Written by

Marybeth Luczak, Editor-in-Chief

BNSF and CN told the Surface Transportation Board (STB) last month that they may seek limited airway rights and line assignment, respectively, due to the proposed merger of Canadian Pacific (CP) and Kansas City Southern (KCS).

In accordance with STB’s merger proceeding schedule (see below), BNSF and CN separately filed descriptions of their anticipated admissible applications on January 12 that would make the applications. Qualified applications are due February 28.

On February 18, the STB issued a decision deferring any decision on whether anticipated conforming applications that may be filed by BNSF and CN would be considered “minor” or “significant” transactions under its regulations until that these requests have been submitted. (Download the decision below.)

What is the BNSF looking for?

The BNSF explained that “it may file conforming applications requesting some or all of the following rights: (i) ‘springing’ or contingent airway rights on a KCS-owned route between Robstown, Texas, and Laredo, Texas; (ii) airway rights on a KCS route between Metro, Texas, and Bossier City, Louisiana; and (iii) airway rights on a route owned by [CP U.S. subsidiary] Soo Line Railroad Company between Savanna, Illinois, and Clinton, Iowa,” STB wrote in its ruling. “BNSF declares that it may apply for these airway rights” to ensure the preservation of effective competition in areas affecting BNSF’s shippers, shippers’ customers and BNSF. “”

On Jan. 12, the BNSF also filed a request for a waiver and/or clarification, according to the STB. The railroad requested “that the Commission classify conforming applications it may file as minor transactions under 49 CFR § 1180.2. … If the Commission determines that such requests are not minor transactions, BNSF requests that the Commission waive certain specific filing requirements that otherwise apply to large transactions. … BNSF is also requesting four specific clarifications or waivers regarding any compliant application it may file, regardless of their classification.

CN Ask

CN filed a description of an anticipated admissible claim that would ask STB to order CP and KCS “to divest the KCS Springfield line, between Kansas City, Missouri, and Springfield, Illinois, to CN as a condition of any approval of the [CP-KCS merger] Transaction,” according to STB. “CN argues that the divestiture “would both mitigate the competitive harm that would result from allowing CP, following its merger with KCS, to downgrade a parallel line, and would promote the public interest by stimulating investment in an underused road. (CN on January 13 announced to the media its desire for the Springfield line; CP replied in the negative.)

According to the STB, CN said its “compliant application would constitute a minor transaction, as it ‘will clearly have no anti-competitive effects’ in the event that the Board would prefer to assess the proposed surrender condition as a material transaction.”

“Minor” or “significant” transaction

What is a “minor” transaction? According to the STB,[u]Under 49 CFR § 1180.2, a transaction that does not involve two or more Class I railroads must be classified as “minor” ― and therefore of no regional or national transportation significance ― if it can be determined that: (1) the transaction will manifestly have no anti-competitive effects; or (2) any anti-competitive effects will be clearly outweighed by the transaction’s anticipated contribution to the public interest in meeting important transportation needs. A transaction not involving the control or merger of two or more Class I railroads should be classified as “significant” if neither of these determinations can be clearly established.

The STB said in its ruling that BNSF and CN had not provided enough information to determine whether their claims through compliant applications would be “minor” or “significant.”

“Not only does the BNSF provide little information about operations on the rail lines in question or the markets affected, it includes almost no specific discussion of the trade-offs or potential negative effects of running rights, in this context. , and how those effects might impact competition,” STB reported. “Without additional information, the Board cannot draw the conclusions required under 49 CFR § 1180.2 that the intended transactions would demonstrably have no effect. anti-competitive.”

For this reason, BNSF’s “petition, to the extent that it seeks to pre-designate its anticipated compliant applications as minor transactions, will be dismissed,” STB wrote. “If BNSF decides to seek trailing rights through Compliant Applications, after reviewing those applications, the Commission will determine whether the relief sought is minor or substantial based on the information provided by BNSF at that time and may require the filing of additional information based on this. determination.

“Similarly, additional information is needed for the Commission to assess the competitive impacts of the divestiture condition in the anticipated admissible application described by CN. The Board appreciates that CN has indicated its willingness to provide the information required for a material transaction. Although the Board will determine whether the proposed transaction is minor or significant based on the information contained in CN’s Qualified Application, the Board commends CN for recognizing the value of the information required in a large transaction, such as market analyzes and operational data as the Council assesses its allegations of competitive harm.

The STB noted that it “would not impose conditions on a railroad consolidation unless it finds that the merger produces effects prejudicial to the public interest (such as a significant loss of competition) that a condition will ameliorate or eliminate”.

For more details, including requests for clarifications or waivers from the BNSF, download the STB decision below.

STB Procedural Schedule for Review of CP-KCS Merger Proposal:

October 29, 2021: Application filed.

November 26, 2021: The Board’s notice of acceptance of the application must be published in the Federal Register.

December 13, 2021: Notices of intent to participate in this procedure are due.

December 28, 2021: The proposed Safety Integration Plan (SIP) must be filed with the Office of Environmental Analysis (OAS) of the STB and the Federal Railroad Administration (FRA).

January 12, 2022: Descriptions of expected, including inconsistent, expected requests. Requests for derogation or clarification regarding these requests are due.

February 22, 2022: Responsive environmental information and verified environmental statements for responsive applicants, including inconsistent, due.

February 28, 2022: Comments, protests, requests for conditions and any other evidence and argument in opposition to the due request. This includes all comments from the US Department of Justice (DOJ) and the US Department of Transportation (USDOT). Compliant applications, including inconsistent ones.

March 30, 2022: Notice of acceptance of conforming applications, including inconsistent ones, if any, published in the Federal Register.

April 22, 2022: Responses to comments, protests, requests for conditions, and other due objections, including DOJ and USDOT filings. Rebuttal in Support of the Due Motion. Responses to reactive, including inconsistent, due requests.

May 23, 2022: Rebuttals in support of compliant, including inconsistent, due requests.

July 1, 2022: Final briefs due. (Note: “The Board will also determine the maximum page count for final briefs in a subsequent decision once the record has been more fully developed.”)

To be determined : Public hearing (if necessary). (Note: “The Board will decide whether to hold a public hearing in a later decision after the case has been more fully developed.”)

To be determined : Date of service of the final decision. (Note: “49 USC § 11325(b)(3) provides that the Board must render its final decision within 90 days of closing the evidentiary record and that the evidentiary proceeding must be completed within one year. from the date of publication of this notice in the Federal Register [Nov. 26, 2021]. However, under NEPA, the Board cannot make a final decision until the required environmental review has been completed. In the event that the EIS process cannot be concluded in sufficient time for the Board to meet the 90-day provision set forth in § 11325(b)(3), the Board will render a final decision as soon as possible after this process. is finished. “)