Source: LINK

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SURFACE TRANSPORTATION BOARD DECISION DOCUMENT
Decision Information


Docket Number:
FD_34330_0


Case Title:
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY--ACQUISITION AND OPERATION EXEMPTION--MONTANA WESTERN RAILWAY COMPANY, INC.


Decision Type:
Decision


Deciding Body:
Entire Board


Decision Summary


Decision Notes:
GRANTED A PETITION UNDER 49 U.S.C. 10502 FOR EXEMPTION FROM THE PRIOR APPROVAL REQUIREMENTS OF 49 U.S.C. 11323-25 FOR BNSF TO ACQUIRE THE INTEREST OF THE CURRENT OPERATOR, MWR, AND TO OPERATE A 52-MILE LINE OF RAILROAD FROM GARRISON TO BUTTE, MT.


Decision Attachments



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Full Text of Decision



33489 SERVICE DATE - JUNE 23, 2003

EB

SURFACE TRANSPORTATION BOARD

DECISION

STB Finance Docket No. 34330

THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY

— ACQUISITION AND OPERATION EXEMPTION —

MONTANA WESTERN RAILWAY COMPANY, INC.

Decided: June 20, 2003

By petition filed on March 25, 2003, The Burlington Northern and Santa Fe Railway Company (BNSF) seeks an exemption pursuant to 49 U.S.C. 10502 from the prior approval requirements of 49 U.S.C. 11323-25 to acquire the interest of the current operator and to operate a 52-mile line of railroad extending from Garrison to Butte, MT (the line). The current operator is Montana Western Railway Company, Inc. (MWR), a Class III carrier and lessee of the line, Footnote which is owned by the Oregon Short Line Railroad (OSLR), a subsidiary of Union Pacific Railroad Company (UP). BNSF requested expedited handling of its petition. Footnote

BACKGROUND



BNSF’s predecessor, Burlington Northern Railroad Company (BN), formerly operated the line pursuant to a 999-year lease between BN and OSLR, which was executed on August 1, 1886, by OSLR’s and BN’s predecessors in interest (lease agreement). In an agreement dated August 4, 1986, BN agreed to sell all of its rights, title and interest in the line, including all of BN’s interest under the lease agreement, to MWR. BNSF states that it seeks to reacquire this interest and operate the line to ensure that shippers using the line will continue to receive quality common carrier service. According to BNSF, MWR’s owners believe that, based on the current level of traffic over the line, there is a risk that the condition of the line and MWR’s service could deteriorate in the future. Therefore, BNSF and MWR have entered into an agreement dated March 11, 2003, pursuant to which MWR has agreed to transfer and BNSF has agreed to reacquire all of the rights, title and interest in the line, including all of the interests under the lease agreement.

BNSF states that it will continue to provide common carrier service to shippers located on the line at competitive rates and that there will be no material change in the service those shippers receive. BNSF submits that the shippers can continue to interchange their products as they did previously either at Garrison on the north end, interchanging with Montana Rail Link (MRL), or at Silver Bow on the south end, interchanging with UP. Additionally, BNSF asserts that bridge traffic currently moving over the line can continue, and that the existing commercial relationships among connecting carriers, Rarus Railroad Company, BNSF, and MRL, will not materially change as a result of the transaction.

In comments filed on April 14, 2003, MRL supports this transaction in view of BNSF’s commitment, in its petition, to maintain service and competition, and its agreement to amend certain contracts between MRL and BNSF. Footnote MRL assumes that BNSF’s omission of MWR from the list of commercial relationships that would not materially change as a result of this transaction is inadvertent and requests that this point be clarified. Based on the petition, it appears that BNSF intends to continue, without material change, all of MWR’s commercial relationships. Other comments received include letters filed by Northwest Petroleum Company, Propane Services, Inc., Triple S Building Center, and Mike Mansfield Advanced Technology Center, expressing concern about BNSF maintaining the current level of rail rates and service on the line. Finally, on June 2, 2003, UP filed a letter stating that it has entered into a settlement agreement with BNSF that resolves UP’s concerns with the transaction and that it supports BNSF’s petition. Footnote

DISCUSSION AND CONCLUSIONS

Under 49 U.S.C. 10502, the Board must exempt a transaction or service from regulation upon finding that: (1) regulation is not necessary to carry out the rail transportation policy of 49 U.S.C. 10101; and (2) either (a) the transaction or service is of limited scope, or (b) regulation is not needed to protect shippers from the abuse of market power.

An exemption from the prior approval requirements of 49 U.S.C. 11323-25 is warranted under the standards of 49 U.S.C. 10502. Detailed scrutiny of this transaction is not necessary to carry out the rail transportation policy. An exemption from the application process will minimize the need for Federal regulatory control [49 U.S.C. 10101(2)], foster sound economic conditions in transportation [49 U.S.C. 10101(5)], reduce regulatory barriers to entry into and exit from the rail industry [49 U.S.C. 10101(7)], and encourage efficient management of railroads [49 U.S.C. 10101(9)]. Other aspects of the rail transportation policy will not be adversely affected.

