Canadian National Railway Company, Grand Trunk Corporation, and Grand Trunk Western Railroad IncorporatedControlIllinois Central Corporation, Illinois Central Railroad Company, Chicago, Central and Pacific Railroad Company, and Cedar River Railroad Company

DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[STB Finance Docket No. 33556] \1\

Canadian National Railway Company, Grand Trunk Corporation, and

Grand Trunk Western Railroad Incorporated--Control--Illinois Central

Corporation, Illinois Central Railroad Company, Chicago, Central and

Pacific Railroad Company, and Cedar River Railroad Company

AGENCY: Surface Transportation Board.

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\1\ This decision covers: (i) the primary application, which was

filed in the STB Finance Docket No. 33556 lead docket; and (ii) one

related filing, an application for terminal trackage rights in

Springfield, IL, filed in the embraced docket, STB Finance Docket

No. 33556 (Sub-No. 1), Canadian National Railway Company, Illinois

Central Railroad Company, The Kansas City Southern Railway Company,

and Gateway Western Railway Company--Terminal Trackage Rights--Union

Pacific Railroad Company and Norfolk & Western Railway Company.

ACTION: Decision No. 6 in STB Finance Docket No. 33556; Notice of

Acceptance of Primary Application and Related Filing; Issuance of Final

Procedural Schedule.

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SUMMARY: The Board is accepting for consideration the primary

application and related filing filed July 15, 1998, by Canadian

National Railway Company (CNR), Grand Trunk Corporation (GTC), and

Grand Trunk Western Railroad Incorporated (GTW),\2\ Illinois Central

Corporation (IC Corp.), Illinois Central Railroad Company (ICR),

Chicago, Central and Pacific Railroad Company (CCP), and Cedar River

Railroad Company (CRRC).\3\ The primary application seeks Surface

Transportation Board (Board) approval and authorization under 49 U.S.C.

11321-26 for: (1) the acquisition of control, by CNR, through its

indirect wholly owned subsidiary Blackhawk Merger Sub, Inc., of control

of IC Corp. and through it of ICR and its railroad affiliates, and (2)

for the resulting common control by CNR of GTW and its railroad

affiliates and ICR and its railroad affiliates. The related filing, an

application for terminal trackage rights,

[[Page 43745]]

seeks related relief contingent upon approval of the primary

application.

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\2\ CNR, GTC, and GTW, and their affiliates, are referred to

collectively as CN.

\3\ IC Corp., ICR, CCP, and CRRC, and their affiliates, are

referred to collectively as IC. CN and IC are referred to

collectively as applicants.

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Having received public comments on the proposed procedural

schedule, as modified by the Board, and applicants' reply to those

comments, the Board is issuing a final procedural schedule. This

schedule provides for the issuance of a final decision no later than

May 11, 1999 (300 days after the primary application's filing date of

July 15, 1998).

DATES: The effective date of this decision is August 14, 1998. Any

party who wishes to participate in this proceeding as a party of record

must file, no later than August 31, 1998, a notice of intent to

participate. Descriptions of responsive (including inconsistent)

applications, and petitions for waiver or clarification regarding those

applications, must be filed by August 31, 1998. All comments, protests,

requests for conditions, and any other evidence and argument in

opposition to the primary application, including filings by the U.S.

Department of Justice (DOJ) and U.S. Department of Transportation

(DOT), and responsive (including inconsistent) applications must be

filed by October 13, 1998. Response to comments, protests, requested

conditions, and other opposition, response to comments of DOJ and DOT,

rebuttal in support of the primary application and related application,

and response to inconsistent and responsive applications, must be filed

by November 27, 1998. For further information respecting dates, see

Appendix A (Final Procedural Schedule).

ADDRESSES: Send an original and 25 copies of all pleadings referring to

STB Finance Docket No. 33556 to: Surface Transportation Board, Office

of the Secretary, Case Control Unit, 1925 K Street, NW., Washington, DC

20423-0001.\4\ In addition, one copy of all documents in this

proceeding must be sent to Administrative Law Judge David Harfeld,

Federal Energy Regulatory Commission, Office of Administrative Law

Judges, 888 First Street, N.E., Suite 11F, Washington, DC 20426 [(202)

219-2514; FAX: (202) 219-3289] and to each of applicants'

representatives: (1) Paul A. Cunningham, Esq., Harkins Cunningham, 1300

19th Street, NW., Suite 600, Washington, DC 20036-1609; and (2) William

C. Sippel, Esq., Oppenheimer Wolff & Donnelly, Two Prudential Plaza,

45th Floor, 180 North Stetson Avenue, Chicago, IL 60601-6710.

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\4\ In order for a document to be considered a formal filing,

the Board must receive an original and 25 copies of the document,

which must show that it has been properly served. In addition, each

formal filing must be accompanied by an electronic submission per

our requirements as discussed in detail in this decision. Parties

must clearly label each formal filing with an identification acronym

and number. See 49 CFR 1180.4(a)(2). Each disk or CD should be

clearly labeled with the identification acronym and number of the

corresponding paper document, and labeled as containing confidential

or redacted materials. Documents transmitted by facsimile (FAX) will

not be considered formal filings and are not encouraged because they

will result in unnecessarily burdensome, duplicative processing.

