STB REPORT #46 - NOVEMBER 16 - 30, 1999 ****************************************************************************** A compilation of decisions and notices published by the Surface Transportation Board. Includes information on track abandonments, ownership changes and trackage rights agreements. Condensed for readability. The full text is available at www.stb.dot.gov/ ****************************************************************************** SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33813 RAILAMERICA, INC. -- CONTROL EXEMPTION RAILTEX, INC. Rail America, Inc., a railroad holding company that controls 12 Class III rail carriers, seeks an exemption for its acquisition of control of RailTex, Inc., a railroad holding company that controls 17 Class III rail carriers. We seek comments on the requested exemption of control of RailTex by RailAmerica. On November 8, 1999, RailAmerica, Inc. and RailTex, Inc. filed a petition for RailAmerica's acquisition of direct control of RailTex and indirect control of RailTex's 17 rail carrier subsidiaries in common with the rail carriers RailAmerica already controls. Because RailAmerica controls Class III rail carriers and is seeking to acquire control of RailTex, which also controls Class III rail carriers, the proposed transaction is within the jurisdiction of the Board. To minimize the period of uncertainty for employees and to permit the petitioners and their customers to realize the projected benefits of the transaction as soon as possible, petitioners have asked the Board to establish an expedited schedule under which comments would be due by December 6, 1999, petitioners reply would be due by December 15, 1999, and a decision by the Board on the merits of the proposed exemption would be due on January 14, 2000. RailAmerica controls 12 Class III rail carriers in the United States. Petitioners describe RailAmerica's rail subsidiaries as follows: (1) the Cascade and Columbia River Railroad Company operates 137 miles of rail line in the State of Washington; (2) Dakota Rail, Inc., operates 43.66 miles of rail line in the State of Minnesota; (3) Delaware Valley Railway Company, Inc., formerly operated over approximately 50 miles of rail line in the States of Delaware and Pennsylvania; (4) The Huron & Eastern Railway Company, Inc. (Huron & Eastern), operates approximately 171 miles of rail line in the State of Michigan; (5) the Minnesota Northern Railroad, Inc., operates approximately 241 miles of rail line in Northwestern Minnesota; (6) the Otter Tail Valley Railroad Company operates approximately 72 miles of rail line in Western Minnesota; (7) the Saginaw Valley Railroad Company, Inc. (Saginaw Valley), operates approximately 65 miles of rail line in the State of Michigan; (8) the St. Croix Valley Railroad Company operates over 44.4 miles of rail line in Eastern Minnesota; (9) the South Central Tennessee Railroad Corporation operates 52 miles of rail line in the State of Tennessee; (10) the Ventura County Railroad Company operates approximately 12.09 miles of rail line in the Port of Hueneme, in the State of California; (11) the West Texas & Lubbock Railroad Company, Inc., operates approximately 104 miles of rail line in the State of Texas; and (12) Toledo, Peoria & Western Railway Corporation (TP&W) operates approximately 369 miles of rail line in the States of Indiana, Illinois, and Iowa. RailTex controls 17 Class III rail carriers in the United States. Petitioners describe RailTex's rail subsidiaries as follows: (1) the Austin & Northwestern Railroad Company, Inc. (AUNW), owns a 107-mile rail line in the States of Texas and New Mexico, which is operated by AUNW's division, the Texas New Mexico Railroad; (2) the Central Oregon & Pacific Railroad, Inc., operates over approximately 449 miles of rail line in the States of Oregon and California; (3) the Central Railroad Company of Indiana operates approximately 157 miles of rail line in the States of Indiana and Ohio; (4) the Central Railroad Company of Indianapolis (CERA) operates approximately 45.6 miles of rail line in the State of Indiana, and operates as agent for, and in the name of, Winamac Southern Railroad Company (WSRY) over approximately 44 miles of rail line in the State of Indiana; (5) the Connecticut Southern Railroad, Inc., operates approximately 78 miles of rail line in the States of Connecticut and Massachusetts; (6) the Dallas, Garland & Northeastern Railroad, Inc., operates approximately 187 miles of rail line and trackage rights over various railroads in the State of Texas; (7) the Georgia Southwestern Railroad, Inc., operates 357 miles of rail line in the States of Georgia and Alabama; (8) the Indiana & Ohio Central Railroad, Inc., operates approximately 154.6 miles of rail line in the State of Ohio; (9) the Indiana & Ohio Railway Company operates approximately 471.1 miles of rail line in the States of Michigan, Ohio and Indiana; (10) the Indiana Southern Railroad, Inc., operates 176 miles of rail line in the State of Indiana; (11) the Mid-Michigan Railroad, Inc. (MMRR), and its three subsidiaries (the Grand Rapids Eastern Railroad, the Michigan Shore Railroad, and the Texas Northeastern Railroad), operate approximately 217 miles of rail line in the States of Michigan and Texas; (12) the Missouri & Northern Arkansas Railroad Company, Inc., operates approximately 530 miles of rail line in the States of Missouri, Kansas and Arkansas; (13) the New England Central Railroad, Inc., operates approximately 343 miles of rail line in the States of Vermont, New Hampshire, Massachusetts, and Connecticut; (14) the North Carolina & Virginia Railroad Company, Inc., and its two divisions (the Chesapeake and Albemarle Railroad, and the Virginia Southern Railroad), operate approximately 210 miles of rail line in the States of Virginia and North Carolina; (15) the Pittsburgh Industrial Railroad, Inc., operates 42 miles of rail line in the State of Pennsylvania; (16) the San Diego & Imperial Valley Railroad Company, Inc., operates approximately 153 miles of rail line in Mexico and the State of California; and (17) the South Carolina Central Railroad Company, Inc., and its division (the Carolina Piedmont Railroad), operate approximately 95 miles of rail line in the State of South Carolina. RailAmerica states that its rail carrier subsidiaries do not connect with any of the RailTex rail carrier subsidiaries except for an indirect connection between the TP&W and CERA via the WSRY line, which CERA operates as an agent for WSRY between Kokomo and Logansport, IN. RailAmerica also states that MMRR may interchange traffic with Huron & Eastern and Saginaw Valley in or near Saginaw, MI, in the future. RailAmerica estimates that the transaction will generate approximately $10 million in annual cost savings. RailAmerica estimates that 21 jobs will be abolished, 10 at RailTex's headquarters in San Antonio, TX, and 11 on various lines. Petitioners state that no unionized employee will be affected by the proposed transaction and that they will not abrogate any collective bargaining agreements. The Board invites comments on the proposed acquisition. Because the procedural schedule proposed by the petitioners appears to be adequate for full and fair development of the record in this proceeding, the proposed schedule will be adopted. Comments may address such issues as the rail transportation policy, the potential for market abuse, whether as a result of the proposed transaction there is likely to be substantial lessening of competition, creation of a monopoly, or restraint of trade in freight surface transportation in any region of the United States, and whether any anticompetitive effects of the transaction outweigh the public interest in meeting significant transportation needs. Decided: November 16, 1999. Service Date - November 16, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-57 (Sub-No. 48X) SOO LINE RAILROAD COMPANY--ABANDONMENT EXEMPTION--IN MARSHALL AND ROBERTS COUNTIES, SD By petition filed on July 30, 1999, Soo Line Railroad Company, doing business as Canadian Pacific Railway, seeks to abandon a line of railroad extending from milepost 208.8+/- near Rosholt to the end of the line at milepost 236.3+/- near Veblen, a distance of approximately 27.5 miles, in Marshall and Roberts Counties, SD. Cenex Harvest States timely filed a reply in partial opposition to the proposed abandonment. By letter filed on September 17, 1999, Cenex withdrew its protest to the proposed abandonment. Subsequently, by letter filed on September 30, 1999, counsel for Cenex requests that Save the Rail Committee be substituted for Cenex as protestant and that the pleading filed on September 8 be considered as filed on its behalf. Counsel states that the reply should have been filed on behalf of the Committee. He does not explain why the Committee was not named on the September 8 pleading or why the evidence submitted by Cenex should be considered as filed by the Committee. Soo replied on October 1, 1999. Counsel's appearance on behalf of the Committee is not timely and does not comport with our rules. Therefore, we will not substitute the Committee for Cenex. United States Senator Tom Daschle, South Dakota Governor William J. Janklow, and South Dakota State Senator Paul Symens filed letters in opposition. In addition, letters were filed by a number of other individuals who oppose the proposed abandonment for the line segment from Rosholt to Claire City (milepost 227.3). Soo replied to the Governor's filings. The United Transportation Union requests imposition of labor protective conditions. We will deny the petition for exemption. The line proposed for abandonment was constructed (circa 1914) with 60-pound rail by a predecessor of Soo. It is the stub-end of a line that once served a larger segment of northeastern South Dakota. The line segment west of Veblen was abandoned in 1971. Historically, the line was used for freight and passenger trains, with the surrounding land use being primarily agricultural and including grain elevators and bulk oil distributors. According to Soo, most commercial activity along the line has ceased. Soo seeks to abandon the line because in its view the line is no longer viable. It asserts that there is not sufficient traffic to justify continued service to the facilities on the line and that it can no longer operate the line profitably considering the cost of needed upgrades and repairs. It states that attempts to increase traffic volume or to sell the line to another operator have been unsuccessful. Because the line is stub-ended, it carries no overhead traffic. Soo submitted traffic, revenue, and cost data in its petition for exemption. Traffic on the line consists of corn, wheat, soybeans, canola seed, urea, and fertilizer. According to Soo, there are two active shippers on the line: Cenex, located in Claire City; and Sissiton-Milbank Elevator (Sissiton), located in New Effington, SD. Soo states that it handled for Cenex 310 carloads in 1996, 391 in 1997, and 375 in 1998, and for Sissiton 35 carloads in 1996, 27 in 1997, and none in 1998. According to Soo's figures, in calendar year 1998, the line generated gross revenues of $431,069, with avoidable costs of $501,035, resulting in an avoidable loss from operations of $69,966. When opportunity costs are factored in, Soo's estimated loss totals $79,492. For calendar year 1999, Soo projects the same revenues and losses as in the base year. Soo estimates rehabilitation costs of $5,525,781 to bring the line up to Federal Railroad Administration (FRA) Class 1 safety standards. This estimate includes the cost of replacing 26,000 ties and 16.6 miles of rail, application of 344 carloads of ballast, and $40,000 for bridge repair. Senator Daschle, expressing the concerns of his constituents, submits that rail service is important to the Claire City area. According to Senator Daschle, the market for grain that is shipped via the line is growing. He states that loss of rail service would cause an increase in shipping costs for farmers in the region, thus making them less competitive in the current grain market. He indicates that these increased shipping costs could lead to the eventual closing of the grain elevator, a prospect that poses a serious threat to the existence of