Exhibit (c)(4)
INTERSTATE COMMERCE COMMISSION
DECISION
Finance Docket No. 32820
NORFOLK SOUTHERN RAILWAY COMPANY AND ATLANTIC AND
EAST CAROLINA RAILWAY COMPANY--LEASE AND OPERATION
EXEMPTION--NORTH CAROLINA RAILROAD COMPANY
Decided: December 13, 1995 SERVED: DECEMBER 22, 1995
By petition filed November 22, 1995, Norfolk Southern
Railway Company (NSR) and Atlantic and East Carolina Railway
Company (A&EC) (collectively NS)1 and North Carolina Railroad
Company (NCRR)2 seek an exemption under 49 U.S.C. 10505 from the
prior approval requirements of 49 U.S.C. 11343-45 to allow NS to
continue the lease and operation of 317 miles of NCRR's rail line
in North Carolina.3
Petitioners have asked for expedited handling of their
exemption request in order to consummate the transaction, for tax
purposes, before the end of the year. We will grant the request
for expedited handling, and the exemption, subject to standard
labor protective conditions.
BACKGROUND
NS and its predecessor railroads have operated the NCRR
line, pursuant to two lease agreements, executed in 1895 and
1939, respectively. The 1895 lease covered the segment of the
line, operated by NSR, between Charlotte and Goldsboro. The 1939
lease covered the segment of the line, operated by A&EC, between
Goldsboro and Morehead City. Both of these lease agreements, as
amended, expired by their terms at the end of 1994. NS and NCRR
have agreed to extend the lease arrangement and entered into a
Lease Extension Agreement dated January 1, 1995. Since then,
they have continued to negotiate over the compensation and other
terms of the lease renewal.4
1 These carriers are wholly owned subsidiaries of Norfolk
Southern Corporation.
2 Approximately 75% of the stock of NCRR is owned by the
State of North Carolina and approximately 25% percent is owned by
private shareholders.
3 The line extends from Charlotte to Morehead City, through
Greensboro, Raleigh, and Goldsboro, NC.
4 NS has continued to operate the line during this period.
1
Because the compensation and other related terms of the
leases have been modified, and provisions have been added to
reflect modern commercial practice, the transaction does not
qualify for the class exemption for lease renewals provided for
in 49 CFR 1180.2(d)(4).5
DISCUSSION AND CONCLUSIONS
Under 49 U.S.C. 11343(a)(2), our prior approval is required
for a rail carrier to lease and operate lines of another rail
carrier. Under 49 U.S.C. 10505, however, we must exempt a
transaction or service from regulation when we find that: (1)
continued regulation is not necessary to carry out the rail
transportation policy of 49 U.S.C. 10101a; and (2) either (a) the
transaction or service is of limited scope, or (b) regulation is
not necessary to protect shippers from the abuse of market power.
Detailed scrutiny of this transaction is not necessary to
carry out the rail transportation policy. By minimizing the
administrative expense associated with the proposed transaction,
an exemption will expedite regulatory decisions and reduce
barriers to entry and exit [49 U.S.C. 10101a(2) and (7)]; foster
sound economic conditions in transportation [49 U.S.C.
10101a(5)]; and enhance a sound transportation system with
effective competition [49 U.S.C. 10101a(4)]. For example, an
exemption will preserve competition by ensuring that a sound rail
system will continue to meet the needs of the public in North
Carolina. Other aspects of the rail transportation policy will
not be affected adversely.
Regulation of the transaction is not necessary to protect
shippers from the abuse of market power. The transaction is
merely the renewal of a lease with no operational changes and no
expansion or reduction in rail service. The competitive
situation will not be altered by the transaction. Given our
finding regarding the probable effect of the transaction on
market power, we need not determine whether the transaction is
limited in scope.
Under 49 U.S.C. 10505(g)(2), we may not use our exemption
authority to relieve a carrier of its obligation to protect the
interests of its employees. Accordingly, as a condition to
granting this exemption, we will impose the employee protective
conditions established in Mendocino Coast Ry., Inc.--Lease and
Operate, 354 I.C.C. 732 (1978) and 360 I.C.C. 653 (1980), as
clarified in Wilmington Term. RR. Inc.--Pur. & Lease--CSX
Transp., Inc., 6 I.C.C.2d 799 (1990), aff'd sub nom. Railway
Labor Executives' Ass'n v. I.C.C., 930 F.2d 511 (6th Cir. 1991).
5 The class exemption applies to leases where the
Commission has previously authorized the transaction, and only an
extension in time is involved. In addition to substantive
provisions being changed, the 1895 lease was not previously
approved by the Commission. 2
Petitioners state that this transaction is excepted from
environmental reporting requirements under 49 CFR 1105.6(c)(2)(i)
and that an historic report is not required under 49 CFR
1105.8(b)(1). Our Section of Environmental Analysis (SEA) has
reviewed the transaction and has concluded that this transaction
is exempt from environmental reporting and historic reporting
requirements.6
NS requests that the Commission expedite handling of the
petition and make the exemption effective no later than December
29, 1995, to allow for consummation of the transaction prior to
the end of the year. NS states that tax considerations and
NCRR's business organization plan, including its plans for
conversion to a Real Estate Income Trust, make it important that
the parties be in a position to consummate the transaction prior
to the end of the 1995 calendar year.
The request for expedited handling is reasonable, and is
granted. Thus, we will make the exemption effective upon
publication.
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. 10505, we exempt from the prior approval
requirements of 49 U.S.C. 11343-45 the lease and operation of the
above-described line, subject to the employee protective
conditions in Mendocino Coast Ry., Inc. - Lease and Operate, 354
I.C.C. 732 (1978) and 360 I.C.C. 653 (1980), as clarified in
Wilmington Term. RR., Inc.--Pur. & Lease--CSX Transp., Inc., 6
I.C.C.2d 799 (1990), aff'd sub nom. Railway Labor Executives'
Ass'n v. I.C.C., 930 F.2d 511 (6th Cir. 1991).
2. Notice will be published in the Federal Register on
December 22, 1995.
3. This exemption will be effective on December 22, 1995.
4. Petitions to reopen must be filed by January 11, 1996.
By the Commission, Chairman Morgan, Vice Chairman Owen, and
Commissioner Simmons.
Vernon A. Williams
(SEAL) Secretary
6 This transaction does not involve a significant change in
carrier operations, petitioners have no plans to dispose of or
alter historic properties, and further Commission approval would
be requires for petitioners to abandon any service.
3