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In addition to submitting an original and 25 copies of all paper

documents filed with the Board, parties also must submit, on 3.5-inch

IBM-compatible floppy diskettes (disks) or compact discs (CDs), copies

of all textual materials, electronic workpapers, data bases and

spreadsheets used to develop quantitative evidence. Textual materials

must be in, or convertible by and into, WordPerfect 7.0. Electronic

spreadsheets must be in, or convertible by and into, Lotus 1-2-3 97

Edition, Excel Version 7.0, or Quattro Pro Version 7.0. A copy of each

disk or CD submitted to the Board should be provided to any other party

upon request.\5\ Further details are discussed below.

\5\ In Decision No. 3 (served May 19, 1998, and published on May

22, 1998, in the Federal Register at 63 FR 28442-44), we denied a

petition for reconsideration of Decision No. 2, concerning the

requirement that parties submit copies of all textual materials on

disks or CDs, and stated that parties may individually seek a waiver

from the disk-CD requirement.

FOR FURTHER INFORMATION CONTACT: Julia M. Farr, (202) 565-1613. [TDD

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for the hearing impaired: (202) 565-1695.]

SUPPLEMENTARY INFORMATION: Applicants are seeking approval of a

proposed transaction set forth in their primary application (CN/IC-6)

filed on July 15, 1998. The proposed transaction involves the

acquisition of control by CNR, through its indirect wholly owned

subsidiary Blackhawk Merger Sub, Inc., of IC Corp., and through it of

ICR and its railroad affiliates, and for the resulting common control

by CNR of GTW and its railroad affiliates and ICR and its railroad

affiliates.

The Applicants

CN's rail network consists of approximately 1,150 route miles in

the United States, and approximately 14,150 route miles in eight

Canadian provinces. CN has principal routes to every major metropolitan

area in Canada, and the major U.S. cities of: Buffalo, NY; Detroit, MI;

Duluth, MN/Superior, WI; and Chicago, IL. The eastern terminus of CN's

network is Halifax, Nova Scotia; the western termini are Prince Rupert

and Vancouver, British Columbia; and the southern terminus is Chicago.

CN's traffic, between Duluth/Superior and Chicago, is carried under

haulage agreements over the lines of The Burlington Northern and Santa

Fe Railway Company (BNSF) and Wisconsin Central Ltd. (WC).

IC operates approximately 3,370 route miles of track running north-

south between Chicago and the Gulf of Mexico, and east-west between

Chicago and Nebraska and Iowa. IC's main north-south route reaches

every major metropolitan area on the Mississippi River, including

Chicago, IL; St. Louis, MO; Memphis, TN; Jackson, MS; and New Orleans,

LA. IC's east-west route extends from Sioux City and Council Bluffs,

IA, in the West to Chicago in the East.

The principal routes of the combined CN/IC rail system would be

identical to those of the individual railroads. The southern terminus

of CN's rail system, Chicago, is the northern terminus of IC's rail

system. Applicants state that no track redundancies would be created by

the transaction, and no abandonments or substantial rerouting would

result from the combination of the two systems.

Tender Offer and Merger

According to applicants, on February 10, 1998, CN, Blackhawk Merger

Sub, Inc. (Merger Sub), and IC entered into an Agreement and Plan of

Merger (as subsequently amended, the Merger Agreement). In accordance

with the Merger Agreement, as of March 14, 1998, the CNR acquired

46,051,761 shares (or approximately 75%) of the outstanding common

stock of IC (the IC Common Shares), at a price of $39.00 per share

6 through a cash tender offer (the Tender Offer) by Merger

Sub. On June 4, 1998, CN consummated a second-step merger (the Merger)

between IC and Merger Sub, with IC being the surviving corporation. In

the Merger, the remaining 25% of outstanding IC Common Shares were

exchanged for approximately 10.1 million common shares of CN,

representing 10.3% of the outstanding common shares of CN after the

Merger on a fully diluted basis. As a result of the Tender Offer and

the Merger, CN became the indirect beneficial owner of all of the stock

of IC.

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\6\ Applicants stated that all monetary amounts listed in the

application are stated in U.S. dollars, unless otherwise noted.

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Voting Trust

Applicants state that, in accordance with the Merger Agreement, the

shares acquired by CN in the Tender Offer and

[[Page 43746]]

in the Merger are held in a voting trust (the Voting Trust) pursuant to

an agreement dated as of March 13, 1998, by and among CN, Merger Sub,

and The Bank of New York, a voting trustee that is a banking

corporation (the Trustee). The Trustee will act by written consent or

will vote all IC stock held by the Voting Trust (the Trust Stock) in

favor of any proposal necessary to effectuate the Merger pursuant to

the Merger Agreement, and, generally so long as the Merger Agreement is

in effect, against any other proposed merger, business combination, or

similar transaction involving IC. On other matters, including the

election or removal of officers, the Trustee generally will vote the

Trust Stock in the Trustee's sole discretion unless the holder(s) of

trust certificates, with the prior written approval of the Board,

directs the Trustee as to any such vote. GTC, a wholly owned subsidiary

of CN, currently holds the trust certificate for all IC stock in the

Voting Trust.