this rural community. Senator Daschle forwarded a letter he received from concerned citizens of the Claire City area who oppose the proposed abandonment of the line segment from Rosholt to Claire City. The letter, signed by nine individuals, asserts that the Cenex elevator at Claire City is viable, grain volume has increased from 700,000 bushels in 1994 to 1.7 million bushels in 1997, and that an average of 380 carloads a year are shipped, generating approximately $550,000 in revenue for Soo. Given the revenue that the line generates, these individuals argue that Soo should not have allowed the line to fall into disrepair. They also state that recent embargoes have been due to unusual flooding conditions and, now that normal weather conditions have returned, embargoes should no longer be necessary. These citizens, like Senator Daschle, express concern over the adverse impact that a loss of rail service will have on Claire City and the surrounding areas. In two separate letters to the Board, Congressman Thune also expresses his concern about the adverse impact that a loss of rail service will have on Claire City, as well as the South Dakota communities of Rosholt, Veblen, Eden, and Hammer. In addition to increased shipping costs and lower profits for grain producers, Congressman Thune is concerned that abandonment of this rail line will add a large volume of tractor-trailers to an already exhausted transportation system and that restrictions on bridges and local roads will further hinder the transportation of grain. As a result, he predicts that area producers may be forced to cease operations. Congressman Thune also states that abandonment could lead to closure of the grain elevator at Claire City. Governor Janklow filed two letters, one in response to the petition and the other in response to Soo's comments to the Governor's earlier letter. While the Governor opposes the entire abandonment, he does recognize that the segment between Claire City and Veblen has been out-of-service for approximately 2 years. He is concerned about the impact that the abandonment will have on the farming economy of northeast South Dakota and the adjacent states, the prices paid for grain products, alternative shipping options, and the public infrastructure. The Governor states that local interests are actively seeking a solution or alternative to abandonment of the line and requests that our decision on Soo's petition be postponed until 90 days after November 17, 1999. Alternatively, the Governor requests that the time for filing an offer of financial assistance be extended by 90 days so that options besides abandonment can be fully explored. According to the Governor, it is the citizens of northeast South Dakota who are the ones that will be most adversely affected by the proposed abandonment, and it is these citizens who have requested his office to seek additional time to negotiate with Soo or solicit for and recruit an alternative operator for the line. Finally, the Governor notes that, in 1994, Soo received an FRA grant through the South Dakota Department of Transportation (SDDOT) for $99,241 to repair portions of the line. He states that, as part of the grant, Soo agreed to repay the grant in full upon the filing for abandonment authority. According to the Governor, SDDOT has not requested repayment at this time, but instead seeks the cooperation of Soo in finding a solution to this situation. State Senator Symens opposes the proposed abandonment from Rosholt to Claire City. He submits that the farm economy is struggling and that the local grain shippers cannot sustain higher truck rates that will apply with a loss of rail service. In addition to increased rates, he states that increased truck service will result in severe damage to roads in this area. The same concerns are expressed in letters from area residents. The exemption process is designed to minimize regulatory burdens. However, it is used only when the information provided is sufficient for us to reach an informed decision. Where there is an inadequate record on which to grant an abandonment petition for exemption, the petition will be denied outright. In this case there is insufficient information for us to make an informed decision on the merits of the abandonment petition for exemption. As in any abandonment case, whether authority is sought by application or petition, the railroad must demonstrate that the line in question is a burden on interstate commerce. Typically, in an attempt to make that showing, the carrier submits evidence to show that the costs that it incurs for the line exceed the revenues attributable to it. While Soo has attempted to make such a showing, it is without supporting documentation that would enable us to analyze the data that it submitted. Soo provides no support for its sizeable rehabilitation estimate of $5,525,781. Soo's estimate is predicated on rehabilitating the line to FRA Class 1 safety standards, but it provides no statement as to the present condition of the line, and gives only historical information about the materials used to construct it. Therefore, we cannot determine if the line is at or below FRA Class 1 safety standards, and if so, what it would cost to rehabilitate the line to the Class 1 level. A carrier seeking abandonment authority is only permitted to claim the cost of rehabilitating the line to meet FRA Class 1 safety standards. Therefore, we must have evidence that the track in fact falls below that level. The information provided by Soo the number of ties, the type of rail, and the amount of ballast needed to rehabilitate the line appears to be excessive, and is more in line with rehabilitation to the Class 2 level or higher. With no indication of how it values track materials, Soo's $92,414 estimate of the net liquidation value (NLV) of the line is not supported. Also, the removal costs of $479,684 appear to be high for such a rural area. Soo's unsupported maintenance-of-way (MOW) figure of $71,324 also is questionable. Other than property taxes of $13,210, there are no other on-branch costs shown by Soo. Off-branch costs are also not adequately explained. Soo states that it used Uniform Rail Costing System (URCS) data in computing these costs, which amount to $416,501 and represent most of the $501,035 in total avoidable costs. Without supporting documentation and an explanation as to how URCS was applied to the traffic at issue, we cannot verify the accuracy of these costs. Finally, in computing opportunity costs, Soo uses the 1997 pre-tax cost of capital rate of 17.5% to calculate the nominal return on value, when it should have used the 1998 figure of 15.6%. While abandonment decisions are not based solely on mathematical computations and considerations, the petitioner here has failed to show that the current situation imposes a burden on it that outweighs the harm that would befall shippers, the public and the surrounding community, if the line were abandoned. The rail transportation policy provides, among other things, that the Board in regulating the railroad industry is to ensure the development and continuation of a sound rail transportation system with effective competition among rail carriers and with other modes, to meet the needs of the public and the national defense. The petition shows that the actual traffic moving over the line has been substantial. The comments suggest the potential for increased traffic in the future. While the parties who filed comments in opposition to the proposed abandonment are not shippers, they are still affected by the proposed abandonment and their interests must be balanced with other factors in determining if abandonment should be permitted. Indeed, our statute specifically charges us to consider whether an abandonment will have a serious, adverse impact on rural and community development. In view of the extent of the public opposition here and Soo's failure to support the data that it presented, we are unable to conclude, on the present record, that regulation is not required to carry out the rail transportation policy. We believe that a more thorough review is warranted, and, therefore, conclude that the petition for exemption should be denied. Denial of this petition is without prejudice to Soo refiling an appropriate abandonment application or a petition for exemption that cures the defects found in the current proposal. Any new filing must be under a new docket subnumber accompanied by a new filing fee. Our denial of Soo's petition for exemption moots labor protection, environmental issues, and the Governor's extension request. It is ordered: 1. Soo's petition for exemption is denied. Decided: November 16, 1999 Service Date - November 17, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION AND NOTICE OF INTERIM TRAIL USE OR ABANDONMENT STB Docket No. AB-303 (Sub-No. 20X) WISCONSIN CENTRAL LTD.--ABANDONMENT EXEMPTION--IN BROWN COUNTY, WI Wisconsin Central Ltd. (WCL) filed a notice to abandon a 1.63-mile line of its railroad between milepost 198.37 and milepost 200 in Green Bay, Brown County, WI. Notice of the exemption was served on October 19, 1999. The exemption is scheduled to become effective on November 18, 1999. SEA stated that the Wisconsin Department of Transportation (WisDOT) had expressed concern regarding cleanup of debris during salvage operations. In the EA, SEA recommended that WCL consult with WisDOT to obtain any permit from the District Maintenance section to work on the highway right-of-way, and comply with the WisDOT Abandoned Railroad Line Salvage and Cleanup Policy/Standards/Procedures to ensure cleanup of salvage debris. On November 3, 1999, WCL filed a letter/comment stating that it is not aware that permits were required to be on the highway right-of-way when track removal and salvage operations are being conducted. WCL also states that it appears that there is no regulation in place in Wisconsin regarding salvage and cleanup of rail right-of-way. After receipt of comments, SEA now recommends that WCL: (1) consult with the WisDOT to obtain any permit that may be required from the District Maintenance section for salvage activities that may affect the highway right-of-way; and (2) consult with the WisDOT to determine if any compliance with WisDOT's Policy/Standards/Procedures that governs the cleanup of salvage debris along the right-of-way is required. By petition filed October 28, 1999, WisDOT, working cooperatively with the State of Wisconsin Department of Natural Resources (WisDNR) for potential acquisition and use of the right-of-way, requested issuance of a notice of interim trail use (NITU) for the entire line, in order to negotiate with WCL for acquisition of the right-of-way for use as a trail. WisDNR submitted a statement indicating its willingness to assume full financial responsibility for the management of, for any legal liability arising out of the transfer or use of , and for payment of any and all taxes that may be levied or assessed against, the right-of-way, as required, and acknowledged that the use of the right-of-way for trail purposes is subject to future reactivation for rail service. By facsimile received on November 2, 1999, and reply filed November 5, 1999, WCL indicated its willingness to negotiate with WisDNR for interim trail use. WisDOT/WisDNR's request complies with the requirements and WCL is willing to negotiate. Therefore, a NITU will be issued. The parties may negotiate an agreement during the 180-day period prescribed below. If the parties reach a mutually acceptable final agreement, no further Board action is necessary. It is ordered: 1. This proceeding is reopened. 2. Upon reconsideration, the notice of exemption served and published in the Federal Register on October 19, 1999, exempting the abandonment of the line described above is modified to the extent necessary to implement interim trail use/rail banking as set forth below, for 180 days commencing November 18, 1999 (until May 16, 2000), and subject to the conditions that WCL shall: (a) consult with the WisDOT to obtain permits that may be required from the District Maintenance section for salvage activities that may affect the highway right-of- way; and (b) consult with the WisDOT to determine if any compliance with WisDOT's Policy/Standards/Procedures that governs the cleanup of salvage debris along the right-of-way is required. 