Appendix — United States v. Interstate Commerce Commission

Supreme Court brief1970

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1969

NORTHERN LINES MERGER CASE

No. 28

UNITED STATES OF AMERICA, APPELLANT

Vv.

INTERSTATE COMMERCE COMMISSION, ET AL.

No. 38

CHARLES E. BRUNDAGE, ET AL., APPELLANTS

INTERSTATE COMMERCE COMMISSION, ET AL.

No. 43

CITY OF AUBURN, APPELLANT

Vv.

INTERSTATE COMMERCE COMMISSION, ET AL.

No. 44

LIVINGSTON ANTI-MERGER COMMITTEE, APPELLANT

Vv.

INTERSTATE COMMERCE COMMISSION, ET AL.

ON APPEALS FROM THE UNITED STATES DISTRICT COURT FOR

THE DISTRICT OF COLUMBIA

TOR Re

ii INDEX

VOLUME I

Relevant Docket Matries

Coenen OF Epes CONTE nn

Jae Gs Tee CO

1966 Report of Commission, denying authorization for

BIE sisrasdes ccaaslonberecilevantdea datliarSdanetscascesetiantal gcorcsedstanametbaiesd

1967 Report of Commission on reconsideration, authorizing

I Ee Meee

Second Report of Commission on Reconsideration, denying

petitions for reconsideration and modifying certain con-

I onc ae _ BOM ee AE Ee Ue

Third Report of Commission on Reconsideration, construing

I A a lacnretelieecaaebabds

VOLUME II

Order of Commission extending period for exercise of merger

authorizations previously granted, April 23, 1969 ._____.

Report of the Hearing Examiner, served August 24, 1964 __

VOLUME III

Report of the Hearing Examiner (continued) _

Report of the Commission on Petitions for Rehearing,

March 31, 1966 RECENT ET BSE ee ee ELS

Complaint by the United States, filed May 9, 1968 >

Answer of Intervening Defendants, filed May 10, 1968

Answer of Interstate Commerce Commission, filed May 14,

BIE sclccsceicsisvoseaeoetn

245

463

498

505

507

1284

*Includes minor corrections noted in sua sponte orders dated

December 11, 1968 and April 16, 1969.

INDEX (Continued) iii

Page

Motion of Charles E. Brundage, et al., to Intervene as Plain-

tiffs, together with complaint, filed May 15, 1968... .._ 1286

Order of District Court granting Motions to ectincina filed

May 16, 1968 _ 1294

Motion of Livingston Anti-merger Committee to Intervene

as Plaintiff, together with complaint, filed May 23, 1968 _. 1295

Court order granting aforesaid motion, filed June 3, 1968 ___. 1302

Answer of Intervening Defendants Great Northern Railway

Company, et al. to Intervening Complaint of nil

Anti-merger Committee . 1303

Answer of Intervening Defendants Great Northern Railway

Company, et al., to Intervening Complaint of Charles E.

Brundage, et al., filed June 5, 1968 1306

Answer of Intervening Defendants 230 Pacific Northwest

Shippers to Complaint of Plaintiff United States of Amer-

| Us RWI UARUUN yn es 1309

Answer of Intervening Defendant Public Utility Commis-

sioner of Oregon, filed June 17, 1968...» 1325

Answer of Chicago, Milwaukee, St. Paul and Pacific Railroad

Company, filed June 24, 1968... Gianni nese eenidikehaec eens 1327

Notice of Appeal of Livingston Anti-Merger Committee _..__ 1336

Supreme Court’s Order of February 24, 1969 noting probable

pi | a a a a ene ere os Oe

505

SERVICE DATE

APRIL 24, 1969

ORDER

INTERSTATE COMMERCE COMMISSION

Finance Docket No. 21478

GREAT NORTHERN PACIFIC & BURLINGTON LINES, INC.—

MERGER, ETC.—GREAT NORTHERN RAILWAY COMPANY,

ET AL.

Finance Docket No. 21479

CHICAGO, BURLINGTON & QUINCY RAILROAD COMPANY,

ET AL.—STOCK ISSUANCE, ETC.

Finance Docket No. 21480

GREAT NORTHERN PACIFIC & BURLINGTON LINES, INC.

ET AL, CONSTRUCTION AND ABANDONMENT

IN THE MATTER OF EXTENSION OF THE PERIOD WITHIN

WHICH THE AUTHORIZATIONS PREVIOUSLY GRANTED

HEREIN MAY BE EXERCISED

PRESENT: VIRGINIA MAE BROWN, Chairman to whom the

above matter has been assigned ‘or action

thereon.

Upon consideration of the record in the above-entitled

proceedings, and of the stay order entered on December

16, 1968, by the Supreme Court of the United States in

United States of America v. United States, et al., No.

899, October Term, 1968, and in City of Auburn v.

United States, et al., No. 999, October Term, 1968; and

good cause appearing therefor:

It is ordered, That the period within which the au-

thorizations previously granted herein may be exercised

be, and is hereby, extended to May 4, 1970.

= ss ee oe

ME SRS

506

Dated at Washington, D. C., this 23d day of April,

1969.

By the Commission, Chairman Brown.

H. NEIL GARSON

Secretary

[SEAL]

—

507

REPORT OF HEARING EXAMINER

INTERSTATE COMMERCE COMMISSION

Finance Docket No. 21478

Finance Docket No. 21479

Finance Docket No, 21480

GREAT NORTHERN PACIFIC & BURLINGTON LINES, INC.—

MERGER, ETC.—GREAT NORTHERN RAILWAY COMPANY,

ET AL.

TABLE OF CONTENTS

Page No.

514 Appearances.

517 The applications.

521 Procedural.

523 Fair hearing.

536 The applicants:

536 Corporate status, operations and properties.

536 Great Northern Pacific & Burlington Lines, Inc.

537 Great Northern Railway Company.

544 Northern Pacific Railway Company.

553 Chicago, Burlington & Quincy Railroad Company.

561 Pacific Coast R. R. Co.

562 Spokane, Portiand and Seattle Railway Company.

564 Officers, directors, and intercorporate relationships.

565 Traffic participation.

576 Valuation,

577 Financial considerations.

586 The transactions:

586 General.

590 The major transactions:

590 The Northern Lines merger.

596 The Burlington merger.

599 The SP&S lease.

602 The related transactions:

602 Acquisition of interests in subsidiaries or affiliates.

603 Acquisition of motor carrier properties.

608 Acquisition of trackage rights.

609 Securities transactions:

609 Issuance of stock—preferred.

611 Issuance of stock—common.

508

Page No.

613 Issuance of bonds.

621 Modification of collateral trust bonds.

623 Assumption of obligations and liability.

628 Other related assumptions of liability.

632 Construction and extension of lines of railroad.

638 Abandonment of lines of railroad.

641 Applicant’s evidence:

641 Origin of application.

646 Economic reports and appraisals.

649 Consolidation study report (Wyer Report).

654 Estimated savings.

658 Studies I—XX.

709 Recapitulation.

711 Appraisals and other reports.

713 Prospective diversion of traffic.

714 Prospective benefits:

a Rte na ear Pacis DR S WERENT aplaia eNSM ALS li ead

Va balP A:

; 714 General.

4 718 Proposed faster freight service—schedules.

4 727 More advantageous transit—routing privileges.

; 732 Increased availability of cars.

737 Improved balance of traffic.

738 Benefits of unification market-wise to producing

areas.

740 Other benefits.

743 National defense.

746 Public relations efforts.

747 Principal shipper support.

769 Competition.

769 General.

770 Railroad.

776 Other modes.

784 Stock exchange considerations.

785 Negotiation and arms-length bargaining.

796 Stockholders’ contribution to the unified system.

802 Interveners:

803 Northern Pacific Stockholders Protective Committee.

813 Intervening railroads.

815 Chicago, Rock Island & Pacific Railroad Company.

815 Union Pacific Railroad Company.

WEE Ner te aT rage; 2 Ren piiccmc “

PO Oe GEE PIELER IS LNG LENE 8 CE PE HEELERS

—

509

Page No.

818 Southern Pacific Company.

823 Western Pacific Railroad Company.

825 Atchison, Topeka and Santa Fe Railroad Company.

828 Soo Line Railroad Company.

833 Chicago, Milwaukee, St. Paul & Pacific Railroad

Company.

909 Chicago & North Western Railway Company.

950 Other Interveners—In support.

956 Other Intervenors—In support with conditions.

973 Other Interveners—lIn support of condition, but neither

in support of or opposed to unifica-

tion as such.

978 Other Interveners—In opposition.

1077 General discussion and conclusions.

1077 Applicable standards.

1083 Benefits.

1092 Injuries.

1097 Summary.

1101 Recommendations.

1116 Ultimate findings, certificate and order.

2 SAD

510

INTERSTATE COMMERCE COMMISSION

Served August 24, 1964

NOTICE TO THE PARTIES

Exceptions, if any, must be filed with the Secretary, IN-

TERSTATE COMMERCE COMMISSION, Washington,

D. C., and served on all other parties in interest within

30 days from the date of service shown above, or within

such further period as may be authorized for the filing

of such exceptions, At the expiration of said period for

the filing of exceptions, the recommended order will be-

come the order of the Commission and will become effec-

tive unless exceptions have been seasonably filed or the

order has been stayed or postponed by the Commission.

If exceptions are filed, replies to exceptions may be filed

within 20 days after the final date for filing of excep-

tions, It should not be assumed that the recommended

order has become effective as the order of the Commis-

sion until a notice or order to that effect has been served.

Finance Docket No, 21478?

GREAT NORTHERN PACIFIC & BURLINGTON LINES, INC.—

MERGER, ETC.—GREAT NORTHERN RAILWAY COMPANY,

ET AL.

Decided

1. (a) Merger of the properties and franchises, includ-

ing the motor carrier operating rights of

Great Northern Railway Company, Northern

Pacific Railway Company, and Pacific Coast

R. R. Co., into Great Northern Pacific & Bur-

lington Lines, Inc., for ownership, management

and operation;

1 This report also embraces Finance Docket Nos. 21479, Chicago,

Burlington & Quincy Railroad Company, et al.—Stock Issuance,

ete., and 21480, Great Northern Pacific & Burlington Lines, Inc.,

et al.—Construction and Abandonment.

“y

(b)

(c)

(d)

(e)

511

Acquisition by Great Northern Pacific & Bur-

lington Lines, Inc., of sole or joint control of

carriers subsidiary to or affiliated with Great

Northern Railway Company, Northern Pacific

Railway Company and Pacific Coast R. R. Co.,

through ownership of stock;

Acquisition by Great Northern Pacific & Bur-

lington Lines, Inc., as successor in interest, of

all lease-hold rights, trackage rights and joint

ownership in or joint use of any railroad line

or lines and terminals incident thereto possessed

by Great Northern Railway Company, Northern

Pacific Railway Company, and Pacific Coast

R. R. Co.;

Subsequent merger of the properties and fran-

chises, including the motor carrier operating

rights, of Chicago, Burlington & Quincy Rail-

road Company, into Great Northern Pacific &

Burlington Lines, Inc., for ownership, manage-

ment and operation;

Acquisition by Great Northern Pacific & Bur-

lington Lines, Inc., of sole or joint controj of

carriers subsidiary to or affiliated with Chicago,

Burlington & Quincy Railroad Company, through

ownership of stock;

(f) Acquisition by Great Northern Pacific & Bur-

(g)

(h)

lington Lines, Inc., of all leasehold rights, track-

age rights and joint ownership ‘in or joint use

of any railroad line or lines and terminals inci-

dent thereto possessed by Chicago, Burlington

& Quincy Railroad Company; and

Lease by Great Northern Pacific & Burlington

Lines, Inc., of the lines of railroad and other

properties owned, used, or operated by Spokane,

Portland and Seattle Railway Company, for a

term of ten years; and

Acquisition by Great Northern Pacific & Bur-

lington Lines, Inc., through the lease and during

the term of said lease, (1) of sole or joint

control of carriers subsidiary to or affiliated

with Spokane, Portland and Seattle Railway

PBA Paes

512

Company, and (2) of all leasehold rights and

trackage rights and joint ownership in or joint

use of any railroad line or lines and terminals

incident thereto of railroad possessed by Spo-

kane, Portland & Seattle Railway Company, ap-

proved and authorized. Conditions prescribed.

Authority granted to Chicago, Burlington & Quincy

Railroad Company to issue not exceeding $70,-

000,000 principal amount of its first and re-

funding 4 percent bonds, due August 1, 2010,

to be sold to Great Northern Pacific & Burling-

ton Lines, Inc., at par, plus accrued interest, if

any, and proceeds to be used for the purposes

set forth herein. Conditions prescribed.

Authority granted to Great Northern Pacific & Bur-

lington Lines, Inc.;

(a) To issue (1) not exceeding 17,500,000 shares of

common capital stock, without par value, (2)

not exceeding 3,102,333 shares of preferred

stock, par value $10 each, (3) not exceeding

$71,500,000 principal amount series A consoli-

dated mortgage 4 percent bonds, due October 1,

1984;

(b) To assume (1) obligations and liabilities of

Great Northern Railway Company, Northern

Pacific Railway Company, Pacific Coast R. R.

Co., Chicago, Burlington & Quincy Railroad |

Company, and companies subsidiary to or affili- |

ated therewith, including obligations contingent-

ly guaranteed either solely by Great Northern

Railway Company, Northern Pacific Railway

Company, Pacific Coast R. R. Co., Chicago, Bur-

lington & Quincy Railroad Company, or jointly

with other guarantors, and (2) during the term

of lease, the obligations and liabilities of Spo-

kane, Portland and Seattle Railway Company,

and companies subsidiary to or affiliated with,

including obligations contingently guaranteed

either solely by Spokane, Portland and Seattle

Railway Company, or jointly with others;

Paes hig INC OPTSaTAUD RORRRERTOE RON SERENE ALE te Nam Ramp. eed NAS

| 513

(ce) To pledge $71,500,000 principal amount of Great

Northern Pacific & Burlington Lines, Inc., series

A, Consolidated mortgage 4 percent bonds, due

October 1, 1984, as collateral security under

Northern Pacific collateral trust indenture;

(d) To modify and alter the status of the Northern

Pacific collateral trust bonds through a supple-

mental indenture thereto which provides for as-

sumption of Northern Pacific Railway Com-

pany’s obligations under the Northern Pacific

collateral trust indenture, proposed substitution

of collateral for the elimination of certain pro-

visions of the collateral trust indenture relating

to substitution of collateral, and for grant of a

right to the holders of the collateral trust bonds

| to direct the manner of voting the pledged series

A consolidated mortgage bonds; all in connec-

tion with proposed mergers and lease. Condi-

tions prescribed. Application for authority un-

der section 20a dismissed in all other respects.

4. Certificates issued;

(a) Authorizing construction by Great Northern Pa-

cific & Burlington Lines, Inc. as successor, of

) connecting lines of railroad and extensions of

lines in Douglas County, Wis., Pine, Stearns,

Wadena, Wilkins, Clay and Polk Counties, Minn.,

Cass and Grand Forks Counties, N. Dak., Lewis

and Clark County, Mont., Bonner County, Idaho,

Spokane, Whitman and King Counties, Wash.,

and Multnomah County, Oreg.; and

(b) Permitting abandonment (1) by Great Northern

Pacific & Burlington Lines, Inc., as successor,

of portions of the lines of railroad of Great

Northern Railway Company in Clay County,

Minn., Lewis and Clark County, Mont., Spokane

County, Wash., and of Northern Pacific Rail-

way Company in Wilkin County, Minn., and

Spokane County, Wash.; and (2) by Spokane,

Portland and Seattle Railway Company, as les-

sor, in Spokane County, Wash.; all in connection

with proposed mergers and lease. Conditions

prescribed.

~— ia ahs aN Rha SL RE NUA RE eee eu Aa os TE iti anita Eder tar ee

514

APPEARANCES

Kenneth F. Burgess, Ray Garrett, John B. Schwemm,

D. Robert Thomas, Harold K. Bradford, Jr., Roger T.

Crosby, E. T. Conmy, Jr., R. T. Cubbage, Frank S. Far-

rell, James A. Gillen, Anthony F. Kane, Martin Lucente,

Frank J. Magill, Eldon Martin, Earl F. Requa, Woodrow

L. Taylor, R. Paul Tjossem, L. E. Torinus, and James

i R. Walker for applicants.

' Homer G. Hamilton for the State of Nebraska, Eldon

i Martin for the State of Missouri, The Missouri Farmers

bi Association, The Nebraska Lumber Merchants Associa-

tion, The North Idaho Economic Development Associa-

i tion, Inec., The Quincey (Ill.) Chamber of Commerce, The

Alliance (Nebr.) Chamber of Commerce, and six various

shippers, Henry A. Archambo for the Minneapolis

(Minn.) Traffic Association, 7. N. Early for the Billings

(Mont.) Traffic Bureau, H. FE. Franklin, Jr., for the Port

of Tacoma, Wash., and the Tacoma (Wash.) Chamber

of Commerce, Gerald E. Franzen for the Chicago Asso-

ciation of Commerce and Industry, FE. J. Hansen for the

Grand Forks (N. Dak.) Chamber of Commerce and Red

River Valley Potato Growers, Association, J. D. Paul for

the Seattle (Wash.) Chamber of Commerce and the

Seattle Traffic Association, FE. C. Pewters for the Everett

(Wash.) Chamber of Commerce, Robert B. Post for Car-

gill, Incorporated, Harry C. Sundblad for the Omaha

(Nebr.) Chamber of Commerce and the Omaha Grain

Exchange, Erv. A. Timm for the St. Paul (Minn.) Area

Chamber of Commerce, ard Lillian Widmyer for herself,

interveners in support.