Regulation of this transaction is not needed to protect shippers from the abuse of market power. BNSF has stated that shippers will continue to have the same service options that they have now. Indeed, while receiving comments regarding future service, no shippers have actually opposed the transaction. Nevertheless, to ensure that shippers are informed, BNSF is required to serve all shippers using the line with a copy of this decision within 5 days after the service date of this decision and to certify to the Board that it has done so. Given the market power finding, it is not necessary to determine whether the transaction is limited in scope.

Under 49 U.S.C. 10502(g), the Board may not use its exemption authority to relieve a rail carrier of its statutory obligation to protect the interests of its employees. Accordingly, as a condition to granting this exemption, the employee protective conditions established in New York Dock Ry. — Control — Brooklyn Eastern Dist., 360 I.C.C. 60 (1979), will be imposed.

The transaction is exempt from environmental reporting requirements under 49 CFR 1105.6(c) and from historic reporting requirements under 49 CFR 1105.8(b).

This action will not significantly affect either the quality of the human environment or the conservation of energy resources.

It is ordered:

1. Under 49 U.S.C. 10502, the above-described transaction is exempted from the prior approval requirements of 49 U.S.C. 11323-25, subject to the employee protective conditions in New York Dock Ry. — Control — Brooklyn Eastern Dist., 360 I.C.C. 60 (1979).

2. BNSF shall serve a copy of this decision on all shippers that use the line within 5 days of the service of this decision and certify to the Board that it has done so.

3. This decision will be published in the Federal Register on June 26, 2003.

4. The exemption will become effective on July 23, 2003.

5. Petitions to stay must be filed by July 8, 2003. Petitions to reopen must be filed by

July 18, 2003.

By the Board, Chairman Nober.



Vernon A. Williams

Secretary

(End quoted source)

I knew someone who worked for Rarus for at least 12 years, and he was CMO when Rarus sold to Patriot and left not that long after. I remember him saying that Montana Western was taking legal action (threatened or actually filed in court) against BN/BNSF for changing the rates which diverted most overhead traffic away from Montana Western. If you read between the lines of the above filing, it is obvious that there was far more to it than simply a Class 1 selling a shortline some track and then diverting traffic from them.

The first railroad into Butte was actually the narrow gauge Utah and Northern was started in the 1870s by Mormon interests in Ogden building towards the Idaho Territory. Jay Gould of Union Pacific obtained control with the intent of extending it to the copper deposits in the Butte area that would become become valuable as the electrical age began to dawn. The U&N extended from Ogden to Pocatello to Butte and finally to Garrison - all as narrow gauge. The line also began extending east of Pocatello when the decision was made to standard gauge it around 1886. At some point its assets were transferred to UP subsidiary Oregon Short Line. Incidentally the Sumpter Valley Railway used their connections with UP and used salvaged U&N equipment (and rail?) for their construction and initial operations. Some of this equipment(at least a coach and some cabooses all much rebuilt) still exists.

Because of the copper mines, Butte ended up with an unbelievable amount of railroads. U&N/OSL/UP from the south, NP's secondary main over Homestake Pass that saw most of the passenger trains (see previous threads), GN's branch from the north (the now out of service RDC-3 GN/Amtk/BCR/ODOT/WURR/INPR ran this route) and the Milwaukee's transcontinental line. Butte and Anaconda both had trolley systems, and there was the once electrified Butte, Anaconda and Pacific plus another shortline if I recall. UP ran an overnight passenger train into Butte right up until Amtrak.

The west is stuck with only two major carriers - BNSF and UP. Both claimed that consolidation and single line service would improve rates and stabilize the companies financially after deregulation, which I agree it mostly did in the initial round of mergers (BN/UP-MKT-WP/DRGW-SP). However the last mega mergers that left us with only two choices I believe were more detrimental all of us to maintain competitive rail service. UP/OSL obviously leased the line from Butte to Garrison (maintaing some kind of trackage rights into Butte) to NP for obvious reasons. NP could and would have easily built their own parallel line (as Milw later did) rendering the U&N/OSL line beyond Silver Bow as a dead end no traffic branch causing UP to lose their investment. Had Montana Western failed or abandoned, would the actual track to Garrison have reverted back to actual owner UP? If so, then UP would have gained a connection to MRL and may have been able to compete for MRL originating traffic to move via UP instead of BNSF. I'm not sure what this traffic would have been, maybe grain and wood products. I wonder if UP would have been competitive to California, Midwest and Gulf destinations? For some reason BNSF remains extremely protective of the area, despite the lack of any obvious potential huge amounts of traffic.

There was a Stauffer phosphorus plant in the Silver Bow area. I remember seeing it on my first trips in the area, and I know Rarus did some contract work for them and sold them a GP7, but I'm not sure who their actual interchange connections were. I don't recall there being any phosphate mines in the area, so did UP bring it up from an Idaho mine? And if there were no local phosphate supplies, why was the plant built there in the first place. Stauffer had a former UP Alco switcher (later sold to nearby Scoular grain and scrapped about 2005 at Anaconda), rumored to have had a GE 70 ton transferred from a closed Stauffer plant (CAN ANYONE CONFIRM?) and finally a former BA&P GP-7. I think the plant was closed some time in the late 1990s, so this would have been a notable loss of traffic for whomever was the primary rail provider. (Was the former plant site cleaned up and now is the Port of Montana - I don't remember)