Petition — Illinois v. Interstate Commerce Commission

Supreme Court brief1977

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IN THE

— a

Supreme Court of the United States... |

OCTOBER TERM, 1976 |

MICHA. AA, te : a?

PEOPLE OF THE STATE OF ILLINOIS, ef al,

Petitioners,

INTERSTATE COMMERCE COMMISSION, ef ai.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

WILLIAM J. SCOTT

Attorney General of the

State of Illinois

160 North LaSalle Street

Chicago, Illinois 60601

HERCULES F. BOLOS

Special Assistant Attorney General

MILTON McCLURE

113 State Street

Beardstown, Illinois 62618

THOMAS F. McFARLAND, JR.

20 North Wacker Drive

Chicago, Illinois 60606

GORDON P. MacDOUGALL

1100 17th Street, N.W.

Washington, D.C. 20036

Attorneys for Petitioners

er CS

THE CASILLAS PRESS, INC.—1717 K Street, N. W.—Weshington, 0. C.-223-1220

TABLE OF CONTENTS

OPINIONS BELOW .

JURISDICTION .

QUESTION PRESENTED

STATUTES INVOLVED .

STATEMENT

REASONS FOR GRANTING THE WRIT

I. THE !.2ED FOR THE L.C.C. TO MAKE

FINDINGS AS TO THE IMPACT OF THE

ABANDONMENT OF ONE LINE SEG-

MENT UPON THE VIABILITY OF OTH-

ER SEGMENTS PROPOSED FOR ABAN-

DONMENT BY THE SAME RAILROAD

IS AN IMPORTANT FEDERAL QUES-

TION WHICH SHOULD BE PROMPTLY

AND DEFINITIVELY RESOLVED AT

THIS TIME

A. A Large Number of Line Abandonments

Are Being Proposed by the Railroads .

B. The Validity of the “Segmentation” Ap-

proach to Railroad Abandonments Should

Be Decided Now By This Court

. THE COURT OF APPEALS DECISION CON-

FLICTS WITH THIS COURT’S STANDARDS

FOR REQUIRING AGENCY CONSIDERA-

TION OF INTERRELATED PROCEEDINGS. .

Page ae

A. hg we 4 and “Middle” — oo Appendix 1 — L.C.C. report and order in F.D. No. 27506

. Time of Filing ie ae ee? ca and F.D. No. 26965, involving Fiora-

: Traffic Data er eee” Re gear ae Shawneetown line. (February 17,1977). . 49a

B. The “Northern” and “Southern” Segments. . 16 Appendix J — Statutes, Portions of Section | of the

Interstate Commerce Act. . . . .. . 78a

DE « os @ » 6.6 8 « «¢ ss 2 ¢ ca

TABLE OF CITATIONS

Appendix A — Opinion and Order of the U.S. Court of

ee Cases:

Appendix B -— Judgment of the U.S. Court of Appeals . . Ila Ashbacker Radio Corp. v. F.C.C., 326

326 U.S. 327 (1945) ine © & & ae fee ee

Appendix C — Order denying eae the U.S. Court

of Appeds . . ' see ee ee Te American Trucking Assns. v. U.S.,

| , a ee!

Appendix D — Order granting stay of mandate of the U.S.

DE --«. « g/g « 8.0 & 20 OB

Appendix E — LC.C. Report and Order recommended by

the Administrative Law Judge in F.D. No.

i Chicago v. United Stat

26745, The Baltimore and Ohio Railroad City of v es,

Company Abandonment Between Coal 396 U.S. 162 (1969)

Shaft and Beardstown in Sangamon and

Cass Counties, Ill. (January 31,1973) . . 14a City of Chicago v. United States,

314 F. Supp. 886 (N.D. Ill. 1970), reversed 400 U.S. 987

Appendix F — LC.C. Order Denying Consolidation of F.D. (1971) . . AR ee a ee 2 9

No. 26745, F.D. No. 26965, and Docket No.

AB-19 (Sub-No. 27) (June 17,1975). . . 33a L.C.C. v. Parker,

rn. - ice es eee we ee ee ee

Appendix G — LC.C. Decision, Certificate & Order in F.D.

No. 26745 — Beardstown/Coal Shaft — McCandles v. Furlaud,

OR ee ee _. ey ee

Appendix H — LC.C. Order denying reconsideration and con-

solidation and authorizing abandonment in Mechling Barge Lines v. U.S., 7

F.D. No. 26745 (May 18,1976) . . . . 37a SIG US. S7SCIGGOQ . . ew ce we ee eee eee

New Jersey v. New York, S. & W. R. Co.,

Sra Gi. OQUUEER © se 6 he 6% Se Oe

N.L.R.B. v. Metropolitaa Life Ins. Co..,

380 U.S. 438 (1965) . . .. . , >. =

Passenger Corp. v. Passengers Assn.,

ok ee

Prairie Trunk Railway-Acquisition and Operation,

A ee, eee ee

S.E.C. v. Chenery Corp.,

Sue Gan Cee Geeery Cl tl tl ttl Sethe

Southern R. Co. v. North Carolina,

i) b... ee eee

Upshaw v. United States, 335 U.S. 410 (1948)

coe Ga GG s 8 ts te & eee

United States v. Chicago, 400 U.S.

SS ee ee ee a ee

Legislative

S. Rept. No. 94-499, 94th Cong., Ist Sess.(1975) . . . .

Articles

Aug, Stephen M., Private Meeting at I.C.C. Followed

by C&O Filing, Washington Star-News (March 19,

1973)

7 fat? 3 2 #s. 2 2 32.2) eee eee

IN THE

Supreme Court of the United States

OCTOBER TERM, 1976

PEOPLE OF THE STATE OF ILLINOIS, er al,

Petitioners,

INTERSTATE COMMERCE COMMISSION, ef al,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Petitioners, People of the State of Illinois (William J.

Scott, Attorney General), City of Beardstown, Cass County

Service Company, and United Transportation Union (John

W. McGinness and George B. Lee), respectfully pray that

a writ of certiorari issue to review the judgment and opin-

ion of the United States Court of Appeals for the Seventh

Circuit, entered in this proceeding on March 23, 1977.

OPINIONS BELOW

The opinion of the U.S. Court of Appeals, not yet re-

ported, is printed as Appendix A hereto (App. |a-10a).

The orders of the Interstate Commerce Commission in

Finance Docket No. 26745, The Baltimore and Ohio Rail-

road Company Abandonment Between Coal Shaft and Beards-

town, Illinois (Appendices E through H, App. |4a-48a) are

unreported.

JURISDICTION

The judgment of the U.S. Court of Appeals was entered

March 23, 1977, and is printed as Appendix B hereto. (App.

lla). The order denying rehearing was entered April 22,

1977, and is printed as Appendix C hereto. (App. 12a). On

May 2, 1977, that court stayed the issuance of its mandate

to and including May 31, 1977.' This Court's jurisdiction

is conferred by 28 U.S.C. 1254(1).

QUESTION PRESENTED

Where a railroad proposes to abandon a 228-mile

line of railroad by means of three separate appli-

cations to the LC.C. covering three segments, does

the LC.C. err in authorizing the abandonment of

one segment (“northern”), without evidence and

findings concerning the impact of the abandon-

ment of that segment upon the continued viabil-

ity of the remaining “middle” and “southern”

segments?

STATUTES INVOLVED

The statutes involved are the railroad line abandonment

provisions of section | of the Interstate Commerce Act, 49

U.S.C. 1 (18)4(20), as amended February 5, 1976 by enact-

ment of sections 802 and 80%c) of P.L. 94-210, Railroad

' ‘The stay order is printed as Appendix D hereto. (App. 13a).

Revitalization and Regulatory Reform Act of 1976, and

October 19, 1976 by section 218 of P.L. 94-555, Rail

Transportation Improvement Act, 49 U.S.C. la. These

statutory provisions are set forth in Appendix J. (App. 78a).

STATEMENT

This is an action to review orders of the Interstate Com-

merce Commission (“I.C.C.”) authorizing The Baltimore and

Ohio Railroad Company (“B&O”) to abandon a 43.7-mile

segment of railroad between Beardstown and Coal Shaft,

1.2 B&O operates a 228-mile line extending between Beards-

town, Ill., on the Illinois River, to Shawneetown, Ill., on

the Ohio River. (App. 15a). B&O filed three applications

for abandonment with the I.C.C. covering separate portions

of this 228-mile line, two in 1971, and the third in 1975.’

This court action involves the so-called “northern” segment.

The other two segments — still undergoing 1.C.C. considera-

tion — are the “middle” segment between Sangamon Jct.‘

and Flora, Ul..5 and the “southern” segment between Flora

and Shawneetown, III.°

2 Coal Shaft is situated on the western outskirts of Springfield.

(App. 2a).

3 The 1975 application was “announced” by B&O in 1972 dur-

ing the hearing for the southern segment, but then retracted. (App.

2a, 17a). The application thereafter was executed by B&O on No-

vember 14, 1974, but withheld from the LCC. until March 18, 1975.

4 Sangamon Jct. is located just east of Springfield. (App. 2a).

5 The “middle” segment is pending at the L.C.C. in Docket No.

AB-19 (Sub-No. 27).

recommended denial of the abandonment in 1973. (App. 2a, 34a,

Sia). However, the 1.C.C. on February 17, 1977 allowed B&O to

discontinue operation of the southern segment, and sale of the seg-

ment to a “short-ine™ operator. (App. 49a). Judicial review of this

decision was instituted March 22, 1977, No. 77-1333 (7th Cir.). Peo-

ple of the State of Illinois v. USA. & LCC. Petitions for reconsid-

eration are also pending with the LCC.

Petitioners challenge the L.C.C. order authorizing B&O to

discontinue operation of its “northern” segment, without

the rendition of findings concerning the impact of the pro-

posed termination of service over the northern segment

upon the continued viability of operations on the other two

segments, particularly the “middle” segment between San-

gamon Jct. and Flora. Ul.’ In short, the LC.C. improperly

considered the northern segment application in a vacuum,

without regard to the entire line.

The LC.C. on June 17, 1975 declined to consolidate the

three abandonment applications, noting that the Adminis-

trative Law Judge’s recommended reports in the northern

and southern segments were both served February 14, 1973.

which granted the northern segment application and denied

the southern segment applications, and that concurrent handl-

ing of all three applications is not warranted and would un-

necessarily result in an undue delay of a final decision in

each proceeding. (App. 33a-34a).

The 1.C.C. on November 3, 1975 authorized abandonment

of the northem segment (App. 34a-36a). Petitions for re-

consideration, and for consolidation, were denied May 18,

1976, the L.C.C.’s order taking account of the intervening

enactment of amendments to the abandonment provisions

of the Interstate Commerce Act on February 5, 1976. (App.

37a-48a).

The Court of Appeals sustained the action of the LCC.

in not considering the interrelationships between the nor-

thern and midde segments, primarily upon the “important

fact” that B&O did not file its application to abandon the

7 Operations on the “northern” segment were marginally profitable

The railroad realized a net profit in 1969 and 1970 of $16,876 and

$27,883 respectively, and a loss of $13,125 in 1971. (App. 24a)

middle segment until after the initial decision had been made

on the northern segment. (App. 6a). The court further

reasoned that the ALJ had before him evidence that “most”

of the northern traffic west east to Indianapolis, rather than

over the middle segment, and that the northern segment

traffic was light to begin with. (App. 6a-7a).

The Court of Appeals held that the LC.C. had met

the requirements established by this Court in Ameri-

can Trucking Assns. v. U.S., 326 U.S. 77 (1945), for

considering the possible interrelationships between the

“northern” and “middle segments”, and between the

“northern” and “southern” segments of B&O’s 228-

mile line between Beardstown and Shawneetown, Ill.

The court stayed its mandate pending application

for writ of certiorari. Earlier, the court had enjoined

operation of the L.C.C. orders pending judicial review.

REASONS FOR GRANTING THE WRIT

|. THE NEED FOR THE L.C.C. TO MAKE FINDINGS AS TO

THE IMPACT OF THE ABANDONMENT OF ONE LINE

SEGMENT UPON THE VIABILITY OF OTHER SEG-

MENTS PROPOSED FOR ABANDONMENT BY THE

SAME RAILROAD IS AN IMPORTANT FEDERAL QUES-

TION WHICH SHOULD BE PROMPTLY AND DEFINI-

TIVELY RESOLVED AT THIS TIME.

A. A Large Number of Line Abandonments are Being

Proposed by the <ailroads.

Congress on February 5, 1976, revised the statutory

provisions governing the abandonment of lines by rail-

roads. Section 1(18) of the Interstate Commerce Act

was amended so as to be confined to extensions of

line, and sections 1(19)(22) were repealed. A new

section ia was enacted to govern abandonments.? Cer-

tain minor revisions to section la were added on (Octo-

ber 19, 1976,"

The changes in the abandonment provisions are bas-

ically procedural in nature, with the exeption of a new

program of federal financial assistance for certain branch

lines after the L.C.C. has determined that public conven-

ience and necessity permit the abandonment of a line."

No change was made in the substantive “public conven-

ience and necessity” standard. The revised procedural

requirements — principally the time frame within which

the L.C.C. must decide the abandonment applications

and the notice which must be afforded the public —

were occasioned by an anticipated flood of abandon-

ment applications. The Senate committee report states

(S. Rept. No. 94-499, p. 43). -

“A 1971 report by the Department of Trans

portation concluded that approximately 21,

000 miles of railroad through the Nation could

be candidates for abandonment. The DOT re-

port for the Northeast/Midwest Region .. .

identified 15,575 miles of both profitable ex-

._ cess”. The Association of American Rail-

8 Section 801 of P.L. 94-210. 90 Stat. 125-27

9 Section 802 and 80%(c) of P.L. 94-210, 90 Stat. 127-30, 146.

10 section 218 of P.L. 94555. 90 Stat. 2628.

'l Section 1a(6), (7), (10). (App. 78a), See also section 803 of P.L.

94.210. 90 Stat. 130-33.

roads estimates that 22,500 miles of rail-

road throughout the Nation are uneconom-

ic, costing the railroad industry nearly $144

million annually.”

The public disclosures by the railroads in April and

May, 1977 as to their lines “potentially subject to aban-

donment”, under the new procedural regulations, '? in-

dicate that 10.9% of the total rail mileage in Illinois

(without considering the lines of the Consolidated Rail

Corporation) are subject to abandonment. The impact

upon other Midwest states is even more severe:!?

STATE IMPACTS

Total Miles ‘Percent

State Miles (1974) Aband.

lowa 1,437 7,587 18.9

Minn. 1,133 7,366 15.4

S.D. 1,520 3,351 45.4

Mo. 736 6,062 12.1

Il. 1,149 10,573 10.9

Mich. 1,136 5,963 19.1

Wis. 1,210 5,808 20.8

It is clear that the Nation is about to witness a major

movement by the railroad industry toward a substantial

4»ction in railroad mileage. The proposed discontin-

u - may parallel the scope and intensity of the

12 49 U.S.C. :%5). 49 CFR 1121.20. See: 41 Fed. Reg. 45821-22,

42 Fed. Reg. 25327.

13 gee Traffic World, Vol. 170, No. 8, p. 15 (May 23, 1977).

passenger train terminations of the 1960's. New Jersey

v. New York, S. & W. R. Co., 372 U.S. 1 (1963);

Southern R. Co. v. North Carolina, 376 U.S. 93

(1964); City of Chicago v. United States, 396 U.S. 162

(1969); United States v. Chicago, 400 U.S. 8 (1970);

Passenger Corp. v. Passengers Assn., 414 U.S. 453 (1974).

B. The Validity of the “Segmentation” Approach to

Railroad Abandonments Should Be Decided now

by this Court.

The new tactic being advanced by B&O and other

major railroads in seeking to abandon a line is to di-

vide the line into segments for the purpose of filing

abandonment applications with the LC.C. Even

though the same freight traffic may move over several

segments, the I.C.C. determines the public convenience

and necessity of one segment without reference to the

other segments also proposed for abandonment. Thus,

in this case, the I.C.C. refused to consolidate the three

segments of B&O’s 228-mile line between Beardstown

and Shawneetown. This failure to consolidate was fol-

lowed by an absence of traffice data and findings as

to the effect which abandonment of one segment might

have on the continued operation of the other segments.

In another example, the Illinois Central Gulf Railroad

Company has filed three applications to abandon a

continuous 50.31-mile line between Sherman and Grove,

Ill. (part of its Peoria-Springfield Line). On March 22,

1977 the LC.C. authorized the abandonment of the

“southern” 10.47-mile segment (AB-43 (Sub-No. 13)),!4

'4 Hilinois Central Gulf Railroad Company — Abandonment Between

Croft and Sherman in Sangamon and Menard Counties, Llinois.

while the “middle” (AB-43 (Sub-No. 18))"5 and “north-

ern” (AB-43 (Sub-No. 19))"© segments were undergoing

hearing in separate proceedings.

