[Federal Register Volume 88, Number 216 (Thursday, November 9, 2023)]
[Notices]
[Pages 77409-77416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24818]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36732]


Canadian Pacific Kansas City Limited and The Kansas City Southern 
Railway Company, d/b/a CPKC--Acquisition and Operation--Certain Rail 
Line of Meridian & Bigbee Railroad, L.L.C. in Lauderdale County, Miss., 
and Choctaw and Marengo Counties, Ala.

AGENCY: Surface Transportation Board.

ACTION: Decision No. 1; notice of acceptance of application; notice of 
acceptance of related filings for consideration; issuance of procedural 
schedule.

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SUMMARY: The Surface Transportation Board (Board) is accepting for 
consideration the primary application (Application) filed October 6, 
2023, by Canadian Pacific Kansas City Limited (CPKCL), a noncarrier, on 
behalf of itself and its wholly owned subsidiary, The Kansas City 
Southern Railway Company (KCS) d/b/a CPKC (collectively, Applicants). 
The Application seeks Board approval for KCS, a Class I rail carrier, 
to acquire from Meridian & Bigbee Railroad, L.L.C. (MNBR), a Class III 
rail carrier, and to operate approximately 50.4 route miles of rail 
line between Meridian, Miss., and Myrtlewood, Ala. (the Western Line). 
This proposal is referred to as the ``Proposed Transaction.'' The Board 
is also accepting for consideration three related filings.

DATES: The effective date of this decision is November 3, 2023. 
Applicants are directed to supplement their Application as discussed in 
this decision by November 21, 2023. Any person who wishes to 
participate in this proceeding as a Party of Record must file, no later 
than November 27, 2023, a notice of intent to participate. All 
comments, protests, requests for conditions, and any other evidence and 
argument in opposition to the Application and related filings, 
including filings by the U.S. Department of Justice (DOJ) and the U.S. 
Department of Transportation (DOT), must be filed by December 11, 2023. 
Responses to comments, protests, requests for conditions, other 
opposition, and rebuttal in support of the Application must be filed by 
January 8, 2024. See Appendix (Procedural Schedule). A final decision 
in this matter will be served no later than 45 days after the date on 
which the evidentiary proceedings conclude, subject to the completion 
of environmental review. Further procedural orders, if any, would be 
issued by the Board.

[[Page 77410]]


ADDRESSES: Any filing submitted in this proceeding should be filed with 
the Board via e-filing on the Board's website. In addition, one copy of 
each filing must be sent (and may be sent by email only if service by 
email is acceptable to the recipient) to each of the following: (1) 
Secretary of Transportation, 1200 New Jersey Avenue SE, Washington, DC 
20590; (2) Attorney General of the United States, c/o Assistant 
Attorney General, Antitrust Division, Room 3109, Department of Justice, 
Washington, DC 20530; (3) Applicants' representative, David F. Rifkind, 
Stinson LLP, 1775 Pennsylvania Avenue NW, Suite 800, Washington, DC 
20006; and (4) any other person designated as a Party of Record on the 
service list.

FOR FURTHER INFORMATION CONTACT: Valerie Quinn at (202) 740-5567. If 
you require an accommodation under the Americans with Disabilities Act, 
please call (202) 245-0245.

