30108 Service Date - May 25, 1999 Eb
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30108 SERVICE DATE - MAY 25, 1999 EB This decision will be included in the bound volumes of the STB printed reports at a later date. SURFACE TRANSPORTATION BOARD STB Finance Docket No. 335561 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 Decision No. 37 ---------- Decided: May 21, 1999 ---------- The Board approves, with certain conditions, the acquisition, by Canadian National Railway Company, Grand Trunk Corporation, and Grand Trunk Western Railroad Incorporated (collectively, CN), of control of Illinois Central Corporation, Illinois Central Railroad Company, Chicago, Central & Pacific Railroad Company, and Cedar River Railroad Company (collectively, IC). 1 This decision embraces: 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; STB Finance Docket No. 33556 (Sub-No. 2), Responsive Application — Ontario Michigan Rail Corporation; and STB Finance Docket No. 33556 (Sub-No. 3), Responsive Application — Canadian Pacific Railway Company and St. Lawrence & Hudson Railway Company Limited. STB Finance Docket No. 33556 TABLE OF CONTENTS INTRODUCTION ..............................................................4 THE CN/IC CONTROL APPLICATION ..........................................9 APPLICABLE STANDARDS ....................................................19 Overview................................................................19 Criteria For Imposing Conditions.............................................21 DISCUSSION AND CONCLUSIONS .............................................22 OVERVIEW ............................................................22 GENERAL ISSUES and SPECIFIC CONDITIONS SOUGHT BY PARTIES ....24 The Alliance Agreement ..............................................24 The Control Issue.............................................25 The Collusion Issue...........................................28 The Build-in/Build-out Issue....................................29 The Pooling Issue.............................................30 NITL Stipulation with Applicants......................................31 The Access Agreement: Geismar ......................................32 The Detroit River Tunnel .............................................34 North Dakota Grain.................................................37 American Forest and Paper Association..................................37 Champion.........................................................38 Lumber Pricing Issues ...............................................39 OVERSIGHT CONDITION ...............................................39 LABOR MATTERS ......................................................40 The implementing agreement process ...................................41 Protection for non-applicant employees ..................................43 Safety ............................................................44 DETAILS OF PUBLIC BENEFITS ........................................45 Quantifiable and Unquantifiable Public Benefits ..........................45 DETAILS OF FINANCIAL MATTERS .....................................48 Financial Condition and Fixed Charges..................................48 Fairness Determination...............................................50 2 STB Finance Docket No. 33556 RELATED APPLICATION ...............................................51 KCS-GWWR (Sub-No. 1) Trackage Rights Application....................51 ENVIRONMENTAL MATTERS ..........................................53 FINDINGS ....................................................................55 CHAIRMAN MORGAN, comment ...............................................58 VICE CHAIRMAN CLYBURN, comment .........................................61 COMMISSIONER BURKES, comment ...........................................63 APPENDIX A: ABBREVIATIONS ...............................................66 APPENDIX B: THE KCS TRACKAGE RIGHTS APPLICATION ...................69 APPENDIX C: COMMENTING PARTIES OTHER THAN LABOR .................81 UNION PACIFIC.........................................................81 CANADIAN PACIFIC .....................................................88 ONTARIO MICHIGAN RAIL CORPORATION ...............................95 COMMENTS RESPECTING TUNNEL ISSUE ................................99 NORTH DAKOTA ......................................................100 EXXON ................................................................103 OCCIDENTAL CHEMICAL CORPORATION ...............................106 RUBICON AND UNIROYAL. .............................................107 