81 FR 45594 - Omnitrax Holdings Combined, Inc.-Acquisition of Control Exemption-Alabama & Tennessee River Railway, LLC, et al.

SURFACE TRANSPORTATION BOARD

Federal Register Volume 81, Issue 135 (July 14, 2016)

[Federal Register Volume 81, Number 135 (Thursday, July 14, 2016)]
[Notices]
[Pages 45594-45596]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-16671]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36032]


Omnitrax Holdings Combined, Inc.--Acquisition of Control 
Exemption--Alabama & Tennessee River Railway, LLC, et al.

    On May 5, 2016, OmniTRAX Holdings Combined, Inc. (OmniTRAX) filed a 
petition for exemption from the requirements of 49 U.S.C. 11323-25.\1\ 
OmniTRAX seeks after-the-fact Board authority for transactions that 
occurred on December 31, 2015, where OmniTRAX acquired direct and 
exclusive control over 18 Class III railroads.\2\ (Pet. 2-5.) OmniTRAX 
states

[[Page 45595]]

that its failure to obtain proper Board authority prior to the 
transactions was due to inadvertent oversight. (Pet. 2.)
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    \1\ Although the petition initially states that it is seeking an 
exemption from the requirements of only 11324 and 11325 (Pet. 2), it 
later specifically references 11323 as well (Pet. 6, 9).
    \2\ The railroads and the state(s) they operate in are as 
follows:
    * Alabama & Tennessee River Railway, LLC: Alabama
    * Alliance Terminal Railroad, LLC: Texas (not currently in 
operation)
    * Brownsville & Rio Grande International Railway, LLC: Texas
    * Chicago Rail Link, LLC: Illinois
    * Fulton County Railway, LLC: Georgia
    \+\ Georgia & Florida Railway, LLC: Georgia, Florida
    * Georgia Woodlands Railroad, LLC: Georgia
    * Great Western Railway of Colorado, LLC: Colorado
    \+\ Illinois Railway, LLC: Illinois
    * Kettle Falls International Railway, LLC: Washington (and 
British Columbia, Canada)
    * Manufacturers' Junction Railway, LLC: Illinois
    \+\ Nebraska, Kansas & Colorado Railway, LLC: Nebraska, Kansas, 
Colorado
    * Newburgh & South Shore Railroad, LLC: Ohio
    * Northern Ohio & Western Railway, LLC: Ohio
    * Panhandle Northern Railroad, LLC: Texas Peru Industrial 
Railroad, LLC: Illinois
    \+\ Sand Springs Railway Company: Oklahoma
    \+\ Stockton Terminal and Eastern Railroad: California (Pet. 3.)
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    This proceeding is related to two pending class exemption 
proceedings: Docket No. FD 36018, in which Central Texas & Colorado 
River Railway, LLC (CTCR), a noncarrier subsidiary of OmniTRAX, seeks 
to acquire and operate a line of railroad, and Docket No. FD 36019, in 
which OmniTRAX seeks to continue in control of CTCR upon its becoming a 
Class III rail carrier. On May 24, 2016, OmniTRAX filed a supplement to 
its petition for exemption, providing additional information and a 
request for expedited action so as not to delay capital improvement 
plans for the CTCR. By decision served on May 26, 2016, the Board held 
the related proceedings in Docket Nos. FD 36018 and FD 36019 in 
abeyance pending action on OmniTRAX's petition for exemption in this 
proceeding. Cent. Tex. & Colo. River Ry.--Acquis. & Operation 
Exemption--Line of Heart of Tex. R.R., FD 36018, et al. (STB served May 
26, 2016).
    OmniTRAX's petition for exemption will be granted. Because we are 
granting the petition for exemption in this proceeding, we are also 
reactivating the proceedings in Docket Nos. FD 36018 and FD 36019 by 
serving and publishing those notices in the Federal Register.

Background

    OmniTRAX is a non-carrier holding company established to control 
short line railroads. (Pet. 2.) OmniTRAX states that it is owned by 
three separate and independent corporations, none of which possess a 
controlling interest in OmniTRAX.\3\ (Id. at 5.)
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    \3\ OmniTRAX states that ``no individual or corporate entity 
possesses a direct or indirect controlling interest in OmniTRAX at 
this time.'' (Pet. 5.) Control is a fact-intensive determination, 
and this decision makes no finding based on this statement by 
OmniTRAX. If, as one example, an individual directly or indirectly 
controlled two of the three parent corporations of OmniTRAX, that 
individual would also need Board authority.
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    Prior to the December 31, 2015 transactions in which OmniTRAX 
acquired direct and exclusive control of 18 Class III rail carriers, 
Patrick D. Broe (Broe) indirectly controlled 17 of the 18 Class III 
railroads. Twelve of the railroads \4\ were directly controlled by 
OmniTRAX Holdings, LLC (OTH), which was controlled by OmniTRAX, Inc. 
(OTI), which was in turn controlled by Broe. In addition, Broe also 
indirectly controlled 5 other railroads,\5\ but through other 
``corporate arrangements not involving OTI or OTH.'' (Pet. 4.)
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    \4\ These twelve carriers are denoted with an asterisk in 
footnote 3.
    \5\ These five carriers are denoted with a plus symbol in 
footnote 3. Although the petition did not provide details of the 
relationship between Broe and these carriers, in Patrick D. Broe--
Acquisition of Control Exemption--Stockton Terminal & Eastern 
Railroad, FD 35525 (STB served July 15, 2011), Broe obtained 
authority to acquire indirect control via ST&E Holdings, Inc., of 
one of the five carriers, the Stockton Terminal & Eastern Railroad 
Company. Later, in Patrick D. Broe--Acquisition of Control 
Exemption--Sand Springs Railway, FD 35829 (STB served June 12, 
2014), Broe obtained authority to acquire indirect control via Sand 
Springs Holdings, LLC, of another of the five carriers, the Sand 
Springs Railway Company. In Broe's 2014 filings with the Board in 
the latter docket, he noted that he controls BNS Holdings, Inc., a 
noncarrier that indirectly controlled the three remaining carriers. 
Broe Notice of Exemption 4, Patrick D. Broe--Acquis. of Control 
Exemption--Sand Springs Ry., FD 35829.
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    Additionally, Broe held a non-controlling interest in the 18th 
railroad, Peru Industrial Railroad, LLC (PIR), an independent short 
line operating in Illinois. PIR connects with one of the other Class 
III railroads--Illinois Railway, LLC (IR)--that was acquired in the 
OmniTRAX transactions. These two railroads connect at Peru, Ill., but 
OmniTRAX asserts that the respective railroad lines do not access or 
serve any common industry or customer(s). OmniTRAX states that IR 
previously obtained exemption authority to lease and operate over PIR's 
lines in Illinois Railway--Lease & Operation Exemption--Rail Line of 
Peru Land Acquisition 2, LLC, FD 35886 (STB served Dec. 24, 2014). 
(Suppl. 6.)
    As mentioned above, OmniTRAX requests expedited action because this 
proceeding is the limiting factor to obtaining regulatory authority in 
the two related proceedings in Docket Nos. FD 36018 and FD 36019. 
OmniTRAX states that holding those dockets in abeyance could result in 
delays to critical railroad physical plant improvements. (Suppl. 7.)