SUPPLEMENTARY INFORMATION: Applicants seek the Board's prior review and 
authorization pursuant to 49 U.S.C. 11323-25 and 49 CFR part 1180 for 
KCS to acquire from MNBR and operate the Western Line, which comprises 
approximately 50.4 route miles of rail line between milepost 0.0<plus-
minus> at Meridian and milepost 50.4<plus-minus> at Myrtlewood. (Appl. 
1, 21-22.) According to the Application, KCS would also acquire all 
operating rail property owned by MNBR on the Western Line, including 
yards at Meridian; Naheola, Ala.; and Myrtlewood; as well as stations 
at Meridian; Whynot, Miss.; Yantley, Ala.; Cromwell, Ala.; Jachin, 
Ala.; Naheola; and Myrtlewood. (Id. at 22.) \1\
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    \1\ This decision embraces the following dockets: CSX 
Transportation, Inc.--Discontinuance of Trackage Rights Exemption--
in Marengo & Choctaw Counties, Ala. & Lauderdale County, Miss., 
Docket No. AB 55 (Sub-No. 814X); Alabama & Gulf Coast Railway--
Trackage Rights Exemption--Kansas City Southern Railway d/b/a 
Canadian Pacific Kansas City, Docket No. FD 36731; and CSX 
Transportation, Inc.--Trackage Rights Exemption--Kansas City 
Southern Railway, Docket No. FD 36730.
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    CPKC's family of operating railroads in the United States includes 
two Class I rail carriers (including KCS) and four Class II rail 
carriers. (Id. at 23.) The CPKC system also includes operations in 
Canada by the Canadian Pacific Railway Company (CPRC) and in Mexico by 
the Kansas City Southern de M[eacute]xico, S.A. de C.V. (KCSM). (Id.) 
Together, these railroad companies operate approximately 8,600 miles of 
track in the United States, which connects with approximately 7,700 
miles that CPRC operates in Canada and approximately 3,800 miles that 
KCSM operates in Mexico. (Id.) KCS currently operates or possesses 
property rights in Alabama, Arkansas, Illinois, Kansas, Louisiana, 
Mississippi, Missouri, Oklahoma, Tennessee, and Texas. (Id. at 19.)
    MNBR, a subsidiary of Genesee & Wyoming, Inc. (G&W), currently 
operates approximately 168 miles of single-track mainline between 
Meridian and Montgomery, Ala. (Id. at 21; id., Ex. 2 at 1.) MNBR owns 
and is the sole operator on the Western Line, where it serves 11 local 
customers. (Id., App. 2, V.S. Clements 6; id., Ex. 15, Operating Plan 
2; id., Ex. 4, Env't Info. 37.) In addition to the Western Line, MNBR 
operates a rail line known as the Eastern Line that connects to the 
Western Line at Myrtlewood and extends east to Burkville, Ala.\2\ (Id. 
at 21.) MNBR also operates between Burkville (the eastern end of the 
Eastern Line) and Montgomery pursuant to overhead trackage rights. (Id. 
at 21; id., Ex. 15, Operating Plan 2.) On the Western Line, MNBR 
currently interchanges with CPKC and Norfolk Southern Railway Company 
(NSR) at Meridian. (Id., Ex. 15, Operating Plan 3.) On the Eastern 
Line, MNBR currently interchanges with Alabama & Gulf Coast Railway LLC 
(AGR) \3\ at Linden, Ala., and with NSR at Selma, Ala. (Id.) MNBR also 
interchanges with CSXT at Montgomery. (Id.)
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    \2\ MNBR owns the line but leases the underlying right of way 
from CSX Transportation, Inc. (CSXT). (Appl. 21; id., App. 4, V.S. 
Walsh 2.) Applicants note that MNBR's lease is scheduled to expire 
in November 2023. (Id. at 2.)
    \3\ AGR is also a subsidiary of G&W. (Id. at 4.)
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    Applicants state that KCS is acquiring the Western Line to 
establish a direct interchange with CSXT at Myrtlewood, and that the 
Proposed Transaction is contingent on CSXT acquiring and resuming 
operations on the Eastern Line. (Id. at 2); see also CSX Transp., 
Inc.--Acquis. & Operation--Rail Line of Meridian & Bigbee R.R., Docket 
No. FD 36727. According to Applicants, CPKC trains will handle overhead 
traffic only and will not provide local service. (Appl., Ex. 4, Env't 
Info. 37.) Applicants state that they expect to interchange one train 
pair daily with CSXT, with an average volume of 70 cars per train, for 
at least the first five years. (Id. at 13; id., Ex. 15, Operating Plan 
8.) Applicants represent that, while CPKC intends to grow the volumes 
served on this route, one train pair daily should provide sufficient 
capacity to accommodate much of the growth in the first five to ten 
years. (Id., Ex. 15, Operating Plan 8.)
    According to the Application, MNBR would continue to provide local 
and overhead rail service on the Western Line post-transaction much as 
it does today, except that it would no longer act as an intermediate 
bridge carrier for CPKC-CSXT traffic. (Id., Ex. 4, Env't Info. 37.) 
Specifically, MNBR would retain exclusive trackage rights to operate 
over the Western Line to (1) serve existing customers and (2) 
interchange with, and handle freight rail traffic to and from, AGR at 
or near Myrtlewood for interchange with CPKC and NSR at Meridian. (Id., 
Ex. 2, Retained Trackage Rights Agreement, art. 2.1.) MNBR would also 
retain non-exclusive trackage rights to operate over the Western Line 
to (1) interchange with, and handle freight rail traffic to and from, 
CSXT at or near Myrtlewood for interchange with NSR at Meridian and (2) 
if requested by CPKC, handle CPKC-CSXT overhead freight rail traffic 
between Meridian and Myrtlewood. (Id.)
    The Board finds that the Application is complete and that the 
Proposed Transaction is a minor transaction based upon the preliminary 
determination that the Proposed Transaction's anticipated contribution 
to the public interest in meeting significant transportation needs 
clearly outweighs any potential anticompetitive effects. 49 CFR 
1180.2(b), (c). The Board makes this preliminary determination based 
solely on the evidence presented in the Application. The Board 
emphasizes that this is not a final determination and may be revisited 
or rebutted by subsequent filings and evidence submitted into the 
record for this proceeding. The Board also adopts a procedural schedule 
for consideration of the Application and directs Applicants to file 
certain supplemental information.
    Finally, an Environmental Assessment (EA) will be prepared to 
comply with the Board's obligations under the National Environmental 
Policy Act, 42 U.S.C. 4321-4370m-11 (NEPA), and related environmental 
laws.\4\
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    \4\ The Board is required to accommodate NEPA's requirements in 
its decision-making. Therefore, the Board will not issue a final 
decision on the merits of the Application until the environmental 
review is complete, including preparation of an EA and opportunity 
for public comment and participation during the EA process. See 
Environmental Matters section below.
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    Financial Arrangements. According to Applicants, no cash is 
involved in the Proposed Transaction and no new securities would be 
issued in connection with the Proposed Transaction. (Id. at 14, 16.) 
Applicants state that the only relevant financial arrangement is the 
in-kind consideration paid by CPKC as provided in the draft purchase 
agreement

[[Page 77411]]