John M. Agrey, John C. Stewart, and Martin Vaaler

: for the Public Service Commission of State of North

: Dakota, John G. Alley for the Province of British Colum-

5 bia (Canada), J. EF. Finsness for the Fargo (N. Dak.)

Chamber of Commerce, and Fred H. Tolin for Whatcom

County (Wash.) Traffic and Rates Bureau, Alaska Cop-

per Companies, Inc., Washington-Oregon Shippers Co-

operative Association, and Van Waters & Rogers, Incor-

porated, and 227 various other shippers and shipper asso-

ciations, interveners in conditional support.

;

bee aa GSEs Seca SAR

NS PIRES OSE ETERS ERIN OI ENE IN AUNREEEL PE RSD SANT

515

Osborne Becklund, Charles H. Clay, F. W. Crouch and

C. Harold Peterson for Soo Line Railroad Company,

Gene F. Bennett, Edwin R. Eckersall, J. C. Garlington,

Raymond K. Merrill, Robert F. Munsell, Warren Ploeger,

Stuart K. Rider, Jr., and Edwin O. Schiewe for the Chi-

cago, Milwaukee, St. Paul & Pacific Railroad Company,

George L. Buland, Charles W. Burkett, Jr., Kenneth M.

Judd, Thormand A. Miller, and Oglesby Young for the

Southern Pacific Company, Martin Cassell and Thomas

I. Megan for the Chicago, Rock Island & Pacific Railroad

Company, Frank W. Davis, Charles H. Dickman, Richard

M. Freeman, Harry B. Otis, and Edgar Vanneman, Jr.,

for the Chicago and North Western Railway, Leighton

Hatch, Walter G. Treanor, and E. L. Van Dellen for the

Western Pacific Railroad Company, L. W. Hobbs, Randall

B. Kester, Francis J. Melia, and Howard E. Roos for the

Union Pacific Railroad, and Starr Thomas for the Atchi-

son, Topeka and Santa Fe Railway Company, intervening

rail carriers.

Joseph E. Quin for Orville F. Freeman, Secretary of

Agriculture of the United States, and Thomas S. Howard

for the United States Department of Justice, interveners

in opposition.

Richard Musenbrock for the State of Minnesota and

the Minnesota Railroad and Warehouse Commission, Her-

man L. Bode and C. A. Merkle for the State of South

Dakota and the Public Utilities Commission for the State

of South Dakota, Frank B. Hayes for the State of Wash-

ington, Waldo F. Wheeler for the Iowa State Commerce

Commission, and Ronald L. Anderson, Jack L. Chestnut,

Walter F. Mondale, Oliver A. Ossanna, E er Petersen,

Paul Rasmussen, and Otto A. Ratke for the Minnesota

Railroad and Warehouse Commission, John H. McKeon,

John Sheehy, and Paul Smith for the Board of Railroad

Commissioners of the State of Montana, and Lloyd G.

Hammel and John F. Weisser for the Public Utility

Commissioner of Oregon, interveners in opposition.

Arvid M. Falk for the City of Minneapolis (Minn.),

Richard P. Gallager for the City of Mandan (N. Dak.),

Anthony C. Gospodar for the City of Breckenridge

(Minn.), Daniel A. Klas for the City of St. Paul (Minn.),

PERI IE AE ES eM ERT ALG AE ALOR L ONS ER NR IGE pet Beas onan Re

516

Alva C. Long for the Cities of Auburn and Sumner

(Wash.) and the Auburn (Wash.) Chamber of Com-

merce, Toby E. Markewicz for the City of Superior

(Wis.), R. G. Nerison for the City of Jamestown (N.

Dak.) , Thomas E. Plante for the City of Duluth (Minn.),

Bernard J. Gallagher for the Spokane (Wash.), Anti

Merger Association, George Kargianis for the Seattle

(Wash.) Improvement Council, Thomas Kennedy for the

Missoula (Mont.) Civic Group, C. W. Leaphart, Jr.,

W. R. McGee, and Webb Sullivan for the Livingston

(Mont.) Anti-Merger Committee, Harry C. Munger for

the Duluth (Minn.) Volunteer Committee Opposing

Merger, and Robert D. McMullan for the Clark County

(Wash.) Anti-Merger Association, interveners in oppo-

sition.

William G. Mahoney for Railway Labor Executives As-

sociation, and E. L. Dirks, Charles B. Falconer, Robert

Lee Kelleher, Ernest Monroe, J. H. McLaughlin, Paul E.

Peterson, and C. W. Wellnitz, for various other organi-

zations of railway employees, interveners in opposition.

Joseph R. Dudley for the Minnesota Motor Transport

Association, Clifford Ferguson for Ed Benedict, and

Samuel R. Freeman for Wheat Producers Transportation

Committee, interveners in opposition.

A. Wilford Larson and Richard V. Maves for the Pub-

lic Service Commission of Wisconsin, A. C. Stoddard and

John E. Tormey for the Michigan Public Service Com-

mission, Louis B. Dailey for Northern Pacific Stockhold-

ers’ Protective Committee, Philip A. Porter for the Wis-

consin Manufacturers Association, and Oliver Lee Stew-

art for Southwest Oregon Shippers Traffic Association,

interveners seeking imposition of specified conditions.

wise CPs: eee ee

517

REPORT, CERTIFICATE AND ORDER

RECOMMENDED BY ROBERT H. MURPHY,

HEARING EXAMINER

THE APPLICATIONS

By joint application filed February 17, 1961, authority

is sought by Great Northern Railway Company (Great

Northern) ,? of St. Paul, Minn., Northern Pacific Railway

Company (Northern Pacific), also of St. Paul, Pacific

Coast R. R. Co. (Pacific Coast), of Seattle, Wash., Chi-

cago, Burlington & Quincy Railroad Company (Burling-

ton), of Chicago, Ill., and Spokane, Portland and Seattle

Railway Company (SP&S), of Portland, Oreg., common

carriers by railroad subject to Part I of the Interstate

Commerce Act, hereinafter called the Act, and Great

Northern Pacific & Burlington Lines, Inc. (New Com-

pany), not a carrier, of Wilmington, Del., to consummate

certain transactions under section 5(2)* of the Act, to

issue certain securities and assume obligation and lia-

bility in respect of securities under section 20a‘ of the

Act, and to effect certain extensions and abandonments

of lines of railroad under sections 1(18) to 1(20),° in-

clusive, of the Act. The application as filed is divided

into four parts, fall into three separate categories of

authority sought, and will be considered as three separate

related docketed matters, as subsequently discussed.

In part I of the application, docketed in Finance

Docket No. 21478, authority is sought under section 5(2)

of the Act (1) for merger into New Company of the

operations, properties, and franchises of Great Northern,

Northern Pacific, and Pacific Coast, upon terms and

conditions of agreement of merger, hereinafter referred

2In this report reference to applicants and interveners and others

mentioned will be by the distinctive names in their respective corpo-

rate titles or by designation shown in parentheses.

549 U.S.C. 5.

*49 U.S.C. 20a.

549 U.S.C. 1.

to as the Northern Lines merger agreement, subsequently

discussed, for ownership, management and operation; (2)

for acquisition by New Company, through ownership of

capital stock, of sole or joint control, as the case may be,

of all carriers subsidiary to or affiliated with Great

Northern and Northern Pacific at the time of merger;

(3) for acquisition by New Company of all leasehold

rights in respect of, all trackage rights over, and all

i joint ownership in and rights of joint use of, any rail-

road line or lines and terminals incident thereto pos-

sessed by Great Northern, Northern Pacific, and Pacific

Coast at the time of merger; (4) subsequently thereto,

for merger into New Company of the operations, prop-

erties, and franchises of Burlington, upon the terms and

conditions of agreement of merger, hereinafter referred

to as the Burlington merger agreement, subsequently dis-

cussed, for ownership, management and operation; (5)

for acquisition by New Company, through ownership of

capital stock, of sole or joint control, as the case may be,

of all carriers subsidiary to or affiliated with Burlington

at the time of merger; (6) for acquisition by New Com-

pany of all leasehold rights in respect of, all trackage

rights over, and all joint ownership in and rights of joint

; use of, any railroad line or lines and terminals incident

; thereto possessed by Burlington at the time of merger;

(7) for lease by New Company of the properties and

assets of SP&S for a term of 10 years, upon terms and

conditions of indenture of lease hereinafter referred to

as the SP&S lease, subsequently discussed; (8) for ac-

quisition and exercise during the term of lease by New

Company as such lessee of sole or joint control, as the

case may be, of all carriers subsidiary to or affiliated

with SP&S at the time of the lease; and (9) for acquisi-

tion and exercise during the term of lease by New Com-

pany as lessee of all leasehold rights in respect of, all

trackage rights over, and al] joint ownership in and

rights of joint use of, any railroad line or lines and

terminals incident thereto possessed by SP&S at the

time of lease.

In part II of the application docketed in Finance

Docket No. 21479, and, in connection with and pursuant

518

SOR eer

ST ye ee RAL

Deine IOA DAO Ady WED

“

;

cad

c |

519

to the transactions for which authority is sought in Fi-

nance Docket No, 21478, authority is sought under sec-

tion 20a of the Act by New Company (1) to issue of

such principal amount, not in excess of $71,500,000, of

its series A consolidated mortgage bonds as shall be equal

to the principal amount of Northern Pacific refunding

and improvement mortgage bonds then pledged under

the Northern Pacific collateral trust indenture and to

pledge such series A consolidated mortgage bonds under

such Northern Pacific collateral trust indenture, to be

effected under a supplemental indenture thereto, in sub-

stitution for, and upon release from pledge of, an equal

principal amount of Northern Pacific refunding and im-

provement mortgage bonds pledged under the Northern

Pacific collateral trust indenture; (2) to issue such

shares of its $10 par value 514 percent cumulative pre-

ferred capital stock, and such shares of its no par value

common capital stock required by the terms of the North-

ern Lines merger agreement to be issued to stockholders

of Great Northern and Northern Pacific upon merger of

Great Northern, Northen Pacific and Pacific Coast into

the New Company; (3) to issue such additional shares

of its preferred and common capital stock as may be

required to be issued upon the exercise, subsequent to

such merger, of restricted stock options, issued under

the restricted stock option plans of Great Northern and

Northern Pacific, respectively, outstanding at the time

of merger; (4) to assume all obligation and liability of

Great Northern and Northern Pacific in respect of secu-

rities; (5; to assume during the term of and as provided

in SP&S lease all obligation and liability of SP&S in

respect of securities; (6) to issue such shares of its no

par value common capital stock required by the terms

of the Burlington merger agreement to be issued to stock-

holders of Burlington upon merger of Burlington into

New Company; and (7) to assume all obligation and

liability of Burlington in respect of securities; and by

Burlington, prior to merger into New Company, to issue

and sell to New Company at principal amount and ac-

crued interest, if any, $70,000,000 principal amount of

its first and refunding series 2010, 4 percent bonds, se-

= RA PILES LLG EA LOL LILLIE LOIN OGLE ETL TILT

wo bate Snih gille Dasie ah at oad

Shae

mone er acca ie aide RN pia el ART

Pri Rs Na

“~~

cured by its first and refunding mortgage, dated Febru-

ary 1, 1921. By amendment filed June 22, 1961, in

Finance Docket No. 21479, and, in connection with and

contingent upon approval and consummation of the trans-

actions described in Finance Docket No. 21478, and the

transactions described wherein authority is sought under

section 20a of the Act for New Company to assume all

obligation and liability of Northern Pacific in respect of

securities and to issue not exceeding $71,500,000 princi-

pal amount of New Company’s series A consolidated

mortgage bonds and pledge them under the Northern

Pacific collateral trust indenture in substitution for, and

upon release of pledge of, an equal principal amount of

Northern Pacific refunding and improvement mortgage

bonds now pledged under such indenture, authority is

also sought by New Company under the same section of

the Act specifically to concurrently alter the status of the

Northern Pacific collateral trust bonds by modification

of the Northern Pacific collateral trust indenture in the

form of a supplemental indenture thereto, which, in

addition to the provisions for assumption by New Com-

pany of all of Northern Pacific’s obligations under the

collateral trust indenture, provides for proposed substi-

tution of collateral, for elimination of certain provisions

of the collateral trust indenture relating to substitution

of collateral, and for grant of rights to holders of col-

lateral trust bonds to direct the manner of voting the

pledged series A consolidated mortgage bonds, unless the

Commission finds that no authority in respect of request

covered by said amendment is required by law.

In parts III and IV of the application docketed as

Finance Docket No. 21480, and, in connection with the

transactions for which authority is sought in Finance

Docket No. 21478, authority is sought under sections

1(18) to 1(20) inclusive, of the Act by New Company

and SP&S for certificates of public convenience and ne-

cessity contingent upon approval and consummation of

the merger and lease transactions for which authority

is sought in Finance Docket No. 21478, permitting (a)

New Company, and SP&S to the extent of its interest

as owner and lessor under proposed lease of portions of

520

REALE MAE Fil PPE OT SREP NOE LE LEE AL AP IPO LS DEI BE DENA WILE Pip -

521

the extensions described in items (19), (21), and (24)

of appendix A hereto covering matters set forth in part

II, to construct and operate the extensions and lines of

railroad described in items (1) through (24) inclusive,

of appendix A, and (b) New Company, and SP&S with

respect to the lines described in items (5) and (7) of

appendix B covering matters set forth in part IV, to

physically abandon the portions of existing lines of rail-

road described items (1) through (7) inclusive, in ap-

pendix B, contingent, as to each abandonment, upon

completion of the respective new portion or portions of

line referred to in the item relating to such abandon-

ment. No railroad in the territory involved in the pro-

posed transactions has requested inclusion in the trans-

actions.

The several docketed applications described are sub-

| mitted together as interdependent parts of a proposal for

| unified operation, control] and management of the prop-

erties and franchises of the applicant companies, Subse-

quent to the filing of the applications, numerous resolu-

tions of cities, municipalities, communities, and other or-

ganizations, letters of support and letters of protest and/

or objection in respect of the applications were received.

By order of the Commission, Commissioner Tuggle, en-

tered July 7, 1961, the matters were referred to the

hearing examiner for hearing and for the recommenda-

tion of an appropriate order accompanied by reasons

therefor. By the terms of that order, hearing was set

for September 19, 1961, at St. Paul. Petitions were filed

by several intervening parties seeking, among other

things, postponement of the hearing date, to which ap-

plicants replied, and by order of the Commission, Divi-

sion 3, the proceedings were reassigned for hearing be-

fore the hearing examiner on October 10, 1961. Exten-

sive public hearings commencing on the last mentioned

date and terminating on July 10, 1962, were held in

several sessions comprising 82 days of hearing at various

points ° throughout the territory involved.

*St. Paul, Minneapolis, and Duluth, Minn., Chicago, Ill, Des

Moines, Iowa, Omaha, Nebr., Portland, Oreg., Seattle, and Spokane,

Was., Fargo and Bismarck, N. Dak., Aberdeen, S. Dak., and

Billings, Great Falls, Helena and Missoula, Mont.

RIO ORE IEE SLES LAL SL IE LL LGA ICSE LGC ALLEN EE ID

Numerous petitions for permission to intervene in the

proceedings were granted before and during the hear-

ings. Pursuant to such petitions filed some 427 petition-

ers were permitted to intervene in the proceedings. Such

petitions were advanced for several reasons, either in

support of the proposals, in opposition to the proposals,

or as their interests might appear. However, some who

were permitted to intervene failed to enter appearance

at the hearings, but evidence of their concern was pre-

sented either through interveners for applicants or other

interveners. Others failed to enter appearance at the

hearings or otherwise pursue their interest, and their

failure to participate or otherwise pursue their interest

should be considered only as expressions of interest with-

out probative support. In addition to applicants, 310 in-

terveners, set forth in appendix C hereto, whose interests

comprise a variety of categories, participated through

appearance of counsel or their representatives and some

introduced evidence.

Support for the proposals was evidenced by applicants,

and by numerous interveners, shippers and receivers of

freight, associations of shippers or shipper organizations,

by chambers of commerce, and by others, including a

number of agencies of government, city and state.

Opposition to the proposals was evidenced by numer-

ous agencies of government, city, state and federal, by

certain rail carriers, by organizations of railway em-

ployees, and by civic and community groups, and others.

Some participation, principally by certain intervening

rail carriers, some shippers and receivers of freight, and

4 some agencies of government, was predicated on a desire

to obtain, in the event of approval of the proposals, im-

position of conditions favorable to certain intervening

rail carriers’ or to support stipulations and agreements

entered into by and between certain intervening rail

earriers* and applicants respecting establishment of or

522

OE ee Pea NT ee

Se ee ae ee ae!

ee FO ESR ea

ord

eis

bow

RRO Rey * aut

; 7Chicago, Milwaukee, St. Paul & Pacific Railroad Co. (Mil-

¢ waukee), and Chicago and North Western Railway Co. (C&NW).

® Soo Line Railroad Co. (Soo), Union Pacific Railroad Company

(Union Pacific), Southern Pacific Company (Southern Pacific),

PLLA L LE SEN ON IS LIA! AEP LOE ENO IIDS IESG ATES ELIE GLE A

mente

maintenance of gateways for the movement of traffic

and/or traffic and operating relationships.

Opposition by an organization representing certain mi-

nority stockholders of Northern Pacific was directed to

objections in respect of ratio of exchange of values

ascribed to certain properties.