3. If an interim trail use/rail banking agreement is reached, it must require the trail user to assume, for the term of the agreement, full responsibility for management of, for any legal liability arising out of the transfer or use of (unless the user is immune from liability, in which case it need only indemnify the railroad against any potential liability), and for the payment of any and all taxes that may be levied or assessed against, the right-of-way. 4. Interim trail use/rail banking is subject to the future restoration of rail service and to the user's continuing to meet the financial obligation for the right-of-way. 5. If interim trail use is implemented, and subsequently the user intends to terminate trail use, it must send the Board a copy of this decision and notice and request that it be vacated on a specified date. 6. If an agreement for interim trail use/rail banking is reached by May 16, 2000, interim trail use may be implemented. If no agreement is reached by that time, WCL may fully abandon the line. Decided: November 12, 1999 Service Date - November 17, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 32760 (Sub-No. 36) 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 (Petition for Enforcement of Arbitration Award) By petition filed on October 26, 1999, the Transportation Communications International Union (TCU) requested that the Board issue an order compelling the Union Pacific Railroad Company (UP) to comply with an arbitration award, issued on October 22, 1999, by Robert O Brien (the O Brien Award), pertaining to UP's consolidation of crew hauling work as a result of the Board's 1996 decision approving UP's acquisition and control of the Southern Pacific Transportation Company (SP). According to TCU, the O Brien Award allowed UP to transfer crew hauling work performed from, and crew hauling employees working out of, what was, prior to the control and merger transaction, SP's Armourdale Yard in Kansas City, KS, to UP's Neff Yard facility 10 miles away in Kansas City, MO, subject to the condition that all of the crew hauling work to be performed out of UP's Neff Yard facility would be performed under SP's collective bargaining agreement, rather than the UP collective bargaining agreement under which work at that location was performed prior to the consolidation of the work. TCU alleged that UP is contravening the O Brien Award by its plans to abolish the positions of 12 clerks performing crew hauling work out of the Armourdale facility, to transfer their work to UP's Neff Yard without allowing them to follow their work, and to require work to be performed under the allegedly less favorable UP collective bargaining agreement. By decision served on October 29, 1999, Chairman Morgan ordered UP to take no action (1) to abolish the positions of the 12 former SP clerks working out of the Armourdale Yard, (2) to transfer their work to UP's Neff Yard facility, or (3) to remove them from the SP collective bargaining agreement, for a period of 60 days from the service date of that decision. By motion filed on November 15, 1999, UP requests a 7-day extension, until November 22, 1999, of the deadline for filing a reply to TCU's petition. In support of its request for an extension, UP represents, in a letter and attachment sent to the Board by facsimile on November 16, 1999, that it has canceled the notice announcing its intention to abolish the positions of the 12 former SP clerks working out of the Armourdale Yard. In a letter sent to the Board by facsimile on November 16, 1999, TCU states that it does not oppose the 7-day extension requested by UP. The extension requested by UP will be granted. It is ordered: 1. The deadline for UP to file its reply to TCU's petition is extended until November 22, 1999. Decided: November 17, 1999 Service Date - Late Release November 17, 1999 ------------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. AB-33 (Sub-No. 141X)] Union Pacific Railroad Company--Abandonment Exemption--in Pima County, AZ On October 29, 1999, Union Pacific Railroad Company (UP) filed to abandon a segment of its line of railroad known as the South Drill Track extending from milepost 982.78 to the end of the line at milepost 984.70, near Tucson, a distance of 1.92 miles in Pima County, AZ. There are no stations on the line. By issuance of this notice, the Board is instituting an exemption proceeding. A final decision will be issued by February 16, 2000. Decided: November 10, 1999. Service Date - November 18, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 33388 Decision No. 134 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 dismisses, at the parties request, a petition asking that the Board revisit the conditions granting trackage rights that permit Canadian Pacific Railway Company and its affiliates (collectively, CP) to operate over certain lines now owned by CSX Corporation and CSX Transportation, Inc., in order to serve shippers in the New York City area. The decision relates to the conditions that the Board imposed in approving the CSX/NS/Conrail transaction in its Decision No. 89, served July 23, 1998. In 1998, the Board approved a proposal under which the rail assets of Conrail were taken over by CSX and NS. The original proposal that the private parties negotiated among themselves divided Conrail's assets in a way that enhanced competition in several respects. Additionally, in approving the transaction, the Board imposed conditions that mitigated potential competitive harm and provided other public benefits. One of these conditions made possible new competitive service for many New York City shippers and receivers that could formerly receive rail service only from Conrail. To permit that new competitive service, the Board granted CP trackage rights over the lines of CSX from Albany, NY, to Oak Point Yard in Bronx, NY. These Board-imposed trackage rights made competitive rail service available to these shippers for the first time since the creation of Conrail more than two decades ago. To ensure that its conditions did not contribute to an unsafe, inefficient, or operationally infeasible railroad operating environment in the congested New York City area, the Board required CP to serve its new shippers through a cost-based switching service performed by CSX into and out of Oak Point Yard, rather than having CP itself also operate trains throughout this area. A dispute subsequently arose over two issues: whether the conditions should be construed as permitting CP to handle traffic to or from Harlem River Yard directly, and whether the cost-based switching service that CSX was required to provide for CP at Oak Point Yard be construed as including certain traffic that moves through a CSX transload facility. After CP brought the matter to the Board for resolution, however, the parties indicated that they were engaging in negotiations in an effort to resolve the issues privately, and asked that Board action be withheld to permit them to pursue negotiations. In a joint motion filed by CP and CSX on November 4, 1999, the parties indicated that they had in fact resolved their differences privately, and requested dismissal of CP's petition without prejudice. The motion will be granted and the petition will be dismissed. It is ordered: 1. The joint motion is granted and CP's petition is dismissed without prejudice. Decided: November 18, 1999 Service Date - Late Release November 19, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-55 (Sub-No. 576X) CSX TRANSPORTATION, INC.--ABANDONMENT EXEMPTION-- IN GUERNSEY COUNTY, OH By petition filed on August 4, 1999, CSX Transportation, Inc. seeks to abandon an approximately 7.79-mile portion of its Louisville Service Lane, Central Ohio Subdivision, between milepost BP-49.49 near Cambridge and milepost BP-41.70 at the end of the track at Gibson, in Guernsey County, OH. Notice of the institution of an exemption proceeding was served on August 24, 1999. On September 13, 1999, Wampum Hardware Co. filed a reply in opposition to the petition. On October 5, 1999, CSXT filed a reply to Wampum's opposition. The United Transportation Union (UTU) requests imposition of labor protective conditions. We will grant the petition, subject to environmental and standard employee protective conditions. CSXT presently operates as part of its Louisville Service Lane its Central Ohio Subdivision, which is a 60.3-mile branch main line extending between Newark, OH, and Gibson, OH. CSXT seeks to abandon the 7.79-mile end segment of this Subdivision. According to petitioner, there is only one shipper on the line, Wampum, which has made very little use of rail service in recent months. Wampum operates an explosives distributorship for the mining industry at Gibson, at the end of the line. Before problems were encountered with its Midwest supplier, Wampum used rail transportation in addition to trucks to handle its inbound shipments of ammonium nitrate. Truck transportation is used exclusively on all outbound shipments. CSXT asserts that abandonment will relieve it of the costs of owning and maintaining an underutilized line of railroad. CSXT states that Wampum received 68 rail carloads of ammonium nitrate in 1997 and 64 carloads in 1998, but only 6 carloads during the first 6 months of 1999. CSXT also states that, between September 1997 and September 1998, Wampum received between 6 and 9 carloads each month by rail. However, beginning in October 1998, Wampum received no more than 3 shipments by rail in any given month and, during a couple of months, Wampum received no shipments by rail. It is clear from these figures, CSXT contends, that the shipper has recently diverted its shipments from rail almost exclusively to truck. CSXT states that it suffered an avoidable loss from operations during 1998 of $70,931. CSXT estimates that, even based on Wampum's receiving 64 carloads per year via rail, it will have an avoidable loss from operations in a forecast year of $12,468 and an overall loss including economic costs of $84,725. Petitioner adds, however, that, based on recent actual traffic, a projection of 64 carloads in the forecast year is extremely optimistic. Wampum, in its opposition, claims that CSXT has not shown that the cost of operating the line exceeds the revenue from that shipper's traffic. Wampum also claims that CSXT has failed to make a case that the line would be operated at any loss. Wampum argues that petitioner has failed to adequately explain and support its forecast and base year operating costs, particularly its forecast year transportation costs and the components of its return on value. Wampum further asserts that CSXT has wrongly assumed that forecast year traffic on the line would be the same as that in the base year, i.e., 64 carloads. According to Wampum, the recent decline in its rail traffic is a temporary phenomenon caused by a quality problem with ammonium nitrate at Wampum's traditional Midwest supplier. Wampum states that it has been receiving its ammonium nitrate by truck from the nearby Pittsburgh, PA area while its Midwest supplier is making plant improvements to eliminate the problem. Wampum claims that the Pittsburgh area supplier is in the process of being sold to another company, and Wampum is uncertain whether it would be able to receive ammonium nitrate from that new owner on favorable terms. According to Wampum, it is likely, therefore, that it would resume the receipt of that commodity by rail from its traditional Midwest supplier upon completion of improvements to its plant, which is imminent. On this basis, Wampum argues, its forecast year rail traffic is likely to amount to approximately 80 carloads -- the same amount of traffic that moved in the 12-month period before it experienced quality problems. Wampum notes that this forecast year traffic volume exceeds CSXT's estimate by 25%, and it asserts that the additional revenues from this increase in traffic might well result in an operating profit for petitioner in the forecast year. Wampum argues that, because CSXT's evidence is unsupported, unexplained, and, in some cases, incorrect, there is an inadequate record here on which to grant the petition. Therefore, Wampum