(Transaction Agreement).\5\ (Id.) Applicants state that the parties 
have agreed upon a valuation of the property rights that KCS would 
acquire, and as consideration, MNBR's parent company, G&W, would 
receive equivalent value in the form of rights with respect to two CPKC 
operating properties in Canada. (Id. at 16.) Applicants further state 
that the Transaction Agreement entitles G&W to receive additional 
compensation under certain circumstances. (Id.)
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    \5\ The Transaction Agreement is attached to the Application as 
Exhibit 2.
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    Passenger Service Impacts. Applicants assert that there would be no 
impact on commuter or other passenger service because no commuter or 
passenger service moves on the Western Line. (Id., Ex. 15, Operating 
Plan 12.)
    Discontinuances/Abandonments. According to Applicants, CPKC does 
not anticipate seeking authority for any discontinuances of service or 
rail line abandonments in relation to the Proposed Transaction. (Id., 
Ex. 15, Operating Plan 12.) Applicants state that CSXT has agreed to 
seek authority to discontinue its overhead trackage rights on the 
Western Line. (Id.); see also CSXT Notice, Oct. 6, 2023, CSX Transp., 
Inc.--Discontinuance of Trackage Rts. Exemption--in Marengo & Choctaw 
Cntys., Ala. & Lauderdale Cnty., Miss., AB 55 (Sub-No. 814X). 
Additionally, Applicants state that, in conjunction with CSXT's 
proposed acquisition of the Eastern Line, CPKC anticipates that MNBR 
will seek authority to discontinue its overhead trackage rights between 
Burkville and Montgomery. (Appl., Ex. 15, Operating Plan 12); see also 
MNBR Notice, Oct. 6, 2023, Meridian & Bigbee R.R.--Discontinuance of 
Incidental Overhead Trackage Rts.--in Lowndes & Montgomery, Ala., AB 
1335X.
    Public Interest Considerations. Applicants assert that the Proposed 
Transaction would enhance competition by establishing a direct, 
efficient interchange with CSXT at Myrtlewood, thereby creating a new 
east-west Class I freight rail corridor linking CPKC-served markets in 
Mexico and the southwestern United States with CSXT-served markets in 
the southeastern United States and beyond. (Appl. 2.) Applicants state 
that a direct CPKC-CSXT routing would give CPKC and CSXT control over 
the traffic between origin and destination, enabling them to deliver 
``a reliable and consistent premium train service.'' (Id. at 11.)
    According to Applicants, this new freight rail corridor would 
provide a shorter and more efficient route for existing CPKC-CSXT 
traffic and a new, highly attractive option for new customers. (Id.) 
Applicants state that CPKC and CSXT intend to coordinate interchange to 
minimize dwell and would operate utilizing run-through power. (Id. at 
11-12.) Applicants further state that a direct CPKC-CSXT routing over 
Myrtlewood would reduce the amount of traffic that CPKC currently 
interchanges with intermediate carriers and would avoid areas such as 
New Orleans that are difficult to traverse and susceptible to seasonal 
weather disruptions. (Id. at 10-11, 14.) As a result, CPKC anticipates 
that the Proposed Transaction would reduce the number of work events 
and yard dwell time associated with existing CPKC-CSXT interline 
traffic, and in turn reduce operational risks. (Id. at 14.) 
Additionally, Applicants contend that the Proposed Transaction would 
position CPKC to compete for the new traffic that it states will be 
generated by several new automotive plants that are planned to open in 
the southeastern United States in the next few years. (Id. at 11.) 
Applicants also note that CPKC intends to invest approximately $46 
million to upgrade the infrastructure of the Western Line to Class I 
railroad standards \6\ and approximately $9 million on bridge repair 
and improvements, elevating the Western Line from a lower-density line 
to a competitive east-west corridor.\7\ (Id. at 12-13.)
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    \6\ Applicants state that CPKC is planning an extensive track 
maintenance and rehabilitation program to improve the track to 
support operations at a sustained maximum speed of 25 MPH, with the 
potential for additional improvements in the future. (Appl. 12.)
    \7\ Applicants further note that CPKC intends to embark on a 
multi-year bridge rehabilitation program, which it estimates will 
cost over $100 million. (Id. at 12-13.)
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    Time Schedule for Consummation. Applicants state that the Proposed 
Transaction is scheduled to be consummated as soon as practicable after 
the Board's decision approving the Application becomes effective and 
upon satisfaction of all other conditions precedent to closing set 
forth in the Transaction Agreement. (Id. at 9.)
    Environmental and Historic Preservation Impacts. Applicants state 
that they include with the Application the information required by 49 
CFR 1180.6(a)(8) and 49 CFR part 1105. (Appl. 36.) As discussed below, 
the Proposed Transaction would exceed the Board's thresholds for 
environmental review. Therefore, the Board will prepare an EA. Based on 
the available information, no historic review is required.
    Labor Impacts. Applicants state that, as a result of the Proposed 
Transaction, CPKC anticipates it would hire 12 new, full-time employees 
in 2024, including one track inspector, one foreman, one machine 
operator, one trackman, and eight Meridian-based train and engine 
service employees. (Appl. 17; id., Ex. 15, Operating Plan 13.) 
Applicants state that no CPKC employee will be adversely affected by 
the Proposed Transaction. (Id. at 17; id., Ex. 15, Operating Plan 13.) 
Applicants note that employees adversely affected by the Proposed 
Transaction would be entitled to the employee protective conditions and 
other procedures adopted in New York Dock Railway--Control--Brooklyn 
Eastern District Terminal, 360 I.C.C. 60 (1979), aff'd sub nom. New 
York Dock Railway v. United States, 609 F.2d 83 (2d Cir. 1979), as 
modified by Wilmington Terminal Railroad--Purchase & Lease--CSX 
Transportation Inc., 6 I.C.C.2d 799, 814-26 (1990), aff'd sub nom. 
Railway Labor Executives' Association v. Interstate Commerce 
Commission, 930 F.2d 511 (6th Cir. 1991). (Appl. 16.)
    Related Filings. Three verified notices of exemption and an 
application for acquisition and operation authority were filed in 
connection with the Proposed Transaction.\8\
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    \8\ Also, on September 28, 2023, Applicants filed a motion for 
protective order in Docket No. FD 36732, which was granted by 
decision served on October 11, 2023.
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    CSXT Acquisition of Trackage Rights. In Docket No. FD 36730, CSXT 
filed a verified notice of exemption under 49 CFR 1180.2(d)(7) to 
acquire overhead trackage rights from KCS over approximately two miles 
of rail line between milepost 50.4 and milepost 48.4 on the Western 
Line. CSXT states that the trackage rights are related to its proposed 
acquisition of the Eastern Line between Burkville and Myrtlewood in 
Docket No. FD 36727. CSXT states that the overhead trackage rights 
would allow CSXT to access a point on the Western Line to interchange 
traffic with AGR and MNBR at Myrtlewood. CSXT states that it intends to 
consummate this transaction on or shortly after the date it acquires 
the Eastern Line from MNBR. As a condition to use of this exemption, 
CSXT states that any employees adversely affected by the transaction 
would be protected by the conditions set forth in Norfolk & Western 
Railway--Trackage Rights--Burlington Northern, Inc., 354 I.C.C. 605 
(1978), as modified in Mendocino Coast Railway--Lease & Operate--
California Western Railroad, 360 I.C.C. 653 (1980).