Briefs were filed by applicants and separately by each

of the following interveners: C&NW, Milwaukee, South-

ern Pacific, Union Pacific, Western Pacific, Railway La-

bor Executives’ Association (RLEA), Northern Pacific

Stockholders’ Protective Committee (NP Stockholders’

Committee), Province of British Columbia, Canada

(Province), Secretary of Agriculture of the United

States (Agriculture), United States Department of Jus-

tice (Justice), lowa State Commerce Commission (Iowa),

State of Minnesota and its Railroad and Warehouse

Commission (Minnesota), Public Utility Commissioner

of Oregon (Oregon), Public Utilities Commission of the

State of South Dakota (South Dakota), Board of Rail-

road Commissioners of the State of Montana (Montana),

State of Washington, Public Service Commission of Wis-

consin (Wisconsin), Public Service Commission of State

of North Dakota and Chamber of Commerce of Fargo,

N. Dak., jointly, Wisconsin Manufacturers’ Association,

Lillian Widmyer, Fred H. Tolin for 230 Pacific North-

west Shippers (sometimes referred to as Tolin Group),

Wheat Producers Transportation Committee, Grand

Forks, N. Dak., Chamber of Commerce .and Red River

Valley Potato Growers Association jointly, Livingston

Anti-Merger Committee, Spokane Anti-Merger Associa-

tion, City of Minneapolis, Minn., Cities of Auburn and

Sumner, Wash., and Auburn, Wash., Chamber of Com-

merce jointly, and Seattle Improvement Council.

523

Fair hearing.

On brief, Minnesota, Oregon, Washington, and Justice

separately contend denial of fair hearing. The key argu-

ments will be discussed, At the October 13, 1951, ses-

Chicago, Rock Island and Pacific Railroad Co. (Rock Island), The

Western Pacific Railroad Company (Western Pacific) and The

Atchison, Topeka and Santa Fe Railway Co. (Santa Fe).

SEM TE LPN HEY AIRE At ALM VOM DIE sd

——

524

sion of the hearing, Minnesota and Washington, among

others, requested continuance of hearing for cross-exam-

ination of applicants’ technical witnesses to a date not

earlier than May 1, 1962. Oregon concurred. The re-

quest was denied, and the date fixed for resumption of

hearing on December 5, 1961. Minnesota, Washington

and Oregon contend that the seven weeks between Octo-

ber 13 and December 5, 1961, were inadequate to analyze

evidence and prepare for cross-examination, and that de-

nial of additional time resulted in limiting the effective

use of the right of cross-examination and denial of fair

hearing. They argue that applicants had the proposal

4 under consideration since July 1956; that the proposals

; could not be evaluated without the supporting evidence

; which applicants introduced at the outset of the hearings

October 10-13, 1961, and that the right to a full and

E fair hearing essential to the legal validity of an admin-

j istrative determination under authority entrusted by

Congress, embraces not only the right to present evidence,

but also a reasonable opportunity to know the claims of

oppositing parties and meet them, citing Morgan v. U. S.

; 304 U. S. 1, (1937). Oregon further argues that no

Interstate Commerce Commission staff personnel partici-

pated in the proceedings; that any analysis which such

Commission staff may undertake to insure coverage of

all pertinent issues should be developed on the record so

that intervening parties representing local public interest

may have the benefit of such analysis in advocating their

position, and that absence of such analysis in the record

denotes absence of due process, Oregon also argues that

it was handicapped by its staff limitations and other

commitments of their time and that, to the extent that

these limitations were not fully considered in setting hear-

ing dates, it was denied a full and fair hearing. Oregon

contends that it was required to present its case in chief

prior to intervener Milwaukee, and that in view of its

limited available staff and the subsequent presentation

by Milwaukee of its six proposed conditions, hereinafter

discussed, which “represented an effort on its part to

be included in the merger under 49 USCA 5(a) (c),” as

well as stipulations entered into of record between appli-

oe ee

St pA Be

;

MOLI IOGEAR BE ENGILIS ALG LIEL GELDER EI: BESTA OE

eants and other intervener railroads, it (Oregon) re

quired additional time, which was not given, to fully

develop all the important public interest factors which

the Commission must consider.

The hearing examiner’s ruling on October 13, 1961,

setting December 5, 1961, as the date for resumption of

hearing for cross-examination of applicants’ technical

witnesses, was challenged by petitions filed (1) by Minne-

sota, Washington, Milwaukee and RLEA, which petitions

were denied by order of the Commission, vice-Chairman

Murphy, entered November 1, 1961, and (2) by Mon-

tana, which petition was denied by order of the Com-

mission, Vice-Chairman Murphy, entered November 9,

1961, and affirmed on reconsideration by order of the

Commission, Division 3, acting as an appellate division,

entered December 1, 1961. The merits of those petitions

were considered and disposed of on the dates indicated.

Not only was adequate time provided, but the parties

contending the action denied them fair hearing were

present throughout the 21 days of hearing which fol-

lowed (December 5, 1961—January 31, 1962, in two

sessions) participated fully in cross-examination of ap-

plicants’ technical witnesses and material covered by ap-

plicants’ exhibits, and had full access to all supporting

data. Their objections renewed on brief are without

merit and should be overruled.

The contention that no Commission staff personnel ap-

peared to participate in cross-examination of applicants’

witnesses and thereby aid opposition in developing a

basis for position is indeed unique and novel. The Com-

mission is under no statutory obligation to have a mem-

ber of its staff participate in these proceedings. Com-

mission staff personnel do not ordinarily participate in

the hearing phase of proceedings such as these except in

circumstances involving investigations of violations of

the Act, or under some specific direction of the Com-

mission, No investigation of violation is here involved,

and the hearing examiner may not speculate as to why

the Commission did not direct the Commission’s Bureau

of Inquiry and Compliance (that arm of the Commission

staff which would inquire in public hearings) to partici-

a LOONIE OIE UE PIN: GOI LW AS SSE ONAL EE LLIN LENE DEALING

525

a: ,

pate in the hearings. These proceedings are not investi-

gative in nature, but involve applications for permissive

authority to consummate certain transactions, for which

the proponents have the burden of proof. Cf 5 USC

1006. Oregon alone has the responsibility of determining

what position to take and to produce evidence in support

of its position. The Commission does not share this re

sponsibility. Hence, it cannot be validly argued that be-

cause Commission staff members did not participate in

cross-examination of applicants’ witnesses the record is

incomplete or that the hearing was not fair. Oregon was

competent and able to present, and did present, evidence

in opposition. Nonparticipation of Commission staff mem-

bers did not adversely affect Oregon’s responsibility and

capability to determine its position, and produce sup-

porting evidence. Its contention is without merit and

should be overruled. Compare Brotherhood of Mainte-

nance of Way Employees, et al. v. U. S. et al. No. 23,467

decided August 13, 1963, U. S. Dist. Court for Eastern

Dist. Michigan, Southern Division.

Oregon’s contention it was not afforded additional time

to present its evidence is contrary to the facts. The rec-

ord shows that its initial presentation of evidence oc-

curred on March 22, 1962 (the 33rd day of hearing) at

Portland, and because at that time intervener Milwaukee

had not presented its evidence in support of its proposed

conditions, but expected to do so subsequently, Oregon

requested additional time, was afforded the time, and pre-

sented its additional evidence on May 9, 1962 (the 54th

day of hearing) at Chicago. Its contention is without

merit. Its reference to Milwaukee’s proposed conditions

as representing an effort to be “included in the merger”

evidences an erroneous interpretation of the statute.

Paragraph (d) of section 5(2) of the Act provides:

“(d). The Commission shall have authority in the

case of a proposed transaction under this paragraph

(2) involving a railroad or railroads, as a prerequi-

site to its approval of the proposed transaction, to

require, upon equitable terms, the inclusion of an-

other railroad or railroads in the territory involved,

upon petition by such railroad or railroads request-

527

ing such inclusion, and upon a finding that such in-

clusion is consistent with the public interest.” (Em-

phasis supplied).

No petition has been filed by any railroad or railroads

herein seeking inclusion.

Minnesota, Washington, and Justice further contend

they were denied a fair hearing by reason of errors in

admission and exclusion of evidence, by deprivation of

full right of cross-examination and imposition of undue

restraints on such participation, and denial of adequate

time to allow for analysis and preparation for cross-

examination of applicants’ rebuttal witnesses. Minnesota

further contends rulings of the hearing examiner in re-

spect of cross-examination of witnesses of other inter-

veners in opposition (Milwaukee and NP Stockholders

Committee), curtailment of cross-examination on appli-

cants’ proposed freight schedules and various subjects in

the applicants’ consultant’s report dealing with abandon-

ment of lines, status of subsidiaries, through traffic, em-

ployment loss, and organization of the New Company,

limitation on cross-examination of witness for intervener

in support St. Paul Area Chamber of Commerce, in im-

properly receiving evidence dealing with testimony of

other supporting witness for the same intervener, failure

to exclude repetitious and cumulative evidence of appli-

cants’ public witnesses, specified rebuttal evidence of ap-

plicants and evidence in respect of certain motor carrier

subsidiaries of applicants, resulted in its functioning

under unwarranted handicaps.

While the record shows concern was evidenced as to

the propriety of an intervener in opposition cross-exam-

ining other interveners in opposition, it likewise shows

that the hearing examiner permitted cross examination

of such interveners’ witnesses by other interveners in

opposition within the purview of their interest in respect

of any stated support of the applications and/or condi-

tions proposed. Thus, such witnesses of interveners Mil-

waukee and NP Stockholders Committee were available

for cross-examination and on the occasions in question

Minnesota declined to cross-examine.

528 |

Minnesota’s contention that curtailment of cross-exam-

ination of applicants’ witnesses on various subjects de-

scribed presented unwarranted handicaps, is likewise

without foundation, Detailed examination of the record

discloses active participation and extensive cross-exam-

ination by counsel for Minnesota. The record also shows

that the contention raised in respect of applicants’ pro-

posed freight schedules deals with efforts by Minnesota

to interrupt cross-examination of another intervener in

opposition witness. Minnesota was not denied cross-ex-

amination of the witness for that was not involved. What

was involved was counsel’s unwarranted interruption of

cross-examination by other counsel and the prompt cur-

tailment of such interruption by the hearing examiner

in pursuance of the maintenance of good order in the

proceedings.

The record shows that in respect of certain recom-

mended abandonments described in applicants’ consult-

ant’s report and not part of the applications involved,

inquiry by Minnesota was, upon objection raised, ex-

cluded by the hearing examiner as not properly part of

the subject matter before the hearing examiner and be-

yond the scope of these proceedings. The contentions are

without merit, and the rulings of the hearing examiner

should be affirmed.

The contentions regarding “rulings” of the hearing ex-

aminer on the question of status of subsidiaries and em-

ployment loss as cited in brief are without foundation.

The record shows in each instance discussion between

counsel for Minnesota and the hearing examiner dealing

with the proper phrasing of questions propounded, that

the questions were rephrased by counsel to permit under-

standing by the witness and clarity of the record, and

were answered by the witness. The record evidences no

undue handicaps upon counsel’s cross-examination. On

similar contentions dealing with Minnesota’s inquiry on

through traffic and organization of New Company, no

citations of record are indicated. On its contention deal-

ing with limitation of cross-examination (which also |

deals with reception of evidence) of witness for inter- |—

vener in support St. Paul Area Chamber of Commerce,

529

the record shows that extensive cross-examination of the

witness ensued; that the line of inquiry in question was

extensive and exhaustive; that Minnesota by motion

sought to have the evidence of intervener St. Paul Area

Chamber of Commerce excluded on the grounds that the

communities represented were not part of the “jurisdic-

tional area” as defined by its witness, and was overruled

by the hearing examiner. The ruling dealing with its

pertinence is proper and should be sustained. In respect

of the contention the hearing examiner improperly re-

ceived evidence in support by the same intervener, the

record shows that St. Paul Area Chamber of Commerce

was a properly recognized intervener in support, having

timely filed its petition, which was granted; that its evi-

dence, subsequently discussed, shows its area embraced

an extensive trade area beyond the city limits of St. Paul;

and that its witnesses from surrounding towns evidenced

actions by their respective chambers of commerce which

was properly admissible as part of that intervener’s

case-in-chief, all subject to cross-examination. The ruling

should be sustained.

Contentions raised by Minnesota, Washington and Jus-

tice that the hearing examiner erred in receiving evidence

of applicants, supporting shippers and others which they

consider cumulative, are not adequately supported by the

record, The record shows that numerous shippers and

others testified for applicants or for other interveners,

and that they represent a wide and divergent variety

of industry and commerce located, or concerned with

transportation at, many points in the broad and extensive

territory here involved. The record also indicates that

all parties presenting public witnesses were aware of,

and endeavored to comply with, the Commission’s cumula-

tive evidence rule’ and that few rulings of the hearing

® Rule 1.76 of the Commission’s General Rules of Practice which

provides: Evidence; cumulative restriction. It shall be the duty

of the officer before whom any proceeding is being heard to limit

the number of witnesses whose testimony may be merely cumula-

tive. And in order to enforce this section, the officer may require a

clear statement on the record of the nature of the testimony to be

given by any witness proffered.

530 ;

examiner on that subject were required. At a number

of the points where hearings were held throughout the

territory involved counsel for Minnesota, Washington

and/or Justice indicated a desire to stipulate certain

public interest evidence of applicants, but applicants de-

clined. On other occasions when applicants indicated a

desire to stipulate certain public interest evidence, the

named interveners stipulated, but thereafter declined to

further stipulate. Efforts to encourage stipulation by

the parties of facts which appeared to the hearing ex-

aminer as susceptible of stipulation were only partially

successful, However, the question of what is cumulative

in connection with shippers representing many varied

industries having different transportation problems,

throughout an extensive area such as here, and seeking

to be heard, is a difficult and sometimes complex judg-

ment question which in all instances must be carefully

examined. In proceedings such as these where broad and

diverse public interest has been manifested, the Com-

mission, which specifically ordered hearings held at nu-

merous points throughout the territory involved, should

not be deprived of proper evidence proffered, even that

bearing on what may be considered by some as cumula-

tive. However, that is a judgment question and has

been ruled on by the hearing examiner. In all instances, |

however, the witnesses were available for cross-exami-

nation and were cross-examined.

Washington further contends the hearing examiner

erred in allowing a witness (Governor Erbe of Iowa)

for applicants, over objection (by Milwaukee) to include

in his testimony reference to communications received

from shippers in Iowa in support of the application (ar-

gument also raised by Justice on brief), in rejecting two

exhibits (179 and 180) offered by it in respect of a sur-

vey conducted by its witness, and in receiving evidence

of applicants on rebuttal which it considers improper,

in which contentions Justice also concurs on brief.

With respect to the ruling of the hearing examiner

permitting the witness for applicant to testify concern-

ing communications received from others, it is significant

to note Milwaukee did not pursue its objection on brief,

Oe ee eno an ee ee

that Washington did not join in the objection when made,

but raises it on brief, and that Justice, which had not

yet intervened likewise raises it on brief. Interveners’

objection has some merit. Upon further reflection and

reconsideration, the hearing examiner believes that the

evidence contained in communications from others, who

were not available for cross-examination and data there-

in could not be otherwise verified, should not have been

received and will not be considered in arriving at the

conclusions herein.

The record shows that the two exhibits offered by

Washington, to which reference is made, viz., a state

ment of its witness dealing with a survey conducted by

him and the results of the survey itself—purporting to

tell the Commission what other persons told the witness

through questionnaires about their views concerning the

| proposed Milwaukee conditions were rejected by the hear-

ing examiner upon objection. The record also shows that

several of those other persons had already testified and

had been cross-examined, and that certain supporting

data was not made available as it was considered confi-

dential. The Commission has long accepted as sound

the general principle that over objection, petitions, letters,

affidavits, questionaires, or cumulative data resulting

from surveys such as here involved, are inadmissible be-

cause of the hearsay character and the inability of op-

posing parties to cross-examine persons who made state-

ments in such questionnaires. Compare Somerset Bus Co.,

Inc, Extension-Somerville-New York, 43 M.C.C. 543, Ore-

gon-Nev.-Calij. Fast Freight, Inc. Ext.-San Jose, 71

M.C.C. 165, Washington, D, C. Commercial Zone, 83

M.C.C. 471, and Regulations for Payment of Rates and

Charges, 310 I.C.C. 391, and the cases therein cited. The

ruling of the hearing examiner should be sustained.

Washington and Justice further argue in respect of

their contentions that evidence of applicants on rebuttal

which they consider improper was admitted over their

_ objection, that failure to sustain objections resulted in

_ the incorporation into the record testimony entirely re-

_ moved from proper rebuttal, and placed a burden on the

opposition, and that having been received, fair hearing

531

532 :

required no less than adequate opportunity to meet it

and it was not provided. The record shows and the

hearing examiner recognizes that some opinion and argu-

mentative matter was contained in rebuttal, difficult of

separation therefrom, but that adequate opportunity was

provided to cross-examine rebuttal witness as subsequent-

ly discussed. The record shows that counsel for Wash-

ington and Justice did not avail itself of opportunity to

cross-examine on the rebuttal evidence. Its contentions

are without merit.

Justice further contends the hearing examiner “inter-

fered with cross-examination of witnesses by counsel for

interveners in opposition and attempted to curtail it for

no sound reasons”. In an example cited, counsel prefers

to quote out of context to give substance to its conten-

tion. Justice correctly quotes the question asked on cross-

examination of one of applicants’ witnesses:

“Q. Being a one-railroad town like that which I

can appreciate, you would be pretty much inclined

to go along with just about anything the Northern

Pacific proposed to do in the area of merger,

wouldn’t you?”