The “segment”approach worked well for the railroads

in achieving the rapid elimination of major passenger

trains in the 1960's. When two railroads joined in

operating the overnight “Georgian” through train be-

tween Chicago, Ill. and Atlanta, Ga., the railroad trans-

porting the train between Chicago, Ill. and Evansville,

Ind. was permitted to discontinue its “train” without

reference to the Evansville, Ind.—Atlanta, Ga. “train”

operated by its connecting railroad, and without re-

gard to the viability of the connecting “Hummingbird”

train operating between Cincinnati, Ohio and New

Orleans, La. via Nashville, Tenn. The Court approved

this methodology on the theory that separate railroads

were involved, each with its own “train’’, as a matter

of agency constructicn of the term “train”. United

States v. Chicago, 400 U.S. 8 (1970). In a somewhat

similar fashion, the famed “California Zephyr” passenger

train operating between Chicago, Ill. and Oakland, Calif.,

was destroyed when one of the three connecting rail-

roads discontinued its “‘train”’segment. City of Chicago

v. United States, 314 F. Supp. 886 (N.D. Ill. 1970),

reversed 400 U.S. 987 (1971).

However, there is a major difference between segementa-

tion of a passenger train among several carriers, on the one

15 tinois Central Gulf Railroad Company Abandonment Between

San Jose and Croft in Menard and Logan Counties, Illinois.

16 Iiinois Central Gulf Railroad Company Abandonment Between

Grove and San Jose, in Mason and Tazewell Counties, Illinois.

hand, and extending the concept to the filing by a single

carrier of several applications to cover the abandon-

ment of its freight line, on the other hand. In passenger

proceedings, each railroad is considered to operate one

“train”, whereas in freight abandonment cases one rail-

road now attempts to subdivide its own freight operation

into several segments.!”

It is important for this Court to rule promptly on the

“segmentation” procedure being advanced for line abandon-

ments, in order to avoid serious damage to the economy

of the affected states served by railroads employing this

tactic.

The “segmentation” device should not be extended from

passenger train disccntinuance by a single railroad which

is a party to joint-railroad movement, to the fragmenta-

tion of a single railroad’s freight operations into multiple

segments on a given line of railroad.

This issue is of pressing importance. Congress by its

recent amendments recognized the importance of having

a railroad announce its intentions to possibly seek aban-

donment of a line well in advance of any actual filing

of an application. See footnote 12, supra. But this pro-

cedural change in the statutory provisions will be under-

cut and frustrated unless the I.C.C. is placed under the

obligation to consider and to make findings concerning

the impact of a proposed abandonment upon other seg-

ments of the involved line which are contemplated for

abandonment.

'7 Train crews serve B&O’s “northern” segment three days per week,

and on the alternate days serve the “Middle” segment, exchanging the

cars with the Flora train at Pana. (App. 20a)

The validity of the “segmentation” technique, carried

forward by the railroads from recent experience with

passenger train discontinuance, warrants a searching re-

view by this Court.

ll. THE COURT OF APPEALS DECISION CONFLICTS WITH

THIS COURT’S STANDARDS FOR REQUIRING AGEN-

CY CONSIDERATION OF INTERRELATED PROCEED-

INGS.

While normally the erroneous nature of the decision

below is not in itself sufficient to warrant plenary consi-

deration, it is sometimes appropriate and necessary to

grant certiorari to correct serious error when the court

below has misapplied, misconstrued, or misconceived an

applicable Supreme Court opinion. McCandles v. Fur-

laud, 296 U.S. 140 (1935); Upshaw v. United States,

335 US. 410 (1948).

The principal decision relied upon by the Court and

the parties, as requiring evidence of traffic flows be-

tween B&O’s “northern” and “middle” segments of

the 228-mile line, is American Trucking Assns. v. U.S.,

326 U.S. 77 (1945). (App. 4a-7a). In that case a

major railroad filed a series of applications to extend

its motor carrier authority. The I.C.C. declined to con-

solidate the applications, and did not receive evidence

of the flow of traffic by truck from points covered

in one application to points covered by other applica-

tions, and did not receive evidence as to the effect on

all railroad routes for which application were pending.

This Court stated in remanding, 326 U.S. at 85:

“We think that it is sufficient to say that the

joint boards and the Commission should have

admitted evidence of the flow of traffic by

truck from points covered in one application

to points covered by other applications and

evidence of the effect of the motor traffic,

developed or prospective on all Seaboard

routes for which applications are pending or

already granted, on the over-the-road motor

carriers. .. .The applicant will of course be

required to furnish needed statistical evidence

which is reasonably available to it and will

have opportunity to submit evidence upon

its own part.”

The court strongly suggested consolidation upon re-

mand. 326 U.S. at 83."

The A.7.A. case is significant also to this abandon-

ment proceeding because the “public convenience and

necessity”standard for motor carrier licenses was taken

from the “public convenience and necessity” standard

for line abandonments. 1CC. vy. Parker, 326 U.S. 60,

65 (1945).

The Court of Appeals thought that the 14 separate ap-

plications in the A.7.A. case made a stronger case for

consideration of segment interrelationships than the

three segments in B&O’s abandonment proceedings but,

18 The court criticized the I.C.C.’s fragmentation of a rate case in

Mechling Barge Lines v. U.S., 376 U.S. 375, 383 (1964).

nevertheless, held that the appropriate consideration of

possible interrelationships was satisfied here. (App. Sa).

The Court erred in so construing and applying the A.7.A.

case.

A. The “Northern” and “Middle” Segments.

1. Time of Filing Application

The principal reason advanced by the Court of Appeals

for upholding the LC.C.’s failure to consider and render

findings on the interrelationships between the “north-

ern” and “middle” segments, is that no application for

abandonment of the “middle” segment had been made

at the time of hearing or initial decision on the north-

ern segment. (App. 6a). This justification was not made

by the LC.C. (App. 33a-34a). The A.7.A. rule for re-

quiring traffic flow data does not depend upon a “cut-

off” date for comparative applications as under the Ash-

backer doctrine, promulgated by the Civil Aeronautics

Board for rival airline routes,'? and by the Federal Com-

mission for broadcast applications. See: Ashbacker

Radio Corp. v. F.C.C., 326 U.S. 327 (1945). Rather, in

view of the finding of the initial decision that a 228-

mile branch line is involved (App. 16a), the failure of

the I.C.C. to render findings concerning all segments

thereof means that the ultimate conclusion — that aban-

donment of the “northern” segment is permitted by the

public convenience and necessity — is without supports

and falls under the prior 228-mile finding, Cf. B. & O.

R. Co. v. United States, 386 U.S. 372, 389 (1967).

19 See: 14 CFR 302.12(b).

20 See: 47 CFR 1.227.

14 15

“Protestants also have alleged error on the

part of the judge in refusing to require the

applicant . . . also to furnish data pertain-

ing to the operation on the middle segment

of the line, particularly as such operations

may be adversely affected by the abandon-

ment of the northern and southern, portions

2. Traffic Data as proposed.”

The Administrative Law Judge suggested that B&O fur-

nish the data, but did not require it, on the ground that

it was not necessary or relevant, and that the “predomin-

ance” of the Beardstown traffic moved to or from the

Indianapolis Division. (App. | 8a-19a):

Moreover, the time for filing an application to abandon

the “middle” segment was in the control of B&O. The

carrier Originally “‘announced” the forthcoming application

in 1972, but then retracted. (App. 16a-17a) The ap-

plication was then executed November !|4, 1974, but not

physically filed until four months later on March 18, 1975.7!

The initial decision in the instant “northern” segment

case found that a 228-mile branch line is involved (App.

16a). The initial decision noted that petitioners re-

quested data for the “middle segment” (App. 17a):

2! The Court of Appeals in a footnote deals with the contention that

B&O had advised the I.C.C. in 1971 that it intended to seek abandon-

ment of the middle segment, and that the I.C.C. knowingly stood by.

(App. 6a). The information was first suggested generally in an article

by Aug, Stephen M., Private Meeting at ICC Followed by C&O Filing,

Washington Star-News, March 19, 1973. Thereafter, counsel for peti-

tioners personally viewed the railroad’s papers at the I.C.C. which showed

an intention to abandon a portion of the middle segment. A petition

for official notice was filed shortly thereafter with the 1.C.C. B&O never

denied the fact. Indeed, B&O in its reply in the I.C.C. proceedings,

dated January 5, 1976 (Doc. No. 159), at p. 3, acknowledged the peti-

tion for official notice, made no objection thereto, and did not disy ste

the facts stated therein. (Doc. No. 101). However, in the Court of

Appeals, the Government contended that “confirming papers” ¢» .¢

not now be located. Counsel for petitioners furnished the Court <

Appeais with an affidavit and a coay of detailed notes taken in 1973

at the offices of the 1.C.C. Admission of the affidavit was unopposed.

Such is appropriate additional evidence. 28 U.S.C. 2347(c). It isa

widely-known fact that C&O-B&O inaugurated a large-scale abandon-

ment program in 1971, with delayed filings of .ome applications.

“It was indicated to the applicant that further

data with respect to the cars operated over the

Beardstown Branch may be useful showing those

which at Sangamon Junction moved to or from

the Indianapolis Division and those which moved

over the Flora Branch. Counsel for applicant

agreed that if the presiding officer so required

the data would be supplied, but it was not con-

sidered necessary or relevant. The record does

show that the predominance of the Beardstown

Branch traffic moved to or from the Indianapolis

Division. In the circumstances the applicant was

not required to provide the specific data with

respect to the division of the cars at Sangamon

Junction. It is concluded that such information

is not essential to a decision in this proceeding.”

The finding that the amount of traffic flowing be-

tween the “northern” and “middle” segments is not

necessary or relevant is directly contrary to the A.7_A.

decision of this Court. Moreover, the fact that the “pre-

dominance” of the Beardstown traffic — which we as-

sume as | car more than 50 percent” — does not

climinate the need for traffic and revenue figures.

The Court of Appeals stated it could not say the

ALJ's report inadequately considered appropriate inter-

relationships. (App. 7a) The Court of Appeals errs

because the ALJ expressly declined to consider the data

necessary or relevant, and thus did not consider the inter-

relationships. The Court of Appeals must rely upon the

justification advanced by the agency. SEC vy. Chenery

Corp., 332 U.S. 194, 196 (1947); NLRB». Metro-

politan Life Ins. Co., 380 U.S. 438, 443-44 (1965).

The Court of Appeals has misconstrued and misapplied

the A.7.A. standards to the relationship between the

“northern” and “middle segments”.

B. The “Northern” and “Southern” Segments.

The LC.C. had evidence in the “northern” case as to the

traffic movement between “northern” and “southern” seg-

ments. The initial decision for both segments were issued

simultaneously in early 1973. A principal reason given by

the LC.C. for failure to consolidate or to give concurrent

handling and disposition with the “southern” segment, also

22 The “predominance” expression was used by B&O’s witness to

describe Beardstown “bridge” traffic, and may not refer to all traffic.

(Tr. 76-78).

echoed by the Court of Appeals, is that the initial decision

denied the “southern” segment application (App. 2a, 6a,

17a, 34a).

However, the LC.C. subsequently overruled the initial

decision for the “southern” segment, and entered an or-

der allowing B&O to discontinue operations over the

“southern” segment by way of sale to a short-line opera-

tor. Prairie Trunk Railway-Acquisition and Operation,

348 LC.C. 832 ‘Feb. 17, 1977). (App. 49a-77a). The

Court of Appeals was aware of the Prairie Trunk deci-

sion.

The failure to follow the A.7.A. decision concerning

the interrelationships between the “northern” and “south-

ern” segments is not excused by the prior favorable result

for the “southern” segment. The initial decision’s final

denial was not followed by the agency.”

23 when the 1.C.C. on June 17, 1975 denied consolidation of the pro-

ceedings involving the three segments, giving as a reason the initial deci-

sion denying abandonment in the “southern” case (App. 33a-34a), it

did so in the face of another initial decision, served June 10, 1975, ap-

proving B&O’s disposition of the line. (App. 52a).

CONCLUSION

For these reasons, a writ of certiorari should issue to

review the judgment and opinion of the United States

Court of Appeals for the Seveath Circuit in this case.

May 31, 1977

Respectfully submitted,

WILLIAM J. SCOTT

Attorney General of the

State of [inois

160 North LaSalle Street

Chicago, Illinois 6060!

HERCULES F. BOLOS

Special Assistant Attorney General

MILTON McCLURE

113 State Street

Beardstown, Ill. 62619

THOMAS F. McFARLAND., JR.

20 North Wacker Drive

Chicago, Ill. 60606

GORDON P. MacDOUGALL

1100 17th Street, N.W.

Washington, D.C. 20036

Attorneys for Petitioners

APPENDIX A

UNITED STATES COURT OF APPEALS

For the Seventh Circuit.

Chicago, Illinois 60604

ARGUED: December 9, 1976

March 23, 1977.

Hon. WILBUR F. PELL, JR., Circuit Judge

Hon. WILLIAM J. BAUER, Circuit Judge

Hon. WILLIAM J. CAMPBELL, Senior District Judge”

PEOPLE OF THE STATE OF ILLINOIS, CITY )

OF BEARDSTOWN, CASS COUNTY SERVICE )

COMPANY, JOHN W. McGCINNESS, and

J. THOMAS McNEAL,

Petitioners,

No. 76-1561 vs.

UNITED STATES OF AMERICA and INTER-

STATE COMMERCE COMMISSION,

Respondents.

ee eee

This is a petition to review, set aside, and remand orders

of the respondent Interstate Commerce Commission (ICC)

authorizing the Baltimore and Ohio Railroad Company

* Senior District Judge William J. Campbell of the Northern Dis-

trict of Illinois is sitting by designation.

(B&O), an intervening respondent here, to abandon a 43.7-

mile railroad line between Beardstown and Coal Shaft, both

in Illinois. Although only the orders pertinent to this line

segment are directly attacked here, the issues in the case in-

volve two other line segments.

The Beardstown-Coal Shaft line (northern segment) pro-

ceeds southeast from the former to the latter point, the lat-

ter being on the western outskirts of Springfield. Approxi-

mately five miles of Chicago and Illinois Midland track and

joint Illinois Central/B&O track proceed through Springfield,

connecting Coal Shaft and Sangamon Junction. At Sanga-

mon Junction, the B&O line divides, one line running east

to Indianapolis, the other running southeast from Sangamon

Junction to Flora (middle segment) and on from Flora to

Shawneetown (southern segment). B&O’s abandonment ap-

plication for the northern segment was filed on August 13,

1971. A similar application for the southern segment was

filed on December 22, 1971. Both applications were as-

signed to the same Administrative Law Judge (ALJ), who

scheduled separate public hearings for each application.

During the southern segment hearings, on June 19, 1972,

B&O counsel stated that B&O intended to make applica-

tuon to abandon the middle segment as well; this represen-

tation was later retracted, B&O noting that a decision on

the middle segment was still under management review.

Several of the petitioners moved for consolidation of the

pending proceedings.

In the ALJ’s January 31, 1973, separate reports on the

northern and southern segments, consolidation was denied,

and authorization to abandon was recommended for the

northern segment but not for the southern segment. Final

action on the reports was held in abeyance by the ICC,

which awaited an appellate decision in a pending Second

Circuit case, the issues of which were applicable to these

proceedings. On March 18, 1975, B&O applied for aban-

donment authority on the middle segment, and several pe-

titioners made a new motion for consolidation and the re-

opening of the northern and southern segment proceedings.

This motion was denied on June 17, 1975. On November

3, 1975, ICC Review Board No. 5 affirmed and adopted

the northern segment report of the ALJ. Requested recon-

sideration was denied by Division 3 of the ICC, acting as

an Appellate Division, and this petition for review followed.

We begin our consideration by noting that petitioners do

not directly attack the substantive conclusion of the ICC

that the public convenience and necessity permit abandon-

ment of the northern segment. Instead, they argue that

the ICC improperly considered the northern segment aban-

donment application in a vacuum, without proper regard

for interrelationships between all three segments which they

characterize as part of one 228-mile line. This argument

takes three forms.

First, petitioners assert that the ICC should have consoli-

dated the northern and southern segment proceedings in re-

sponse to their 1972 motion, and should have reopened

both of these for consolidation with the middle segment

proceeding in response to their 1975 motion. We disagree.

The choice of whether or not to consolidate related pro-

ceedings is “a matter for administrative discretion,” Amer-

ican Trucking Associations, Inc. v. United States, 326 U.S.

77, 83 (1945), and it is not for this court to dictate to

the ICC the procedures it should follow in discharging its

duties, See Federal Communications Commission v. Potts-

ville Broadcasting Co., 309 U.S. 134, 143 (1940). As the

District of Columbia Circuit recently recognized:

No principle of administrative law is more

firmly established than that of agency control

of its own calendar. Practical problems of

calendar administration confront an agency

whenever related applications are pending at

the same time. Consolidation * * * and similar

questions are housekeeping details addressed to

the discretion of the agency and, due process

or statutory considerations aside, are no concern

of the courts.

Association of Massachusetts Consumers, Incorporated v.

United States Securities and Exchange Commission, 516

F.2d 711, 714 (D.C. Cir. 1975), cert. denied, 423 U.S.

1052 (1976), quoting City of San Antonio vy. Civil Aero-

nautics Board, 374 F.2d 326, 329 (D.C. Cir. 1967). See

also | K. Davis, Administrative Law Treatres $8.12, at $72-

73 (1958). There are no statutory or due process consid-

erations present here, and no suggestion is made that the

compara..ve hearing exception of Ashbacker Radio Corp.

v. Federal Communications Commission, 326 U.S. 327

(1945S), and its progeny, has any application to this case.

