B.C.D. 01-30

EMPLOYER STATUS DETERMINATION

Pennsylvania Lines, LLC (PRR)

MAR 2 8 2001

This is the determination of the Railroad Retirement Board concerning the status of

Pennsylvania Lines, LLC (PRR) as an employer under the Railroad Retirement Act

(45 U.S.C.§ 231 et sea.) (RRA) and the Railroad Unemployment Insurance Act (45

U.S.C. § 351 et sea.) (RULA).

Initial information regarding PRR was provided by Mr. Robert M. Kesler, Jr.,

General Counsel-Taxes for Norfolk Southern Corporation (NS). Mr. Kesler stated

that PRR is a Delaware hmited liability company wholly-owned by Consolidated

Rail Corporation (Conrail). The Chief Executive Officer of PRR is Mr. Tony Ingram.

According to Mr. Kesler, PRR is a passive lessor of rail assets. PRR leases all of its

assets to NS, which is responsible for the operation and maintenance of the PRR

assets. Mr. Kesler stated that PRR does not generate any rail traffic with respect to

the PRR assets, but all such traffic is generated by NS. PRR began operations on 

June 1, 1999 and reportedly initially had no employees. However, Mr. Kesler stated

that PRR anticipated hiring a part-time employee to perform some accounting

functions (approximately 20 hours per month) by the end of 2000. Mr. Kesler

reported that PRR does not interchange with any railroads.

Pursuant to a transaction approved by the STB, and consummated by the parties on

June 1, 1999, PRR was assigned assets designated to be operated as part of the NS

rail system. As set forth in the STB decision, CSX Corporation (CSXC) is the parent

company of CSX Transportation, Inc. (CSXT), a rail carrier employer under the

RRA and RUIA (B.A. No. 1524). CSXC and CSXT are referred to collectively as

CSX. PRR is a subsidiary of Consolidated Rail Corporation, Inc. (CRC), which is

also an employer under the Acts (B.A. No. 1321). On June 1, 1999, CSXT and

Norfolk Southern (NS) (B.A. No. 9408) took over railroad operations formerly

conducted by Conrail. In connection with the partition of the operations of Conrail

by and between CSXT and NS, CSX and NS1 acquired 100% of the common stock of

1 See Surface Transportation Board (STB) Finance Docket No. 33388. Decision No. 89, -July 20, 1998.

Footnote 3 of this lengthy STB decision explains that:

“CSXC and CSXT and their wholly owned subsidiaries, and also the wholly owned

CRC subsidiary to be known as New York Central Lines LLC (NYC), are referred to

collectively as CSX. NSC and NSR and their wholly owned subsidiaries, and also the

wholly owned CRC subsidiary to be known as Pennsylvania Lines LLC (PRR), are

referred to collectively as NS. CRR and CRC. and also their wholly owned 

subsidiaries other than NYC and PRR. are referred to collectively as Conrail or CR.

CSX. NS, and Conrail are referred to collectively as applicants (or, sometimes, the

primary applicants)."

BA# 2274
Pennsylvania Lines, LLC (PRR)

Conrail Inc. (CRR), as part of their takeover of the railroad operations of

Consolidated Rail Corporation (CRC). See STB Finance Docket No. 33388, Decision 

No. 89, decided July 20, 1998, p. 23. CRC remains a direct wholly owned subsidiary

of CRR. CRR became a direct wholly owned subsidiary of Green Acquisition Corp.

(Tender Sub); Tender Sub is now a direct wholly owned subsidiary of CRR Holdings;

and CRR Holdings is jointly owned by CSX Corporation and Norfolk Southern

Corporation.

According to information provided by Mr.Kesler, PRR began operations June 1,

1999, and has an operating agreement with, and leases equipment to, NS. The

operating agreement between PRR and NS provides for NS to pay a fee for the use 

of assets allocated to the contract. The assets so allocated are not specified in the

contract itself. The equipment lease examined in connection with this

determination is similar.

According to the operating agreement provided by Mr. Kesler, NS would have the

right and obligation to use the rail property for the term of the agreement “in such

manner and for such purposes as [NS] considers necessary and appropriate” in

connection with the operation of its business. NS will have the exclusive right to

operate the property, will sell transportation services, dispatch and run trains, bill

customers and otherwise extend its transportation operation onto the property

owned by PRR, according to the equipment and operating agreements provided.

Additionally, the equipment agreement states that NS will have the obligation to

maintain the property of PRR. Regarding the equipment leased under the

Equipment Agreement between PRR and NS, the equipment is delineated as the

“Allocated Assets.” PRR’s total track mileage is approximately 7,400 miles,

according to Mr. Kesler.

According to the information provided, it appears that all of PRR’s revenue will be

attributable to the operating agreement and equipment lease agreements with NS.

Section 1(a)(1) of the Railroad Retirement Act (45 U.S.C. § 231(a)(1)), defines a 

covered employer as:
Pennsylvania Lines, LLC (PRR)

-j-

(i) any carrier by railroad subject to the jurisdiction of the

Surface Transportation Board under part A ofsubtitle IV of title 49, 

United States Code;

(ii) any company which is directly or indirectly owned or

controlled by, or under common control with, one or more employers as

defined in paragraph (i) of this subdivision, and which operates any

equipment or facility or performs any service (except trucking service,

casual service, and the casual operation of equipment or facilities) in

connection with the transportation of passengers or property by

railroad * * *.

In its decision regarding the employer status of Railroad Ventures, Inc. (B.C.D. 00­

47), the Board held that an entity that has STB authority to operate a rail line, but

leases or contracts with another to operate the line in question, is covered under the

Acts administered by the Board unless the Board determines that the entity is not a 

carrier. The Board enunciated a three-part test in B.C.D. 00-47 to be applied in

making this determination. An entity that leases a fine to another company or

contracts with another company to operate the line is a carrier under the Railroad

Retirement Act unless the Board finds that all three of the following factors exist:

1) the entity does not have as a primary business purpose to profit from railroad

activities; 2) the entity does not operate or retain the capacity to operate the rail

line; and 3) the operator of the rail line is already covered or would be found to be

covered under the Acts administered by the Board.

Applying this test to the facts of PRR, the Board determines that PRR is a covered

rail carrier employer under the Acts. PRR is a wholly owned subsidiary of

Consolidated Rail Corporation. We noted in our decision in B.C.D. No. 00-47 that

an entity that is affiliated through common ownership with other for profit carriers

will be presumed to have as a primary business purpose to profit from the

ownership of the line. Additionally, there is no information that would indicate that

PRR’s intent in purchasing the line is primarily designed to preserve rail service

rather than to profit from railroading activities. We do not have to reach the other

two considerations, since all three need to be present to remain outside the coverage

of the RRA and the RUIA.
Pennsylvania Lines, LLC (PRR)

Accordingly, the Board finds that PRR became a rail carrier employer under section

l(a)(l)(i) of the RRA and the corresponding sections of the RUIA beginning June 1,

1999, the date rail operations began on its rail line.

Cherryl y. Thomas

V. M. Speakman, Jr.

Jerome F. Kever