argues that the petition must be denied outright. In reply, CSXT points out that, although Wampum projects a 25% increase in traffic in the forecast year that would result in increased revenues, it fails to account for the increased avoidable costs for handling that traffic. CSXT also argues that Wampum has failed to justify its projected 80-carload figure for the forecast year -- particularly in light of the fact that no carloads are moving via rail today and none may move in the future. It notes that the temporary quality problem with Wampum's former Midwest ammonium nitrate supplier has been ongoing for a year, and that there is no suggestion that the problem has been or is about to be solved. CSXT also points out the confusion, uncertainty, and speculation surrounding this whole situation. Indeed, CSXT expresses its belief that the shipper here merely wants rail service left in place to hold down truck rates from a potential new supplier in Pittsburgh. There is virtually no traffic moving over the line at the present time. Nor is there any assurance from the lone protestant that there will be any traffic in the future. Wampum's assertion that this situation is temporary is belied by the shipper's own presentation. Wampum's testimony indicates that it would revert to rail service only if its current supplier in Pittsburgh, which ships by truck, is sold to a new company that fails to give Wampum terms as favorable as those it now receives. The resumption of rail service is further contingent on Wampum's Midwest supplier solving problems that caused Wampum to drop that supplier. Given these factors, the record does not support Wampum's forecast that the line will carry 80 cars annually. CSXT's forecast year data show that the revenue from carrying 64 cars annually over the line would fail to cover the cost of providing that service. Wampum challenges one of the elements in CSXT's forecast year submission, the cost of transportation (employee wages, fuel, etc.), by noting that this item is higher than the comparable figure used by CSXT in computing its base year. But, as CSXT points out, the cost figure for maintenance of way and structures for the forecast year is significantly lower than for the base year, resulting in significantly lower total avoidable costs for the forecast year. Moreover, CSXT's projected transportation costs are within reason for hauling 64 cars a year. Indeed, the railroad's service to Wampum presents some unusual characteristics that would produce higher than usual costs. CSXT serves Wampum on an as-needed basis by a local train operating out of Newark, OH, with a three-man crew. On those days when the local serves Wampum, a relief crew must be called to pick up the train on its return run to Newark because the regular crew would have to violate hours of service requirements to perform the task. Service to Wampum is difficult for another reason. In order to serve the shipper's facility, the crew must pull the train between Cambridge and Gibson, as there is no run around track (a track that would permit the railroad to move the locomotive from one end of the train to the other) between Cambridge and Gibson. Once the crew has finished switching Wampum, the crew must push the train back to Cambridge, a less efficient procedure than pulling it. This procedure, according to CSXT, has required the payment of overtime. CSXT has made its case that any revenues it can reasonably expect to earn from providing service over this line will not cover the cost of providing that service. The line is a burden on interstate commerce. Its abandonment has been justified. Regulation of the transaction is not necessary to protect shippers from an abuse of market power. The sole shipper on the line, Wampum, has made minimal use of rail service in recent months and is currently moving no traffic by rail over the line. Wampum continues to experience quality problems with its Midwest supplier -- the source of its rail traffic -- and has switched to truck service to move its inbound ammonium nitrate. Although Wampum has stated that completion of improvements to its supplier's plant is imminent, Wampum has provided no specific time frame as to when rail traffic will again move and in what volume. Consequently, what the record before us does show is that no rail traffic is presently moving and that none may move in the future. Although Wampum claims that abandonment would seriously harm it (due to increased truck freight charges) and the area mining industry, there is no support for this allegation on the record. While Wampum's transportation costs may increase as a result of the abandonment, it is well settled that a railroad will not be required to operate a segment of trackage at a loss simply to prevent shippers from incurring higher transportation costs by truck. We note that any financially responsible person (and all government agencies are deemed to be financially responsible) may file an offer of financial assistance (OFA). Should Wampum or any other interested party wish to retain the line, it may acquire the line or subsidize its continued operation under the OFA procedures. SEA indicated that the United States Fish and Wildlife Service recommends that, if salvage operations involve the cutting of dead trees or trees with cavities or exfoliating bark, such cutting should not take place between April 15 and September 15 in order to avoid disturbing the breeding habitat of the Indiana Bat, a Federally listed endangered species. The United States Environmental Protection Agency states that all debris resulting from salvage operations must be removed from the right-of-way, streams and wetlands, and appropriate measures employed to prevent or control spills of fuels, lubricants, or any other pollutants into any watercourse. The United States Army Corps of Engineers (Corps) notes that the line crosses Leatherwood Creek and its tributaries at 17 locations and is adjacent to several large wetland complexes at three separate locations. The Corps states that, if dredge or fill material is placed in any of these areas, a permit under the Clean Water Act would be required. SEA therefore recommended that the following conditions be placed on any decision granting abandonment authority: (1) if salvage operations require the removal of dead trees or trees with cavities or exfoliating bark, the railroad shall not engage in such cutting between April 15 and September 15; (2) CSXT shall remove all debris from salvage operations from the right-of-way, streams and wetlands, and shall employ appropriate measures to prevent or control spills of fuel, lubricants or other pollutants into any watercourse; and (3) if salvage operations require the placement of fill or dredge material into streams or wetlands, CSXT shall consult the United States Army Corps of Engineers, Huntington District, prior to commencement of the salvage operations to determine if permits are required. It is ordered: 1. Under 49 U.S.C. 10502, we exempt from the prior approval requirements of 49 U.S.C. 10903 the abandonment by CSXT of the above-described line, subject to the employee protective conditions set forth in Oregon Short Line R. Co.--Abandonment-Goshen, 360 I.C.C. 91 (1979), and subject to the conditions that: (1) if salvage operations require the removal of dead trees or trees with cavities or exfoliating bark, CSXT shall not engage in such cutting between April 15 and September 15; (2) CSXT shall remove all debris from salvage operations from the right-of- way, streams and wetlands, and shall employ appropriate measures to prevent or control spills of fuel, lubricants or other pollutants into any watercourse; and (3) if salvage operations require the placement of fill or dredge material into streams or wetlands, CSXT shall consult the United States Army Corps of Engineers, Huntington District, prior to commencement of the salvage operations to determine if permits are required. 2. CSXT is directed to serve a copy of this decision on Wampum Hardware Co. within 5 days after the service date of this decision and to certify to the Board that it has done so. 3. Provided no OFA has been received, this exemption will be effective December 22, 1999. 4. CSXT 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 CSXT's filing of a notice of consummation by November 22, 2000, and there are no legal or regulatory barriers to consummation, the authority to abandon will automatically expire. Decided: November 22, 1999 Service Date - Late Release November 22, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-55 (Sub-No. 575X) CSX TRANSPORTATION, INC. ABANDONMENT EXEMPTION IN LEE COUNTY, VA CSX Transportation, Inc. (CSXT) filed to abandon its line of railroad between milepost OCV-242.00 and milepost OCV-243.6, near Hagans, in Lee County, VA, a distance of approximately 1.6 miles. Notice of the exemption was served on October 26, 1999. The exemption is scheduled to become effective on November 25, 1999. SEA states that the Commonwealth of Virginia Department of Environmental Quality submitted a list of suggestions concerning water quality, air quality, erosion and sediment control and storm water management and pesticides and herbicides prior to salvage operations. Therefore, SEA recommends that, prior to conducting any salvage operations, CSXT consult with (1) the Virginia Department of Environmental Quality, Southwest Regional Office, concerning water quality and air quality, (2) the Department of Conservation and Recreation's Division of Soil and Water Conservation, to ensure compliance with Virginia's regulations regarding soil erosion and sediment control and storm water management, and (3) the Department of Agriculture and Consumer Services, concerning the use of herbicides and pesticides. The conditions will be imposed. It is ordered: 1. This proceeding is reopened. 2. Upon reconsideration, the exemption of the abandonment of the line described above is subject to the condition that CSXT consult with (1) the Virginia Department of Environmental Quality, Southwest Regional Office, concerning water quality and air quality, (2) the Department of Conservation and Recreation's Division of Soil and Water Conservation, to ensure compliance with Virginia's regulations regarding soil erosion and sediment control and storm water management, and (3) the Department of Agriculture and Consumer Services, concerning the use of herbicides and pesticides. Decided: November 18, 1999 Service Date - November 23, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB SERVICE ORDER NO. 1523 PETITION FOR EMERGENCY SERVICE ORDER In a petition filed on Friday, October 29, 1999, Acme Steel Company asks the Board to issue an emergency service order. Acme requests an order directing that Norfolk Southern Railway Company (NS), CSX Transportation, Inc. (CSXT), and Indiana Harbor Belt Railroad Company (IHB) cooperate with each other and coordinate in providing rail transportation to Acme's facilities in the Chicago, IL area. Responses to Acme's petition were filed separately by NS, CSXT, and IHB. In the responses, the carriers indicate that efforts are already underway to provide improved service to Acme and to other shippers. Acme states that it filed the petition for emergency service relief to address the service problems that have arisen during the transitional period since the operations of the Consolidated Rail Corporation (Conrail) were taken over by CSXT and NS. Acme is a producer of iron and steel located in Riverdale, IL, that was formerly served by Conrail. According to Acme, since the transfer of Conrail's operations to CSXT and NS on June 1, 1999, Acme's rail service, which is now provided by NS, has deteriorated. Acme states that its service problems are attributable to the way the carriers interact in providing service throughout the Chicago Terminal area, and that it has met with all three of the involved railroads sometimes separately, and sometimes together but that its service remains deficient. Acme points out that [t]he overlapping interrelationship between the rail carriers that operate in the Chicago area obviously requires a high emphasis on cooperation and coordination in order to ensure smooth and efficient operations. Acme states that such cooperation and