[[Page 77412]]

    AGR Acquisition of Trackage Rights. In Docket No. FD 36731, AGR, a 
Class II rail carrier, filed a verified notice of exemption under 49 
CFR 1180.2(d)(7) to acquire overhead trackage rights from CPKC over 
approximately 8.4 miles of rail line between milepost 50.4<plus-minus> 
and milepost 42.0<plus-minus>. AGR currently holds incidental operating 
rights from Linden to Myrtlewood over the Eastern Line for purposes of 
interchange with MNBR. AGR intends to use the overhead trackage rights 
sought in Docket No. FD 36731 for continued interchange with MNBR and 
to interchange with CSXT at Myrtlewood following CSXT's acquisition of 
the Eastern Line.\9\ AGR states that it intends to consummate the 
agreement and commence operations either on the effective date of its 
notice or upon the consummation of CPKC's acquisition of the Western 
Line, whichever is later. As a condition to use of this exemption, AGR 
states that any employees adversely affected by the transaction would 
be protected by the conditions set forth in Norfolk & Western Railway--
Trackage Rights, 354 I.C.C. 605, as modified in Mendocino Coast 
Railway--Lease & Operate, 360 I.C.C. 653.
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    \9\ Applicants state that CPKC would grant AGR trackage rights 
to Naheola Yard in order to give AGR the flexibility to interchange 
with MNBR at Naheola Yard instead of Myrtlewood if operating 
conditions warrant, e.g., if for some reason, the designated 
Myrtlewood yard track cannot accommodate the volume of MNBR's and 
AGR's interchange traffic. (Appl., Ex. 15, Operating Plan 8.)
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    CSXT Discontinuance of Trackage Rights. In Docket No. AB 55 (Sub-
No. 814X), CSXT filed a verified notice of exemption under the class 
exemption at 49 CFR part 1152, subpart F, to discontinue overhead 
trackage rights over the entirety of the Western Line, including ``head 
and tail operating room'' at both ends, for a total distance of 
approximately 51 miles. CSXT states that it has not moved any traffic 
over the line during the past two years and that it intends to 
consummate its discontinuance authority on the same day that CPKC 
consummates its proposed acquisition of the Western Line. As a 
condition to the use of this exemption, CSXT states that any employees 
adversely affected by the transaction would be protected by the 
conditions set forth in Oregon Short Line Railroad--Abandonment Portion 
Goshen Branch Between Firth & Ammon, in Bingham & Bonneville Counties, 
Idaho, 360 I.C.C. 91 (1979).
    CSXT is seeking this discontinuance authority under the Board's 
two-year-out-of-service class exemption procedures, although another 
carrier, MNBR, has been providing local service over the same line 
during that two-year period. In Austin Area Terminal Railroad--
Discontinuance of Service Exemption--in Bastrop, Burnet, Lee, Llano, 
Travis, & Williamson Counties, Tex., AB 578X (STB served Nov. 3, 2023), 
the Board recently reaffirmed that to qualify for the two-year-out-of-
service class exemption a carrier must certify that no local traffic 
has moved over the line for two years, not just its own traffic. 
Accordingly, the Board upheld a prior decision that rejected a verified 
notice because the required certification concerning the absence of 
local traffic on the line was deficient. Id. at 1. The Board noted, 
however, that carriers may petition the Board for individual exemptions 
under 49 U.S.C. 10502(a) and granted on its own motion an individual 
exemption authorizing the discontinuance. Id. at 4-5.
    Although, per Austin Area Terminal Railroad, CSXT may not proceed 
under the Board's two-year-out-of-service class exemption procedures, 
the Board will nonetheless consider whether to grant an individual 
exemption for this discontinuance authority on its own motion as it 
considers the Proposed Transaction. To that end, CSXT may supplement 
the record in Docket No. AB 55 (Sub-No. 814X) by November 21, 2023, 
with any additional information and argument it would like the Board to 
consider in determining whether the proposed discontinuance meets the 
exemption standard of 49 U.S.C. 10502(a).
    CSXT Acquisition of the Eastern Line. In Docket No. FD 36727, CSXT 
seeks the Board's prior review and authorization pursuant to 49 U.S.C. 
11323-25 and 49 CFR part 1180 to acquire from MNBR and to operate the 
Eastern Line. The Eastern Line consists of two segments totaling 
approximately 93.68 miles: (1) extending from milepost XXB 189.00 near 
Burkville to milepost XXB 222.00 at Western Junction, a distance of 
approximately 30.22 miles; \10\ and (2) extending from a connection 
with the first segment at Western Junction, milepost OOR 716.25 to 
milepost ORS 779.71 near Myrtlewood, a distance of approximately 63.46 
miles. The Eastern Line includes Selma Yard, at Selma, and the 
following stations: Myrtlewood, Linden, Thomaston, Safford, Orville, 
Beloit, Selma, Industrial Lead, Tyler, Benton, Whitehall, and 
Burkville. Together with the Proposed Transaction, CSXT's proposed 
acquisition of the Eastern Line would create a direct CPKC-CSXT 
interchange at Myrtlewood. While CPKC states in the Application that 
the Proposed Transaction is contingent on CSXT acquiring and resuming 
operations on the Eastern Line, CSXT states in its application that its 
acquisition of the Eastern Line could proceed regardless of whether the 
CPKC acquires the Western Line.\11\
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    \10\ By decision served November 3, 2023, in Docket No. FD 
36727, CSXT has been asked to confirm the total distance of the 
Burkville to Western Junction segment. See CSX Transp., Inc.--
Acquis. & Operation--Rail Line of Meridian & Bigbee R.R., FD 36727 
et al., slip op. at 3 n.3 (STB served Nov. 3, 2023).
    \11\ On October 25, 2023, NSR filed a request (NSR's Request) 
for the Board to consolidate this proceeding with the proceeding in 
Docket No. FD 36727 regarding the CSXT's acquisition of the Eastern 
Line (and all of the related filings in both dockets) and to hold 
the consolidated proceeding in abeyance, including the Board's 
determination of whether to designate the transactions as minor or 
significant, until such time that CSXT and CPKC provide certain 
additional information, primarily regarding the potential effects of 
changes in CPKC-CSXT traffic flows on other traffic. On October 27, 
2023, Applicants replied in opposition to NSR's request, arguing 
that the Proposed Transaction builds upon but is not part of CSXT's 
proposed acquisition of the Eastern Line and is properly classified 
as a minor transaction. (CPKC Reply 4-6, Oct. 27, 2023.) Applicants 
further argue that the Application appropriately addresses the 
cumulative effects of the Proposed Transaction against the backdrop 
of CSXT's proposed transaction. (Id. at 6-10.) On October 31, 2023, 
Illinois Central Railroad Company filed in support of NSR's request 
for consolidation, and CPKC responded the same day. For the reasons 
given above, the current record supports a minor designation. The 
Board will not order the parties to submit a consolidated 
application at this time, though as discussed below, the Board's 
Office of Environmental Analysis (OEA) has determined that it is 
appropriate to prepare one EA to encompass both the Western Line and 
the Eastern Line. The Board may further address the consolidation 
issue in a subsequent decision. Additionally, the Board will not 
hold the proceedings in abeyance, as the Board is requiring 
Applicants to supplement the record as discussed further in this 
decision.
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    Primary Application and Related Filings. The Board finds that the 
Proposed Transaction would be a ``minor transaction'' under 49 CFR 
1180.2(c), and the Board accepts the Application for consideration 
because it is in substantial compliance with the applicable regulations 
governing minor transactions. See 49 U.S.C. 11321-26; 49 CFR part 1180. 
Additionally, the Board is accepting for consideration the related 
filings in Docket Nos. FD 36730 and FD 36731, which are also in 
compliance with the applicable regulations.\12\ As discussed below, the 
Board will require Applicants to