We perceive no abuse of the ICC’s substantial discretion

in this regard; both the ALJ's decision and the Commission's

1975 order denying consolidation after B & O sought to

abandon the middle segment set out sound reasons for deny-

ing consolidation, and it is not our function to second-guess

these determinations.

Petitioners’ second argument, which relies heavily on

American Trucking Associations, Inc. v. United States, supra,

is that even if the ICC was not obliged to consolidate the

segment proceedings, it was obliged, in determining the public

convenience and necessity, to consider the effects of abandon-

ing each segment on the other segments. In American Truck-

ing, a rail carrier filed fourteen applications for authorities

to conduct trucking services auxiliary to its rail services, paral-

lel to the railroad’s main lines and covering most of the dis-

tance between Richmond, Virginia and Jacksonville, Florida.

Numerous entirely independent hearings were conducted on a

segmented basis, and evidence of the effect of the proposed

service on non-rail carriers in the areas covered was excluded

in each proceeding. The Court did require that evidence be

admitted pertinent to the effect on motor carriers of all the

applicant’s routes, and stated that evidence of truck flow

from points covered by one application to points covered by

one application to points covered by another could not be

excluded. 326 U.S. at 85. We think that the requirement of

assessing impact on non-rail carriers which did not limit their

operations to the neat little geographic packages represented

in the fourteen applications made a stronger case for consid-

eration of segment interrelationships in American Trucking

than is present in this abandcnment proceeding. But assuming

arguendo, that appropriate consideration of possible inter-

relationships was required here, we believe any such require-

ment was met.

With reference to the only two abandonment applications

pending at the time, covering the northern and southern seg-

ments, the same ALJ heard both proceedings and was thor-

oughly familiar with the comparative considerations under-

lying both. He concluded that “[e] ach of the proceedings

is clearly identifiable and separate,” and that “the shippers

and their interest are different.”” We have reviewed the re-

cord, and we surely cannot say that these findings lack sub-

stantial support in the evidence. In this regard, we think it

is significant that the record shows that the preponderance

of northern segment traffic moved east from Sangamon

Junction to Indianapolis and did rot travel on either the

middle or southern segments, and that of more than 2500

cars moving over either the northern or southern segments

in 1971, only 14 moved on both segments. We also note

that the ALJ found the conditions pertaining to the northern

and southern segments to be so different that he recom-

mended granting the former and denying the latter applicat-

ion for abandonment.

With respect to interrelationships between the northern and

middle segments, we repeat the important fact that no ap-

plication for abandonment of the middle segment had been

made at the time of hearing or initial decision on the northern

segment.' We do not believe it was incumbent on the ALJ

to forecast B&O’s intentions regarding the middle segment

in 1972 and to design his hearing schedule and evidentiary

rulings on the basis of the then unfounded assumption that

abandonment was in the works. Cf American Trucking, supra,

326 U.S. at 83. Nor do we think there was any requirement

that the ICC, in determining the public convenience and neces-

sity, re-open this proceeding more than two years after the

record was closed and recommendations were made because

B&O did ultimately file an abandonment application on the

middle segment in 1975. In any case, the ALJ had before him

evidence that most of the northern segment traffic travel-

| Petitioners place substantial emphasis on their claim that the ICC

had been informed in writing in 1971 that B&O intended to make

such an application. However, other than a petition filed with the

ICC by two of the petitioners here which averred this to be a fact,

there is nothing in the record to support such a conclusion, and the

joint brief of the United States and the ICC represents that a search

of ICC files failed to produce any such writings. Accordingly, we

can give very little, if any, significance to the petitioners’ suggestions

that B&O communicated a fixed intention to the ICC in 1971 but

withheld application to avoid consolidated consideration and that

the ICC knowingly stood by and watched this happen.

led on east to Indianapolis rather than southeast over the

middle and/or southern segments. Because the northern seg-

ment traffic was light to begin with, we surely cannot say

that the ALJ’s later-adopted report inadequately considered

appropriate interrelationships. Petitioners contention that

they were improperly denied access to more specific break-

downs on traffic data relating the northern and middle seg-

ments must be rejected for similar reasons.

Petitioners’ third and final argument along these lines

is directed at the adequacy of the ICC’s environmental

Threshold Assessment Survey (TAS) and conclusions there-

from that the northern segment abandonment was not a

major federal action significantly affecting the quality of

the environment within the meaning of the National Environ-

mental Policy Act, 42 U.S.C. § s 4321 et seq., and that a

full environmental impact statement (EIS) was not required.

Petitioners concede that the rule in this circuit is that such

negative threshold determinations by a federal agency must

stand unless they are “arbitrary, capricious, an abuse of

discretion or otherwise not in accordance with law or with-

out observance of procedure required by law.” First National

Bank of Chicago, v. Richardson, 484 F.2d 1369, 1381 (7th

Cir. 1973); Nucleus of Chicago Homeowners Association v.

Lynn, 524 F.2d 225, 229-30 (7th Cir. 1975), cert. denied,

424 U.S. 967. Petitioners’ argument here is that the scope

of evaluation in a decision not to file in EIS, like the scope

of an EIS when one is filed, must be at least as broad as the

federal action being undertaken, See Aberdeen & Rockfish

Railroad Co. v. Students Challenging Regulatory Agency

Procedures (SCRAP), 422 U.S. 289, 322 (1975); and Kleepe

v. Sierra Club, ___. U.S. _., 44 U.S.L.W. 5104, 5109

(June 28, 1976), and that the TAS prepared here was fatal-

ly deficient because it considered only the northern segment

abandonment. We disagree. As the Supreme Court

recently made clear in Kleppe, supra, ___U.S. ___., 44

U.S.L.W. at 5110, the refusal to prepare a comprehensive

evaluation may be set aside only if arbitrary, and we cannot

say the ICC’s threshold determination here was arbitrarily

limited in scope.

At the time the TAS was first issued (January 30, 1975),

only the northern and southern segment abandoment ap-

plications had been filed. Emphasizing the 1 11-mile geo-

graphic separation between these segments and the factors

which had led the ALJ to deny consolidation, the TAS ex-

pressec the ICC Environmental Staff's view that the segments

could properly be considered separately. This determination

was not arbitrary; nor was a consolidated environmental re-

view required by what was then the mere possibility of

a later application to abandon the middle segment. See Kleppe,

supra, ___U.S. at ___, 44 U.S.L.W. at 5108; compare Swain

v. Brinegar, 542 F.2d 364, 369 (7th Cir. 1976) (en banc):

and see Chicago Homeowners, supra, 524 F.2d at 230.

After B&O filed its middle segment application, the ICC

staff issued an addendum to the TAS. The addendum indi-

cated the staff's previous awareness of a possible middle seg-

ment filing, but concluded that the middle segment was “func-

tionally and environmentally dissimilar” to the northern seg-

ment and that any environmental nexus was “too remote to

be a factor in this TAS.” The addendum set out nonarbitrary

considerations supporting these conclusions and properly distin-

guished between segment interrelationships which pertained

only to the merits of the normal public convenience and neces-

sity determination and those which pertained to environmental

factors. At least in the circumstances of this case, we per-

ceive no abuse of discretion in this appraoch. We also think

it is significant in this regard that a comprehensive environ-

mental evaluation of all three segment applications would

have entailed a substantial and unnecessary delay in the

resolution of the then nearly completed northern segment pro-

ceeding.

One other point requires brief attention, although peti-

tioners do not press it. In the joint brief of the United States

and the ICC, respondents conceded that the technically pro-

per procedure would have been to prepare the TAS before

oral hearing in this proceeding, so that comments if neces-

sary as part of the recommended Report and Order. Re-

spondents seek to excuse their noncompliance with this pro-

cedure here because it was only after the June 1974 deci-

sion on appeal in Harlem Valley Transportation Association

v. Stafford, 500 F.2d 328 (2d Cir. 1974).,? that the propriety

of such a procedure was made clear to the ICC. In addition,

they argue, remand to solve this technical noncompliance pro-

blem would serve no useful purpose, because comments on the

TAS were received and were valuated and responded to in

the TAS addendum, because the environmental concerns of

at least one petitioner were briefed to the ALJ and considered

in his recommended Report and Order,’ and because, in short,

“the environmental factors have been thoroughly considered

2 The decision in Harlem Valley, supra, was what the ICC was a-

waiting when it stayed final determination of this and other proceed-

ings, as mentioned above.

3 The objection of this petitioner, Cass County Service Company,

to allegedly improper “ex parte” contacts between ICC staff and B&O

in the preparation of the TAS has been considered and is without sub-

stantial merit in the circumstances of this case.

10a

and NEPA procedures have now been fully complied with

...” We note the Second Circuit’s appraisal that “the ICC

has been slow in reacting to the directives of NEPA,”

Harlem Valley, supra, 500 F.2d at 331, and we do not defend

the ICC’s “technical” noncompliance with proper NEPA pro-

cedures here. Nonetheless, we take the ICC’s concession as

to proper procedure to indicate its willingness to comply in

present and future proceedings, and we agree thai, in the

circumstances of this case, no useful purpose other than that

of a symbolic slap on the wrist would be achieved by re-

manding. For the reasons set forth in this order, the peti-

tion for review is denied.

PETITION DENIED.

lla

Appendix B

Unpublished Per Curiam Order

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

March 23, 1977

Before

Hon. WILBUR F. PELL, JR., Circuit Judge

Hon. WILLIAM J. BAUER, Circuit Judge

Hon. WILLIAM J. CAMPBELL, Senior District Judge

No. 74-1561

PEOPLE OF THE STATO OF ILLINOIS, CITY

OF BEARDSTOWN, CASS COUNTY SERVICE Petition for Review

COMPANY, JOHN W. MC GINNES, and of Orders of the

J, THOMAS MC NEAL, Interstate Commerce

Petitioners, Commussion

UNITED STATES OF AMERICA and

INTERSTATE COMMERCE COMMISSION,

Respondents.

This cause came on to be heard on the transcript of the

record from the Interstate Commerce Commission, and was

argued by counsel.

On consideration whereof, it is ordered and adjudged by

this Court that the petition for review of orders of the

Interstate Commerce Commission in this cause be, and the

same is hereby, DENIED, in accordance with the order of

this Court entered this date.

* Honorable William J. Campbell, Senior Judge, United States

District Court for the Northern District of Illinois, sitting by

designation

12a

Appendix C

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

Chicago, Illinois 60604

April 22, 1977

Before

Hon. WILBUR F. PELL, Circuit Judge

Hon. WILLIAM J. BAUER, Circuit Judge

Hon. WILLIAM J. CAMPBELL, Senior District Judge*

PEOPLE OF THE STATE OF ILLINOIS, et al.,

Petitioners, On Petition for

No. 76-1561 v. Review Of Or-

UNITED STATES OF AMERICA and ders of the In-

INTERSTATE COMMERCE COMMISSION, _ terstate Com-

Respondents. merce Comis-

sion

On consideration of the petition for rehearing filed in

the above-entitled cause by People of the State of Illinois,

et al., petitioner, all of the judges on the original panel

having voted to deny the same,

IT IS HEREBY ORDERED that the aforesaid petition

for rehearing be, and the same is hereby, DENIED.

* Honorable William J. Campbell, Senior Judge, United States Dis

trict Court for the Northern District of Illinois, sitting by designation.

13a

Appendix D

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

Chicago, Illinois 60604

May 2, 1977

Before

Hon. WILBUR F. PELL, JR., Circuit Judge

PEOPLE OF THE STATE OF ILLINOIS, CITY

OF BEARDSTOWN, CASS COUNTY SERVICE

COMPANY, JOHN W. McGINNESS and J.

McNEAL,

Petitioners, Petition for Re-

view of an Order

No. 76-1561 v. pete

Commerce Commission.

UNITED STATES OF AMERICA and INTER-

STATE COMMERCE COMMISSION,

Respondents,

BALTIMORE AND OHIO RAILROAD COMPANY,

Intervenor

CAPITAL CITY RAILROAD RELOCATION

AUTHORITY,

Intervenor.

On consideration of the “MOTION FOR STAY OF

MANDATE PENDING APPLICATION FOR CERTIORARI”

filed herein by counsel for the petitioners on April 28, 1977,

IT IS ORDERED that said motion be, and the same

APPENDIX E

INTERSTATE COMMERCE COMMISSION

SERVICE DATE:

February 14, 1973

Finance Docket No. 26745

THE BALTIMORE AND OHIO RAILROAD COMPANY

ABANDONMENT BETWEEN COAL SHAFT AND

BEARDSTOWN IN SANGAMON AND

CASS COUNTIES, ILLINOIS

Richard B. Allen, for applicant.

John R. Chapin, for intervenors in support of

applicant.

' Exceptions, if any, must be filed with the Secretary, INTERSTATE

COMMERCE COMMISSION, Washington, D.C., and served on all other

parties in interest, within 30 days from the date of service shown above.

Replies thereto may be filed within 20 days after the final date for fil-

ing exceptions.

1Sa

Gordon P. MacDougall, Robert L. Graves, Henry E.

Bruno, George Patrick Sheahan, Thomas J. Duggen, George

B. Lee, Robert D. Fritz, and Winston C. Harbicht, for pro-

testants.

James R. Sullivan, for the State of Illinois and the

REPORT AND ORDER

RECOMMENDED BY GERALD E. JESSUP,

ADMINISTRATIVE LAW JUDGE

By application filed August 13, 1971, The Baltimore

and Ohio Railroad Company (B&O), a common carrier by

railroad subject to part | of the Interstate Commerce Act,

seeks a certificate of public convenience and necessity un-

der section | (18-20) of the Act permitting abandonment

of its branch line of road and operation thereof from sta-

tion 9738 + 00 at Springfield, Ill., to the end of the line

at station 12046 + 06.5 at Beardstown, Ill., a distance of

43.7 miles located in Sangamon and Cass Counties, lilinois.

The application was referred to the administrative law judge

for hearing and the recommendation of an appropriate order.

Hearing was held at Springfield, Ill., July 10 and 11, 1972.

Briefs were filed on behalf of most of the parties.

The application for abandonment was supported by the

Capital City Railroad Relocation Authority of the City of

Springfield as well as the city, and was opposed by 11 par-

ties? The Illinois Commerce Commission asked that this

2 Vistron Co- poration, Illinois Agricultural Association, FS Services,

Inc., Cass County Service Co., Mayor of Beardstown, United Transporta-

tion Union, Brotherhood of Locomotive Engineers, Brotherhood of Main-

tenance of Way Employees, Brotherhood of Railway and Airline Clerks,

Illinois Lepislative Board and Indiana Legislative Board.

16a

Commission defer action on the matter pending a more

complete record, and it takes no position on the merits

at this time.

PRELIMINARY MATTERS:

On brief and by petition certain protestants have raised

issues which should be here noted and considered.

Applicant has filed with this Commission two abandon-

ment applications relating to separate portions of a 228-mile

branch of line extending from Beardstown, Ill., on the Illinois

River to Shawneetown, Ill., on the Ohio River. In this pro-

ceeding applicant seeks abandonment of the northernmost 43.7

miles known as the Beardstown Branch which extends be-

tween Beardstown and Springfield. In Finance Docket 26965

applicant seeks abandonment of the southernmost 73.27 mile

portion known as the Shawneetown Branch. Both of these

applications were heard by this judge on separate records, FD

No. 26965 in June 1972, and FD No. 26745 in July 1972.

Separate reports and orders recommended by the Administra-

tive Law Judge in these proceedings are being released simul-

taneously.

At the hearing in FD-26965 on June 19, 1972, counsel

for the applicant announced that a further application was to

be filed seeking abandonment of the remaining middle por-

tion of the line (approximately 111 miles).

By petition dated June 26, 1972, filed in both FD-

26965 and FD-26745 counsel for certain of the protestants

urged reopening of FD-26965, and consolidation of that

proceeding with FD-26745 for hearing and decision on a

joint record; and also for consolidation of the applica-

tion proposed to be filed for abandonment of the mid-

die segment with the other two, in order to correlate the

17a

evidence as it pertains to the entire 228 mile branch line.

In response to this petition, the B&O has noted that its

counsel was in error in announcing that an application

for abandonment of the middle part of the branch would

be filed inasmuch as that matter was still under manage-

ment review. The applicant argues that the Beardstown

and Shawneetown branches are separated by more than

100 miles and that in 1971, of the 800 cars of freight

handled on the Beardstown Branch and 1,705 cars on

the Shawneetown Branch, only 14 moved over both

branches. Furthermore, the branches are operated separa-

tely and may be considered appropriately in separate pro-

ceedings.

Each of the proceedings is clearly identifiable and

separate, the shippers and their interest are different, and

the proposed disposition of the applications are different,

based upon different facts and circumstances applicable

to the respective applications. Consolidation of the ap-

plications for further hearing is neither necessary nor

warranted. The order being entered in FD-26965 pro-

vides for denial of the petition.

Protestants also have alleged error on the part of the

judge in refusing to require the applicant to furnish cer-

tain financial data of The Chesapeake and Ohio Railway

Company which controls the B&O, and also to furnish

data pertaining to the operations on the middle segment

of the line, particularly as such operations may be ad-

versely affected by the abandonment of the northern

and southern portions as proposed.