Justice states that it was a proper question but that

... “Yet the examiner interjected, ‘Don’t be mislead by

that question’” ending its reference to quotation from

the record. The reference to the statement of the hear-

ing examiner taken wholly out of context warrants ex-

position. The record shows that objection was raised by

counsel for applicants to the question on the grounds it

was “argument,” to which hearing examiner stated, “I

don’t think that is argument.” Whereupon the question

was re-read to the witness at the request of counsel for

Justice following which the transcript of testimony (tr.

10384-10385) reflects the following:

A. Under the present conditions—

Q. (By Mr. Howard) (interrupting) is that —

right? j

Exam. Murphy: Don’t be mislead by that ques- —

tion. You are on cross-examination—I am address- —

533

ing this question solely to the witness’s demeanor, I

want to be sure the witness understands the ques-

tion—do you fully understand that question?

The Witness: Well, the fact that it is the only

railroad in town doesn’t influence me, no.

Exam. Murphy: If I understand the question,

you don’t mean that, Counsel, to indicate that people

of Brainerd would be just docile about the thing,

do you?

Mr. Howard: Oh, no, I certainly didn’t ask that.

The Witness: Could I assert here. I have ap-

peared in opposition—

Exam. Murphy (interrupting): When you used

the phrase “one-railroad town”, that is the point.

Mr. Howard: I confined it, Mr. Examiner, speci-

fically to the area of merger because they could be

doing many things the residents don’t like. I think

the question says in the area of merger.

Exam. Murphy: All right.

A. We did go on record in favor of merger.

Mr. Howard: I won’t pursue that point further.

No further questions. Thank you.

The context is thus clear, Other similar circumstances

cited warrant the same conclusion. Its contention is

without merit.

Contentions by Minnesota, Washington and Justice,

that adequate time after receipt of rebuttal evidence to

allow for analysis and preparation for cross-examination

of applicants’ rebuttal witnesses was not afforded and

thus deprived them of a fair hearing warrants discus-

sion. The record shows that on June 18-20, 1962, copies

of applicants’ rebuttal evidence material was distributed

to all active parties, including the named contending in-

terveners; that on June 22, 1962, counsel for Washington

having examined that material requested additional time

(specifically 60 days, which request was joined in by

_ counsel for Minnesota and Justice) within which to fur-

_ ther study the data preparatory to cross-examination and

_ that it be provided an opportunity at a later date to

_ cross-examine applicants’ rebuttal witnesses; that the

hearing examiner reserved ruling on the request until

completion of the scheduled rebuttal (beginning on June

27, 1962, and continuing through June 30, 1962); that

applicants’ rebuttal witnesses were cross-examined ex-

tensively by other interveners, some questions propounded

by counsel for Justice, but notations of record made by

Minnesota, Washington and Justice to reserve their

cross-examination for such subsequent hearing date as

may be set by the hearing examiner, which reservations

were granted; that upon conclusion by other interveners

of cross-examination of rebuttal witnesses (June 30,

1962), the hearing examiner, having reviewed the evi-

dence submitted and the cross-examination of the sev-

eral witnesses by other interveners, concluded the re-

quested recess of 60 days excessive, and adjourned the

hearing tc July 10, 1962, for the purpose of providing

counsel for Minnesota, Washington and Justice oppor-

tunity to cross-examine on applicants’ rebuttal evidence;

that counsel for Minnesota and Washington, by separate

letters dated July 3, 1962, and counsel for Justice, by

letter dated July 5, 1962, addressed to the Secretary,

Interstate Commerce Commission, indicated that insuffi-

cient time had been granted, that they were not and

could not be prepared to go forward with cross-examina-

tion and, citing Rule 1.4" of the Commissions General

Rules of Practice, requested to be excused from attend-

ance and participation at the subsequent hearing session

scheduled for July 10, 1962. The request was granted

by the Secretary. The hearing session scheduled for July

10, 1962, was held and counsel for Minnesota, Washing-

ton and Justice did not appear. The record shows that

those counsel, active in the proceedings, had ample oppor-

tunity to examine applicants’ rebuttal evidence and pro-

ceed with cross-examination, They chose not to seek re-

view of the date set by the hearing examiner, but to

534

10 Dealing with communications and pleading generally, the perti-

nent portion of which reads: “(a) How addressed. All communica-

tions, including correspondence concerning matters referred to

boards, should be addressed to the Commission unless otherwise

specifically directed. All communications should clearly designate

the docket number, if any, and short title. The person communicat-

ing shall state his address, the party he represents, and how re-

sponse should be sent to him if not by first class mail.”

535

absent themselves from the hearing set primarily to pro-

vide them with opportunity to cross-examine applicants’

rebuttal witnesses, who were available for such purpose.

Interveners’ arguments and contentions of denial of fair

hearing are without merit and should be denied.

Certain facts regarding the physical composition of

the record warrant discussion. The transcript of record

totals 15,004 pages, together with 243 exhibits, the efforts

of fifty separate and distinct interests represented by

124 counsel or representatives of record during 82 days

of hearing. The transcript of record reflects testimony

of 623 witnesses of which 328 were applicants’ witnesses

and 295 were interveners’ witnesses. With minor excep-

tions, those witnesses were vigorously and extensively

cross-examined as evidenced by the record, analysis of

which reflects the following significant data: Of the total

pages of transcript 10,051 pages, or 67 percent of the

total pages of transcript were devoted to cross-examina-

tion by all parties. Aggregate cross-examination by coun-

sel for Minnesota, Washington and Justice utilized 4,341

pages or 43.2 percent devoted to cross-examination;

counsel for Minnesota utilized 2,434 pages, or 27.2 per-

cent of total cross-examination; counsel for Washington

utilized 690 pages, or 6.1 percent of total cross-examina-

tion; and counsel for Justice utilized 998 pages, or 9.9

percent of total cross-examination. Minnesota partici-

pated on all but the 82nd day, and Washington partici-

pated on all but the 72nd and 82nd day; and Justice’

participation which began on the 30th day, after comple-

tion of cross-examination of applicants’ technical wit-

nesses, and continued through the 76th day and from

the 78th through the 81st day, was, except for presenta-

tion of its two witnesses, whose evidence is subsequently

discussed, together with filing of brief, directed almost

exclusively to cross-examination of shipper and other pub-

lic witnesses evidencing support of the proposals or con-

ditions requested by other interveners.

536

THE APPLICANTS

Corporate status, operations and properties.

New Company, a Delaware corporation, was organized

January 18, 1961, for the purpose of owning, construct-

ing, and operating a railroad, engaging in transporta-

tion of persons and property by railroad and by other

modes, and also to engage in all types of businesses and

activities to the extent permitted by the laws of Dela-

ware, including the business of acquiring, developing and

operating various types of nontransportation properties.

Its incorporation was effected to permit it to become the

corporate successor of Great Northern, Northern Pacific,

Pacific Coast, and Burlington, and lessee of SP&S. It

has outstanding 200 shares of common capital stock,

without par value, but with a stated value of $5 each,

owned in equal proportions by Great Northern and

Northern Pacific, issuance of which shares was author-

ized pursuant to authority granted by order of the Com-

mission, Finance Board No. 2, in Finance Docket No.

21477, Great Northern Pacific & Burlington Lines, Inc.

Stock, 1.C.C. , (not printed in full), decided March

19, 1961. Those shares were authorized and issued solely

to enable New Company to have stockholders capable of

assenting to the proposed transactions for which author-

ity is here sought. Upon consummation of the first of

the merger transactions for which authority is sought

(the Northern Lines merger) as subsequently discussed,

and concurrently therewith, the certificate of incorpora-

tion of New Company would be amended so that, among

other things, the authorized capital stock of New Com-

pany would be reclassified and increased to 3,102,283

shares of preferred stock, par value $10 each, and 17,-

500,000 shares of common capital stock, without par

value, whereupon the original 200 shares above described

would be retired and cancelled. Upon accomplishment

of the transactions for which authority is here sought,

New Company would not be controlled by any corpora-

tion, individual or trustee.

New Company has no assets other than its initial

capital of $1,000. It is not a carrier, owns no property

| 537

and is not presently engaged in any operations. Upon

consummation of the first of the transactions for which

authority is here sought, i. e., the Northern Lines merger,

it would succeed to the properties and assets of Great

Northern, Northern Pacific, and Pacific Coast, and be-

come a carrier in its own right. Subsequent transactions

herein involve merger into New Company of the proper-

ties and assets of Burlington, and lease of the properties

and assets of SP&S, and upon consummation of all of the

transactions New Company would operate those proper-

ties principally as a common carrier by railroad subject

to Part I of the Act.

Great Northern, a Minnesota corporation, was organ-

ized originally under the territorial laws of Minnesota

on March 1, 1856, as Minneapolis and Saint Cloud Rail-

road Company. The name of the corporation was changed

to its present name on September 18, 1889, The author-

ized capital stock of Great Northern is 7,500,000 shares

of common capital stock, without par value. As of August

81, 1961, it had outstanding 6,073,135 shares. However,

as of December 31, 1961, it has issued 6,208,957 shares,

of which 6,075,269 shares were outstanding and owned

by approximately 41,000 shareholders, 133,647 shares of

which were held in treasury (including 109,265 shares

reserved for purpose of satisfying restricted stock options

granted from time to time to officers and key employees

at prices ranging from $24 to $58 per share), and 41

shares were reserved for conversion of outstanding fac-

tional scrip. It is not controlled by any other corporation

or company.

Great Northern’s long-term debt as of August 31, 1961,

consisted of bonds aggregating $178,662,900, equipment

obligations aggregating $66,059,954, including $7,916,318

due within one year, and miscellaneous obligations $20,-

552, including $10,276 due within one year. As of De-

cember 31, 1961, its long-term debt consisted of bonds

aggregating $178,662,900, equipment obligations aggre-

gating $63,736,230, including $8,619,594 due within one

year, and miscellaneous obligations $20,552, including

$10,276 due within one year. Details respecting the va-

rious obligations comprising such debt is described else-

where herein.

538 :

Great Northern has conducted operations under its

present name since 1889 as a common carrier by railroad

and such operations were conducted by predecessors

under different names continuously since 1862, Its rail-

road operations as of December 31, 1960, comprised

8,277.69 miles of road, of which 4,355.36 were main line

(4,261.69 owned and 104.67 trackage rights) and 3,613.33

were branch line (3,507.02 owned and 106.31 trackage

rights) and are subject to Part I of the Act. Of its

owned main line trackage, 34.78 miles are jointly owned

with various railroads and .08 mile operated under lease

from another railroad, Of its owned branch line, 99.2

miles are jointly owned with various railroad companies.

It owns but does not operate 0.26 mile of railroad leased

to other railroad companies. Its principal main lines of

railroad through 10 states*' and two Canadian prov-

inces,’* extend from Duluth, Minneapolis, and St. Paul,

Minn., Superior, Wis., and Sioux City, Iowa, westerly

to Seattle, Wash., and other western cities, including

Vancouver, B. C., and Portland, Oreg., via Willmar,

Minn., and Garretson, S. Dak., via St. Cloud, Minn.,

Fargo, Casselton and Grand Forks, N. Dak., Havre and

Shelby, Mont., Sandpoint, Idaho, and Spokane, Wash.

Other lines connecting with the principal lines serve the

Mesabi Iron Range in northern Minnesota, and Great

Falls, Butte and Billings, Mont. Its principal branch

line mileage is in Minnesota and North Dakota, A line

also extends southerly through central Oregon to Bieber,

Calif., over a portion of which between Chemult and

Klamath Falls, Oreg., it operates over the tracks of

Southern Pacific under a contract expiring in the year

2027, approved in Finance Docket No. 4730, Through

an affiliate, The Midland Railway Company of Manitoba,

hereinafter called Midland, Great Northern also reaches

Winnipeg, Manitoba. Its principal points of interchange

with other railroads include, in addition to the terminal

points first mentioned, the points of Laurei, Billings,

11 Wisconsin, Minnesota, North Dakota, South Dakota, Iowa,

Montana, Idaho, Washington, Oregon, and California.

12 Manitoba and British Columbia.

Butte, and Sweetgrass, Mont., Spokane, Chemult, and

Noyes, Minn., Northgate, N. Dak., New Westminster,

B. C., and Winnipeg.

Great Northern has been fully dieselized since 1958,

and as of August 31, 1961, owned 647 diesel units of

locomotive, 596 passenger train cars, and 40,635 freight

train cars, and leased or otherwise controlled 347 other

units. As of December 1, 1961, however, it owned, leased

or controlled 47,146 units of freight car equipment, of

which 5,837 were refrigerator cars including 360 owned

by Western Fruit Express, a wholly-owned subsidiary,

22,198 were box cars, including 5,475 double-door cars

and 396 damage-free insulated box cars.

In addition to the above-described transportation prop-

erties Great Northern holds property rights in the ua-

ture of trackage rights to operate over the lines or por-

tions of the lines of other railroads and in some instances

to utilize jointly with others described terminal or pas-

senger station facilities covered by currently effective

agreements, the nature and other vital statistics of which

are set forth in appendix D.

Great Northern also conducts operations as a common

carrier by motor vehicle, subject to Part II of the Act.

Under effective certificates issued in No. MC-28572 (Sub-

No, 3), and various other related sub-numbered proceed-

ings, it engages in the transportation of passengers and

their baggage and mail, newspapers, and express in the

same vehicle with passengers, between Whitefish and

Kalispell, Mont.; between Great Falls and Havre; and

between Williston, N. Dak., and Scobey, Mont. Such

operations as are authorized are restricted to service at

stations on the railroad. Under effective certificates is-

sued in No, MC-28573 and various related sub-numbered

proceedings it engages in the transportation of general

commodities between specified points in Minnesota, North

Dakota, Montana, and Oregon. Such operations are gen-

erally confined to those between points which are sta-

tions along the railroad described as “key points”, al-

though some are off-line, and the operations carry the

usual restrictions including those limiting service to that

auxiliary to or supplemental of rail service of the Great

Northern, such traffic moving under rail billing.

539

540

The measure of control or ownership exercised by

Great Northern over such other carriers, terminal and

other railroad service companies, and other significant

companies is shown in summary form in appendix E

hereto. A description of certain of the various companies

in which Great Northern has and New Company would

acquire proprietary interest is appropriate.

Through 100 percent stock ownership, Great Northern

controls the following carriers subject to the Act: (1)

Great Northern Pipe Line Company (Pipe Line), (2)

Superior & Duluth Transfer Company (S&DT), and (3)

Pacific Coast, an applicant herein.

Pipe Line, a North Dakota corporation, has been en-

gaged as a pipeline common carrier, operating a crude

oil pipe line wholly in North Dakota, extending from

the Newburg, Wiley and Glenburn fields to terminal and

tank-car loading facilities on the main line of Great

Northern east of Minot, N. Dak., 49.5 miles. Portal

Pipe Line Company (Portal), a Delaware corporation,

was organized to construct and operate a common car-

rier pipe line approximately 350 miles long for the trans-

portation of crude oil from Minot and other points in

the area to Clearbrook, Minn. Great Northern, a sub-

seriber of 45 percent of the capital stock of Portal has

entered into agreement with the latter whereby Portal

would acquire and operate all the properties of Pipe Line,

the manner of such acquisition to be determined.

S&DT, a Wisconsin corporation, acquired by Great

Northern pursuant to authority granted in No. MC-F-

7052, Great Northern Ry. Co.—Control—Superior & D.

Transfer, 85 M.C.C. 401, decided February 1, 1961, con-

ducts motor carrier operations in interstate or foreign

commerce, in a pick-up and delivery service for Great

Northern freight as well as freight for other railroads,

pursuant to superseding certificates issued in No. MC-

1066, on April 21, 1961, authorizing operations between

Duluth and Superior, which operations carry the usual

restrictions limiting service to that which is auxiliary

to or supplemental of rail service. It also operates a

retail coal business, storage warehouse, and acts as agent

for national furniture movers.

| | 541

‘

Pacific Coast, an applicant, was acquired by Great

Northern on August 31, 1951. Its corporate status, oper-

ations and properties, as well as contemplated action

with respect to its corporate identity and properties, are

described elsewhere herein.

Great Northern owns and controls jointly with North-

ern Pacific, the following carriers subject to the Act:

(1) Burlington, an applicant, in which Great Northern

holds 830,179 shares or 48.5 percent of the outstanding

stocks, of which 842 shares are owned of record by

Great Northern and the remaining 829,337 shares are

pledged with the trustee under Great Northern’s general

gold bond mortgage, and (2) SP&S, also an applicant in

which Great Northern is beneficial owner of, and en-

titled to exercise voting rights on, 200,000 shares, or 50

percent of the outstanding common stock, and the owner

of 50 percent of the outstanding first mortgage bonds

of SP&S. The corporate status, operations and proper-

ties of each of those carriers are described elsewhere

herein.

Great Northern owns jointly with Southern Pacific

the Oregon, California & Eastern Railway Company

(OC&E), a Nevada corporation, that owns and operates

a line of railroad extending between Klamath Falls and

Bly, Oreg., 64.04 miles, and is engaged primarily in log-

ging. It is operated independently, the proprietary lines

dividing the profits or losses equally.