coordination is greatly lacking in the Chicago area, and as proof it argues that its service has become slower during October than it was earlier. Acme asks the Board to issue an emergency service order directing the carriers to cooperate so that service to Acme will be provided no less quickly than was historically provided by Conrail. NS and CSXT each responded to Acme's petition on November 8, 1999. IHB responded on November 9, 1999. In their responses, each railroad points out that it has been working diligently to manage its operations within the busy Chicago rail network in order to improve service to Acme and to other shippers as well. In support of its request for emergency relief, Acme analogizes its situation to that of shippers during what the Board found was a transportation emergency in the western United States in 1997. Acme recognizes, as it must, that the current situation is not similar to that which compelled the Board to declare an emergency in the West, but it nevertheless seeks an emergency order. Oddly, however, Acme does not seek the sort of relief provided for in the emergency service provisions of the law, and the relief that it does seek an order direct[ing] NS, CSXT and IHB . . . to immediately begin cooperating in coordinating their facilities to allow the prompt movement of hot metal between South Chicago and Riverdale is not necessary. The provisions of 49 U.S.C. 11123 authorize us to issue temporary emergency service orders when we determine that any failure of traffic movement exists which creates an emergency situation of such magnitude as to have substantial adverse effects on shippers, or on rail service in a region of the United States. Under the emergency service order provisions of section 11123, if we find that there is an emergency situation, we may (1) direct the handling, routing, and movement of the traffic of a rail carrier and its distribution over its own or other railroad lines; (2) require joint or common use of railroad facilities; (3) prescribe temporary through routes; or (4) give directions for preference or priority in transportation, embargoes, or movement of traffic under permits. Clearly, shippers have faced service issues since the transfer of Conrail's operations to CSXT and NS on June 1, 1999. The Board continues to actively monitor the operational aspects of the transaction through regular service data reporting, and through daily contacts with railroads, shippers, and railroad employees, and has developed an informal process to address specific service complaints. The Board's Office of Compliance and Enforcement (OCE) has established an open line of communication with senior railroad officials, and OCE immediately forwards service complaints brought to it informally by shippers seeking assistance. OCE follows up on each complaint to ensure that it is being addressed appropriately. In some cases, OCE staff may review the steps that the carrier is taking, and may recommend alternatives. Handling shippers individual service issues informally in this manner, we have found, provides an effective way for the Board to facilitate real solutions to shippers service concerns without overreaching governmental action. Acme has not made OCE aware of any service problems or asked OCE to work informally on its behalf, and indeed in its formal petition for emergency relief it does not ask the Board to take specific actions directed at the three involved carriers that would address specific operational problems, or, as noted, to exercise any of the powers enumerated in section 11123. Rather, it simply wants us to declare an emergency so that we can then issue an order on Acme's behalf directing the carriers to cooperate. We do not see the need to issue such an intrusive order here: the carriers indicate that substantial effort is being made to cooperate and coordinate, and Acme's own petition indicates that, on more than one occasion, it has held meetings that were attended by representatives of all three carriers. Thus, such unnecessary government involvement in private business would be inappropriate. An order formally directing the carriers to do what they are already doing would serve no useful purpose. While we do not believe that this situation warrants formal action by the Board, we will continue to monitor the overall situation, and also hold CSXT, NS, and IHB to their representations that they are cooperating and coordinating their operations so that they can improve their services to Acme and to other shippers and railroads utilizing the complex Chicago Terminal. The Board will not, however, issue an emergency service order under the circumstances presented in Acme's petition. It is ordered: 1. The motion for protective order is granted and all confidential material submitted in STB Service Order No. 1523 will be kept under seal and not placed in the public docket or otherwise disclosed to the public. 2. The petition for an emergency service order is denied. 3. The carriers are held to their representations that they will continue to make every reasonable effort to cooperate with one another, and to coordinate their operations. Decided: November 23, 1999 Service Date - November 24, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-55 (Sub-No. 567X) CSX TRANSPORTATION, INC. ABANDONMENT EXEMPTION IN ALLEGHENY COUNTY, PA On February 12, 1999, a decision and notice of interim trail use or abandonment was served authorizing a 180-day period for the City of Pittsburgh to negotiate an interim trail use/rail banking agreement with CSX Transportation, Inc. (CSXT), for a .85-mile line extending from milepost 0.00 to milepost 0.85 in Pittsburgh, Allegheny County, PA. The 180-day negotiating period was scheduled to expire on August 11, 1999, but was extended through November 9, 1999, by decision served on August 11, 1999. Subsequently, the City filed a request for an extension of the negotiating period for an additional 90 days. The City states that negotiations are ongoing, but that more time is needed to reach a final agreement. CSXT replied, stating that it agrees to an extension of the negotiating period, but only for 60 days. Where as here, the carrier willing to continue trail use negotiations, the negotiating period may be extended. Under the circumstances, a 60-day extension is warranted and will promote the establishment of trail use and rail banking. Accordingly, the negotiating period will be extended for an additional 60 days from November 9, 1999. It is ordered: 1. The negotiating period is extended to January 8, 2000. Decided: November 19, 1999 Service Date - November 24, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Docket No. AB-57 (Sub-No. 49X) SOO LINE RAILROAD COMPANY--ABANDONMENT EXEMPTION--IN MACINTOSH COUNTY, ND Soo Line Railroad Company filed a notice to abandon a 19.0+/-mile portion of its line of railroad known as the Pollack Line between milepost 342.0+/-near Wishek and milepost 361.0+- at the end of the track near Ashley, in MacIntosh County, ND. Notice of the exemption was served on October 27, 1999. The exemption is scheduled to become effective on November 26, 1999. SEA states that the National Geodetic Survey (NGS) has identified 11 geodetic station markers that may be affected by the proposed abandonment. NGS requests that it be notified 90 days in advance of any activities that may disturb or destroy these markers to plan for their relocation. Therefore, SEA recommends that a condition be imposed requiring Soo to consult with the NGS and provide NGS with 90 days notice prior to disturbing or destroying any geodetic markers. SEA also states that the North Dakota Department of Health (NDDH) requests that Soo take necessary precautions to avoid spills of any materials which would have an adverse effect on ground water quality and to avoid fugitive dust emissions. Additionally, NDDH has expressed concerns regarding waste management, noise, and the possibility that contamination sites might be uncovered during salvage operations. Therefore, SEA recommends that conditions be imposed requiring Soo to: (1) employ best management practices to minimize fugitive dust emissions, spills of any material into waterways and wetlands, and noise having adverse effects on persons living near the site of salvage operations; (2) dispose of all solid waste materials in accordance with the State of North Dakota's solid and hazardous waste rules; (3) consult with the NDDH if salvage operations result in the discovery of fuel contamination; and (4) revegetate disturbed areas as soon as possible after completion of salvage operations. The conditions will be imposed as recommended. It is ordered: 1. This proceeding is reopened. 2. Upon reconsideration, the exemption of the abandonment of the line described above is subject to the conditions that Soo shall: (a) consult with the NGS and provide NGS with 90 days notice prior to disturbing or destroying any geodetic markers identified; (b) employ best management practices to minimize fugitive dust emissions, spills of any material into waterways and wetlands, and noise having adverse effects on persons living near the site of salvage operations; (c) dispose of all solid waste materials in accordance with the State of North Dakota solid and hazardous waste rules; (d) consult with the NDDH if salvage operations result in the discovery of fuel contamination; and (e) revegetate disturbed areas as soon as possible after completion of salvage operations. Decided: November 19, 1999 Service Date - November 24, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION AND NOTICE OF INTERIM TRAIL USE OR ABANDONMENT STB Docket No. AB-560 (Sub-No. 1X) ABERDEEN & ROCKFISH RAILROAD COMPANY D/B/A DUNN-ERWIN RAILWAY-- ABANDONMENT AND DISCONTINUANCE EXEMPTION--IN HARNETT COUNTY, NC By decision and notice of interim trail use or abandonment (NITU) served July 2, 1999, Aberdeen & Rockfish Railroad Company d/b/a Dunn-Erwin Railway (DER) was granted an exemption to abandon a line of railroad that it owns and discontinue service over a line of railroad that it leases from CSX Transportation, Inc. (CSXT), in Harnett County, NC. The NITU also authorized the Sandhills Area Land Trust (SALT) to negotiate an interim trail use/rail banking agreement with DER only for the line to be abandoned. The line to be abandoned is approximately 5.488 miles long and extends from milepost SDS 53.00 near Erwin to milepost SDS 56.66 at Dunn, and from milepost SDE 0.00 near Erwin to milepost SDE 2.02 at Erwin. The exemption to discontinue service between milepost SDS 56.66 and milepost SDS 57.01 became effective on August 1, 1999. On November 15, 1999, SALT and North Carolina Rail-Trails, Inc. (NCRT), jointly filed a request for NCRT's substitution as interim trail use applicant in lieu of SALT. NCRT and SALT request that the effective date of the transfer and substitution be November 30, 1999. SALT and NCRT have made the required showing for the substitution of interim trail user. Accordingly, the request will be granted. It is ordered: 1. The decision and notice of interim trail use served July 2, 1999, is modified to reflect the fact that NCRT is authorized to negotiate an interim trail use/rail banking agreement with DER. Decided: November 23, 1999 Service Date - November 29, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33759 PRAIRIE CREEK AND CONNECTING RAILWAY, INC.