Official notice is taken of the annual reports of both

the B&O and C&O Railroads. From those reports it is

18a

noted that the B&O balance sheet as of December 31,

1971 shows assets aggregating $1,232,155,307, including

current assets of $137,662,775. Its current liabilities

were $1. 565,425, and shareholders equity $601,553

408. Its income statement for 1971 shows railway opera-

ting revenues of $495,811,770, with a net of $120,599,355.

Its maintenance of way and structures expenses for the

year was $64,965,815.

For the same period the C&O balance sheet lists total

assets of $1,314,876,274 including current assets of $165,

287,045. Its current liabilities were $141,701,729, and

shareholders equity $622,026,969. Its income statement

noted railway operating revenue of $455,202,257 with a

net of $88,036,163. Its maintenance of way and structures

expenditure for the year was $60,978,309.

The record clearly notes that certain of the B&O per-

sonnel hold similar positions with the C&O and perform

duties for both roads. The record also shows the total

number of cars of freight which had a movement over both

the Beardstown and Shawneetown Branches. It was indi-

cated to the applicant that further data with respect to

the cars operated over the Beardstown Branch may be

useful showing those which at Sangamon Junction moved

to or from the Indianapolis Division and those which

moved over the Flora Branch. Counsel for applicant

agreed that if the presiding officer so required the

data would be supplied, but it was not considered

necessary or relevant. The record does show that the

predominance of the Beardstown Branch traffic moved

to or from the Indianapolis Division. In the circum-

cumstances the applicant was not required to provide

the specific data with respect to the division of the

19a

cars at Sangamon Junction. It is concluded that such

information is not essential for a decision in this pro-

ceeding.

In view of the financial data available from the annual

reports, the operating data noted, and the conclusions here-

in reached, the rulings with respect to these evidentiary mat-

ters are affirmed.

THE LINE:

The lines of the B&O extend generally between Chicago

and Springfield, Ill., and St. Louis, Mo., on the west and

Philadelphia and Baltimore on the east, with entry into New

York City. The proposed abandonment here under consi-

deration involves the Beardstown to Sprinfield, Ill., por-

tion of a 228-mile line which extends from Beardstown in

a southerly direction by way of Flora, Ill., to Shawneetown,

Ill. At Flora it intersects the main line of the B&O between

St. Louis and Baltimore. Immediately south of Springfield

at a point called Sangamon Junction tnere is also a branch

which extends by way of Indianapolis, Ind. and Hamilton,

Ohio joining the main line between St. Louis and Baltimore

at Cincinnati.

On the Beardstown to Springfield segment here proposed

to be abandoned there are 11 stations, 8 of which are non-

agency stations, 2 are joint-agency, and | an open station.

The population at these stations range from 0 to 6,200 with

6 having populations under 100. Two are served by other

railroads, namely, the Illinois Central Gulf Railroad at Ash-

land and the Burlington Northern at Beardstown. At Ash-

land (population 1,137) the agent for the Illinois Central

Gulf also acts as B&O agent, and at Beardstown (population

6,208) the Burlington Northern agent acts as B&O agent.

Interchange with other railroads is maintained only at Spring-

field and Beardstown.

20a

Present service on the branch consists of a local freight

train making one round trip between Springfield and Beards-

town on Monday, Wednesday and Friday. The crew opera-

tes between Springfield and Pana on Tuesday, Thursday and

Saturday. No passenger service is performed. The crew con-

sists of an engineer, conductor, brakeman and flagman. There

have been no changes in this service in the past 2 calandar

years. There are 69 highway crossings only 5 of which are

protected by automatic flashing light signals. Speed is limited

to 25 miles per hour.

The branch line is in very poor physical condition result-

ing from a long period of deferred maintenance. There are

24.7 miles of 85-pound rail which is between 68 and 74

years old, and except for 3 miles of 100-pound rail the re-

mainder is 90-pound rail between 56 and 65 years old. Dur-

ing 1971 there were 21 service failures of rail. Replacement

of rail is necessary. The cross tie condition is very poor and

requires immediate replacement of approximately 675 ties

per mile (29,500 on the branch), and the roadbed requires

considerable work.

Rehabilitation of the line using secondhand 100-pound

rail will require an expenditure of approximately $1.6 mil-

lion. This does not include replacement of bridges, most

of which are of timber construction and are more than 40

years old. One of the bridges requires immediate rebuild-

ing at a cost of $220,000 and 2 others need replacement

at a cost of $43,000. Within the next 10 years an addition-

al $1.2 million will be needed for bridge replacement. The

engineer computed normalized raaintenance of the line as

approximately $132,000 annually.

2la

TRAFFIC:

The area served is essentially a farming area, sparsely settled,

with very little manufacturing. The record discloses the handling

of 1,161 cars over the branch in 1969, 1,228 cars in 1970, and

800 cars in 1971. The tonnage in these respective years was

56,879 tons in 1969, 62,954 tons in 1970, and 37,201 tons in 1971.

In accounting for some of the tonnage reduction in

1971, applicant noted that in 1969 it handled 177 cars

of freight for the Ashland Farmers Elevator at Ashland,

Ill. while in 1970 there were only 58 cars for this shipper.

Also in 1970 applicant transported 329 cars of stone pro-

ducts which included a large special intrastate movement

to Philadelphia, Ill., for a construction project, while in

1971 it transported only a total of 70 cars of this type

of material. The record discloses some tonnage gains

during the 3-year period, especially in the handling of

food products and electrical and non-electrical machinery,

but tonnage decreases in most other categories of freight.

The major portion of the farm products shipments in-

volved short hauls, primarily to processors at such points

as Decatur, Springfield and Taylorsville, Ill., all within a

distance of 100 miles of the origin points.

Over 50 percent of the traffic moving on this seg-

ment consists of overhead freight which neither originates

nor terminates on it. For example of the 800 cars moving

over the branch in 1971, 322 either originated or termi-

nated on the branch, and 478 were overhead cars inter-

changed with the Burlington Northern at Beardstown.

A study of each of these 478 overhead cars reveals that

if the proposed abandonment is authorized, the B&O

will retain 95 percent of this overhead traffic, using other

gateways. The other 5 percent could be handled by other

railroads. Ninety percent of the retained overhead freight

22a

would be interlined at East St. Louis which has much bet-

ter yerd facilities and at which point applicant conducts

a much larger interchange with the Burlington Northern.

The remainder of this retain overhead freight would be

interchanged at such points as Springfield, Decatur, and

Chicago, III.

About 86 percent of the cars of freight handled by

applicant on this branch falls into 5 primary commodity

categories. In 1971, 36 percent consisted of chemicals

or allied products, which is predominantly overhead

freight moving from the applicant’s Indianapolis Divi-

sion to destinaticns in Minnesota and Nebraska. Seven-

teen percent involved the transportation of lumber or

wood products, avout half of which is overhead traffic.

Nine percent (70 cars) involved the transportation of

stone of which 68 cars moved overhead from applicant’s

Indianapolis Division to Chicago. Approximately 18

percent involved the transportation of food products a

major portion of which originated or terminated on the

branch. Six percent of the cars involved the transportation

of farm products, primarily to processors at Decatur, Spring-

field, and Taylorsville, Ill. The remaining 14 percent of

the cars of freight is divided among some 15 other com-

modity categories.

REVENUE AND EXPENSES:

Revenues from traffic handled on this branch in the

years 1969, 1970 and 1971 respectively totaled $184,515,

$207,178, and $167,759. On a mileage prorate basis ap-

proximately 1/3 of the total revenue in each year was as-

signed to the branch and the remainder to the balance

of the B&O system.? From these revenues applicant

3 In addition to the revenue to the B&O System there also was a

net revenue accruing to the family lines (C&O and Western Maryland

Railway) in the respective years of $524, $487, and $232.

————

23a

realized a net profit in 1969 and 1970 of $16,876 and

$27,882 respectively, and a loss of $13,125 in 1971. In

these years the maintenance of way expenditures for the

branch were only $39,887, $45,817, and $53,468. Ap-

plicant contends that had the annual normalized expendi-

ture been made for maintenance ($132,382), it would have

resulted in a substantial deficit operation in each year. In

computing its costs applicant puported to use those which

would be avoided by the abandonment, using actual figures

for the branch line and the usual 50 percnet of revenue for-

mula in determing costs on the remainder of the system

lines.*

Based upon the 1971 traffic, revenue, and cost fig-

ures, except substituting normalized maintenance and also

including the cost of amortizing the rehabilitation ex-

penditure of $1,630,644 over a 30-year period at 7 per-

cent interest (which applicant computed as $130,452

a year), applicant projects an annual deficit of $217,

089 for the future from the operation of this branch.

This does not include the bridge replacement program of

approximately $1.2 million previously noted which must be

completed within the next 10 years.

The accuracy of some of the financial data is open

to question. As an example applicant has included the

overhead revenue as revenue which would be lost by the

abandonment even though the evidence discloses that 95

percent of the overhead traffic would be retained. At the

same time it has included overhead costs as saveable ex-

4 Chicago & N.W. Ry. Co., 282 1.C.C. 525, 531-532.

24a

penses even though the cost of handling the freight will

continue to the applicant. The B&O suggests, and probably

rightfully, that a realignment of the financial data with

respect to the overhead traffic would show the abandon-

ment to result in an even greater advantage to the applicant.

Also included as saveable expenses are some labor portions

of the maintenance of way and equipment costs which

actually have not been established to be avoidable. Over-

all however, it seems clear that operation of the branch

in the future with an adequate maintenance program would

result in a deficit operation, or at best a marginal opera-

tion.

CITY OF SPRINGFIELD — RAILROAD RELOCATION

AUTHORITY:

The city of Springfield and the Capital City Rail-

road Relocation Authority expressed support for the aban-

donment. Their support is based upon a plan for reloca-

tion of all railroad tracks from central Springfield, which

involves the 6 railroads serving Springfield including ap-

plicant. The total relocation project is estimated to

cost approximately $34 million of which 2 to 3 mil-

lion is allocated for relocation of the B&O tracks. It

is to be noted that this proposed abandonment does

not embrace any of the tracks involved in the relocation

project, and the project as drafted does not contemplate

abandonment of the Beardstown branch. If the abaondon-

ment of the Beardstown branch is authorized the B&O

then contemplates a further application to abandon its

tracks within the central part of Springfield, which will

make unnecessary the relocation of its tracks under the

plan, thus saving the Relocation Authority the estimated

$2 to $3 million.

25a

ALTERNATE SERVICES:

Rail service is available at Beardstown by the Bur-

lington Northern, at Ashland by the Illinois Central Gulf,

and at Springfield by the Illinois Central Gulf, Norfolk and

Western Railway Company,lllinois Terminal Railroad Com-

pany, Chicago and Illinois Midland Railway Com-

pany, and the applicant. A number of motor com-

mon carriers of general commodities serve the points along

the line, as well as several motor carriers handling grain

shipments. In addition to the motor common carrier

services, the record shows that several of the elevators

located on the Beardstown branch operate their own trucks.

The fact that only two shippers or receivers of freight

opposed the abandonment is indicative of the availability

of transportation services to meet the public needs in this

area.

SHIPPER OPPOSITION:

Only 2 shippers appeared in opposition to the proposed

abandonment. The Sohigro Service Division of Vistron

Corp., which is a wholly-owned subsidiary of Standard Oil

Company (Ohio), operates a retail distribution outlet at

Virginia, Ill., for its fertilizer and fertilizer materials. It

has an investment of approximately $130,000 at this locat-

ion and depends upon the B&O service for receipt of its sup-

plies. The availability of rail service was stated to have

been a prime factor in the decision to locate the plant at

Virginia. In 1971 it received about 900 tons by rail, some

of which originated at points as far distant as Florida

and Canada. Its total rail freight bill for the year was

$10,762, of which the B&O received only a small portion

as its appropriate division. Use of alternate transportation

modes or combinations is considered economically unfeasi-

ble by the witness, inasmuch as it would increase trans-

portation costs for the 1971 volume by approximately $4,

600.

26a

other shipper opposing the abandonment is Cass

County ‘ce Co. which is a modified farmers co-op al-

so locatea Virginia, Ill. It has been in business for

12 years aud has annual sales of approximately $3 mil-

lion. It operates a bulk-blend fertilizer plant and grain

elevator at this location. In its fiscal year 1970-1971,

it received 3,200 tons of fertilizer materials (approximately

50 carloads). The proposed abandonment of rail service

would result in an increase in its transportation costs.

This may result in the loss of some business to its

competitors at Beardstown and Ashland which have al-

ternate rail service. Truck service is used for its grain

shipments of approximately 600,000 bushels per year

which go to the river terminal at Beardstown, about

12 miles away.

UNITED TRANSPORTATION UNION — MAYOR

OF BEARDSTOWN:

In opposing the proposed abandonment, the witness

for the United Transportation Union noted that the 4-man

crew which operates the Beardstown branch 3 days a

week also operates a round-trip between Springfield and

Pana the other 3 days. The abandonment would affect

2 men on the Beardstown crew who live in Springfield.

Their job opportunities with the B&O would be at Washing-

ton, Ind. (180 miles from Springfield), East St. Louis, Ill.

(about 90 miles from Springfield), or Flora (about 135 miles).

The mayor of Beardstown, who also is an employee of

Bulrington Northern, expressed the view that abandonment

of the B&O’s Beardstown Branch would adversely affect the

ability of the community to attract new industry.

27a

ENVIRONMENTAL CONSIDERATION:

On brief protestant Cass County Service Co. urges that

if this abandonment is permitted, it will require 160 truck-

loads of 20 tons each to move the 3,200 tons of fertilizer

materials which it receives annually by rail, assuming its

business to remain constant. It argues that the trucks

will pollute the air, break up the highways, create traf-

fic congestion, and increase safety hazards. It further

urges that considering the projected annual loss of $226,

257 (recomputed $217,089) which the B&O may avoid

by the abandonment, the railroad should be required to

immunize protestant against any increase in its trans-

portation costs for obtaining its supplies for a period

of 5 years; and further that applicant should be required

to provide a substituted truck for rail service during that

period, plus transloading facilities at Springfield.

alleged adverse environmental impact which abandonment

of the rail line may generate. This absence of evidence em-

braces data with respect to the density of the material

involved for determining the truckload factor, the dis-

tances traveled, present and anticipated future pollution

levels in the area, traffic levels and patterns which may be

affected, and various other data from which a conclusion

may be drawn concerning the issus Notwithstanding this

lack of precise information it would appear that the

volume of truck traffic which would be generated by the

abandonment is relatively insignificant, both quantita-

tively and from an environment pollution aspect. In

the circumstances, it must be concluded that permitting

the proposed abandonment would »ot seriously affect

the quality of human environme:. vithin the meaning

of the National Environmental policy Act of 1969.

28a

FURTHER DISCUSSION AND CONCLUSIONS

In deciding whether the public convenience and neces-

sity will permit abandonment of this branch, consideration

must necessarily be given to the public need for the ser-

vice provided by the line, the use being made of it, the

traffic potential in the area, the revenues that reasonably

may be expecfed to accrue from the operations over the

branch, the expenses involved, and the financial ability

of the carrier to continue its operation.

The record amply supports the conclusions that under

the most charitable view actual operation of the branch in

its present condition is at best, financially marginal. That

the B&O will have to rehabilitate the branch at a very great

cost in order to continue its safe operation is uncontra-

verted. Even assuming that the combined resources of the

B&O and its contrbllig C&O can affford the rehabilitation

expenditure, a question arises whether the profitability of

the branch justifies the expenditure, and also whether the

public need for the branch warrants it.*

There is no possibility that the costs of rehabilitation

can be recouped from the earnings of the branch. While

the overall prosperity of a carrier is to be considered in

balancing the issues of public convenience and necessity

against undue burdens on interstate commerce this factor

is not controlling. A carrier should not be required to

continue indefinitely operation of a branch line which will

5 of East Carolina Ry. Abandonment, 324 1.C.C. 506, 514.

aff. sub nom Asbury v. United States, 298 F. Supp. 589 (1969).

29a

not pay the cost of operation, maintenance and taxes on

the theory that the system as a whole is profitable.’

The Commission and the Courts often have expressed the

view that improvident expenditures by a common car-

rier should not be required by governmental fiat. The

point at which abandonment is considered justified is a

matterl of sound judgement to be determined by the cir-

cumstances of each case.

Here the record shows that in 1971, 59 percent of

the 800 cars of freight handled over the branch constitu-

ted overhead traffic, 95 percent of which the B&O will

retain through other gateway connections if teh abandon-

ment is approved. Only 322 cars contained freight which

either originated or terminated on the branch. Of these,

103 cars contained food or kindred products and 75 cars

contained lumber or wood products, aggregating 55 per-

cent of the cars moving to or from points on the branch. Yet,

the only 2 shippers who appeared in opposition to the

abandonment use the rail service for receipt of fertilizer

materials. One received 900 tons in 1971, aggregating

freight charges of $10,762, only a small portion of which

accrued to the B&O; and the other received approkimately

50 carloads. The one asserted that use truck services

would increase its annual freight expenses by approximately

$4,600 and the other by approximately $11,950.

The paucity of shipper opposition to the proposed

abandonment also is a factor to be considered. The fact

that the 2 shippers here opposing the abandonment may

7 cf New York Central R. Co. Abandonment, 254 1.C.C. 745,

761.; Missouri-Kansas-Texas R. Co. Abandonment, Okla., 338 1.C.C.

728, 741-742.

8 of Purcell v. United States, 315 U.S. 381 (1942).