In addition to those carriers subject to the Act, Great

Northern also owns jointly with Northern Pacific, in

equal proportions, the capital stock of Midland, a Cana-

dian railroad not subject to the Act. Midland, organized

by its current owners in 1905 pursuant to an act of the

Legislative Assembly of Manitoba passed in 1993, is

utilized by its owners to enable each of them to obtain

access to Winnipeg. It owns 14.5 miles of terminal tracks

in Winnipeg and has trackage rights over the lines of

Canadian National Railway from the International

Boundary near Pembina, N. Dak., and from Emberson

Junction, Manitoba, to Winnipeg. It owns a small amount

of rolling stock, and its operations are conducted under

a long time agreement with and between Great Northern

542 |

and Northern Pacific which provides for consolidation

between the International Boundary and Winnipeg of

the freight trains of each and furnishing by each on an

equalization of mileage basis of the locomotive and ca-

booses for that service and operation by each company

of its own passenger trains through to the Winnipeg

terminals with its own crews, carrying the crews on its

own payrolls and paying all expenses connected with

such train service direct. Each parent company retains

its own earnings, including portions thereof north of

the boundary. Other expenses of Midland are paid di-

rectly by Great Northern and Northern Pacific in agreed

proportions. Earnings accruing to eack of the parent

lines and expenses paid by each are absorbed into the

accounts of each parent line and are included in reve-

nues and expenses reported by each to this Commission.

As indicated in appendix E, Great Northern holds

minority interests in the capital stocks of a number of

other carriers subject to the Act. The principal ones

which warrant description are The Lake Superior Ter-

minal & Transfer Railway Company (LST&T), The

Minnesota Transfer Railway Company (Minnesota

Transfer), and The Saint Paul Union Depot Company

(St. Paul Depot).

LST&T, the capital stock of which is owned 331% per-

cent each by Great Northern and Northern Pacific, and

16% percent each by C&NW and Soo, owns and operates

terminal facilities at Superior, Wis., and performs trans-

fer and terminal switching services for each of its four

proprietary lines. Each one-sixth share of ownership is |

entitled to one vote and elects one of six directors, Other | — |

than transfer to New Company of Great Northern and :

Northern Pacifie’s above described stock ownership, few

changes are contemplated in the event of approval here- |

in. After merger, New Company would elect four di- ,

rectors. Since under LST&T’s by-laws, five votes are |

required to approve any corporate action, either Great | —

Northern or Northern Pacific now has veto power which |

New Company would possess; similarly C&NW and Soo |

together would retain their veto power following consum-

mation if approved. Operating expenses of LST&T are

| 543

allocated on a use basis. Following consummation Great

Northern cars moving to and from industries served by

Northern Pacific and Northern Pacific cars moving to

and from industries served by Great Northern, now

transferred between the two companies by LST&T would

be handled entirely by New Company. In addition, be-

cause of elimination of separate billing, there would be

reduction in accounting work eliminating three employ-

ees.

Minnesota Transfer, the capital stock of which is

owned by eight railroads (including Great Northern,

Northern Pacific, and Burlington, each of which owns a

one-ninth interest, except C&NW which owns a two-

ninths interest as result of its recent acquisition of Min-

neapolis & St. Louis Railroad), owns and operates ter-

minal facilities at Twin Cities and performs transfer

and terminal switching services for its proprietary lines.

With respect to allocation of expenses among the pro-

prietary lines, a controversy is now pending before the

courts in respect of proper division of expenses as a

result of acquisition above described. Neither Great

Northern, Northern Pacific nor Burlington uses the fa-

cilities in making interchanges with each other, but

Great Northern and Northern Pacific use its services for

interchange with the Milwaukee and another railroad and

any change in method of making interchange with those

companies would be a matter of negotiation between

them and New Company.

St. Paul Depot, the capital stock of which is owned in

equal proportions by eight proprietary lines, including

Great Northern, Northern Pacific, and Burlington, owns

and operates the Union Passenger Station and related

facilities in St. Paul, which are used by its proprietary

lines, Operating expenses are allocated on a use basis,

and changes in allocation require unanimous agreement

of the owning companies. In the event of approval he

in, following consummation and consolidation of passén-

ger trains between St. Paul and Chicago, there would

be a reduction in the number of cars handled through

its facilities. However, employees would not be affected,

_ and its operations and relations would otherwise remain

- _- unchanged.

544 ,

In addition to its transportation properties and other ’

investments, which includes 100 percent stock ownership

in Western Fruit Express Company, which owns over

5,800 refrigerator cars and which furnish refrigerator

car service to Great Northern and certain other rail-

roads, Great Northern’s interest in non-transportation

properties is evidenced in its wholly-owned subsidiary, j

Glacier Park Company, which in addition to owning 175,- i

000 shares (9.6 percent of the capital stock of Western

Pacific, previously described, and 20,264 shares (2.3 per-

cent) of the capital stock of Puget Sound Pulp & Timber

Company, also owns approximately 152,000 acres of tim-

ber and timber growing lands in the Kalispell area of

Montana, and mineral rights in 8,700 acres now under

lease to a major oil company, in the Waterton Lake area

of southern Alberta. The record contains no separate

valuations of those properties that is identifiable.

Northern Pacific, a Wisconsin corporation, was organ-

ized March 15, 1870, as the Superior and St. Croix Rail-

road Company. The name of the corporation was changed

to its present name on July 10, 1896. On September 1,

1896, it acquired the railroad and land grant of North-

ern Pacific Railroad Company, a Federal corporation.

The authorized capita] stock of Northern Pacific is 7,500,-

000 shares of common stock, par value $5 each. As of

August 31, 1961, it had outstanding 5,993,684 shares.

However, as of December 31, 1961, it had issued 5,997,-

577 shares, of which 5,993,276 were outstanding, owned

by approximately 32,000 stockholders, and 4,301 were

held in treasury, including 28 shares reserved for con-

version of. outstanding fractional scrip. It is not con-

trolled by any other corporation or company.

Northern Pacifie’s long-term debt as of August 31,

1961, consisted of bonds aggregating $209,341,200, and

equipment obligations $90,168,857, including $10,207,107 —

due within one year, and miscellaneous obligations $284,-

510, including $50,853 due within one year. As of De

cember 31, 1961, its long-term debt consisted of bonds —

aggregating $208,917,200, and equipment obligations —

$88,056,694. Details respecting the various obligations

comprising such debt are described elsewhere herein.

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LENA ADMD ln an RI eI SR a oN SA SKeaabal eae

545

Northern Pacific has conducted operations under its

present name continuously since 1896, as a common car-

rier by railroad, and such operations were conducted by

its predecessor theretofore since 1872, Its railroad oper-

ations as of December 31, 1960, comprised 6,800.31 miles

of road, of which 2,784.30 were main line (2,714.89

owned including 6.36 miles jointly with other rail car-

riers, 17.40 were trackage rights, and 53.01 were oper-

ated under lease), and 4,016.01 miles were branch line

(3,718.42 owned, including 35.75 jointly with other rail

carriers, 249.19 were trackage rights, and 48.40 operated

under lease from the United States Government) and

are subject to Part I of the Act. It owns but does not

operate 35.49 miles leased to SP&S. Its principal main

lines of railroad through seven states ** and the Canadian

Province of Manitoba, extend from St. Paul and Minne-

apolis, and from Superior and Ashland, Wis., and Du-

luth, westerly via Fargo and Bismarck, N. Dak., Billings,

Butte and Helena, Mont., Spokane, Seattle and Tacoma,

Wash., and Portland. Branch lines connecting with the

principal main lines serve the agricultural and lumber

producing territories which are intermediate, and a line

extending to a connection with its affiliate, Midland, at

Pembina, N. Dak., and International Falls, Minn., en-

ables it to serve Winnipeg. Its principal points of inter-

change are at St. Paul, Duluth, Ashland, Superior, Lau-

rel, Billings, Butte, Spokane, Seattle, Pasco and Portland.

Internationally, the principal points of interchange with

other carriers by railroad are at Sumas, Wash., Pem-

bina, and Winnipeg.

As of August 31, 1961, Northern Pacific owned 627

diesel units of locomotive, 34,394 freight train cars and

402 passenger train cars and leased 300 freight train

ears and four passenger train cars from others. As of

December 1, 1961, however, it owned, leased, or con-

trolled 34,715 units of freight car equipment, of which

1,404 were refrigerator cars, 19,051 were box cars, in-

cluding 4,678 double-door cars, and 747 damage-free in-

sulated box cars.

18 Wisconsin, Minnesota, North Dakota, Montana, Idaho, Wash-

ington, and Oregon.

546

In addition to the above-described transportation prop-

erties, Northern Pacific holds property rights in the na-

ture of trackage rights to operate over the line or por-

tions of the lines of other railroads and in some instances

utilizes jointly with others described terminal or pas-

senger station facilities covered by currently effective

agreements, the nature of which, and other vital statis-

tics of which are set forth in appendix D.

The measure of control or ownership exercised by

Northern Pacific over such other carriers, terminal and

other railroad service companies, and other significant

companies is also shown in summary form in appendix

E hereto. A description of certain of the various com-

panies in which Northern Pacific has, and New Company

would acquire, a proprietary interest is appropriate.

Through 100 percent stock ownership, Northern Pa-

cific controls the following carriers subject to the Act:

(1) Walla Walla Valley Railway Company (Valley Rail-

way), (2) The Duluth Union Depot and Transfer Com-

pany (Duluth Union Depot), and (3) Northern Pacific

Transport (NP Transport). Valley Railway, an Oregon

corporation, organized April 30, 1910, as an interurban |

railroad, independently operates a line of railroad con-

sisting of 13.99 miles of main line and 5.16 miles of

branch line between Walla Walla and Baker-Langdon,

Wash., and Milton-Freewater, Oreg. All of its capital

stock was acquired in 1921 by a former wholly-owned

subsidiary, since liquidated, and acquired by Northern

Pacific pursuant to authority granted in Finance Docket

No. 19663, Walla Walla Valley Railway Company Con-

trol, 295 1.C.C. 826, decided March 11, 1957. It serves

principally as an originator of traffic for Northern Pa-

cific.

Duluth Union Depot, a Minnesota Corporation, organ-

ized March 12, 1889, owns and operates a passenger sta-

tion, 2.86 miles of terminal trackage and one diesel elec-

tric switching locomotive in Duluth, Minn. Great North-

ern, Northern Pacific, and Duluth, Missabe and Iron

Range Company (DMI) are tenant lines utilizing its

facilities.

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547

NP Transport, a Delaware corporation, organized

September 5, 1929, operates as a common carrier by

motor vehicle, in interstate or foreign commerce (a)

pursuant to effective certificates issued in No. MC-84690

and various sub-numbered proceedings, in the transpor-

tation of passengers and their baggage, and express,

newspapers and mail in the same vehicle with passen-

gers, over regular routes, generally between Billings, on

the east, and Spokane, on the west, via Laurel, Living-

ston, Helena, Butte, and Missoula, also to Glacier Na-

tional Park, via Livingston and Helena, Gardner, via

Red Lodge, Mont., and between Missoula and Darby,

Mont., and (b) pursuant to effective certificates issued

in No, MC-63562, and various sub-numbered proceedings,

in the transportation of general commodities, principally

over regular routes, generally between Glendive and Sid-

ney, Mont., on the east, and Portland, Oreg., and South

Bend, Moclips, Bremerton, Everett, and Bellingham,

Wash., on the west via Laurel (and south to Bridger,

Mont.), Logan, Helena, Butte, Missoula, and Kailespell,

Mon., Spokane, Pasco, Lewiston, Seattle, Tacoma, and

Sumas, Wash., generally along the rail lines of the rail-

road, most of which operations are subject to key point

and prior or subsequent rail haul restrictions. Some of

its operations were authorized by certificates recognizing

certain “grandfather” rights, and are unrestricted. It

also performs pick-up and deliver service in the trans-

portation of general commodities for Northern Pacific

at points in Minnesota, North Dakota, Montana, Idaho,

Washington, and Oregon. As of December 31, 1961, it

utilized in its operations 808 pieces of equipment con-

sisting of 90 trucks, 127 truck tractors, 529 semitrailers,

2 poletrailers, 20 passenger busses, 11 bus-truck combi-

nations, and a limousine for special charter parties. It

also owned 340 semitrailers leased to Northern Pacific

for trailer on flat car (TOFC) service.

Northern Pacific also controls, jointly with Great

Northern, applicants Burlington and SP&S, as well as

Midland described elsewhere herein. It owns 830,179

shares, or 48.59 percent of the outstanding common

stock of Burlington of which 842 shares are owned of

548

record and the remaining 829,337 shares are pledged

with the trustee under Northern Pacific refunding and

improvement mortgage, described elsewhere herein.

Northern Pacific owns jointly with Union Pacific in

equal proportions the capital stock of Camas Prairie

Railroad Company (Camas Prairie), a carrier subject

to the Act which operates independently a line of rail-

road, 257.77 miles, extending between Riparia, Wash.,

and Grangeville, Oreg., via Lewiston, Idaho, and between

Lewiston and Stites and Headquarters, Idaho. It has

connections with each of its proprietary lines, and serves

principally as an originator of traffic for them.

As indicated in appendix E, Northern Pacific holds

minority interests in the capital stock of a number of

other carriers subject to the Act. The principal ones

which warrant description are: (1) The Northern Pa-

cific Terminal Company of Oregon (NP Terminal), (2)

LST&T, (3) St. Paul Depot, (4) Minnesota Transfer,

and (5) Butte Pipe Line Company (Butte Pipe). The

operations of LST&T, St. Paul Depot, and Minnesota

Transfer have been described elsewhere herein.

NP Terminal, the capital stock of which is owned 40

percent each by Northern Pacific and Union Pacific, and

20 percent by Soutern Pacific, owns and operates exten-

sive terminal facilities in and around Portland, Oreg.,

performs switching service, including to and from in-

dustries on its own lines, and transfer work for the

proprietary lines and SP&S, and owns and operates the

Union Depot and related facilities, performing passenger

terminal services for proprietary lines, Great Northern

and SP&S. It owns a small yard in which are handled

Northern Pacific’s freight trains, and operates the Guild’s

Lake Yard owned 75 percent by the terminal company

and 25 percent by Great Northern, but used in varying

degrees by Northern Pacific, Union Pacific, Southern

Pacific and Great Northern. Other than transfer to New

Company of Northern Pacific’s above-described stock

ownership, in event of approval, few changes in opera-

tions would occur. Those include performance on an

ownership basis rather than on a tenant line basis of

passenger work now performed for Great Northern and

yorker inane ted PCR

SP&S at Union Depot, reduction in some accounting

work performed by the terminal company due to elimi-

nation of some billing. It is not anticipated that such

changes would affect employees, Freight work performed

for Great Northern at Guild’s Lake Yard now on an

ownership basis would not be affected. In addition, it

is proposed that what are now SP&S freight trains would

use Guild’s Lake Yard to which would also be trans-

ferred work presently performed for Great Northern

and SP&S in its Hoyt Street Yard. It is anticipated that

inerease in activity at Guild’s Lake Yard would exceed

decrease attributable to New Company’s preferential so-

licitation for inside gateways of Klamath Falls and

Bieber as against Portland, subsequently discussed, and

that the terminal company may increase the number of

employees, but its cost would be offset by increased use

charges paid to it by New Company.

Butte Pipe, in which Northern Pacific owns 10 per-

cent of its capital stock, operates as a common carrier

by pipe line with 510.373 miles of line in eastern Mon-

tana and Wyoming.

In addition to its transportation properties and other

investments, which include 100 percent stock ownership

of Cuyuna Realty Company, Lemhi Telephone Company,

and Missabe Realty Company, not engaged in transpor-

tation, Northern Pacific has large land holdings which

are important sources of income to it. Most of the lands

were part of the land grant made by the Act of Con-

gress of July 2, 1864, incorporating the Northern Pacific

Railroad Company and granting lands to induce con-

struction of its railroad from a point on Lake Superior

to Puget Sound by the northern route, so as to bring

about settlement and development of that region, add

value to the government lands therein and establish fa-

cilities for the transportation of mails, troops, munitions

and public stores to and from the west coast. To aid

in the construction 39,473,369 acres of alternate, odd-

numbered sections of non-mineral public lands were

granted by the original grant together with a right of

way of 200 feet on either side of the railroad where it

passed through the public domain together with neces-

sary lands for station buildings, shops and other appur-

550 |

tenances. The rights to them were acquired by Northern

Pacific at foreclosure and sequestration sales following

foreclosure in 1896 of mortgages placed on the railroad

and land grant by the federal corporation.

Since the original grant of lands described, Northern

Pacific has disposed of considerable acreage by sale over

the intervening years. Of the sale of lands since acquisi-

tion under the grant, the record shows that the proceeds,

net after payment of expenses and taxes paid into the

hands of the trustee of the Northern Pacific prior lien

mortgage, aggregated approximately $110,000,000.

As of December 31, 1960, Northern Pacific and its

wholly-owned non-carrier subsidiaries together owned in

fee 2,236,992 acres of land (with the exception of cer-

tain minerals in 23,177 acres) in Wisconsin, Minnesota,

North Dakota, Montana, Wyoming, Idaho, Washington

and Oregon; surface only of an additional 1,937 acres

of land in Minnesota, Montana, and Washington; and

certain mineral rights in an additional 6,075,659 acres

of land in the eight states above mentioned, including

5,067,000 acres on which all mineral rights, including

oil and gas rights are owned, 999,277 acres on which

oil, coal and iron rights are owned, and 9,270 acres on

which only coal rights are owned. Although huge, the

lands described comprise but a small part of the original

land grant lands owned in fee. However, the present

holdings of Northern Pacific of such properties are

unique as a lands holding. If owned in a separate cor-

porate entity, it would probably represent one of the

largest and most diversified land companies within the

United States. The increasing importance of the proper-

ties to Northern Pacific stockholders is prompted by a

comparison of earning from such properties in relation

to its net income from all sources. By 1961, Northern

Pacifie’s net income of $5,913,216 from the natural re-

sources properties, without certain deductions, was more

‘ than one-third of the total net income of $16,313,322 as

shown in its annual report to stockholders for 1961, an

exhibit of record. Of the lands owned in fee, approxi-

mately 1,360,000 acres are timber and timber growing

lands located in Washington, Oregon, Idaho, Montana,

551

and Minnesota. While Northern Pacific manages its own

timber lands, it does not engage in logging or other

lumber operations, Such operations are carried out by

other companies to whom Northern Pacific has granted

cutting rights. Of those lands, Northern Pacific owns

in fee, or owns oil and gas rights in, approximately

4,460,000 acres are in North Dakota, Montana and Wy-

oming, in portions of which oil and gas production have

been developed, and approximately 980,000 acres in areas

in which no production has yet been developed in Mon-

tana, Washington and Oregon.

