[Federal Register Volume 85, Number 235 (Monday, December 7, 2020)]
[Notices]
[Pages 78913-78914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26811]



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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36448]


Canadian Pacific Railway Company--Control Exemption--Detroit 
River Tunnel Company

    On October 16, 2020, Canadian Pacific Railway Company (CPRC),\1\ a 
Class I carrier, filed a petition under 49 U.S.C. 10502 for exemption 
from the prior approval requirements of 49 U.S.C. 11323-24 to allow 
CPRC and its wholly owned noncarrier subsidiary, DRTP Holdings ULC, 
``to acquire certain partnership interests'' from Borealis 
Transportation Infrastructure Trust (BTIT) \2\ in the Detroit River 
Tunnel Partnership (the Partnership), which indirectly owns the Detroit 
River Tunnel a/k/a the Michigan Central Railway Tunnel (Tunnel), and 
``to continue in control of the Tunnel.'' (Pet. 1.) \3\ The Board will 
grant CPRC's petition for exemption, subject to standard labor 
protective conditions.
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    \1\ CPRC is the Canadian rail operating subsidiary of Canadian 
Pacific Railway Ltd. CPRC and its U.S. rail operating subsidiaries 
do business as Canadian Pacific (CP).
    \2\ BTIT is an indirect subsidiary of OMERS Administration 
Corporation. (Pet. 2.)
    \3\ CPRC filed its petition as a continuance-in-control 
exemption. It appears, however, that the transaction involves CPRC 
acquiring BTIT's 83.5% ownership interest, and as such, it has been 
captioned as a control exemption.
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Background

    Detroit River Tunnel Company (DRTC), which is indirectly owned by 
the Partnership,\4\ owns the Tunnel, a two-bore rail tunnel that 
connects Windsor, Ont., and Detroit, Mich. DRTC's rail line extends 
3.24 miles, between milepost 228.08 in Detroit and milepost 224.84 in 
Windsor, of which approximately 1.79 miles are located within the 
United States. (Pet. 1-2.) Pursuant to a 2001 Operating, Management, 
and Maintenance Agreement (OMM Agreement) and a 2009 Amended and 
Restated Partnership Agreement (Partnership Agreement) between CPRC and 
BTIT, CPRC currently exercises operational control over the Tunnel. 
(Id. at 3.) Under the OMM Agreement, CPRC maintains the Tunnel and 
dispatches and controls Tunnel rail operations.\5\ (Id.) CPRC is also 
responsible for ensuring that other railroads can use the Tunnel 
pursuant to each railroad's Tunnel User Agreement.\6\ (See Pet., Ex. 3, 
OMM Agreement, Article 2.4.) CPRC currently owns 16.5% of the ownership 
interests in the Partnership; BTIT owns the remaining 83.5%. (Pet. 2.)
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    \4\ CPRC states that the Partnership owns the Detroit River 
Tunnel Holding Corporation, which owns DRTC. (Pet. 2, n.1.)
    \5\ In 2001, the Board exempted a control transaction under 
which CPRC held 50% of ownership interests in the newly created 
Partnership as well as ``increased operational control of the 
Tunnel.'' See Borealis Infrastructure Trust Mgmt. Inc.--Acquis. 
Exemption--Detroit River Tunnel Co., FD 33984 et al., slip op. at 7 
(STB served Dec. 19, 2001). BTIT also acquired the remaining 50% of 
ownership interests in the Partnership from Canadian National 
Railway Company (CN). Id. at 3, 5 (finding that BTIT did not require 
Board authorization to acquire its 50% share in the Partnership). 
CPRC states that, in 2009, BTIT acquired an additional 33.5% 
ownership interest in the Partnership from CPRC, increasing its 
ownership to its current 83.5% share and reducing CPRC's ownership 
interest to 16.5%, and that the OMM Agreement, under which CPRC 
dispatches trains and controls operations, continued in effect. 
(Pet. 2-3.)
    \6\ CPRC states that operations in the Tunnel, including CPRC's, 
are pursuant to DRTC-granted trackage rights. See, e.g., Canadian 
Pac. R.R.--Trackage Rights Exemption--Detroit River Tunnel Co., FD 
34006 (STB served Mar. 16, 2001). CPRC notes that CP traffic 
currently accounts for approximately 98% of all Tunnel traffic and 
that, currently, CSX Transportation, Inc. (CSXT), is the only 
carrier with an active Tunnel User Agreement. CPRC further notes 
that CN's occasional use of the Tunnel has been pursuant to detour 
agreements and that CN primarily moves traffic via a nearby Paul M. 
Tellier Tunnel. (Pet. 3, nn.6 & 8.)
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    Under the proposed transaction, CPRC's acquisition of BTIT's 83.5% 
ownership interest in the Partnership would result in CPRC, directly 
and via DRTP Holdings ULC, holding 100% of the ownership interests in 
the Tunnel. (Pet. 4.) CPRC states that it would continue to dispatch, 
operate, and maintain the Tunnel, as the Partnership Agreement and OMM 
Agreement would remain in effect. (Id. at 3.) CPRC notes that other 
railroads would continue to maintain their access to the Tunnel. CPRC 
thus states that the transaction would not have an adverse effect on 
service levels and that no significant operational changes are planned. 
(Id. at 3-4.)