-- CONSTRUCTION AND OPERATION EXEMPTION--IN CEDAR RAPIDS, IA On September 21, 1999, Prairie Creek and Connecting Railway, Inc. (PCCR), filed a petition to construct a line of railroad, approximately one mile in length, from an interchange with the Union Pacific Railroad Company to the facilities of Archer-Daniels-Midland Company (ADM) in Cedar Rapids, IA. On September 29, 1999, Cedar Rapids and Iowa City Railway Company (CRANDIC) filed under seal a motion to deny the petition or, in the alternative, to extend the time for filing a response. In a request filed on October 5, 1999, PCCR sought an extension of time to reply to CRANDIC's motion to deny the petition. On October 8, 1999, the United Transportation Union (UTU) filed a motion to deny PCCR's petition. The Brotherhood of Maintenance of Way Employes and the Chicago Central and Pacific Railroad Company filed letters in support of CRANDIC's motion. The International Association of Machinists and Aerospace Workers filed a notice of its intent to participate in this proceeding. The City of Cedar Rapids expressed interest in the consideration of environmental issues. In a decision served October 7, 1999, the due date for PCCR's reply was extended to November 9, 1999. On November 9, 1999, PCCR filed a reply to CRANDIC's motion and UTU's motion. In a motion filed on November 19, 1999, and served on all parties, PCCR requests leave to withdraw its petition for exemption without prejudice. It states that PCCR, ADM and CRANDIC have come to an agreement that obviates the need to continue this proceeding. The withdrawal of the petition for exemption renders the motions of CRANDIC and UTU moot. In view of the withdrawal, the proceeding will be discontinued without prejudice. It is ordered: 1. The request to withdraw the petition for exemption is granted and the proceeding is discontinued without prejudice. 2. CRANDIC's motion and UTU's motion are dismissed as moot. Decided: November 29, 1999 Service Date - Late Release November 29, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33793 SWKR OPERATING CO., INC.--PETITION FOR DECLARATORY ORDER-- LINE RELOCATION IN COCHISE COUNTY, AZ In a petition filed August 27, 1999, SWKR Operating Co., Inc. (SWKR) sought a declaratory order to remove the uncertainty that its proposed construction of a 1,775-foot line of railroad from Naco, in Cochise County, AZ, to the international border with Mexico is a line relocation for which no authorization from the Board is required. In the petition, SWKR stated that the growth of transborder traffic prompted by the North American Free Trade Agreement and the congestion that has occurred at the nearby railroad crossing point of Nogales, AZ, have spurred interest in reopening the crossing at Naco. By letter filed November 19, 1999, SWKR, acting through its counsel, requests that the petition be allowed to be withdrawn and that the proceeding be discontinued. The request will be granted. It is ordered: 1. The request to withdraw the petition for declaratory order is granted and the proceeding in STB Finance Docket No. 33793 is discontinued. 2. The decision is effective on its date of service. Decided: November 29, 1999 Service Date - November 30, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33820 CENTRAL OF TENNESSEE RAILWAY & NAVIGATION COMPANY INCORPORATED DBA THE LONGHORN RAILWAY COMPANY PETITION FOR DECLARATORY ORDER Central of Tennessee Railway & Navigation Company Incorporated doing business as The Longhorn Railway Company (LHRR), the operator of a 162-mile rail line between Giddings and Llano, TX, filed a petition for a declaratory order on November 12, 1999, alleging that Capital Metropolitan Transportation Authority (CMTA), owner of the Giddings-Llano line, is engaged in a pattern of behavior that is inconsistent with the latter's common carrier obligation, and that this pattern of behavior is impeding LHRR's ability to carry out its own common carrier obligation as operator of, and forcing it discontinue freight service to, the Giddings-Llano line. In a petition filed on November 23, 1999, CMTA requests a 15-day extension to respond to LHRR's declaratory order petition, and states that LHRR has consented to the extension request. Ownership of the Giddings-Llano line apparently was transferred from the city of Austin, TX to CMTA on May 20, 1998. Austin acquired the Giddings-Llano line from Southern Pacific Transportation Company in 1986 and entered into a 10-year contract for Austin & Northwestern Railroad to operate the Giddings-Llano line. Under the Administrative Procedure Act, [this] agency . . . in its sound discretion, may issue a declaratory order to terminate controversy or remove uncertainty. The requested extension of the 20-day time period for filing replies will not unduly delay a determination on whether to institute this declaratory order proceeding. It is ordered: 1. The reply due date is extended to December 17, 1999. Decided: November 29, 1999 Service Date - November 30, 1999 ------------------------------------------------------------------------- SURFACE TRANSPORTATION BOARD STB Finance Docket No. 32760 (Sub-No. 21) Decision No. 15 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 issues that have been raised and the conclusions that we have reached in the third annual round of the UP/SP general oversight proceeding. Our review of this record indicates that the service crisis is over and that there have been no competitive problems resulting from the merger. In a decision 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 as supplemented by the CMA agreement and further expanded by the Board. Common control was consummated on September 11, 1996, and the mergers we authorized were completed on February 1, 1998. In a decision 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 for any major adjustments in the imposed conditions. Although we had concluded that the UP/SP merger had not produced any substantial competitive problems as of mid-1997, it had then become evident that the UP rail system was experiencing serious service problems. In response to these problems, we took 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 (effective 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) by decision served December 4, 1997, we extended the emergency service order to March 15, 1998, and modified that order to address four additional matters (service involving Texas, California, western coal, and midwest agricultural shippers); (4) by decision served February 25, 1998, we extended the emergency service order, as previously modified, to August 2, 1998 (the maximum time permissible); (5) by decision served March 31, 1998, we instituted a Houston/Gulf Coast oversight proceeding to consider long-term proposals for additional remedial conditions pertaining to rail service in the Houston/Gulf Coast region; (6) by decision served July 31, 1998, we allowed the emergency service order to expire on August 2, 1998 (subject, however, to certain wind down arrangements that continued until September 17, 1998); and (7) by decision served December 21, 1998, we adopted a clear route condition intended to facilitate the smooth movement of railcars through Houston, and provided for joint dispatching of trains in and around the Houston area. In another decision served December 21, 1998, we addressed the issues that had been raised in the second annual round of the general oversight proceeding. We concluded that the UP/SP merger, though its implementation had not proceeded operationally as smoothly as we had anticipated, had not thus far caused any substantial competitive harm, and that there was no need for any adjustment in the general conditions imposed in connection with the merger to preserve competition. Here, we have considered the issues raised in the following pleadings that were filed in the third annual round of the general oversight proceeding: the third annual report on merger and condition implementation filed July 1, 1999, by UP; the quarterly progress report, filed July 1, 1999, by BNSF; the comments filed August 16, 1999, by the United States Department of Transportation (DOT); the letter filed August 16, 1999, by The National Industrial Transportation League (NITL); the comments filed August 16, 1999, by the California Public Utilities Commission (CPUC); the UP/SP reply filed September 3, 1999; and the BNSF reply filed September 3, 1999. The pleadings submitted in the third annual round of the general oversight proceeding reflect that the service crisis is over, and that the merger is producing benefits for the shipping public (i.e., better service and lower rates). There is no evidence that the merger has produced any competitive problems. UP has submitted ample and unrebutted evidence to demonstrate that it has overcome its service problems. UP reports that its service has recovered fully and continues to improve, and all of the information available to us confirms that analysis. Moreover, all indications are that both the UP/SP merger and the competitive conditions we imposed are continuing to strengthen competition for railroad transportation in the West. Despite the participation of hundreds of shippers throughout the merger process and in our follow-up proceedings, no shipper has appeared here to even allege that this merger has resulted in any competitive harm. It appears that the merger is continuing to produce competitive benefits and improved service, and this assessment is shared by DOT. UP has submitted numerous examples to demonstrate new single-line service and shorter routings. Equipment supply has improved, and switching charges have been reduced by an aggregate amount of $85 million during the first 3 post-merger years. UP notes that the merger has made possible backhauls, triangulation, and more efficient equipment repositioning, which in turn have allowed UP to provide its shippers with more competitive rates and service. UP has made significant progress in merger implementation during the past year. It has successfully installed its Transportation Control System (TCS) and other support systems. It has continued to resolve issues necessary to the integration of its workforces. It has made substantial progress in consolidating and improving terminals and yards. Most notably, it has totally rebuilt Roseville Yard in Northern California. With guidance from the Federal Railroad Administration (FRA), UP has enhanced the safety of the merged system's operations; DOT has expressed satisfaction with UP's greatly improved safety record during this past year. UP has undertaken or completed merger-related capital investments, and indicates that, by the end of 1999, it will have spent, in the 3-year 1997-1999 period, more than $1 billion on such improvements. The 2-to-1 shippers have continued to benefit both from access to BNSF resulting from our merger conditions and from the rate and service initiatives UP has had to undertake to meet BNSF competition. BNSF concurs that it has continued its efforts to provide reliable, dependable, and consistent service over the UP/SP trackage rights lines. This business has continued to grow steadily, and many shippers have benefitted from new merger-related access to BNSF, which we predicted would become a more vigorous competitor than the financially distressed SP. BNSF notes that it continues to be effective in marketing its services over the UP/SP trackage rights lines. Although BNSF has raised specific issues concerning UP's conduct towards it in terms of carrying out the merger conditions, these objections, which we discuss further below, do not detract from the overall merger implementation picture, which continues to be extremely positive. ISSUES RAISED BY BNSF. The various issues raised by BNSF continue to involve issue-specific disputes that BNSF and UP ought to be able to resolve on their own, on a case by case basis, without our intervention. ISSUES RAISED BY CPUC. In UP/SP Merger, we imposed a 5-year oversight condition so that we could ensure that the remedial conditions we had imposed upon the merger would ameliorate any anticompetitive impacts that an unconditioned merger might have produced. CPUC alleges adverse impacts in three areas discussed below. Because the merger has not produced these adverse impacts, we will deny CPUC's requests for relief. The Interstate 5 Corridor. CPUC contends that, unless we grant BNSF trackage rights over UP between Marysville, CA, and Eugene, OR (or impose some similar remedy), there will continue to be, in the Interstate 5 (I-5) Corridor, a flawed type of north-south rail competition because UP's I-5 Corridor route will continue to be superior to BNSF s. Prior to the merger, however, there was no real north-south rail competition, flawed or otherwise, in the I-5 Corridor. Rail competition in the I-5 Corridor has not been weakened by the merger; rather, rail competition in the I-5 Corridor was created by the merger. UP has explained that it granted BNSF those concessions [in the I-5 Corridor] not to resolve any loss of competition as a result of the UP/SP merger, but as a quid pro quo in the negotiations between BNSF and UP . . . . Although the merger's procompetitive impact in the I-5 Corridor may not be as beneficial as CPUC might have preferred, the merger has not had an adverse impact in the I-5 Corridor. The Calexico/Mexicali Border Crossing. CPUC contends that the public interest would be served if UP were required to improve the Niland-Calexico line for NAFTA rail transportation purposes. But, the merger has changed nothing other than the line's ownership: it was an SP line; it is now a UP line. The merger, therefore, has not had an adverse competitive impact as respects rail operations at the Calexico/Mexicali border crossing. The Central Corridor. CPUC contends that pre-merger UP vs. SP competition in the Central Corridor has not been effectively replicated by post-merger UP vs. BNSF competition, and that we should therefore begin a process to select another railroad that would be willing to take over the Central Corridor's secondary line between Northern California and the Midwest and reinstitute aggressive competition. Contrary to CPUC's claims, as discussed further below, we believe that, in the Central Corridor, pre-merger UP vs. SP competition has been effectively replicated by post-merger UP vs. BNSF competition. (1) CPUC claims that BNSF's Central Corridor market share is substantially less than UP s. We have previously noted: that BNSF's market share is not the decisive criterion by which to judge the degree to which BNSF replicates the competition that would otherwise have been lost through the merger; that, although BNSF must have sufficient Central Corridor traffic to sustain service levels that will allow it to be a realistic choice for shippers, its Central Corridor traffic level can be far less than that of an independent SP; and that the most important indicator of the impact of BNSF's Central Corridor trackage rights is the effect that BNSF's presence in the market has on the rates offered by UP. All indications are that BNSF's presence in the Central Corridor has required UP to compete vigorously for BNSF-accessible traffic requiring the use of that corridor. (2) CPUC claims that most of BNSF's California-Midwest traffic, and almost all of BNSF's California-Midwest intermodal traffic, continues to be routed via BNSF's Southern Corridor route (which BNSF refers to as its Transcon Route ). BNSF's Southern Corridor route is generally regarded as superior to any conceivable Central Corridor route, particularly for intermodal traffic. As UP has observed: CPUC offers no plausible explanation why BNSF's routing choice for Northern California-Midwest overhead shipments should be of any concern to shippers or to the State of California. If shippers are receiving competitive service and rates, routing of overhead traffic has no impact on the public interest. As a general matter, we should not be in the business of making railroad operating decisions. (3) CPUC claims that BNSF's 1999 Central Corridor traffic levels have not kept pace with BNSF's 1998 Central Corridor traffic levels. But BNSF has explained that, in 1998, it handled a one-time spot movement of coal for Utah Railway from Sierra Pacific Power at Valmy, NV, which temporarily increased BNSF's volumes on the Central Corridor. (4) CPUC claims that, although BNSF had previously indicated an intent to use its own crews west of Salt Lake City, BNSF has not yet begun to, and apparently no longer intends to, do so. BNSF has explained that UP crews are used to handling BNSF trains (with BNSF power) for certain of its Central Corridor trackage rights movements west of Provo, UT, that it has recently chosen to replace UP crews with BNSF crews for trains operating over the former SP route from Stockton and Roseville, CA, through Reno/Sparks, NV, and that the rerouting of trains over the Transcon Route and the relief of congestion on the UP lines have made it unnecessary for BNSF to use its own crews on the Central Corridor. (5) CPUC claims that BNSF has further minimized the use of its own crews in the Central Corridor by hiring the Utah Railway Company (URC) to switch cars and gather traffic for BNSF. As BNSF explains: The combination of BNSF roadhaul service and Utah Railway pickup and delivery provides Utah customers with a viable, competitive service option. (6) CPUC claims that California shippers have not benefitted from the lower rates that strong Central Corridor competition would produce. This assertion is unsupported. There is no evidence on this record that the merger has resulted in any rate increases for California shippers, and there is no reason to believe that any shipper's rates would be reduced if BNSF were to shift traffic from its highly efficient Southern Corridor route to a less efficient Central Corridor route. (7) CPUC claims that, because BNSF is not participating to any degree in the movement through the Central Corridor of container shipments from the Port of Oakland, that port (the nation's fourth largest container port) has become less attractive as a West Coast point of entry. This assertion is unsupported; there is no evidence that the Port of Oakland shares this concern, or that the Port of Oakland has actually become less attractive as a point of entry. In addition, this assertion overlooks the fact that, prior to the merger, SP routed most of its Oakland traffic via its own more efficient Southern Corridor route (and not via its less efficient Central Corridor route). As the Port of Oakland has itself explained: It is, and always has been our understanding that BNSF trackage rights over the Central [C]orridor could not be used as a route to serve double-stack intermodal markets in and out of the Bay Area. This is because restricted tunnel clearances on the route make it impossible for BNSF to provide double-stack service. . . . We believe that the existing BNSF route out of Northern California through Barstow already provides excellent transit times. CPUC claims that, as a practical matter, BNSF will never use its Central Corridor trackage rights to haul double-stack intermodal containers from/to the Port of Oakland. This may well be true, but, as we have already noted, the important point is that BNSF will be handling this traffic (via its more efficient Southern Corridor route). (8) CPUC claims that, once UP has enlarged the tunnels on the Donner Summit route, portions of the Feather River Canyon route will become ripe for abandonment. The anticipated abandonments are highly unlikely, and, in any event, our jurisdiction as respects abandonments will allow us to deal with this matter if and when an abandonment is ever proposed. GENERAL OVERSIGHT CONTINUED. The fourth annual round of the general oversight proceeding will be conducted in mid-2000, in accordance with the schedule indicated below. It is ordered: 1. The requests for relief urged by CPUC are denied. 2. UP and BNSF shall continue to report quarterly, with comprehensive summary presentations included in their progress reports due on July 3, 2000. UP and BNSF shall make their 100% traffic waybill tapes available by July 17, 2000. 3. Comments of interested parties concerning oversight will be due on August 18, 2000. 4. Replies will be due on September 5, 2000. Decided: November 29, 1999 Service Date - Late Release November 30, 1999 APPENDIX: SUMMARY OF PLEADINGS THE UP/SP REPORT. The evidence, UP argues, demonstrates that UP has overcome the service crisis, and that both the UP/SP merger and the competitive conditions we imposed in UP/SP Merger have strengthened, and are continuing to strengthen, transport competition in the West. UP insists that its service has recovered fully and continues to improve. UP contends, in particular: that the merger is continuing to produce competitive benefits in the form of single-line service and shorter routings, improved equipment supply, and reduced switch charges; and that 2-to-1 shippers have continued to benefit both from access to BNSF and from the rate and service initiatives UP has had to undertake to meet BNSF competition. UP further contends that the merger has not had adverse competitive effects on 3-to-2 traffic or on shippers of Utah and Colorado coal, Gulf Coast chemicals, or grain. The UP/SP report also provides an update on merger implementation. UP claims that it has made progress during the past year: in installing its Transportation Control System (TCS) and other support systems; in integrating workforces; in consolidating and improving terminals and yards; in enhancing the safety of the merged system's operations; and in pursuing merger-related capital investments (UP indicates that, by the end of 1999, it will have made, in the 3-year 1997-1999 period, more than $1 billion in merger-related capital investments). THE BNSF REPORT. BNSF contends: that it has continued its efforts to provide reliable, dependable, and consistent service over the UP/SP trackage rights lines; that its capabilities and business have continued to grow steadily; and that, as a result, many shippers have benefitted from new merger-related access to BNSF. BNSF adds: that it continues to be effective in marketing its services over the UP/SP trackage rights lines; that its traffic volumes over these lines have continued to grow; and that it remains committed to securing new business from new customers and additional business from existing customers. BNSF raises four issues relating to its operations over the UP/SP trackage rights lines. Issue #1: Application of Agreements by UP. BNSF claims that, on a number of occasions, UP has applied the terms of various operating and other agreements in ways inconsistent with full competition by BNSF under the conditions imposed in UP/SP Merger. BNSF has specified four such occasions. (a) BNSF claims that, in the Central Corridor, although UP is obligated to provide sufficient crews to BNSF, it has been UP's practice to crew its own trains first. (b) BNSF claims that, on the Baytown Branch, although BNSF has the right to serve Econorail by UP reciprocal switch, UP has demanded that BNSF commence direct service to Econorail. (c) BNSF claims that, in early June, UP announced that it would, effective immediately, refuse to allow BNSF to access a track in Eagle Pass designated as a Centralized Examination Station (CES), which had been used for customs inspection of incoming shipments when required by United States Customs inspectors. BNSF adds that, although an agreement respecting the Eagle Pass CES has been reached, UP's temporary refusal to allow BNSF to use this facility had a disruptive impact. (d) BNSF claims that, in May 1999, UP advised Coastal Corporation, a 2-to-1 shipper, that, because Coastal was routing outbound asphalt via BNSF, UP would exercise an option to cancel Coastal's lease of UP property on which Coastal had located its asphalt railcar loading racks. BNSF also claims that UP further advised Coastal that the property lease would be extended if Coastal would return the asphalt traffic to UP. BNSF indicates that this issue was resolved in late June when UP agreed to extend the lease with Coastal and not require Coastal to switch its asphalt traffic from BNSF back to UP. BNSF insists, in essence, that, in each of the cited instances, the actions taken by UP violated the terms of the various agreements that BNSF and UP have entered into in connection with the conditions imposed in UP/SP Merger. BNSF claims that such conduct will make it increasingly difficult to provide the fully effective competitive service we envisioned when we approved the UP/SP merger. BNSF adds that it is continuing to work with UP to resolve these matters on a case-by-case basis, and that it will, in the absence of a successful resolution, pursue its remedies before the Board or otherwise. Issue #2: Communications Between UP and BNSF. BNSF claims that, on a number of occasions, UP has negotiated with BNSF respecting BNSF's right to access particular shippers by delivering messages through the shippers. BNSF adds: that it has raised this concern with UP several times; that, however, UP has continued this practice; and that it has been, and remains, difficult for BNSF to deal with UP on such access issues when UP fails to communicate directly with BNSF. Issue #3: Houston and Gulf Coast Area. BNSF contends: that, during the past