30a

experience some increase in their transportation costs

through the use of alternate services is not to be determina-

tive of whether this low traffic density branch line should

be abandoned. An unprofitable operation can not be

expected to be continued for the profit of a few ship-

pers who may be adversely affected.? Furthermore, the

evidence indicates no future potential for increased tonnage

over the branch.

Considering the small amount of traffic moving over

the line, the carrier’s ability to retain in excess of 50

percent of the traffic through the use of other gateways,

the absence of any foreseeable traffic potential, the mar-

ginal nature of the operation, the large rehabilitation

costs necessary to continue it, and the general lack of

interest by shippers in continuance of the branch opera-

tion, it is concluded that the present and future public

convenience and necessity permit abanconment of the

branch line!®

In order to protect the employees who may be adversely

affected by the action herein authorized, the usual condi-

tions for the protection of employees as prescribed in Chicago,

B&Q R. Co. Abandonment 257 I1.C.C. 700 will be incorpora-

ted.

Contentions of the parties as to fact or law not speci-

fically discussed herein have been given consideration and

found to be not of controlling significance or unwarranted.

The requested findings to the extent not granted here-

in are denied.

9 Chesapeake & O. Ry. Co. Abandonment, 242 1.C.C. 622, 628.

10 of St. Louis S.W. Ry. Co. of Texas Abandonment, 290 1.C.C. 53,

73-74,

——e— ee ——————

3la

ULTIMATE FINDINGS, CERTIFICATE, AND ORDER

The administrative Law Judge finds that, subject to

the conditions for the protection of railway employees pre-

scribed by the Commission in Chicago, B.&Q. R. Co.,

Abandonment, 257 1.C.C, 700, the present and future pub-

lic convenience and necessity permit abandonment by The

Baltimore and Ohio Railrad Company of its Beardstown

Branch line of road and operation thereof from Valuation

Station 9738 + 00 at Springfield, Ill., to the end of the

line at Valuation Station 12046 + 06.5 at or near Beards-

town Ill., located in Sangamon and Cass Counties, Illinois;

and further that this decision is not a major Federal Action

significantly affecting the quality of the human environ-

ment within the meaning of the National Environmental

Policy Act of 1969.

Premises considered, it is the Certificate and Order

of the Administrative Law Judge that:

Subject to the conditions for the protection of rail-

way employees referred to above, the present and future

public convenience and necessity permit the abandon-

ment by The Baltimore and Ohio Railroad Company of

its Beardstown Branch line of road and operation thereof

from Valuation Station 9373 + 00 at Springfield, Ill., to

the end of the line at Valuation Station 12046 + 06.5 at

or near Beardstown, Ill., located in Sangamon and Cass

Counties, Illinois.

If the authority herein is exercised, The Baltimore

and Ohio Railroad Company shall submit for consideration

two copies of the journal entries showing the retirement

from service of the line herein permitted to be abandoned.

Tariffs applicable to the line herein permitted to

be abandoned may be cancelled on or after the effective

32a

date hereof upon notice to the Commission and to the

general public by not less than 10 days filing and posting

in the manner presecribed in Section 6 of the Interstate

Commerce Act.

When filing schedules cancelling tariffs applicable

to the line to be abandoned, The Baltimore and Ohio

Railroad Company shall, in such schedules, refer to this

certificate and order by date and docket number.

The authority herein granted shall not be exercised prior

to the date of service of an order adopting this certifi-

cate and order as the certificate and order of the Commis-

sion or a notice stating that it has become the certifi-

cate and order of the Commission.

Unless the authorization herein granted is exercised

within one year from the effective date hereof, this certifi-

cate and order shall be of no further force and effect.

By the Commission, Gerald E. Jessup, Administrative

Law Judge.

Dated at Washington, D.C. this 21st day of January

1973.

ROBERT L. OSWALD

Secretary.

(SEAL)

33a

APPENDIX F

‘SERVICE DATE

JUN 23 1975

Finance Docket No. 26745

THE BALTIMORE AND OHIO RAILROAD COMPANY

ABANDONMENT BETWEEN COAL SHAFT AND

BEARDSTOWN, IN SANGAMON AND

CASS COUNTIES, ILLINOIS

Finance Docket No. 26965

BALTIMORE & OHIO RAILROAD COMPANY ABAN-

DONMENT BETWEEN RINARD AND SHAWNEETOWN,

IN CLAY, WAYNE, WHITE AND

GALLATIN COUNTIES, ILLINOIS

Docket No. AB-19 (Sub-No. 27)

BALTIMORE AND OHIO RAILROAD COMPANY

ABANDONMENT BETWEEN FLORA AND SANGAMON

JUNCTION, IN CLAY, EFFINGHAM, FAYETTE,

SHELBY, CHRISTIAN, AND SANGAMON COUNTIES,

ILLINOIS

PRESENT: KENNETH H. TUGGLE, Commissioner,

to whom the matter which are subject

of the order have been assigned for

action thereon.

Upon consideration of the record in the above-entitled

proceeding, including the petition to consolidate the above-

entitled applications for hearing and disposition, filed joint-

ly by the State of Illinois, Thomas J. Duggan, and J. Thomas

35a

34a

Appendix G

McNeal, on May 8, 1975; the Recommended Reports and SERVICE DATE

Orders of Administrative Law Judge Gerald E. Jessup, both NOV 14 1975

served February 14, 1973 which denied the application in

F.D. No. 26965 and granted the application in F.D. No. DECISION, CERTIFICATE & ORDER

26745; and the reply of The Baltimore and Ohio Railroad , At a Session of the INTERSTATE COMMERCE COMMIS-

Company, filed May 23, 1975; , SiON, Review Board Number 5, held at its office in

‘ eh eae a | Washington, D.C., on the 3rd day of November, 1975.

appearing, concurren ng and disposition inance Docxet No.

of the above-entitled proceedings is not warranted and would 4 = 26746

unnecessarily result in an undue delay of a final decision in THE BALTIMORE AND OHIO RAILROAD COMPANY

each proceeding: ABANDONMENT BETWEEN COAL SHAFT AND

BEARDSTOWN IN SANGAMON AND

It is ordered, That the petition be, and it is hereby, CASS COUNTIES, ILLINOIS

eonied. . Upon consideration of the record in the above-en-

By the Commission, Commissioner Tuggle. titled proceeding, including the initial decision of the

Administrative Law Judge served February 14, 1973, the

sion, the people of the State of Illinois, the City of Beards-

JOSEPH M. HARRINGTON oe = the cm oat teas oe pag a aes -

; , exceptions filed jointly e ois -

(SEAL) Acting Secretary | cultural Association, F.S. Services, Inc., and Cass County Ser-

NOTE: This decision is not a major Federal action signifi- vice Company on March 12, 1973, and the reply of the

cantly affecting the quality of the human environ- Baltimore & Ohio Railroad Company filed April 1, 1973; and

ment within the meaning of the National Environ-

, ; ; f th

mental Policy Act of 1969. It appearing, That the findings and conclusions of the

Administrative Law Judge with respect to all matters, fact and

law considered and discussed in his report are, in all respects,

" proper and correct; that the exceptions of protestants and

4 reply of applicant raise no new or material issues of fact

‘ or law not adequately considered and properly disposed of

by the Administrative Law Judge in his report; and that

said exceptions and reply thereto otherwise ar not of such

a nature to require the issuance by this Board of a report

discussing the evidence in light cf such pleadings;

It further appearing, That an environmental threshold

assessment survey has been prepared by this Commission and

made available for public inspection upon request; that

such survey has found that no significant impact on the

36a

environment would result from the approval of the applica-

tion; that by order, Commissioner Tuggle dated February 7,

1975, it was determined that based on the aforesaid threshold

assessment survey, no environmental impact statement need

be issued in this proceeding, as it does not represent a

major Federal action significantly affecting the quality of

the human environment within the meaning of the National

Environmental Policy Act of 1969, 42 U.S.C. 84321, et. seq.;

that appropriate notice of such termination has been pub-

lished as directed by this Commission; that this Commissior

receivec. no substantive comments as to said determination

as of the date hereof; that said threshold assessment survey

is a part of the record in this proceeding and has been consi-

dered herein; and that the economic advantages to be

gained from abandonment outweigh any adverse environ-

mental factors.

Wherefore, and good cause appearing therefor:

We find, that the evidence considered in the light of the

exceptions and reply thereto does not warrant a result dif-

ferent from that reached by the Administrative Law Judge;

and that the statement of facts, the conclusions and find-

ings of the Administrative Law Judge being proper and

correct in all materials respects, should be, and they are

hereby, affirmed and adopted as our own;

It is ordered, That subject tot the conditions stated there-

in to protect employees, the recommended certificate and

order of the Administrative Law Judge served February 14,

1973 permitting the Baltimore & Ohio Railroad Company

to abandon that portion of its line between Coal Shaft and

Beardstown and Sangamon and Cases Counties, Illinois

approximately 43.7 miles in length be, and it is hereby,

adopted as a certificate and order of the Commission,

Review Board Number 5, effective 35 days from date of

service hereof.

By the Commission, Review Board Number 5.

ROBERT L. OSWALD

Secretary

37a

Appendix H

SERVICE DATE

JUN 1 1976

ORDER

At a Session of the INTERSTATE COMMERCE COMMIS-

ION, Division 3, acting as an Appellate Division,

held at its office in Washington, D.C., on the 18th

day of May, 1976.

Finance Docket No. 26745

THE BALTIMORE AND OHIO RAILROAD COMPANY

ABANDONMENT BETWEEN COAL SHAFT AND

BEARDSTOWN IN SANGAMON AND CASS

COUNTIES, ILLINOIS

Upon consideration of the record in the above-entitled

proceeding, including the decision, certificate and order of

Review Board Number 5, dated November 3, 1975, the

joint petition for reconsideration filed December 8, 1975,

by Illinois Agricultural Association, FS Services, Inc., and

Cass County Service Company, the joint petition for re-

consideration filed December 15, 1975, by the State of

Illinois, the City of Beardstown, and United Transporta-

tion Union, with the said petitions also asking for consolida-

tics of the instant proceeding with Finance Docket No.

2965, in which the Baltimore & Ohio Railroad Company

seeks abandonment between Rinard and Shawnestown, in

Clay, Wayne, White and Gallatin Counties, Ill., and docket

No. AB-19 (Sub-No. 27), in which the Baltimore and Ohio

Railroad Company seeks abandonment between Flora and

Sangamon Junction in Clay, Effingham, Fayette, Shelby,

38a

Christian and Sangamon Counties, Ill. (with the second

above-noted petition asking, in the alternative, for consolida-

tion with docket No. AB-19 (Sub-No. 27 alune), and

applicant’s reply to the petition:

It appearing, That previous requests for consolidation

have been denied in this proceeding, including the order of

Commissioner Tuggle, dated June 17, 1975, which denied

the proposed consolidation with Finance Docket No. 26965

and docket No. AB-19 (Sub-No. 27); that the instant peti-

tions set forth no material facts or arguments of any

substance which were not previously considered by the

decision, certificate and order of Review Board Number 5;

and that reconsideration is not warranted;

lt further appearing, That this decision is not a major

Federal action significantly affecting the quality of the hu-

man environment within the meaning of the National Environ-

mental Act of 1969; and

It further appearing and the said Division, acting as

an Appellate Division affirms, That the present and future

public convenience and necessity permit abandonment by

The Baltimore and Ohio Railroad Company of the above-

described line of railroad, subject to the condition that

employees shall be entitled for protection, to the conditions

as set forth in Chicago, B. & Q. R. Co. Abandonment, 257

L.C.C. 700;

It is ordered, That the petitions be, and they are hereby,

denied;

It is further ordered, That in the event any person or

government entity is considering an offer of financial as-

sistance to enable the rail service involved to be continued,

then such person or government entity should promptly

give notice that it is considering such an offer by certi-

fied mail to carrier applicant and by first class mail to all

parties of record and the Commission;

om Oe

39a

It is further ordered, That applicant railroad shall, within

10 days after receiving notice that an offer of financial

assistance is being considered, make available to the party

considering the offer of financial assistance the information

described under the heading “Railroads Seeking Abandon-

ment Authority”, which appears in the attached Notice of

the Commission entitled “Procedures for Pending Rail Aban-

donment Cases”, served March 31, 1976, and published on

that date in the Federal Register, 41 FR 1369! (here-

inafter called the Procedures), and such information shall

be made available in the manner described in the Procedures;

It is further ordered, That this order being administratively

final, notice of the finding of public convenience and neces-

sity made herein shall be published in the Federal Register

pursuant to the requirements of section |a(6)(a) of the

Interstate Commerce Act, as amended;

It is further ordered, That, notwithstanding any notice

that financial assistance is being considered that may have

been given pursuant to the above ordering paragraph, any

person or government entity desiring to offer financial as-

sistance to enable the rail service involved to be continued

shall, within 15 days of publication in the Federal Register

of the above-described finding of public convenience and

necessity, send notification of such offer by certified mail

to applicant railroad and the Commission and by first

class mail to all parties of record, and such notification

shall include the terms and information described under

the hearing “Persons Offering Rail Service Assistant”’,

which appears in the Procedures;

It is further ordered, That if the Commission finds that a

financially responsible person has offered financial assistance

in accordance with the Procedures, the Commission shall post-

pone the issuance of a certificate of abandonment for such

40a

reasonable time, not to exceed 6 months, as is necessary to

enable such person or government entity to enter into a bind-

ing agreement with the applicant railroad to provide

financial assistance for continued rail service or to purchase

the rail line;

It is further orderd, That when the Commission is

informed of the execution of any financial assistance agree-

ment or acquisition and operating agreement, the issuance of

the certificate of abandonment shall be posponed for such

period of time as such an agreement (including any

extensions or modifications) is in effect;

It is further ordered, That all correspondence to the Commis-

sion with respect to offers of financial assistance for the

continued operations or acquisition of the subject line

shall contain an appropriate reference to the subject pro-

ceeding; and that on the lower left hand corner of envelopes

containing such correspondence the following notation shall

be typed in boldface ““AB-RSCP”;

It is further ordered, That subject to the conditions set

forth above, an appropriate certificate of abandonment

shall be issued, and the applicant shall not effect any a

abandonment or discontinuance of service prior to the

effective date of such certificate of abandonment.

And it is further ordered, That the decision and order of Re-

view Board Number 5 dated November 3, 1975, shall be

effective on the date this order is served.

By the Commission, Division 3, acting as an Appellate Divi-

sion, Commissioners Brown, MacFarland and Corber.

ROBERT L. OSWALD,

(SEAL) Seceotery

4la

SERVICE DATE

March 31, 1976

INTERSTATE COMMERCE COMMISSION

Washington, D.C.

NOTICE

PrRocepures FOR PENDING Rail ABANDONMENT CASES

Information to interested persons concerning the implementation

of section |a(8) of the Interstate Commerce Act, as amended

by the Railroad Revitalization and Regulatory Reform Act of

1976, Public Law 94-210, enacted on February 5, 1976, which

relates to abandonment or discontinuance of operations

proceedings filed prior to the promulgation of new regulations

pertaining to such proceedings.

General

The purpose of this Notice is to provide information about the

Interstate Commerce Commission's proposed means for handling

pending railroad abandonment and discontinuance proceedings and

the procedures it will follow in processing abandonment

applications already on file or filed before final regulations are

effective. “Abandonment” means the elimination of a rail line and

includes a discontinuance of operations. “Discontinuance” means

oaly the cessation of operations over the line. The term

“abandonment” is used in this notice to embrace both situations.

Changes in the Commission's abandonment procedures were

made necessary by the enactment, on February 5, 1976, of the

Railroad Revitalization and Regulatory Reform Act of 1976 (Public

Law 94-210). The need to process some 200 pending rail

abandonment applications makes it imperative that these

procedures be instituted as soon as possible, and precludes the

opportunity for public comment at this time.

The procedures described in this Notice are of an interim nature

and wiil apply, effective upon the date of their publication, to all

cases in which the Commission authorizes the abandonment of a

line of railroad pursuant to an application currently on file with it or

filed before final regulations are effective. The Commission will

soon issue &@ notice of proposed rulemaking looking toward the

issuance of permanent regulations to govern subsequently filed

abandonment applications. The procedures set forth in this Notice

may be modified in view of the results of that proceeding.

42a

New Abandonment Provisions

The procedures described in this Notice implement new

paragraphs |a(6) and (7) of the Interstate Commerce Act. Those

paragraphs contain new provisions under which—

1. The Commission must provide public notice, through Federal

public convenience and necessity would permit a railroad to

abandon trackage or discontinue service.

2. Persons, including governmental entities, wishing to preserve

rail freight service set for discontinuance or abandonment may offer

to purchase the line for continued operation or provide financial

assistnce to the railroad in the form of a “rail service continuation

payment” (which may be conveniently termed an operating subsidy).

In the words of new paragraph | a(6) of the Interstate Commerce

Act, the financial assistance must (A) cover the difference between

the revenues which are attributable to such line of railroad and the

together with a reasonable return on the value of such line; or (B)

cover the acquisition cost of all or any portion of such line of

railroad.”

