GWI: STB Grants BIP Exemption

STB Rules that BIP'S Exemption to Purchase GWI Meets Statutory Requirements. Board Grants Exemption Along with a Whiff of Skepticism About the Transaction and the Efficacy of the Class Exemption Statutes for Transactions of Such Magnitude.

28 October, Washington DC – Following its 22 July abeyance order, a comment and reply period, and a prolonged review, The Board has allowed Brookfield Infrastructure Partners’ exemption to acquire GWI’s 106 U.S. railroads. The STB issued its Decision granting the exemption, along with a separate Notice of Exemption. The transaction is now waiting on approval by the Committee on Foreign Investment in the United States (CFIUS) 1 , which could take up to several months.

Decision

The Board’s 28 October Decision acknowledges the concerns and protestations expressed in more than a dozen comments filed during the abeyance period imposed by the Board following BIP’s 09 July Verified Notice of Exemption. Fifteen comments raised concerns about the continuation of excursion events on GWI’s Providence & Worcester line; four comments presented serious questions about BIP’s fitness to control a vital, nationwide collection of railroads.

In its discussion, the Board acknowledged the merits of all of the comments filed. In the case of the excursion trains, the Board found that, apart from their concerns about continuing the excursion trains, the Blackstone Valley commenters in general did not oppose the transaction per se. Regarding the comments advocating denial of the exemption, the Board found that the commenters failed to present an adequate legal argument for the Board to rule out the exemption.

The Decision concludes:

[…] Because the overall transaction is also subject to CFIUS approval, Applicants will remain subject to the Board’s previous direction to provide updates regarding the status of CFIUS review and to provide an update within seven days after they are notified of the outcome of such review. 

 It is ordered:

  1. The exemption will become effective on the service date of this decision.
  2. Notice of this decision will be published in the Federal Register.  
  3. This decision is effective on its service date.

{STB Document #47263 EB}

Discord on the Board

An extraordinary addendum follows the ruling:

BOARD MEMBER OBERMAN, commenting: 

Because this transaction meets the requirements of 49 C.F.R. § 1180.2(d), and because, as stated in the decision, the comments submitted have not undermined the applicability of the class exemption process, I join in approving the transaction’s going forward as a class exemption. Nevertheless, I write separately to express my concerns with the use of the class exemption process for transactions of this magnitude. 

GWI’s North American operations, which will be acquired pursuant to the proposed transaction, include 106 short line and regional railroads subject to Board jurisdiction […]. GWI’s railroads are essential to serving a large number of shippers and receivers and constitute essential links in the national rail network. Most or all of the country’s Class I railroads could not serve many of their customers without the service provided by GWI’s railroads. Indeed, if GWI were itself a rail carrier, its North American operations would clearly make it a Class I carrier A .As it is, GWI is a widespread presence throughout the national rail network, in which it plays an integral role. Thus, this is by far the largest and most geographically diverse collection of railroads impacting the U.S. freight network ever to be processed as a class exemption under the Board’s existing regulations B .  

 

For these reasons, in my opinion, this proceeding raises significant questions regarding whether transactions of this magnitude were contemplated when the class exemption regulations were adopted, and therefore raises questions as to whether it is appropriate for such major transactions to be eligible under those regulations in the first place. While I agree that, under existing regulations, this transaction may proceed as a class exemption, I do think the Board should consider in the future whether the exemption process should be applicable to transactions of such scale.

 


1 The Committee on Foreign Investment in the United States is reviewing the transaction to determine if ownership of GWI by Canadian (BIP) and Singaporean sovereign wealth fund GCI.

A See Indexing the Annual Operating Revenues of R.R.s , EP 748 (STB served June 14, 2019) (calculating Class I revenue threshold at $489,935,956).

B Cf. Fortress Inv. Grp. LLC—Control Exemption—RailAmerica, Inc., FD 34972 (STB served Dec. 22, 2006) (publishing notice for the acquisition of 30 rail carriers); Mont. Rail Link, Inc.—Exemption Acquis. & Operation—Certain Lines of Burlington N. R.R. , FD 31089 (ICC served May 26, 1988) (denying petitions for revocation of notice of exemption permitting acquisition of two non-contiguous segments of rail line totaling 830.62 miles in length in Montana and Idaho); Wisc. Cent. Ltd.—Exemption Acquis. & Operation—Certain Lines of Soo Line R.R. , FD 31102 (ICC served Oct. 8, 1987) (vacating stay and permitting consummation of a class exemption for the acquisition of 1,801 miles of rail line in Wisconsin and parts of Michigan, Minnesota, and Illinois; acquisition of 173.6 miles of trackage rights in Wisconsin and parts of Minnesota and Illinois; and assignment of 27.7 miles of trackage rights on third-party carriers in Wisconsin).