Discussion and Conclusions

    The acquisition of control of a rail carrier (or carriers) by a 
person that is not a rail carrier but that controls any number of rail 
carriers requires approval by the Board pursuant to 49 U.S.C. 
11323(a)(5). Under 10502(a), however, we must exempt a transaction or 
service from regulation if we find that: (1) Regulation is not 
necessary to carry out the rail transportation policy (RTP) of 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 
49 U.S.C. 11323-25 is consistent with the standards of 10502. Detailed 
scrutiny of the proposed transactions through an application for review 
and approval under 11323-25 is not necessary here to carry out the RTP. 
Approval of the transactions at issue will result in a change in 
ownership of the 18 aforementioned rail carriers with no lessening of 
competition and will bring those railroads under the oversight of 
established short-line management. An exemption will promote the RTP by 
minimizing the need for federal regulatory control over the 
transactions, 10101(2); ensuring the development and continuation of a 
sound rail transportation system that will continue to meet the needs 
of the public, 10101(4); reducing the barriers to entry and exit from 
the rail transportation industry, 10101(7); encouraging efficient 
management, 10101(9); and providing for the expeditious resolution of 
this and the related proceedings, 10101(15). Other aspects of the RTP 
will not be adversely affected.
    Nor is detailed scrutiny of the proposed transactions necessary to 
protect shippers from an abuse of market power. According to OmniTRAX, 
no shipper will lose access to rail service as a result of the 
transactions, and operations will continue as they did before OmniTRAX 
assumed control. (Pet. 9.) Further, OmniTRAX states that the relevant 
agreements related to the acquisitions contain no provision that would 
limit any of the 18 railroads' future interchange of traffic to or from 
third-party connecting carriers. (Id.) Although PIR connects with IR, 
OmniTRAX states that their lines do not access or serve any common 
industry or customers. In addition, OmniTRAX states that ``PIR's only 
outlet to the balance of the interstate railroad network is via its 
connection to IR,'' that PIR and its customers would continue to rely 
upon intermediate IR service to reach line-haul carriers. (Suppl. 6.) 
Accordingly, based on the record, these transactions do not appear to 
shift or consolidate market power; therefore, we do not find that 
regulation is necessary to protect shippers from the abuse of market 
power.\6\
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    \6\ As there is no evidence that regulation is needed to protect 
shippers from the abuse of market power, we do not need to determine 
whether the transaction is limited in scope. See 49 U.S.C. 10502(a).

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[[Page 45596]]

    Under 49 U.S.C. 10502(g), we may not use our exemption authority to 
relieve a rail carrier of its statutory obligation to protect the 
interests of its employees. The Board, however, is not required to 
impose labor protective conditions when only Class III rail carriers 
are involved in a transaction that falls under 49 U.S.C. 11324-25, as 
is the case here. 49 U.S.C. 11326(c).
    These transactions are categorically excluded from environmental 
review under 49 CFR. 1105.6(c)(2)(i) because they will not result in 
any significant change in carrier operations. Similarly, the 
transactions are exempt from the historic reporting requirements under 
49 CFR. 1105.8(b)(3) because they will not substantially change the 
level of maintenance of railroad properties.
    As indicated, OmniTRAX has requested expedited action to avoid 
delays to critical railroad physical plant improvements. We find 
OmniTRAX's request to be reasonable. We will grant the exemption and 
the exemption will be effective immediately.
    It is ordered:
    1. Under 49 U.S.C. 10502, the Board exempts the above-described 
transactions from the prior approval requirements of 11323-25.
    2. Notice will be published in the Federal Register.
    3. This exemption will be effective on July 14, 2016.

    Decided: July 11, 2016.

    By the Board, Chairman Elliott, Vice Chairman Miller, and 
Commissioner Begeman.
Brendetta S. Jones,
Clearance Clerk.
[FR Doc. 2016-16671 Filed 7-13-16; 8:45 am]
 BILLING CODE 4915-01-P