[[Page 77413]]

supplement the record and reserves the right to require further 
supplemental information as necessary to complete the record.
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    \12\ In Docket No. FD 36727, the Board accepted for 
consideration CSXT's application to acquire the Eastern Line. See 
CSX Transp., Inc.--Acquis. & Operation, FD 36727 et al., slip op. at 
8. Additionally, as discussed above, CSXT's verified notice of 
exemption in Docket No. AB 55 (Sub-No. 814X) does not qualify for 
the class exemption procedures under which it was filed; however, 
the verified notice will be accepted as evidence bearing on 
consideration of whether to grant CSXT an individual exemption on 
the Board's own motion.
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    When a transaction does not involve the merger or control of two or 
more Class I railroads, the Board's treatment differs depending upon 
whether the transaction would have ``regional or national 
transportation significance.'' 49 U.S.C. 11325. Under 49 CFR 1180.2, a 
transaction that does not involve two or more Class I railroads is to 
be classified as ``minor''--and thus not having regional or national 
transportation significance--if a determination can be made that 
either: (1) the transaction clearly will not have any anticompetitive 
effects, or (2) any anticompetitive effects of the transaction will 
clearly be outweighed by the transaction's anticipated contribution to 
the public interest in meeting significant transportation needs. A 
transaction not involving the control or merger of two or more Class I 
railroads is to be classified as ``significant'' if neither of these 
determinations can be made. (Id.)
    The Board finds the Proposed Transaction to be a ``minor 
transaction'' because it appears from the face of the Application that 
the efficiency and other public interest benefits would clearly 
outweigh the potential anticompetitive effects of the transaction. The 
Proposed Transaction, in conjunction with CSXT's acquisition of the 
Eastern Line, would create a new, direct Class I to Class I connection 
that could provide potential improvements in the efficient movement of 
existing and future intermodal, automotive, and other interline traffic 
between the Southeastern United States and the Southwestern United 
States and Mexico. (See Appl. 5.) A direct CPKC-CSXT route has the 
potential to offer faster transit times and more efficient and reliable 
service, (see id., App. 3, V.S. Wahba 6), giving CPKC a new ability to 
compete effectively against existing interline routing options. It 
could also reduce the amount of traffic that CPKC currently 
interchanges with intermediate carriers--including with the MNBR at 
Meridian--and allow certain movements to avoid areas such as New 
Orleans that are difficult to traverse and susceptible to seasonal 
weather disruptions. (See id. at 14.) Diverting existing traffic to the 
new Myrtlewood gateway from congested gateways such as New Orleans 
could improve the efficiency of operations at those existing gateways. 
Moreover, adding a new gateway would provide redundancy in the national 
network and could reduce the economic impact of future outages in other 
areas (e.g., if rail infrastructure in the New Orleans area becomes 
unusable for a prolonged period due to flooding). The shorter transit 
times could also benefit shippers by lowering equipment costs and 
inventory carrying costs. (See id., App. 3, V.S. Wahba 2.)
    Applicants represent that there would be no two-to-one shippers as 
a result of the Proposed Transaction, i.e., no shipper would lose 
access to a second rail carrier. (See id. at 14-15.) They further 
assert that, given MNBR's retained trackage rights (including pricing 
authority) with no limitations on interchange, existing shippers on the 
Western Line could receive the same rail service and have the same rail 
options currently available. (See id. at 2, 14; id., Ex. 2, Transaction 
Agreement, Sec.  2.06(a).) Indeed, it appears that, given Applicants' 
anticipated investments in the Western Line, customers of both 
Applicants and MNBR would benefit from more efficient service over 
upgraded and safer facilities. (See id. at 12-13, 15.) There is a 
potential that traffic currently interchanged with other carriers may 
be diverted to the Myrtlewood interchange post-transaction (as 
discussed in the section below), and this has implications for 
competition, including a potential increase in competition to the 
benefit of shippers. The Board finds, at least preliminarily, that the 
potential risks of anticompetitive effects are clearly outweighed by 
the Proposed Transaction's anticipated benefits.
    For these reasons, based on the information provided in the 
Application, the Board finds the Proposed Transaction to be a minor 
transaction under 49 CFR 1180.2(c). This determination should not be 
read to mean that the Proposed Transaction is insignificant or of 
little importance. Indeed, after the record is fully developed, the 
Board will conduct a careful review before making a final determination 
as to whether the Proposed Transaction would substantially lessen 
competition, create a monopoly, or restrain trade, and whether any 
anticompetitive effects would be outweighed by the public interest. See 
49 U.S.C. 11324(d)(1)-(2). The Board may also consider imposing 
conditions on the Proposed Transaction.
    Supplemental Information. The Board notes that the Proposed 
Transaction, in conjunction with CSXT's proposed acquisition of the 
Eastern Line, may result in shifts to traffic flows, including traffic 
currently interchanged with a third-party carrier. For example, post-
transaction, CPKC anticipates being able to use the new connection at 
Myrtlewood to interchange directly with CSXT automotive traffic moving 
between KCSM-served locations in Mexico and CSXT-served locations on 
the East Coast, (see id., App. 3, V.S. Wahba 5-7), whereas today, KCSM 
interchanges that traffic with a bridge carrier at Laredo, Tex., which 
carries the traffic to/from CSXT interchanges at East St. Louis, 
Memphis, and New Orleans, (id., App. 3, V.S. Wahba 5 (``The available 
direct links between the CPKC and CSXT networks generally do not 
provide competitive options for this traffic category . . . .'')). In 
order to assist the Board in its consideration of the Application and 