year, BNSF has continued to use UP haulage to serve customers south of Corpus Christi; that, with the end of the service crisis, that haulage service has improved, and has enabled BNSF to provide competition to UP for shippers at Harlingen and Brownsville, and from/to a connection at Matamoros with Transportaci¢n Ferroviaria Mexicana, S.A. de C.V. (TFM); and that BNSF is monitoring its traffic levels to determine whether it should commence trackage rights operations between Robstown, Harlingen, Brownsville, and Matamoros. BNSF adds: that The Brownsville & Rio Grande International Railroad (BRGI) and BNSF remain concerned about the impacts that construction of the Port of Brownsville rail bypass will have on the routing of BNSF's trains; and that BRGI and BNSF are closely following the project so that any adverse impacts can be avoided or minimized. Issue #4: Sacramento. BNSF claims: that the recent reopening, by UP, of Roseville Yard (now known as the Jerry R. Davis Yard) did not improve service for shippers electing to route via BNSF from/to the Sacramento area, including those on the Central California Traction Company (CCT) in the Lodi and Fruitridge/Polk area; that, because of the elimination of switching capacity on UP at Sacramento following the Roseville Yard reopening, cars from these shippers were sporadically moved by UP through Roseville, adding days and inconsistencies to transit times in conjunction with BNSF; and that, starting in mid-June, BNSF has been able to improve its service by operating its Stockton-Sacramento local entirely on the former SP route between those points (BNSF indicates that the prior operation used both the UP and SP routes). BNSF adds: that it notes, and has handled for resolution on a shipment-specific basis with UP, the continuing sporadic movement of BNSF shipments through Roseville, and that it met with UP at the end of June to discuss these matters and to propose alternative interchange plans with UP to fully eliminate the unnecessary looping of BNSF Sacramento, Polk, and Fruitridge traffic through the reopened Roseville Yard. BNSF has also mentioned two other issues. (i) BNSF indicates that certain data issues have arisen in connection with a new operating plan agreed upon by BNSF and UP respecting service to BNSF-accessible customers on the former SP Baytown and Cedar Bayou Branches between Dayton, TX, and Baytown, TX. These data issues, BNSF continues, have occurred because certain shippers have released cars for plastic storage without billing, and because UP has stored such cars intended for BNSF in remote storage-in-transit (SIT) facilities not directly accessible to BNSF. BNSF concedes, however, that these data issues have impacted both UP and BNSF, and that both carriers have generally been able to work through the problems caused by these data issues. (ii) Another issue mentioned by BNSF involves BNSF's claim that it has a right to access a Four Star Sugar Co. facility constructed in 1998 in El Paso, TX. We addressed this issue in a decision issued a few days after BNSF filed its report. UP and BNSF have advised, in their quarterly progress reports filed October 1, 1999, that, in light of the guidance provided, UP has agreed that BNSF has access to Four Star Sugar. THE DOT-4 COMMENTS. DOT's comments address three issues: the safety of UP rail operations; the adequacy of UP service levels; and the state of intramodal rail competition. Issue #1: Safety. DOT contends that, over the past year, there has been a substantial improvement in safety on UP, and that, under the auspices of the FRA Safety Assurance and Compliance Program (SACP), a strong partnership dedicated to improving safety has been formed by UP, its unions, and FRA. Considerable progress, DOT claims, has already been made: only one employee fatality, DOT notes, occurred during the year 1998 as a result of train accidents or incidents, compared with nine such fatalities during the year 1997. DOT cites, among other things: the efforts UP has made to eliminate safety problems resulting from fatigue, including the hiring of 3,917 new employees into the Train Engine and Yard ranks during 1998, the establishment of training and education programs to combat problems stemming from fatigue, and the adoption of agreements to improve accommodations for away- from-home employees; the steps UP has taken to reduce dispatcher workload, including the adjustment of workloads, the establishment of a dispatching center in Spring, TX, the creation of additional dispatcher positions, and the hiring of 114 new dispatchers in 1998; and the progress that UP has made toward improving signal reliability, safety training, and policies relating to maintenance-of-way personnel. DOT indicates that UP is now the only major railroad with a system-wide policy that provides train crews with guaranteed time off. DOT adds that, although UP no longer presents a singular safety concern to FRA, FRA will continue to monitor the safety of UP rail operations. Issue #2: Service. DOT contends that UP rail service has returned to normal levels. Issue #3: Competition. DOT contends that all indications thus far are that the conditions we imposed in UP/SP Merger have maintained intramodal rail competition. There is today, DOT advises, vigorous competition between UP and BNSF. DOT contends that implementation of the merger appears to be proceeding satisfactorily, and that, given this circumstance, no significant modifications to the applicable conditions are now warranted. DOT adds, however, that we should continue this oversight proceeding for the entire 5-year period originally contemplated. THE NITL LETTER. NITL concedes that the service problems experienced by UP during 1997-1998 have abated, and that BNSF's traffic over the trackage rights lines has grown since the merger was approved. NITL contends, however, that it is not yet possible to conclude that BNSF has been able to replicate completely and permanently the rail-to-rail competition that existed pre-merger. NITL therefore argues that oversight should be continued. NITL also asks that we continue to require UP and BNSF to file quarterly and annual reports, and that we instruct our staff to continue to analyze whether there is effective rail competition in the region affected by the merger. THE CPUC COMMENTS. CPUC's comments address three issues: the Central Corridor; the I-5 Corridor; and the Calexico/Mexicali border crossing. Issue #1: The Central Corridor. CPUC argues that, in the Central Corridor, pre-merger UP vs. SP competition has not been effectively replicated by post-merger UP vs. BNSF competition. CPUC, which contends that BNSF has done little with its Central Corridor trackage rights, notes: that the vast bulk of BNSF's California-Midwest traffic continues to be routed via BNSF's heavily traveled double-tracked Southern Corridor route; that BNSF has only an approximately 5% share of Central Corridor traffic moving between Northern California, on the one hand, and, on the other hand, Utah and points east of Utah; that BNSF's 1999 Central Corridor traffic levels have not even kept pace with BNSF's 1998 Central Corridor traffic levels; that, as regards Central Corridor traffic from/to California, BNSF crews handle such traffic only east of Salt Lake City (west of Salt Lake City, BNSF trains are manned by UP crews); and that BNSF has further minimized the use of its own crews in the Central Corridor by hiring the Utah Railway Company (URC) to switch cars and gather traffic for BNSF. CPUC insists that, today, UP dominates the Central Corridor; BNSF, CPUC claims, is providing only token competition. CPUC claims that the lack of competition in the Central Corridor has already had a negative impact. CPUC contends that California shippers, receivers, and the public are not benefiting from the lower rates that strong Central Corridor competition would produce. CPUC further contends that, because BNSF is not participating to any degree in the movement through the Central Corridor of container shipments from the Port of Oakland, that port (the nation's fourth largest container port) has become less attractive as a West Coast point of entry. CPUC further claims that the lack of competition in the Central Corridor is likely to have an even greater negative impact in the future. CPUC contends: that, although UP now controls both Central Corridor routes, UP itself does not need both routes; that, when the current project to enlarge the tunnels on the Donner Summit route is completed, UP is likely to favor that route; and that, when this happens, portions of the Feather River Canyon route will become ripe for abandonment. CPUC further contends: that BNSF, which has only trackage rights on the Feather River Canyon route, will have little reason to invest in that route; and that, under the terms of the BNSF agreement, BNSF will have a disincentive to use the Donner Summit route for double-stack intermodal shipments. CPUC argues, in essence, that, once the Central Corridor has become a one-route corridor, BNSF will never use its Central Corridor trackage rights to haul double-stack intermodal containers from/to the Port of Oakland. CPUC therefore asks that we begin a process to select another railroad that would be willing to take over the Central Corridor's secondary line between Northern California and the Midwest and reinstitute aggressive competition. Issue #2: The I-5 Corridor. CPUC argues that, in the I-5 Corridor connecting California and the Pacific Northwest, UP has a decided advantage over BNSF, because UP's I-5 Corridor route is superior to BNSF's I-5 Corridor route, and also because UP's I-5 Corridor route provides more direct access from/to more major Pacific Northwest population centers. CPUC contends that UP's advantage shows in a number of ways: in the fact that UP runs some 119 trains a week whereas BNSF runs only 31 trains a week; in the fact that BNSF's trains are smaller; and in the fact that BNSF's trains going from/to California in the I-5 Corridor include few, if any, intermodal shipments. Intermodal competition in the I-5 Corridor, CPUC claims, is essentially nonexistent: almost all of the substantial amount of intermodal traffic that moves in that corridor is transported by UP. CPUC therefore contends that, in order to intensify BNSF's presence in the I-5 Corridor and expand BNSF's participation in rail traffic west of the Cascades, BNSF should be granted trackage rights over UP between Marysville, CA, and Eugene, OR. CPUC argues that such trackage rights: would substantially shorten BNSF's mileages to Portland, OR, Seattle, WA, and Vancouver, BC; and would thereby help develop a competitive I-5 Corridor intermodal service between points in California, on the one hand, and, on the other, points in the Pacific Northwest and in Western Canada. CPUC adds that, without such trackage rights, California will be left with inadequate north-south rail competition. Issue #3: The Calexico/Mexicali Border Crossing. CPUC contends: that, prior to the merger, the SP line into Calexico (the line runs between Niland and Calexico) was not well maintained; that, at the time of the merger, CPUC hoped that new (i.e., UP) ownership would bring capital improvements to the Niland-Calexico line and further develop it for NAFTA trade; but that, despite extensive commercial development on both sides of the border, the Niland- Calexico line remains essentially as it was at the time of the merger. CPUC suggests that the public interest in rail competition in the California-Mexico border area would be served by a general rehabilitation of regional rail facilities, including the improvement of the line between Niland and Calexico and the rehabilitation of the line of the San Diego & Imperial Valley Railroad (SDIV). Improvement of the Niland-Calexico line, CPUC adds, could lead to rehabilitation of the SDIV line and other improvements in the region's rail facilities. CPUC therefore suggests that UP should improve the Niland-Calexico line for NAFTA rail transportation purposes. ============================================================ Comments or questions about this compilation should be directed to Paul Moore at 71367.1057@Compuserve.com. ============================================================