3. If, within 30 days after publishing its finding that a proposed

abandonment should be authorized, the Commission finds that a

“financially responsible” person has made an offer likely to cover

the losses on the line plus a reasonable profit, or to cover the cost of

acquisition of all or any portion of such line, it must postpone the

issuance of the certificate abandonment (thus, in effect, requiring

that service continue) for a period up to 6 month while negotiations

for financial support take place. By the end of that 6 month period a

binding agreement must be executed by the raiiroad and the offeror

or a certificate authorizing the requested abandonment will be

issued.

4. The applicant railroad is required to make available promptly

to any person considering an offer or financial assistance its latest

information about the physical condition of the line and data

sufficient to permit computation of the amount of subsidy needed to

justify continued operation.

5. Whenever an offer of financial assistance is made, the

Commission must determine the amount by which ihe avoidable

costs attributable to the line, plus a reasonable return on the value

of the rail properties involved, exceed the revenues attributable to

the line, thus providing assistance to any offeror of a subsidy in

43a

determining the amount that would have to be paid. The Standards

for Determining Rail Service Continuation Subsidies, 49 CFR

$1125, adopted by the Commission's Rail Services Planning Office

for the development of estimated subsidy payments under the

Regional Rail Reorganization Act of 1973, shall be used in

developing estimated payments under these new provisions.

6. The Commission must postpone the issuance of the certificate

of abandonment for the period that any assistance or acquisiton and

operating agreement remains in effect.

The Local Rail Service Assistance Program

The new abandonment provisions of the Interstate Commerce

Act are related to other provisions of Public Law 94-210. Section

803 of that act establishes a nationwide local rail services assistance

program, to be administered by the United States Department of

Transportation, under which the Federal Government may

reimburse the States for all or a portion of the funds expended by

them in preserving or improving local rail freight service. The

program becomes effective July 1, 1976, and extends through June

30, 1981. To be eligible for Federal aid, a State must develop a

State rail services plan acceptable to the Secretary of

Transportation, and comply with certain other statutory

requirements and wth regulations to be issued by the Secretary.

In deciding how to implement the new abandonment provisions of

the loterstate Commerce Act, the Commission has considered the

program, the Commission has determined that there is no need to

delay the processing of ponding rail abandonment cases. Relatively

few of them are in the final stages where an “administratively final”

Commission order is imminent. An order of the Commission's

employee boards, commonly called review boards, becomes

administratively final upon the failure of any party to seek

reconsideration of a board's decision. The initial decision of an

Administrative Law Judge becomes administratively final if

exceptions are not filed, unless the decision is stayed by the

Commission. In most instances, a decision of the Commission or a

division of the Commission becomes administratively final on the

date on which it is served.

their conclusion, any finding that an abandonment should be

authorized will be made subject to conditions to assure that any

44a

State or individual considering making an offer of financial

assistance will be given time to pursue that end, in accordance with

the time limits discussed below. It would facilitate the processing of

these cases, and enable the Commission to better deal with rail

assistance proposals if persons interested in making such proposals

could make that fact known as early as possible in each

abandonment proceeding. Any party considering the making of an

offer of financial assistance may do so at any time during the

pendency of the abandonment proceeding. Notice of the intention

to offer financial assistance must be in written form, with

appropriate reference to the proceeding involved, and must be

served by certified mail upon the carrier seeking abandonment and

first-class mail upon all parties of record and the Commission.

I should be emphasized that submission of the notice of intent to

offer financial assistance will not be used as an element supporting a

decision authorizing an abandonment. The purpose of the notice is

to provide persons with the information necessary to decide

whether to offer financial assistance; to afford the railroads an

opportunity to provide the required information; and to facilitate

the Commission's action on the offer.

The Commission's Abandonment Procedure

In finding that any abandonment of rail freight service shouid be

authorized, the Commission will impose conditions giving full effect

to the provisions of the new law providing for the retention of

service thropgh rail service assistance payments. No certificate

authorizing an abandonment will be issued until the finding that the

abandonment should be authorized is served upon all parties and

the governor of each State in which the trackage is located, and is

published by notice in the Federal Register.

Issuance of the certificate of abandonment will be postponed for

up to 6 months if, within 15 days of the publication of the Federal

financial assistance has been made by a person shown to be

financially responsible and determines that the offer is likely to

cover the cost of acquiring all or part of the line or the losses

incurred in operating the line plus a reasonable return on the value

of the line.

The Commission will adopt the same conceptual approach

developed by the Rail Services Planning Office in connection with

the regional subsidy program authorized by the Regional Rail

Reorganization Act of 1973 for the purposes of estimating the

subsidy payment. It is recognized that there are statutory

————

45a

differences in the two programs. These differences relate primarily

to the exclusion of a management fee in the national program, the

inclusion of certain additional costs as set forth in section |a(11) of

the Interstate Commerce Act, and the basis upon which a

reasonable return is to be calculated. The Commission will take

these differences into consideration in establishing the subsidy

payment. The Rail Services Planning Office, whose address appears

at the end of this notice, will provide copies of the standards as well

as technical assistance to the railroads and to potential subsidizers

in developing the estimates.

For the Commission to postpone the issuance of a certificate for a

period not to exceed 6 months, to allow an offeror and the railroad

to enter into a binding agreement for financial assistance, the

notification to the Commission of an offer must include information

sufficient to support the statutory finding that the assistance offered

is likely to cover the difference between the revenues attributable

to the line of railroad aad the avoidable cost of providing freight

service over that line plus a reasonable return on the value of that

line, or that it is likely to cover the acquisition cost of all or a

portion of the line. The Commission is required by section

1 a(6)(a)(ii) to make such a finding before postponing the issuance of

a certificate.

When the Commission by order posipones issuance of a

certificate for up to 6 months, the railroad and the offeror have that

period to execute an assistance or acquisition and operating

agreement. Upon notification that such a binding agreement has

been executed, the Commission shall further postpone the issuance

of a certificate for the period such an agreement is in effect,

including extensions. The Commission's abandonment order will

provide that issuance of a certificate of abandonment will be

postponed if the railroad and the person offering assistance enter

into a binding agreement for continued operations and that the

postponement will be for the period of the agreement.

Such an agreement may be based on any form of financial

assistance acceptable to the railroad and the person offering

financial assistance. From time to time in abandonment proceedings

before the Commission, railroads allege that the cost of

rehabilitation necessary for efficient operation is so high that

continued operations are economically infeasible. Therefore,

instances may arise in which a railroad will accept an offer to

finance rehabilitation of a line and will enter into a financial

assistance agreement providing for continued operations on that

basis. For example, a State or other interested person might

46a

rehabilitate the line, and the railroad, relieved of the rehabilitation

cost, may then be able to operate the line at a profit. As previously

noted rehabilitation costs paid for by a State may be eligible for

reimbursement by the Federal Government.

If a binding agreement is not reached because of the railroad's

refusal to accept an offer which the Commission finds sufficient to

satisfy the statutory requirements for continued operation under

subsidy, the abandonment proceeding may be reopened within the

6-month postponement period so that the Commission, on the basis

of the new facts, may reconsider the question of whether the

abandonment should be authorized.

A further condition will be imposed that requires the railroad to

make available its most recent reports on the physical condition of

the line, and information making it possible to compute an adequate

rail services continuation payment, to any person notifying the

railroad inat he is considering making an offer of financial

assistance requiring such information.

The certificate issued by the Commission in an abandonment

proceeding will be made subject to such conditions as may be

required by the public convenience and necessity, and shall include

provisions for the protection of the interests of railroad employees.

Persons Offering Rail Service Assistance

Because of statutory time limits imposed upon the Commission,

anyone making an offer of financial or other assistance in order to

provide for the continuation of rail freight service that would

otherwise be abandoned, should make certain that the Commission

receives notice of such offer within 15 days of the publication in the

Federal Register of notice of the finding that the abandonment

should be authorized. That notification should include:

1. A copy of a firm offer to provide assistance, stating clearly the

amount of money or other consideration offered and any terms or

conditions to the offer. The offeror should certify that the offer has

been made to the railroad.

2. Information demonstrating the financial reponsibility of the

person making the offer. The offeror should submit evidence

demonstrating that it has, or will have at the time the proposed

agreement is to be executed, appropriate authority, and the

necessary funds, to enter into and fulfill contracts of the kind

contemplated. If the offeror is not a government entity, the

information demonstrating financial responsibility must include, but

need not be limited to:

47a

(a) A balance sheet showing its financial condition as of the latest

available date but no more than 6 months prior to the date of the

notification to the Commission, and

(b) An income statement showing its revenues, expenses, and net

income for the current calendar year to the latest available date and

for each of the two preceding calendar years.

3. Information sufficient to support a finding by the Commission

that the assistance being offered is likely to cover the difference

between the revenues attributable to the line of railroad and the

avoidable costs of providing rail freight service over the line, plus a

reasonable return on the value of the line; or that it is likely to

cover the cost of acquiring all or a portion of the line.

Railroads Seeking Abandonment Authority

A railroad which is an applicant for authority to abandon a line of

railroad or a rail service shall be required to make available to any

person informing it that it is considering offering financial

assistance and requesting such information, within 10 days of

receiving such notification whether such notification is received

before or after the publication in the Federal Register:

1. Its most recent reports on the physical condition of the line of

railroad which is the subject of application.

2. A current report on the train service on the line and a current

report on the traffic and revenue attributable to the line.

3. An actual computation of the extent to which the avoidable

cost of providing rail freight service on such line of railroad, plus a

reasonable return on the value of the rail properties involved,

exceed the revenues attributable to such line of railroad, as

determined by the Standards for Determining Rail Service

Continuation Subsidies, 49 CFR $1125.

The information described above shall either be furnished to the

offeror of financial assistance or be made available for examination,

during regular working hours, at a location within each State within

which is located the line of railroad which is the subject of the

abandonment application or some other location acceptable to the

offeror. Information concerning the nature, kind, quantity,

destination, consignee, or routing of traffic shall, in the railroad’s

discretion, be made available to the offeror, provided all affected

parties consent or disclosure is otherwise made in accordance with

section 15(11) of the Interstate Commerce Act, 49 U.S.C. §15(1 1).

48a

Compliance with Time Limits

In view of the statutory requirements imposed upon the

Commission, all parties, both offerors of financial assistance and

railroads seeking certificates for abandonment or discontinuance of

lines of railroad, will be required to adhere strictly to the time

limits set forth in this Notice. Failure to do so could prevent the

Commission from making its required findings within the 30-day

Statutory period, 4nd may result in an adverse decision to the party

in default.

Rail carriers which have pending applications seeking authority to

abandon or discontinue lines of railroad should consider, at least in

proceedings under protest, supplementing their applications with

the material necessary for parties to determine the possible

requirements for rail service Continuation payments or acquisition

of the line in order to continue rail service. Persons considering

making an offer of a rail continuation payment, in order to provide

for continued service over a line for which a certificate for

abandonment or discontinuance is being sought, should indicate

their intention without delay—if possible, prior to the publication in

the Federal Register of the Commission's findings.

In order to expedite the handling of submissions to the

Commission, envelopes mailed to the Commission either by carriers

or offerors should have the initials AB-RSCP printed in the lower

left-hand corner, and the docket number of the proceeding, if

known.

Further Information

Persons wishing information about the status of a particular

abandonment proceeding or about the filing of pleadings, requests

for leave to intervene, and similar procedural matters should

contact the Section of Finance, Interstate Commerce Commission,

12th Street and Constitution Avenue, N.W., Washington, D.C.

20423 (telephone: 202-275-7245).

Persons desiring information about the rail freight services

assistance program or about the computation of assistance payments

should contact the Rail Services Planning Office, Interstate

Commerce Commission, 1900 L. Street, N.'W., Washington, D.C.

20036 (telephone 202-254-3281).

By the Comniission.

Dated March 24, 1976.

Rosert L. OswaLo

(SEAL) Secretary.

—_——

Re ow te

ae ee ee ee ee Oe A POR Oe were we om

49a

Appendix I

Finance Docket No. 27506'

PRAIRIE TRUNK RAILWAY—ACQUISITION AND

OPERATION—BETWEEN FLORA AND SHAWNEETOWN IN

CLAY, WAYNE, WHITE, AND GALLATIN COUNTIES, ILL.

Decided February 17, 1977

1. la Finance Docket No. 27506, certificate issued authorizing the acquisition and

operation by Prairie Trunk Railway of a line of railroad between Flora and

Shawnectown, Ill, and assignment of certain trackage rights over @ portion

thereof, subject to certain prescribed conditions.

2. In Finance Docket No. 27507, authority granted to Prairie Trunk Railway to issue

not exceeding 750,000 shares of no-par common stock with a stated value of $1

per share, the proceeds of which to be used for the acquisition and operation of

the line of railroad herein authorized to be acquired, and application in all other

respects denied.

3. In Finance Docket No. 27728, authority granted to Trans-Action Associates,

Incorporated, to control Prairie Trunk Railway as a wholly owned subsiduary

subject to certain conditions.

4. In Finance Docket No. 26965 application of the Baltimore and Ohio Rai \road

Company for authority to abandon the line of railroad to be acquired by Prairie

Trunk Railway dismissed.

Samuel W. Witwer, Jr., for applicants in F.D. Nos. 27506, 27507,

and 27728.

Richard B. Allen for applicant in F.D. No. 26965.

Gordon P. MacDougall for protestants in each application.

William J. Scott, Peter A. Fasseas, James R. Sullivan, Hercules F.

Bolos, and Helga Huber for the State of Illinois and the Illinois

Commerce Commission protestants in each application.

Robert L. Graves for protestants in F.D. Nos. 26965, 27506,

27507, and intervener in opposition in F.D. No. 27728.

Byron F. Andrews, Jr., for protestants in F.D. No. 26965 and

interveners in support in F.D. No. 27506.

David G. Abraham for interveners in support in F.D. No. 27506.

‘This report embraces Finance Docket Ne 27507. Pramse Trunk Rasiway Securities. and

Finance Docket Ne 27728. Trans-Actwn Assocites. Incorporated — ontroli—Prawc Trunk

Rattway. Finance Decket Ne 26965. Balumere & Obw Ratiroad Company Abandonment

Between Rinard and Shawnectown, wm Clay. Wayne. White, and Gallatin Counties. Nha

; mp ICC

50a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION 833

oan” P. Sheahan for protestant in F.D. Nos. 26965, 27506, and

$07.

Thomas F. McFarland for intervener in F.D. No. 27506.

Thomas G. Woodall for intervener in support in F.D. No. 27728.

REPORT OF THE COMMISSION

Division 3, COMMISSIONERS BROWN. MACFARLAND. AND CLAPP

By Division 3:

These proceedings were heard on separate records but, as they

involve matters which are interrelated in effect, are herein

consolidated for disposition in a single report.

By application filed December 22, 1971, in Finance Docket No.

26965, The Baltimore & Ohio Railroad Company (B&O or Chessie

System), a common carrier by railroad subject to part | of the

Interstate Commerce Act, seeks a certificate of public convenience

and necessity under section | (18-20) of the act permitting the

abandonment of operations over its branch line between Flora and

Shawneetown extending from Station 3869 + 50 near Rinard, III., to

Station 0 + 00 at Shawnectown, IIl., a distance of 73.27 miles and

abandonment of the line itself from Station 3869 + 50 to Station

319 + 13.7 near Junction, Ill, and from Station 36 + 56.2 near New

Shawneetown, Iii, to Station 0 + 00, a total distance of 67.91

miles*; all in Clay, Wayne, White, and Gallatin Counties, Ill. This

proceeding was the subject of an oral hearing before an

Administrative Law Judge held at Carmi, IIL, June 19 through June

22, 1972. By report and recommended order served February !4,

1973, the Administrative Law Judge noted that while the volume of

traffic handied over the line had been marginal at best, B&O's

efforts to exploit the traffic potential in the area had been apathetic.

He questioned the need for the $2.5 million capital expenditure for

road rehabilitation projected by B&W and, concluding that the

branch was capable of generating sufficient freight to sustain its

operation, including normalized maintenance, recommended that

the application for abandonment be denied. Exceptions to this

report and recommended order were filed by applicant B&O to

which joint replies were filed by protestants Illinois Agricultural

Association, FS Services, Inc., Wabash Valley Service Company,

White Valley Farm Buctau, Gallatin Valley Farm Bureau, and

Wayne County Farm Bureau; by protestants State of Illinois, Illinois

shandonment owned puatly by the B&O aad Lownville and Nashville Rasiroad Company

(L&aN)

"sw Icc

—

Sla

INTERSTATE COMMERCE COMMISSION REPORTS

Commerce Commission, Thomas J. Duggan,’ and J. Thomas

McNeal‘; and by protestants Shawneetown Regional Port District

and B&O Concerned Citizens of Southern Illinois.

In F.D. No. 27506, the title proceeding, by application filed

October 15, 1973, as amended, Prairie Trunk Railway (Prairie

Trunk) of Joliet, IIL, a newly formed corporation organized for the

purpose of acquiring and operating railroads, seeks authority

pursuant to section 1(18) of the act to acquire and operate the line

of railroad proposed for abandonment by B&O in F.D. No. 26965

(the Abandonment case) as well as to acquire through assignment

the B&O interest in the 5.36-mile segment of line between Station

319 + 13.7 and Station 36 + 56.2 jointly owned and operated by

B&O and L&N. In a separately submitted pleading expressing its

support of the Prairie Trunk application B&O requests dismissal of

the Abandonment case upon approval of the Prairie Trunk

acquisition proposal. B&O further advised of its willingness to

assume responsibility for and be subjected to the imposition of those

conditions for the protection of adversely affected employees

embodied in Chicago, B. & Q. R. Abandonment, 275 1.C.C. 700,

(the Burlington conditions), as a condition of approval of the Prairie

Trunk acquisition.