in making the determination of what--if any--conditions might be 
warranted, Applicants will be directed to supplement the Application by 
November 21, 2023, with certain additional information. See 49 CFR 
1180.4(c)(2)(v) (``The applicant shall submit such additional 
information to support its application as the Board may require.'').
    In CPKC's reply to NSR's Request, CPKC maintains that it is ``bound 
by KCSR's 2004 commitment not to close the Laredo gateway,'' and hence 
that ``UP will continue to have the opportunity to compete to 
participate in flows of traffic between Mexico and CSXT destinations in 
the U.S. Southeast via Laredo and New Orleans.'' (CPKC Reply 5 n.3, 
Oct. 27, 2023.) CPKC also states, ``[t]he newly invigorated rail 
service that CPKC is pursuing via this transaction is an outgrowth of 
the Board's approval of the CP/KCS transaction, which for example 
enabled the combined CPKC system to offer improved transportation 
solutions--and thereby to compete more effectively against its much 
larger rivals--for traffic of automotive manufacturers and parts 
suppliers.'' (Id. at 2-3.) In making its preliminary determination 
here, the Board recognizes the effects of the conditions it imposed on 
the merger between Canadian Pacific Railway and Kansas City Southern 
Railway regarding gateways and related data reporting requirements. See 
Can. Pac. Ry.--Control--Kan. City S. (CPKC Approval Decision), FD 36500 
et al, slip op. at 12-13 (STB served Mar. 15, 2023). These conditions 
decrease the likelihood of any substantial lessening of 
competition.\13\ Nonetheless, in a supplemental filing, CPKC will be 
directed to describe in detail the scope

[[Page 77414]]

of ``KCSR's 2004 commitment not to close the Laredo gateway,'' the 
intersection between the 2004 commitment and the conditions imposed in 
CPKC Approval Decision, FD 36500 et al., and the commitment's potential 
implications on the Board's final analysis of the competitive effects 
of the Proposed Transaction.
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    \13\ The Board notes that CPKC states that there is not ``some 
secret overarching agreement between CPKC and CSXT that has not been 
put before the Board and that somehow implicates the competitive 
landscape.'' (CPKC Reply 5-6, Oct. 27, 2023.)
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    Additionally, in its supplement, to further inform the Board's 
analysis, CPKC additionally shall provide a list of all origination/
destination areas,\14\ including gateways, for the projected diverted 
and new traffic; identify any interchange partners participating in 
current movements of this traffic as well as projected diverted and new 
movements (if applicable); \15\ and provide the associated volumes by 
origination/destination areas for projected diverted and new traffic. 
The Board recognizes that CPKC was recently required to produce 
substantial information about its network and the markets it serves in 
Canadian Pacific Railway--Control--Kansas City Southern, Docket No. FD 
36500 et al. Some of the work involved with that production may be 
relevant to the Proposed Transaction, potentially lowering the burden 
on CPKC of producing the information requested here, which the Board 
recognizes goes beyond what is generally required for a minor 
transaction under 49 CFR 1180.4 (and therefore, not necessarily 
applicable to future minor transactions).
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    \14\ Origination/destination areas may be as broad as a state or 
group of states. CPKC shall provide a justification for whatever 
grouping metric it uses for its analysis and shall specify the 
gateway(s) used by traffic for the origination or destination areas.
    \15\ Information should include the total count of cars 
interchanged, categorized by two-digit Standard Transportation 
Commodity Code and broken out by interchange partner.
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    To assist the Board in evaluating the Proposed Transaction, in 
conjunction with CSXT's proposed acquisition of the Eastern Line, the 
Applicants will be directed to provide additional operational 
information. As NSR notes, the Application does not include an analysis 
of the potential operational impacts to shippers or Amtrak passengers 
on rail segments outside the Eastern Line and Western Line. (NSR Reply 
12-13.) Accordingly, the Board directs Applicants to detail any impacts 
anticipated on other rail operations, including (1) potential impacts 
on any passenger rail operations that involve crossing the Western Line 
and (2) delays that may be occasioned because a line is scheduled to 
handle increased traffic due to route consolidations or traffic 
diversions. Applicants also shall provide a description of the effect 
of any deferred maintenance or delayed capital improvements on the 
subject lines and associated equipment. This should include the 
schedule for eliminating such deferrals, details of general system 
rehabilitation (including rehabilitation relating to the transaction, 
such as proposed yard and terminal modifications), and how these 
activities will lead to service improvements or operating economies 
anticipated from the transaction.
    Procedural Schedule. Applicants are directed to supplement their 
Application as discussed in this decision by November 21, 2023. Any 
person who wishes to participate in this proceeding as a Party of 
Record must file a notice of intent to participate no later than 
November 27, 2023; all comments, protests, requests for conditions, and 
any other evidence and argument in opposition to the Application, 
including filings by DOJ and DOT, must be filed by December 11, 2023; 
and responses to comments, protests, requests for conditions, and other 
opposition on the transportation merits of the Proposed Transaction 
must be filed by January 8, 2024.\16\ The Board is required to issue 
``a final decision by the 45th day after the date on which it concludes 
the evidentiary proceedings,'' 49 U.S.C. 11325(d)(2), and will do so 
here, subject to the completion of environmental review.\17\ The Board 
reserves the right to adjust the schedule as circumstances may warrant. 
The adopted procedural schedule is in the Appendix to this decision.
---------------------------------------------------------------------------