On February 25, 1998, CN received an informal opinion from the

Board's staff to the effect that CN's use of the Voting Trust will be

consistent with the Board's policies and will preclude unlawful control

of IC by CN.

Related United Transportation Union (UTU) Filing

On July 16, 1998, UTU filed a Motion to Dismiss and Comment on the

Procedural Schedule (UTU-3). UTU is the designated representative for

various crafts or classes of operating employees on ICR and GTW. The

request for dismissal is based upon the ground that these carriers have

violated 49 U.S.C. 11323 by effectively merging the properties of these

two carriers into one corporation for the management and operation of

the previously separately owned properties without the approval or

authorization of the Board. UTU further states that IC and CN have

violated section 11323 by beginning to coordinate the labor relations

functions of these two large carriers without prior approval.

On August 5, 1998, applicants filed a Reply to UTU's Motion to

Dismiss (CN/IC-12). Applicants state that: (1) UTU has raised no issue

supporting a conclusion that CN may have engaged in unlawful control of

IC, and that, even if the particular conduct UTU alleges occurred, it

would amount to no more than necessary and proper communication and

coordination between merging railroads; (2) UTU has cited no legal

authority for its basic premise that the exchange of information it

alleges constitutes improper conduct or evidence of unlawful control,

and that publicly held railroads negotiating a potential merger

agreement are entitled to engage in appropriate due diligence inquiries

about each other, as required by the Board's rules and decisions, and

as contemplated by the Board's protective order; 7 and (3)

even if UTU's motion alleged an arguable control violation, it would

not warrant dismissal, and that such a violation could not warrant

denial of the application unless it were so serious and substantial

that it clearly outweighed other public interest factors, which UTU has

not alleged or shown. Applicants request that the Board should deny

UTU's motion as being substantively without merit, both factually and

legally, and procedurally flawed.

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\7\ Applicants note that the Board issued a protective order in

Decision No. 1, served February 26, 1998, which provided that

exchanges of data or other cooperative efforts between CN and IC for

purposes of this proceeding will not be deemed a violation of 49

U.S.C. 11323; UTU alleges that CN and IC filed together a notice of

intent to file a joint application for CN control of IC. Applicants

state that such joint notices of intent are common in control

proceedings, and its use here is of no consequence.

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The Board shares UTU's concerns that there not be management or

operations in common between railroad entities absent our approval of

the common management or operations. Here, however, the applicants have

satisfactorily addressed the matters raised by UTU and the factors

described do not demonstrate unlawful control. Nor does the structure

of the proposed arrangement reflect unauthorized common control of two

or more carriers. As previously mentioned, by letter dated February 25,

1998, the Board's staff issued an informal opinion concerning a Voting

Trust Agreement (VTA) proposed to be entered into by and between CNR,

Merger Sub, and a Trustee, and found that the VTA provided for the

placement, into an independent and irrevocable voting trust, of all of

the common stock of IC Corp. acquired by CN or by any of its

affiliates. In the staff opinion, it was found that the voting trust to

be established under the VTA will effectively insulate CN and its

affiliates from the violation of Subtitle IV of Title 49 of the United

States Code and the policy of the Board that would result if CN were to

acquire, without authorization, a sufficient interest in the carrier

subsidiaries of IC Corp. as otherwise to result in control; and that,

under the VTA, control of IC Corp. and its carrier subsidiaries can be

exercised by CN and its subsidiaries only subsequent to approval by the

Board of the CN/IC control application. We agree with the staff opinion

and find that applicants' VTA conforms to Board regulations as well as

long-standing Board and Interstate Commerce Commission precedent

recognizing that beneficial ownership can be separated from control by

an appropriate voting trust instrument.8 Thus, UTU's request

for dismissal of the proceeding is denied at this time.9

Should UTU or any other person obtain evidence of unauthorized common

control, through breach of the VTA or otherwise, that person may submit

that evidence for our review.

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\8\ See CSX Corporation and CSX Transportation, Inc., Norfolk

Southern Corporation and Norfolk Southern Railway Company--Control

and Operating Leases/Agreements--Conrail Inc. and Consolidated Rail

Corporation, STB Finance Docket No. 33388, Decision No. 89 (STB

served July 23, 1998) (CSX/NS/CR No. 89), slip op. at 127.

\9\ UTU states that the Board should dismiss the proceeding, or

alternatively, impose the statutory procedural schedule set forth at

49 U.S.C. 11325(b) to ensure proper review of the transaction.

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Labor Impact

Applicants have submitted one Labor Impact Statement which shows

the projected effects of the CN/IC merger on all categories of

employment, including both agreement and nonagreement personnel of the

combined CN/IC system. The Labor Impact Statement is organized by job

classification, and for each classification, it reflects the location

at which positions will be created, eliminated, or transferred, if

applicable; the number of positions affected at each location; and

whether positions will be moved to another location, abolished, or

added. If a position is to be relocated, the Labor Impact Statement

identifies the new location.