Northern Pacific does not itself engage in exploration

for, development or production of oil or gas. Its oil and

gas properties are generally developed through contracts

with operating oil companies, which contracts provide for

royalties to Northern Pacific and either for exploratory

drilling by the operator or for cash bonuses. In some

eases Northern Pacific shares in a portion of the working

interest production and costs. As of December 31, 1960,

357,000 acres of Northern Pacific’s ownership were com-

mitted to leases or agreements. Oil and gas were being

produced on approximately 49,500 of such acres and

Northern Pacific shared in the production of oil and

gas from approximately 75,000 additional acres under

unitization or pooling agreements.

Average daily rate of Northern Pacific’s net oil pro-

duction for the period 1951 through 1960, inclusive, to-

gether with the number of wells in which as of the end

of each year Northern Pacific shared in the production,

is shown of record, as follows:

; qs _....... Bbls of oil per day

Year Wells Working Interest Royalty interest Total

1951 229 0 840 840

1952 247 0 932 932

1953 294 45 1,189 1,234

1954 324 236 1,386 1,622

1955 384 608 1,602 2,210

1956 458 1,611 2,292 3,903

1957 514 3,572 2,991 6,563

1958 578 4,297 3,131 7,428

1959 606 4,488 3,210 7,698

1960 664 4,652 3,368 8,020

552

On December 31, 1960, Northern Pacific had estimated

net proved developed oil reserves of 18,051,000 barrels

(9,805,000 working interest and 8,246,000 royalty) and

estimated recoverable net proved developed gas reserves

of 6,290,000 mef.

Northern Pacific holds extensive acreages of coal lands,

principally lignite, and also holds other mineral proper-

ties, including several with iron deposits, which lands

and properties are not considered by it to be of signifi-

cant proportions in relation to its total assets, principally

because the total net income from such mining proper-

ties has been nominal and no substantial improvement

is anticipated.

Gross revenues from timber, oi] and gas and other

minerals for the ten year period 1951 through 1960, in-

clusive, is shown of record, as follows:

Year Timber Oil and Gas Other Minerals Total

1951 $ 677,224 $ 695,520 $ 551,890 $ 1,924,634

1952 851,253 851,253 511,449 2,144,076

1953 615,771 987,017 599,160 2,201,948

1954 1,023,063 1,327,019 1,023,711 3,373,793

1955 1,400,000 1,686,153 1,001,885 4,088,038

1956 1,914,538 3,209,362 1,224,277 6,348,177

1957 1,343,951 6,004,294 1,326,927 8,675,172

1958 2,036,313 7,074,439 752,639 9,863,391

1959 3,950,927 7,618,894 519,881 12,089,702

1960 3,584,685 7,387,183 517,457 11,489,325

Northern Pacific represents that net income from

timber, oi] and gas, and other minerals cannot be accu-

rately stated for the reasons that, with the exception of

oil and gas, separate accounting records are not main-

tained for these activities; that the expense records main-

tained for oi] and gas do not include any allocation of

interest on funded debt, real property taxes, pension

or overhead costs; and that the accounting records main-

tained for timber and mineral properties, while adequate

for management purposes, are not kept in the same de-

tail as for oil and gas operations, but are partly esti-

mated and, as in the case of oi] and gas, does not include

eee ee ee Sk eee

ae eeths tata (, (Aw Seen,

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tive:

So an Chen sey

553

expenses of the character referred to above. Its estimate

of net income from those sources, after income taxes for

the 5-year period 1956-1960, inclusive, without taking

into account the expenses mentioned above, is shown as

follows:

Year Timber Oil and Gas Other Minerals Total

1956 $1,183,141 $1,481,226 $724,332 $3,388,699

1957 733,911 2,561,010 809,173 4,104,094

1958 1,246,185 3,095,478 424,617 4,766,280

1959 2,670,577 8,814,752 249,116 6,734,445

1960 2,386,843 8,552,375 241,264 6,180,482

Burlington, an Illinois corporation, was organized June

24, 1864, through the consolidation of two corporations,

one of which had been incorporated in 1849 as the Au-

rora Branch Railroad Company. It has only one class of

capital stock outstanding, consisting of common capital

stock, par value $100 each. As of December 31, 1960,

it had outstanding 1,708,391 shares, of which all but

four shares, reserved for conversion of outstanding fac-

tional scrip, were owned by approximately 643 stock-

holders, 641 of which held 48,033 shares. As of Decem-

ber 31, 1961, no significant change in outstanding shares

had occurred. Of its outstanding capital stock, 97.18

percent are owned in equal proportions by Great North-

ern and Northern Pacific, each of which owns benefi-

cially 830,179 shares, Those shares were acquired through

purchase in 1901 to assure Burlington a permanent con-

nection by its short line with the Northwest rich in min-

erals and lumber, with its markets for agriculture and

other products, and with the commerce of the Pacific

Ocean by way of Puget Sound and the Columbia River,

while the Northern Lines were assured of a permanent

connection by the shortest line with the agricultural and

manufacturing areas of the middlewest and its markets

for the products of the north and eommerce of the Pacific

northwest. Of those shares, 842 each are owned of rec-

ord by Great Northern and Northern Pacific, respec-

tively, and 829,337 shares are pledged with The First

National City Bank of New York, trustee under Great

Northern Railway Company general gold bond mortgage,

and 829,337 shares are pledged with Guaranty Trust

Company of New York, trustee under Northern Pacific

Railway Company refunding and improvement mortgage.

The remaining 48,033 shares, or 2.82 percent, are pub-

licly held.

Burlington’s long-term debt as of August 31, 1961,

consisted of bonds aggregating $128,723,000, and equip-

ment obligations $93,604,604, including $11,977,372 due

within one year. As of December 31, 1961, its long-term

debt consisted of bonds aggregating $127,932,000, and

equipment obligations aggregating $92,811,480, including

$12,631,662 due within one year. Details respecting the

various obligations comprising such debt are described

elsewhere herein.

Burlington has conducted operations as a common car-

rier by railroad since 1864. Its present railroad opera-

tions comprise 8,648.31 miles of road, of which 5,111.86

are main line (4,645.22 are owned, including 2.87 miles

jointly with other carriers, 435.72 are trackage rights

and 30.92 are operated under lease), and 3,536.45 are

branch line (3,401.95 are owned and 134.50 are trackage

rights), and are subject to Part I of the Act. Its prin-

cipal main lines of railroad through 11 states extend

from Chicago, Ill., northwesterly to St. Paul and Minne-

apolis, and from Chicago westerly and southwesterly to

St. Louis and Kansas City, Mo., Omaha and Lincoln,

: Nebr., Denver, Colo., and Billings and Huntley, Mont.

Connecting main lines extend to Peoria and Rockford,

; Ill., Des Moines and Sioux City, Iowa, Deadwood, S.

, Dak., and via the line of a subsidiary (Paducah & Illi-

: nois Railroad Company) to Paducah, Ky. It maintains

# an extensive branch line system, principally for grain

q in Nebraska and Kansas. Its principal points of inter-

j change are at Chicago, Peoria, and East St. Louis, IIl.,

St. Joseph, Kansas City and St. Louis, Mo., Omaha and

Grand Island, Nebr., Council Bluffs and Sioux City, Iowa,

St. Paul, Minneapolis, Denver, Billings, Laurel and

Paducah.

14 Tllinois, Iowa, Kansas, Colorado, Minnesota, Missouri, Montana,

Nebraska, South Dakota, Wisconsin, and Wyoming.

, 555

Burlington’s regular operations have been dieselized

since 1957 and most of its operations were conducted

with diesels for many years prior thereto. As of Decem-

ber 31, 1960, it owned 692 diesel units and 13 steam

units of locomotive, 1,024 passenger train cars, of which

79 were leased to others, and 43,509 freight train cars.

However, as of December 1, 1961, it owned, leased, or

controlled 48,998 units of freight train cars, of which

22,306 were box cars, including 760 double door cars

and 549 damage free insulated box cars, and 1,963 were

refrigerator cars owned by its wholly owned subsidiary,

Burlington Refrigerator Express.

Burlington also conducts operations as a common car-

rier by motor vehicle subject to Part II of the Act. Under

effective certificates issued in No. MC-66580 and sub-

numbered proceedings engages in the transportation of

passengers and their baggage, and express, newspapers

and mail, in the same vehicle with passengers, over reg-

ular routes between Miner, Wis., and Winona, Minn.,

serving no intermediate points, and between Atchison,

Kans., and Armour, Mo. Under effective certificates is-

sued in No. MC-66581 and various sub-numbered pro-

ceedings, it engages in the transportation over regular

routes of general commodities, with exceptions between

Sterling and Merino, Colo., serving all intermediate

points, with restriction; of baggage, express, mail, news-

papers, milk and cream between Alliance, Nebr., and

Torrington, Wyo., and between Bayard, Nebr., and junc-

tion U. S. Highways 26 and 26N, serving all intermedi-

ate points, with restrictions; of milk and cream and by-

products thereof between Atchison, Kans., and Armour,

Mo.; of general commodities between St. Louis, Mo., and

Alton, Ill., serving East Alton, Ill., subject to restrictions;

of general commodities, moving in express service be-

tween Dubuque, Iowa and Savanna, IIl., serving no in-

termediate points, with restrictions; and of baggage and

express between Rock Island and Savanna, Ill., serving

Specified intermediate points. The restrictions indicated

are generally those limiting service to that which is aux-

iliary to or supplemental of rail service, such operations

generally being confined to those between points stations

along the railroad, although some are off-line.

556 .

In addition to the above-described transportation prop-

erties, Burlington holds property rights in the nature of

trackage rights to operate over the lines or segments of

lines of other railroads, and in some instances utilizes

jointly with others described terminal or passenger sta-

tion facilities, covered by currently effective agreements,

the nature of which, and other vital statistics of waich,

are set forth in appendix D.

The measure of control or ownership exercised by Bur-

lington over such other carriers, terminal and other rail-

road service companies, and other significant companies

is also shown in summary form in appendix E hereto.

A description of certain of the various companies in

which Burlington has and New Company would acquire

a proprietary interest is appropriate.

Those carriers subject to the Act wholly owned or con-

trolled through ownership of a majority of outstanding

capital stock by Burlington are: (1) Burlington Truck

Lines, Inc. (BTL), (2) Missouri and Illinois Bridge and

Belt Railway Company (Belt Railway), (3) The Colo-

rado and Southern Railway Company (C&S), (4) Fort

Worth and Denver Railway Company (FW&D), and (5)

Winona Bridge Railway Company (Winona Railway).

BTL, an Illinois corporation, wholly owned by Burling-

ton, was organized June 14, 1945, to succeed to the

freight operations of Burlington Transportation Com-

pany, which had been conducted since 1935, operates pur-

suant to certificates issued by this Commission in No.

MC-107500 and various sub-numbered proceedings, as a

common carrier by motor vehicle, in interstate or for-

eign commerce, of general commodities, for the most

part, with certain exceptions, generally over a network

of regular routes throughout eight of the eleven states

Q in which Burlington rail operations are conducted, which

d routes substantially parallel much of the Burlington rail

‘ operations. Its principal operations are conducted at

; motor carrier rates under motor carrier tariffs and in-

volve for the most part truckload traffic. Additionally,

it performs on rail freight billing a service for the rail-

road (Burlington or its subsidiaries) wherever interests

of rail shippers or receivers are promoted. A portion of

AH AO oC Nagle Sea ne

it a al 3 eee seat anes

Senet CO erat

- eS il 4,

Laie ite en i

REF A RAT Ds

| | 557

BTL’s operations carry restrictions or limitations to

service from or to, or traffic interchanged at points on

the rail lines of Burlington or its railroad subsidiaries,

or that which is auxiliary to or supplemental of rail

service of the railroad. BTL’s operations reach Billings,

a point served by Great Northern, Northern Pacific, and

NP Transport, at which point its lines connect with the

Montana motor carrier operations of NP Transport and

Great Northern. The latter’s certificates are restricted

to service auxiliary to or supplemental of rail service of

Great Northern and it does not participate with BTL

in joint through interstate rates. BTL’s operations are

duplicative with those of NP Transport to the extent that

both operate over U. S. Highways 10 and 310 between

Billings and Bridger, Mont., 44 miles, although the serv-

ice authorized and performed is not duplicative. NP

Transport service over that segment is confined to traffic

from Billings area to Bridger or other Montana points

whereas BTL handles no traffic locally between Bridger

and Billings. There are a limited number of joint through

interstate rates via Billings participated in by BTL and

NP Transport. Through the Billings interchange, BTL

in its operations south thereof participates in some joint

through interstate traffic moving to and from points in

Montana. As of December 31, 1961, BTL operated ap-

proximately 145 trucks, 477 tractors, and 2,243 trailers

of various types. Of the latter figure 600 were owned

by Burlington. It maintains extensive repair and main-

tenance facilities at Galesburg and Berwyn, IIl., Omaha

and Denver. BTL maintains its own freight solicitation

sources and none of its traffic department personnel are

employees of the parent company. Its principal traffic

and operating officials are concerned with motor rather

than rail transportation. A substantial volume of its

tonnage involves interchange traffic. It interchanges

traffic with other motor carriers at all connecting points,

principally Chicago, Peoria, and St. Louis. In addition,

it transports rail less-than-carload freight for Burlington

over truck routes serving stations on the railroad, per-

forms pick-up and delivery *;vice on rail-less-than-car-

load shipments involving some 20 million pounds annually

{°

SEE PERI SEINE! NOEL AE TNE

at 53 separate locations, transports some mail in peddle

service between specified railroad stations, distributes

rail carload traffic at eight terminal localities and per-

forms pick-up and delivery service on rail trailer-on-

flatear loads.

Belt Railway, a Missouri corporation, in which Bur-

lington owns 81.82 percent of its outstanding capital

stock (Missouri Pacific Railroad Company owning the

remainder) owns a bridge traversing the Mississippi

River between Alton, Ill., and West Alton, Mo., and

owns and operates certain railroad facilities near Alton.

It performs switching service to and from industries

located on its lines, It facilities are used principally by

Burlington, but also by several other railroads.

C&S, a Colorado corporation, in which Burlington owns |

74.72 percent of its outstanding capital stock, the re —

mainder being publicly held, operates as a common Car-

rier by railroad in Colorado, Wyoming and New Mexico,

its main line extending from Wendover, Wyo., where it

connects with Burlington, to the boundary between New

Mexico and Texas, near Texline, Tex., where it connects

with its wholly-owned subsidiary, FW&D. Its rail oper-

ations extend over 713 miles of road of which 610 are

owned.

FW&D operates as a common carrier by railroad,

solely in Texas, from a junction with C&S at the Texas-

New Mexico Boundary to Galveston, Tex., with branch

lines to Lubbock, Abilene, and Dimmit, Tex. Its rail

operations extend over 1,363 miles, of which 1,003 are

owned.

Winona Railway, a Minnesota corporation, in which

Burlington owns 66.66 percent of its outstanding capital

; stock (Green Bay & Western R.R. Co., owning the re

; mainder) owns a bridge traversing the Mississippi River

4 between Winona, Minn., and East Winona, Wis., and

: certain rail facilities in that area, used by each of its

owners in traversing the river.

As indicated in appendix D, Burlington holds minor-

ity interests in the capital stock of a number of other

carriers subject to the Act. The principal ones which

warrant description are: (1) Davenport, Rock Island and |

558

| ee r= ne

559

Northwestern Railway Company (DRI&N ), (2) Keokuk

Union Depot Company (Keokuk Depot ), (3) Atchison

Union Depot and Railroad Company (Atchison Depot),

(4) Paducah and Illinois Railroad Company (PIR), (5)

Chicago Union Station Company (Chicago Station), (6)

Illinois Northern Railway Company (lIllinois Northern),

(7) Iowa Transfer Railway (lowa Transfer), (8) The

Denver Union Terminal Railway Company (Denver Ter-

minal), (9) Illinois Terminal Railroad Company (Illi-

nois Terminal), Kansas City Terminal Railway Company

(Kansas City Terminal) (10) The Belt Railway Com-

pany of Chicago (Belt Railway), and (11) Terminal

Railroad Association of St. Louis (Terminal St. Louis).

Others have been described or are of little significance.

DRI&N, the capital stock of which is owned in equal

proportions by Burlington and the Milwaukee, owns cer-

tain railroad facilities in and near Davenport, Iowa, and

Rock Island, IIl., including a bridge across the Missis-

sippi River. It performs switching service to and from

industries located on its lines for the proprietary lines,

and each of those lines uses its properties, particularly

the bridge.

Keokuk Depot, the capital stock of which is owned 40

percent by Burlington and 20 percent each by Rock Is-

land and two other railroads, owns and operates a union

passenger depot and related facilities at Keokuk, Iowa.

Atchison Depot, the capital stock of which is owned

37.5 percent by Burlington, 25 percent each by Santa Fe

and Missouri Pacific, and 12.5 percent by Rock Island,

owns and operates a passenger depot facility at Atchi-

son, Kans.

