations: K 102 RESET, L 102, L 102 RESET, and M102. Service Date - December 29, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. AB-33 (Sub-No. 130X)] Union Pacific Railroad Company--Abandonment Exemption--in Pocahontas, Buena Vista and Clay Counties, IA (Royal Branch) On December 9, 1998, Union Pacific Railroad Company (UP) filed a petition to abandon 25.25 miles of a line of railroad known as the Royal Branch, extending between milepost 477.10 near Laurens to the end of the line at milepost 502.35 near Royal, in Pocahontas, Buena Vista and Clay Counties, IA. The line includes the non-agency rail stations of Rossie at milepost 495.70 and Royal at milepost 501.80. By issuance of this notice, the Board is instituting an exemption proceeding. A final decision will be issued by March 29, 1999. Decided: December 21, 1998. Service Date - December 29, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 33362 PADUCAH & LOUISVILLE RAILWAY, INC.--CONTROL EXEMPTION-- PADUCAH & ILLINOIS RAILROAD COMPANY On December 23, 1998, Illinois Central Railroad Company (IC) filed a motion for an extension of time, until January 21, 1999, to reply to a petition for an order to show cause or otherwise establish terms and conditions filed on December 17, 1998, by the Paducah & Louisville Railway, Inc. (P&L). According to IC, key personnel and counsel, including many with knowledge of facts essential to IC's reply, are unavailable to prepare an appropriate reply by the current due date of January 6, 1999. IC asserts that the 15-day extension request will not prejudice P&L, which does not object to the delay. The extension request is reasonable and will be granted. It is ordered: 1. IC's request to extend the due date for replies from January 6, to January 21, 1999, is granted. Decided: December 28, 1998 Service Date - December 29, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-6 (Sub-No. 381X) THE BURLINGTON NORTHEN AND SANTA FE RAILWAY COMPANY-- ABANDONMENT EXEMPTION--IN HENNEPIN AND RAMSEY COUNTIES, MN The Burlington Northern and Santa Fe Railway Company (BNSF) filed a notice to abandon 2.43 miles of rail line between milepost 0.00 near East Minneapolis and milepost 2.43 near Rollins Oil, in Hennepin and Ramsey Counties, MN. Notice of the exemption was served on November 30, 1998. The exemption is scheduled to become effective on December 30, 1998. The Board's Section of Environmental Analysis (SEA) served an environmental assessment (EA) in this proceeding on December 8, 1998. In the EA, SEA indicates that the Minnesota Pollution Control Agency (MPCA) has expressed several concerns about possible impacts during salvage operations. MPCA states that BNSF should avoid possible impacts to streams, avoid using fertilizers containing phosphorus, implement a site erosion control plan, and provide information concerning the removal and disposal of railroad ties. Therefore, SEA recommends that a condition be imposed requiring BNSF to consult with the MPCA to address possible impacts resulting from salvage operations prior to engaging in any salvage activities. The condition will be imposed. In the EA, SEA concluded that the right-of-way may be suitable for other public use following abandonment in this proceeding. On December 14, 1998, the Minnesota Department of Transportation (Mn/Dot) filed a request for a 180-day public use condition. Mn/Dot states that it and several agencies are considering to acquire the 2.43-mile rail line corridor for alternative transportation and transmission usages. Mn/Dot states that it and the other agencies need the 180- day period allowed to study alternative transportation usages, obtain right-of-way appraisals, and negotiate with BNSF. It is ordered: 1. This proceeding is reopened. 2. The request for imposition of a public use condition is granted. The exemption of the abandonment of the 2.43-mile segment is subject to the condition that BNSF leave intact all of the right-of-way underlying the tracks, including bridges, trestles, culverts and tunnels (but not track ties and signal equipment), for a period of 180 days from the December 30, 1998 effective date of the abandonment exemption (until June 28, 1999), to enable any State or local government agency, or other interested person to negotiate the acquisition of the line for public use. 3. The exemption of the abandonment is subject to the condition that BNSF, prior to engaging in any salvage activities, consult with the MPCA to address possible impacts resulting from salvage operations. Decided: December 28, 1998 Service Date - Late Release December 29, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION Docket No. AB-167 (Sub-No. 1148) CONSOLIDATED RAIL CORPORATION--ABANDONMENT--BETWEEN WALKERS MILL AND BURGETTSTOWN, IN ALLEGHENY AND WASHINGTON COUNTIES, PA By decision and certificate of interim trail use or abandonment (CITU) served July 14, 1995, a 180-day period was authorized for National Pike Trail Council (NPTC) and Allegheny County, PA, to negotiate an interim trail use/rail banking agreement with Consolidated Rail Corporation (Conrail) for the 15.7-mile right-of-way between milepost 11.00 at Walkers Mill and milepost 26.7 at Burgettstown, in Allegheny and Washington Counties, PA. At NPTC's request, the 180-day trail use negotiating period was extended through December 31, 1998, by decisions served December 22, 1995, August 22, 1996, January 14, 1997, July 14, 1997, January 14, 1998, and July 10, 1998. On December 11, 1998, NPTC filed another request for a 180-day extension of the trail use negotiating period stating that the additional time is needed to finalize the negotiations, sign documents, and complete the sales transaction. According to NPTC, all parties involved are near settlement and a final agreement is imminent. Conrail supports the extension request. It is ordered: 1. The CITU negotiating period is extended through June 29, 1999. Decided: December 28, 1998 Service Date - December 30, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. AB-402 (Sub-No. 6X)] Fox Valley & Western Ltd.