As explained in the Joint Verified Statement submitted with the

Labor Impact Statement,10 the number and percentage of

adversely affected employees will be small in relation to the number of

employees on the combined CN/IC system. The combined system will have

approximately 26,000 employees, of which approximately 5,200 will be in

the United States. Approximately 311 positions will be abolished, and

approximately 138 other positions will be transferred within the United

States. In this regard, applicants anticipate the following: (1)

Impacts of the transaction will be mostly accommodated by normal

attrition during the 3-year implementation period; (2) the transaction

should have a positive effect on job opportunities; (3) some employees

may be offered the option of receiving a severance package;

[[Page 43747]]

and (4) some adversely affected employees will refuse relocation offers

and voluntarily forfeit their right to protective benefits.

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\10\ See CN/IC-7 at 283-84, Joint Verified Statement of Richard

J. Dixon, Joseph T. Torchia, and James M. Harrell.

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Applicants anticipate that, if we approve the transactions proposed

in the primary application and the related filing, we will impose on

such transactions the standard labor protective conditions customarily

imposed on similar such transactions. See CN/IC-7 at 283.

Related Filing

In STB Finance Docket No. 33556 (Sub-No. 1), CN, IC, Kansas City

Southern Railway Company (KCS) and its affiliate Gateway Western

Railway Company (GWWR), have filed an application for an order under 49

U.S.C. 11102 permitting GWWR to use without restriction three short

connected segments of terminal trackage in Springfield, IL. These

segments are now owned by Union Pacific Railroad Company (UP) as

successor to SPCSL Corp. (SPCSL), and Norfolk & Western Railway Company

(N&W), an affiliate of Norfolk Southern Corporation (NS).11

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\11\ Applicants in this sub-numbered docket have advised that

they have contacted UP about securing consent for use of the

trackage involved in order for GWWR and IC to be able to interchange

traffic in Springfield without regard to the limitations of the

Ridgely Yard agreement, and are willing to continue such discussions

after the filing of this application. They will advise the Board if

those discussions make it unnecessary to act on this application.

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Applicants state that, without such relief, GWWR and IC will be

unable to establish an efficient interchange necessary to serve

effectively the new competitive traffic movements made possible by the

CN/IC combination, as augmented by an agreement among CN, IC, and KCS

dated April 15, 1998.12

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\12\ Applicants state that this agreement creates a strategic

alliance among the parties and provides for their cooperative

undertakings to provide joint-line service in specified areas

competitive with other rail carriers, and provides that the alliance

will use Springfield as one of two main interchanges for designated

traffic. The agreement also provides that the railroads will use

their best efforts to remove any impediments to the full utilization

of an efficient connection between IC and GWWR in the vicinity of

Springfield.

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Acceptance of Primary Application and Related Filing

We are accepting the primary application for consideration because

it is in substantial compliance with the applicable regulations,

waivers,13 and requirements. See 49 U.S.C. 11321-26; 49 CFR

part 1180. We are also accepting for consideration the related filing,

which is also in substantial compliance with the applicable regulations

and requirements.14

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\13\ In Decision No. 4, served June 23, 1998, we granted to the

extent set forth in the decision, applicants' CN/IC-4 petition for

waiver or clarification, and related relief.

\14\ We reserve the right to require the filing of supplemental

information from applicants or any other party or individual, if

necessary to complete the record in this matter.

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Public Inspection

The primary application and related filing, including the various

accompanying exhibits, are available for inspection in the Docket File

Reading Room (Room 755) at the offices of the Surface Transportation

Board, 1925 K Street, N.W., in Washington, DC.

Procedural Schedule

In Decision No. 5, served June 23, 1998, and published June 26,

1998, in the Federal Register at 63 FR 34956-59, we issued a proposed

procedural schedule, and invited all interested parties to submit

written comments on the proposed procedural schedule by July 16, 1998,

with applicants' reply due by July 27, 1998. In response, we received

the following comments: (1) UTU-3, UTU's motion to dismiss and comment

on procedural schedule; (2) The Fertilizer Institute's (TFI) comments;

and (3) CN/IC-10, applicants' comments. Applicants also filed reply

comments (CN/IC-11) on July 27, 1998 and Allied Rail Unions responded

(ARU-2) on August 5, 1998, to that filing, and argued against

shortening the proposed schedule . We have carefully reviewed and

considered all of these comments.

As we noted previously in our discussion of UTU's motion to

dismiss, UTU requests that we dismiss the proceeding, or alternatively,

impose the statutory procedural schedule set forth at 49 U.S.C.

11325(b) to ensure proper review of the transaction. The statute allows

16 months for the processing of major consolidation proceedings. Under

49 U.S.C. 11325(b)(3), the Board must conclude the evidentiary stage of

the proceeding within 13 months of the application's filing

date,15 and must issue the final decision by the 90th day

after the conclusion of the evidentiary stage.

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\15\ Specifically, the statute requires the completion of the

evidentiary stage within 12 months after publication of the Federal

Register notice accepting the application. That publication is due

no later than 30 days after the application is filed.

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In their comments and reply comments, applicants request that we

adopt their original 180-day proposed schedule or, at least, adopt a

middle-ground schedule and a single filing date approach. Applicants

further state that, while the CN/IC transaction is important, it does

not compare in size and complexity to the recent control transactions

in CSX/NS/CR, UP/SP, and BN/SF. TFI also urges that we adopt a schedule

similar to the 180-day schedule proposed by applicants.