PIR, the capital stock of which is owned in equal pro-

portions by Burlington, and two other railroads, owns

certain railroad facilities between Paducah, Ky., and

Metropolis, Ill., principally a bridge across the Ohio

mi Its facilities are used by each of the proprietary

ines.

Chicago Station, the capital stock of which is owned

in equal proportions by Burlington, the Milwaukee and

two other railroads, owns and operates a passenger sta-

tion and related facilities in Chicago, used by Burling-

560

ton, the Milwaukee and two other railroads. Operating

expenses are allocated on a use basis. Other expenses,

such as taxes, bond interest and sinking fund payments

are allocated on an ownership basis. Under the merger

proposals applicants contemplate consolidation of certain

passenger train operations which would reduce the num-

ber of cars handled into and out of the subject facilities

but it is not anticipated that employees would be affected.

Illinois Northern, the capital stock of which is owned

51 percent by Santa Fe, 25 percent by Burlington, and

12 percent each by two other railroads, owns and oper-

ates certain railroad facilities in southwestern Chicago,

and performs switching service to and from industries

on its lines and between railroads.

Iowa Transfer, the capital stock of which is owned in

equal proportions by Burlington, Rock Island, and two

other railroads, operates transfer facilities at Des Moines,

Iowa, for the handling of traffic between several rail-

roads.

Denver Terminal, the capital stock of which is owned

in equal proportions by Burlington, The Colorado &

Southern Railway Company, The Denver & Rio Grande

Western, Rock Island, Santa Fe, and Union Pacific, owns

and operates Union Passenger Station and related facili-

ties in Denver, which are used by its six proprietary

companies.

Illinois Terminal, the capital stock of which is owned

in equal proportions by 11 railroads, including Burling-

ton, operates a railroad between St. Louis, Mo., and East

St. Louis, and Springfield, Ill., between Springfield and

Peoria, Ill., and between Springfield and DeLong, IIL,

performing both switching and line-haul service.

Kansas City Terminal, the capital stock of which is

owned in equal proportions by 12 railroads, including

Burlington, owns and operates extensive terminal facili-

ties at Kansas City, Mo., and engages in some switching

and transfer work, Operating expenses are allocated on

a use basis, but other expenses, such as taxes and inter-

est on debt are allocated on an ownership basis.

Belt Railway, the capital stock of which is owned by |

several railroads including Burlington which has a one-

er had Ratha ase tected bBo tee et ae Ws

;

]

561

twelfth interest, operates extensive properties in the Chi-

cago area, performing transfer and terminal switching

services for its proprietary lines and other railroads.

Terminal St. Louis, the capital stock of which is owned

by several railroads, including Burlington, which owns

one-sixteenth interest, owns and operates extensive ter-

minal facilities in the St. Louis area, including a pas-

senger depot. Expenses are allocated on a use basis.

In addition to its transportation properties and other

investments, Burlington controls, through 100 percent

stock ownership, Burlington Refrigerator Express Com-

pany, Burlington Equipment Company, and St. Louis &

Kansas City Land Company. Through the last named,

it is beneficial owner of 100,200 shares, or 1.5 percent

of the common capital stock of The Denver and Rio

Grande Western Railroad Company, and is also owner

for investment only of 60,428 shares or 6.59 percent of

the common capital stock of Gulf Mobile & Ohio Railroad.

Pacific Coast, a Washington Corporation, was organ-

ized June 15, 1932, to acquire the properties of its prede-

cessor, Pacific Coast Railroad Company. That acquisition

was authorized in Finance Docket No. 9576, Pacific

Coast R. Co, Acquisition, 187 I.C.C. 563, decided Sep-

tember 30, 1932. Pacific Coast has only one class of

capital stock outstanding. As of December 31, 1960, it

had outstanding 10,000 shares of common capital stock,

par value $100 each, all owned by Great Northern. As

of December 31, 1961, the record reflects no change.

Those shares were acquired by Great Northern pursuant

to authority granted in Finance Docket No. 17134, Pa-

cific Coast R. R. Co. Control, 282 I.C.C. 600, decided

August 31, 1951. It has no other securities authorized

or outstanding.

Pacific Coast’s railroad operations are all located with-

in King County, Wash., and comprise 32.03 miles of

road, all owned by it, consisting of 22.29 miles of main

line extending from Seattle through Black River and

Renton to Maple Valley, Wash.; 7.61 miles of branch

line between Maple Valley and Black Diamond, Wash.,

and 2.13 miles of branch line at Renton, Wash. Its

points of interchange are at Seattle, Black River, Renton,

562 |

and Henry’s, Wash. Pacific Coast provides freight serv-

ice only, and does not own any motive power, rolling

stock, or major maintenance equipment. Such items of

equipment as it requires are leased from Great Northern.

SP&S, a Washington corporation, was organized August

23, 1905, as Portland and Seattle Railway Company. The

name of the corporation was changed to its present name

on February 1, 1908. SP&S has only one class of capi-

tal stock outstanding. It had outstanding as of Decem-

ber 31, 1960, 400,000 shares of common capital stock,

par value $100 each, owned 200,000 shares each, bene-

ficially and entitled to voting rights, by Great Northern

and Northern Pacific. As of December 31, 1961, no sig-

nificant change in the above occurred. Of the total of

shares owned by Great Northern, 199,995 are owned of

record by it, and the remaining five shares are of record

in the names of nominees. Of the shares owned by Great

Northern, 199,975 shares are pledged with The Hanover

Bank under an escrow agreement of February 16, 1911,

pursuant to an agreement of the saine date with Great

Northern, Northern Pacific and SP&S. Of the total of

shares owned by Northern Pacific, 199,995 shares are

owned of record and 5 shares are of record in the names

of nominees. Of the total of the shares owned by North-

ern Pacific, 199,975 are pledged with The Hanover Bank

under the same escrow agreement, and all of the shares

(200,000) owned by Northern Pacific are subject to the

lien of the Northern Pacific refunding and improvement

mortgage. Under the agreements mentioned, the certifi-

cate for the 199,975 shares of SP&S stock owned by

Great Northern, and the certificate for the 199,975 shares

of SP&S stock owned by Northern Pacific, are to be re

turned to Great Northern and Northern Pacific, respec-

tively, upon satisfaction of the mortgage or deed of trust

securing certain bonded indebtedness of SP&S, upon joint

written request of Great Northern, Northern Pacific, and

SP&sS.

SP&S’s long-term debt as of August 31, 1961, con-

sisted of bonds aggregating $54,710,000, and equipment

obligations aggregating $5,067,460, including $1,055,967

due within one year. As of December 31, 1961, its long-

563

term debt consisted of bonds aggregating $54,710,000

and equipment obligations $4,729,288, Details respect-

ing the obligations comprising such debt are described

elsewhere herein.

Since 1909, SP&S has been continuously engaged in

transportation by railroad as a common carrier. Its pres-

ent railroad operations are in Washington and Oregon,

and comprise 599.53 miles of road, of which 515.26 are

main line (450.37 are owned, including two segments—

5.40 miles—jointly with Northern Pacific, 29.40 are

trackage rights from various other rai] carriers, and

35.49 are leased from Northern Pacific) and 84.27 are

branch line, all owned, It wholly owns and controls Ore-

gon Electric Railway Company (Oregon Electric) and

Oregon Trunk Railway (Oregon Trunk) subsequently

discussed, which are operated as part of its system, and

the operating results of those companies are not sepa-

rately reported, but are combined on a system basis in

the reports of SP&S to this Commission. The main lines

of SP&S, exclusive of those of Oregon Electric and Ore-

gon Trunk, extend from Spokane westerly along the

Snake and Columbia Rivers to Portland, and from Will-

bridge, Oreg., to Seaside, Oreg. The principal branch

lines extend from Lyle, Wash., to Goldendale, Wash., and

from United Junction, Oreg., to Vernonia, Oreg. The

principal points of interchange are at Spokane, Pasco,

Vencouver, and Wishram, Wash., and Portland, East

Portland, North Portland, Willbridge, Bowers Junction,

and Linnton, Oreg.

As of December 1, 1960, it owned 107 diesel units of

locomotive, 3,692 freight train cars, and 54 passenger

train cars. On December 1, 1961, however, it owned

3,614 units of freight train car equipment, of which

2,435 were box cars, including 492 double-door cars.

In addition to the above-described transportation prop-

erties, SP&S holds property rights in the nature of track-

age rights to operate over the lines or segments of lines

of other railroads, and, in some instances, utilizes jointly

with others described terminal or passenger station fa-

cilities, covered by currently effective agreements, the

nature of which, and other vital statistics of which, are

set forth in appendix D.

564

As indicated, SP&S controls through 100 percent stock

ownership the following carriers subject to the Act: (1)

Oregon Electric and (2) Oregon Trunk. Oregon Elec-

tric, an Oregon corporation, organized May 14, 1906,

operates a line of railroad consisting of 201.25 miles |

(167.25 owned and 34 miles under trackage rights) ex-

tending from Portland to Eugene, Oreg., with branches

to Forest Grove, Fostee, and Dollar, Oreg. As of De

cember 31, 1960, its equipment comprised 48 flat cars

and one rack car. It owns no motive power. It is oper-

ated as an integral part of the SP&S system with SP&S

trains operating over its trackage and SP&S officers serv-

ing also as its officers. It has no employees. All of its out- —

standing long-term debt is owned by SP&S. Under the |

proposal involving SP&S lease its corporate identity would —

be retained but the operations would become an integral, —

though separate part, of New Company during the term

of the lease in the same manner as conducted by SP&

ests.

Oregon Trunk, a Washington corporation, wholly-owned

by SP&S, organized November 3, 1909, operates a line

of railroad consisting of 151.93 miles (127.93 owned and

24 miles under trackage rights from Union Pacific) ex-

tending from a connection with SP&S at Wishram, Wash., |

— i wee eS "

wt Cent he

to Bend, Oreg. It owns no equipment, all of its motive —

power and equipment being furnished by SP&S. It also

is operated as an integral part of the SP&S system with —

SP&S trains operating over its trackage and SP&S off-

cers serving also as its officers. It has no employees.

Under the proposal involving SP&S lease, its interests

would be affected similarly to those of Oregon Electric

SP&S also owns a minority interest in the capital

stock of another carrier and a non-carrier more specifi-

eally set forth in appendix E hereto,

Officers, directors, and intercorporate relationships.

The record shows that there are a number of intercor-

porate relationships between applicants in the nature of

common officers and/or directors. Several officers and

directors of applicants hold positions in common and

serve in similar capacities with respect to various affili-

Se fel

565

ated companies, Several officers of some applicants are

officers or directors or trustees of others. Of the officers

and/or directors of Great Northern, eighteen function as

officers or directors or trustees of fourteen affiliates. Of

the officers and/or directors of Northern Pacific, six func-

tion as officers and/or directors or trustees of thirteen

affiliates. Of the officers and/or directors of Burlington,

two function as officer and/or director of twelve affiliates.

Appendix F attached hereto sets forth the names of the

members of the boards of directors and officers of New

Company, Great Northern, Northern Pacific, Pacific

Coast and SP&S, as of October 1, 1961. Certain indi-

viduals whose names appear in appendix F hold posi-

tions with one or more of the carriers or affiliates, and

the intercorporate relationships thereby created among

the respective applicant carriers and their affiliates are

set forth in appendix G.

Upon consummation of the Northern Lines merger

here involved, the board of directors of New Company

would be increased from three to twenty-four. Of the

vacancies thus created, nine are to be filled by the elec-

tion of persons who are then directors of Great North-

ern, nine by the election of persons who are then direc-

tors of Northern Pacific, and three by the election of

persons who are then directors of Burlington, but are

not then officers or directors of either Great Northern

or Northern Pacific.

There are several intercorporate relationships between

New Company and Great Northern and Northern Pacific

as set forth in appendix G.

Traffic participation.

The area of the United States served by the component

railroads embraces the Midwest and South Central Plains,

the northern portions of the Central Plains, and of the

Great Plains, Mountain and Pacific Territory. The ma-

jor transcontinental routes of Great Northern Pacific

operate generally through the same northern states be-

tween Twin Cities (St. Paul and Minneapolis, Minn.)

and Puget Sound, and the Pacific Northwest. The major

transcontinental routes of Burlington are between Chi-

cago and Twin Cities, and between Chicago and Kansas

City, Omaha and Denver. The lines of SP&S form part

of the through routes of Great Northern and Northern

Pacific on traffic to and from northwest coast terminals.

The lines of the two Northern lines, although their _

main lines are geographically parallel, are complemen-

tary to each other. The greater part of the mileage of |

the Northern Pacific is on the western part of its sys-

tem, while most of the mileage of the Great Northern is

on the eastern part of its system. To a greatly prepond-

erating extent, the lines of the two Northern lines serve

distinct local territories, Great Northern serving pri-

marily the northern portion of the northern tier of states

west of Minnesota and Northern Pacific serving primar-

ily the southern portion thereof, while only Great North-

ern has mileage in South Dakota, Iowa, and in the south-

ern part of Minnesota. As a result, the actual competi-

tion between the lines of the two companies is relatively

small, except at important terminals which enjoy and

will continue to enjoy ample competitive service from

other lines and routes already available.

The great portion of the area served by the Northern |

: Lines is characterized by light precipitation, high eleva- _

tion, and comparatively short growing season, all of

which tends to place natural and unavoidable restrictions

on industrial «evansion. Moreover, the area served by —

the Northern Lines is characterized by concentration of |

population on their eastern and western termini, between

which is an extensive area over 1,700 miles in length

and over 900 miles in breadth, rich in animal, agricul-

tural, mineral and forest resources, but light in distri-

; bution of population. Comparison of population data for

4 1950 and 1960 show that except for the states served

: by the Northern Lines on their eastern and western

termini population increase has been substantially less

than the national average increase and far less than

the “explosive” increase that has marked such south-

western states as California and Arizona.

The economy of the vast intermediate area between

the eastern and western termini of the Northern Lines

is almost entirely based on products of agriculture, ani-

566

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567

mals, forests, and mines, as distinguished from that area

embraced in the territory served by the Burlington, which

is significant by its participation in products of agricul-

ture, mines, manufactures and miscellaneous, and for-

warder traffic. Industrial development where it exists

modifies the basic products of the area into semi-finished

forms, The local economy within that area is predicated

upon the distribution of the finished products of manufac-

ture consisting of the basic tools used in the producing

areas and the ordinary articles of livelihood used by a

population dependent upon basic products.

From the earliest times involving transportation in the

area involved, the production of the basic products of the

intermediate territory has been predicated on the depend-

ence on and availability of transportation facilities at

rates sufficiently depressed to enable producers to meet

the market competition created by producers located

closer to the great consuming areas, or who, for other

reasons, have lower transportation costs. The burden of

such depressed rates on the products of the Pacific north-

west is not one which is the choice of railroad manage-

ment to reduce rates to regain traffic from competitive

transportation agencies, but is more fundamental in that

if depressed rates are not provided to meet marked com-

petition the ability of the western producing areas to

reach essential markets is destroyed and the area econ-

omy damaged. Those basic products, so far as they re-

late to the area served by the Northern Lines and SP&S,

involve generally iron ore of northeastern Minnesota,

around which the area economy is built, products of

forests (pulpwood, wocd bolds, and short logs moving to

paper mills, pulpboard and match block plants) of north

central Minnesota, sugar beets, sugar, beet sugar final

molasses, beet pulp, grain and potatoes from the Red

River Valley area of western Minnesota, grain from

Minnesota, North Dakota and Montana, petroleum and

oil, and salt from the Williston Basin area of north-

western North Dakota and northeastern Montana, lignite

from western North Dakota, non-ferrous metals and

aluminum from Montana, Washington, and Oregon, re-

sidual oils and asphalt from Wyoming, North Dakota and

. Sree pete?

ne .

Re ee: Se a

568

Montana, vermiculite and magnesite from north central

Montana and northeastern Washington, fresh fruits and

vegetables from Washington and Oregon, and forest prod-

ucts from Oregon, Washington and Idaho. This traffic

involving forest products is a major contributor to the

economy of Great Northern, Northern Pacific and SP&S,

supplies and forms in excess of 35 percent of the east-

bound transcontinental revenue of railroads serving

Transcontinental territory and is basic to the economy

of the Pacific Northwest.

The area served by the two Northern Lines and SP&S

has a serious and continuous problem in marketing its

products since it is located far from the centers of popu-

lation on and east of the Mississippi River and on the

Pacific seaboard, and those interior states provide but

a limited market for the products produced in volume

in such states, and, accordingly, volume production de-

pends on ability to reach national centers of population.

Thus, such products as are produced in volume are heav-

ily dependent on sound, efficient railroad transportation,

and no other form of transportation can offer all of

the producers the services they require to participate in

major markets. Moreover, rates provided must be ade-

quate to meet market competition, otherwise the ability

of the producing areas served by the Northern Lines

and the economy of those areas would be adversely

affected.

While the area served by the Burlington is, in gen-

eral, more heavily populated than the areas served by

the Northern lines, the circumstances of market compe-

tition of competing products and the need for mainte-

nance of adequate or depressed rates are also found

with respect to various products handled by Burlington.