--Abandonment Exemption--in Waupaca County, WI On December 10, 1998, Fox Valley & Western Ltd. (FVW), filed a petition to abandon a 10.7-mile line of railroad known as the Manawa-Scandinavia Line, extending from milepost 50.3 near Manawa to the end of the line at milepost 61.0 in Scandinavia, in Waupaca County, WI. The line includes the station of Scandinavia at milepost 61.0. FVW seeks exemption from offer of financial assistance procedures and public use conditions. These requests will be addressed in the final decision. By issuance of this notice, the Board is instituting an exemption proceeding. A final decision will be issued by March 30, 1999. Decided: December 21, 1998. Service Date - December 30, 1998 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. AB-33 (Sub-No. 131X)] Union Pacific Railroad Company--Abandonment Exemption--in Cameron County, TX On December 14, 1998, Union Pacific Railroad Company (UP) filed a petition to abandon its line of railroad known as the Brownsville Branch, extending from milepost 197.90 near Naranjo Road to milepost 205.04 near E. Van Buren St., a distance of 7.14 miles in Brownsville, Cameron County, TX. By issuance of this notice, the Board is instituting an exemption proceeding. A final decision will be issued by April 2, 1999. Decided: December 18, 1998. Service Date - December 31, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD ENVIRONMENTAL ASSESSMENT NO. AB- 57 (SUB-NO. 44X) Soo Line Railroad Company--Abandonment Exemption -- in St. Louis County, MN In this proceeding, the Soo Line Railroad Company has filed a notice in connection with the abandonment of its railroad line located between MP 464.25 and MP 465.43, a distance of 1.18 miles in West Duluth, in St. Louis County, MN. The Minnesota Pollution Control Agency expressed several concerns that could result from salvage activities, including: avoiding possible impacts to streams; avoiding use of fertilizers containing phosphorus, implementing a site erosion control plan, and removing and disposing of railroad ties. Therefore, we recommend that the following condition be placed on any decision granting abandonment authority: Prior to commencing any salvage activities, Soo Line Railroad Company shall consult with the Minnesota Pollution Control Agency to address possible impacts resulting from salvage activities. The Minnesota Department of Natural Resources has identified the southern end of the project area as an important fish and wildlife habitat. In addition, the project is close to the St. Louis River estuary shoreline. Therefore, we recommend that the following condition be placed on any decision granting abandonment authority: Prior to commencing any salvage activities, Soo Line Railroad Company shall consult with the Minnesota Department of Natural Resources to address possible impacts resulting from salvage activities. Service Date - December 31, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD ENVIRONMENTAL ASSESSMENT DOCKET NO. AB-437 (Sub. No. 2X) Kansas Southwestern Railway, L.L.C.- Abandonment Exemption - In Reno, Pratt, and Staffort Counties, Kansas In the above entitled proceeding, Kansas Southwestern Railway, L.L.C. (KSW)filed a notice in connection with the abandonment of its lines of railroad as follows: (1) its Iuka Branch between Milepost 609.97, at Olcott, and Milepost 630.13, at Iuka; and (2) the portion of its Stafford Branch between Milepost 610.0, at Olcott, and Milepost 654.11, at Radium, totaling approximately 64.27 miles of rail line in Reno, Pratt, and Stafford Counties, Kansas. KSW states in its application that in the past years, KSW has transported mixed commodities, with an emphasis on grains and agricultural products. We recommend that no environmental conditions be placed on any decision granting abandonment authority. Service Date - December 31, 1998 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33290 SAULT STE. MARIE BRIDGE CO.--ACQUISITION AND OPERATION EXEMPTION-- LINES OF UNION PACIFIC RAILROAD COMPANY On December 30, 1996, Sault Ste. Marie Bridge Company (SSMB), a Class III common carrier by rail, filed a notice of exemption to acquire and operate rail lines of Union Pacific Railroad Company (UP) in the Upper Peninsula of Michigan and northern Wisconsin (the Duck Creek North Lines ). On January 6, 1997, Inland Steel Company and LTV Steel Company, Inc. (protestants) jointly filed a petition to reject the notice of exemption or to revoke the exemption. Simultaneously, protestants filed a petition to stay the effectiveness of the notice of exemption pending a ruling on the petition to reject or revoke. By decision served January 24, 1997, the stay request was denied and a procedural schedule was set out to provide opportunities for the parties to supplement the record prior to the Board's consideration of the petition to revoke or reject. Protestants filed a supplemental petition to reject or revoke on September 17, 1997. The parties reported settlement discussions between them as early as 1997 and, on April 1, 1998, protestants and SSMB jointly advised the Board that they had reached agreement in principle on the terms of a settlement. By motion filed December 11, 1998, protestants state that they have reached a complete settlement of their underlying disputes with SSMB and its affiliates, and request withdrawal of their petitions to reject or revoke. Protestants also ask that the proceedings based on those petitions be discontinued. By letter filed December 28, 1998, SSMB states that it fully supports protestants request. Protestants request is reasonable and will be granted. It is ordered: 1. Protestants request to withdraw their petitions to reject or revoke is granted and the proceedings based on those filings are discontinued. Decided: December 30, 1998 Service Date - December 31, 1998 ============================================================ Comments or questions about this compilation should be directed to Paul Moore at 71367.1057@Compuserve.com. ============================================================