Specifically, applicants request that we eliminate the proposed

bifurcation and trifurcation of filings because it will create needless

problems and burdens on all parties. TFI also urges the elimination of

staggered filing dates for different parties. Applicants propose that

all comments, protests, and requests for conditions, any other evidence

or argument in opposition to the application by all parties, and any

inconsistent or responsive applications, be due at the same date (F+90

days under the Board's proposed schedule), and that applicants'

rebuttal or other responses to those filings be due 30 days later

(F+120 days). Applicants note that no major merger in this decade has

been considered under a fragmented procedural format, and that there is

nothing inherent in the CN/IC transaction to warrant such a departure

from consistent prior practice.

We will grant applicants' and TFI's request that we eliminate the

staggered filing dates. As suggested by applicants, all comments,

protests, and requests for conditions, any other evidence or argument

in opposition to the application by all parties, and any inconsistent

or responsive applications, will be due on the same date (F+90 days).

Applicants' rebuttal and other responses to those filings will be due

45 days later. Other relevant due dates are discussed in detail under

our discussion of filing due dates.

Few objections have been raised to the 10-month proposed procedural

schedule. In light of UTU's concerns, we are reluctant at this time to

reduce the time for processing the application. Earlier comments in

opposition to applicants' 6-month proposed procedural schedule were

filed by the Brotherhood of Maintenance of Way Employees (BMWE) on June

2, 1998, and the UTU on June 8, 1998. Both BMWE and UTU had stated that

applicants' 180-day proposed schedule was too short and urged the Board

to adopt the statutory procedural schedule set forth at 49 U.S.C.

11325(b). Alternatively, UTU urged the Board to adopt a 350-day

schedule modeled upon the procedural schedule issued by the Board in

CSX/NS/CR No. 6 (STB served May 30, 1997). We believe that a 10-month

procedural schedule would not delay unnecessarily any benefits that

would flow from the proposed integration of the CN and IC systems and

is middle-ground schedule that would allow sufficient time to develop

the record upon which the Board's

[[Page 43748]]

decision would be based. If, at some point in this proceeding (perhaps

after Board receipt of filings due on F+90 days), it becomes clear that

there are few contested issues to be resolved, we would be open to a

reexamination of whether a shorter schedule and a more expeditious

resolution can be accommodated.

Notice of Intent To Participate

Any person who wishes to participate in this proceeding as a party

of record (POR) must file with the Secretary of the Board, no later

than August 31, 1998, an original and 25 copies of a notice of intent

to participate, accompanied by a certificate of service indicating that

the notice has been properly served on Judge Harfeld and on applicants'

representatives. In addition, as previously noted, parties must submit

one electronic copy of each document filed with the Board. Further

details respecting such electronic submissions are provided below.

We will serve, as soon as practicable after August 31, 1998, a

notice containing the official service list (the service list notice).

Each party of record will be required to serve upon all other parties

of record, within 10 days of the service date of the service list

notice, copies of all filings previously submitted by that party (to

the extent such filings have not previously been served upon such other

parties). Each party of record also will be required to file with the

Secretary of the Board, within 10 days of the service date of the

service list notice, an original plus five copies of a certificate of

service, along with an electronic copy, indicating that the service

required by the preceding sentence has been accomplished. Every filing

made by a party of record after the service date of the service list

notice must have its own certificate of service indicating that both

Judge Harfeld and all PORs on the service list have been served with a

copy of the filing. Members of the United States Congress (MOCs) and

Governors (GOVs) are not parties of record (PORs), and therefore, need

not be served with copies of filings, unless any such Member or

Governor has requested to be, and is designated as, a POR.

We will serve copies of our decisions, orders, and notices only on

those persons who are designated on the official service list as either

POR, MOC, or GOV. All other interested persons are encouraged to make

advance arrangements with the Board's copy contractor, DC News & Data,

Inc. (DC News), to receive copies of Board decisions, orders, and

notices served in this proceeding. DC News will handle the collection

of charges and the mailing and/or faxing of decisions, orders, and

notices to persons who request this service. The telephone number for

DC News is: (202) 289-4357.16

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\16\ An interested person does not need to be on the service

list to obtain a copy of the primary application or any other filing

made in this proceeding. Our Railroad Consolidation Procedures

provide: ``Any document filed with the Board (including

applications, pleadings, etc.) shall be promptly furnished to

interested persons on request, unless subject to a protective

order.'' See 49 CFR 1180.4(a)(3), as recently amended in Railroad

Consolidation Procedures--Modification of Fee Policy, STB Ex Parte

No. 556, 62 FR 9714, 9717 (Mar. 4, 1997) (interim rules), 62 FR

28375 (May 23, 1997) (final rules). Furthermore, DC News will

provide, for a charge, copies of the primary application or any

other filing made in this proceeding, except to the extent any such

filing is subject to the protective order heretofore entered in this

proceeding.

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Descriptions of, and Filings Respecting, Responsive (Including

Inconsistent) Applications 17

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\17\ An original and 25 copies of such descriptions, petitions

for waiver or clarification, Responsive Environmental Reports, and

Verified Statements must refer to STB Finance Docket No. 33556 (lead

docket) and must be filed with the Surface Transportation Board,

Office of the Secretary, Case Control Unit, 1925 K Street, N.W.,

Washington, DC 20423-0001. In addition, parties must submit one

electronic copy of each document filed with the Board. Further

details respecting such electronic submissions are provided below.