VULCAN ..............................................................111 NITL..................................................................113 TFI....................................................................116 AMERICAN FOREST & PAPER ASSOCIATION.............................117 CHAMPION............................................................119 U.S. DEPARTMENT OF TRANSPORTATION...............................119 COMMENTS RESPECTING LUMBER PRICING SCHEME....................123 APPENDIX D: LABOR PARTIES ..............................................126 BROTHERHOOD OF LOCOMOTIVE ENGINEERS ..........................126 UNITED TRANSPORTATION UNION.....................................131 AMERICAN TRAIN DISPATCHERS DEPARTMENT ........................132 INTERNATIONAL ASSOCIATION OF MACHINISTS........................136 TRANSPORTATION•COMMUNICATIONS INTERNATIONAL UNION ........137 3 STB Finance Docket No. 33556 JOHN D. FITZGERALD ..................................................141 ALLIED RAIL UNIONS..................................................141 BROTHERHOOD OF MAINTENANCE OF WAY EMPLOYES .................142 APPENDIX E: ENVIRONMENTAL CONDITIONS ...............................144 SAFETY: HAZARDOUS MATERIALS TRANSPORT CONDITIONS ...........144 ENVIRONMENTAL JUSTICE CONDITIONS ...............................147 CONSTRUCTION CONDITIONS..........................................148 SAFETY INTEGRATION CONDITIONS ...................................150 MONITORING AND ENFORCEMENT CONDITION .........................150 ATTACHMENT A: Best Management Practices for Construction Activities .........151 INTRODUCTION2 The CN/IC Control Application. By application3 filed July 15, 1998, Canadian National Railway Company (CNR), Grand Trunk Corporation (GTC), and Grand Trunk Western Railroad Incorporated (GTW),4 and Illinois Central Corporation (IC Corp.), Illinois Central Railroad Company (ICR), Chicago, Central & Pacific Railroad Company (CCP), and Cedar River Railroad 2 Abbreviations frequently used in this decision are listed in Appendix A. Unless otherwise indicated, all monetary amounts referenced in this decision are stated in U.S. dollars. 3 The CN/IC control application is docketed as STB Finance Docket No. 33556. 4 CNR is a rail carrier. GTC, a holding company, is a wholly owned subsidiary of CNR. GTW, a rail carrier, is a wholly owned subsidiary of GTC, as are Duluth, Winnipeg and Pacific Railway Company (DWP, a rail carrier) and St. Clair Tunnel Company (SCTC, a rail carrier). CNR, GTC, and GTW, and their wholly owned subsidiaries (including DWP and SCTC, but excluding Illinois Central Corporation and its wholly owned subsidiaries), are referred to collectively as CN. 4 STB Finance Docket No. 33556 Company (CRRC),56 seek approval under 49 U.S.C. 11321-26 for: (1) the acquisition by CN of control of IC; and (2) the integration of the rail operations of CN and IC.7 Parties Supporting The CN/IC Control Application. The CN/IC control application has been endorsed by more than 240 parties, including more than 190 shippers. See CN/IC-8 and CN/IC-31.8 The KCS Trackage Rights Application. By application (referred to as the KCS trackage rights application) filed July 15, 1998, CNR, ICR, The Kansas City Southern Railway Company, and Gateway Western Railway Company9 seek the entry of an order under 49 U.S.C. 11102 permitting GWWR to use without restriction three connected segments of track in Springfield, IL, that total approximately 4.6 miles in length and that are owned in part by Union Pacific Railroad Company (UP) and in part by Norfolk Southern Railway Company (NS). The evidence and 5 IC Corp. is a holding company, as is CCP Holdings, Inc. (CCPH, a wholly owned subsidiary of IC Corp.). ICR, a rail carrier, is a wholly owned subsidiary of IC Corp. Waterloo Railway Company (WRC, a rail carrier) is a wholly owned subsidiary of ICR. CCP (a rail carrier) and CRRC (also a rail carrier) are wholly owned subsidiaries of CCPH. IC Corp., ICR, CCP, and CRRC, and their wholly owned subsidiaries (including CCPH and WRC), are referred to collectively as IC. 6 The transaction for which approval is sought (i.e., the acquisition by CN of control of IC, and the integration of the rail operations of CN and IC) is variously referred to as the CN/IC control transaction and the CN/IC “merger.” Because GTW and ICR are Class I railroads, this transaction is classified as a “major” transaction. See 49 CFR 1180.2(a) (classification of 49 U.S.C. 11323 transactions). 7 CN and IC are referred to collectively as the applicants (or, sometimes, the primary applicants). The