Discussion and Conclusions

    Under 49 U.S.C. 11323(a)(3), the acquisition of control of a rail 
carrier by any number of rail carriers requires prior Board approval. 
Under section 10502(a), however, the Board must exempt a transaction or 
service from regulation if it finds that: (1) Regulation is not 
necessary to carry out the rail transportation policy (RTP) of 49 
U.S.C. 10101; and (2) either the transaction or service is limited in 
scope, or regulation is not needed to protect shippers from the abuse 
of market power.
    In this case, an exemption from the prior approval requirements of 
sections 11323-24 is consistent with the standards of section 10502. 
Detailed scrutiny of the proposed transaction through an application 
for review and approval under sections 11323-24 is not necessary here 
to carry out the RTP. Approval of the transaction would result in CPRC 
increasing its ownership share of the Partnership with no lessening of 
competition or change in dispatch and operations of the Tunnel. An 
exemption would promote the RTP by: Minimizing the need for federal 
regulatory control over the transaction, section 10101(2); ensuring the 
development and continuation of a sound rail transportation system that 
would continue to meet the needs of the public, section 10101(4); 
fostering sound economic conditions in transportation, section 
10101(5); encouraging efficient management, section 10101(9); and 
providing for the expeditious resolution of this proceeding, section 
10101(15). Other aspects of the RTP would not be adversely affected.
    Regulation of the control transaction is not needed to protect 
shippers from an abuse of market power.\7\ Nothing in the record 
indicates that any shipper would lose an existing rail service option 
as a result of the proposed transaction. According to CPRC, it would 
continue to dispatch, operate, and maintain the Tunnel, as it has since 
2001. CPRC also states that, pursuant to the terms of the OMM 
Agreement, other railroads would continue to be able to use the Tunnel 
pursuant to Tunnel User Agreements. Currently, CP traffic accounts for 
approximately 98% of all Tunnel traffic and CSXT is the only carrier 
with an active Tunnel User Agreement. The transaction thus would not 
result in any shipper losing access to rail service or foreclose any 
transportation options currently available to shippers. Moreover, no 
shipper (or any other entity) has objected to the control transaction.
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    \7\ Given this finding, the Board need not determine whether the 
transaction is limited in scope. See 49 U.S.C. 10502(a).
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    Under 49 U.S.C. 10502(g), the Board may not use its exemption 
authority to relieve a carrier of its statutory obligation to protect 
the interests of employees. Accordingly, as a condition to granting 
this exemption, the Board will impose the standard employee protective 
conditions in New York Dock Railway--Control--Brooklyn Eastern District 
Terminal, 360 I.C.C 60, aff'd New York Dock Railway v. United States, 
609 F.2d 83 (2d Cir. 1979).
    The control transaction is exempt from environmental reporting 
requirements under 49 CFR 1105.6(c)(1)(i) because it will not result in 
any significant change in carrier operations. Similarly, the 
transaction is exempt from the historic reporting

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requirements under 49 CFR 1105.8(b)(3), because it will not 
substantially change the level of maintenance of railroad properties.
    CPRC requests authority to control the Tunnel by December 15, 2020, 
so that the parties can close the transaction before the end of the 
year. The exemption will be effective December 15, 2020, and petitions 
to stay will be due by December 10, 2020. Petitions to reopen will be 
due by December 22, 2020.
    It is ordered:
    1. Under 49 U.S.C. 10502, the Board exempts from the prior approval 
requirements of 49 U.S.C. 11323-25 the control transaction described 
above, subject to the employee protective conditions in New York Dock 
Railway--Control--Brooklyn Eastern District Terminal, 360 I.C.C 60, 
aff'd New York Dock Railway v. United States, 609 F.2d 83 (2d Cir. 
1979).
    2. Notice of the exemption will be published in the Federal 
Register.
    3. The exemption will become effective on December 15, 2020. 
Petitions for stay must be filed by December 10, 2020. Petitions to 
reopen must be filed by December 22, 2020.

    Decided: December 1, 2020.

    By the Board, Board Members Begeman, Fuchs, and Oberman.
Tammy Lowery,
Clearance Clerk.
[FR Doc. 2020-26811 Filed 12-4-20; 8:45 am]
BILLING CODE 4915-01-P