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Because the transaction proposed by applicants constitutes a major

transaction within the meaning of our rail consolidation rules (49 CFR

part 1180) 18 parties intending to file responsive

(including inconsistent) applications must submit descriptions of those

applications by August 31, 1998. The description must state that the

commenting party intends to file an application seeking affirmative

relief that requires an application to be filed with the Board (e.g.,

divestiture, purchase, trackage rights, inclusion, construction, or

abandonment) and must include a general statement of what that

application is expected to include. This will be considered a prefiling

notice without which the Board will not entertain applications for this

type of relief.

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\18\ See Decision No. 2, served March 13, 1998, and published

that day in the Federal Register at 63 FR 12574-75.

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Petitions for waiver or clarification by responsive (including

inconsistent) applicants must be filed by August 31, 1998. Each

responsive (including inconsistent) application filed and accepted will

be consolidated with the primary application in this proceeding.

Any responsive (including inconsistent) applicant must file by

September 21, 1998, either: (1) a verified statement that the

responsive (including inconsistent) application will have no

significant environmental impact; or (2) a responsive environmental

report (RER) that contains detailed environmental information regarding

the responsive (including inconsistent) application.

The RER

The RER should comply with all requirements for environmental

reports contained in our environmental rules at 49 CFR 1105.7. The RER

should be based on consultations with the Board's Section of

Environmental Analysis (SEA) and the various agencies set forth in 49

CFR 1105.7(b). In addition, the information in the RER should be

organized as follows: Executive Summary; Purpose and Need for Agency

Action; Description of the Inconsistent or Responsive Application and

Related Operations; Description of the Affected Environment;

Description of Alternatives; Analysis of the Potential Environmental

Impacts; Proposed Mitigation; and Appropriate Appendices that include

correspondence and consultation responses, bibliography, and a list of

preparers.

The purpose of an RER is to provide us the information we need to

assess the potential environmental impacts of all inconsistent and

responsive applications in the context of the overall merger proposal.

After an RER is received, SEA will verify the information contained in

the document. If the RER is acceptable, SEA will include the RER with

the Draft Environmental Assessment (Draft EA) for the entire merger

that will be served and made available for public comment.

In order to ensure timely, consistent, and appropriate

environmental documentation, inconsistent and responsive applicants

must consult with SEA as early as possible. If an RER is insufficient,

we may require additional environmental information or reject the

inconsistent or responsive application.

A verified statement of no significant impact

If an action proposed under an inconsistent or responsive

transaction would typically fall within 49 CFR 1105.6(c)(2), an RER

would not be required because such an action is generally exempt from

environmental review. In such a case, the inconsistent or responsive

applicant would be required to file only a verified statement. The

verified statement must demonstrate that the inconsistent or responsive

application meets the exemption criteria of 49 CFR 1105.6(c)(2). Again,

anyone desiring to file an inconsistent application or responsive

application must consult

[[Page 43749]]

with SEA as early as possible regarding the appropriate environmental

documentation.

SEA will review the verified statements. If a verified statement is

insufficient, we may require additional environmental information or

reject the inconsistent or responsive application. The verified

statements, like the RERs, will be included in the Draft EA, which will

be available for public review and comment.

Comments, Protests, Requests for Conditions, and Other Opposition

Evidence and Argument, Including Filings by DOJ and DOT; Responsive

(Including Inconsistent) Applications

Any interested persons, including the U.S. Attorney General and the

U.S. Secretary of Transportation, may file written comments, protests,

requests for conditions, and any other opposition evidence and

argument, as well as responsive (including inconsistent) applications

no later than October 13, 1998. This deadline applies to comments,

etc., addressing the primary application or the related filing

submitted with the primary application.

Parties filing comments, protests, requests for conditions, and any

other opposition evidence and argument (including filings by DOJ and

DOT) must submit an original and 25 copies of such documents, referring

to STB Finance Docket No. 33556 (lead docket). Parties filing

responsive (including inconsistent) applications must contact the

Office of the Secretary, Case Control Unit, at (202) 565-1681 to obtain

docket numbers for their respective applications, and must submit an

original and 25 copies of each responsive (including inconsistent)

application, referring to the assigned sub-docket number for that

application and must accompany such application with the appropriate

filing fee. All submissions must be filed with the Surface

Transportation Board, Office of the Secretary, Case Control Unit, 1925

K Street, NW., Washington, DC 20423-0001. In addition, as previously

noted, parties must submit one electronic copy of each document filed

with the Board. Further details respecting such electronic submissions

are provided below.

Written comments, etc., must be concurrently served by first class

mail on the U.S. Attorney General and the U.S. Secretary of

Transportation, Judge Harfeld, applicants' representatives, and all

other parties of record.

Written comments, etc., must include: (1) the docket number and

title of the proceeding; (2) the name, address, and telephone number of

the commenting party and its representative upon whom service shall be

made; (3) the commenting party's position, i.e., whether it supports or

opposes the proposed transaction; (4) a list of any specific protective

conditions sought; and (5) an analysis of the issues with particular

attention to our general policy statement for the merger or control of

at least two Class I railroads (49 CFR 1180.1), the statutory criteria

(49 U.S.C. 11324), and antitrust policy.

