Senator BAUCUS. One of the fears that some people have about the holding company arrangement is that natural resources will no longer be used, because they will be competing, to help the rail operations, and as a consequence, the rail operations will go to various utility commissions and ask for rate increase or to abandon lines or to move to the kinds of contract rates that you are talking about. That is particularly worrisome because of the importance of freight rates not only to individual farmers, but also to the national economy-that is, that U.S. agricultural exports contribute about $25 billion to our balance of payments problem, and if freight rates go up, either through the kinds of problems we are talking about here, or waterway user fees, which are passed on to farmers as an additional cost of production and therefore less profitable, that that not only affects farmers, but also from a national security point of view, it tends to have an adverse effect upon our security, as well as our general economy. Do you agree with that? Is that a concern with you, too?

Mr. LEUTHOLD. Yes, we would agree. I think once the 52-unit-car rate is in place, and subterminals are in place in Montana-which is happening much, much faster than anybody felt it was going to happen-that we are going to see rates that you never believed you would see.

Senator BAUCUs. I want thank you all very much. Bud, I want to particularly thank you, and Paul and John, we appreciate your coming.

That concludes our testimony today. I want again to thank very much all of the witnesses for their valuable presentations of testimony and the answers to questions that they have given to us. The hearing record will be kept open for 30 days to permit submission of additional written statements.

That concludes the hearing.

[Whereupon, at 2:45 p.m., the committee was adjourned.]

The Commission adopts final rules governing informational requirements for carriers seeking authority for rail transactions brought under 49 U.S.C. 11343. These final rules amend 49 CFR Part 1111 and are set forth in the appendix to this decision.

DECISION

BY THE COMMISSION:

SUMMARY

We have decided to revise the informational requirements for rail carriers seeking authority for transactions governed by 49 U.S.C. 1134311346. At the same time we are adopting rules incorporating the time limits of 49 U.S.C. 11345, as amended by section 228 of the Staggers Rail Act of 1980 (Staggers Act), Public Law 96-448. We have also made other changes necessitated by the Staggers Act. The revisions described below and set forth in the appendix will result in better use of Commission and carrier resources by reducing required information and avoiding lengthy and costly proceedings when unwarranted by their impact. Additionally, the submission of information that is unnecessary or available elsewhere will no longer be required.

BACKGROUND

In Ex Parte No. 282 (Sub-No. 3), we instituted a general rulemaking proceeding on our own motion by a notice published in the Federal Register on November 20, 1979 (44 F.R. 66626). There we proposed to revise our rail consolidation regulations, Railroad Acquisition, Control, Merger, Consolidation Project, Trackage Rights and Lease Procedures, 49 CFR Part 1111 (Consolidation Procedures), so that the information. required in an application would vary in accordance with the significance of the transaction involved. Thus, we proposed to reduce the informaThis decision embraces Ex Parte No 282 (Sub-No 8), Railroad Consolidation Procedures-Time Revisions. 366 1.C.C.

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tional requirements for certain transactions defined as “minor," and categorically exempted from our regulation, under 49 U.S.C. 10505, certain additional transactions deemed of no regulatory significance. In addition, the proposed rules clarified the information required in all applications and the procedures for handling, prosecuting, and opposing a rail consolidation transaction.

Upon receipt of the comments and reevaluation of the proposal, we issued final rules and exemptions generally adopting the procedural aspects of the proposed rules. Railroad Consolidation Procedures, 363 I.C.C. 200 (1980) (45 F.R. 62991, September 23, 1980). However, we determined that we should further modify and reduce the information required by our regulations, and proposed new rules containing these changes. Id., see 45 F.R. 63012. The new proposal substantially reduced the data required to be submitted with an application, and announced that we would henceforth take notice of a number of specified official documents containing the same or similar information.

In addition, the proposed rules contained no reference to the traditional "traffic studies" which measure the likely extent to which a proposed transaction would divert traffic from competing carriers. These traffic studies, while generating useful information, had tended to focus the attention of the parties (and hence the Commission) more on issues of traffic diversion than on the impact of a transaction on competition or essential services. See Railroad Consolidation Procedures, 363 I.C.C. 784 (1981). Accordingly, the September 1980 proposal replaced the traditional "traffic study" with a requirement that applicants submit an "impact analysis" which not only indicated the potential diversion of traffic ("for the purpose of assessing the possibility that such [competing] carriers will be unable to provide essential services"), but also addressed the competitive impact of the merger. 363 I.C.C. at 214. The specific type of impact analysis was left "to the discretion of the party preparing the study." Id. at 215.

Only two comments were submitted in reponse to this proposal: by the Association of American Railroads (AAR) and Consolidated Rail Corporation (Conrail). Our processing of this proposal was, however, significantly delayed for two reasons.

First, in section 228 of the Staggers Act, Congress significantly changed the law governing our processing and determination of rail consolidation transactions. To deal with the most immediate of these amendments-the expedited statutory deadlines applicable to transactions other than the "merger or control of two or more class I railroads" - we published interim rules on November 10, 1981 (45 F.R. 74488). Comments to these interim rules were filed on December 10, 1981 by Patrick 366 I.C.C.

W. Simmons, Illinois Legislative Director for the United Transportation Union (UTU). Further, because the Staggers Act changed the basis upon which we consider certain types of rail consolidation transactions, we have also reviewed our proposal to determine what changes in our informational regulations are necessary. And, as required by the Staggers Act and recent court decisions, we have supplemented the provisions governing exempted transactions to clarify that the participating carriers remain subject to the statutory obligation to protect the interests of employees.2

Second, in using the newly adopted procedural regulations, we have discovered several problems which we have sought to correct to the extent possible in this proceeding.

After considering the comments, the statutory provisions and our own experience with the regulations, we have decided to adopt the rules proposed (1) in Ex Parte No. 282 (Sub-No. 3) with minor amendments suggested by the comments and as necessary to comply with the Staggers Act and recent court decisions, and (2) in Ex Parte No. 282 (Sub-No. 8) without substantive amendment.

Because the subject and issues involving the Consolidation Procedures were before the public, and because our changes are either required by the Staggers Act or without substantive effect to the rights of parties to consolidation proceedings, we believe our reevaluation and partial modification of the procedural regulations adopted in September 1980, the informational regulations proposed in September, 1980, and the interim regulations published in November 1980 can be made without notice and comment. American Iron & Steel Inst. v. Envir. Prot. Agency, 568 F. 2d. 284, 293 (3d Cir., 1977).

DISCUSSION

We will discuss changes to our September 23, 1980 adopted and proposed Consolidation Procedures seriatum.

Before discussing the comments, a brief overview of the format of the Consolidation Procedures is provided. The Consolidation Procedures consist of two subparts. Subpart A deals generally with transactions by rail carriers under 49 U.S.C. 11343. Subpart B (which is unchanged in this proceeding) governs the acquisition of lines of bankrupt railroads under either the Milwaukee Railroad Restructuring Act, Pub. L., No. 96101 (1979), or 11 U.S.C. 1172.

Within subpart A, sections 1111.0-1111.4 contain a declaration of scope and purpose, our general policy statement, types of transactions, These actions are taken pursuant to court remand of the appeal by various labor interests from our decision promulgating new procedural rules. See Simmons v. I.C.C., No. 80-2577 (D.C. Cir. October 22,

366 I.C.C.