In F.D. No. 27507, by application filed October 15, 1973,

concurrently with the application in F.D. No. 27506, Prairie Trunk

seeks authority under section 20a of the act to issue | million shares

of no-par-value common stock With a stated value of $1 per share

and a secured 15-year promissory note’ in principal amount not

_exceeding $650,000 bearing an annual interest rate | 1/2 percent

above the prevailing New York (Chase Manhattan Bank) prime

__---‘taterest rate from time to time in effect. These securities represent

the initial capitalization of Prairie Trunk. Initially Prairie Truck

proposes to issue 100,000 shares of the no-par common stock and

the $650,000 promissory note to Trans-Action Associates,

Incorporated (Trans-Action), of Joliet, Ill, for $750,000 in cash or

equivalent assets. Upon the issuance of these securities, Prairie

Trunk would become a wholly owned subsidiary of Trans-Action.*

‘Tinos Legustatve Director for the Unned Transportation Union (UTU)

“Indsane Legisiative Director tor UTU

“Applicant's originally filed request to wsue secured S-year notes was apparently mudified as

reflected im oral testimony and a submitted exhibit to a pruposed |S-year secured promissory

note

‘Prawe Truns the shell corpordtion. was. in fact. created by Trans-Action interests.

348 LCC.

S2a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION

The applications in F.D. No. 27506 (the Acquisitioa case) and

F.D. No. 27507 (the Securities case) were the subject of an oral

hearing on a consolidated record held June 26 and 27, 1974, at

Fairfield, Ill, before a second Administrative Law Judge not

previously involved in the Abandonment case. By initial decision

served June 10, 1975, the Administrative Law Judge approved the

section 1(18) acquisition and operation proposed by Prairie Trunk in

F.D. No. 27506 subject to (a) the subsequent approval by the

Commission of an appropriate application under section 5(2) of the

act by Trans-Action to control Prairie Trunk (b) the Burlington

conditions for the protection of railway employees, the expense of

which to be borne by the Chessie System (B&O), (c) the further

condition that wages to be offered by Prairie Trunk for jobs formerly

covered by union contract shall not be reduced below the level now

in force under such contracts, (d) the submission of satisfactory

proof of the Commission that the sum of $750,000 pledged to

Prairie Trunk by Trans-Action has been reduced to cash and placed

at the disposal of Prairie Trunk for the uses and purposes set forth in

the application, and (e) the condition that for a period of 5 years

from the consummation date of the acquisition, no abandonment

application relating to the subject line of railroad may be filed by

Prairie Trunk prior to a bona fide offer of resale to any party to the

proceeding at a purchase price no less favorable than that approved

for payment to B&O adjusted to Consumer Price Index changes. The

request for dismissal of the Abandonment case was denied by the

Administrative Law Judge as being a matter pending before the

Commission and not properly before him. In F.D. No. 27507 the

issuance of | million shares of common capital stock and secured

notes not to exceed $650,000 in principal amount proposed by

Prairie Trunk was authorized by the Administrative Law Judge.

Exceptions to the initial decision of the Administrative Law Judge

served June 10, 1975, were filed by applicant Prairie Trunk, jointly

by protestants Thomas J. Duggan and J. Thomas McNeal, and

separately by protestant Illinois Commerce Commission. A joint

reply to applicant's exceptions were filed by Thomas J. Duggan and

J. Thomas McNeal. Applicant replied to protestants’ exceptions,

and B&O Concerned Citizens of Southern IIlinois, intervener in

support of the Prairie Trunk applications, replied to the exceptions

of Illinois Commerce Commission.

In F.D. No. 27728, by application filed September 5, 1974, Trans-

Action, a noncarrier holding company controlling Louisiana

Ma ICC

53a

INTERSTATE COMMERCE COMMISSION REPORTS

Midiand Railway Company (Louisiana Midland), a common carrier

by railroad subject to part | of the act, as a wholly owned subsidiary,

seeks authority under section 5(2) of the act to own and control

more than one regulated common carrier by railroad, a condition

which in view of Trans-Action's relationship with Prairie Trunk

would be a resulting consequence of approval of the Acquisition

and Securities cases. Protests were filed by the Railway Labor

Executives’ Association (RLEA), the Congress of Railway Unions

(CRU), jointly by Thomas J. Duggan and J. Thomas McNeal! (UTU),

and jointly by the State of Illinois and the Illinois Commerce

Commission (Illinois). RLEA and CRU expressed concern o~ the

that 1 of the application might have an adverse

7 oes dh cations Their protests were directed solely to

this issue with both seeking the imposition of employee protective

conditions in the event of approval of the application, RLEA

seeking imposition of the conditions contained in New Orleans

Union Passenger Terminal Case, 282 1.C.C. 271 (the New Orleans

conditions) and CRU seeking imposition of those contained in

( tlahoma Ry. Co. Trustees Abandonment, 257 1.C.C. 177 (the

Uklahoma conditions).

By order of the Commission, Division 3, dated March 10, 1976,

the proceeding in F.D. No. 27728 (the Control case) was set for

handling under the modified procedure. The order raised serveral

questions relating to the financial status of Trans-Action, the

interest payment obligation to be imposed upon Prairie Trunk by its

parent, the necessity for imposing labor protective conditions and if

so the choice thereof, and indicated a need for more recent

information as regards operations over the Flora-Shawneetown line.

Pursuant to the March 10, 1976, order an initial — —

modified containing a verification t tua

aeons Gants to the best of the knowledge and belief of

the affiant’ was submitted by Trans-Action. Protestants Iilinois and

UTU submitted a joint statement in reply to applicant's initial

statement. A rebuttal statement containing a verification with an

affirmative assertion of knowledge of the matters and things

discussed therein on the part of the affiant as well as an assertion of

the truth and correctness to the best of affiant's knowledge and

belief of all previously submitted representations, attachments, and

financial statements was filed by applicant

"The verification wes gives by Craig E Burroughs, presstent of Trens-Action as well as Prairie

om 48 LCC

S4a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION

A motion to strike certain portions of applicant's verified rebuttal

statement was filed jointly by Illinois and UTU, and applicant

replied thereto. Protestants contend that the portion of applicant's

rebuttal verification which refers to previously submitted materials

constitutes improper rebuttal They assert that applicant's initial

statement was improperly verified and that the entire statement

should be considered as argument only. They further contend that as

the exhibits attached to the rebuttal statement were not prepared by

the affiant, they should be stricken as evidence. The language of the

rebuttal verification to which protestants object was added by

applicant to clarify its initial statement verification in response to

the criticism of that verification contained in protestants’ reply

statement. We consider applicant's initial verification as clarified by

its rebuttal verification to be in substantial compliance with rule 50

of the Commission's General Rules of Practice (49 CFR 1100.50),

cf. Pyramid Van Lines, Ext.—€limination of Gateways, 107 M.C.C.

812, 815. The objected-to exhibits represent a response to matters

raised in protestants’ reply statement and constitute proper rebuttal.

In all respects the motion to strike is overruled.

Petitions for leave to intervene and to submit tendered statements

in the Control case were filed jointly by Illinois Agricultural

Association and its affiliates FS Service, Inc., Wabash Valley Service

Company, White County Farm Bureau, Gallatin County Farm

Bureau, and Wayne County Farm Bureau (IAA), and separately by

Shawneetown Regional! Port District (Port District). As petitioners

are parties to the related Abandonment and Acquisition cases, their

requests for intervention are granted and their tendered statements,

1AA's statement of position and Port District's statement in support

of applicant, are accepted for filing

EXCEPTIONS TO THE INITIAL DECISION

IN THE ACQUISITION AND Securities Cases

In its exceptions to the initial decision of the Administrative Law

Judge in the Acquisition and Securities cases, Prairie Trunk objects

to the imposition of the minimum wage Condition for jobs formerly

covered by union contract contending that the Commission lacks

authority to prescribe or dictate wages in this manner and that the

condition does violence to the Railway Labor Act (45 U.S.C. 151!)

and interferes with free collective bargaining /t notes that the wages

of existing employees” affected by the transaction will be protected

through the imposition of the Burlington conditions and that the

We nnn ~te « eee =e tee - «— Bee e Vea :

55a

INTERSTATE COMMERCE) COMMISSION REPORTS

minimum wage condition to which m objects can only apply to

employees tw be recruited by Prairie Trunk subsequent to approval

of the Acquisition case by the Commission. It further urges the

inclusion of specific affirmative findings directing the continuation

of existing through rates, routes, and divisions presently applicable

to the subject line of railroad and authorizing the assumption by

Prairie Trunk of all rights and obligations of B&O in the 5.36-mile

segment of line owned jointly with L&N. Such findings it believes

would insure stability and avoid ambiguity and controversy.

In reply UTU contends that the labor protective conditions

imposed by the Administrative Law Judge are less than adequate

and that adoption of Prairie Trunk’s exceptions in this regard would

be inequitable and unjust. It points out that UTU and other labor

organizations have collective bargaining agreements with B&O

covering employment on the involved line of railroad, that the

proposed operations of Prairie Trunk would rely upon and be

strongly integrated with B&O, and that Prairie Trunk has expressed

its willingness to give preference in employment to present B&O

employees. It asserts that in the exercise of its broad powers under

section 1(18-20) of the act, the Commission clearly has authority to

impose a maintenance-ol-wage-levels condition as a condition for

approval of a proposed acquisition. Further, it urges that Prairie

Trunk be required to collectively bargain with representatives of the

present employees working on the subject line of railroad. It

expresses no objection to the imposition of the standard DT&I

rowting Conditions requested by Prairie Trunk but contends that this

demonstrates the true section 5(2) character of the proceeding As

to specific authorization for the assumption by Prairie Trunk of

B&O's rights and obligations uader its joint trackage agreement with

L&N, protestant believes the participation of L&N is necessary for

such a determination.

Iinwois in its exceptions questions the financial ability of Prairie

Trunk to maintain service on the Flora-Shawnectown line and

requests the Commission to make positive findings as to the

financial viability of Prairie Trunk'’s proposed operation. It further

excepts to the eavironmental findings of the Administrative Law

Judge to the effect that approval of the subject applications will not

have a significant effect upon the quality of the human ecavironment

within the meaning of the National Environmental Policy Act of

1969. contending that neither a negative Threshold Assessment

Survey nor draft cavironmental impact statement were available at

MAIC.

56a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION

the hearing, or within the required period prior thereto, and that

Prairie Trunk’s proposed operations will differ significantly from

that presently being provided by B&O. In addition it raises certain

procedural matters which will be discussed below.

UTU excepts generally to the approval of the subject applications

urging that they be denied or dismissed. It challenges the legal

premise accepted in the initial decision that a new carrier (Prairie

Trunk) may under section 1(18) acquire and operate a line of

railroad without the issuance pursuant to a section 1(18) application

of a certificate of abandonment to the former operator (B&O),

contending that the decision in Cadillac & Lake City Ry. Co.

Acquisition and Operation, 320 1.C.C. 617, wherein the acquisition

was approved and the abandonment dismissed, which was rendered

by an employee board and relied upon by the Administrative Law

Judge, was erroneous in its adoption of this practice and contrary to

the manifest weight of Commission precedent, citing Okmulgee

Northern Ry. Co. Abandonment, 320 1.C.C. 637, 638-40. It asserts

that in approving the proposed acquisition the Administrative Law

Judge misconceived the primary justification for the application to

be cost reduction when in fact it is based upon a projected increase

in traffic characterized as fantastic and not supported by the

evidence. It contends that the capability of Prairie Trunk to render

the proposed service has not been established. Protestant concurs

and adopts the position of Illinois as regards the environmental

findings. It asserts that as the proposed transaction constitutes an

acquisition rather than an abandonment, should it be approved, the

appropriate employee protective canditions to be imposed are the

New Orleans conditions rather than Burlington conditions. It further

requests that the Commission under its broad section 1(18) powers

as a condition of approval require Prairie Trunk to collectively

bargain with representatives of present employees of the line. The

procedural matters discussed below raised by Illinois were also

raised by this protestant.

In reply Prairie Trunk insists that the exceptions of protestants are

without merit. It emphasizes public and shipper support for the

proposed acquisition and notes the limited interest of protestants

UTU and Iilinois. It contends that there is nothing improper with

the procedure utilized in Cadillac & Lake City, supra, and that its

assumption of operations over the Fliora-Shawneectown line

precludes the occurence of any abandonment by B&O. It asserts that

the viability of its financial position was adequately supported by

8 LCC.

57a

INTERSTATE COMMERCE COMMISSION REPORTS

evidence of record unchallenged by protestants, and that the

questioning of its traffic projections by protestants is inappropriate

and inconsistent with their optimistic view of the line's traffic

potential offered in the Abandonment case. It considers the

environmental determination of the Administrative Law Judge to be

both reasonable and correct in that the subject transaction involves

the mere substitution of one carrier for another in the performance

of operations over the same track. As to the labor protective

conditions, it points out that the Burlington conditions imposed by

the Administrative Law Judge are applicable to all employees

involved in B&O operations on the Flora-Shawneetown line, that

the Burlington conditions are similar to the other employee

protective conditions sought by protestants, and that the benefit to

be afforded affected employees through the impusition of standard

employee protective conditions other than the Burlington

conditions is not readily apparent.

B&O Concerned Citizens of Southern Illinois (Concerned

Citizens) in reply to the exceptions of Illinois expresses its

satisfaction with the manner in which the Administrative Law Judge

dealt with the subject of applicant's financial viability and disposed

of the environmental issue. As the Prairie Trunk proposal

constitutes a Continuation of existing railroad operations, it believes

no further amplification is required of the environmental issue. It

urges that the initial decision be affirmed.

Procedural matters raised on exceptions.—Protestants Illinois and

UTU request the Commission to take official notice of the United

States Railway Association (USRA) recommendation released June

23, 1975, to exclude the Flora-Shawnectown line (Trackage

Coordination Project IL-5) from the Final System Plan containing

the comment/reason that Illinois Central Gulf Railroad (ICG) is

interested in acquiring the entire line and intends to deal directly

with B&O and file a proposal with this Commission. Protestants urge

that further action in the subject proceedings be deferred pending

the filing of the ICG application. In reply, Prairie Trunk asserts that

the comment/reason indicated for the USRA recommendation is

based on speculation and misinformation. It notes that B&O has

taken no action inconsistent with the proposed acquisition and has

in fact reiterated its intention to sell the line to Prairie Trunk upon

receipt of appropriate Commission authorization.” No such proposal

generel attorney tor BHO asserinng that BAO has ne plans of mmrentions of selling the subyect lune

to ICG and contirmung 1 wmtention to honor us agreement wah Prawe Trunk

Mae icc

58a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION

has been submitted to the Commission by ICG as of this date, the

absence of which relegates the matters sought to be officially

noticed into the realm of pure speculation meriting no further

discussion. The request for official notice is denied.

Protestants further seek the consolidation of the Acquisition and

Securities cases with the Control and Abandonment cases \as well as

two other B&O abandonment applications, F.D. No. 26745,

Baltimore & Ohio Railroad Company Abandonment Between Coal

Shaft and Beardstown in Sangamon and Cass C ounties, Illinois, and

Docket No. AB-19 (Sub-No. 27), Baltimore & Ohio Railroad

Company Abandonment Between Flora and Sangamon Junction in

Clay, Effingham, Fayette, Shelby, Christian, and Sangamon

Counties, Illinois. As previously indicated the first four proceedings

to which protestants refer have herein been consolidated for

disposition in a single report. The latter two abandonment

applications involve connecting rail line segments northwest of

Flora extending between Flora and Beardstown. Previous requests

for consolidation of the three B&O abandonment applications in

F.D. No. 26745, Docket No. AB-19 (Sub-No. 27), and F.D. No.

26965 independently raised in various proceedings have repeatedly

been denied.” Protestants offer no substantial reasons as to why a

reversal of the previous refusals to consolidate is in order. The

request for consolidation of the three B&O abandonment

applications is denied.

THE Prion ADMINISTRATIVE LAw JuDGE REPORTS

AND THE PRaAinié TRUNK-TRANS-ACTION PROPOSALS

The facts set forth in the report of the Administrative Law Judge

issued in the Abandonment case and the initial decision of the

Administrative Law Judge issued in the Acquisition and Securities

cases have been accurately stated in all material respects, and, as

supplemented and expanded upon herein, are adopted as our own.

To the extent facts are restated, we have deemed it necessary for

clarity of discussion.

Pursuant to a Memorandum of Understanding dated July 25, 1973,

Trans-Action and B&O have entered into an agreement whereby

Trans-Action is to acquire the B&O line of railroad between Flora

and Shawneetown as well as the entire B&O interest in the 5.36-mile

segment of line between Junction and New Shawneetown which it

owns jointly with LAN for the sum of $500,000. The $500,000 is to

be payable to cash wip $160,080 dus upon receipt of approval by

See report and recommended order of the Administrative Law Judge served February !4,

1973, in F.D. No. 26965; order of the Commission, C ommissioner Tuggle, dated June 17, 1975, in

all three proceedings, end the order of the Commission, Division 3, Acting as an Appeliate

Division, dated May 18, 1976, in F.D. No 26745.