The area served by Burlington provides in part a mar-

ket for the basic raw and semi-manufactured products

of the fields, forests and mines of the western territory

served by the two Northern Lines, it is complementary

in part, and it is significant that Burlington has con-

nections at Chicago and Peoria, IIl., and St. Louis with

other trunk and terminal lines serving large steel, ma-

chinery, and manufacturing plants that find a market

569

in the northwest area. Moreover, Burlington serves many

packinghouse centers of the midwest, including Omaha,

Denver, Chicago, Kansas City, St. Louis, and St. Joseph,

Mo., whereas the Northern Lines serve the livestock

growing areas of the Northwest. Burlington’s lines are

complementary also in that it serves the common termi-

nals of Twin Cities, Sioux City, and Laurel, at which

points important interchange of freight is conducted be-

tween the principal applicant carriers. However, Bur-

lington’s relative participation in traffic involving manu-

factures and miscellaneous and forwarder traffic, via

Missouri River and Denver gateways, and in long-haul

transcontinental traffic via those gateways, compared to

its other type traffic, is insignificant.

The flow of traffic between Pacific Northwest and Mid-

west and Eastern territory is generally unbalanced, the

eastbound and westbound movements having distinctive

differences. Historically, eastbound traffic generally con-

sisted of basic or semi-basic products of the area served,

principally in the group products of agriculture, prod-

ucts of mines and products of forests.

Significantly, the transcontinental hauls of the rail-

roads of the Pacific Northwest are among the longest

rail hauls in the world. As distances increase, the effi-

ciency and economy of rail transportation in relation to

motor carriage likewise increase. The long haul, lower-

rated production of the west gathered from the produc-

ing areas throughout the territory is generally not at-

tractive to motor carriers and for the most part not

susceptible to economical transportation by any other

mode of transportation and is entirely dependent upon

rail transportation. Whereas, the higher-rated manufac-

tured articles moving to the west for consumption and

those products of agriculture, such as grain, for which

there is a relatively inelastic demand, are highly vul-

nerable to intermodal competition. It is the relatively

higher rated traffic which has historically served to bal-

ance the revenues of the rail carriers engaged in trans-

porting in volume the lower-rated, market-competitive

traffic of the west.

However, throughout western Minnesota and North

Dakota, Great Northern and Northern Pacific have main-

IE ARE SIR RELIES RNS FEMORIS RTE MRA BE

tained an extensive system of branch lines in order to

provide grain producers with efficient transportation of

products to the major markets. Burlington maintains an

extensive branch line system, principally for grain in

Nebraska and Kansas. Coupled with the extensive branch

line operation has been the establishment and mainte

nance of inspection points to facilitate merchandising of

grain, and the railroads have continued to make contri-

butions in the vital matter of car supply. In recent

years, agriculturally exempt motor carriers have created

discriminatory conditions of competition between motor

carrier transportation and railroad transportation which

have caused some concern to the railroads, particularly

dealing with movement of exempt agricultural commodi-

ties in a return movement when they had previously

participated in a single directional movement. Moreover,

in recent years when industrial production of the Pacific

Northwest has evidenced signs of growth as a result of |

new producing plants of finished articles, substantial aids

to the economy of the Pacific Northwest, provide only

a limited market area, except for surplus production,

and such traffic which previously moved westbound, is

vulnerable and attractive to motor carrier competition,

and lost to the long hauls of the railroads.

Thus, railroads serving the western areas face a pros-

pect of continuing market problems in the movement of

basic products of the west to national markets in co-

operation with producers of the area, and declining re

turn on westbound long-haul movements of finished arti-

cles which would not be replaced by revenues on shorter

hauls from decentralized plants.

: Western territory generally has historically been a

market for finished products of the East and Midwest.

Under national economic changes, including development

of industry in the South, the Southwest and along the

Pacific seaboard, interior territory and terminal areas

of applicant railroads remain a market for finished prod-

ucts of East and Midwest, but with the significant

changes that decentralized producers of many major con-

modities, particularly in California, now distribute in a

570

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571

reverse direction as far from the Pacific seaboard as

central Montana and east thereof.

Moreover, with concern for national economic changes,

it is significant to note that when the railroads were

built westward during the last part of the last century,

problems of inducing traffic from the newly opened areas

necessitated establishment of branch lines to develop the

territory in relation to known natural resources and a

responsibility to provide low rate levels on those basic

products of the newly opened areas moving eastward

with the view that flow of finished articles of consump-

tion would move westbound to the new areas and pro-

vide a compensatory balancing of traffic and revenue off-

setting the depressed charges for movement of the basic

products of the area.

Considerable traffic terminating in the area served by

applicant railroads is included in statistical data dealing

with group manufactures and miscellaneous and for-

warder traffic described elsewhere herein, Such traffic

has always been higher-rated traffic than other groups

and is attractive and vulnerable to motor carrier com-

petition which has been aided by demands of interior

territory for movement of such traffic in less than car-

load quantities and improvements in available highway

facilities.

During the period up to the early thirties the Northern

Lines participated in substantial movements of solid fuels

from producing areas on their lines and at and east of

their eastern termini. Those movements, except for move-

ments to public utility plants, have been eroded by the

increased use of petroleum and natural gas. Petroleum

products until the early thirties moved almost exclusively

by rail throughout the area, but pipe lines from produc-

mg areas to strategic locations within terminal areas

on applicant railroads’ lines have for all practical pur-

poses eliminated long haul movements of light petroleum

products by rail.

Extension of navigation on the Columbia River, per-

mitting water borne petroleum products to move via

barge to up river points accessible to points in the Inland

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Empire * area, together with extensive use of tank ships

in coastwise operation on the Pacific Ocean, and motor

truck distribution beyond river terminals, has eliminated

rail movement of light petroleum products to and through

Pacific coast terminals. :

Over the past three decades, improvement of public |

highways, together with technological improvements in |

motor vehicles, has made the general flow of manufac-

tured goods to the interior areas vulnerable to growing

motor carrier competition. In addition, statutory exemp-

tion in current regulatory laws has enabled motor car-

riers to participate in the movement of agricultural

products without publication of rates and with no re-

sponsibility to avoid discrimination or preference and

prejudice as between shippers or localities, which exemp-

tion has also made it possible for motor carriers of man-

ufactured and finished commodities having a one way

movement to balance their operations by securing return

hauls of agricultural commodities from selected points

at unpublished rates substantially below rail carload rates

on the same commodities. Moreover, in recent years

specialized motor carriers handling commodities such as

bulk cement, agricultural implements and tractors, and

iron and steel articles have made serious inroads on reve-

4 nues received from those traffic groups, both from traffic

4 lost and rate reductions made to maintain rail transpor-

tation competitive. Private motor carriage together with

low cost water transportation on the Great Lakes and

F Mississippi River have had effect on revenue reduction

i from applicant railroads. Some commodities, such as

building materials, have been partially retained by the

4 railroads, but requirement for off-track deliveries has

F permitted continued loss of traffic despite rate reduction

3 to meet motor truck competition.

Although there are significant aspects on the other

side of the coin, such as use of improved and specialized

572

2 15It was stipulated that the Inland Empire area is defined as

eastern Washington, northern Idaho, and western Montana, bounded

on the west by the Cascades, on the north by the Canadian border,

on the east by the Rockies and Bitterroot range and on the south

by the Blue Mountains.

573

rail freight equipment designed for specific shippers or

specific types of commodities, and extended use of tech-

nological advances in railroad operational techniques

where possible and feasible, and while railroad partici-

pation in traffic in finished articles should normally fol-

low national increases in population and production, be-

cause of economic and technological change and compe-

tition of other modes of transportation, applicant car-

riers’ experience indicates they are not securing their

share of that increase and this is a continuing threat to

the maintenance of sound railroad service,

The operations unified as proposed un=«* ~.«w Com-

pany’s direction and control with importan »* | ° routes

between California, Oregon, and Washingtom, »e one

hand, and transcontinental territory on the other, and

its services to and from intervening areas, together with

enlarged stock of rolling equipment of varied types and

uses, and an ability to coordinate that equipment to

serve the needs of the enlarged service area, would per-

mit a revision of and grouping of revenues both from

the traffic above described with revenues from the basic

commodity groups originated in the interior in a pat-

tern which would produce a stronger railroad than the

component applicant carriers separately. Because Great

Northern’ lines are generally north of those of Northern

Pacific, and both are north and west of those of Bur-

lington, and because the physical characteristics of the

country traversed by those railroads are somewhat dif-

ferent, there are significant differences in their traffic

experiences in the major commodity groups from which

their revenues are derived, and those differences, includ-

ing fluctuation of traffic and revenues arising from

such conditions as bad harvest for particular crops,

shrinkage in ore, iron and steel shipments during in-

dustrial strikes, and other economic conditions which

from time to time affect the volume of traffic in certain

commodities and certain areas, give impetus to the pro-

posals in that efforts to balance traffic are a constant

concern in the operations of a carrier system. The highly

variant experiences in those major commodity groups by

the principal applicant carriers, it is advanced, would

make for a more balanced transportation agency under

nae Sey es ae

574 /

consolidation. Those differences are reflected in the data

which follow.

Great Northern’s railway operating revenues for 1960

were $246,024,650, of which its gross carload freight

revenue aggregated $221,671,274, and by major commod-

ity groups are divided as follows:

Gross % of

freight system

Group Carloads Tons revenue C.L. rev.

Products of agriculture 216,313 9,400,040 $70,219,799 31.68

Animals and products 21,447 288,214 3,896,599 1.76

Products of mines 418,697 26,465,179 40,250,458 18.16

Products of forests 119,037 3,963,179 37,900,327 17.10

Manufactures and misc. 251,799 17,629,647 63,831,964 28.80

Forwarder traffic 15,976 170,347 5,572,127 2.50

Northern Pacific’s railway operating revenues for 1960

were $174,915,492, of which its gross carload freight

revenue aggregated $155,570,634, and by major commod-

ity groups was divided as follows:

; Gross % of

; freight system

; Group Carloads Tons revenue’ CLL. rev.

; pa aoc poten

7 Products of agriculture 134,272 5,561,486 $32,022,139 20.58

4 Animals and products 20,136 287,157 4,090,623 2.63

; Products of mines 100,780 5,825,494 12,707,165 8.17

; Products of forests 167,330 5,811,561 46,301,843 29.76

| Manufactures and misc, 221,780 6,998,380 58,013,482 37.29

Forwarder traffic 7,131 74,043 2,435,382 1.57

Burlington’s railway operating revenues for 1960 were

$251,135,890, of which its gross carload freight revenue

aggregated $211,504,613, and by major commodity groups

was divided as follows:

575

Gross % of

freight system

Group Carloads Tons revenue C.L. rev.

Products of agriculture 281,331 11,771,182 $47,989,589 22.69

Animals and products 101,884 1,413,321 17,149,764 8.11

Products of mines 299,909 16,912,562 32,668,625 15.45

Products of forests 83,690 2,538,776 14,409,752 6.81

Manufactures and misc. 474,116 13,649,299 89,448,715 42.29

Forwarder traffic 72,453 789,559 9,838,158 4.65

SP&S’ railway operating revenues for (on a system

basis) 1960 were $32,705,176 of which its gross car-

load freight revenue aggregated $30,364,409, and by

major commodity groups was divided as follows:

Gross % of

freight system

Group Carloads Tons revenue C.L. rev.

Products of agriculture 40,896 1,747,204 $ 7,081,186 23.32

Animals and products 2,445 46,764 251,246 83

Products of mines 10,811 598,543 1,115,358 3.67

Products of forests 83,340 2,861,407 11,641,793 38.34

Manufactures and mise. 111,919 3,420,399 9,586,529 31.57

Forwarder traffic 4,344 79,145 688,297 2.27

Pacific Coast’s railway operating revenues for 1960

were $318,311, of which its gross carload freight revenue

was $281,421, and segregated by designation of class in

which it received revenue of $10,000 or more, is as

follows:

Gross % of

freight system

Group Carloads Tons revenue CLL. rev.

Products of mines 760 43,609 $ 44,881 15.95

Manufactures and mise. 5,940 162,068 230,948 82.06

16 SP&S railway operating revenue alone for 1960 was $25,048,890.

There is no breakdown of that data showing gross carload revenue

except on a system basis.

576

Based on the above, and on a consolidated basis, the

operations of Great Northern, Northern Pacific, Bur-

lington and SP&S (exclusive of Pacific Coast the reve-

nues of which were small as previously indicated) for

1960, would have reflected an improved balance both in

the separate classes and in the major groups and a

higher degree of stability, as follows:

Carload Percentage

freight revenues distribution

Group 1960-unified unified

Products of agriculture $157,312,713 25.41

Animals and products 25,388,232 4.10

Products of mines 86,741,606 14.01

Products of forests 110,253,715 17.81

Manufactures and misc. 220,880,690 35.68

Forwarder traffic 18,533,964 2.99

$619,110,920 100.00

Railroad properties—Valuations :

The property involved in the proposed mergers in-

cludes all of the properties of Great Northern, Northern

Pacific, Burlington and Pacific Coast, and the property

involved in the proposed lease includes all of the property

of SP&S. In the tabulation attached as appendix H are

shown the recorded valuations of the transportation prop-

erties of each of the named carriers as determined by

the Commission for rate-making purposes, as of June

30, 1915, for Great Northern (133 LC.C. 1, 153, 156),

June 30, 1917, for Northern Pacific (25 Val. Rep. 397,

440) and for Burlington (134 L.C.C, 68, 69), June 30, 1916,

for Pacific Coast (121 LC.C, 11, 16) and for SP&S (41

Val. Rep. 1, 27). Where applicable the data reflect ap-

propriate adjustments heretofore necessary to give effect

to various acquisitions and other changes which, from

time to time, were combined to form each of the present

systems, Separately shown is the net cost of additions

and betterments made to the properties of each of the

named carriers since the valuation dates indicate above

formed by the Commission to December 31, 1960.

577

oT:

Each of the applicants, other than New Company,

observes depreciation accounting with respect to railroad

property and equipment in accordance with the provi-

sions of the uniform system of accounts for railroads

prescribed by the Commission. For all such applicants,

the rates so accrued by classes of property are reflected

in their respective annual reports to this Commission.

ent ete Sa a %

Other properties—Valuations :

Valuations ascribed to non-railroad properties are dis-

cussed herein in connection with stock exchange consid-

erations and approved reports, Those valuations are the

results of independent examinations and appraisals of

various types of properties by a number of qualified

appraisers whose identity and extent of their analysis

is likewise discussed.

Financial.

The three major railroad applicants, Great Northern,

Northern Pacific, and Burlington, have enjoyed a mode-

rate degree of prosperity over the past several years, and

each railroad is currently in a relatively healthy financial

condition. SP&S has enjoyed a similar position, but, as

it is wholly owned by Great Northern and Northern Pa-

cific, its success is dependent upon the success of its par-

ent railroads. Pacific Coast is dependent entirely upon

Great Northern. The financial position of those carriers

is best portrayed in the series of appendices attached to

which reference is made.

Attached hereto as appendix IJ-1 is a tabulation show-

ing in separate columns genera] balance sheet statements,

as at August 31, 1961, for (1) New Company, (2)

Northern Pacific, (3) Great Northern, (4) Pacific Coast,

(5) combined balance sheet data of New Company em-

bracing that of Great Northern, Northern Pacific, and

Pacific Coast, (6) account adjustments and eliminations

_ giving effect to Northern Lines merger transaction, and

_ (7) adjusted and combined pro-forma general balance

sheet statement of New Company after Northern Lines

578

merger transaction is effected, together with appropriate

notes.

Appendix I-2 hereto is a tabulation showing in sepa-

rate columns as at August 31, 1961 (1) pro-forma gen-

eral balance sheet statement of New Company, after

Northern Lines merger transaction is effected, (2) ac

count adjustments to reflect results of proposed issuance

and purchase of $70 million Burlington bonds, (3) gen-

eral balance sheet statement of Burlington, (4) account

adjustments and eliminations giving effect to Burlington

merger transaction, and (5) adjusted and combined pro- |

forma general balance sheet statement of New Company

after Northern Lines merger transaction and subsequent

Burlington merger transaction is effected, (6) account

adjustments and eliminations of interermpany transac-

tions, and (7) pro-forma general balance sheet statement

of New Company, after subsequent Burlington merger

transaction, together with appropriate notes.

Appendix I-3 hereto is a tabulation showing in sepa-

rate columns as at August 31, 1961, (1) pro-forma gen-

eral balance sheet statement of New Company after

Northern Lines merger transaction and Burlington merg-

er transaction are effected, (2) general balance sheet

statement of SP&S, (3) combined balance sheet data of

New Company, (4) account adjustments and eliminations

giving effect to subsequent lease by New Company of

SP&S, and (5) adjusted and combined pro-forma gen-

eral balance sheet statement of New Company after

Northern Lines merger, Burlington merger, and SP&

lease transactions effected, together with appropriate

notes,

Appendix I-4 hereto reflects the pro-forma retained

income-unappropriated as of August 31, 1961, after giv-

ing effect to unification of the subject properties.

The accounting data shown in the pro-forma balance

sheet statements are not to be construed as recommended

for approval at this time, but will be subject to considera-

tion upon submission of statements showing all expendi-

tures and the accounting entries proposed to record the a

transactions as required by the order herein.

~ ah NE 6k el we aaa ed

579

The excess of current assets over current liabilities as

of August 31, 1961, produces a net working capital posi-

tion for Great Northern, Northern Pacific and Burlington

of $32.6 million, $73.4 million, and $28.9 million, respec-

tively, or a combined total of $134.9 million before ad-

justments and elimination of intercompany balances.

The net working capital position of Great Northern,

Northern Pacific and Burlington which exceeds by $18.2,

$62.6 and $13.9 million, respectively, the mean monthly

average of their respective operating expenses, less de-

preciation, for the first eight months of 1961 of $14.4,

$10.8, and $15.0 million, respectively, is more than ade-

quate to meet normal requirements. The pro-forma bal-

ance sheet after giving effect to merger of New Company

and Burlington, including lease of SP&S, and after inter-

company adjustments and eliminations,

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