Protesting parties are advised that, if they seek either the denial

of the primary application or the imposition of conditions upon any

approval thereof, on the theory that approval without imposition of

conditions will harm either their ability to provide essential services

and/or competition, they must present substantial evidence in support

of their positions. See Lamoille Valley R.R. Co. v. ICC, 711 F.2d 295

(D.C. Cir 1983).

Response to Comments, Protests, Requested Conditions, and Other

Opposition, Including DOJ and DOT; Rebuttal in Support of Primary

Application and Related Application

Parties submitting responses to comments, protests, requested

conditions, and other opposition, including DOJ and DOT, and rebuttal

in support of the primary application and related application, must be

filed with the Board by November 27, 1998.

Other Dates

The procedural schedule adopted in this decision further provides:

(1) that applicants must file a Safety Integration Plan on August 14,

1998, as they have proposed; (2) that responses to any responsive

(including inconsistent) applications must be filed by November 27,

1998; (3) that rebuttal in support of responsive (including

inconsistent) applications must be filed by December 28, 1998; (4) that

briefs must be filed by February 5, 1999; (5) that oral argument will

be heard on March 8, 1999; (6) that, at the discretion of the Board, a

voting conference will be held on March 15, 1999; and (7) that the

final written decision, addressing the primary application and the

related filing, and also addressing any responsive (including

inconsistent) applications will be served on May 11, 1999.

Discovery

In Decision No. 2, served March 13, 1998, this proceeding was

assigned to Judge Harfeld for the handling of all discovery matters and

the initial resolution of all discovery disputes. Parties wishing to

engage in discovery must consult with Judge Harfeld, who is designated

to handle discovery matters and disputes. Judge Harfeld has the

authority to rule on discovery matters but not to modify the procedural

schedule.

Deadlines Applicable to Appeals and Replies

Any appeal to a decision issued by Judge Harfeld must be filed

within 3 working days of the date of his decision; any response to such

appeal must be filed within 3 working days of the date of filing of the

appeal; and any reply to any motion filed with the Board itself in the

first instance must be filed within 3 working days of the date of

filing of the motion.

Environmental Review Process

SEA has determined that preparation of an Environmental Assessment

(EA) is appropriate in this proceeding. This approach is consistent

with the Board's environmental rules at 49 CFR 1105.6(b)(4), which call

for an EA in a merger or acquisition such as this one. In making its

determination to prepare an EA, SEA considered the nature and scope of

environmental issues that could arise in this proceeding, as well as

its consultation with applicants and its evaluation of the information

to date, including the operating plan and associated environmental data

that CN/IC submitted with their primary application filed on July 15,

1998. We agree with SEA that an EA is warranted in this proceeding.

The procedural schedule that we are adopting will permit us to take

a hard look at environmental issues required by the National

Environmental Policy Act (NEPA) and related regulations of the Council

on Environmental Quality, and will provide the necessary time to enable

us to prepare an EA and to include public participation by federal,

state, and local agencies, as well as other concerned parties. If SEA

determines that this proceeding has the potential for significant

environmental impacts, then SEA may prepare an Environmental Impact

Statement, as required by NEPA.

The EA will address potential environmental impacts of activities

associated with the proposed merger, including rail line traffic

density increases and decreases, rail yard and intermodal facility

activity changes, and new construction. Specifically, the EA will

address potential environmental impacts on safety, transportation

systems, land use, energy, air quality, noise, biological resources,

water resources, historic and cultural resources, environmental

justice, and socioeconomic effects directly related to

[[Page 43750]]

changes in the environment, and will also include SEA's recommendations

for environmental mitigation.

Applicants originally proposed to file an environmental report 30

days after they filed their application. In a letter dated June 18,

1998, however, applicants requested that SEA conduct a modified

environmental review process in this proceeding. SEA concurs with this

approach. Under this approach, applicants provided, with their

application and operating plan, an environmental overview rather than

an environmental report. See CN/IC-6, Environmental Data--Exhibit 4, at

22-34. This is consistent with the Board's environmental rules at 49

CFR 1105.10(d), which waive the requirement for an environmental report

for applicants that retain an independent third-party contractor to

work under SEA's direction to prepare the necessary environmental

documentation. For this proceeding, applicants have retained the

requisite independent third-party contractor.

With direction and guidance from SEA, applicants will prepare and

submit to SEA a Preliminary Draft Environmental Assessment (PDEA).

Preparation of a PDEA is consistent with the Council on Environmental

Quality regulations at 40 CFR 1506.5(b) that permit preparation of an

environmental assessment by an applicant. Upon receipt of applicants'

PDEA, SEA will review and verify the environmental information provided

by applicants in this document. SEA will then prepare a Draft EA for

public review and comment. The Draft EA will include SEA's independent

preliminary recommendations for mitigation to address potentially

adverse environmental impacts.

As part of the environmental review process, applicants will also

submit a Safety Integration Plan, which will fully describe the

extensive plans they have for maximizing the safe operation of the

combined system.