    \16\ Applicants propose a round of briefs due on the same day 
that the evidentiary record is statutorily required to close. (Appl. 
8); see also 49 U.S.C. 11325(d)(2). But they provide no explanation 
as to the intent or necessity of these additional briefs, which are 
not contemplated by the governing statute or the Board's 
regulations. See 49 U.S.C. 11325(d)(2); 49 CFR 1180.4(e)(2). 
Accordingly, the Board has not included the proposed briefs in the 
procedural schedule adopted here.
    \17\ This notice will be published in the Federal Register on 
November 9, 2023, and all subsequent deadlines will be calculated 
from this date. Deadlines for filings are calculated in accordance 
with 49 CFR 1104.7(a).
---------------------------------------------------------------------------

    Notice of Intent To Participate. Any person who wishes to 
participate in this proceeding as a Party of Record must file with the 
Board, no later than November 27, 2023, a notice of intent to 
participate, accompanied by a certificate of service indicating that 
the notice has been properly served on the Secretary of Transportation, 
the Attorney General of the United States, and Applicants' 
representative.
    If a request is made in the notice of intent to participate to have 
more than one name added to the service list as a Party of Record 
representing a particular entity, the extra name(s) will be added to 
the service list as a ``Non-Party.'' Any person designated as a Non-
Party will receive copies of Board decisions, orders, and notices but 
not copies of official filings. Persons seeking to change their status 
must accompany that request with a written certification that they have 
complied with the service requirements set forth at 49 CFR 1180.4 and 
any other requirements set forth in this decision.
    Discovery. Discovery may begin immediately. The parties are 
encouraged to resolve all discovery matters expeditiously and amicably.
    Service on Parties of Record. Each Party of Record will be required 
to serve upon all other Parties of Record, within 10 days of the 
service date of this decision, 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 will also be 
required to file with the Board, within 10 days of the service date of 
this decision, a certificate of service 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 this decision must 
have its own certificate of service indicating that all Parties of 
Record on the service list have been served with a copy of the filing. 
Members of the United States Congress and Governors are not Parties of 
Record and need not be served with copies of filings, unless any Member 
or Governor has requested to be, and is designated as, a Party of 
Record.
    Environmental Matters. NEPA requires that the Board take 
environmental considerations into account in its decision-making. Under 
the Board's environmental regulations, an acquisition under 49 U.S.C. 
11323 generally requires the preparation of an EA where certain 
thresholds would be exceeded. See 49 CFR 1105.6(b)(4). The thresholds 
for assessing environmental impacts from increased rail traffic on rail 
lines in acquisitions are an increase in rail traffic of at least 100% 
(measured in gross ton miles annually) or an increase of at least eight 
trains per day. 49 CFR 1105.7(e)(5). For air quality impacts, rail 
lines located in areas classified as being in ``nonattainment'' areas 
under the Clean Air Act (42 U.S.C. 7401-7671q) are also assessed if 
they would experience an increase in rail traffic of at least 50% 
(measured in gross ton miles annually) or an increase of at least three 
trains per day. 49 CFR 1105.7(e)(5)(ii).
    In the Application, Applicants submitted environmental information,

[[Page 77415]]

