Brookfield, in an Aug. 16 letter to the board made public on the agency’s website today, wrote that the hold creates unnecessary regulatory uncertainty, raises costs, and complicates a transaction that would normally qualify for an exemption under longstanding policy.
The Surface Transportation Board on July 22 put an indefinite hold on the deal until it can weigh whether it’s appropriate to grant the normal exemption for an acquisition that does not involve two railroads, a Class I, or a deal that links rail lines.
“The board is considering the issues presented here, including whether the class exemption is appropriate for this transaction,” the STB’s decision says. “To provide sufficient time for the board to fully consider the issues presented, the exemption that is the subject of this proceeding will not become effective until further order of the board.”
Under U.S. law, railroad transactions fall into four categories: major, significant, minor, and exempt. Brookfield and G&W sought to have the transaction exempt from board review, as typically happens when a non-railroad company buys a railroad.
“The board should be highly reluctant to upset settled expectations in the railroad industry by suspending rules governing acquisitions that do not raise competitive concerns that have been used in numerous transactions over several decades,” Brookfield said in its filing. “The short line industry has made routine and uncontroversial use of the class exemption at issue here, thereby contributing to the financial viability of the industry. It would be unfortunate and wholly inappropriate for the STB to inject uncertainty into these markets, which would be the unintended consequence of the board imposing extended and unnecessary regulatory requirements on a transaction that otherwise meets the criteria of an existing class exemption.”
Some analysts have noted that the acquisition of G&W, which operates 106 railroads in America and has 13,000 miles of track around the globe, is not a typical short line deal.
But Brookfield points out that the board has approved similar, if smaller deals involving short line holding companies.
“Numerous transactions involving the acquisition of families of short line railroads, like the proposed transaction, have been authorized through this class exemption,” Brookfield wrote.
Brookfield urged the board to approve the exemption by Sept. 15, which is 10 days after the board’s comment and reply period closes. The board, as part of its July 22 order, sought public comment on the deal by Aug. 21 and replies to that comment by Sept. 5.
The only comments thus far are a handful from Rhode Island officials interested in ensuring that periodic excursion service over G&W’s Providence and Worcester Railroad will continue under the new ownership.
G&W, Brookfield Infrastructure Partners, and GIC, an investment firm based in Singapore, on July 1 announced the deal to take the largest short line holding company private. G&W owns 120 short lines, primarily in North America, but also has operations in Australia and Europe.
Well said Carl. US GOVERNMENT GET THE HELL OUT OF THE WAY AND LET PRIVATE COMPANIES DO WHAT THEY DO BEST. MAKE MONEY. STB THIS MEANS YOU.
Carl Welch: Bravo!!
The STB should cease to exist. It is composed of un-elected bureaucrats who have dictatorial powers. Public hearings before any government agency area a farce. It looks like they don’t like a public company being taken private. Public companies are easier for the government to control. And we support the STB with tax money. All taxes are theft.
And they already announced a sale of the Australian operations to the other half of the current partnership, selling the 51% stake that G&W currently holds and completely leaving Australia. So there fore I think the STB should take their time in reviewing this application, since the parties are already considering deals before the ink has dried on the acquisition.