After reviewing all of the public comments on the Draft EA and

conducting additional analyses, SEA will prepare a Final Environmental

Assessment (Final EA).

The Final EA will include SEA's final recommendations for

environmental mitigation. The Board will consider all public comments,

the Draft EA and Final EA, and SEA's environmental recommendations in

making its final decision in this proceeding.

For additional information on preparation of the EA, contact SEA's

Project Manager for the proposed CN/IC Acquisition, Michael Dalton, at

(202) 565-1530.

Electronic Submissions

As already mentioned, in addition to submitting an original and 25

paper copies of each document filed with the Board, parties must

submit, on disks or CDs, copies of all textual materials, electronic

workpapers, data bases and spreadsheets used to develop quantitative

evidence. Data must be submitted on 3.5 inch IBM-compatible floppy

disks or CDs. Textual materials must be in, or convertible by and into,

WordPerfect 7.0. Electronic spreadsheets must be in, or convertible by

and into, Lotus 1-2-3 97 Edition, Excel Version 7.0, or Quattro Pro

Version 7.0. Each disk or CD should be clearly labeled with the

identification acronym and number of the corresponding paper document,

see 49 CFR 1180.4(a)(2), and a copy of such disk or CD should be

provided to any other party upon request. Also, each disk or CD should

be clearly labeled as containing confidential or redacted materials.

The data contained on the disks and CDs submitted to the Board will be

subject to the protective order granted in Decision No. 1, served

February 26, 1998, and will be for the exclusive use of Board employees

reviewing substantive and/or procedural matters in this proceeding. The

flexibility provided by such computer data will facilitate timely

review by the Board and its staff.19

---------------------------------------------------------------------------

\19\ The electronic submission requirements set forth in this

decision supersede, for the purposes of this proceeding, the

otherwise applicable electronic submission requirements set forth in

our regulations. See 49 CFR 1104.3(a), as amended in Expedited

Procedures for Processing Rail Rate Reasonableness, Exemption and

Revocation Proceedings, STB Ex Parte No. 527, 61 FR 52710, 52711

(Oct. 8, 1996), 61 FR 58490, 58491 (Nov. 15, 1996).

---------------------------------------------------------------------------

This action will not significantly affect either the quality of the

human environment or the conservation of energy resources.

It is ordered

1. UTU's motion to dismiss is denied.

2. The primary application in STB Finance Docket No. 33556, and the

related filing in the embraced docket, STB Finance Docket No. 33556

(Sub-No. 1), are accepted for consideration.

3. Parties must comply with the Final Procedural Schedule adopted

by the Board in this proceeding as shown in Appendix A.

4. Parties must comply with the procedural requirements described

in this decision.

5. Any appeal to a decision issued by Judge Harfeld must be filed

within 3 working days of the date of his decision, and any response to

any such appeal must be filed within 3 working days of the date of

filing of the appeal.

6. Any reply to any motion filed with the Board itself in the first

instance must be filed within 3 working days of the date of filing of

the motion.

7. This decision is effective on August 14, 1998.

Decided: August 10, 1998.

By the Board, Chairman Morgan and Vice Chairman Owen.

Vernon A. Williams,

Secretary.

Appendix A: Final Procedural Schedule

July 15, 1998

Primary application and related application filed.

August 14, 1998

Board notice of acceptance of primary application and related

application published in the Federal Register.

August 14, 1998

Safety Integration Plan due.

August 31, 1998

Notification of intent to participate due.

August 31, 1998

Description of anticipated inconsistent and responsive

applications due; petitions for waiver or clarification due with

respect to such applications.

September 21, 1998

Responsive Environmental Report and Environmental Verified

Statements for inconsistent and responsive applicants due.

October 13, 1998

All comments, protests, requests for conditions, and any other

evidence and argument in opposition to the primary application due,

including filings of the U.S. Department of Justice (DOJ) and the

U.S. Department of Transportation (DOT). Inconsistent and responsive

applications due.

November 2, 1998

Notice of acceptance (if required) of inconsistent and

responsive applications published in the Federal Register.

November 27, 1998

Response to comments, protests, requested conditions, and other

opposition due. Response to comments of DOJ and DOT due. Rebuttal in

support of primary application and related applications due.

Response to inconsistent and responsive applications due.

December 28, 1998

Rebuttal in support of inconsistent and responsive applications

due.

February 5, 1999

Briefs due, all parties (not to exceed 50 pages for applicants

and not to exceed 25 pages for all other parties).

March 8, 1999

Oral argument (close of record).

March 15, 1999

Voting conference (at Board's discretion).

May 11, 1999

Date of service of final decision.

Immediately upon each evidentiary filing, the filing party will

place all documents relevant to the filing (other than documents

that are privileged or otherwise protected

[[Page 43751]]

from discovery) in a depository open to all parties, and will make

its witnesses available for depositions. Access to documents subject

to protective order will be appropriately restricted. Discovery

relating to applications and other filings (including responsive and

inconsistent applications), where permitted, will begin immediately

upon their filing. The Administrative Law Judge (ALJ) assigned to

this proceeding will have the authority initially to resolve any

discovery disputes.

[FR Doc. 98-21934 Filed 8-13-98; 8:45 am]

BILLING CODE 4915-00-P