including estimated volume increases on the Western Line by track 
segment (Exhibit 4). The estimated volume for each segment includes 
transaction-related projections for five years (through 2029), as well 
as no-action projections (traffic including increases that would occur 
without the Proposed Transaction). CPKC states that there would be a 
transaction-related increase of one train a day in each direction on 
the Western Line, an overall addition of two trains per day, which 
would result in an increase in gross-ton miles in excess of 100%. 
(Appl., Ex. 4, Env't Info. 41-42.) According to Applicants, the 
Proposed Transaction would not result in traffic being diverted to 
other transportation systems or modes. (Appl., Ex. 4, Env't Info. 40.)
    The NEPA Process. OEA has reviewed the data provided by Applicants, 
including their traffic projections through 2029. Based on the current 
record, neither the 8-trains-per-day nor the 3-trains-per-day 
thresholds for environmental review will be exceeded as a result of the 
Proposed Transaction. However, because there will be an increase in 
gross-ton miles in excess of 100% on the line segments involved in the 
Proposed Transaction, the gross-ton mile threshold will be exceeded and 
therefore, OEA will prepare an EA. See 49 CFR 1105.7(e)(5)(i); 
1105.10(b). For expediency and efficiency, OEA has determined that it 
is appropriate to prepare one EA to encompass both the Western Line and 
the Eastern Line (including the Burkeville-Montgomery segment) because 
these transactions involve contiguous segments of the same rail line; 
indeed, CPKC's acquisition of the Western Line is contingent on CSXT's 
acquisition of the Eastern Line, and both CPKC and CSXT provided volume 
forecasts showing exceedance of the gross-ton mile thresholds based on 
each transaction being authorized and implemented. (Appl., Ex. 4, Env't 
Info. 38); see also CSXT Appl., Ex. 4, Env't Info. 6-7, Oct. 6, 2023, 
CSX Transp., Inc.--Acquis. & Operation--Rail Line of Meridian & Bigbee 
R.R., FD 36727. In addition, the environmental impacts from both 
transactions are expected to be very similar and both applications were 
filed at the same time, allowing environmental review of the two 
transactions to proceed simultaneously.
    The EA process will address potential environmental impacts of 
activities associated with both the Western Line and the Eastern Line, 
including changes in rail line traffic and rail yard activity. OEA will 
prepare a Draft EA and issue it for public comment. Following the close 
of the comment period, OEA will prepare a Final EA. The Final EA will 
address the comments received on the Draft EA, present OEA's final 
conclusions regarding the potential environmental impacts of the 
transactions, and set forth OEA's final recommendations to the Board, 
including recommended environmental mitigation measures.\18\ The Board 
then will consider the entire record, including the record on the 
transportation merits, the Draft EA, the Final EA, and all public 
comments received. In its final decision, the Board will decide whether 
the Proposed Transaction should be authorized and, if so, what 
conditions, including environmental mitigation conditions, to impose.
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    \18\ The Board's general practice has been to mitigate only 
impacts resulting directly from a proposed transaction, and not to 
require mitigation for existing conditions and existing railroad 
operations. See 49 CFR 1180.1(f)(1).
---------------------------------------------------------------------------

    Historic Review. The Board's regulations provide that historic 
review normally is not required for acquisitions where there would be 
no significant change in operations and properties 50 years old and 
older would not be affected. See 49 CFR 1105.8. Based on the current 
record, no historic review is required.
    Service of Decisions, Orders, and Notices. The Board will serve 
copies of its decisions, orders, and notices on those persons who are 
designated on the service list as a Party of Record or Non-Party. All 
other interested persons are encouraged to obtain copies of decisions, 
orders, and notices via the Board's website at www.stb.gov.
    Access to Filings. Under the Board's rules, 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. 49 CFR 1180.4(a)(3). The Application and other 
filings in this proceeding will be furnished to interested persons upon 
request and will also be available on the Board's website at 
www.stb.gov. In addition, the Application may be obtained from 
Applicants' representative at the address indicated above.
    It is ordered:
    1. The Application filed in Docket No. FD 36732 and the related 
filings in Docket Nos. FD 36730 and FD 36731 are accepted for 
consideration.
    2. Applicants shall file the supplemental information described 
above by November 21, 2023.
    3. The filing in Docket No. AB 55 (Sub-No. 814X) is accepted to the 
extent discussed above. CSXT may file supplemental evidence and 
argument in support of an individual exemption in that docket by 
November 21, 2023.
    4. The parties to this proceeding must comply with the procedural 
schedule shown in the Appendix to this decision and the procedural 
requirements described in this decision.
    5. NSR's request to hold this proceeding in abeyance in denied.
    6. This decision is effective on November 3, 2023.
    Decided: November 3, 2023.
    By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and 
Schultz. Board Member Schultz, joined by Board Member Fuchs, concurred 
with a separate expression.
    Board Member Schultz, with whom Board Member Fuchs joins, 
concurring:
    I agree that the Proposed Transaction should be classified as minor 
and that the record at this stage of the proceeding indicates that any 
anticompetitive effects of the Proposed Transaction will clearly be 
outweighed by the Proposed Transaction's anticipated contribution to 
the public interest in meeting significant transportation needs. On 
this record, I would not order Applicants to submit this extensive 
amount of supplemental information at this stage in the proceeding. 
While the Board has the authority to require the filing of supplemental 
information, the better course here would have been to assess whether 
any supplemental information is necessary after full analysis of all 
comments and requests for conditions and again after responses to those 
comments and requests, when the Board would benefit from the full views 
of shippers, railroads, and the broader public.

Jeffrey Herzig,
Clearance Clerk.

[[Page 77416]]

Appendix

                                               Procedural Schedule
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
October 6, 2023.....................................  Application filed.
November 3, 2023....................................  Board notice of acceptance of application served.
November 21, 2023...................................  Applicants' supplemental information due.
November 27, 2023...................................  Notices of intent to participate in this proceeding due.
December 11, 2023...................................  All comments, protests, requests for conditions, and any
                                                       other evidence and argument in opposition to the
                                                       application, including filings of DOJ and DOT, due.
January 8, 2024.....................................  Responses to comments, protests, requests for conditions,
                                                       and other opposition due. Rebuttal in support of the
                                                       application due.
TBD.................................................  Record closes.
No later than 45 days after close of the record.....   Date by which a final decision will be served.\1\
30 days after service...............................  Board's decision becomes effective.
----------------------------------------------------------------------------------------------------------------
\1\ Under 49 U.S.C. 11325(d)(2), the Board must issue its final decision within 45 days of the close of the
  evidentiary record. However, under NEPA, the Board may not issue a final decision until after the required
  environmental review is complete. In the event the environmental review process is not able to be concluded in
  sufficient time for the Board to meet the 45-day provision in section 11325(d)(2), the Board will issue a
  final decision as soon as possible after that process is complete.

[FR Doc. 2023-24818 Filed 11-8-23; 8:45 am]
BILLING CODE 4915-01-P