59a

INTERSTATE COMMERCE COMMISSION REPORTS

this Commission of the proposed acquisition and $400,000 to be

paid upon commencement of operations over the newly acquired

line of 180 days after final Commission authorization, whichever

first occurs.

Trans-Action proposes to assign the assets and interest of B&O to

be acquired plus $250,000 to Prairie Trunk in exchange for 100,000

shares of Prairie Trunk no-par-value common stock and a secured

$650,000 promissory note to be issued pursuant to the Securities

case. The principal amount of the promissory note would be payable

in 15 years and bear interest at a per annum rate | 1/2 percent above

the prevailing New York (Chase Manhattan Bank) prime interest

rate from time to time in effect with interest payable semiannually.

The $250,000 is to provide Prairie Trunk with the necessary capital

to meet projected start-up expenditure, equipment acquisition,

construction, and working capital requirements. These requirements

are identified as $20,000 for tools, shop machinery, and

maintenance-of-way equipment; $15,000 for motor vehicles for

agency, mechanical, and roadway maintenance forces (one mobile

station van, two | 1/2-ton pickup trucks, and one 2 1/2-ton Hi-rail

truck); $6,000 for office furnishings and equipment; $20,000 for

communications equipment; $89,000 for noninterchangeable

freight equipment to service local movements; $5,000 for

organizational expenses; and the balance of $95,000 for working

capital purposes.'' Trans-Action will also make available to Prairie

Trunk assets in its possession such as 10 interchangeable 40-foot

boxcars and various types of track materials when and as needed."

The $750,000 required to finance the B&O acquisition and the

initial Prairie Trunk capital will be generated by Trans-Action

through ibs sale of steel! rail and related materials inventories which

are carried on the financial statements of Trans-Action at nominal

values. As of April 19, 1976, negotiations were pending for the sale

"En the application as originally filed $60,000 was designated for the acquisition for three used

locomotive units and $40,000 for the corstruction of shop and office faciiniies at Shawneetown.

Trans-Action owns one locomotive unit which it will make available io its subsidiary and has

access to other units which can be iessed (rom Peabody Coal Company and B&O as needed The

contemplated shop and office faci!ities wiii sot be needed initially Shop space at the B&O diese!

servicing facility at Flora will be available for neavy maintenance requiremenis.

“"Trans- Action indicates that the use of these assets by Prairie Trunk as well as its use of the

locomotive unit referred to in footnute |! will not require an expenditure of cash on the part of

Prairie Trunk. The locomotive will be considered as an additional capital contribution by Trans-

Action for which additional shares of Prairie Trunk stock will be issued The manner by which

Trans-Action will be compensated for the use of the other asset, if such compensation is

contemplated. was not indicated

348 LCC.

60a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION

of approximately 2,059 tons of rail and rail fastenings, representing

the balance of Trans-Action’s unsold inventories of these items,

which if successful would yield to Trans-Action approximately

$900,000.

Trans-Action's balance sheet as of November 30, 1975, indicates

total assets of $471,436, made up of current assets of $43,450;

investments of $424,833, consisting of railroad equipment $6,825,"

railroad real estate $14,508, capital stock of Great Plains Railway

$3,000, and capital stock of Columbus & Greenville Railway

$400,500"; and property and equipment (net) $3,153. Current

liabilities totaling $154,514 include accrued wages of $48,475 and

estimated income tax liability of $86,000; long-term liabilities

representing loan from officer and accrued interest thereon amount

to $21,601; while shareholders’ equity consisting of capital stock of

$3,200 and retained earnings of $292,121 totals $295,321. For the 6

months ended November 30, 1975, Trans-Action’s gross income

totaled $413,033, of which $406,333 represented the sale of rails.

Net income for the period after provision for income taxes

amounted to $294,340.

The railroad operation proposed by Prairie Trunk will be directed

primarily at local shippers and the expansion, promotion, and

development of rail movements local to the line. While as indicated

in appendix A hereto the number of carloads handled by B&O over

its Flora-Shawneetown branch for the years 1969 through 1975 has

with the exception of 1970 trended downward with consistency,

because the emphasis of its locally based short-line railroad service

will be upon local shippers and local transportation needs, Prairie

Trunk anticipates an immediate and dramatic expansion in the

volume of traffic to be moved over the subject line Prairie Trunk's

projections as to traffic volume and gross operating revenues are set

forth in appendix B. Traffic volume projections are broken down by

commodities. For comparative purposes appendix B also contains a

commodity breakdown of the traffic handled by B&O for the years

1969, 1970, and 1971. Based on these traffic estimates Prairie Trunk

anticipates profitable operations within 2 years of the institution of

“Yactudes rail and wack fastenings valued on the books at $1

“Represents cost of 200.250 shares of common stock at $2 per share Of these, 125,000 were

held in a voting trust and offered for sale to local investors in Mississuppi at $2 per share By

February 22, 1976, sale of the 125,000 shares was completed and the proceeds wrned over to

Trans-Action

Trans-Action's investment in the capital stock of Lousiana Midland Rastway being carned on

the equity method w valued at zerw as of the balance sheet date

saan CC

6la

INTERSTATE COMMERCE COMMISSION REPORTS

its service. Its financial projections are outlined in the pro forma

incom> statement set forth in appendix C.

Trans-Action’s objective in its control and operation of Prairie

Trunk will not be to accumulate and distribute short-term profits

but rather to enhance the asset value of its subsidiary through the

development of a responsible and enduring service-oriented short-

line railroad.

POSITION OF PROTESTANTS AND OTHER PARTIES

Illinois. —Protestant vigorously opposes the Abandonment case

for the reasons set forth in the February !4, 1973, report and

recommended order of the Administrative Law Judge, particularly

the strong public need for continued rail service on the Flora-

Shawneetown line and the potential for substantial increases in

traffic that exists along the line. It opposes the Acquisition and

Control cases because it considers Trans-Action and Prairie Trunk

to be in a financially weak position and not entirely capable of

providing the rail service required on the line. Protestant indicated

its support for the acquisition of the Flora-Shawneetown line by

another rail carrier not a party to these proceedings.

UTU.—UTU opposes the Abandonment case for the same reasons

indicated by Iilinois. For similar reasons it also opposes the

Acquisition and Control cases. Protestant questions the reliability of

the Prairie Trunk traffic projections as well as applicant's ability to

perform the rail service it proposes. UTU considers the Burlington

conditions inappropriate for protecting the interests of employees in

the pending proceedings.

Concerned Citizens.—Concerned Citizens, a group of

approximately 100 shippers and consignees located in communities

on the Flora-Shawneetown line, actively opposes the Abandonment

case but supports the acquisition and operation of the subject line by

any qualified and responsible railroad. lt supports the proposed

P.airie Trunk acquisition as the best available alternative for the

improvement of a needed rail service essential to the economic

maintenance and development of its area. It considers the financial

conditions imposed by the Administrative Law Judge in the initia!

decision of June 10, 1975, adequate to insure the financial viability

of the proposed Prairie Trunk operation. |

1AA.—These affiliated farm service organizations representing

farmer members located in southern Illinois vigorously oppose the

Abandonment case. Because of the failure of B&O to provide

wR ICC

62a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION

adequate car service and track maintenance on the subject line, [AA

reluctantly supported the Acquisition case proposals. It is

particularly anxious that its members are arsured of a reliable rail

transportation service rendered by a financially responsible carrier.

Based on information contained in the joint reply statement

submitted by Illinois and UTU in the Control case, IAA is no longer

satisfied that Trans-Action is responsible either financially or

otherwise to insure that adequate rail transportation service will be

available to its members. For this reason it opposes Trans-Action's

application for control and no longer supports the proposed

acquisition.

Port District.—This operator of a public port facility on the Ohio

River at Shawneetown stands in opposition to the Abandonment

case but fully supports the Acquisition and Control cases. It

considers the proposed short-line railroad to be the last hope for

regular and dependable rail service for shippers and receivers in its

region. It is aware of and has identified several new development

projects at its port facility which will require the availability of

adequate rail service.

DISCUSSION AND CONCLUSIONS

At the outset, we take cognizance of the fact that while

consummation of the Louisiana Midland rail line acquisition®

occurred on April 28, 1974, some 2 months prior to the oral hearing

in the Acquisition and Securities cases and some 4 months prior to

the formal filing of the Control case herein under consideration, the

parent-subsidiary relationship between Trans-Action and Louisiana

Midiand and Trans-Action and Prairie Trunk was fully disclosed at

the oral hearing and the subject of careful and intensive

examination. Indeed the condition imposed by the Administrative

Law Judge in the initial decision served June 10, 1975, requiring

Trans-Action to file and subsequently secure Commission approval

of the common control relationship which would result from

approval of the Prairie Trunk acquisition proposal reflected a

formalization of Trans-Action’s clearly expressed intent in this

regard. Although Louisiana Midland is currently engaged in the

“This transaction was approved in F.D. No 27450, Lowisiana Midland Railway

Company—A cquisition and Operation of Line of Railroad in Winn, Grant, LaSalle, Catahoula,

and Concordia Parishes, Louisiana (not printed), decided March 13, 1974, by the Commission.

Review Board Number 5, wherein L owssiana Midiand was authorized to acquire a described line of

rasiroad from litinow Central Gulf Railroad Company.

48 LCC.

63a

INTERSTATE COMMERCE COMMISSION REPORTS

performance of a short-line rail transportation service similar in

terms of physical operation to the type of short-line railroad

operation herein proposed by Prairie Trunk, the 76-mile line of

railroad between Packton and Vidalia, La, located in the northeast

portion of central Louisiana over which it operates is separated

geographically from the southeastern illinois line of railroad and

area of service identified with the proposed Prairie Trunk operativ..

by well in excess of 500 miles. Assuming that approval of the

proposed Prairie Trunk acquisition is justifiable, the two railroad

operations are so clearly separate and unrelated as te merit our

concluding that common ownership and control of Louisiana

Midiand and Prairie Trunk by Trans-Action will have no adverse

competitive effect upon the utilizers of their respective services.

In our consideration of the Prairie Trunk acquisition proposal and

its impact upon the interest of the public, two principal questions

have been raised. First, accepting the fact that Prairie Trunk and its

parent are sincere in their desire to improve and expand rail service

on the subject line, is Prairie Trunk capable in terms of operating

competence and financial ability of fulfilling its objectives or at a

minimum of insuring the continued availability of adequate rail

service on the line’ Second, if the undertaking of this endeavor is

within the capability of Prairie Trunk, whether the conditions

imposed by the Administrative Law Judge in his initial decision

served June 10, 1975, for the protection of railroad employees

atfected by the acquisition shouid be modified’

Confronted by the consistent erosion in the volume of traffic

handied by B&O on its Flora-Shawneetown line, the repetitious

shipper complains as to the steady deterioration of service on the

line, the negative approach taken by B&O in its operation of the line

as reflected by weak and ineffective attempts to develop traffic and

a persistency of effort to end its operating responsibility for the line

either through abandonment or sale, it is quite evident that the

service envisioned by the Prairie Trunk proposal would be a

significant improvement over that presently available on the line

and of substantial benefit to shippers in the area. Clearly, if Prairie

Trunk though initially dependent upon Trans-Action for managerial

direction and financial resources is able to function in its own

capacity as an independent entity and a financially responsibie

short-line railroad, the best interest of the public would be served

by approval of the proposed acquisition.

Me LOC

64a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION

Trans-Action is a transportation consulting firm specializing in

light-density rail line problems. Since its organization in May 1971 ,"*

it has been engaged in the development of short-line feasibility

studies (including engineering reports), the financing of new railroad

ventures, and, in the course of assisting interested parties involved

in transportation regulatory matters, in the preparation of pleadings,

analyses, and testimony. It has functioned as a consultant and

provided complete organization and management services for a

variety of short-line railroads. In view of this background,

particularly that relating to the organization and operation of short-

line railroads, we are satisfied that Trans-Action possesses the

experience and knowledge required to provide Prairie Trunk with

the kind of responsible leadership and management necessary to

undertake and successfully pursue the short-line railroad operation

proposed herein. Cf. Cambria & 1. R. Co. Control, 275 1.C.C. 360,

365.

The real applicant in the acquisition proceeding is Trans-Action.'

It proposes to utilize as the vehicle through which it will own and

operate the line of railroad to be acquired a newly created wholly

owned subsidiary, We recognize, however, that the subsidiary,

Prairie Trunk, represents an independent corporate entity separate

and distinct from Trans-Action. It is particularly for this reason that

Trans-Action has an obligation to the shipping public served by the

subject line to insure that its subsidiary is adequately capitalized and

financially independent.

Trans-Action has indicated that its interest in the Flora-

Shawneetown line is not for short-term profits but rather for the

preservation, enhancement, and long-term development of a

responsible public service corporation in the short-line railroad

field. To finance this undertaking Trans-Action proposes to provide

Prairie Trunk with the equivalent of $750,000 in assets and cash to

underwrite Prairie Trunk’s anticipated cepital and operating funding

requirements, with the understanding that additional resources will

“Trans-Action was incorporated under the laws of Illinois on May 28, 1971, as Faburr Fund,

inc. ts present name was adopted by charter amendment filed January 10, 1973.

"The agreement to acquire the B&O Flora-Shawneciown branch is between Trans-Action and

B&O Prairie Trunk is not @ party to that agreement, but through assignment from Trans-Action

will acquire the rail line im exchange for securities. While the authority requested in the

Acquisition case is technically inaccurate, corrective action need not be taken as the intent of the

acquisiies proposal w clear

348 LCC.

65a

INTERSTATE COMMERCE COMMISSION REPORTS

be made available if needed. From the financial information

submitted in these proceedings, we are satisfied that Trans-Action is

in @ position to provide Prairie Trunk with this initially suggested

$750,000 funding requirement.

Unfortunately as proposed in the Securities case the financing of

Prairie Trunk will consist of $100,000 in equity capital and $650,000

in secured interest-bearing debt. Such a financial arrangement is

hardly reassuring, for it imposes serious limitations upon the

financial independence of Prairie Trunk as a separate corporate

entity and subjects its rail operation to an unnecessary interest

expense burden. In the face of the speculative uncertainties

inherent in the optimistic traffic projects of Prairie Trunk, and, as

suggested by the evidence presented in the Abandonment case, the

potential necessity to incur substantial expenditures tor

rehabilitation and maintenance of the line, ut is particularly

important that the fledging Prairie Trunk operation be financially

flexible.

To provide Prairie Trunk with an acceptable degree of financial

flexibility and independence, it is necessary that its initial capital

structure be simplified by eliminating the $650,000 debt proposal

and requring an equity investment by Trans-Action in the common

stock of Prairie Trunk of $750,000. Elimination of the $650,000

promissory note, which was to be secured by all of the physical

property transferred by Trans-Action to Prairie Trunk, will have a

twofold effect. First, it will provide Prairie Trunk with a collection

of assets totally unencumbered by debt representing a resource by

reason of which additional financing, when and if required, from

parties other than Trans-Action may be secured. Second, it will

remove a $65,000 annual interest expense burden,’” an amount

representing approximately 15 percent of the projected expenses

estimated by Prairie Trunk for its first year of operation.

Notwithstanding the fact that interest payments duc its parent

corporation could readily be deferred by Prairie Trunk, the expense

represents a legally enforceable legitimate charge against income

and imposes an unnecessary burden and needless obstacle to the

financial health of the Prairie Trunk rail operation.

— While recognizing the Prairie Trunk proposal to be an attempt to,

upgrade the level of service available on the Flora-Shawneetown

line, an effort which should be encouraged, we are tully aware of the

many uncertainties which surround the projected operation. We are

‘Based on Prawse Trunk'’s pre torma meome statement proyection

66a

PRAIRIE TRUNK RAILWAY—ACQUISITION AND OPERATION

also aware that the liquidation value of the steel rail and other

assets to be acquired by Prairie Trunk far exceeds the $500,000

purchase price. The shipping public has a decided interest in the

continuation of a Flora-Shawneetown rail service and should be

afforded some measure of assurance that future rail service on the

line will not be jeopardized because of an irresponsible or

underfinanced ownership or a lack of sincerity of commitment on

the part of the new operators. The broadening of Prairie Trunk’s

equity capital base will enhance its financial stability and

independence providing it with a measure of insulation from the

activities of its parent. To avoid the temptation of a handsome

profit through abandonment and liquidation, we will retain the 5-

year condition imposed by the Administrative Law Judge in the

initial decision served June 10, 1975, which preempts the filing of

an abandonment application prior to a bona fide offer of resale to

any party herein. As a caveat to Prairie Trunk and its parent, we will

not look with favor upon any future abandonment proposal which

may result in a substantial profit arising out of the liquidated scrap

value of the line, particularly if the public demonstrates an active

interest in continued rail service.

While UTU questions the technical propriety of the manner in

which the Administrative Law Judge disposed of the Acquisition

case, it is clear that the issues raised—i.c., (1) that an abandonment

must be authorized before an acquisition can be approved, and (2)

that the proposed transaction is subject to section 5(2) of the act

rather than section 1(18)—are actually directed at the employee

protection issue, specifically the nature and extent to which

conditions for the protection of employees should be imposed.

Pursuant to section 5(2\f)"* the imposition by the Commission of

empl

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